Special Guest: Paul Craig Roberts PhD – Chairman of the Institute for Political Economy

Dr. Paul Craig Roberts is extremely meticulous in examining the central problems facing America and the developed economies today. You may not like nor agree with what he says but there is little double as a former high level Treasury official, academic professor and Wall Street Journal editor, that he knows what he is talking about.

FINANCIAL REPRESSION

“It is going on on several fronts conducted by different people for their own agendas, though they all seem to be mutually supporting.

COLLUSION BETWEEN PARTICIPANTS

“I think there is a lot of collusion. For example the government colluded with the banking system in financial deregulation. For example they repealed Glass-Steagall. They expressed this absurd claim that financial markets are self regulating.”

“They turned the financial system into a gambling casino where the bets are covered by the tax payer and central bank.”

The cancer which started in the US Financial System has spread globally. The carriers of the cancer has been the International Banks.

WASHINGTON ANSWERS TO WALL STREET

“Some of the Financial Repression is collusion of government serving the financial interests because Wall Street is a huge supplier of political campaign funds which you are highly dependent on to get re-elected. So you answer to the donors. You don’t answer to the public interest. It doesn’t give you any money.”

“You answer to:

• Wall Street,
• The Military-Security Complex,
• The Agri Business like Monsanto,
• The extractive Industries (Oil, Timber, Mining)

These are the powerful interest groups that use the government to serve their interests.”

THERE ARE NO LONGER COUNTERVAILING POWERS IN WASHINGTON

With the destruction of the manufacturing jobs in America through off-shoring, it has reduced the power of the unions and destroyed the Democrats independent source of campaign funds.

“You now have two parties with the same head and reporting to the same masters. There is no longer any countervailing power”

You no longer have the Democrats supporting workers against the Republicans supporting business. Both parties represent them.

“This is the reason you can’t do anything about Financial Repression!”

NEO-CONSERVATIVE CONTROL OF FOREIGN POLICY – $6T TRILLION IN WAR DEBT

We have been in 14 years of wars and added $6T of national debt to finance these wars “without adding five cents of investment for the country having taken place.”

“We now have the Neo-Conservatives driving the conflict with Russia (which is insane), with China (which is insane). The United States doesn’t have the power to try and dominate Russia / China. Especially now that the two countries have a strategic alliance”

“You have much of the world turning away from the United States because of Washington’s

• Abuse of the Dollar as the World’s Reserve Currency,
• Abuse of the dollar based payment system,
• Imposing unilateral sanctions which are acts of war,
• Threatening people with expulsion from the clearance mechanism and people saying we won’t have any part of this,
• The BRIICS establishing their own version of the IMF,
• The Impact of the Spy Scandals and people saying they will build their own internet,

All of this is not only going to effect business it is going to effect American power. It is going to start shriveling!”

“If you have these crazed Neo-Conservatives demanding control of the world, faced with declining power, you don’t know what they will do! It is a very, very dangerous situation. I’m surprised it has taken the world so long to realize the threat the US poses to the rest of the world.”

“The US Dollar payment system is essentially a system for looting. This, Globalization and Neo-liberal economics are tools of American economic imperialism. Countries are beginning to realize this. The looting of countries by American imperialism has now reached the point where it is turning on itself – Greece for example.”

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: Haydon Perryman, CGMA – FATCA Program Manager

“This a modern day “Doomsday” Book, the same asWilliam the Conqueror implemented in 1066 after conquering England. He needed to know where the wealth was so he could tax it”

“This is Not Really About Tax There are Easier Ways to Solve Tax Tracking – Its about a Common Reporting Standard. Its about the ability to track Capital”

“FATCA is a decoy for the Common Reporting Standard”

“There is an incredibly aggressive urgency of implementation – an unprecedentedly quick agreement between 57 governments”

Why?

Either to Tax it , Expropriation it or Control Its Free Movement

“Era of Banking Secrecy is Over!”

“A Complete Misunderstanding by Banks”

THE ROAD AHEAD: FATCA, IGAS AND THE CRS

The costs of FATCA Compliance will be USD 1 to 2 trillion worldwide.The bulk of these costs will be incurred in the customer outreach required to obtain the required documentation.

There will also be considerable customer backlash to FATCA and the documentation it requires. In the age of social media this matters, if this sounds like hyperbole please have a look at this URL

At a most basic level FATCA, the IGAs and the CRS are about making tax part of standard KYC/AML procedures and then reporting, for tax purposes, to those jurisdictions, in which the account holder has tax residence or citizenship.

LINK HERE to the podcast

EVERYTHING YOU NEED TO KNOW ABOUT GATCA / FATCA

DOWNLOAD THE 525 PAGE REPORT

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: Dr. Marc Faber – Editor and Publisher of “The Gloom, Boom & Doom Report”

Dr Marc Faber feels strongly that the current money printing policies “will not end well”!

He feels that:

“Governments are not smart enough to have thought the current scheme out. The professors, academics (who have never worked a day in their lives in the private sector) and central banks think by having artificially low interest rates you can solve problems. Actually, they aggravate the problems!”

“When central banks print money nothing begins to make sense!” — “It is no longer a free market. Markets are now manipulated by governments and notably by their agents, the central bankers.”

FINANCIAL REPRESSION – An “Expropriation”

“Basically what central banks have done around the world is to push interest rates to extremely low or even negative rates. I don’t call it a repression. I call it an expropriation of the savers because before the intervention of the banks occurred post 2008, a saver got a decent rate of interest. Now they get nothing at all! So either they speculate or they lose purchasing power over time!”

The purchasing power of money is depreciating. Financial Repression or what Dr Faber calls “expropriation”, he feels is very negative for the middle and working class.

The current government and central bank policies “are leading to huge asset bubbles in stock, real estate, commodities, collectibles, art and so forth.” Inflation and Deflation work much the same way according to Marc Faber. All prices do no go up or nor decline at the same time.

“We had the collapse of the Nasdaq after March 2000. Then the Fed created the housing bubble and after it collapsed after 2007, it had a devastating impact on a very large number of households. Then in 2008 we had a commodities bubble with oil going to $147/bl and now you know where oil is trading at. Its now 1/3 of what it was at that time basically. The Money printing leads to bubbles which they deflate and hurt the majority at the expense of a few people. This is not going to help the economy in the long run – PERIOD!”

PENSION AND INSURANCE “MODELS” – In Serious Trouble

The pension plans and Insurance industry is in deep trouble. They are basically forced to speculate on something. That speculation will end very badly!

WHAT SHOULD INVESTORS DO?

Dr Faber says quite honestly,

“I am an economist, strategist and investor. The answer to the question of what should an investor do is – I DO NOT KNOW! But people expect me to know so I can tell you what I would do. In the absence of knowing precisely how the end game will be played we should invest in a diversified portfolio of different assets. Some in real estate, some in equities, some in cash & bonds, and some in precious metals.”

“For an investor to not own some precious metals at this point is almost irresponsible!”

MORE QE IS COMING

“I don’t believe we have currency wars but rather the central bankers, one after the other, prints in a ’round about'”

“Money printing has never ended well in history. It can postpone the problems, but it will make the end result even worse.”

“I believe the Fed will intervene at some point with another round of QE!”

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: Professor Laurence Kotlikoff – William Warren FairField Professor of Economics at Boston University

Professor Laurence Kotlikoff believes the current banking system needs to be restructured into “Limited Purpose Banking to remove excess leverage and opacity; that the bureaucrats are having a field day with new ineffective regulations and the US government is financially bankrupt when accounted for correctly.

FINANCIAL REPRESSION

To Professor Kotlikoff the Financial System needs to be understood as a Public Good. It is a market place which needs coordination and banks & financial intermediaries are there to facilitate the operation and management of that public good. Regulators are there to keep the public good working. The question is what kind of regulation do we need that will ensure the financial system keeps working.

“Today the system is in bigger danger than 2008 because fundamentally the banks are being allowed to operate with dramatically larger leverage than would keep things safe!”

Additionally, the banks are being allowed to operate with full opacity. They don’t have to tell what they own in terms of assets or liabilities. Therefore depositors don’t know the risk they are taking which can lead to bank runs which we saw in 2008 where banks didn’t trust other banks.

“We are all set up to see this happen again because of all this leverage and opacity. The system is more fragile!”

THE FIX

In his book Jimmy Stewart is Dead, Professor Kotlikoff talked about shifting from a “Faith Based” banking system to a “Show Me!” banking system where financial intermediaries disclose all the assets they are holding. Instead of borrowing money to invest in assets we can’t see, they would sell shares through equity finance. They in effect would be equity financed Mutual Funds.

The purpose of “Limited Purpose Banking” which Professor Kotlikoff is proposing in his book is that all the financial middle men who are running the “public good” not be allowed to gamble with it. To most people their banking would be through:

• Cash Mutual Funds – For the Payment System
• Mortgage Mutual Funds – Instead of Fannie Freddie

The leveraged derivative element of the current speculative banking system would be run in a similar manner to modern parimutuel betting system polls. Dodd-Frank legislation has not made the system safer and instead sees only one regulator agency (the “Federal Financial Authority”) which oversees disclosures versus 130 entities in Dodd-Frank!

THE $210 TRILLION FISCAL GAP

Economists like Professor Kotlikoff feel the ‘Fiscal Gap’ is what we should be measuring, not one part of it which is the National Debt. The Fiscal Gap according to the CBO is presently $210T while the National Debt approximates $13T. We are focused on the $13T but really we need to be focused on is the $210T.

Over 1200 economists and 17 Nobel Laureates have endorsed a bill that mandates that the CBO & GAO do ‘Fiscal Gap’ reporting to look at the big picture.. Information on this bill can be found atwww.theinformact.org.

The current shortfall is 10.5% of GDP, each and every year. To offset this would require a 60% increase in taxes or for a 35% cut of all expenditures and benefits.

“The US is actually fiscally broke!”

The banks are holding a lot of the governments debt which is unpayable. Governments that cannot pay their bills print money. Eventually this inevitably leads to inflation. This will make the bonds worth less money which would highly likely put the banking system underwater.

SUPPORT

theinformact.org

thepurpleplans.org

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: Charles Biderman – Founder & CEO, Trim Tabs Investment Research Inc.

A seasoned professional, Charles Biderman points out that when you create money, you create debt. When that debt goes to front run demand you will face the problems we are now facing in the energy industry with supply or ghost cities in China. Zero interest rates has brought forward demand which is now resulting in commodity deflation. “There is now no relationship between the economy and the stock market because of zero interest rate policies!”.

FINANCIAL REPRESSION

“The markets are rigged by the central bank policy of zero interest rates. To the extent the markets are rigged we don’t have free markets. That would be Financial Repression!”

A ‘NO GROWTH’ WORLD

“We are in a no growth world. We have governments in the US, Europe,Japan and China that are anti-growth, anti-free market growth. On the other hand we have central banks that are committed to creating as much money as is necessary to keep stock markets as high as they can be even though we have a total disconnect between the economy and the markets. The only reason the markets are doing as well as they are doing (both equity and bonds) is because of zero interest rates. In essence free money from the central banks!”

“The zero interest rate policy of the global central banks is creating a global recession, not a global recovery!”

“The central banks have no clue what they are doing .. at some point the people will realize the emperor has no clothes and the US debt is not worth the paper it is written on!”

“Remember, this whole free money binge was to be a bridge over the downturn so the economy would recover. But when you have no-growth, anti-growth policies in place prohibiting real economic growth you are going to have no growth and higher prices.”

NO-GROWTH, ANTI-GROWTH POLICIES

The US needs to grow at close to 10% a year to fund the current debt and entitlement obligations. Charles feels it is obvious that his is not going to happen. “The US is bankrupt! …. like Vallejo, CA we will be forced to restructure!”

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: Dr. Lacy Hunt – Executive Vice President Hoisington Investment Management Company

Lacy Hunt and his partner Van Hoisington were called “The Henry Fords of bond investing” by Forbes Magazine. You can understand why when you listen to Dr Lacy Hunt describe the current global macro environment.

FINANCIAL REPRESSION

“A superficial attempt to deal with the excessive indebtedness that grips the global economy .. and in my opinion will not work!”

“Monetary Policy is not the solution here. There are Fiscal Policy solutions but they require shared sacrifice, strong leadership (something we don’t have in the US or Europe – no one has) … basically what w are trying to do is to solve an extremely over-indebted situation domestically and globally by taking on more debt and aggravating the problem “

DEFLATION

“The current economic maladies and continuing downshift of economic activity has been the over-accumulation of debt. In many cases

“Debt funded the purchase of consumable and non-productive assets, which failed to create a future stream of revenue to repay the debt.”

“The increase since 2008 has been primarily in emerging economies. Since Debt is the acceleration of current spending in lieu of future spending.”

CURRENCY MANIPULATION

INTEREST RATES

“The downward pressure on global economic growth rates will remain in place in 2015. Therefore record low inflation and interest rates will continue to be made around the world in the new year, as governments utilize policies to spur growth at the expense of other regions.”

“new lows in yields in 2015 in the intermediate- and long-term maturities of U.S. Treasury securities”

THE CURRENCY WARS OF THE 1920’S & 1930’S

Lacy muses on the effects of debt and takes us back to the ’20s and ’30s, when there were similar problems with debt in countries that had engaged in currency wars for over a decade.

Clearly the policies of yesteryear and the present are forms of “beggar-my-neighbor” policies, which theMIT Dictionary of Modern Economics explains as follows: “Economic measures taken by one country to improve its domestic economic conditions … have adverse effects on other economies. A country may increase domestic employment by increasing exports or reducing imports by … devaluing its currency or applying tariffs, quotas, or export subsidies. The benefit which it attains is at the expense of some other country which experiences lower exports or increased imports.… Such a country may then be forced to retaliate by a similar type of measure.”

The existence of over-indebtedness, and its resulting restraint on growth and inflation, has forced governments today, as in the past, to attempt to escape these poor economic conditions by spurring their exports or taking market share from other economies. As shown above, it is a fruitless exercise with harmful side effects.

It behooves us to pay attention to Lacy since he has been one of the most accurate forecasters of interest rates for the last 20 to 30 years.

2015 -Parallels to that earlier period.

• First, there is a global problem with debt and slow growth, and no country is immune.
• Second, the economic problems now, like then, are more serious and are more apparent outside the United States. However, due to negative income and price effects on our trade balance, foreign problems are transmitting into the U.S. and interacting with underlying structural problems.
• Third, over- indebtedness is rampant today as it was in the 1920s and 1930s.
• Fourth, competitive currency devaluations are taking place today as they did in the earlier period. These are a combination of monetary and/or fiscal policy actions and also, with floating exchange rates, a consequence of shifting assessments of private participants in the markets.

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: Professor Steve Keen – Professor & Head Economics, History & Politics Kingston University, London

THE ART OF GETTING AN EDUCATION IN ECONOMICS

Professor Steve Keen has found that top flight universities are dominated by very narrow, doctrinaire teaching. This stylized view has resulted in critics of this view only getting jobs in low ranking university. With pride Steve Keen puts his latest university in that camp. “If you want a good education in Economics, you don’t go to a good university. The wider range of thought and diverse analytics is found at the lower ranking university. Kingston University is one of those classic university!”

FINANCIAL REPRESSION

He does not consider himself an Austrian Economist though he sees it has a number of key tenets that 85% of the economist aren’t aware.

He sees Financial Repression as more about the size of the debt burden within an economy which drives the behavior of central banks. It is about the excess weight of private debt crushing the economy. Everything else is a result of this.”

The results include the “badly thought out Quantitative Easing response to a crisis which they caused by effectively ignoring the growth in private sector debt, but aren’t even aware that this is the cause of the crisis.” “Very few banks have any real clue of what they are doing. If you doubt this, all you have to do is read the minutes of the Federal Reserve. They wouldn’t dare make them up because it makes them look like a bunch of fools who have no idea what is happening.”

Obviously this sort of view does not make Professor Keen popular with the establishment, seeking prestigious and lucrative government and teaching positions.

QE IS NOT MONEY PRINTING!

Irving Fishers explanation of where the Great Depression evolved from was the level and growth of private debt along with too low a rate of inflation. Prof Keen is of this school in which reducing this debt will only result in further falling economic growth. Former Fed Chairman and expert on the Great Depression did not believe this. Professor Keen considers Bernanke’s argument against this a “load of waffle!”. “It is completely naive to the role of banks in the economy!”

Professor lays out why he was able to warn of the coming 2008 Financial Crisis an why he does not feel the current “revival’ can last anymore than 5 years before the same sort of thing occurs.

MODERN DEBT JUBILEE

This interview is worth listening to simply for Professor Keens concept of Modern Debt Jubilee and the Syrian history of successfully doing this every 49 years. You may not agree with his view but it an interesting history lesson of how this worked prior to the advent of central banking.

Many may also agree with his views and the discussion on why the Euro was always a mistake as will be Draghi’s expected upcoming QE announcment. Few will likely also disagree with Professor Keen that moden central banking do not properly understand the role of banks, money, debt and capitalism.

Steve’s closing advise: “Don’t trust the economists!!”

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: Martin Armstrong – Editor & Publisher of Armstrong Economics

FINANCIAL REPRESSION

“What it really is, is a power struggle where we go through cycles where people have confidence in the people, then government. It oscillates back and forth and now we are in a phase we can call the ‘Private Sector Phase’, where people are questioning government.”

“Repression comes in when it is about whatever it takes to maintain power! Largely it is about the fact they are going broke because they have promised all sorts of pensions, and these sorts of things, but they have not funded them!”

GOVERNMENT COMPETENCE

“There is no conspiracy .. it is much worse .. it is really the ‘Keystone Cops’! … government creates the illusion it is in control, but it isn’t in control!”

“People give government and politicians way too much credit. They assume they actually know what they are doing! … what people don’t understand about governments is that we have academics advising and primarily lawyers running the government, with few with any experience or understanding of economics. We should hire traders who at least have some experience!”

“They just don’t understand. There is no design. Everything has been very ‘ad hoc. Its really about the spoils…. giving it to family and friends!”

“If you look at the debt since 1950, you will see that 70% of the national debt is accumulated interest. It didn’t go to provide schools and roads and things of this nature. The whole socialist idea is complete nonsense!”

‘NO PEG HAS EVER LASTED’

The EU, EURO and the recent removal of the Swiss Franc Euro peg are examples of the fundamental problems with government. Martin has consulted to various EU and Swiss authorities since 1998. He is miffed at what he has witnessed but it is no different than has sees everywhere else.

WE ARE IN A DEBT BUBBLE

“We are not facing a stock market crash, we are facing a bond market crash! That is far worse”

“What people don’t realize is that the US Great Depression was a sovereign debt crisis. All of Europe defaulted and went into a moratorium, South America defaulted for about the fourth time and China defaulted. You halt capital formation and that is what a bond crash does. In the great Depression everyone lost. That is what we are facing!”

“We are in a period where on a global scale, capital doesn’t know where to go and the culprit is government. We are in period where there is going to be more confidence to buy bonds such as General Motors than that of any government! There is a substantial difference between Private and Public Debt”

RISING TAXES ARE DEFLATIONARY

Martin believes there is an extremely serious tax problem, especially at the municipal level due to unfunded pensions and obligations. Because wages are not rising in the USA, this is now acting in a deflationary fashion.

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: Robert Wenzel – Editor & Publisher of Economic Policy Journal.com & Target Liberty

Long time Austrian School Economist and Libertarian with a professional background in Wall Street Finance, Robert Wenzel warned of the 2007-2008 Financial Crisis in his book: The Fed Flunks: My Speech at the New York Federal Reserve Bank and was subsequently asked to Washington and the Federal Reserve to detail how he knew where “I really gave it to them!!”

FINANCIAL REPRESSION

He sees the central banks of the world and the Federal Reserve as manipulating the economy through interest rates and flows of funds which makes it very difficult for the individual to make money consistently which represses everyone but gives a major advantage to Wall Street. Much of this is done through restrictive regulations where the “devil is in the details”. Very few really understand the significance of the “details”.

Active in Silicon Valley, Robert Wenzel has seen closeup how the ‘regulatory details’ offer major advantage which give staggering advantage and financial gain to the few, but disadvantage or competitively impede many in their business enterprise. Though Robert Wenzel does not use the term he describes the workings of Crony Capitalism which Macro Analytics has chronicled in many previous videos.

“It is a rigged system where they simply write regulations when things go off the rails for them!”

What this means is it is now making it almost impossible for the average person and small business entrepreneur to survive and prosper.

“THE WORST GET TO THE TOP”

When asked how informed politicians are of what is going on, Wenzel is reminded of Nobel Laureate Economist, Fredrich von Hayeks writings in the “Road to Serfdom” that:

“The worse get to the top”

They are willing to say and do anything to get to the top. These are the ones that know what is going on. A lot of elected politicians simply don’t know what is going on and are marginalized. As in the world of finance, “bad money forces out good money”.

“INFLATION & INTEREST RATE SURPRISES AHEAD“

Wenzel believes the Fed’s stated inflation target of 2% is in actuality 3%. Until this level is achieved the Fed is not going to let up. Unfortunately because of the economic lags and distortions in the signals, Wenzel sees it getting out of control resulting in inflation levels not seen since the late 1970’s. Having presented at the Federal Reserve, Wenzel says:

“The Fed is surprisingly unaware of anything outside of money printing! … It is stunning how off the page they are and how they have no clue, as evident in the Fed minutes where they don’t even mention the money supply!”

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: Dominic Frisby 

Now 45 years old and having been a comedian since his mid twenties, Dominic Frisby got interested in Economics and Finance in 2005 prior to the Financial Crisis. He subsequently became a devout Gold Bug and follower of Austrian Economics and Sound Money when he decided he needed to manage his money himself.

He concluded that:

“Money should be independent. The role of money is to be a medium of exchange, a store of wealth and a unit of account. But instead Money has become a political tool. The mixing of money and politics is very dangerous!”

Dominic feels strongly that many of our basic daily terminologies such as inflation, capitalism and socialism have become corrupted in their meaning and usage. The same is true for “money”. “All of this has distorted people’s behavior in an almost corrupt way” which he describes as only a comedian can.

FINANCIAL REPRESSION

Dominic Frisby defines Financial Repression as:

“The Government manipulation of money in order to achieve a specific goal. The current goal is to bailout the financial system for the excesses it created in the lead up to the 2008 Financial Crisis and also to bailout themselves.”

“Governments have spend way more than they have earned and now have debt that is unpayable and the way they are paying it back is through manipulation, which other people call Financial Repression.”

WHAT THE FUTURE HOLDS

“This will go on for my life time and my children’s life time …. until something else happens”. Frisby says “don’t shot the messenger but our leaders have gotten away with it so far and history shows leaders have always played tricks with money and debt”. “Financial Repression will always exist as long as we have leaders, just like sinning will always exist – you just have to accept it!”

SOCIAL GOVERNMENT ENTITLEMENTS

The government according to Dominic Frisby, who has spent his life within the UK’s social entitlement program, should have nothing to do with Healthcare, Education and Welfare. “All of this doesn’t need to be as expensive as it is!”

“We need less state, more market and more … ‘people’!”

CONCLUSION

“We need to question everything, including the questioners questions and their dogma”

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: David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.

CROMNIBUS

We interrupted David Stockman in Aspen where he was just finishing an article concerning the Cromnibus Bill which the Senate having passed was forwarding to the White House. You can easily sense the annoyance in David’s tone about yet another “abomination” out of Washington of a $1.1T, 1600 page Bill and no one given the time to even read it. “Pork and earmarks” were blatantly evident and tacked all over it. As a former Washington insider he is very clear on what is wrong in Washington.

It seemed very appropriate to ask David on this day to talk with us about Financial Repression!

FINANCIAL REPRESSION

“Honest interest rates and financial asset prices come about from price discovery in the free market owing to the interplay of supply and demand for savings, borrowing and other forms of investment in the marketplace.The opposite of that is the regime we have today which I call the regime of financial repression.

“It is characterized by Dishonest or false prices that are not set by the market but are administered by the central bank under the doctrine of ZIRP, QE, wealth effect and all of the other artifices they have invented to justify intervention in the heart of the financial market day-in and day-out! Capitalism cannot function efficiently nor can the economy grow at a healthy sustainable, balanced rate if you do not have a free market within the capital markets or money markets. It is at the very heart of the capitalist enterprise. Today we do not have that! We have absolute Financial Repression!‘

BANKS HAVE BECOME WARDS OF THE STATE

“We have a problem with the banking system in this country todayand that is because banks as they now exist and function are not free market institutions by any shape, form, function or form of imagination! They are essentially wards of the state”

Stockman believes they would not exist in their current form nor would they take the kinds of risk they take if it were not for:

• The $9T of government deposit insurance,
• Access to the Fed’s discount window,
• Banking licenses from the state which therefore shield them from the claims they would be exposed to otherwise.

The resulting level of malinvestment and market distortions will soon come to an end when we again have realistic price discovery. He believes it is “only a matter of time before we have another more cataclysmic financial meltdown” due to the sheer weight of speculation in this central bank, bubble driven era which is now occurring.

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: Egon von Greyerz – Matterhorn Asset Management AG

Interview with Egon von Greyerz of Matterhorn Asset Management .. on the recent Swiss Gold Initiative vote:

Lesson Learned:

“You can’t fight the Elite! When they decide they will beat you, they will beat you — eventually however they will fail!”

“The whole of the elite were against us. Now, we thought the people, the Swiss people, would be on our side because the Swiss people understand the importance of gold. They were clearly influenced by the massive campaign of the government and of the central bank. The losses for the Swiss National Bank could have been very serious, and that’s why they were quite desperate to stop this initiative.”

What are the ramifications now?

“Switzerland now has to print money. The currency is only backed by 7% gold, and now they have a free-for-all to print more money .. this, of course, will be very bullish for gold because it won’t be just Switzerland. Virtually, every country in the world will start printing money.” 

On November 30th the Swiss voted on:

1. Returning their national gold which is held abroad back to Switzerland
2. Requiring the Swiss National Bank to hold 20% of their assets in physical gold
3. Prohibiting further gold sales

So why was this referendum so important?  Because Switzerland has, for hundreds of years,  been a bastion of sound monetary policy and low inflation. But this has gradually changed in the last 100 years since the creation of the Fed in the US and especially during the past 15 years when the Swiss government quietly removed the 40% gold backing from the revised Federal Constitution which was adopted by popular vote in 1999.

No paper currency has ever survived throughout history in its original form. And the Swiss Franc from having been a strong currency is now in the process of being slowly destroyed by the recent policies of the Swiss National Bank (SNB).
Since 2008 the SNB’s balance sheet has expanded 5 times from CHF 100 Billion to CHF 500 Billion. So Switzerland has printed around 400 Billion Swiss Francs in the last 6 years in order to hold its currency down against the Euro and other currencies. CHF 400 Billion is around 2/3 of GDP.

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: Andrew Sheng – Former Head of the Hong Kong SEC

ANDREW SHENG , Distinguished Fellow of the Fung Global Institute and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission, and is currently an adjunct professor at Tsinghua University in Beijing. His latest book is From Asian to Global Financial Crisis.

Andrew Sheng has spent his career in Asia as a central banker and regulator. He summarizes the current global situation as developed economies simply “kicking the can down the road” to avoid the painful and inevitable structural changes that must lie ahead. “There are no free lunches. Avoidance will only make it more expenses and painful later on!” He quotes former Treasury Secretary Larry Summers on this subject; “do you want your teeth pulled out slowly or very quickly?” Sheng concludes “we are going to have a long tooth ache for a very long time to come!”

FINANCIAL REPRESSION

Sheng describes what he refers to as the “Financial Repression Tax”:

“Governments (via regulated banks) will pay depositors very low rates, sometimes below inflation rates in order to fund the budget. The result is what is known as a Financial Repression Tax. This represses the financial system. The biggest payers of the Financial Repression Tax become the pension funds, insurance companies and long term savers.”

“Besides the government tax, this effectively also allows the rich & privileged to borrow from the poor! Rich countries are borrowing from the poorer countries”

AVOIDING DAY OF INEVITABILITY OF STRUCTURAL ADJUSTMENT

“As long as central bankers are printing we have a ‘paper economy’ not a real economy. That is where Financial Repression really harms the system”

SOURCE OF GROWING GLOBAL INEQUALITY

Sheng feels strongly that the inevitable outcome of broad based Financial Repression is and has become global inequality. “Quantitative Easing and the ‘leveraged play’ around the world is worsening inequality“.

THE MARKET IS NOW POLICY DRIVEN

Sheng also believes the free market is presently not allowed to operate. Markets are highly distorted from trillions of dollars of ‘pumping’.

“People equate finance with debt. Debt is about risk shifting and not about risk sharing! We presently have things backward. If you think of the real economy as the horse, and finance as the cart; what we have today is the cart in front of the horse!”

CONSEQUENCES OF FINANCIAL REPRESSION POLICIES

Andrew Sheng believes we are headed for another crisis. Common sense could help fix the problems but he feels common sense appears not to be so common, especially when politics in involved.

This interview touches a broad range of the fallout from Financial Repression; from how the US Fed is now locked into low interest rates, the ‘hot money’ US Dollar Carry Trade and why lenders are more concerned about balance sheet repair than investment.

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: Simon Black, the SOVERIGNMAN

SIMON BLACK , is the publisher of SovereignMan.com and “Sovereign Man: Confidential” – An International Investment Intelligence Service. A graduate of West Point he served tours of duty in the middle east as an intelligence officer before beginning SovereignMan.com. He has visited over 116 countries and visits 40-50 countries annually looking for investment solutions to suit the realities of today’s increasing government regulations and restrictions.

“Financial Repression is Theft.

It is a very clever, cunning deceitful form of theft.

Governments are stealing purchasing power and essentially defaulting on their obligation to maintain a sound currency.”

“Presently in many cases you have to pay a bankrupt government for the privilege of loaning them money!

Negative real interest rates is covert theft”

Simon believes that the mentality of many governments has shifted from an ‘abundance mentality’ to a negative ‘scarcity mentality’ that has left them chasing innocent, harmless people around the world (ie witness FATCA and the avalanche of renouncing citizenship) versus trying to attract productive people, being more competitive and “making the pie bigger”. This is no longer the thinking that the US was founded on.

THE SOVEREIGN MAN APPROACH

The problem we’re facing is the fragility and danger that comes from massive centralization of economic and political power. The solution then, is to decentralize.

This strategy of diversifying aspects of your life across the globe is calledInternationalization, and that’s what Sovereign Man’s Six Pillars of Self Reliance are about.

The SIX PILLARS OF SELF RELIANCE – Financial sovereignty in the 21st century

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 Giambruno – Casey Research

FINANCIAL REPRESSION

“Financial Repression is Financial Authoritarianism.

It is not only repressing financial aspects of people’s lives but all aspects of life and when you consider the amount of power that is wielded through Financial Repression, it is more accurate to call it Financial Authoritarianism!”

SOURCE OF FINANCIAL REPRESSION

Financial Repression is needed to help governments finance their debt, where the impedence comes from the level of government spending. Since almost all countries use a central banking model and fiat currencies this allows Financial Repression to exist. It gives the government the tools to implement Financial Repression which it wouldn’t otherwise have in a SOUND MONEY System.

“The lynchpin of how Financial Repression is implemented is the Central Banking Model “

“What is fundamentally wrong with this is that it allows the government to take something (that something being Purchasing Power) that is not theirs, without people knowing. You learn in kindergarden that you don’t take something that is not yours but that is exactly what they are doing!”

FATCA – FOREIGN ACCOUNTS TAX COMPLIANCE ACT

One of the most egregious examples of Financial Repression in the international arena is FATCA and the soon to be unleashed GATCA. The Foreign Account Tax Compliance Act (FATCA) effectively begins the process of ring fencing investors options through nothing more than a stealth form of capital controls.

The real issue to banks around the world is:

1. Cost of Compliance
2. Draconian penalties if even an honest mistake is made.

Therefore international banks don’t want American accounts which is making it horrendously difficult for Americans to now live and operate abroad. FATCA has laid the foundation for GATCA in 2018 which is part of the end game for global taxation.

Like Financial Repression FATCA (and GATCA) is devious and not upfront with the American people. FATCA is a blatant example of “government for the government by the government” versus a constitution based upon “a government for the people by the people”!

Learn more about FATCA / GATCA and more as Casey Research’s “International Man” talks what Financial Repression means around the world.

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: Daniel Amerman – Financial Consultant, CFA, Duluth MN USA

Is there a “Back Door” method for the government to pay down the federal debt using private savings? Daniel Amerman says emphatically, YES!

It is called FINANCIAL REPRESSION, though as a former banker Amerman likes to think of it in more accounting terms like liabilities and assets.

In practice there are four primary methods which a nation can use to pay down excessive debts incurred to support spendthrift habits and political obligations.

1. AUSTERITY: Decades of Austerity,
2. DEFAULT: Defaulting on government debts,
3. DEBASEMENT: Inflating away the value of the debt though slashing the value of the currency,
4. POLICY: Process of Financial Repression

Financial Repression is a subtle method of taking vast sums of private wealth with no political consequences. It has strong advantages for the government:

1. It works in practice and has been used successfully before ( 1945 – 1970),
2. Almost No Political Damage,

The government methodically uses regulations over a period of many years to force a negative rate of return onto investors (in inflation adjusted terms) so that the real wealth of savers shrinks by an average of 3-4% per year.

A SHEEP SHEERING STRUCTURE

The characteristics of postwar era “Sheep Sheering” are:

1. Inflation,
2. Government control of Interest Rates to guarantee Negative Real Rates of Return,
3. The Funding of government debt by financial institutions,
4. Capital controls,
5. Discouragement of Precious Metals investment.

If you real want to understand FINANCIAL REPRESSION, this is where you start.

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: Axel Merk

FINANCIAL REPRESSION

“In a nutshell, it is ways governments are trying to deprive you of purchasing power because the government has too much debt and must debase the value of the debt.”

“Through the backdoor the government is trying to take some of your net worth …. It is a wealth TRANSFER from savers to those who have piled up a excess debt” “It is most commonly done through negative real interest rates!“

CENTRAL BANK INFLATION GOALS

“You often don’t have enough inflation in the world when you have too much debt”.

This is why the US, the EU and Japan are trying frantically get inflation up, despite it being bad for the average citizen or saver.

Axel Merk believes that if in 10 years we were to get back to historic bond level,s then there would be an addition $1 trillion in government interest rates. The fed is simply not going to allow that and therefore interest rates are realistically not going up.

NEGATIVE REAL INTEREST RATES

Even a Fed Funds Rate of 1.75 next year would likely still mean we would have negative real interest rates.

SOCIAL UNREST & POLITICAL INSTABILITY

“Policy makes never blame themselves for the problems they have. They always blame a minority, the wealthy or foreigners”

When you have too much debt political stability declines. In parts of the world where food and energy are bigger part of their disposable income you can expect social unrest as these inflation policies take on greater roles.

It is a fact that austerity policies fail at the polls as we have seen in Europe. In the US we are electing increasingly more populist politicians which means entitlement reforms have a slim chance of happening. Therefore “Kicking-the-Can-Down-the-Road” and reliance on the central bank to keep rates low.

We have former super powers on the decline and emerging super powers on the rise. We can only hope that this transition will be peaceful. A central banker told Axel prior to his starting his funds that “We can only hope the adjustment process will be slow and gradual”

JAPAN IS AHEAD OF US IN THIS EVOLUTION

“Liquidity has dried up in the JGB market which means that at some point it is easier to have some sort of crisis”

REGULATION

Regulations in general are about barriers to entry. Therefore it limits risk taking which inevitably leads to less economic growth. By simply keeping interest rates low it doesn’t put sufficient pressures on the system for structural reforms. As low interest rate policies continue to fail the political bias will be to “double down” which means the problems get even worse. Eventually the structural changes required becomes too great to be politically possible without hiding behind a major crisis.

SWISS NATIONAL GOLD REFERENDUM

The Swiss are fiercely independent and don’t like the dependencies which the Euro peg to the Swiss Franc are creating. They don’t like the debt an unelected central bank is piling onto the nation. What is important is that the referendum is trying to force more discipline into monetary policy.

WHAT INVESTORS MUST REALIZE

Cash is no longer safe anymore! The purchasing power of cash is at risk. Once investors realize this the investment world is open! They then need to invest based on the risk spectrum.

• EQUITIES – Prices are elevated because of the actions of central banks ,
• BONDS – “I wouldn’t touch with a ten foot pole in the current environment.
• DIVERSIFICATION suggests adding Currencies and Precious Metals.
• BE ALERT – Have your own opinion after building your own framework

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: Doug Casey – Casey Research

“MODERN CURRENCIES ARE FLOATING ABSTRACTIONS”

Developed economies’ currencies “are turning into toilet paper”.

“JAPAN IS A GIANT ACCIDENT WAITING TO HAPPEN!”

“If you are looking for a one way street, perhaps the best speculation in the world today would to be short Japanese government bonds denominated in Yen”. The demographics in Japan are the worst in the world.

“THE EU WILL CEASE TO EXIST“

Its really a horrible conglomeration of countries which should be simply a free trade area with the government in Brussels making it impossible. It is totally dysfunctional and will breakup.

DOUG’S RECOMMENDATIONS

1. “Hold onto your hat” – Things are going to get real interesting starting in 2015,
2. Doug sees turmoil coming which we haven’t seen since the start of the Industrial Revolution or the French Revolution,
3. Hold gold and silver. Some should be in coins in your possession.

Best-selling author, world-renowned speculator, and libertarian philosopher Doug Doug Casey speaks out on FINANCIAL REPRESSION

Doug sees the world in the “eye of a gigantic financial hurricane”. It entered the hurricane in 2007-2008 and will likely see the next stage in 2015. Here are just some of Doug’s views and statements from this fascinating and exclusive interview with Gordon T Long.

REALISTICALLY SEES WAR AHEAD

“The US is being provocative with its military bases in 125 countries around the world and is provoking the Russians in the Ukraine.” The US is now a country in a continuous state of war. “The US military is out of control.”

“AMERICA DOESN’T EXIST ANYMORE!”

“America has turned into a police state”. It is the most dangerous entity in the world today and has become hated globally because of its militarism.

“THE REAL RISK TO INVESTORS IS ‘POLITICAL'”

US Investors must urgently diversify their assets abroad while it is still possible. More restrictive regulatory policies lie ahead.

US STANDARD OF LIVING & RESPECT IN THE WORLD HAS FALLEN

Today the US is more taxed and regulated than ever before, which limits its abilities to solve its problems.

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: Mike Pento – Pento Portfolio Strategies LLC

Michael Pento speaks out strongly by saying: “We cannot allow the whims of a small group of unelected people to depreciate the value of currencies without any accountability whatsoever. Who gave Mr Bernanke and Ms Yellen the authority to do all these QEs? Who voted them into power? Why do we believe deflation is a bane on the American populous? Why do we want real incomes to fall and prices to go up? We cannot allow these people to to destroy the American middle class and American consumer!”

FINANCIAL REPRESSION

“Any attempt by government to make sure debt service payments remain serviceable.”

That is the key. “Whether it is to force people into the bond market, whether it is to keep interest rates artificially low – whatever they need to do to make sure they don’t have to use the tax base to pay their debt and deficits. They utilize artificial methods to make sure they can make debt service payments.”

JAPAN IS MICHAEL PENTO’S FAVORITE EXAMPLE

“In Japan they have been able to take the entire JGB market and monopolize the whole entire thing! There is nothing that occurs there unless the government is a buyer. There are days on end where there is no trading because their 10 year note is .005%.”

“Japan is an insolvent nation that has taken its interest rates down to levels where there is no private market for their debt – it is a ticking time bomb ….. The danger here is the Yen can unravel here and become intractable.”

“If interest rates go up just 1% the nation is completely insolvent. The Yen could unravel very quickly and cause the economy of Japan to collapse, which would be massively disruptive to all economies and markets across the globe.”

FREE MARKET SYSTEM HAS BEEN COMPLETELY VANQUISHED

“No one knows what the prices are of anything any longer! Capitalism has been annulled, cancelled and abrogated by government and central banks (which are one and same thing)”.

WHERE WE ARE HEADED

1. A complete breakdown in central bank credibility lies ahead,
2. A complete collapse of the financial system will occur when interest raters normalize. The Fed won’t initiate this normalization but rather the free market will,
3. A resulting global economic collapse will wipe out tax bases and therefore debts and deficits will skyrocket
4. Because of this threat, more QE, more financial repression and further market intrusions lie ahead.

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: Tim Price – PFP Group

Tim recalls the words we last heard in the dark days of 2008:

“When you’re a distressed seller of an illiquid asset in a market panic, it’s not even like being in a crowded theater that’s on fire. It’s like being in a crowded theater that’s on fire and the only way you can get out is by persuading somebody outside to swap places with you .”

This is precisely what occurs when the regulatory pressures and un-natural forces of FINANCIAL REPRESSION finally ends

“Financial Repression is government stealing from savers and the future!”

“The single biggest problem of our times economically, is that for the last 40 years there has been an unsustainable buildup of credit expansion throughout the developed world … and we have reached the end of the road new. Every policy by governments and their agents (the central banks) is too a) Kick the Can Down the Road and B) to steal from savers to keep this bandwagon rolling!”

THREE ALTERNATIVE APPROACHES TO ATTEMPT A RESOLUTION:

Tim believes Japan is presently the ‘dress rehearsal’ and the rest of the world will be the main event.

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.