On November 1st, the first European bank has passed along these negative interest rates to its retail customers.

So if you maintain a balance of more than 500,000 euros at Deutsche Skatbank of Germany, you now have the privilege of paying 0.25% per year… to the bank.

We’ve already seen this at the institutional level: commercial banks in Europe are paying the ECB negative interest on certain balances.

And large investors are paying European governments negative interest on certain bonds.

Now we’re seeing this effect bleed over into retail banking.

It’s starting with higher net worth individuals (the average guy doesn’t have half a million euros laying around in the bank). But the trend here is pretty clear – FINANCIAL REPRESSION is coming soon to a bank near you.

It almost seems like an episode from the Twilight Zone… or some bizarre parallel universe. That’s the investment environment we’re in now.

Bottom line: if you’re responsible with your money and set some aside for the future, you will be penalized. If you blow your savings and go into debt, you will be rewarded.

If we ask the question “cui bono”, the answer is pretty obvious: heavily indebted governments benefit substantially from zero (or negative) rates.

Case in Point:

the British government just announced that they would pay down some of their debt that they racked up nine decades ago.

In 1927, then Chancellor of the Exchequer Winston Churchill issued a series of bonds to consolidate and refinance much of the debt that Britain had racked up from World War I and before.

This debt is still outstanding to this day. And the British government is just starting to pay it down– about $350 million worth.

Think about it– $350 million was a lot of money in 1927. Thanks to decades of inflation, it’s practically a rounding error on government balance sheets today.

This is why they’re all so desperate to create inflation… and why they’ll stop at nothing to make it happen. (It remains to be seen whether they’ll be successful, but they are willing to go down swinging…)

What’s even more extraordinary is how they’re trying to convince everyone why inflation is necessary… and why negative rates are a good thing.

On the ECB’s own website, they say that negative interest rates will “benefit savers in the end because they support growth and thus create a climate in which interest rates can gradually return to higher levels.”

I’m not sure a more intellectually dishonest statement could be made; they’re essentially telling people that the path to prosperity is paved in debt and consumption, as opposed to savings and production.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

(NBER #16893 – Page 35)

“THE LIQUIDATION OF GOVERNMENT DEBT”

“The saving (or “revenue”) to the government or the “liquidation effect” or the “financial repression tax” is the real (negative) interest rate times the “tax base,” which is the stock of domestic government debt outstanding.”

Working Paper 16893, National Science Foundation Grant No. 0849224

ESTIMATE 3-4% of US GDP Y-o-Y

“Such annual deficit reduction quickly accumulates (even without any compounding) to a 30-40 percent of GDP debt reduction in the course of a decade”

“Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts. A subtle type of debt restructuring takes the form of “financial repression.” Financial repression includes:

1. Directed lending to government by captive domestic audiences (such as pension funds),
2. Explicit or implicit caps on interest rates,
3. Regulation of cross-border capital movements, and (generally)
4. A tighter connection between government and banks.

“In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s. Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt. Thus, financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation. Inflation need not take market participants entirely by surprise and, in effect, it need not be very high (by historic standards). For the advanced economies in our sample, real interest rates were negative roughly ½ of the time during 1945-1980. For the United States and the United Kingdom our estimates of the annual liquidation of debt via negative real interest rates amounted on average from 3 to 4 percent of GDP a year.“

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

A generation of development economists owe Ronald McKinnon, who died earlier this month, a huge intellectual debt for his insight – introduced in his 1973 book Money and Capital in Economic Development

“that governments that engage in financial repression (channeling funds toward themselves to reduce their debt) hamper financial development”. Indeed, McKinnon provided the key to understanding why emerging economies’ financial sectors were underdeveloped.

At the end of his life, McKinnon was working on a related – also potentially groundbreaking – concept: a dollar-renminbi standard. In his view, such a system would alleviate the Financial Fepression and fragmentation that is undermining global financial stability and growth. The question is whether the powers that be – particularly in the United States, which has long benefited from the dollar’s global domination – would ever agree to such a cooperative system.

The notion that the dollar’s global dominance is contributing to Financial Repression represents a significant historical shift. AsMcKinnon pointed out, the dollar became a dominant international currency after World War II because it helped to reduce financial repression and fragmentation in Europe and Asia, where

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Like Buy US Treasuries at a Minimal Rate from a Country with Exploding Debt & Reduced Abilities to Pay

This happens when the Fed Manipulates a Market Bubble thereby Reducing Stock Yields because of higher stock Prices – Then removes liquidity (TAPER) which triggers a flight to PERCEIVED SAFETY.

PRESTO – US Debt gets cheaper due to FEAR

NOW YOU UNDERSTAND FINANCIAL REPRESSION AS YOU HOLD PAPER THAT IS UNPAYBALE AND INEXTINQUISABLE, YIELDING LESS THAN INFLATION!!!!

What is the Real Risk in

US Treasuries?

Who WILL BE Left Holding the Bag?

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Special Guest: Grant Williams

Grant suggests that the dictionary defines repression as essentially about trying to repress true feelings. Financial Repression is the government’s attempt to steer behavior away from true investments and into those that assist the government to pay down its debts.

“The result is essentially outright theft by borrowers from savers. The pool of savings on earth is the last really untapped pool of capital that government has to go after”.

According to Grant the explosion in credit through removal from the Gold Standard, financial engineering and keeping interest rates low has left a differential between Credit Growth and GDP that has forced governments with no choice but to adopt Financial Repression policies. By debasing their currency and through inflation government create the most insidious type of wealth transfer that most people just don’t understand.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

The Stampede is only beginning, as government grows in size and use of regulations to direct money to support increasing government needs.

IN THE LAND OF THE FREE

Collectivism Leads to Dependency which Leads to Servitude

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Special Guest: Nick Barisheff – President & CEP, Bullion Management Group Inc.

Nick Barisheff suggests that to protect yourself from government Financial Repression policies, a diversified portfolio with a strategic allocation of 20% in precious metals is presently merited. The Precious Metals allocation should be diversified in physical holdings between gold, silver and platinum.

Nick argues that China is closer to 5000 tons of gold than the 1000-1700 currently reported by official sources. When this all becomes properly understood it will send shock waves through the system!

Barisheff believes China is acquiring physical Gold in its Sovereign Wealth Fund which doesn’t have to report it to anyone. The last time they did the Chinese Central Bank Gold Reserves went from 800 to 1600 tonnes.  They haven’t reported in five years. During this 5 years Nick argues the gold is coming from Leased Gold. There has been approximately 1500 tonnes per year in net leasing over the last 10 years.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

The Macroprudential Policy of FINANCIAL REPRESSION is the embodiment of a program fighting these 5 natural truths:

Many “in-the-know” have warned!

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Great insightful article on financial repression by Daniel Amerman .. questions how the U.S. federal government can pay down its enormous debt .. sees 4 primary options that the government can take:

The essay reminds readers the 4th option is the likely approach, points out the world took this approach in the 1940s through the 1970s to pay down government debt .. “Because of the sheer size of the problem – most of the population must be made to participate, year after year. Financial Repression therefore uses an assortment of carrots and sticks to ensure that investors have little choice but to participate – on a playing field that has been rigged against them as a matter of design – even if they are among the small minority who are aware of what is being done to them.”The essay covers 4 areas of financial repression:

LINK HERE to part 1
LINK HERE to part 2

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– Alasdair Macleod

LINK HERE to the source article

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“The Fed’s policy of financial repression sends the wrong signal. It punishes savers, such as pensions and retirees, while rewarding speculators and debtors. It is like giving my son ice cream after he yells at his mother and punches his brother.

If the Fed is so worried about the economy that they have to keep rates low for a very long time, then how can a corporation have enough confidence to want to begin a capital investment project? . Many Fed policies have been, or have become, counter-productive .. Fed policies and financial asset prices have recently reached their practical limits.”

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

FT essay below which makes the argument he has been making in the past few years: Given the Federal Reserve’s ultra-easy monetary policies, including near zero interest rate policy & quantitative easing (QE), companies have a tremendous incentive to issue cheap debt to buy expensive stock, diverting corporate cash from creating jobs & investment.

Forbes essay references the recent emphasis in economics & business on “shareholder value”, how this emphasis has resulted in unintended consequences, one of which is the simple share buybacks trend of recent years .. lists several results associated with this “shareholder value” creed:

LINK HERE to the article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.

Sick of the overbearing regulation, taxation, and entitlement mentality in society—in the book Atlas Shrugged, John Galt went to one entrepreneur after another to convince them that they just didn’t need to put up with it anymore.

They didn’t need to keep propping up a system that was trying to destroy them. Where’s the point in continuing to feed a parasitic system?

So one by one, these innovators and producers simply closed up shop, deciding to just “shrug” and abandon what they were providing thanklessly to the looters.

Today many companies are doing the same. They may not be abandoning their businesses altogether, but they are moving them out of the hands of the parasites by moving their tax bases abroad.

In Ayn Rand’s book, the Economic Planning Bureau dealt with this by legislating that no businesses could leave: “[a]ll the manufacturing establishments of the country, of any size and nature, were forbidden to move from their present locations, except when granted a special permission to do so.”

In real life today, we have a string of policies being proposed to similarly discourage companies from leaving, or failing that, to try to claw as much money as possible from them first.

Even the language used by these bill’s supporters is eerily similar to the novel, as politicians call for corporations to pay their “fair share” and bemoan that Americans have to “pick up the tax burden inverted companies shrug off.”

At the time, Rand might have thought that she was writing about an extreme, fictional society. But it seems that the Land of the Free is eager to exceed even her worst expectations.

When she wrote about the “Economic Emergency Law”, which forbade any discrimination “for any reason whatever against any person in any matter involving his livelihood”, she was likely thinking about criteria such as race, gender, and age.

She might have even considered they would try to prevent employers from making judgments based on a person’s ability, though I’m sure she would not have even imagined what politicians have actually come up with in the US.

NEW REGULATIONS

(LOOK PAST THE BILLS’ “SPUN” TITLES)

H.R. 5278: No Federal Contracts for Corporate Deserters Act

First, take the H.R. 5278: No Federal Contracts for Corporate Deserters Act, which bars federal contracts for American companies that have gone overseas for tax purposes.

H.R. 5549: Pay What You Owe Before You Go Act

Then take the H.R. 5549: Pay What You Owe Before You Go Act, which seeks the seizure of unrepatriated corporate revenue.

 S. 1972/ H.R. 3972: Fair Employment Opportunity Act

Try the S. 1972/ H.R. 3972: Fair Employment Opportunity Act that proposed to prohibit discrimination according to a person’s history of unemployment.

S. 1837: Equal Employment for All Act

Or even worse, the S. 1837: Equal Employment for All Act that would have prohibited employers from even looking at prospective employee’s credit ratings.

 H.R. 4904: Vegetables Are Really Important Eating Tools for You (VARIETY)

The literary similarities don’t just stop with corporations either. Compare the fictional Project Soybean, designed to “recondition” people’s dietary habits to the actual H.R. 4904: Vegetables Are Really Important Eating Tools for You (VARIETY).

Tell me, which one sounds more ludicrous to you? With each new piece of legislation being proposed in the Land of the Free, Atlas Shrugged seems to be ever more prophetic.

While even the most terrifying elements of the book are coming true, so are the reactions. People and companies are leaving, refusing the put up with the looting of their efforts any longer.

Despite politicians’ desperate attempts to stop it, Atlas is already shrugging.

“John Galt is Prometheus who changed his mind. After centuries of being torn by vultures in payment for having brought to men the fire of the gods, he broke his chains—and he withdrew his fire—until the day when men withdraw their vultures.”

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.