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Monday
April 20th
2015

DE-DOLLARIZATION

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

 

DE-DOLLARIZATION

with John Rubino & Gordon T Long

Published 04-20-15

35 Minute Video

IT BEGINS!

John Rubino and Gordon T Long discuss the status of global De-Dollarization within the context of three developing macro events:

  • THE ASIAN INFRASTRUCTURE INVESTMENT BANK (AIIB) “MUTINY”
  • PUTIN’S EURASIA CURRENCY PROPOSAL
  • MOUNTING PETRODOLLAR MERCANTILISM PRESSURES

It is clear from insiders that:

"China plans to push for yuan to take prominence in loans under the Asian Infrastructure Investment Bank and the Silk Road Fund. China may encourage $100b AIIB and $40b Silk Road Fund to issue loans directly in yuan or set up yuan-denominated funds under the two institutions. This is according to the people, who ask not to be identified because deliberations are private.” 

The South China Morning Post specifically reports:

Beijing will push for the yuan to be included in a basket of currencies used to denominate and settle loans from the Chinese-led Asian Infrastructure Investment Bank (AIIB), according to think tank sources.

Beijing will also encourage the AIIB and the Silk Road Fund to set up special currency funds and issue yuan-denominated loans through both institutions, the sources said.

If the US dollar is used, it weakens China’s bid for the yuan to be a global currency.

The efforts are part of a drive to internationalize the Chinese currency and come as the International Monetary Fund prepares to discuss the possible inclusion of the yuan as its fifth reserve currency and as part of the basket that forms the IMF's Special Drawing Rights.

The sources' claims appeared to be confirmed by a state media report, which said that a basket of currencies called the "AIIB CURRENCY" would most likely be adopted as the bank's currency of settlement… 

Hao Hong, chief economist and managing director of research at Bocom International, said -  China should do its best to establish the yuan as a currency for settlement and denomination.

 

PUTIN’S EURASIA CURRENCY PROPOSAL

"The time has come to start thinking about forming a currency union," Mr Putin

 

The EEU is an economic union which comprises Russia, Belarus, Kazakhstan and Armenia. Kyrgyzstan is also set to join the bloc. 

 

 

MOUNTING PETRODOLLAR MERCANTILISM PRESSURES

 

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Saturday
April 18th
2015

MISH SHEDLOCK TALKS AMERICA'S PENSION PROBLEM

 

"Mish" Shedlock

 

SPECIAL GUEST: MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blog.

An espoused self educated Austrian Economist,  Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com

OPEN ACCESS

MISH SHEDLOCK TALKS

AMERICA'S PENSION PROBLEM

Published 04-18-15

Mish Shedlock talks about the magnitude of the mounting Pension Problem in America and uses his home state of Illinois as a prime example. According to a State Budget Solutions, last year’s state unfunded pensions reached an all-time high of $4.7 trillion. This funding gap state public pension plans are underfunded by $4.7 trillion, up from $4.1 trillion in 2013. Overall, the combined plans' funded status has dipped three percentage points to 36%. Split among all Americans, the unfunded liability is over $15,000 per person.

PENDING PENSION CRISIS

"Illinois Pension's in general are 39% funded! This is after this massive rally we have had since 2009 in financial assets. Some of the worst ones are only about 20% funded."

"Various cities in Illinois have problems, Chicago being one of them. The City of Chicago has a huge pension crisis right now. We have things in Illinois like "Home Rule Taxes" where cities can levy their own taxes in addition to the state. That is why we have varying sales tax that range anywhere from 6.25% to 10%, depending on locality."

"I have been working with the Illinois Policy Institute on pension and bankruptcy issues. There are a number of cities in Illinois that are ready to file bankruptcy. The problem is they can't file bankruptcy because the state doesn't allow it."

"The fundamental problem is they have made more promises than they can possibly keep!"

GAMING THE SYSTEM

The problem is "you have police and fire workers who can retire after 20 years ... and collect up to 70% of their earnings based on the 5 highest years salaries. We see a lot of pension spiking in the last few years where for example police work overtime (which counts towards their best five years) so these workers stand to collect far more in retirement (total years in retirement) than they actually ever made while working (total years worked).

"Tax payers are actually funding the employees portion of the pensions by excessive wages and direct contributions ".

"Chicago floated General Obligation Bonds to fund current expenses. That is illegal! We have bonds here in Illinois that are called tax exempt on the basis they are supposed to be funding long term infrastructure expenses that are funding short term needs."

OSCENE PROPERTY TAXES

"Taxes in Illinois are are already obscene. A homeowner on a $600,000 home can expect to pay $14-15,000 per year - every year on property taxes. Do you really own your own home in Illinois?"

"Pensions are so underfunded in Illinois that they are going to go bust in the next slowdown. I believe one (a slowdown) is on the way."

LOOMING CRISIS GLOBALLY

Negative interest rates are sweeping the globe. How will states, cities and towns fund themselves and their pension obligations in an era of potential negative nominal bond rates?

  • Returns on the heavily weighted funds' bond holdings are being potentially destroyed , while
  • State bond offerings are likely to face mounting issues around maintaining investor attraction with such monstrous overhang levels of unfunded pension liabilities.

"How will states, cities and towns fund (attract) long term assets with 15 year negative bonds?"

 

 

 

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Monday
April 6th,
2015

RICK RULE talks FINANCIAL REPRESSION

Rick Rule

 

SPECIAL GUEST: RICK RULE , is Chairman and Chief Executive Officer of Sprott US Holdings, Inc. Mr. Rule is a frequent speaker at industry conferences, and is interviewed for numerous radio, television, print and online media outlets concerning natural resource investment and industry topics. He is frequently quoted and referred by prominent natural resource oriented newsletters and advisories. Mr. Rule has a long experience in many resource sectors including agriculture, alternative energy, forestry, oil and gas, mining and water. Mr. Rule is particularly active in private placement markets, having originated and participated in hundreds of debt and equity transactions with private, pre-public and public companies.

Rick Rule is a no nonsense and frank market participant with sound commonsense from over 40 years of being part of the nature resource sector.

FINANCIAL REPRESSION

"Financial controls or 'trickery' imposed on the public by the state."

"There is certainly financial 'trickery' imposed on us by large financial institutions but they do that utilizing the state or in conjunction with the state. The practical manifestation of Financial Repression are all around us. I would suggest that a large part of the mandate of the Securities and Exchange Commission as an example is to effect barriers to entry to smaller participants in the securities business.

The most egregious forms of Financial Repression are in the first instance:

  • Tax (which many regard as slavery - I don't but regard it as extortion!)
  • The Manipulation of Interest Rates and
  • The Manipulation of the Currency."

"The interest rates payable to savers relative to the real rate of depreciation of the purchasing power of - pick one: the dollar, the euro, the yen - are despicable!"

ALAN GREENSPAN

"As recently as October last year I had the pleasure of listening to Alan Greenspan who ironically (despite the fact he is a vowed libertarian and architect of a lot of this Financial Repression) and he said something very stark too the audience! He said that a sound currency is not consistent with a representative democracy. A sound currency benefits the productive class and savers. In a representative democracy most of the people are spenders. Low interest rates and a depreciating currency aids the spenders and borrowers. It doesn't aid the savers. In that context Financial Repression is understandable and I'm afraid inevitable."

EXTRAORDINARY FAITH & "RETURN FREE RISK"

"We appear to be in a place in history and the economy where there is extraordianary faith in the big thinkers in the world - the Merkels, the Obamas, the Greenspans, the Yellens. It is partly this faith that is allowing them to keep these interest rates this low. It is a belief that the big thinkers of the world "stick handled" societies global financial crisis of 2008 and by managing the levers of the economy, managed to save us from ourselves. I would of course disagree with that diagnosis (but no one cares much what I think). I certainly believe that savers will tire of buying financial instruments that have no real yield. If you think about the value proposition as an example offered up by the bellwether savings instrument world wide (the US 10 Year Treasury) yielding 1.8%. What that means is the Fed absolutely, positively guarantees you 1.8% per year for 10 years. The difficulty I have with that is that even at their ascribed CPI inflation rate, what they are promising you is 20 basis points a year in real yield. Jim Grant famously described that as "Return Free Risk".

INVESTMENT IN LONG TERM PRODUCTIVE ASSETS

Rick Rule feels that the perverse incentives from manipulated data has resulted in a lack of investment within the US in Productive Assets that would allow the employment of technology and the real wages of workers to rise.

The reason is:

1- If you aren't seeing underlining demand and top line sales growth in your business, why would invest in productive capacity?

2- The US Tax Code is anti-growth. Depreciation schedules are much more investor friendly even in socialist countries today that in the US.

GOLD

"I don't know what is going to happen with gold short term". "What will move Gold, Silver, Platinum and Palladium are first and foremost is a reduction in confidence in the US dollar and the US 10 Year Treasury. It important to understand that gold doesn't need to win the war. It just needs to lose the war less badly!"

"Gold has performed admirably outside the US over the last year."

Gold can be seen to be already in a Bull Market globally - except in the US, as a result of a 25% rise in the US dollar.

 

 

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Wednesday
April 8th,
2015

THE NATURE OF WORK

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

with Charles Hugh Smith & Gordon T Long

32 Minutes - 16 Slides

Charles Hugh Smith and Gordon T Long discuss the changing global nature of work.

INNOVATION & INTELLECTUAL CAPITAL

THE NEW OWNERSHIP SOCIETY

 

Collaboration  +  Shared Ownership of Income Streams =  New Model of Work

 

NEW COLLABORATIVE GLOBAL ENTERPRISES

SUMMARY

  • “Fewer, Smarter Workers”
  • You Must Create the Work and Own the Value Proposition
  • Innovation is Paramount

"The Web is the New “Wild West”!

 

 

 

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Monday
April 6th,
2015

LEO KOLIVAKIS talks PENSION POVERTY & INEQUALITY

Leo Kolivakis

 

 

SPECIAL GUEST: LEO KOLIVAKIS , is an independent senior pension and investment analyst having worked on both the buy and sell-side. He has researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de He has also consulted to the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system. Leo Kolivakis is editor and publisher the PensionPulse.blogspot.com

Leo Kolivakis brings a unique perspective to Pensions having worked on both the Buy & Sell side as a Pension Plan analyst.

TITANIC GLOBAL BATTLE

Kolivakis sees a titanic battle going on around the world between Inflation & Deflation with the world shifting due to demographics, private / public debt problems and a global jobs crisis. As a result he sees bond yields falling because it is resulting in no inflation. "The bond market is rightly concerned about tight fiscal policy and austerity in a world of low growth, low inflation (possibly deflation) for a prolonged period of time". "I am more worried about what is going on in China .. if you have a boom-bust scenario in China, the potential to import deflation (ie through lower goods prices, currency devaluation etc) is a significant concern".

PENSIONS IN PERIL

"I believe there is a Private and Public Pension Crisis in America that needs to be openly discussed by US citizens & politicians. The private savings crisis in America shows the median 401K balance is under $20,000 and somewhere around $76,000 for people 60-65 years of age. That is definitely not enough money to retire comfortably for the rest of your life!"

"In the private sector where corporations are cutting defined benefit programs and going to low cost defined contribution plans, there is another crisis happening." People are being forced to take on the responsibility of pension investment management decisions.

"Individuals are now caring the risk of their retirement!"

"What people don't realize is the shift to Defined Contributions is very deflationary. People simply don't spend as much as they do on Defined Benefits when they have known fixed incomes."

GOVERNANCE PROBLEMS

"There is a huge problem with the Public Pension Funds in the United States. The problem focuses around the governance model. It is all wrong! They have way too much political interference. They don't have proper pension fund plan managers that can take internal actions, lower the costs of the funds and ... match assets with liabilities"

"The US needs to consider privatizing Social Security and creating independent investment boards."

"What is going on in the US right now is you have a lot of investment consulting shops that are typically forcing these public pension funds to invest in very high fee, high risk private equity / hedge funds. That is fine for the Private Equity Funds and Hedge Funds but it is not in the best interest of these public pension funds. I don't think it is. As a matter of fact I know it is not!"

"The US really needs to reform its Public Pension Plans. To introduce shared risk models so that the risk of the plan is shared between the stakeholders (i.e. the employees), the government and the pension. They need to reform the governance so they start to pay the pension plan managers properly to manage more and more of the assets internally".

"Pension Investments Are Fueling Inequality! The migration of Pension Plans to Alternative Investments such as Private Equity / Hedge Funds are contributing to the growth in Inequality"

PENSION POVERTY

  1. DEFINED BENEFITS - A massive underfunding problem between $7 - $10T
  2. CONTRIBUTORY BENEFITS - Median 401K Levels of $18,400 are 'orders of magnitude' short,
  3. SELF FUNDING - IRA and Roth Plans are not earning the levels of income required for retirement. Market draw-downs have seriously impaired long term growth,
  4. SAVINGS RATES - Falling Real Disposable Income is increasingly limiting already extremely low personal savings rates.

 

 

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Tuesday
March 24th
2015

SURPRISES & DISAPPOINTMENTS BEGIN

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

 

SURPRISES & DISAPPOINTMENTS BEGIN!

with John Rubino & Gordon T Long

Published 03-24-15

36 Minute Video

John Rubino and Gordon T Long discuss the overwhelming number of negative economic surprises and disappointments presently occurring.

Against this backdrop within this 36 minute video, they consider what is holding the markets up, how long this is likely to continue and what to expect from the central bankers going forward.

Both are very optimistic about the future but not before the capitalist system is allowed to do its magic of clearing out malinvestment and then through price discovery and the correct pricing risk, allow investment to return and propel the global economy forward.

 

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Monday
March 23rd,
2015

GUIDO HULSMANN talks FINANCIAL REPRESSION

Guido Hulsmann

 

 

SPECIAL GUEST: Jörg Guido Hülsmann , is a professor of economics at the University of Angers in France and adherent of the Austrian School. He has edited six books and is the author of The Ethics of Money Production and Mises: The Last Knight of Liberalism. He has translated several renowned economics books into German and written many articles in English, French, and German. He is a contributor to scholarly journals such as the Quarterly Journal of Austrian EconomicsThe Independent ReviewProcesos de Mercado, and the Journal of Markets and Morality, as well as to magazines and newspapers such as La Tribune (France), Finanz und Wirtschaft (Switzerland), Le Temps(Switzerland), Wiener Zeitung (Austria), and eigentümlich frei (Germany).

Professor Hülsmann is the director of the Austrian Research Seminar in Paris.

FINANCIAL REPRESSION

"Financial Repression is the name we give to all the different government interventions in which governments seek to improve their own bargaining position with financial markets."

"As a consequence of Financial Repression (that is of government intervention) people use their savings differently than they would otherwise have used. Therefore different people benefit from those savings (most probably the government itself) to a greater extent than otherwise would have been the case."

FINANCIAL REGULATION

"The most surprising developments have been regulation, like the Dodd-Frank Act, Basel III, FATCA. They are pretty intrusive. These regulations have been sold to the public as necessary to control the financial markets, which is certainly the case but this is one side, the other is precisely the cause. Governments control the markets and can force Insurance Companies, Banks, Investment Trusts to use their funds in a certain way that governments are then ready to benefit from. This is very often at the expense of the savers."

EXPECTED TRENDS

INCREASED REGULATIONS

The amount of paperwork and red tape that will be required to comply with expanding regulations is already growing dramatically. "We already require by law in Europe, for example, for an Investment Fund to have a Risk Officer who reports directly to the Ministry of Finance. It is absolutely mind boggling and it makes it very difficult for people to continue doing business profitably - it makes it quite miserable unless you are a big firm!" "These rules boil down to squeezing all small and even medium sized businesses out of business!"

'FORCED LENDING TO THE STATE OF FORCED SAVINGS'

"I expect a trend that will become much larger and more important in the future is what I call "Forced Lending to the State of Forced Savings!" Professor Hulsmann sees Pensions as being a particularly attractive target for this sort of trend.

PRICE RIGGING

We have already seen this most evidently in the area of Precious Metals price rigging. "This is because they are the natural alternative to hold savings outside of Financial Markets and Real Estate Markets! Both are artificially bloated thanks to central bank policy."... "it is natural that people turn to Precious Metals because there is no counterparty risk".

LEGAL PRIVILEGE

"Under a fiat money standard, governments (or their central banks) may obligate themselves to bail out, with increased issues of standard money, any bank or any major bank in distress. In the late nineteenth century, the principle became accepted that the central bank must act as the "lender of last resort", which will lend money freely to banks threatened with failure. Another recent American device to abolish the confidence limitation on bank credit is "deposit insurance", whereby the government guar­antees to furnish paper money to redeem the banks’ demand li­abilities. These and similar devices remove the market brakes on rampant credit expansion.

According to Hülsmann, there are four groups of legal privileges granted by the state (usually more than one is granted):

  • Legalized Counterfeiting - the promises of banks are allowed to be more "elastic". For example, a coin marked "an ounce of gold" will be allowed to have any amount of gold or none, and can have any meaning. Banknotes were named "promises to pay", but were obscure on the details.
  • Monopoly - only some monetary products may be produced by law, like a specific metal; or only the banknotes or coins of a certain bank. This limits the freedom of choice of users of money and benefits the producers and first recipients at the detriment of others.
  • Legal Tender is a money, that must be accepted in exchanges under a predefined price. Some monies may be driven out of the market due to Gresham's Law.
  • Legalized Suspension of Payments allows banks to avoid paying their obligations, while receiving payments from their debtors. If a bank is freed from contractual obligations to redeem its money and it is also legal tender, its banknotes become genuine paper money.

With legal privileges the banks are allowed to behave more irresponsibly, which increases moral hazard.

PERMANENT POSITIVE PRICE INFLATION RATE

"Without a Fiat Currency system it is impossible to create a permanent positive price inflation rate. With the gold standard the tendency for the price level was generally deflationary... a constantly declining price levels."

"If you have declining prices then there is a very strong incentive for savers to not worry about any financial investments at all, but to just save in the form of cash ... when you have constantly increasing prices... holding cash becomes suicidal for savers. You then have only two choices. Buy Real Estate or Financial Titles. You get promises of remuneration for your savings so you are partially compensated for the lose of purchasing power."

"Deflationary Recessions are a healing process - it is what precisely gets the economy back in touch with the real world and allow you to move forward event more forcibly!

 

Please link to the page of our Austrian research seminar:

AND ask your readers to get in touch with me (jgh@guidohulsmann.com) to make a donation.

All donations are tax-deductable.

 

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Thursday
March 19th,
2015

MARSHALL AUERBACK talks FINANCIAL REPRESSION

Marshall Auerback

 

 

SPECIAL GUEST: MARSHALL AUERBACK , Director of Institutional Partnerships, Institute for New Economic Thinking. Auerback has over 20 years of experience in the investment management business. He served as a director and global portfolio strategist for the Canada-based fund management group Pinetree Capital. He also was head of economic research for Madison Street Partners, a Denver-based investment management group, and he worked as an economic consultant to PIMCO, the world’s largest bond fund management group.  In addition, Auerback is a Research Associate at the Levy Economics Institute of Bard College and a Research Fellow for the Economists for Peace and Security. (http://www.epsusa.org)

Previously, Auerback managed the Prudent Global Fixed Income Fund for David W. Tice & Associates and assisted with the management of the Prudent Bear Fund. He also worked as an international economics strategist for Veneroso Associates, which provided macroeconomic strategy to a number of leading institutional investors. Prior to that, Auerback ran an emerging markets fund for Tiedemann Investment Group in New York. He began his finance career as an investment manager at GT Management, focusing on the markets of Japan, Australia, and the Pacific Rim, while based in Hong Kong and then Tokyo.

Auerback graduated magna cum laude from Queen’s University in Canada and received a post-graduate masters degree from Oxford University.

FINANCIAL REPRESSION

"Financial Repression can be a fairly loaded word. I think you can say that anytime you have a central bank which is a monopoly of anything, which can establish a price, you can have repression. I am less concerned with the labels and more concerned with the fact that we have been in response to this unprecedented crisis, been increasingly undertaking exotic experiments on behalf of the central banks. Most notably Quantitative Easing. It has had the effect of repressing interest rates or keeping them low. This of course is great for borrowers, but has the unintended by-product of depriving people of income."

A FLAWED SYSTEM

Financial Repression is an experiment that " is flawed in terms of the economics behind it. I don't think it does much to help elevate aggregate demand (spending power) and it turns out to be a large implicit subsidy for the financial sector."

"As far as I am concerned we are already over-financed as an economy and do too much for the banks anyway. It is really a fundamentally mistaken policy approach!"

TRENDS SINCE THE FINANCIAL CRISIS

"We have had three rounds of Quantitative Easing by the Fed, we have undertaken similar policies in Japan and more recently in Europe. If you look at the impact it has been rather minimal! The Japanese economy is still pretty stagnant. The US is growing but I believe that has less to do with QE and more to do with the fact that we had a fairly robust fiscal policy response after the crisis in 2009. Likewise in Europe we have been mired in depression like numbers which is worse than anything we had in the 1930s. It hasn't worked but we keep trying it."

"The economics behind it are flawed. it is based on the notion that if a bank buys a bond and puts reserves into the banking system that somehow it can encourage the banker to lend. We actually don't lend out reserves and are only used for interbank lending amongst banks. Also lending is a two way process. You have to have a credit worthy borrower and a credit worthy lender. If you have individuals or business that are piled down with debt they may not be very credit worthy or they may be less inclined to take on more debt"

"You want to engender rising employment, rising income so people aren't as reliant on credit. I think that is the problem our system has had over the last 30 years. We have become Credit centric versus Income centric!"

"We have been conducting this 'pulmonary resuscitation' to a fundamentally dead financial system rather than use the money to revive the economy and transition it into more productive economic activity."

CONTROL FRAUD

"When you have an economy that is over financialized and banks account for a disproportionate amounts of activity, and you have a compensation incentive system that is highly dependent on share price appreciation, then you provide a very perverse incentive for business not to invest in productive business affairs but to use excessive cash to buyback shares."

"What is worse is you begin to use all sorts of accounting tricks. This is what Professor Bill Black calls 'Control Fraud' . You get a form of casino capitalism. Actually, the casinos in Las Vegas are regulated more favorably than the banks are."

PRIVATE DEBT BUILD-UP

Marshall Auerback believes we have had excessive build-up in Corporate and Household debt. "When you have a demand shock, then servicing that debt becomes a problem. You end up with a large build-up of public debt in response." Unfortunately those who benefited now want cuts to things like Medicare that were not the cause of the problem. "Its a pretty perverse example of the wrong headed people running our system."

EMPLOYMENT - JOB GUARANTEE PROGRAM

TIME FOR A NEW APPROACH ON UNEMPLOYMENT: GOVERNMENT AS EMPLOYER OF LAST RESORT  By Marshall Auerback

At 10.2%, official American unemployment is now at its highest level since 1983 (http://finance.yahoo.com/news/Jobless-rate-tops-10-pct-for-apf-563122944.html?x=0&.v=8 ). 

Nearly 16 million people can't find jobs even though we are constantly being told that the worst recession since the Great Depression has officially ended. Yet instead of trying to revive the productive economy, most of the Obama Administration’s recover efforts still remain focused on cardio-shock treatment for Wall Street. Additionally, the President still seems curiously hamstrung by his Herbert Hoover-like devotion to fiscal rectitude: he wants to spend without “adding one dime to the budget deficit”, as he announced at his Congressional address on health care in September, even though deficits are a natural consequence of slowing economic growth, falling tax revenues and higher social welfare payments. 

To all of the chicken-littles (including the President) who fret about “excessive” government spending, we would simply point out that it is far better to deploy government spending in a way which REDUCES unemployment, rather than arises as a consequence of it.  We therefore suggest a new approach:

Government as Employer of Last Resort (ELR) or a Job Guarantee program.

The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment.  Furthermore, by fixing the wage paid under this JG program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. Other benefits could be provided, including vacation and sick leave, and contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom up reform of the current patchwork health care system.

Government as employer of last resort would not be introducing another element of intrusive bureaucracy into our economy, but simply better utilizing the existing stock of unemployed, now dependent on the public purse – especially the chronically long term unemployed. The current system we have relies on unemployed labor and excess capacity to try to dampen wage and price increases; however, it pays unemployed labor for not working and allows that labor to depreciate and develop behaviors that act as a barrier to future private sector employment.  Social spending on the unemployed prevents aggregate demand from collapsing into a depression-like state, but little is done to enhance future growth and demand, which can be done via the JG by providing them with employment, greater education and higher skill levels.  

The JG program would allow for the elimination of many existing government welfare payments for anyone not specifically targeted for exemption, and would command greater political legitimacy, as society places a high value on work as the means through which individuals earn a livelihood. Minimum wage legislation would no longer be needed as it would be established via the JG. Labor would welcome the safety net of a guaranteed job, and business would recognize the benefit of a pool of available labor it could draw from at some spread to the government wage paid to JG employees. Additionally, the guaranteed public service job would be a counter- cyclical influence, automatically increasing government employment and spending as jobs were lost in the private sector, and decreasing government jobs and spending as the private sector expanded. It would therefore remain a permanent feature of our economy, in effect acting as a buffer stock to put a floor under unemployment, whilst maintaining price stability whereby government offers a fixed wage which does not “outbid” the private sector, but simply creates a stabilizing floor and thereby prevents deflation.

ELR is desired because a more or less free market system does not (and, perhaps, cannot) continuously generate true full employment.  No civilized nation should allow a large portion of its population to go without adequate food, clothing and shelter.  Best of all is that the program would be creating a stock of EMPLOYED people, rather than a buffered stock of unemployed, where social capital depletes rapidly, and several long-term social pathologies develop.  The current policies clearly are not working; it’s time to try something that can put as many Americans as possible into productive employment.

 

 

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Wednesday
March 18th,
2015

KRISTINA HOOPER talks FINANCIAL REPRESSION

Kristina Hooper

 

 

SPECIAL GUEST: KRISTINA HOOPER, CFP, CAIA, CIMA, ChFC Managing Director, US Investment Strategist, Head of US Capital Markets Research & Strategy. Kristina Hooper is a managing director, US Investment Strategist and Head of US Capital Markets Research & Strategy with Allianz Global Investors, which she joined in 1998. She provides financial professionals and their clients with updates on financial-market performance, market trends, economic trends and financial-planning concepts. Ms. Hooper has appeared on CNBC and Reuters TV and is regularly quoted in The Wall Street JournalInvestor’s Business DailyReuters and other financial-news publications. She has 18 years of investment-industry experience and previously worked in product management at UBS (formerly PaineWebber) and at MetLife. Ms. Hooper has a B.A., cum laude, from Wellesley College; a J.D. from Pace University School of Law, where she was a Trustees’ Merit Scholar; and an M.B.A. in finance from New York University’s Leonard N. Stern School of Business, where she was a Teaching Fellow in macroeconomics and organizational behavior. Ms. Hooper holds the Certified Financial Planner, Chartered Alternative Investment Analyst, Certified Investment Management Analyst and Chartered Financial Consultant designations. She is a CFA Level II candidate.


FINANCIAL REPRESSION

What is financial repression?

Government actions (lower interest rates, increased regulations, etc.) to reduce debt while maintaining inflation

Goal: Create negative real (after-inflation) returns and inflate away public debt by forcing real rates below GDP growth

Why does it matter to investors?

It’s a “stealth tax” that systematically strips wealth; “safe” investments no longer generate enough income

It rewards debtors and punishes savers—especially retirees

Financial repression: It’s happening now around the globe

A Financial Repression checklist:

  • Extremely low key interest rates and bond yields
  • Central bank purchases of government bonds
  • Political pressure on banks to purchase government bonds
  • Nationalization of select banks
  • Repression-friendly regulatory measures
  • Restrictions on foreign capital movements
  • Pension asset transfers to governments

 

 

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Tuesday
March 17th,
2015

DOUG NOLAND talks FINANCIAL REPRESSION

Doug Nolan

 

 

SPECIAL GUEST: DOUGLAS C.NOLAND , Former Vice President, Federated Income Securities Trust and serves as senior portfolio manager of Federated Prudent Bear Fund, Federated Prudent DollarBear Fund and Federated Market Opportunity Fund. Before joining Federated, Doug was employed with David Tice & Associates, Inc. where he served as an assistant portfolio manager and strategist of Prudent B F Bear Fund and Prudent Global Income Fund. He earned a bachelor’s degree in accounting and finance from the University of Oregon and a master’s of business administration from Indiana University.

 

FINANCIAL REPRESSION

"Financial Repression is fundamental to current policy to try and sustain a global credit bubble... Policies have become ever more desperate as the credit bubble has gone global! It is a matter of policy makers distorting the incentives, especially the financial incentives. It is particularly painful for savers. Policy makers want to drive money out of savers into risk markets by creating incentives for speculation and leveraging to reflate the system and generate significant credit growth."

"It is flawed economic doctrine, flawed policy making and goes back a long way."

  • After the 1987 Stock Market Crash the Greenspan Fed flooded the market with liquidity,
  • We then had the late 80's excesses and that bubble burst,
  • In the early 90;s the Greenspan Fed came in and aggressively slashed interest rates and created a steep yield curve so the banks could borrow cheap and lend dear,
  • It created leveraged speculation,
  • We have been in serial bubbles ever since then. Each gets bigger and each post reflationary effort is even more extraordinary.
  • The 'Once in 100 Year Flood' was not the 2008 Crisis. We are in an even bigger bubble now. It is a Global Bubble. It is at the heart of money and credit. When the next crisis occurs the policies of Financial Repression won't have much of an impact unfortunately.

THE MARKET BASED CREDIT SYSTEM

"Back in the 1990's I was obsessed with trying to understand how an impaired banking system from the early 1990's morphed into this new age financial system that was fueling historic prosperity and a bull market. By the late 1990's I was convinced we had fundamentally changed finance. That uniquely for the first time in history we had global credit that was unconstrained. The quality and quantity of credit was unrestrained. There was no gold standard, there was no Bretton Woods Monetary regime, there was not even any ad hoc. dollar reserve system to restrain credit. Unlike historically when credit was dominated by bank lending, this new credit that developed in the 1990's was market based - securitization, Fannie Mae, Freddie Mac, Derivatives, Wall Street Finance. I was convinced that credit which is unstable would see this new credit highly unstable."

"I believed the government would reign this credit in. I had no inkling that the government would accommodate this type of credit and use this type of credit for reflationary policy. That is really how it got away from them! Accommodating financial leveraging and speculation etc."

WE HAVE DISREGARDED THE VULNERABILITIES OF CAPITALISM

"I am very much a free market person. I want the market to dictate price. As much as possible I want the government out of it. I look at the Financial Sphere and Economic Sphere. The Financial Sphere needs to be carefully regulated. You cannot have unconstrained credit! You cannot have a Financial Sphere that inflates at a whim because that distorts the pricing mechanism."

"I fear that when the crisis collapses the system it is going to be folks like us and our listeners who will have defend Capitalism by saying:

"Capitalism wasn't to blame. It was a run away Financial Sphere and poor Policy making in managing money & credit that was the culprit!"

Capitalism is not flawed but instead has vulnerabilities. We cannot disregard these vulnerabilities. These vulnerabilities are in Credit. We have disregarded the vulnerabilities within Capitalism. We have not separated the real economy pricing mechanism which operates very differently in the Financial Sphere.

This extensive discussion covers a wide range of subjects including:

  • THE BUILD-UP OF SYSTEMIC RISK
  • A CRISIS OF CONFIDENCE IS AHEAD
  • WHY WE HAVE RECORD ARTIFICIAL HOUSEHOLD WEALTH
  • FINANCIAL FRAGILITY - As long as Credit is expanding things looks good. But it camouflages the underlying financial fragility.
  • 2008 WAS ABOUT PRIVATE CREDIT - THE NEXT CRISIS WILL BE ABOUT PUBLIC CREDIT
  • THE GLOBAL BUBBLE HAS NOW BEEN PIERCED

"You can now expect the unexpected from Policy Makers"

 

 

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Sunday
March 15th,
2015

PETER BOOCKVAR talks FINANCIAL REPRESSION

Peter Boockvar

 

 

SPECIAL GUEST: PETER BOOCKVAR Managing Director, Chief Market Analyst with The Lindsey Group, a macro economic and market research firm. Prior to joining The Lindsey Group, Peter spent a brief time at Omega Advisors, a New York based hedge fund, as a macro analyst and portfolio manager. Before this, he was a partner at Miller Tabak & Co for 18 years where he was recently the equity strategist and a portfolio manager with Miller Tabak Advisors. He joined Donaldson, Lufkin and Jenrette in 1992 in their corporate bond research department as a junior analyst. He is also president of OCLI, LLC and OCLI2, LLC, farmland real estate investment funds. He is a CNBC contributor and appears regularly on their network. Peter graduated Magna Cum Laude with a B.B.A. in Finance from George Washington University.


FINANCIAL REPRESSION

"Financial Repression is the artificial suppression of interest rates well below the rate of inflation and well below what they would be otherwise if set by the supply and demand for money. That is what should determine what the cost of money is!"

SUPPLY & DEMAND CONSEQUENCES

"The central banks are pressuring you to act today in some activity that you would otherwise have done tomorrow. They want you to buy a car today, they want you to buy a house today, they want you to buy that stock today - not tomorrow. It just pulls demand activity forward! When this begins activity in the short term accelerates both in terms of both economic activity and higher asset prices. At some point you reach a wall where you have pulled forward so much activity that you have reached the law of diminishing returns!"

"All of this has pulled forward future returns on asset prices, but that doesn't stop asset prices from going higher! ... "You get short term benefits but at the expense of long term costs. You pay for it over the long term."... "What the central bankers actually end up creating is Deflation because of the excess capacity build-up to match the artificially created demand!"

We have Deflation presently in Commodity prices but in the US we have Inflation in Professional Services.

"Central Bankers have 'mucked' up the entire concept of Supply & Demand and price discovery. All the various inputs are 'out of whack relative to where they would be historically!"

POTENTIAL FED RATE INCREASES

"This ends when Inflation actually starts to increase! When Interest Rates do start to rise and in affect take away the printing press of the central bankers. Right now Central Bankers have given themselves license to do what they want because at these low levels of inflation, but at some point the bond market is not going to be so accommodating!"

The Central Bankers are trapped in a policy they can't get out of. It is ridiculous that after 6 years of ZIRP everyone is 'freaking out' over a mere 25 basis point increase.

The Fed's academic econometric models are flashing red over labor market metrics. Therefore they will increase rates in June irrelevant of whether that is actually the right thing to do (assuming you believe the Labor numbers) . That is what guides them.

"The issue is not whether the Fed raises rates but rather the turbulence it causes and what it means to potential future rate hikes."

A MAJOR CORRECTION IS POTENTIALLY JUST BEGINNING

The combined Fed tightening and a changed earnings picture suggest the basis for rising equity markets is no longer there. The Multiple expansion game is not there.

"How far we decline I am not sure. I am not sure where the Yellen 'Put' is. It is an 'out of the money' Put but I am not sure what the strike price is! I don't know if it is 15% or 25% lower. I am pretty sure if we are down 20-25% Yellen will cut rates below where she has them after raising them in June. I would then not be surprised to see another round of QE."

AT SOME POINT THE FED WILL LOSE CONTROL

"We know the Fed lost control of commodity prices. The Fed is trying to generate inflation and commodity prices have gone the exact opposite way! At some point they are also going to lose control of stock prices."

"ECB QE was the final act of Central Bank Largesse!"

"There is literally Monetary Madness Going On!"

 

 

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Monday
March 9th,
2015

WHAT DO THE TRENDS SUGGEST?

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

with Charles Hugh Smith & Gordon T Long

33 Minutes - 15 Slides

Charles Hugh Smith and Gordon T Long discuss some of the major secular trends occurring today and give their views on what they may be telling us about what might be ahead.

TECTONIC FORCES

  • Private Sector rapidly decentralizing and networking decision making,
  • Public Sector rapidly centralizing and taking more control through laws, regulations, fees, licenses and taxes.

5 TRENDS TO CONSIDER

TECHNOLOGY PRESSURES

 

GROWING DISRUPTIVE PRESSURES TO A FRAGILE SYSTEM

DISRUPTION:

  • Strengthens Robust, Decentralized Systems,
  • Breaks Fragile, Centralized Systems.

 

DESTABILIZING FORCES AT PLAY IN A FRAGILE ECONOMIC ENVIRONMENT!

 

 

 

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Sunday
March 8th,
2015

AMIN RAJAN talks INVESTING IN A DEBT-FUELLED WORLD

Amin Rajan

 

 

SPECIAL GUEST: PROF. AMIN RAJAN Chief Executive of CREATE (Centre for Research and Technology in Europe)-Research – A network of prominent researchers undertaking high level advisory assignments for governments, global banks, fund managers, multinational companies and international bodies such as the EU, OECD and ILO. He is a visiting professor at the Centre for Leadership Studies at Exeter University, and an associate fellow at Oxford University’s Said Business School. He is an expert on employment and workforce diversity and is one of the most sought after speakers on the future of work, organization and society and its leadership implications.

Prof Rajan has also acted as a senior consultant to companies such as ABN-AMRO, Aegon Group, Barclays, BlackRock, BP, BT, Citibank, Credit Suisse, Deutsche Bank, EDS, Fiat, Ford, GSK, HSBC, IBM, ING Bank, JPMorgan Asset management, Legal & General plc, Lloyds Bank, Microsoft, Morgan Stanley, Motorola, Principal Global investors, RBC Dexia, Royal Bank of Scotland, Prudential, Rolls Royce, Royal SunAlliance, T.Rowe Price, Shell, Storehouse Group and UBS.

FINANCIAL REPRESSION

"Financial Repression is a device used by governments to liquidate their debt."

Financial Repression uses low interest rates (which reduces their financing costs) and inflation (which vaporizes its debt). The Negative Real Interest Rates which the two in combination create, has in the modern era been the way governments reduced their debt burdens.

"Financial Repression brings about an arbitrary redistribution of wealth."

Today it is the governments only politically realistic option.

The critical problem is holders of fixed income debt get hurt where there is a redistribution of wealth:

  1. From Savers to Borrowers.
  2. From Pension Plans to Governments

EXPECTED DURATION

Historically we should expect Financial Repression to last anywhere from 15 to 50 Years. We are now into only the seventh year! In Prof Rajan's opinion "this show has a long shelf life and likely to run another 5 - 10 years"

 Download Report

PENSION PLANS - Entering "De-Accumulation Stage"

Aging demographics in the debt burdened developed economies is exaggerating the effects of Financial Repression because of the need for Investment Income products by retirees.

Pension Plans are now going into the "De-Accumulation Stage" where there is more money going out of the plan than is going in. Pension plans face problems of both under contribution levels and De-accumulation resulting in serious underfunding positions.

THE RETIREMENT TSUNAMI

The "Baby Boomer' Generation is in the process of retiring. There will be 78 Million in the US and 84 Million. Europe which accounts for 8% of the global population and 25% of global output accounts for a massive 48% of global welfare budgets.

The shift from Defined Benefits (DB) to Defined Contributions (DC) is about the "Personalization of Risk" so we are told, "so people can be 'empowered' and will be less dependent on their employers plans". Instead Prof Rajan argues we have "Personalization of risk has a big downside. It transfers risk from those who couldn’t manage it to those who don’t understand it!"

SOLUTIONS ALPHA

Product alpha is about beating the markets, solutions alpha is however about meeting investors’ predefined needs.

"Solutions Alpha is not about trying to beat the market nor the crowd, because these markets are going to end in tears at some stage. So when thinking about retirement think about exactly what your needs are then think about asset classes that will help you meet these needs. 'Shoot-The-Lights-Out' returns are no longer an option without huge amounts of risk!"

Solutions alpha will remain the epicenter of innovation. Solutions Alpha requires looking for asset classes that deliver:

  1. Regular Income,
  2. Inflation Protection,
  3. Low Volatility.

Examples would be Rental Real Estate, Infrastructure, Timber, Farm Land and many traditional "hard assets".

LIQUIDITY CRISIS - Volcker Rule Has it 'Preordained'

When the next market correction occurs "liquidity is going to dry up in no time at all because of the Volcker Rule. The inventories of Bonds which the Investment Banks are caring are now one-eight of what they were pre-2008. Any mass exit and there will be no liquidity and prices will drop like a stone!"

OBSERVATION

Prof. Amin Rajan observes that two paradigm changes have occurred in capitalism:

  1. Capitalism has Lost Social Expression - It is no Longer Improving and Benefiting Society as a Whole
  2. Over Financialization - Financial Engineering and Trading for Profits had taken control of Capitalism versus Investing In Productive Assets for increasing productivity. Markets no longer channel capital from savers to investments in productive assets. There are neither savers nor productive assets involved in the process but rather financialization.

 

 

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Monday
March 1st,
2015

MEB FABER talks GLOBAL VALUE

 

Mebane Faber

 

 

SPECIAL GUEST: MEBANE T. FABERChief Investment Officer and Portfolio Manager

Mr. Faber is a co-founder and the Chief Investment Officer of Cambria Investment Management.  Faber is the manager of Cambria’s ETFs, separate accounts and private investment funds for accredited investors.  Mr. Faber has authored numerous white papers and three books: Shareholder Yield, The Ivy Portfolio, and Global Value.   He is a frequent speaker and writer on investment strategies and has been featured in Barron’sThe New York Times, and The New Yorker. Mr. Faber graduated from the University of Virginia with a double major in Engineering Science and Biology.

FINANCIAL REPRESSION

"An environment where interest raters are lower than inflation and you have a low or even negative interest rate environment which helps someone and hurts someone else. It hurts savers but is good for borrowers and people who have a lot of debt. The inflation eats away at that debt. It helps someone like the US government"

"Stocks and bonds like high real interest rates. They typically don't like low or negative real interest rates". Other asset classes like gold like negative real rates and have over the last decade, but not so much over the last couple of years."

VALUE & MOMENTUM

Faber likes both value and momentum and believes they can work together as part of a global portfolio, particularly where they intersect. Cambria uses Shiller's 10 Year CAPE benchmark to look at equities. It is typically around 17 and is now around 27 in the US. It presently shows a lot of great valuations around the world however momentum has been in US stocks, bonds and real estate. "Right now we see a lot of opportunity, but particularly abroad".

THE "HOME COUNTRY" BIAS

The US is only about 50% of global market cap but most US investors have a 'hometown bias" of having 70% of their portfolio in US securities. Faber has found that it consistently ranges from as low as 65 to as high as 85%. Meanwhile, when considered on a GDP basis the US is only about a fifth to 25% and on a valuation basis is the third most expensive. This would suggest the US has a headwind, especially after a six year run. An exposure of at least half to foreign investment seems more reasonable to Meb Faber.

DEVELOPED AND EMERGING COUNTRIES

We start with a universe of about 45 countries with reasonable liquidity. One of Cambria's funds buys the eleven cheapest countries in the world. Faber's analysis suggests avoiding countries that create large bubbles can be a critically important when viewed over the longer term because of the size of the inevitable corrections."

"One of the emotional challenges and why value works is because it is hard to do."

CLASSIC MISTAKES

  1. "Not Getting Out of Your Own Way!"
    • Getting Caught Up In Performance,
    • Not Having a Plan,
    • Trying to Time Your Investments,
    • Realistic Expectations.
  2. "Not Paying Attention to Fees"
  3. "Too Wedded to An Investment Style"
    • Need to be Asset Class Agnostic

 

 

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Monday
February 23rd
2015

First ZIRP, Now NIRP!

A Destabilizing Policy

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

 

First ZIRP, Now NIRP!

A Destabilizing Policy

Published 02-23-15

32 Minutes

What is the significance of the dramatic shift from ZIRP (Zero Interest Rate Policy) to NIRP (Negative Interest Rate Policy)?

This is a startling development that changes the investment landscape, strategies and business models of many traditional industries. We have watched rapid developments in Europe unfold with:

NIRP from the Central Banks  of:

  • ECB,
  • Switzerland,
  • Denmark
  • Sweden.

We have NIR Bonds from :

  • Germany's BMW,
  • France's LVMH,
  • Britain's BP,
  • Swiss Nestle

 

When money becomes less than free and you get paid interest to borrow all sorts of distortions begin to happen.

STOCK BUYBACKS

Negative interest rates are inviting companies to be "PAID TO BORROW MONEY" and then use the proceeds to buyback their shares, boost eranings per share and reduce dividend payments.

It has fostered an explosion in stock buybacks

FRACTURED BUSINESS MODELS

The question on the table that few can answer is: How do these industries survive with negative rates?

  • Pension Plans,
  • Insurance Plans,
  • Money Funds,
  • Retirement Plans

Industries which have been considered to be the safest places to place money are now being forced into becoming quasi hedge funds to achieve yield. This is a towering change in the world.

If because of this, any one of the participants in any one these industries were to 'blow up' it would add greatly to the already skeptical mistrust of investors.

It is highly likely to trigger a' risk-off' shift 'in a heart beat which would impact credit flows and liquidity! The same thing that happened in 2008.

WITH LOW INTEREST RATES NOT WORKING - DID THE CENTRAL BANKS FINALLY LOSE CONTROL?

 

 

 

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Sunday
February 22nd,
2015

Dr. PAUL CRAIG ROBERTS talks FINANCIAL REPRESSION

Dr. Paul Roberts

 

 

SPECIAL GUEST : Paul Craig Roberts Ph.D. Paul Craig Roberts has had careers in scholarship and academia, journalism, public service, and business. President Reagan appointed Dr. Roberts Assistant Secretary of the Treasury for Economic Policy and he was confirmed in office by the U.S. Senate. From 1975 to 1978, Dr. Roberts served on the congressional staff where he drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy. After leaving the Treasury, he served as a consultant to the U.S. Department of Defense and the U.S. Department of Commerce.

Dr. Roberts has held academic appointments at Virginia Tech, Tulane University, University of New Mexico, Stanford University where he was Senior Research Fellow in the Hoover Institution, George Mason University where he had a joint appointment as professor of economics and professor of business administration, and Georgetown University where he held the William E. Simon Chair in Political Economy in the Center for Strategic and International Studies. 

 

Published 02-22-15

31 Minutes

Dr. Paul Craig Roberts is extremely meticulous in examining the central problems facing America and the developed economies today. You may not like nor agree with what he says but there is little double as a former high level Treasury official, academic professor and Wall Street Journal editor, that he knows what he is talking about.

FINANCIAL REPRESSION

"It is going on on several fronts conducted by different people for their own agendas, though they all seem to be mutually supporting.

  1. FINANCIALIZATION OF THE ECONOMY by the Big Banks. - "What that means is that they are converting the entirety of the economic surplus to paying interest on debt. They are draining the economy of all vitality! There is nothing left for the expansion of consumer demand, business investment and old age pensions. It expropriates the economic surplus that is created beyond the maintenance of the current living standard into interest on debt."
  2. OFF-SHORING OF MIDDLE CLASS JOBS by Corporations & Wall Street - "What the Corporations and Wall Street have achieved by off-shoring manufacturing jobs and tradable professional job skills such as software engineering & information technology. What they have done by moving these offshore is to recreate the labor market conditions and wage exploitation of the late 19th century."
  3. MANIPULATION OF THE BULLION MARKETS by the Futures Market Bullion Banks - "There is no free market in the futures markets. These are markets that are manipulated."

COLLUSION BETWEEN PARTICIPANTS

"I think there is a lot of collusion. For example the government colluded with the banking system in financial deregulation. For example they repealed Glass-Steagall. They expressed this absurd claim that financial markets are self regulating."

"They turned the financial system into a gambling casino where the bets are covered by the tax payer and central bank."

The cancer which started in the US Financial System has spread globally. The carriers of the cancer has been the International Banks.

WASHINGTON ANSWERS TO WALL STREET

"Some of the Financial Repression is collusion of government serving the financial interests because Wall Street is a huge supplier of political campaign funds which you are highly dependent on to get re-elected. So you answer to the donors. You don't answer to the public interest. It doesn't give you any money."

"You answer to:

  • Wall Street,
  • The Military-Security Complex,
  • The Agri Business like Monsanto,
  • The extractive Industries (Oil, Timber, Mining)

These are the powerful interest groups that use the government to serve their interests."

THERE ARE NO LONGER COUNTERVAILING POWERS IN WASHINGTON

With the destruction of the manufacturing jobs in America through off-shoring, it has reduced the power of the unions and destroyed the Democrats independent source of campaign funds.

"You now have two parties with the same head and reporting to the same masters. There is no longer any countervailing power"

You no longer have the Democrats supporting workers against the Republicans supporting business. Both parties represent them.

"This is the reason you can't do anything about Financial Repression!"

NEO-CONSERVATIVE CONTROL OF FOREIGN POLICY - $6T TRILLION IN WAR DEBT

We have been in 14 years of wars and added $6T of national debt to finance these wars "without adding five cents of investment for the country having taken place."

"We now have the Neo-Conservatives driving the conflict with Russia (which is insane), with China (which is insane). The United States doesn't have the power to try and dominate Russia / China. Especially now that the two countries have a strategic alliance"

"You have much of the world turning away from the United States because of Washington's

  • Abuse of the Dollar as the World's Reserve Currency,
  • Abuse of the dollar based payment system,
  • Imposing unilateral sanctions which are acts of war,
  • Threatening people with expulsion from the clearance mechanism and people saying we won't have any part of this,
  • The BRIICS establishing their own version of the IMF,
  • The Impact of the Spy Scandals and people saying they will build their own internet,

All of this is not only going to effect business it is going to effect American power. It is going to start shriveling!"

"If you have these crazed Neo-Conservatives demanding control of the world, faced with declining power, you don't know what they will do! It is a very, very dangerous situation. I'm surprised it has taken the world so long to realize the threat the US poses to the rest of the world."

"The US Dollar payment system is essentially a system for looting. This, Globalization and Neo-liberal economics are tools of American economic imperialism. Countries are beginning to realize this. The looting of countries by American imperialism has now reached the point where it is turning on itself - Greece for example."

 

 

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Saturday
February 21st,
2015

What is FATCA?

 

Haydon Perryman

 

 

SPECIAL GUEST: Haydon Perryman CGMA is an experienced FATCA Programme Manager, has mobilized three FATCA Programmes from scratch, including those of Lloyds Banking Group and the Investment Banking Arm of RBS. Haydon has been working on FATCA for four years. Haydon has a detailed understanding of the FATCA regulations and the practical strategies involved in ensuring an FFI meets the requirements of FATCA at an agreed level. Haydon has a wealth of industry contacts on FATCA in Banking, the Big Four and amongst Tax and Legal Advisors. Haydon’s FATCA experience spans Investment Banking, Corporate Banking and Retail Banking.

"This a modern day "Doomsday" Book, the same as William the Conqueror Implemented in 1066 after conquering England. He needed to know where the wealth was so he could tax it"

"This is Not Really About Tax There are Easier Ways to Solve Tax Tracking - Its about a Common Reporting Standard. Its about the ability to track Capital"

"FATCA is a decoy for the Common Reporting Standard"

"There is an incredibly aggressive urgency of implementation - an unprecedentedly quick agreement between 57 governments"

 

Why?

Either to Tax it , Expropriation it or Control Its Free Movement

 

"Era of Banking Secrecy is Over!"

"A Complete Misunderstanding by Banks"

NEW ACRONYMS IN THE ERA OF FINANCIAL REPRESSION

  • FATCA - Foreign Accounts Tax Compliance Act
  • GATCA - Global Account Tax Compliance "Acts"
  • CRS - Common Reporting Standard
  • IGAs - Inter Governmental Agreements on FATCA
  • AEOI - OECD's Automatic Exchange of Information
  • AML/KYC Procedures - The term “AML/KYC Procedures” means the customer due diligence procedures of a Reporting Financial Institution pursuant to the anti-money laundering or similar requirements to which such Reporting Financial Institution is subject.

THE ROAD AHEAD: FATCA, IGAS AND THE CRS

The costs of FATCA Compliance will be USD 1 to 2 trillion worldwide. The bulk of these costs will be incurred in the customer outreach required to obtain the required documentation.

There will also be considerable customer backlash to FATCA and the documentation it requires. In the age of social media this matters, if this sounds like hyperbole please have a look at this URL

At a most basic level FATCA, the IGAs and the CRS are about making tax part of standard KYC/AML procedures and then reporting, for tax purposes, to those jurisdictions, in which the account holder has tax residence or citizenship.

EVERYTHING YOU NEED TO KNOW ABOUT GATCA / FATCA

DOWNLOAD THE 525 PAGE REPORT

 

 

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Thursday
February 19th,
2015

Dr. MARC FABER talks FINANCIAL REPRESSION

Dr. Marc Faber

 

 

SPECIAL GUEST : Marc Faber, Ph.D. Editor and Publisher of “The Gloom, Boom & Doom Report” and website:  www.gloomboomdoom.com

Dr Marc Faber feels strongly that the current money printing policies "will not end well"!

He feels that:

"Governments are not smart enough to have thought the current scheme out. The professors, academics (who have never worked a day in their lives in the private sector) and central banks think by having artificially low interest rates you can solve problems. Actually, they aggravate the problems!"

"When central banks print money nothing begins to make sense!" -- "It is no longer a free market. Markets are now manipulated by governments and notably by their agents, the central bankers." 

FINANCIAL REPRESSION - An "Expropriation"

"Basically what central banks have done around the world is to push interest rates to extremely low or even negative rates. I don't call it a repression. I call it an expropriation of the savers because before the intervention of the banks occurred post 2008, a saver got a decent rate of interest. Now they get nothing at all! So either they speculate or they lose purchasing power over time!"

The purchasing power of money is depreciating. Financial Repression or what Dr Faber calls "expropriation", he feels is very negative for the middle and working class.

The current government and central bank policies "are leading to huge asset bubbles in stock, real estate, commodities, collectibles, art and so forth." Inflation and Deflation work much the same way according to Marc Faber. All prices do no go up or nor decline at the same time.

"We had the collapse of the Nasdaq after March 2000. Then the Fed created the housing bubble and after it collapsed after 2007, it had a devastating impact on a very large number of households. Then in 2008 we had a commodities bubble with oil going to $147/bl and now you know where oil is trading at. Its now 1/3 of what it was at that time basically. The Money printing leads to bubbles which they deflate and hurt the majority at the expense of a few people. This is not going to help the economy in the long run - PERIOD!"

PENSION AND INSURANCE "MODELS" - In Serious Trouble

The pension plans and Insurance industry is in deep trouble. They are basically forced to speculate on something. That speculation will end very badly!

WHAT SHOULD INVESTORS DO?

Dr Faber says quite honestly,

"I am an economist, strategist and investor. The answer to the question of what should an investor do is - I DO NOT KNOW! But people expect me to know so I can tell you what I would do. In the absence of knowing precisely how the end game will be played we should invest in a diversified portfolio of different assets. Some in real estate, some in equities, some in cash & bonds, and some in precious metals."

"For an investor to not own some precious metals at this point is almost irresponsible!"

MORE QE IS COMING

"I don't believe we have currency wars but rather the central bankers, one after the other, prints in a 'round about'"

"Money printing has never ended well in history. It can postpone the problems, but it will make the end result even worse."

"I believe the Fed will intervene at some point with another round of QE!"

 

 

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Saturday
February 14th,
2015

LAURENCE KOTLIKOFF talks BANKING & THE "FISCAL GAP"

Laurence Kotlikoff

 

 

SPECIAL GUEST : Professor Laurence Kotlikoff, Ph.D. is a William Warren FairField Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Research Associate of the National Bureau of Economic Research, a Fellow of the Econometric Society, a former Senior Economist, and on President Reagan's Council of Economic Advisers.

Professor Laurence Kotlikoff believes the current banking system needs to be restructured into "Limited Purpose Banking to remove excess leverage and opacity; that the bureaucrats are having a field day with new ineffective regulations and the US government is financially bankrupt when accounted for correctly.

FINANCIAL REPRESSION

To Professor Kotlikoff the Financial System needs to be understood as a Public Good. It is a market place which needs coordination and banks & financial intermediaries are there to facilitate the operation and management of that public good. Regulators are there to keep the public good working. The question is what kind of regulation do we need that will ensure the financial system keeps working.

"Today the system is in bigger danger than 2008 because fundamentally the banks are being allowed to operate with dramatically larger leverage than would keep things safe!"

Additionally, the banks are being allowed to operate with full opacity. They don't have to tell what they own in terms of assets or liabilities. Therefore depositors don't know the risk they are taking which can lead to bank runs which we saw in 2008 where banks didn't trust other banks.

"We are all set up to see this happen again because of all this leverage and opacity. The system is more fragile!"

THE FIX

In his book "Jimmy Stewart is Dead", Professor Kotlikoff talked about shifting from a "Faith Based" banking system to a "Show Me!" banking system where financial intermediaries disclose all the assets they are holding. Instead of borrowing money to invest in assets we can't see, they would sell shares through equity finance. They in effect would be equity financed Mutual Funds.

The purpose of "Limited Purpose Banking" which Professor Kotlikoff is proposing in his book is that all the financial middle men who are running the "public good" not be allowed to gamble with it. To most people their banking would be through:

  • Cash Mutual Funds - For the Payment System
  • Mortgage Mutual Funds - Instead of Fannie Freddie

The leveraged derivative element of the current speculative banking system would be run in a similar manner to modern parimutuel betting system polls. Dodd-Frank legislation has not made the system safer and instead sees only one regulator agency (the "Federal Financial Authority") which oversees disclosures versus 130 entities in Dodd-Frank!

THE $210 TRILLION FISCAL GAP

Economists like Professor Kotlikoff feel the 'Fiscal Gap' is what we should be measuring, not one part of it which is the National Debt. The Fiscal Gap according to the CBO is presently $210T while the National Debt approximates $13T. We are focused on the $13T but really we need to be focused on is the $210T.

Over 1200 economists and 17 Nobel Laureates have endorsed a bill that mandates that the CBO & GAO do 'Fiscal Gap' reporting to look at the big picture.. Information on this bill can be found at www.theinformact.org.

The current shortfall is 10.5% of GDP, each and every year. To offset this would require a 60% increase in taxes or for a 35% cut of all expenditures and benefits.

"The US is actually fiscally broke!"

The banks are holding a lot of the governments debt which is unpayable. Governments that cannot pay their bills print money. Eventually this inevitably leads to inflation. This will make the bonds worth less money which would highly likely put the banking system underwater.

SUPPORT

theinformact.org

thepurpleplans.org

 

 

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Thursday
February 12th,
2015

LACY HUNT talks DEBT DEFLATION

Lacy Hunt

 

 

SPECIAL GUEST : Lacy H. Hunt, Ph.D. is an internationally known economist, is Executive Vice President of Hoisington Investment Management Company, a firm that manages over $5 billion for pension funds, endowments, insurance companies and others.

Lacy Hunt is the author of two books, and numerous articles in leading magazines, periodicals and scholarly journals.  Included among the publishers of his articles are. Barron’sThe Wall Street JournalThe New York TimesThe Christian Science Monitor, the Journal of Finance, the Financial Analysts  Journal of Portfolio Management.

Previously, he was Chief U.S. Economist for the HSBC Group, one of the world’s largest banks, Executive Vice President and Chief Economist at Fidelity Bank and Vice President for Monetary Economics at Chase Econometrics Associates, Inc.  A native of Texas, Dr. Hunt has served as Senior Economist for the Federal Reserve Bank of Dallas. 

OPEN ACCESS

40 Minutes

Lacy Hunt and his partner Van Hoisington were called "The Henry Fords of bond investing" by Forbes Magazine. You can understand why when you listen to Dr Lacy Hunt describe the current global macro environment.

FINANCIAL REPRESSION

"A superficial attempt to deal with the excessive indebtedness that grips the global economy .. and in my opinion will not work!"

"Monetary Policy is not the solution here. There are Fiscal Policy solutions but they require shared sacrifice, strong leadership (something we don't have in the US or Europe - no one has) ... basically what w are trying to do is to solve an extremely over-indebted situation domestically and globally by taking on more debt and aggravating the problem "

DEFLATION

“The current economic maladies and continuing downshift of economic activity has been the over-accumulation of debt. In many cases

"Debt funded the purchase of consumable and non-productive assets, which failed to create a future stream of revenue to repay the debt.”

“The increase since 2008 has been primarily in emerging economies. Since Debt is the acceleration of current spending in lieu of future spending.”

CURRENCY MANIPULATION

    1. Impairs global activity,
    2. Spurs dis-inflationary or deflationary trends and
    3. Engenders instability in world financial markets.

THE CURRENCY WARS OF THE 1920’S & 1930’S

Lacy muses on the effects of debt and takes us back to the ’20s and ’30s, when there were similar problems with debt in countries that had engaged in currency wars for over a decade.

Clearly the policies of yesteryear and the present are forms of “beggar-my-neighbor” policies, which the MIT Dictionary of Modern Economics explains as follows: “Economic measures taken by one country to improve its domestic economic conditions … have adverse effects on other economies. A country may increase domestic employment by increasing exports or reducing imports by … devaluing its currency or applying tariffs, quotas, or export subsidies. The benefit which it attains is at the expense of some other country which experiences lower exports or increased imports.… Such a country may then be forced to retaliate by a similar type of measure.”

The existence of over-indebtedness, and its resulting restraint on growth and inflation, has forced governments today, as in the past, to attempt to escape these poor economic conditions by spurring their exports or taking market share from other economies. As shown above, it is a fruitless exercise with harmful side effects.

It behooves us to pay attention to Lacy since he has been one of the most accurate forecasters of interest rates for the last 20 to 30 years.

2015 -Parallels to that earlier period.

  • First, there is a global problem with debt and slow growth, and no country is immune.
  • Second, the economic problems now, like then, are more serious and are more apparent outside the United States. However, due to negative income and price effects on our trade balance, foreign problems are transmitting into the U.S. and interacting with underlying structural problems.
  • Third, over- indebtedness is rampant today as it was in the 1920s and 1930s.
  • Fourth, competitive currency devaluations are taking place today as they did in the earlier period. These are a combination of monetary and/or fiscal policy actions and also, with floating exchange rates, a consequence of shifting assessments of private participants in the markets.

INTEREST RATES

“The downward pressure on global economic growth rates will remain in place in 2015. Therefore record low inflation and interest rates will continue to be made around the world in the new year, as governments utilize policies to spur growth at the expense of other regions.”

“new lows in yields in 2015 in the intermediate- and long-term maturities of U.S. Treasury securities”

 

 

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Monday
February 9th,
2015

THE NEXT "PEG" TO FALL

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

with Charles Hugh Smith & Gordon T Long

35 Minutes - 20 Slides

Charles Hugh Smith and Gordon T Long discuss the Currency War pressures now on China to devalue the currency. Such an event could potentially send deflation shock waves around the globe and show how impotent and precarious central bank policy has truly become.

DOMINOES ARE FALLING!

  • First the Russian Ruble (December),
  • Second the Swiss Franc (January)
  • Third The Danish Krona (February)

WHAT'S NEXT - As A Result of the Dollar Bull?

  • The Singapore Dollar?
  • The Hong Kong Dollar?
  • The Yuan Devalues (Bands Expanded)??

 

 

HAVE CENTRAL BANKERS LOST CONTROL?

 

 

 

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