IMF Paper proposes changes to its authority to ensure it is authorized & capable of handling negative interest rates .. “There is no authority under the Articles of Agreement for the Fund to establish a zero or negative SDRinterest rate .. This paper proposes technical amendments .. and the burden sharing mechanism to address these issues.” .. IMF preparing financial repression on interest rates.
12/08/2014 - IMF Needs To Authorize Itself To Have Zero or Negative Interest Rates
12/06/2014 - Financial Repression Sheering Savers & Investors
“I think that the reason bankers and governments dislike gold backed hard currencies is that it limits their ability to devalue their fiat currency and redistribute wealth in order to stay in power. The governmental solution to all the debt in the world is to try to inflate it away and slowly take money away from the people via currency depreciation and manipulating interest rates so savers and forced owners of government debt (such as pension schemes) make a negative return .. The market is not free, it is controlled .. A move away from fiat currency and back to using gold backed currency would remove the ability of governments to print money and this in turn would remove their ability constantly try to avoid facing the consequences of building up huge debts, which in term means they would have to face the music and actually have a plan to repay it .. It is the central banks and private banks who are complicit in this government sponsored process .. I am getting pretty fed up with having my savings earning no interest and possibly being devalued and of not being able to find any sensible place to invest my hard earned money due to central bank policies making it impossible to make any return anywhere without taking crazy risks.”
– Tim Price’s latest letter
12/06/2014 - Nick Giambruno with the FRA
Special Guest: Nick Giambruno – Casey Research
“Financial Repression is Financial Authoritarianism.
It is not only repressing financial aspects of people’s lives but all aspects of life and when you consider the amount of power that is wielded through Financial Repression, it is more accurate to call it Financial Authoritarianism!”
SOURCE OF FINANCIAL REPRESSION
Financial Repression is needed to help governments finance their debt, where the impedence comes from the level of government spending. Since almost all countries use a central banking model and fiat currencies this allows Financial Repression to exist. It gives the government the tools to implement Financial Repression which it wouldn’t otherwise have in a SOUND MONEY System.
“The lynchpin of how Financial Repression is implemented is the Central Banking Model “
“What is fundamentally wrong with this is that it allows the government to take something (that something being Purchasing Power) that is not theirs, without people knowing. You learn in kindergarden that you don’t take something that is not yours but that is exactly what they are doing!”
FATCA – FOREIGN ACCOUNTS TAX COMPLIANCE ACT
One of the most egregious examples of Financial Repression in the international arena is FATCA and the soon to be unleashed GATCA. The Foreign Account Tax Compliance Act (FATCA) effectively begins the process of ring fencing investors options through nothing more than a stealth form of capital controls.
The real issue to banks around the world is:
- Cost of Compliance
- Draconian penalties if even an honest mistake is made.
Therefore international banks don’t want American accounts which is making it horrendously difficult for Americans to now live and operate abroad. FATCA has laid the foundation for GATCA in 2018 which is part of the end game for global taxation.
Like Financial Repression FATCA (and GATCA) is devious and not upfront with the American people. FATCA is a blatant example of “government for the government by the government” versus a constitution based upon “a government for the people by the people”!
Learn more about FATCA / GATCA and more as Casey Research’s “International Man” talks what Financial Repression means around the world.
12/05/2014 - New G20 Rules on Financial Repression
Ellen Brown highlights the results of the recent G20 meeting in Australia, a meeting which Russell Napier called “the day money died” – the day deposits died as money .. Napier: deposits are now just part of the commercial banks’ capital structure, which means they can be “bailed-in” or confiscated to save the banks .. the new rules include derivatives, stipulating a priority of payment of banks’ derivative obligations ahead of everyone else in the event of a crisis .. Brown points out “everyone else” includes pension funds .. “‘Bail in’ has been sold as avoiding future government bailouts and eliminating too big to fail (TBTF). But it actually institutionalizes TBTF, since the big banks are kept in business by expropriating the funds of their creditors.” .. the new G20 rules being implemented emphasize turning bank liabilities into capital, with liabilities including “unsecured debt” like bank deposits .. Brown says banks are now offering “bailinable bonds” which convert into bank capital in the event of a bank crisis – pension funds are now buying these types of bonds in seeking yield sufficient to meet their pension obligations, but a recent policy brief by the Peterson Institute for International Economics calls “bailinable securities” fool’s gold that woud save banks at the expense of pensioners in the event of a bank crisis .. so investors, individuals, pensioners, savers & retirees are now at risk of confiscatory bail-ins to help keep too big to fail banks in business.
12/04/2014 - Central Banks and Financial Repression
“Central banks would like to escalate their devastating war on savers by driving interest rates even deeper into negative nominal and real territory. But they are now stymied for two reasons .. In the case of their preferred route of driving ‘real’ interest rates more deeply into negative returns by cranking up consumer inflation, they are blocked by economic reality. Households are still buried in debt and can no longer borrow, spend and ratchet-up their balance sheet leverage ratios as they did in the 40 years preceding the financial crisis. Likewise, a deflationary global economy— drowning in the excess industrial capacity and malinvestments that have been generated by nearly two decades of worldwide financial repression—– keeps a tight lid on the price of consumer goods. So the tried and true route of inflating governments out of their debt obligations has been precluded .. At the same time, interest rates are already at the zero bound in nominal rate terms, meaning that only significantly negative nominal rates can further reduce the burden of public debt. However, even central bankers are smart enough to realize that if the monetary and fiscal authorities of the state go too far in imposing negative rates on bank deposits or in threatening to ‘bail-in’ depositors, they could incite a run on the bank.”
– David Stockman
11/30/2014 - Financial Repression: Distorting and Inflating Asset Prices
“The purpose of central bank financial repression and ZIRP is to distort and inflate asset prices. Our monetary politburo even admits that it is in the monetary scam business via its self-serving doctrine called ‘wealth effects’ .. The game here is to drive the stock market averages ever higher through massive liquidity injections into the Wall Street dealer markets. This purportedly causes people to feel richer and to spend and invest more, creating a virtuous circle of prosperity, world without end .. We know by now, however, that ‘wealth effects’ money printing does not help the main street economy. And while it does produce awesome financial market gains—–these turn out to be unsustainable bubbles that inexorably crash .. The resulting financial bubbles have been global in scope .. The true nature of today’s Keynesian central banking – The actual impact of the current ‘wealth effects’ regime is not economic growth and rising profits, but, instead, a vast inflation of financial assets.”
– David Stockman*
11/29/2014 - Daniel Amerman Gives a Tutorial on Financial Repression
Special Guest: Daniel Amerman – Financial Consultant, CFA, Duluth MN USA
11/29/2014 - Financial Repression: Negative “Real” Rates are the Norm
Article highlights how a number of banks are charging institutional clients for depositing their funds, meaning the interest rates are negative .. Several banks, including Bank of New York Mellon Corp, Credit Suisse Group AG, Goldman Sachs Group Inc & JP Morgan Chase & Co., have applied this practice .. “Investors and corporations, along with investment funds and asset managers, are becoming the biggest victims of this practice. They view this change as revolutionary. Multinational organizations that manage large-scale operations in the continent are witnessing a spike in their expenses as a result of this practice. Fear of a doomed European financial system is one of the driving forces behind such drastic measures. Currently, the economy is at a halt and in desperate need for households and businesses to add money in the system and revive confidence in investors .. This might lead to abandoned clients looking for more secure options to place their misplaced money or force them to opt for high-risk instruments such as debt-based funds or repurchase agreements.”
11/28/2014 - Tim Price On Financial Repression
Article & interview on perspective by Tim Price on financial repression insight on UK Tip TV .. Rather than saving the global economy, very low interest rates are a ’coiled spring’ for trouble ahead .. very low interest rates are implementing financial repression, which involves deliberately holding down interest rates below inflation & keeping government borrowing costs low .. “People are piling into stocks because they’ve frankly got no other choice, but I think we’ve seen how this film ends.” .. Price thinks that investing in Asia is the best bet to deal in this environment.
11/27/2014 - The Consequences of Imposing Negative Interest Rates
Pater Tenebrarum essay on the adverse unintended consequences of banks imposing negative interest rates on deposits, all a result of financial repression .. he points out how banks have recently started to charge interest on bank deposits in Germany, & now banks elsewhere are doing the same: “Other banks were presumably watching to see if depositors would flee, and when that didn’t happen, Commerzbank decided to go down the same road.” .. the essay quotes Austrian School Economist Ludwig von Mises on what happens when interest payments are abolished or go negative – owners of capital will begin to consume their capital & society will become impoverished: “.. there cannot be any question of abolishing interest by any institutions, laws, and devices of bank manipulation. What can be abolished by laws and decrees is merely the right of the capitalists to receive interest. But such laws would bring about capital consumption and would very soon throw mankind back into the original state of natural poverty.”
11/23/2014 - Axel Merk Speaks Out on Financial Repression
Special Guest: Axel Merk
“In a nutshell, it is ways governments are trying to deprive you of purchasing power because the government has too much debt and must debase the value of the debt.”
“Through the backdoor the government is trying to take some of your net worth …. It is a wealth TRANSFER from savers to those who have piled up a excess debt” “It is most commonly done through negative real interest rates!“
CENTRAL BANK INFLATION GOALS
“You often don’t have enough inflation in the world when you have too much debt”.
This is why the US, the EU and Japan are trying frantically get inflation up, despite it being bad for the average citizen or saver.
Axel Merk believes that if in 10 years we were to get back to historic bond level,s then there would be an addition $1 trillion in government interest rates. The fed is simply not going to allow that and therefore interest rates are realistically not going up.
NEGATIVE REAL INTEREST RATES
Even a Fed Funds Rate of 1.75 next year would likely still mean we would have negative real interest rates.
SOCIAL UNREST & POLITICAL INSTABILITY
“Policy makes never blame themselves for the problems they have. They always blame a minority, the wealthy or foreigners”
When you have too much debt political stability declines. In parts of the world where food and energy are bigger part of their disposable income you can expect social unrest as these inflation policies take on greater roles.
It is a fact that austerity policies fail at the polls as we have seen in Europe. In the US we are electing increasingly more populist politicians which means entitlement reforms have a slim chance of happening. Therefore “Kicking-the-Can-Down-the-Road” and reliance on the central bank to keep rates low.
We have former super powers on the decline and emerging super powers on the rise. We can only hope that this transition will be peaceful. A central banker told Axel prior to his starting his funds that “We can only hope the adjustment process will be slow and gradual”
JAPAN IS AHEAD OF US IN THIS EVOLUTION
“Liquidity has dried up in the JGB market which means that at some point it is easier to have some sort of crisis”
Regulations in general are about barriers to entry. Therefore it limits risk taking which inevitably leads to less economic growth. By simply keeping interest rates low it doesn’t put sufficient pressures on the system for structural reforms. As low interest rate policies continue to fail the political bias will be to “double down” which means the problems get even worse. Eventually the structural changes required becomes too great to be politically possible without hiding behind a major crisis.
SWISS NATIONAL GOLD REFERENDUM
The Swiss are fiercely independent and don’t like the dependencies which the Euro peg to the Swiss Franc are creating. They don’t like the debt an unelected central bank is piling onto the nation. What is important is that the referendum is trying to force more discipline into monetary policy.
WHAT INVESTORS MUST REALIZE
Cash is no longer safe anymore! The purchasing power of cash is at risk. Once investors realize this the investment world is open! They then need to invest based on the risk spectrum.
- EQUITIES – Prices are elevated because of the actions of central banks ,
- BONDS – “I wouldn’t touch with a ten foot pole in the current environment.
- DIVERSIFICATION suggests adding Currencies and Precious Metals.
- BE ALERT – Have your own opinion after building your own framework
11/23/2014 - Insight into Financial Repression
Brinker Capital Senior Investment Manager, Jeff Raupp, CFA, provides commentary on the issues surrounding the debt burdens of many developed governments today, how this era of financial repression may impact investors .. 5 minutes
11/22/2014 - Low Interest Rates From Financial Repression Means Savers Are Struggling To Save
Article from Korean news source (in English) highlghts how low interest rates mean Koreans are struggling to save .. “Low interest rates on time deposits mean that Koreans can’t save the way they used to .. Until the 1990s, when the average interest rate hovered at around 10%, a common way to build up assets in Korea was to set aside a portion of wages in the bank every month as a time deposit – after a while, you would be able to buy property with the savings .. not any more .. “Korean consumers will have to live with such low-interest bank savings for a substantial period of time as the country’s central bank is likely to keep its benchmark interest rate in response to the continued quantitative easing of major economies like Japan and the European Union.” .. when you take into account the inflation rate in Korea, you have negative real interest rates, characteristic of financial repression.
11/22/2014 - FINANCIAL REPRESSION for DUMMIES
Gordon T. Long has been sounding the alarm on Financial Repression for quite some time. Unfortunately most people have been unaware that their wealth is being stripped away before their very eyes. But Gordon and his associates have devised a number of strategies that can be exercised to avoid this fate. Before you can solve a problem, you’ve got to admit that it exits.
11/20/2014 - Doug Casey – A Financial Repression World Tour
Special Guest: Doug Casey – Casey Research
“MODERN CURRENCIES ARE FLOATING ABSTRACTIONS”
Developed economies’ currencies “are turning into toilet paper”.
“JAPAN IS A GIANT ACCIDENT WAITING TO HAPPEN!”
“If you are looking for a one way street, perhaps the best speculation in the world today would to be short Japanese government bonds denominated in Yen”. The demographics in Japan are the worst in the world.
“THE EU WILL CEASE TO EXIST“
Its really a horrible conglomeration of countries which should be simply a free trade area with the government in Brussels making it impossible. It is totally dysfunctional and will breakup.
- “Hold onto your hat” – Things are going to get real interesting starting in 2015,
- Doug sees turmoil coming which we haven’t seen since the start of the Industrial Revolution or the French Revolution,
- Hold gold and silver. Some should be in coins in your possession.
Best-selling author, world-renowned speculator, and libertarian philosopher Doug Doug Casey speaks out on FINANCIAL REPRESSION
Doug sees the world in the “eye of a gigantic financial hurricane”. It entered the hurricane in 2007-2008 and will likely see the next stage in 2015. Here are just some of Doug’s views and statements from this fascinating and exclusive interview with Gordon T Long.
REALISTICALLY SEES WAR AHEAD
“The US is being provocative with its military bases in 125 countries around the world and is provoking the Russians in the Ukraine.” The US is now a country in a continuous state of war. “The US military is out of control.”
“AMERICA DOESN’T EXIST ANYMORE!”
“America has turned into a police state”. It is the most dangerous entity in the world today and has become hated globally because of its militarism.
“THE REAL RISK TO INVESTORS IS ‘POLITICAL'”
US Investors must urgently diversify their assets abroad while it is still possible. More restrictive regulatory policies lie ahead.
US STANDARD OF LIVING & RESPECT IN THE WORLD HAS FALLEN
Today the US is more taxed and regulated than ever before, which limits its abilities to solve its problems.
11/18/2014 - Here is the Official G20 Document Approved By the G20 Countries for Banks To Confiscate Your Bank Deposits
See page 5 of the document below for the signed & agreed piece which allows banks to simply take your bank deposits, under certain conditions, in the event of a bank crisis: “The Key Attributes describe the powers and tools that authorities should have to achieve this objective. These include the bail-in power, i.e., the power to write down and convert into equity all or parts of the firm’s unsecured and uninsured liabilities of the firm under resolution or any successor in a manner that respects the creditor hierarchy and to the extent necessary to absorb the losses. Hence, the resolution strategies that are being developed for G-SIBs provide for a recapitalisation by a way of a bail-in (with or without use of a bridge institution) to support the orderly resolution or wind-down of a G-SIB in a manner that maintains at a minimum continuity of critical functions. As set out in the July 2013 FSB Guidance on the Development of Effective Resolution Strategies, one crucial consideration in the development of effective resolution strategies is the availability in resolution of lossabsorbing capacity in sufficient amounts and at the right location(s) within a group.”
G-SIB = global systemically important bank
11/17/2014 - Mike Pento: Speaking Out on Financial Repression
Special Guest: Mike Pento – Pento Portfolio Strategies LLC
FREE MARKET SYSTEM HAS BEEN COMPLETELY VANQUISHED
WHERE WE ARE HEADED
11/16/2014 - Financial Repression: Wealth Confiscation & Bailins Relating to Bank Deposits & Gold
International Man essay explores the growing trend of governments & banks to setup “bailin” mechanisms which effectively confiscate a certain percentage of bank depositor deposits at banks in the event of a banking crisis .. the European Union (EU) has now setup this type of bailin mechanism to start soon in Europe – All the banks in the EU will be given the freedom to perform their own bail-in: they may absorb any deposits that exceed €100,000 .. “Following the Cyprus bail-in, we believe that Cyprus was intended as a trial-balloon, that a similar bail-in would later be created for the EU, the US, and a host of other jurisdictions. That prediction seems to be panning out.” .. this essay suggests a similar movement may happen to the paper-gold market – potentially: “Banks could be given the go-ahead to simply cancel the paper-gold certificates that they have sold. This will enrich the banks by billions of dollars, and the only losers will be the greedy rich who have so much money to burn that they have purchased gold certificates.” .. banks doing this would be “praised” by governments for taking the action for the “Greater Good.”
11/15/2014 - Financial Repression: Central Banks & ‘Officials’ Will Force Banks To Buy More Government Bonds
Just as the Federal Reserve has stopped its quantitative easing program, the Bank of Japan stepped up to the plate to take over the bond buying .. now the New York Times reports that the Financial Stability Board, a panel made up of central bankers, finance officials & top regulators from the world’s largest economies, announce proposals this week that would double the amount of money that large banks would be required to have on hand to absorb losses .. the idea minimizes the possibility of governments to have to bail out their banks, plus makes banks buy government bonds at the same time – a double whammy to help governments with their debt & deficit burdens [Cliff Note: They call it ‘financial repression’. We think it would be more honest to call it ‘exploitation’ … Words can affect perception & make reality seem more innocent than it is. As an expression, ‘financial repression is similar to the expression ‘Quantitative Easing’ .. which sounds innocent until you call it for what it really is: creating new money from thin air for the benefit of those who are in control of the money system.] .. “The new rules would require global systemically important banks to hold twice as much capital, 6%, as required by the Basel III rules. In addition, banks would be required to have capital equal to at least 16 percent and as much as 20% of their outstanding loans, derivatives portfolios and other assets, after adjusting for risk. Part of this capital could be borrowed from investors who would earn interest, but would lose their money if the bank got into trouble. Combined with the impact of other new regulations, the rules would require banks to increase their capital to 25% of assets adjusted for risk.” .. the article emphasizes bank lobbyists will push back vigorously on these proposals.
11/15/2014 - Tim Price – Speaking Out on Financial Repression
Special Guest: Tim Price – PFP Group
Tim recalls the words we last heard in the dark days of 2008:
“When you’re a distressed seller of an illiquid asset in a market panic, it’s not even like being in a crowded theater that’s on fire. It’s like being in a crowded theater that’s on fire and the only way you can get out is by persuading somebody outside to swap places with you .”
This is precisely what occurs when the regulatory pressures and un-natural forces of FINANCIAL REPRESSION finally ends
“Financial Repression is government stealing from savers and the future!”
“The single biggest problem of our times economically, is that for the last 40 years there has been an unsustainable buildup of credit expansion throughout the developed world … and we have reached the end of the road new. Every policy by governments and their agents (the central banks) is too a) Kick the Can Down the Road and B) to steal from savers to keep this bandwagon rolling!”
THREE ALTERNATIVE APPROACHES TO ATTEMPT A RESOLUTION:
- Generate Sufficient Economic Growth to Keep Servicing the Debt,
- Repudiation or Debt Default,
- An Explicit Policy of State Sanctioned Inflationism.
Approach #1 and #2 or no longer realistically viable, leaving governments with only option #3. The last options has historically always been the option governments of fiat based systems have resorted to throughout the ages because of a lack of “political will and discipline”.
Tim believes Japan is presently the ‘dress rehearsal’ and the rest of the world will be the main event.