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01/09/2015 - Dominic Frisby Talks Financial Repression

Special Guest: Dominic Frisby 

 

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

He concluded that:

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

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

FINANCIAL REPRESSION

Dominic Frisby defines Financial Repression as:

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

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

WHAT THE FUTURE HOLDS

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

SOCIAL GOVERNMENT ENTITLEMENTS

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

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

CONCLUSION

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

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


01/03/2015 - Greek Turmoil Could Spread The Risk of Bail-Ins Globally

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GoldCore commentary on the implications of Greece’s recent financial turmoil – it’s affecting Spain & Italy already .. suggests Greece & the risk of a new euro zone debt crisis will again be a key focus for investors in 2015 .. Goldman Sachs recently warned: “In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged ‘bank holiday'” .. GoldCore suggests also that market fears for potential euro exit risks could rise if this happens: “It could be that the fear-mongering of the past few weeks may become self-fulfilling prophecies if Greeks decide that their cash is safer under the mattress than in a risky Greek bank earning little or no interest Then theECB would be confronted with having to ‘bail-out’ Greece or more likely would opt for bail-ins whereby the deposits of Greek savers and companies are frozen in ‘bank holidays’ prior to being seized in a Cyprus style cash grab .. In such a scenario, the ECB would likely be forced to abandon its proposed bond-buying scheme early next year as it could not be seen to be openly buying toxic debt. This in turn could have knock on effects for the global economy as the anticipated liquidity the ECB were to provide evaporates.” .. the commentary raises the awareness of the potential for bail-ins globally in this unfolding era of financial repression.

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.


01/03/2015 - The Confiscation of Bank Deposits

Ellen Brown* explains how the recent G20 meeting rubber stamped new regulations that will make Cyprus style bank bail-ins a worldwide reality .. 24 minutes

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.


01/02/2015 - Lessons on Financial Repression From the 1720 South Sea Bubble

The NY Times article on how the British government was forced to undertake a bailout due to the bursting of the South Sea Bubble back in 1720 .. “Now, prompted by record low interest rates, the British government is planning to pay off some of the debts it racked up over hundreds of years, dating as far back as the South Sea Bubble .. and would repay part of the country’s debt from World War I, and want to pay off other bonds for debt incurred in the 18th and 19th centuries .. The maneuver is also a reminder of how debts incurred by governments are passed down through generations.”

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.


12/29/2014 - Financial Repression: Bank Bailins & Governments Encouraging Government Bond Buying

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.


12/29/2014 - How Central Banks Unknowingly Create Their Achilles Heel: Deflation

‘EXCESS’ INFLATION: Inflation creation when the business cycle needs to contract.(ie 2% targets during systemic deleveraging.)

  • This is because the Prime Directive of central banks is to make it ever easier to service yesterday’s debt.
  • Excessive inflation results from central banks being forced to push negative real interest rates too low (to protect debt holders) relative to real economic expansion and capital wealth creation.

DEFLATION:

“Any increase in the purchasing power of nominal wages”.

  • The rise of software, robotics and global wage arbitrage is resulting in wages not rising along with prices. As a result, everyone who depends on earned income is getting poorer.
  • For the actual real-world the result of central banks easing, money pumping and zero interest rates is Deflation.
  • Central bank easing and zero-interest rate policy (ZIRP) fuel over-capacity which leads to declining prices: deflation with a capital D.
  • Central bank easing and zero-interest rate policy (ZIRP) additionally fuels malinvestment which leads to over valued collateral and an eventual collateral collapse as NPL (non-performing loans) debt cannot to “rolled” (ie no one no longer wants to risk financing)

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

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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.


12/27/2014 - The IMF on Financial Repression

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.


12/27/2014 - Financial Repression Is About Negative Interest Rates

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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.


12/27/2014 - BUYING MONETARY INSURANCE Before the Flood!

AUSTRIAN INVESTING

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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.


12/23/2014 - Financial Repression: 0% Rate Policy Causing Recession

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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.


12/23/2014 - Morgan Stanley on Financial Repression

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

• Explicit or indirect caps / ceilings on interest rates

– Government regulation in the U.S.
– Ceilings on bank lending rates
– Central Bank interest rate targets

• Creation and maintenance of a captive, domestic investor base

– Capital account restrictions and exchange controls to force a ‘home bias’
– High reserve requirements
– Regulatory measures that require financial institutions to hold government debt in their portfolios
– Transaction taxes on equities; prohibitions on gold transactions

• Direct ownership of, or extensive management over, banks and other financial institutions

– Restriction of entry into financial markets
– Directing credit towards certain industries

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.


12/22/2014 - Financial Repression By Central Banks and Private Banks Worldwide

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.


12/20/2014 - Financial Repression Banks Remove the “Heart” of Dodd-Frank

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!

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,”

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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.


12/20/2014 - Financial Repression: Energy Company Debt Fallout from Federal Reserve Financial Repression Policies

credit_bubble_machineBloomberg 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.


12/20/2014 - Financial Repression Creating System Bias and Noise

35297_c“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.


12/18/2014 - David Stockman – The CROMNIBUS “Abomination”!

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.

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“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.

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”

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.


12/16/2014 - Egon von Greyerz – Lessons Learned from the Suisse Gold Referendum

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.” 

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.


12/15/2014 - Andrew Sheng with the FRA Financial Repression With the former head of the Hong Kong SEC

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.


12/13/2014 - Iceland Plans to Impose a 25-40% Exit Tax on all Assets Leaving the Country

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

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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.


12/12/2014 - Financial Repression Has Caused Drastic Mispricing of Financial Assets

“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.