Interviews

10/31/2015 - Ty Andros – The Austrian School of Economics Uses the “Indirect Exchange” to Capture Real Wealth

Special Guest: Ty Andros – CIO Sanctuary Fund, Publisher of “Tedbits”

 

FRA Co-Founder Gordon T. Long deliberates the Austrian School of Economics with Ty Andros of Tedbits Newsletter. Ty Andros began his commodity career in the early 1980’s and became a managed futures specialist beginning in 1985.Mr. Andros attended the University of San Diego, and the University of Miami, majoring in Marketing, Economics and Business Administration. Mr. Andros is active in Economic analysis and brings this information and analysis to his clients on a regular basis.

WHAT IS AUSTRIAN ECONOMICS?

“Austrian economics is just human behaviour, and common sense, and history.”

“But what’s happening is human behaviour, nonsense, and history. We are at a period where people have forgotten history and are doomed to repeat it. “

“Austrian school and capitalism are one in the same.”

“Austrian Economics is production of wealth, producing more than you consume. Meeting people’s needs and doing it in a superior manner; in other words, capitalism.”

The historical school, had argued that economic science is incapable of generating universal principles and that scientific research should instead be focused on detailed historical examination. The school thought the English classical economists mistaken in believing in economic laws that transcended time and national boundaries.

APPLYING AUSTRIANISM TO INVESTING

“You have to prey on paper.”

“The only real way the middle class will get to success is going out serving others and getting rewarded for it.”

“Austrian school is just history, common sense, and the production of wealth; everything else will flow from there. The reason middle classes cannot rise is somehow the public has gotten the idea that they are going to raise their lifestyle through the stroke of a pen at a central bank or other government bodies.”

THE INDIRECT EXCHANGE

“In today’s world economic growth is a function of a printing press; consumption presented as production.”

It is a situation in which goods, services, etc. are traded between two countries using the currency of a third country. Real wealth can only be created by growing it, mining it, building it, manufacturing it; being rewarded for providing more goods and services for less to consumers. What we have now is phony capitalism, which is more money for less goods and services, while consumer demand is being mandated by government planning and controlled by central banking.

EVENTS TO UNFOLD IN THE UPCOMING YEARS

“We are in a death event.”

“If you date interest rates going back 600-600 years, we have never once had a scenario where they were kept at zero for 6 years. What we have is a flat line; just like in any medical monitor a flat line is fatal.”

“The system is dead, we are just sitting there on the fumes and they can’t relight it because they have outlawed free enterprise capitalism, and wealth creation. Look at the health care system right now, it is just a leviathan. They went in there and wrote Obama Care for themselves and that’s how they became supporters. It was government sanctioned.”

“Just look at Japan, we are headed right there.”

“The long term the yield curve is going to invert, but it is going to invert near zero. There is no growth, the only growth there is, is just credit creation. To spurt credit creation they have to make it easier for people to borrow so people can miscalculate their returns.”

CURRENCY EXTINCTION

“Currencies expire when people wake up, the value that currencies hold are only values within people’s minds.”

There is absolutely no value in them. As long as they are perceived as having real worth, you can purchase real things; this is the indirect exchange. Money is a store of value because it is not pegged to anything, as long as this allusion is there; we are substituting it to grab a hold of real cash flowing assets.10-23-14-FRA-Ty_Andros-Indirect_Exchange_Graphic-420

THE LEVERAGE COLLAPSE

“The dollar is going down, and it is going to die; but it will be the last to die.”

“They really have people thinking that the dollar is a risk free asset, and it is not. It is a worthless junk bond.  Currencies don’t float, they just sink at different rates, and the sinking is managed by the BIS and the ECB, Bank of England, Bank of Japan etc. and they all mange the theft of remaining value with their printing presses.”

“The financial systems were given the keys to the castle. These economies are not run for the benefit of the entrepreneur; they are run for the benefit of the financiers. It is a game that the central banks have been playing since the 1600’s when the Rothschild’s went after the Bank of England. We are in troubling times and we need to be well informed. If you are an investor and you do it right, it will be the greatest time in history.”

“A Depression is incoming and this one will be nasty, in fact it will be the worst one ever.”

Abstract written by Karan Singh karan1.singh@ryerson.ca

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.


10/30/2015 - Chris Casey: The Austrian Case for Inflation

Special Guest: Chris Casey – Managing Director, WindRock Wealth Management

 

FRA Co-Founder, Gordon T. Long interviewed Chris Casey of Windrock Wealth Management on the concept of inflation and other applications of Austrian economics to investment theory.  Mr. Casey, an Austrian economist, is a frequent speaker and writer on macroeconomic topics and their related investment implications.

WHAT IS AUSTRIAN ECONOMICS AND WHY DOES IT MATTER?

The Austrian school offers the “most realistic interpretation” of society and economics according to Mr. Casey.  Gordon agrees in noting that “mathematical models are only as good as their assumptions.”  While equations and models may be useful as a construct to frame concepts, any social science cannot be scientifically tested due to the inability to control the countless variables at work.  As such, Mr. Casey prefers the Austrian approach which “looks at basic self-evident axioms as it relates to mankind in nature and then uses deductive reasoning to describe how the real world works.”  According to Mr. Casey, the unique Austrian explanations of inflation and the business cycle (recessions) have direct applications to practical investment ideas.

THE AUSTRIAN EXPLANATION OF RECESSIONS

Most mainstream economists believe recessions are inherent to capitalism since their repeated cycles largely began during the industrial revolution.  The Austrian school recognizes a different causation occurring at the same time: fiat money with or without central banking.  By artificially increasing the money supply through fiat money, interest rate levels are temporarily lowered.  This incents businesses and individuals to make investment decisions they would not otherwise have made: in short, malinvestments.  Recessions to liquidate the inevitably follow monetary mischief.

THE AUSTRIAN EXPLANATION OF INFLATION

The Keynesian school of economics has two theories of inflation which fail to comport with reality and are theoretically faulty.  Their “demand-pull” explanation requires full employment and full capacity in an economy, but Mr. Casey demonstrates that fails to account for a doubling of prices during the 1970’s during economic weakness.

The “cost-push” theory is equally wrong.  By blaming a particular price increase in a commodity such as oil for all price increases, it would have predicted pronounced inflation and deflation over the last 15 years as the oil price gyrated wildly.  In addition, it is theoretically faulty as more money spent on oil means less money is spent on other goods and services – which lowers their prices and renders the overall price level largely unaffected.

“Prices are merely a function of the supply and demand for money” states Mr. Casey.  More supply means dollars are worth less while higher demand lowers prices as people seek to increase cash balances by selling goods and services through lower prices.

WHEN WILL WE EXPERIENCE INFLATION?

Mr. Casey believes that “once we have another downturn, the Fed . . . will step right in.  Once we have that . . . we’ll really start to see the inflation take off.”

What will the Federal Reserve’s next move be?  They have other options besides another round of quantitative easing.  Mr. Casey notes they may stop paying interest on excess reserves held by commercial banks at the Federal Reserve, and they may also lower the reserve requirement which could have a pronounced and immediate impact on increasing the supply of money.

WHAT SHOULD INVESTORS DO?

“Timing is everything, so utilize investments which pay well now, but in an inflation will be a home run.”

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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.


10/30/2015 - Doug Casey: Retirement & Living Overseas for Americans – The Growing Trend (& Need!)

Special Guest: Doug Casey – Casey Research Personal Freedom Through Financial Freedom

 

FRA Co-Founder Gordon T. Long interviews Doug Casey on the different and emerging trends that are taking place in the U.S. Doug is an author, investor and founder of Casey Research.

On trends and changes in the U.S, Doug relates it to a “lush, comfortable and well maintained prison”. In his opinion th
e country is gradually degrading. He points out that the standard of living in other countries is steadily going up unlike before when the standard of living in the U.S was clearly ahead of others.

He agrees with Gordon on the fact that very soon people will be forced to retire outside of the U.S due to the rising health and medical costs. Doug points out this trend will only just increase because for years the current good standard of living being enjoyed by the U.S is a result of the heavy borrowing that has been taking place for years.

When you take on debt, you are either mortgaging your future or you are consuming capital that somebody has saved in the past and lent to you to increase your standard of living now, but when you pay the debt you reduce your standard of living by more than that amount because you have to pay interest on it in addition”.

He predicts that when interest rates start going back up, things are going to get bad quickly, and he advises people to take precaution now by diversifying both politically and geographically while they can. He also recommends that people should acquire as many gold and silver coins as possible as it would be a great way to conserve capital.

“I don’t think in today’s high tech world, the government serves a useful purpose. There’s nothing that the state does that could not and would not be done better and cheaper and without coercion by the free market”.

“If you are the citizen of a country, the government considers you as its property this is why you are better of living in a country where you are not a citizen, and so they treat you as a guest to be cultivated as opposed to a milk cow that has to be milked”.

On the issue of people renouncing the U.S citizenship, Doug believes that this trend will simply keep on increasing. He likens this increasing exodus to what happened in the past, when the American predecessors left England in search of greener opportunities. He advises that Americans’ who value their freedom should look into getting dual citizenships.

“The quality of medical care is at least as good outside the U.S as it is in the U.S and it is much much less expensive”.

Doug believes that the popular belief held by most people, that the medical coverage you get when traveling the world is of a lesser quality as that in the United States is wrong. In his opinion you receive a cheaper and much better service.

 

Abstract written by Chukwuma Uwaga – chuwaga@gmail.com10-23-14-FRA-Doug_Casey-00-Cover-39

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.


10/30/2015 - Robert Blumen: The Core Tenets of the Austrian School of Economics

Special Guest: Robert Blumen – Follower of the Austrian School of Economics

 

FRA Co-Founder, Gordon T. Long interviewed Robert Blumen, noted follower of the Austrian School of Economics, on the Core Tenets of the Austrian School and the Key Elements for investing in an Era of Financial Repression.

CORE TENETS

1. All economic understanding must be based on individual action
2. Subjective valuation drives prices
3. Marginal utility
4. Entrepreneurship
5. Time preference as the basis of interest and profit
6. The role of capital in production
7. Savings is required to create capital
8. Price Theory:  – prices determine costs, not the other way around
9. Money as an evolutionary solution the problem of barter
10. Precious metals as an evolutionary solution to the choice of the best money
11. The purchasing power of money as a price that balances money supply and money demand
12. Non-neutrality of money  (Cantillon effects)
13. The importance of money prices
14. Money is a good, and like any good, money does not have constant purchasing power.   Stable money does not mean stable prices.
15. Mises’ “critique of intervention”:  one thing leads to another
16. The “impossibility” of socialism (central planning)
17. Macro-Economics must be founded on micro economics
18. Macro-economics is based on Say’s law.
19. The rejection of the Keynesian revolution in macro.
20. Money and money substitutes (bank deposits, bank notes).
21. Banking with 100% gold reserves
22. Fractional reserve banking.  The Austrian critique of fractional reserve banking
23. Central banking.  The Austrian critique of central banking.

24. Austrian business cycle theory – the theory of unsustainable booms drive by fractional reserve banking and central banking.

  1. Inflation is not just rising prices, it distorts production as well.
    b.    Distortions are unsustainable
    c.     The “crack up bust” as one possible ending to the unsustainable boom

25. Deflation:

  1. Deflation has been demonized by the Keynesians.
    b.    Natural slow deflation is the result of increasing production.
    c.     Deflation is the correction process from inflation.
    d.    Deflation is not a mouse trap that the economy gets stuck in and cannot escape.

26. An Austrian understanding of recessions and depressions through Say’s Law, entrepreneurship, and market price theory

 

 

KEY ELEMENTS IN AN ERA OF FINANCIAL REPRESSION

1. Entrepreneurs create wealth by employing scarce resources in production within the context of the price system.

This requires real markets with real prices.

2. Central planning can not replace market prices.

3. Central bankers have it backwards.  Counter-cyclical policies create the business cycle.

4. Interest is not a number you can set to anything you like for “policy” reasons.  It is a price and it cannot be zero.

5. Attempting to keep interest rates at zero creates unsustainable distortions in the productive part of the economy.

6. Something that is unsustainable must stop  – at some point.

7. In the end there are two choices – market prices or destruction of the monetary system

8. Investors think in terms of money, but money itself is unstable.

9. The path from fake prices to real prices will be difficult.

 

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.


10/29/2015 - Michael Snyder Says: “We Are Approaching A Global Economic Collapse!”

Special Guest: Michael Snyder – Lawyer, Author, Publisher – TheEconomicCollapseBlog.com

 

FRA Co-Founder Gordon T. Long interviews Michael Snyder on financial repression He is an author and publisher of the economic collapse, blog and other blogs.

FINANCIAL REPRESSION

On financial repression Michael prefers to look at it from the angle of who is doing the repression, which in his opinion is being carried out by the governments and central banks. He believes that markets work best when free market forces are allowed to play out without interference, and that the governments and central banks are anathemas to the market.

He says the area that has witnessed the greatest distortions as a result of outside interference are the emerging markets. He goes on to explain that the period of easy money and quantitative easing flowing into the markets caused a boom in the lending of money to emerging markets all over the world. As a result of these markets gorging on all this cheap money with low interest rates, a lot of debt has been accumulated, and most of that debt is denominated in U.S dollars.

As a result of a crash in commodity prices, the emerging markets are getting less for their exports and due to the reduction in quantitative easing, the dollar is increasing in value and its taking a lot more of their currency to service and pay these debts.

Michael noted that there is no easy way out from this, He believes that the current crisis will keep on getting worse especially as global economy is slowing down.

 “I think that what we are seeing already is just going to accelerate we are going to have emerging markets really struggle and this is carrying on into global trade”. This is a global problem created by a global bubble that was created by the Federal Reserve and others and so I don’t know that there is any easy solutions and in fact, what we are seeing now is just the initial stage of a crisis that is going to get much much worse”.

He expects that initially major financial institutions all over the world will get into trouble with some of them even failing resulting in the banks refusing to lend to themselves and us thereby causing a credit crunch or freeze, which in turn will bring economic activity to a standstill and as a result cause a short severe period of deflation.

“I believe we are  going to see financial crisis financial crash more intervention which is going to cause other problems, ultimately I believe we are going to see major financial intuitions all over the world fail, I believe we are going to see a loss of faith completely and entirely this time around in the central bank of the world and governments and I believe this is going to causes economic chaos around the globe in a scale we have never seen before in our times, and I believe this is going to be a tragedy that is going to play out over  years and it’s going to fundamentally transform our standard of living and the world around us as we move forward”.

PREPARATION

On what can be done to prepare for this eventuality Michael advises that as for the short term people should evaluate financial assets that could crash in value. He also advises a 6month emergency fund at the very least. On long term protection, he recommends gold, silver and precious metals as ways people can protect their wealth. As for a longer term of protection he suggests people should have supplies of food and supplies in the event of a long term emergency, as well as having some cash at home in the event of bank holidays or shutdowns. Finally he strongly recommends a greater level of self-sufficiency from the system as he believes that it is going to fail soon.

Abstract written by Chukwuma Uwaga – chuwaga@gmail.com

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.


10/23/2015 - John Butler – Investing Based on the Austrian School of Economics

Special Guest: John Butler, Amphora Commodities Alpha

 

FRA Co-Founder Gordon T. Long discusses the Austrian School of Economics with John Butler and how its methodologies can be applied to the current global economy. John Butler has 18 years’ experience in the global financial industry, having worked for European and US investment banks in London, New York and Germany.

Prior to launching the Amphora Commodities Alpha Fund he was Managing Director and Head of the Index Strategies Group at Deutsche Bank in London, where he was responsible for the development and marketing of proprietary, systematic quantitative strategies for global interest rate markets. Prior to joining DB in 2007, John was Managing Director and Head of European Interest Rate Strategy at Lehman Brothers in London, where he and his team were voted #1 in the Institutional Investor research survey. In addition to other research, he publishes the Amphora Report newsletter which appears on several major financial websites

THE AUSTRIAN SCHOOL OF ECONOMICS

“It is the no free lunch school of economics.”

The Austrian school believes that economics systems are ultimately information systems. Some of those systems use information more efficiently and effectively than others, and in particular systems of which authorities of various kinds meddle with the market. Authorities may do this by extracting capital from the market via tax rates or even by manipulating the money of that market through some sort of artificial interest rate policy.

“From the Austrian schools point of view, anything that impedes the free price information flow of an economic system will result in a sub optimal economic outcome.”

Without the rule of law, without the ability to strongly enforce property rights, without the ability to prosecute fraud, and various other legal frameworks; the Austrian economic model cannot work.

“Our goal is to make sure economic information flows as efficiently as possible within a solid legal structure.”

HOW THE AUSTRIAN SCHOOL CAN BE APPLIED IN INVESTING

Austrianism teaches us that the future is unpredictable. The economy is made up of the billions of people in the world, with each person making transactions almost every day. Each decision is an individual’s choice, and each decision, even the decision not to spend your money has some effect on the economy.

“Austrian school provides you a way to identify distortions, a powerful way that is caused by a fiscal and monetary policy set such as interest rate or fiscal policy manipulation. Austrians are able to look at these policies and be able to see how they are impacting the investment environment. This gives you a sense of where the distortions are. In theory you get an idea of where you should be overweight and underweight from an investor’s point of view.”

CURRENT EVENTS AMPHORA IS FOCUSED ON

“Currently we are seeing a general overvaluation of risky assets that has been caused by truly an unprecedented set of highly expansionary monetary and fiscal policies throughout most of the world.”

Income growth has not kept up; assets are expensive relative to incomes. So the correct strategy is not simply to short assets, which is dangerous; but if indeed they do look for ways to stimulate aggregate demand more directly rather than through the banking system.

The correct strategies to have today are those that will perform if incomes begin to catch up to asset prices, it could be asset prices declining towards incomes or vice versa. It is impossible to know which one is going to happen, but it is highly likely looking forward that a conversion of the two will happen.

POSSIBILITY OF NEGATIVE NOMINAL INTEREST RATES

“Policy makers have become almost pathological; they have a relentless attitude to make their policies work.”

“Problem with this is, once you get to this point, you can no longer question your original set of assumption. Austrian school of economics knows that the original sets of Keynesian assumptions that have gone into forming this unconventional and aggressive policy mix are themselves flawed. We are on this course where if it were left to run itself, policy makers will operation in these counter-productive directions because they will not question whether their assumptions are wrong.”

“Banning cash will prevent people from making even the simplest transaction in their own neighborhoods; it will lead to complete riot and chaos.”

“Putting a ban on cash is a terrible idea. It is terrible for them and for the economy as a whole. Sadly, with the way things are going, policy makers are going to teach everyone a very hard lesson about blindly accept anything the bureaucracy tells you to do.

CENTRAL BANKS ROLE IF ASSET CORRECTION OCCURRED

“If you do get a major correction in asset markets that causes collateral problems in financial markets, the policy makers are out of options. The only thing they could do is begin capital controls”

Prevent investors being able to freely liquidate or withdraw funds from their existing investments. This of course is very anti-capitalist, very inti-market. It goes directly against everything that a free enterprise economy should stand for; but when you follow these policies you will eventually get to a dead end.

Abstract written by Karan Singh karan1.singh@ryerson.ca

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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.


10/09/2015 - Leland Millar Talks Quality of China’s Economic Reporting

Special Guest: Leland Millar – President, China Beige Book International

 

FRA Co-Founder Gordon T. Long interviews Leland miller, the president of the china beige book international and discusses financial repression in the context of the Chinese economy. He describes himself as a Lifelong china watcher who decided to do something about the complete lack of data in china.

“One of the things that the china beige book plans to do is to give people a real picture of not just the growth dynamics, but also the labor market, the credit dynamics, the macro implications of Chinese growth, indications of future Chinese demand, implications of commodity markets around the world, we try to give the people a much better picture on what’s actually happening instead of just relying on official data and press release”.

FINANCIAL REPRESSION

Leland describes the Chinese reform as a reversal of financial repression and this repression in the context of the Chinese economy is the oppression of consumers and households by state organizations through its economic systems.

“It means reversing this long time economic model, where the state will profit through the economic system at the expense of the consumers and household, and one of the things that the new leadership is intent on doing in order to create consumption is to empower consumers, so they spend more and stop empowering state organizations which are fuelling the overcapacity and the massive debt bubble”.

What should investor know about china?

He explains the biggest misconception concerning the Chinese economy is believing the GDP tells you much about how china is doing.

“It is a broad, blunt indicator that doesn’t measure productive growth or credit dynamics”.

On some of the challenges of getting reliable data in china, Leland explains that he and his team had to ask Chinese firms and consumers on ground what is happening in the country, and  set up a number of polling units across sectors in order to get reliable and accurate information.

Economic trends in china

“For years we have been talking about the Chinese slowdown; it’s inevitable, despite the fact that the economy has been slowing”.

He goes on to explain that although the market sentiment has gone from optimism to “Armageddon” in recent months, the actual data is at odds with these sentiments. As a result of china’s economic slowdown, there is great vulnerability among emerging markets. Now, the reason for this is that for years these markets have relied on china’s demand without factoring the likelihood of a decline or certainty of a decline in china’s demand.

On China’s view of America, Leland has this to say

The Chinese look at America as a model that they are interested in taking pieces from; they like the dynamism of the economy and the global status.  On one hand, they see us as a model to learn a lot of things from but also as a serious threat that is looking to constrain their inevitable and ultimate rise”.

Abstract written by chukwuma uwaga uwaga3@outlook.com

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.


10/02/2015 - Paul Craig Roberts PhD Talks About the Alarming Decline In Western Democracy

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

 

FRA’s Gordon T Long talks financial repression and the decline in democracy with Paul Craig Roberts. Paul is the chairman of the institute for political economy, he was also the former assistant secretary of the US treasury for economic policy in the Reagan administration.

“As far as I can tell not only has democracy departed the western world but also compassion empathy for others, morality integrity respect for truth justice fairness self-respect western civilization has become a hollow shell there is nothing left but greed and coercion and the threat of coercion”.

He believes this outcome is based on the behavior and statements of the government and the public’s acceptance of it. Part of the reason the public doesn’t care, is due to a lack of information as about 90% of the American media is owned by 6 large mega corporations that manipulate the news.

“The story that is told by the American media is Washington’s propaganda line and of course whatever the corporation’s propaganda line is and there is no challenge to either”.

On the republican debates, Paul questions the aggressive stands that most of the candidates seemed to have towards foreign policy. He states that this stand will simply create distrust among nuclear wielding powers.

“Every American president since John F Kennedy worked with the soviet leadership to diffuse the nuclear issue”.

He says that this shift in culture across the candidates is a combination of both campaign finance and a shift in culture.

“There’s no such thing as a free market in the United States, it requires many producers none of which can affect price…….look at the banks, the banks are so concentrated that they are too big to fail. How do you have capitalism if a failed enterprise doesn’t close down instead it is bailed out by the people or by the Federal Reserve printing money to buy its worthless portfolio. This not capitalism, there’s no capitalism here, this is an oligarchy!”

“What has the government said that’s true? Think of anything, can you think of anything they’ve said that’s true? We know that the unemployment rate they’re reporting is false, inflation rate is false, and the gross domestic product is false. We know all of this, we know that Saddam Hussein did not have weapons of mass destruction, he did not have Al Qaeda connections, that Assad of Syria did not use chemical weapons. We know Russia did not invade Ukraine but they say this over and over and over. I can’t think of one thing that the government or corporate world has said in 20 years that’s true”.

Abstract written by Chukwuma Uwaga – chuwaga@gmail.com

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.


10/02/2015 - Jeff Davis Talks Financial Repression & the Effects on the US Banking Sector

Special Guest: Jeff Davis – Managing Director, Financial Institutions Group, Mercer Capital

 

FRA Co-Founder Gordon T. Long interviews Jeff Davis of Mercer Capital, and discusses financial repression and its effects on the banking sector.

Davis is currently a Managing Director of Financial Institutions Group at Mercer Capital. Davis also provides financial advisory services primarily related to the valuation of privately-held equity and debt issued by financial services companies and advisory related to capital structures and M&A.

FINANCIAL REPRESSION’S EFFECT ON THE US BANKING SECTOR

“Financial repression is a price control that relates to all facets of the economy and has profound impact.”

The 3 major cycles: Business Cycle, Credit Cycle and Rate Cycle.

The banks straddle all 3 to be a key contributor of capital in the US economy. Financial repression impacts at a very base level for all 3 cycles.”

“Financial repression has artificially pumped up asset value.

“Commercial real estate values really pivoted in 2010. There is additional risk in the system now that asset values are pumped up”(See Chart to Left)

Leverage Ratio

“If you look at the leverage ratio we can see that over the last 20 years the industry has been raising capital. I don’t think that’s a bad thing. We are significantly much better capitalized than Europe which is a good thing, but as it relates to an investor there is a lower return on equity.”(See Chart to Left)

“Regarding financial repression, if you think about interest rates today, it is very painful for an institution to hold cash. There is significant risk taking occurring amongst commercial banks in taking additional credit risk and duration risk. Structurally banks aren’t as spread in terms of their assets relative to their borrowings that fund these assets.”

“Companies don’t go broke because they don’t make money. Companies go broke when they have no liquidity, so what financial repression has done is push liquidity into the system. So now heavily indebted companies are able to borrow money and we will soon see the consequences of that.”Financial_RepressionX_clip_image002

HOW BANKS FUNCTION

“The banks are special for being separated from commerce.”

“The objective for a bank is to earn a spread on assets. Loans being the highest yielding asset, followed by bonds, and finally cash. The banks role is to take the deposits and prudently while still taking risk, lend the money into the economy to help finance the economy.”

SHADOW BANKING

“Over the last several decades the shadow banking system has developed into an alternative lender as well as another place for people to put their money.”Financial_RepressionX_clip_image008

The term “shadow bank” was coined by economist Paul McCulley in a 2007 speech at the annual financial symposium hosted by the Kansas City Federal Reserve Bank in Jackson Hole, Wyoming. In McCulley’s talk, shadow banking referred mainly to nonbank financial institutions that engaged in what economists call maturity transformation.

Commercial banks engage in maturity transformation when they use deposits, which are normally short term, to fund loans that are longer term. Shadow banks do something similar.

“Shadow banking system is separate from commercial banking system, but is a very large piece of the credit allocator. A lot of risk has been pushed out of commercial banks and is now in the shadow banking system, where it is not as opaque as a commercial bank.”

CONCERNS WITH SUSTAINED LOW INTEREST RATES

One day there will be a reckoning. It’s simply a buildup of risk; an attempt by central authorities to guide the economy.

Malinvestment: A mistaken investment in wrong lines of production, which inevitably lead to wasted capital and economic losses, subsequently requiring the reallocation of resources to more productive uses.

“A delay of lost recognition and mass malinvestment which is all a credit risk within the banking systems. However, my biggest concern is a dramatic slowdown in the economy, short rates at zero.”

Abstract written by Karan Singh karan1.singh@ryerson.ca

Commercial Real Estate Values

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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.


09/25/2015 - Don Rissmiller – The Biggest Fed Meeting Since 2008 In Terms of Expectations

Special Guest: Don Rissmiller – Partner & Chief Economist, Strategas Research Partners

 

FRA Co-Founder Gordon T. Long talks Financial Repression and current economic developments with Don Rissmiller, a founding partner and chief economist of Strategas Research Partners. Mr. Rissmiller has overseen Strategas macroeconomic research since 2006, as well as thematic research, and high frequency econometric forecasting.

“When we think about financial repression, we think about interest rates being below normal levels or below inflation. You would do that if you’re in an environment with a lot of debt. The solution if you have too much debt is to try to make the burden of that debt to decrease.”

Rissmiller highlights the 3 avenues in which the government receives funds through taxes. Taxing income, taxing transactions, and taxing wealth; however financial repression relates by,

“Keeping interest rates below inflation is a fancy way of taxing liquid wealth, taxing cash.”

THE RESULT OF LOW INTERST RATES

“You’re trying to stimulate the economy by implementing lower interest rates.”

The financial repression process begins at the monetary policy level as a response to some shock In the economy. The goal is to get risk taking up in the economy, and that’s complicated with monetary policy because it is not the best policy when it comes to risk taking,

“It may be the best you can do, it may be an appropriate policy response in a time of stress, but it still has consequences that may not all be desirable.”

When you think about where we are going, what you can do is use whatever works. “You have to force other investors to take more risk. You might bid up asset prices, and of course assets are not equally distributed so that has consequences for income inequality.”

THE SEPTEMBER 17th FOMC MEETING

“It was the biggest fed meeting since 2008 in terms of expectations”

The Fed took the approach that they would like to wait a little more and see some more data. This is not uncommon, if we look back to 2013 to see an example of this, the Fed started talking about the quantitative easing taper in the middle of 2013, and by Sept 2013 the expectation was they were ready to go, but they held back for 3 more months because of the tightening of financial conditions.

“This is a reasonable way to look at what will happen in September of 2015, a tightening of financial conditions plus data that wasn’t equate to have confidence in your forecasts leading the Fed to delay.”

FORECASTING THE US ECONOMY

Considering the global slowdown in world trade and commodity prices, Rissmiller shares some foresight into the potential future of the American economy.

“We are seeing weakness in manufacturing that means another sector will have to pick up the slack. The sectors I will focus on are housing, consumer, and the government.”

“In housing we are seeing some improved signs on household formation. As unemployment is looking more normal we have had more household buying.”

“Consumer spending has been growing, we think this can continue because the decrease in energy prices tends to effect consumer spending with a lag and so we are going to continue to see positives to lower energy prices.”

” The government sector has been a drag, there is still one more budget fight coming in the next few weeks and that’s going to be a challenge, but if we get through that we are into the part of the election cycle where government drag turns into a small boost, we are already seeing some rehiring at the state and local level and that is significant as well.”

Abstract written by Karan Singh karan1.singh@ryerson.ca

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.


09/25/2015 - Stewart Taylor Discussing Financial Repression with Eaton Vance VP

Special Guest: Stewart Taylor – Vice President, Eaton Vance & Senior Fixed Income Trader

 

FRA Co-Founder Gordon T. Long breaks down financial repression and the future of emerging markets with Stewart Taylor. Stewart is currently Vice President and Portfolio Manager at Eaton Vance Management based in Boston, managing the Short Duration Real Return Fund since 2005.

THE SEPTEMBER 17th FOMC MEETING

“I am sure the Fed is going to move, the Fed knows they have to get away from zero bound.”

To Taylor, financial repression is keeping interest rates below a considered normal level. When asked about the recent FOMC meeting, he had this to say…

 “They missed a chance in 2013 to raise rates, they had a free shot at it and they didn’t do it. I think they had a free shot at it again this past month, they didn’t take it, and now it becomes harder as we go along. Particularly, given what we are seeing happening in emerging markets.”

A progressive opening up of more countries to foreign investors has been accompanied by major structural transformations in many parts of the world. Strong economic growth combined with the development of financial markets has led to the expansion of investment opportunities in emerging markets and has reshaped the equity sector.

The graph to the left shows a dramatic drop for emerging markets performances of this September. The decline is Indicative to what Taylor had to say regarding the meeting…

“After hearing what the fed said, I don’t think the market feels the Fed has much confidence in the economy right now.”

THE COMMODITY SECTOR

“I am looking for ways to own commodities now.”

When asked about the commodity sector in emerging markets, Taylor states

“Commodities have been going down for the past 3 years while equities have been increasing or staying in the long trading range. I think it is evidence that perhaps equities have become somewhat divorced from the real economy. I certainly think that commodities are more indicative of the economy than equities are. “

THE FUTURE OF BOND MARKETS

Is a shift in the bond market inevitable?

“I do think a shift is coming, but I think the one thing that happens with rates that not many people appreciate is that first of all there is a difference between how rates behave in an inflationary environment, and how they behave in a deflationary environment.”

“I think at some point an abrupt shift will happen, but if you look historically you see that these changes take sometimes decades to complete.”

THE BRICS

“I am a firm believer that too much debt pushes down economic growth, and we are in a world that is constrained by debt and that isn’t going to change anytime soon.”

Taylor compares China’s equity market to America’s; both are very similar, China’s is just multiplied by a greater degree.

“Their equity market isn’t well connected to the underlying economy, so that’s why I dismiss equities as a signal. “

“You look at countries like Brazil that are being hurt by corruption, that’s hugely concerning considering how large of a role Brazil plays in the emerging markets. The BRICS, with the exception of India have all had a really rough time as of late and I don’t see that changing anytime soon.”

Abstract written by Karan Singh karan1.singh@ryerson.ca

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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.


09/18/2015 - Martin Barnes – Why Financial Repression is Here to Stay!

Special Guest: Martin Barnes – Chief Economist, BCA Research

 

FRA Co-Founder Gordon T. Long sits with BCA Research Chief Economist, Martin Barnes, a highly decorated and well renowned economist of 40+ years to talk Financial Repression and Barnes most recent work, Low Growth and High Debt: Financial Repression is Here to Stay.

FINANCIAL REPRESSION

Barnes defines Financial Repression as,

“An environment where interest rates are kept below levels which most people would consider being normal.”

In a recent publication, Low Growth and High Debt: Financial Repression is Here to Stay, Barnes focused on the problems of continued high debt levels and argues Financial Repression as a legitimate solution to the global debt crisis.

“If you can’t easily get your debt burdens down, then at a minimum you have to make the debt easier to live with, and the only way you can make your debt easier to live with is through Financial Repression. In other words, financial repression is the inevitable result of a world with low growth and stubbornly high debt.”

CONSEQUENCES OF LOW INTEREST RATES

“If money is free, very clever people at some point are going to do stupid things with it. There is no question that low interest rates will encourage some misbehaviour, and speculation. However it is hard to make the claim that today’s interest rates are low enough to be causing economic problems.”

Despite already low interest rates, economic growth around the world has been relatively low. Barnes states, “Economies should be booming with current interest rates but they’re not, we are living in a world that I would argue needs lower interest rates.”

“The by-product is financial distortion which has powerful implications for certain groups of people such as people trying to live off of fixed incomes. But you can’t push interest rates up to protect the interest of those people if the global economy is screaming for even lower rates. We cannot have a level of interest rates that will have everyone happy.”

THE PENSION FUND DILEMMA

A major mistake with the development of pension funds is that governments did not increase the pension age with the increase life expectancy.

“In a world of low returns, and people living much longer, the promises that were made a long time ago can no longer be kept. Everyone needs to understand that at some point those promises have to change, either by raising retirement age or increasing contribution rates. The logic behind these pensions is unsustainable and therefore it must change.”

SITUATION IN CANADA

In the midst of falling commodity prices, devalued currency and the housing market bubble, Barnes states the Canadian economic situation

“…is not disastrous; just like so many other economies, we are stuck in low growth. Exports are battling against moderate global growth and world trade. The big drop in the Canadian dollar has not lead to a big pick up in exports as we would have hoped. We are very tightly linked with the US economy and they are slowly growing so that is a positive.”

“Housing by every standard is incredibly overdone, especially in Toronto and Vancouver, it’s hard to get away from the fact that house prices are extraordinarily high here and it will likely erode.”

“China is moving away from its commodity oriented growth to a more service oriented model. The world is moving away from its commodity dependence which is not great for Canada, but we’ll adjust to that.”

Check out his interview with Gordon T Long which covers this and much more.

Abstract written by Karan Singh

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.


09/11/2015 - David Berson – The Fed’s Plan for Interest Rates

Special Guest: David Berson – Senior Vice President & Chief Economist, Nationwide Mutual

 

David Berson is the senior vice president of Nationwide Mutual. Before now, he has worked as a College professor, at the Fed and for 20 years he was the chief economist at Sallie Mae. He has also worked at Nationwide Mutual insurance for the past three and a half years.

To David depending on where you are in the financial system financial repression will mean different things to you. According to him,

“Financial repression is holding interest rates below the level where they would naturally go.”

He explains that there are two sides to holding down the interest rate, a positive and a negative side. The positive with reducing the interest rate and applying quantitative easing include the addition of liquidity to the economy. According to him, most of the models used by macroeconomists indicate that monetary expansion helps the economy a bit at first but only a period of time. David says the expansion policy helped boost the economy out of recession and is responsible for the modest growth we see now. But the downside to it all is that keeping rates lower than it should naturally be results in savers being hurt due to the extremely low interest rates. At the same time borrowers are at an advantage. It also makes it difficult for investors to have a reasonable return. David agrees that low interest rates push investors to riskier assets but also insists that it is one of the points of having an expansionary monetary policy. He further reiterates that the upside to the artificial reduction in rates is the increased liquidity, which moves the economy a bit upwards.

“They need to concentrate on what’s happening in the domestic economy, they are the US central bank, they are not the central bank of emerging market countries even if those countries are greatly affected by what we do”

According to David, what’s happening in terms of the fall in commodity prices is not directly as a result of what the Fed does. He believes it is as a direct result of the rapid growth in china’s economy as they move to become an industrialized economy. He explains that the primary force driving the fall of commodity prices is the slowing down of the Chinese economy that is occurring now.

On what the Fed will do, David thinks the Fed will tighten this September although he also mentions that with the recent market volatility, the chances of that happening is less than 50%. He believes the Fed should tighten this September as he believes that such an action will help the economy.

On the disappointing recovery of the economy, David explains that there is an excess of government oversight on the economy, which has further contributed to the slowing down of the economy. If you look at what he calls the core GDP, which includes private sales and private purchases minus volatile inventory, trade and government, he is convinced that growth has picked up better than the overall GDP suggests and much closer to historical averages.

“One of the reasons why economic growth has been weaker in this expansion than others is a lack of government spending now I think that in the short-term negative in the long run I think a move in resources from the government sector to the private sector is positive but it takes a while for that to manifest itself in stronger overall GDP growth”.

Check out his interview with Gordon T Long which covers this and much more.

Abstract written by Chukwuma Uwaga – chuwaga@gmail.com

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.


09/08/2015 - James Bianco – The Fed’s Plan for Interest Rates

Special Guest: James Bianco – President, Bianco Research LLC

 

Bianco research started in 1998 and is affiliated with Arbor research and training. It is an independent research company with James Bianco as its president.  Bianco research specializes in macro, fixed income and equity research.

James views financial repression in light of what Ben Bernake said in his November 12 op-ed in the Washington post:

”the purpose of QE2 is the fed buys bonds, force down interest rates, that would make them relatively unattractive for most bond investors, seeking alternatives they would move further out the risk curve and they would not buy .They would push up those assets prices, create a wealth effect expecting a cycle in which the wealth effect creates economic growth to justify those higher prices”.

The forced down interest rate will not bode well for individuals who need certain rates of return to guarantee things like pension and retirement. You end up taking more risk by buying riskier assets which pushes up its price causing you to feel wealthier. He explains that when a government body in this case the CBN steps in and sets price at levels where they would not ordinarily go by themselves, they are repressing the price of interest rate, inflating the price of risk assets. They argue it is a greater good because of the wealth effect that comes from that.

James doesn’t think that the wealth effect occurs as a result of that. According to him, Milton Friedman in 1915 developed the permanent income hypothesis which states that if an asset goes up in price for example a house, you treat it as another form of permanent income. One the other hand, if your stock portfolio goes up, you perceive as temporary due to what you read in the paper.

“That’s why we obsess over the fed because we think all this stuff is temporary and we want to find out how temporary it is, because when the fed raises rates… I guess to mix my metaphors a little bit with the old warren buffets’ old line that we find out that we are swimming naked when the tide goes out”.

That’s why a rate hike is such a big deal in the financial markets.
What will the Feds do?

There are two things to keep in mind concerning what the feds will do. There’s the economic data and the market pricing of it”.

He says that based on the economic data, the fed has set up some parameters for itself and from a data dependent point of view, they have everything they need, but James believes that what will hold back the feds will be market instability. Currently, there is a great deal of volatility and uncertainty in the Chinese and emerging markets. He believes the instability in these markets will cause the feds will to maintain interest rates because they are hoping that things would calm down enough by Dec. He mentions that part of the reason for the unstable markets is due to the Feds insistence on raising rates.

EU

On his view of the EU, James Bianco has this to say:

“The history of the Europe is for the last thousand years is every generation they try to kill each other and the last one was in World War 2”.

Then they decided to get closer in order to prevent more wars. This led them to create the euro. According to him, the problem with the euro, is that you have 17 different countries in different cycles using the same currencies. He says that Draghi’s plan is to get interest rates to below zero and continue trying to stimulate the economy. He goes further to explain that the current refugee crisis that the EU is facing will have a huge negative impact on their economy. He doesn’t think Draghi’s plan will work because people think it’s temporal and as long as they think that, the permanent income hypothesis will take effect.

Check out his interview with Gordon T Long which covers this and much more.

Abstract written by Chukwuma Uwaga – chuwaga@gmail.com

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.


09/02/2015 - Adam Andrzejewski Talks Financial Repression & Actions for Government Transparency

Special Guest: Adam Andrzejewski – Chairman, American Transparency and Editor, OpenTheBooks.com

 

ADAM ANDRZEJEWSKI DISCUSSES HIS PUBLIC INITIATIVES TO BRING MORE TRANSPARENCY OF GOVERNMENT SPENDING AT ALL LEVELS TO THE ELECTORATE.

FRA Co-Founder Gordon T. Long interviewed Adam Andrzejewski, the Chairman of American Transparency and Editor, OpenTheBooks.com. on his personal goals which prompted his launch of these public projects.  Mr Andrzejewski’s American “Heratio Alger” story needs to be told.

In October 1997, Adam Andrzejewski founded an independent publishing business with his brother, Abram Andrzejewski. The publishing company, HomePages Directories, employs nearly 150 people and has an annual revenue of nearly $20 million. Adam Andrzejewski also started a grassroots initiative to enable local counties and school boards to post their check register online.

On March 1, 2009, Adam Andrzejewski announced his intent to run for the office of Governor of Illinois. Andrzejewski was one of four Republicans to file with the Illinois State Board of Elections to be placed on the ballot, submitting over 14,000 signatures. On 25 January 2010 Andrzejewski received an endorsement from Lech Wałęsa, former Polish President and Nobel Peace Prize Laureate. On 1 February 2010, Andrzejewski was endorsed by talk radio host Rush Limbaugh. On 2 February 2010 Andrzejewski was defeated by a significant margin in the Republican primary for Governor of Illinois.

His platform was based on government transparency. His campaign slogan was “Every Dime Online in Real Time.” Today as Chairman of American Transparency and Editor, OpenTheBooks.com. he is following through in a high profile and aggressive manner on his campaign platform and his personal goal to bring visibility of all levels of public government spending to the voting public.

Adam believes it is this visibility which will force accountability and responsibility from elected officials charged with the fiscal decisions of local, city, state and federal government offices.

“Open The Books” has become a national rallying cry for transparency in public spending. U.S. Senator Tom Coburn, sponsor of the 2006 “Google Your Government Act,” recognized Adam’s work,

“Open the Books is doing the work I envisioned when the Coburn-Obama bill became law. Their innovative app and other tools are putting sunlight through a magnifying glass.”

LEARN MORE & SUPPORT OPEN THE BOOKS

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.


08/31/2015 - Chris Casey Talks Financial Repression & the Myth of Money Velocity

Special Guest: Chris Casey – Managing Director, WindRock Wealth Management

 

CHRIS CASEY DISCUSSES TYPES OF FINANCIAL REPRESSION, THE MYTH OF MONETARY VELOCITY, AND WHAT IT MEANS FOR INVESTORS.

FRA Co-Founder Gordon T. Long interviewed Chris Casey of Windrock Wealth Management on the monetary policy aspects of financial repression.  Mr. Casey, an Austrian economist, is a frequent speaker and writer on macroeconomic topics and their related investment implications.

TYPES OF FINANCIAL REPRESSION

“Financial repression can best be described as government intervention in the financial markets which causes distortions not only within financial markets, but throughout the economy.”

According to Mr. Casey, financial repression can take direct and indirect forms.  The most damaging form of indirect financial repression is the expansion of the money supply decreases interest rates.  The artificially lowered interest rate structure causes widespread malinvestment within an economy.

All of this would perhaps be tolerable if monetary policy actually stimulated the economy, but Mr. Casey states that even Federal Reserve economists have recognized the ineffectiveness of the multiple quantitative easing programs.

THE MYTH OF MONETARY VELOCITY

Mainstream economists believe inflation is currently mitigated by today’s historically low monetary velocity (“the number of times one dollar is spent to buy goods and services per unit of time”), so the money supply can be expanded without the damaging effects of inflation.  Chris Casey takes issue with this as well as the very concept of velocity.

“Velocity has no impact whatsoever, in fact it is a meaningless statistic.”

Worse, the theoretical construct from which the concept of velocity derives, the Fisher Equation of Exchange, is equally faulty.  This equation attempts to explain the price level within an economy, but while it includes the supply of money, it ignores the demand for money which renders it useless.   A useless theory in the wrong hands can create disastrous policy:

“The real danger is that by looking at velocity, by being focused on velocity, mainstream economists have been focusing on a false measure which creates false decisions which is going to have a very real impact on investors.”

WHAT SHOULD INVESTORS DO?

Where may the faulty policy decisions lead the U.S. economy?  Chris Casey believes that “the endgame eventually will be a massive inflationary recession.”  Gordon T. Long then asked Mr. Casey:

“What could you suggest to our listeners that they should be doing or thinking about to protect themselves in this environment?”

After recommending investors consider becoming fairly liquid, Chris Casey addressed how to profit from the coming economic environment:

“Build a portfolio of hard assets.  You want to look at anything from precious metals to certain types of real estate such as rental residential real estate to farmland.  You potentially want to look at foreign currencies to diversify from the U.S. dollar despite the dollar’s strength over the last 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.


08/31/2015 - Ramiro Larroy – Lessons in Financial Repression from Argentina

Special Guest: Ramiro Larroy – Partner & Director, Integras Capital

 

RAMIRO LARROY DISCUSSES HIS VIEWS ON WHAT LESSONS THE WORLD CAN LEARN FROM RGENTINA ABOUT INVESTING IN AN ERA OF FINANCIAL REPRESSION

FRA Co-Founder Gordon T. Long interviewed Ramiro Larroy, Partner & Director, Integras Capital in Buenos Aires, Argentina.

FINANCIAL REPRESSION

“Financial Repression globally is basically governments keeping interest rates below the rate of inflation as a way of taxing savers”

Ramiro suggests that in Argentina it is much more direct it its enactment by governments. “We had many experiences throughout the years where depositors in banks were ‘bailed-in’ and forced to take on debt as opposed to their deposits”

“IT IS A TAX! It was applied a little differently in Argentina than how it is being achieved by governments in developed countries.”

THE ARGENTINIAN EXPERIENCE

“When Argentina regained democracy in 1983 we had a government that from an economic standpoint did not do that well. They ran fiscal deficits and prices of exports were poor. By the end of this government in 1989 the country was heavily in debt with inflation. At the same time they paid high interest rates on deposits so people kept deposits in the bank. With these deposits the banks were able to buy government debt. In 1990 enacted (like at midnight!) a program where everyone that had deposits received a bond.” Literally, overnight with no recourse.

“Maybe people were able to earn a rate higher than inflation before, but all of a sudden they lost everything!” The government did not have the money to pay the money owed on the bonds it had issued. This was a way to reset and issue a new long term bond.” Argentinians have experience in their bank deposits being taken from them.

CHANGED INVESTMENT SENTIMENT

“These banking actions resulted in a huge change in the mind set of investors! It is now very difficult for a family to have a substantial part of their assets to be held locally or exclusively in the banking sector. Though rates may be ‘ok’ in the banks, people are not comfortable with the risks they are taking! Pretty well everyone has developed OTHER WAYS OF STORING WEALTH, from Real Estate, to buying Gold to buying physical US Dollars.”

“The more wealthy individuals and families have their wealth outside of Argentina as a way of protecting those assets. It is not about higher returns, but rather not wanting to lose the wealth.”

STORE OF VALUE STRATEGIES

“Store of Value Strategies are so prevalent that on this day we are talking, in the morning paper of one of the largest newspapers in Argentina, the major story is “8 Strategies Not to Lose Your Wealth in the Upcoming Depreciation! Need I say more!”

.. there are many lessons to be learned in this broad 35 minute interview discussion. Maybe the most important is that Argentina is 15-20 years ahead in regard to Financial Repression investor strategies. Government actions are very predictable when debt becomes too large for officials to handle.

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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.


08/29/2015 - Danielle DiMartino Booth Talks Financial Repression, A Camp Kotok 2015 Guest

Special Guest: Danielle DiMartino Booth – Former Federal Reserve Advisor, Chief Market Strategist, The Lisco Report

 

Having done lots of fishing this summer at Camp Kotok in northern Maine, Danielle DiMartino Booth is here interviewed by FRA Co-Founder Gordon T Long. Danielle is a former Dallas Federal Reserve Bank Advisor and now the Chief Market Strategist of The Liscio Report. She takes an Austrian School of Economics viewpoint on economic and financial matters.

Danielle emphasizes how she understands financial repression “in her bones” because she worked in “The Financial Repression Factory”, referring to the Federal Reserve. She understands the level of malinvestment, mispricing and lack of price discovery as the unintended consequences of repressive and obfuscating monetary policies of central banks. She thinks the Federal Reserve “does not have a deep enough appreciation of malinvestment .. as if Ludwig von Mises never walked the planet.”

She is angered by the considerable level of savings which has been foregone thanks to the quantitative easing (QE) policies of the Federal Reserve. Gone are the days of retiring on a Certificate of Deposit paying a decent level of interest income, due to the virtually 0% interest rates.

Danielle says there must be a renewed emphasis on education and innovation in America for it create jobs and jobs that are higher-paying generally than is currently the case.

Check out her recent speech – subscribe to our Mailing and Alert System and we will email you the PDF or view the Scribd below:

July 2015 Speech by Danielle DiMartino Booth

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.


08/25/2015 - Peter Schiff Talks Gold Backed Debit Cards

Special Guest: Peter Schiff – CEO & Chief Global Strategist, Euro Pacific Capital Inc.

 

PETER SCHIFF TALKS FINANCIAL REPRESSION, CRYPTOCURRENCIES AND MORE.

Continuing with our series on financial repression, today we have Peter Schiff here with us who is being interviewed by FRA’s Gordon T long. Peter Schiff in his own words has been in the industry his whole life. He is also one of the few people to predict the financial crisis and was vocal about it in 2008.

FINANCIAL REPRESSION.

According to Peter one of the ways in which the government represses its citizens financially is through the banking system. He talks about the lack of privacy that arises from the opening of a bank account.

In America today, if you have a bank account you have no privacy anymore. Your banker is basically an unpaid spy working for the government trying to monitor your activities for anything suspicious so they can turn you in to the government!”

Other ways include inflation, which erodes the value of one’s assets over time and government taxation in its many forms.

BAIL-INS AND CASHLESS SOCIETY.

“Bail-ins are a function of government deposit schemes which really don’t work!”.

He goes on further to explain that the reason they don’t work is due to the safety nets which these schemes provide. A situation is created where the banks “know that the depositors couldn’t care less how risky the bank is”. He alternatively suggests that market forces be allowed to reign in the banks so that banks compete on the basis of how much risk they can mitigate.

“People are looking for an alternative to the fiat currency created by governments”.

He mentions is one of the basis on which bitcoin was formed, although he doesn’t believe in its longevity going as far as likening it to a Ponzi scheme. The flaw in bitcoin according to peter Schiff is its lack of intrinsic value, unlike gold.

EURO PACIFIC BANK

“How do I spend my gold?”

Peter Schiff asserts this is a problem faced by consumers around the world and his bank Euro Pacific provides a solution to this problem. Customers are provided with gold and silver backed accounts with which they can access their gold 24/7. This works by using a 2-step process in which the customers have to open their account and sell off gold before they can swipe their card. Ultimately, he plans on streamlining this 2-step process into a 1-step process. This will work by converting gold in real time at the market value when customers swipe their debit cards.

Peter Schiff mentions how the real benefit from this system will be the ability of customers to save their gold since it holds on to its value and spend their fiat currencies. He goes on to compare his system and that of bitgold saying that the concept of giving out free gold which bitgold uses is not a viable business plan.

Check out his interview with Gordon T Long which covers much more of this.

Abstract written by Chukwuma Uwaga – chuwaga@gmail.com

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.


07/23/2015 - Guillermo Barba talks FINANCIAL REPRESSION w/FRA

Special Guest: Guillermo Barba – Mexican Economist, Blogger & Forbes Mexico Writer

 

A Mexican Economist, Guillermo Barba never heard of the Austrian school of economics until after graduating. Mexican University teaching still focuses on Marxist philosophy and Keynesian thinking. His subsequent exposure to the Austrian school of Economics was an eye opener which started him on a road which he hopes to help others in Mexico and Latin American become exposed to. He believes that the socialist thinking which South American universities are still oriented towards is one of the cancers in the world and hurting economic development.

“I became a real economist after I met the Austrian School of Economics!”

“The Austrian School has a framework to explain the current ‘economic mess’ in the world today!”

Barba’s popular Mexican blog is focused on financial intelligence because he felt the truth was not being told and it needed to be.

FINANCIAL REPRESSION

“Mexicans know perfectly what Financial Repression means! Living in Mexico means living in the neighborhood of the United States of America. That is a lot of financial repression!”

“The entire world is suffering from Financial Repression because there are Financial Repressors. That is the problem. Who are those financial repressors? As Hugo Salinas Price told him, the entire world is controlled by a group of about 1000 people and a smaller core group control most of the decisions. Most of them are bankers”

Barba believes that t he global reserve system which is based on the US dollar “is basically a scam”. According to Barba, to keep the whole system working the powers to be must get people into debt. Debt must grow exponentially.

IMPORTANCE OF SAVINGS

“Pushing people to spend and taken on debt versus savings is insane! Savings is the base and the cornerstone of development. Savings are the cornerstone of capital! The world needs capital accumulation, not debt accumulation!

“Debt accumulation is not sustainable. Capital accumulation is sustainable!”

Guillermo Barba believes the powers to be simply don’t know what to do other than just ‘print more money’. He also sees the US dollar getting much, much stronger as people generally won’t know what to do to protect their wealth. This will offer opportunities to use inflated US dollars to buy real estates at attractive prices.

….. there is much more in this interview on the Mexican and South American economies.

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.