Mark Nestmann reports on the decisions of the G20 group of nations from last month .. “The world’s megabanks now have official permission to pledge depositor accounts as collateral to make leveraged derivative bets. And if they lose a bet, the counterparty to the contract has first dibs on your money.” .. in addition, the G20 endorsed a proposal entitled Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution – Deposits in banks that are too big to fail will be “promptly recapitalized” with their “unsecured debt.” (mostly bank deposits) .. “Insolvent banks will recapitalize themselves by converting your deposits – checking accounts, but also money market accounts and CDs – into stock.” .. the G20 also declared that derivatives are secured debts – your bank can pledge your bank deposit to a secured creditor so that in case the bank does not win the derivative bet – “heads the bank wins, tails you lose” .. if you have U.S. bank deposits less than the U.S.-federally insured amount – $250,000 – the above treatment won’t be applied, but consider that there is only $54 Billion in the FDIC kitty to insure $6 Trillion in insured deposits, not to mention derivatives contracts with a total value of nearly $300 trillion. The failure of just a single major Wall Street bank could exhaust the fund” .. Nestmann thinks the reason why the G20 is doing this is they hope you will invest in government bonds backed by the “full faith and credit” of its member governments – this financial repression-driven buying will help to keep down interest rates on the high debt level of G20 member governments.

LINK HERE TO THE ARTICLE

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

Central Banks by creating ‘Excessive’ INFLATION actually sow their eventual destruction by creating DEFLATION

EASY CREDIT CREATES EXCESS SUPPLY & DEMAND WHICH EVENTUALLY REACH EQUILIBRIUM

1. BROUGHT FORWARD DEMAND THEN LEAVES A DEMAND RATE VACUUM
2. INFLATION REDUCES REAL DISPOSABLE INCOME WHICH FURTHER REDUCES DEMAND

SHRINKING AGGREGATE DEMAND THEN REDUCES COMMODITY PRICES WHICH LEADS TO COLLAPSING COLLATERAL VALUES

THE OIL SHOCK IS YOUR FIRST SIGN!

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.

Update from the IMF on some of their financial repression tools, so-called as “macroprudential policy tools.”

LINK HERE TO THE ARTICLE

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

Simon Black highlights how from Sweden to the euro zone to Switzerland, central banks & some commercial banks are beginning to force nominal interest rates into negative territory .. supposedely in an effort to help generate some inflation .. “Remember, it was the ECB that has led the world into negative interest rates. They are clearly the most valiant soldier in the War on Deflation, having pushed negative interest rates into the broader banking sector. If you are a very lucky German, for example, you may now be finding yourself PAYING your local bank for the privilege of letting them make loans at your expense. And lucky institutional investors across the world are finding themselves fortunate enough to be paying NEGATIVE yields to loan money to bankrupt European governments. Look at the bright side: it’s quite an honor to be able to fight for your country (or whatever quasi-federalized supra-national entity the EU is supposed to be). You too can do your part in the War on Deflation. Yes, it might cost you your entire life’s savings and your family’s future livelihood.”

LINK HERE TO THE ARTICLE

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

Ronald-Peter Stoeferle is a noted Austrian economist and money manager who believes strongly that “we should expect that financial repression as well as wealth taxes in various facets which will increasingly gain in importance in coming years”. He believes “this to be a disastrous strategy, as the redistribution will merely buy time, while the structural problems remain unsolved.”

A NEW MONETARY REGIME

Since 1971 we have had a new monetary era or regime that has directed massive debt induced growth which has been doubling every 10 years. The system presently wants and needs to deleverage but the political pressures don’t allow for central bankers and politicians to let this happen. What we have instead is policy induced inflation pressures creating monetary tectonic pressures.

Incrementum believes we presently have a “Bull market in Greed and a Bear Market in Fear” which will resolve itself with Gold being one of the big winner and moving to $2300 US/Oz. The recent weakness in Gold is due to:

• Disinflation and rising real interest rates,
• Partly declining money supply (especially in the ECB),
• Very weak commodity prices,
• Record high short positions,
• Rising opportunity cost of owning gold due to the rally in equities,
• Tightening credit standards,
• Increasingly negative analyst opinions,
• Firmer US$ based on confidence in the US Economic outlook,
• A high level of conviction in the ability of central bankers to “get it right”.

Most, if not all, of these false premises or signals will soon begin cyclically reversing.

“Financial repression is ultimately a government imposed transfer of wealth.”

AUSTRIAN INVESTING

Ronald-Peter Stoeferle and the team at Incrementum LI are developing a new approach which they refer to as Austrian Investing which combines the Macro views of the Austrian School of Economics with Asset Management. Their latest book “Austrian Investing between Inflation & Deflation (presently available in German only) shows how grasping the consequences of the interplay between inflation and deflation will be crucial for prudent investors. Investors should prepare for both scenarios – inflation and deflation.

Followers of the Austrian School have been extremely successful at anticipating major economic events like the Great Depression and the Housing Bubble.

• Monetary Policy – The Starting Point
• Macro Orientation – Most Important today
• Top-Down
• Understanding that central bankers & politicians cannot control the dynamics of inflation.

It is important to realize that radical monetary interventions will not lead to self-sustained recovery but to further turmoil in the financial markets.

AUSTRIAN INVESTING REQUIRES PROPRIETARY INFLATION INDICATORS

Understanding the Monetary Tectonic forces of Inflation and Deflation is critical to investment success. As such Incrementum LI uses their “Incrementum Inflation Signal Indicator”. Since August it has been signalling massive Disinflation / Deflation which has shifted their portfolio allocations.

 Private Investors should watch the Gold-Silver Ratio closely.

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.

CNBC’s Rick Santelli & Charles Biderman discuss the global 0% rate policy, how it is causing global recession.

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.

From last year but mostly still relevant, provides insight into what financial repression is & what the investment implications are .. looks at financial repression as:

LINK HERE TO THE ARTICLE

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

In his latest essay, former Assistant Secretary of the U.S. Treasury Department Dr. Paul Craig Roberts identifies the dangerous trend of more & more manipulation of the financial markets by central banks & private banks worldwide, provides analysis & consideration of whether this trend can continue or not .. emphasizes the forces of financial repression – negative interest rates – happening in a supposed economic recovery”

LINK HERE TO THE ARTICLE

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

6 years of highly visible Dodd-Frank legislation and thousands of lines of regulation, with no public debate, was just quietly removed and “neutered” by the stealth of an “Ear-Mark”.

To maintain government financing the banks have held Washington hostage.

Maintain our profit margins and have the public accept the risk of $3003 TRILLION or….. else!

• Senate Passes The Cromnibus: Here Is Who Voted “No” And What It Actually Contains 12-14-14 Zero Hedge
• Presenting The $303 Trillion In Derivatives That US Taxpayers Are Now On The Hook For 12-12-14 Zero Hedge
• Democrats Who Voted For The Cromnibus Received Double The Money From Wall Street Than “No” Voters 12-13-14 Zero Hedge
• Wall Street Moves to Put Taxpayers on the Hook for Derivatives Trades12-05-14 Michael Krieger, Liberty Blitzkrieg
• “The Most Egregious Sections Of Law I’ve Encountered During My Time As A Representative” 12-05-14 Michael Krieger, Liberty Blitzkrieg
• Citigroup Written Legislation Moves Through the House of Representatives.

The Bill (yet another ‘Ear-Mark’) allows financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp. — potentially putting taxpayers on the hook for losses caused by the risky contracts. Big Wall Street banks had typically traded derivatives from these FDIC-backed units, but the 2010 Dodd-Frank financial reform law required them to move many of the transactions to other subsidiaries that are not insured by taxpayers.

“It is because there is a lot of money at stake,” Johnson said. “They want to be able to take big risks where they get the upside and the taxpayer gets the potential downside,”

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.

Bloomberg reports on the unfolding fallout now happening in energy-company debt as a result of Federal Reserve financial repression policies of zero interest rates & stimulus-induced asset inflation .. “Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to 8% next year .. ‘Anything that becomes a mania — it ends badly .. And this is a mania.'” .. The Fed’s decision to keep benchmark interest rates at record lows .. has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked.”

LINK HERE TO THE ARTICLE

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

“The current capitalism suffocating regime of Keynesian central banking and extreme financial repression has created systematic bias and noise .. These distortions are the result of mis-allocations and malinvestments reflecting artificial sub-economic costs of debt and capital. The resulting bubbles and booms, in turn, cause highly aggregated measures of economic activity to be flattered by the unsustainable production, spending and investment trends underneath at the sector level .. Bubble finance does not create growth; it funds phony booms that end up as destructive round trips .. The meaning of the oil crash is that the central bank fueled bubble of this century is over and done. We are now entering an age of global cooling, drastic industrial deflation, serial bubble blow-ups and faltering corporate profits.”

– David Stockman

LINK HERE TO THE ARTICLE

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

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.

Bloomberg & Morgunbladid report that Iceland plans to impose an exit tax as part of removing its capital controls – all bank assets would be subject to the levy .. more financial repression .. “Representatives from Iceland’s government, central bank and parliament discussed imposing a tax as high as 40% on investors exiting the island.”

LINK HERE TO THE ARTICLE

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

“There are financial time bombs planted everywhere in the world economy because central bank financial repression has caused drastic mispricing of nearly every class of financial asset, which is to say, every layer of collateral which has ratcheted-up the entire edifice .. This drastic central bank driven financial repression has unleashed a mindless pursuit of ‘yield’ or short-term trading gains that give the concept of ‘irrational exuberance’ an entirely new definition .. What is happening now is that risk is coming out of hiding; the collateral chains are buckling; the financial time bombs are beginning to explode. There is nothing especially new about this development—its the third occurrence this century. But there is possibly something different this time around the block. This time the carnage could be much worse because the most recent tsunami of central bank credit was orders of magnitude larger and more virulent than during the run-up to the Lehman event or the dotcom implosion. Moreover, the central banks are now out of dry powder—– impaled on the zero-bound. That means any resort to a massive new round of money printing can not be disguised as an effort to ‘stimulate’ the macro-economy by temporarily driving interest rates to ‘extraordinarily’ low levels. They are already there. So duck and cover. This storm could be a monster.”

– David Stockman

LINK HERE TO THE ARTICLE

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

GoldCore article on recent developments relating to bailins & financial repression .. Banks in most western nations are vulnerable to bail-ins in 2015 & the recent G20 meeting in Brisbane was a further move towards the stealth bail-in regimes .. S&P Managing Director Stefan Best: “The European bail-in tool decreases the predictability of state support.”

LINK HERE TO THE ARTICLE

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

TomWoodsTV interviews David Stockman .. Stockman says the Keynesians have had their day in Japan & worldwide .. rails against Harvard University’s Ken Rogoff on the abolition of physical cash to facilitate the further expansion of monetary policy – governments trying to implement negative nominal real interest rates to take wealth away from bank depositors to help pay down government debt .. it’s financial repression .. 30 minutes

LINK HERE TO THE ARTICLE

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

The WSJ reports that big U.S. banks – primarily of the TBTF variety – “are urging some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits.” .. The banks, including J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp. , have spoken privately with clients in recent months to tell them that the new regulations are making some deposits less profitable .. “In some cases, the banks have told clients, which range from large companies to hedge funds, insurers and smaller banks, that they will begin charging fees on accounts that have been free for big customers, the people said. Bank officials are also working with these firms to find alternatives for some of their deposits, they said .. J.P. Morgan told some clients of its commercial bank recently that it would begin charging monthly fees on deposit accounts from which clients can withdraw money at any time. The new charges will start Jan. 1 for U.S. accounts, according to an Oct. 21 memo reviewed by the Journal, and later for international accounts.”

LINK HERE TO THE ARTICLE

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

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.