Special Guest: Douglas E. French – Author, Past President of the Ludwig von Mises Institute and noted Casey Research Contributor

“The biggest bubble we have is US Treasuries. The believe you can’t get hurt is a quality you always see in a bubble. The idea that lending an entity, that is $17T and going to $18T and beyond in debt, and will never be able to pay that back and the idea that you will get 2.5% for 10 years and it is ‘return free risk’ is certainly bubble territory!“

FINANCIAL REPRESSION

“You have PhD’s at the Fed trying to create economic growth with inflation and low rates. The repression is that people like you and I won’t ever be able to retire because we won’t be able to get any return on our money so we can prop up the government and keep it in business.”

This is the overall Macro Strategy of the government but central planning has never worked! ….. They are essentially trying to print their way out of a jam! ……. Because of Financial Repression almost ¾ Trillion dollars has gone to the government that should be in private hands!!!”

FRENCH WARNS INVESTORS

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 Ponzi Economy (from John Hussman)

The central point is this. The U.S. economy has shifted course from one of productive capital accumulation to a reliance on continuous expansion of debt in excess of the economic ability to repay it. Call this the Ponzi Economy.

The U.S. Ponzi Economy is one where:

1. Domestic workers are underemployed and consume beyond their means;
2. Household and government debt make up the shortfall;
3. corporate profits expand to a record share of GDP as revenues are sustained by household and government deficits;
4. Local employment is replaced by outsourced goods and labor;
5. Companies refrain from productive investment, accumulate the debt of other companies and issue new debt of their own, primarily to repurchase their own shares at escalating valuations;
6. Our trading partners (particularly China and Japan) become our largest creditors and accumulate trillions of dollars of claims that can effectively be traded for U.S. property and future output;
7. Fed policy encourages the yield-seeking diversion of scarce savings toward speculation in risky securities; and
8. As with every Ponzi scheme, everyone is happy as long as nobody seeks to be repaid.

LINK HERE to the article chart taken from

HUSSMAN: Though a certain amount of disruption resulting from overvalued financial markets, compressed risk premiums, and excessive debt issuance is baked-in-the-cake, there is also a ray of hope. Regardless of the point the U.S. economy has arrived to, there is room to improve matters by making each next decision well. Those next decisions should include ……

“an abandonment of financial repression by the Federal Reserve and a gradual normalization of interest rates that would increase savings, discourage speculative yield-seeking, and allow the markets to signal supply and scarcity without distortion“

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.

Austrian School Economist & Director of International Development withEuro Pacific Capital firm Dickson Buchanan compares the relative safety between the so-called safe-haven investments of government bonds versus the “barbarous relic” of gold .. sees the government bond market as being under endless interest rate suppression (financial repression) .. “Today we live in the monetary madhouse erected by our central banks. Distortion and irregularity prevail, not clarity and stability. Instead of private investors looking for win-win profit opportunities in a free market for money and credit, we have central banks using ‘forward guidance’ to dictate where capital should flow. Today’s bond market and the giant balance sheet of the Fed are a direct result of their intervention .. Government debt is simply not a safe play in today’s markets. It’s either speculative or it’s suicidal. On the other hand, there is no speculation about gold. The yellow metal’s value has remained relatively stable for thousands of years without a government’s promise. Gold is no ‘barbarous relic’ – it’s our financial salvation.”

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.

Bloomberg article highlights how reckless derivative speculation is in big banks which are being supported by the government .. Danielle Park comments on this article: “When we don’t learn, we are doomed to keep suffering…the investment banks are still backed by the public purse today and are now bigger and bolder in concentrated risk bets than ever before.” ..Bloomberg notes that Citigroup now has the largest stockpile of interest rate swap derivatives – a type of derivative that can swing in value when central banks raise rates: “More than 92% of the bank’s derivatives don’t trade on exchanges, making it harder for regulators to spot dangers in the market .. financial repression of interest rates is making it harder to profit from interest rate swap derivatives: “Reduced volatility associated with Fedpolicies to suppress interest rates is making it harder to profit from swaps.”

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.

BMG Bullion’s Nick Barisheff sees government policy described as financial repression as a hidden form of taxation & a hidden method of transferring wealth from investors to the government .. advises investing in gold as the most effective solution to financial repression .. “Financial repression is a hidden form of taxation and a hidden method of transferring wealth from investors to the government. Again, this makes sense when we accept that the debt owed to privately owned banks, like the Federal Reserve, must be addressed through indirect means. Without the option of austerity, blatant direct taxation and increasing interest rates, governments are forced to employ the three methods of debt reduction available to them in a more secretive way” – indirect taxation inflation; the involuntary assumption of government debt by its citizens; debasement or inflation brought about through unbridled currency creation & capital controls.

Nick Barisheff BMG Bullion www.bmgbullion.com

LINK HERE to the paper

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.

St. Gallen Symposium with UBS, HSBC, Credit Suisse, Zurich Insurance Group.. a year old but still relevant

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.

“I’m looking at the enormous risk of holding money or other assets in a bank. We know that banks were bankrupt, and since then nothing has changed. The balance sheets haven’t improved at the banks. The only thing that has happened is the banks now have the right to value toxic debt at maturity rather than at market value. We know that if they valued these toxic assets at market value, most banks would not survive .. Banks are paying almost zero interest to most customers, and after fees it could even be a negative return. And the risk of holding your money in the bank is bigger than ever .. Governments have increased their debts and saved the banks. But after Cyprus most countries have adopted the bail-in principle. This means that next time around, and there will be a next time, anyone who has assets in the bank is likely to lose either much or all of them. But we won’t just have bail-ins. There will also be forced saving or even confiscation of investor money. Governments will force investors to put a major part of their funds in the bank into government securities to finance the increasing deficits that we will see in the next few years .. Coming back to the massive derivatives positions held by banks in the U.S., they have an unimaginable several hundred trillion dollars’ worth of derivatives. The largest part of this potentially lethal derivatives bubble is in government bonds. That’s the backstop. So it’s critical for governments to keep bond rates as low as possible to keep the banks solvent, because if rates go up, the derivatives implosion will destroy the banking system. This would have horrific consequences for the world .. So governments are doing all they can to keep interest rates low. But they will fail. Because of the money all governments, including the U.S. government, will print in the next few years, at some point we will see the derivatives implosion that will trigger the end of the current financial system.”

– Egon von Greyerz

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.

7.6M AMERICANS LIVING ABROAD feel like they are now being “treated like crooks” by being cut off by banks and brokerages as a result of US FINANCIAL REPRESSION.

“A U.S. crackdown on money laundering and tax evasion is the excuse for the blatant and punitive abuse”.

Many registered firms are being forced to close accounts for Americans abroad or decline to open new ones, in order to avoid:

• Increased compliance costs,
• The consequences for potential errors (punitive US regualtory fines).

FOREIGN ACCOUNT TAX COMPLIANCE ACT (Fatca).

• Congress enacted it in 2010 after learning that foreign banks, especially in Switzerland, had profited by encouraging U.S. taxpayers to hide money with them abroad. The main provisions of Fatca took effect in July.
• As a result, foreign financial firms must report to the Internal Revenue Service investment income and balances above certain thresholds for accounts held by U.S. customers.
• Nearly 100,000 banks and other companies have registered with the IRS.
• If they hadn’t, all their customers would have 30% withheld from income received from U.S. sources, such as interest and dividends.
• A bank official must sign a statement guaranteeing compliance with Fatca. “Banks look at this from a liability perspective,” he said. “The less the bank has to report to the IRS, the less risk there is.”

AGGRESSIVE ENFORCEMENT

The heightened enforcement of rules is against so-called illicit finance, such as money laundering or financial transactions that breach U.S. sanctions. Enforcement is again intensifying after a pause during the financial crisis, making it more expensive or difficult to move money from one country to another. Among those affected by the tightened policies are retirees of modest means

Expats Left Frustrated as Banks Cut Services Abroad 09-11-14 WSJ

LINK HERE to the article

BEING INTENTIONALLY PUT IN PURGATORY?

Americans abroad are also encountering troubles with U.S.-based investment accounts. In recent months, firms including Fidelity Investments, Charles Schwab Corp., T. Rowe Price and others have told overseas investors and advisers they may no longer buy or trade mutual funds.

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 commentary, John Rubino* explains how inflation & currency devaluation are forms of “default” of a country on its debt .. on the effects of currency devaluation: “Savers now accepting 0.5% interest on bank CDs will be shocked to find out that the government is explicitly trying to devalue the currency by 5% a year, giving those CDs a -4.5% annual return and making saving for retirement — or even preserving capital — impossible.” .. highlights the secondary & tertiary effects of currency devaluation or inflation to address a big debt problem – there is actually more debt taken on .. worries about the potential for what Austrian economics calls a “crack-up boom” – when a critical mass of people figure out the government is going to make the currency worth less each year for a really long time: “Individuals and businesses lose interest in holding the currency, instead spending it on real stuff as fast as it comes in, thus setting off an asset bubble/hyperinflation.”

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.

Economist Richard Duncan* explains why he thinks the Federal Reserve will soon be launching another round of quantitative easing (QE) .. in recent years,QE has been allowing the government to finance its deficit spending at very low interest rates (financial repression) .. over the last few years, the U.S. government has borrowed approximately $5.8 trillion to finance its budget deficits – during that time, the Fed acquired $1.9 trillion worth of government bonds: If the Fed had not bought those bonds, either the government would have had to spend $1.9 trillion less, which would have removed $1.9 trillion of aggregate demand from the economy, or else the government would have had to borrow the $1.9 trillion from the financial markets. That would have drained liquidity from the system and pushed up interest rates Higher interest rates would have further damaged the economy – “QE allowed the government to boost aggregate demand through deficit spending and to finance its deficit spending at very low interest rates.” .. the Fed also bought mortgage debt to stop the collapse in property prices .. Duncan sees the stock market runup as being fueled by QE, helping to relfate the economy .. “It is not at all certain, however, that the economy will remain ‘reflated’ when QE ends in October. In fact, the odds are quite high that it will begin to deflate again. Should that occur, the Fed would then have to decide whether to do nothing and allow everything it has accomplished to unravel in a process most probably leading back to severe recession and deflation or else to launch yet another round of Quantitative Easing. I believe it will be an easy decision for the Fed to make.After all, what’s a few trillion dollars more (shared) among friends?”

– Economist Richard Duncan

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 Trillion of Budget Deficits

Fed Funds Rate at 0% for nearly 6 Years

$3.5 Trillion of Fiat Money Creation

$25 Trillion Expansion of Household Net Worth (thanks to QE)

We have managed to achieve this….

THE POWERS TO BE ARE GETTING DESPERATE!

Expect FINANCIAL REPRESSION to accelerate & become more aggressive.

Keynesians See FINANCIAL REPRESSION

as the only option.

Read Yellen Speech – Fisher’s Speech

SEE: Financial Repression Archives – 07-20-14

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.

“With returns on government bonds at historical rock-bottom prices, sovereign wealth funds (SWFs) are emerging as part of the trend that shifts confidence and capital from the Public to the Private sector .. we see both sovereign wealth funds as well as central bank reserves moving into the stock market markets and other higher-yielding assets like real estate at a rate that private investors have not even contemplated. The traditional talking-heads are completely lost ranting on and on about bubbles yet they cannot grasp that the retail speculative element is not yet in the marketplace .. The capital flows are in themselves being altered as government capital itself has been forced to look further afield to grow public pension money and to maintain some diversification in central bank currency reserves as the euro has reduced the number of currencies that can be used for diversification. The resulting tide of money flows is becoming starkly different as governments themselves are being forced into private investment that is interestingly creating a danger of distorting stock markets to escape the narrowing opportunities to achieve diversification in currencies and the collapse in interest rates that defeats pension funds as a whole. These two converging trends are causing prices to reflect political priorities rather than traditional financial reality.”

– Martin Armstrong

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.

Guess where most of the new mothers below shop??

Any Correlations Here?

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.

International Man article on how western world indebted governments need money, how they will protect the big banks at the expense of the citizens withfinancial repression ..  The International Monetary Fund (IMF) published a horrifying paper, called The Fund’s Lending Framework and Sovereign Debt. That paper in turn was based on one from December 2013, called Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten .. The December 2013 document, right at the start, says that financial repression is necessary: “The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression .. As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.” .. The IMF report goes on to say: “Governments can stuff debt into local pension funds and insurance companies, forcing them through regulation to accept far lower rates of return than they might otherwise demand .. Domestic defaults, restructurings, or conversions are particularly difficult to document and can sometimes be disguised as ‘voluntary’ .. The Fund would be able to provide exceptional access on the basis of a debt operation that involves an extension of maturities .. That means that 30-day notes can be instantly turned into 30-year bonds.” – this last sentence means the ability to change 30-day notes into 30-year bonds, effectively holding the money captive for a much longer period of time .. here are some more examples globally:

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.

Financial Repression Using Shrinkflation: “As ‘shrinkflation’ becomes no longer viable, it will soon reveal itself in the form of higher consumer prices. And with central banks around the world creating inflation as a policy measure so as to inflate away the world’s massive debt pile, the question remains as to whether the central banks will be able to control this deliberately induced inflation in an environment where ‘shrinkflation’ no longer works.”

– Pippa Malmgren

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 entire problem we face going ahead stems from the very idea of Karl Marx that government is capable of managing the economy either through communism or autocratic-socialism where the state dictates to the economy under the pretense of caring for the people, that has truly become a derivative of fascism where the state comes first. This is even reflected in the conviction rate .. that has risen from 72% in the 1970s to virtually 99% today eliminating fair trials. We also see it taking shape in the militarization of the police that actually do not protect society, but rather protect the state from the people .. This is autocratic-socialism where the state pretends its abuse of the people is for their benefit when in fact there is always a profit that falls to them ..Savers are being exploited by government under the pretense of managing the economy. You see many retired people back in the work force doing service jobs because they can no longer earn income on their savings for life. Savers receive no return on their life savings because central banks punish savers and subsidize the debtors assuming that borrowing is required for economic growth. This core assumption that government even possesses the mental capabilities to manage the economy is extremely dangerous for it then creates a fascist state where society is supposed to worship the state as all-knowing and caring where its survival takes precedent over the individual.”

– Martin Armstrong

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.

“Merely setting interest rates below inflation, however, won’t fully achieve the desired result. The second part of financial repression is convincing a captive audience of buyers to hold government debt at exceedingly low yields. This can be done through the regulation of banks and pensions, capital controls, and good old-fashioned arm twisting…It isn’t hard to find examples of these tactics. The Basel III regulations give banks strong incentives to hold sovereign debt to satisfy their capital requirements. Ireland has pressed their National Pension Reserve Fund into service purchasing government securities and recapitalizing their banking system. Japan Post, the world’s largest pension plan, continues to buy JGBs apace.”

– “Financial Repression: Why It Matters”, Shane Shepherd, Research Associates , April 2013

LINK HERE to the article with additional quotes also

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.

Dutch economists Sylvester Eijffinger & Edin Mujagic see western countries implementing policies aimed at reducing or at least slowing down the level of public debt .. “In times of slow economic growth, policymakers’ options are grim .. many Western policymakers are seeking alternative solutions – many of which can be classified as financial repression .. Financial repression occurs when governments take measures to channel to themselves funds that, in a deregulated market, would go elsewhere. For example, many governments have implemented regulations for banks and insurance companies that increase the amount of government debt that they own.” .. this can be done through regulations like Basel Accord which require banks to set aside enough cash to handle unexpected events – the cash is encouraged to be in the form of government bonds .. also another mechanism of financial repression: “Western central banks are using another kind of financial repression by maintaining negative real interest rates (yielding less than the rate of inflation), which enables them to service their debt for free.” .. also there is the mechanism of raiding pension funds: “In many countries, including France, Ireland, and Portugal, governments have raided pension funds in order to finance their budget deficits. The UK is poised to take similar action, “allowing” local government pension funds to invest in infrastructure projects.”

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.

“We are now in an age of financial repression and, as observed by Edin Mujagic, an academic on the matter from Tilburg University, “we have moved into a new stage where we are setting up institutions specifically created for financial repression.” .. Financial repression causes all savers – institutional as well as individual — to lose money. In short, “individual savers are being punished for doing the right thing whereas the people responsible are not” .. 9 minutes

LINK HERE to the video

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 Federal Reserve, under pressure from lawmakers and state officials, is considering allowing banks to use certain types of municipal debt to satisfy a new postcrisis financing rule.

U.S. regulators are expected to finalize safeguards requiring that banks hold enough liquid assets—such as cash or those easily convertible to cash—to fund their operations for 30 days if other sources of funding aren’t available. Municipal securities issued by states and localities wouldn’t count as “high-quality liquid assets” under the rule, meaning such securities wouldn’t qualify for use under the new funding requirements.

States and localities have warned that excluding their securities could cause banks to retreat from a $3.7 trillion market in which they have increasingly become an important player, which could driving up borrowing costs to finance roads, schools and bridges. Banks have nearly doubled their ownership in municipal securities over the past decade to more than 11%, according to Fed data.

HOW DOES THIS PROTECT THE PUBLIC

WHEN MUNICIPAL DEBT IS THE PROBLEM?

LINK HERE to the article

MUNICIPAL DEBT IS THE PROBLEM!

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.