The Economic Death Spiral of “Financial Repression”

“Financial repression” is the euphemism for the latest economic scam, and it’s worth looking out for it to avoid its consequences.

August 7, 2023

By: Bobby Casey, Managing Director

financial repression T​here was a small snippet of Andrew Tate where he talked about the financial system and how it’s rigged… or how he believes it’s rigged. The example goes something like:

I​n a cash situation, if a man has $50 and spends it on groceries, and gives the $50 to the grocer, then the grocer spends the $50 on produce from a farmer, then the farmer spends the $50 on tools… the $50 remains $50.

I​n a credit card situation, using the same chain of events, in each transaction the bank takes roughly 4%.

H​e was trying to demonstrate the immutable and uncompromised benefit of using cash. Never mind the privacy! Similar admonishments for leaving the gold standards are surfacing for favoring a cashless society. There is an integrity to physical currency, the likes of which might only be seen in block chain based crypto.

W​hen the US left the gold standard, the books got shady rather quickly. The US shifted toward the petrodollar which was basically a handshake between the US and Saudi Arabia. And the debt as well as inflation began to take off, while the value of the USD plummeted precipitously.

T​hat’s the TL;DR version of things, anyway.

I​f you haven’t seen the Mike Judge classic movie “Office Space”, you really should. In the event that you haven’t, the crime the three office colleagues commit in that movie is an attempt to shave fractions of a penny off of each ATM transaction. The withdrawal is whole, as is the debit from their account, but within that transaction are fractions of pennies being rounded.

Instead of rounding, they program it to deposit that fraction of a difference into a separate account.

O​ne analogy, one historical account, and one fictitious story all are examples that lay the groundwork for what is really happening. During and coming out of the pandemic, we heard terms like “Great Reset”. What also followed close behind was “greatest transfer of wealth from poor to rich in history”.

T​HAT is the issue. The transfer of wealth. Debt only makes sense if someone is making money on it. Otherwise, why bother?

T​here is a term circulating called “financial repression”. What is that and what does it look like?

I​t’s a very similar scheme to the one I described from Tate and “Office Space” where there’s a percentage of the transaction that lines the pockets of banks.

T​he IMF defines it as: a tax on bondholders and savers via negative or below- market real interest rates. It’s meant to be a mechanism by which to offset debt.

In simpler terms, if inflation is 9% and governments fix interest rates at 4%, then a perpetual 5% transfer of wealth from lender to borrower compounds over time. They are literally skimming off the wealth stored in treasury bonds.

S​cams usually rely on certain parties remaining ignorant about the grift. In the case of a Ponzi scheme, for example, one person’s investment is paying off another person’s investment.

This is why Social Security is called a Ponzi Scheme: the current work force is paying for the retired work force. We’re lead to believe that we all paid in and can cash it out, but that’s not true. The model requires that everyone do their part unquestioningly… or by force… for it to work.

I​f the bondholders get wise to this, then they’d sell their bonds, driving interest rates higher. To temper the rising rates, the Central Bank would print more money.

T​he remaining bondholders would get wise to this, and demand higher interest rates to offset the inflation.

And round and round we go… until we march ourselves into a Venezuelan situation.

S​o how do we prevent the capital flight in the first place? Easy. Capital controls. Capital controls have myriad manifestations. But given the nature of this death spiral, I’d wager the government coming to its largest holder of debt: the people in the form of mandates and regulations.

Maybe, similar to the ESG scores on investments, a certain percentage of investment must be allocated toward treasury bonds? It’s not unheard-of. They could put this on company pension and retirement plans as a mandate.

Investment services might be mandated to urge their clients into a percentage of treasuries, and become the surrogate salesmen for government bonds. Just as retailers became the proxy enforcers of mask mandates, and employers became the proxy enforcers of vaccine mandates.

T​here’s always appealing to fear and/or patriotism. Think of all the times that’s worked. Pandemic, the wars coming out of 9/11… Telling people that their investment in treasuries is tantamount to protecting their own retirements isn’t a lie. Of course, they wouldn’t have needed to do that had the government not created this mess in the first place… so that’s left out of the sales pitch.

And if all the cajoling and coaxing fails, they’ll stop asking, and just convert your retirement assets into treasury bonds, and you’ll just wake up one day to that fact. That’s just shy of full-blown expropriation. Again, not unheard-of.

A​s if that wasn’t bad enough, you can only imagine the “Misinformation Propaganda Campaign” that will ensue!

I​f inflation indeed spirals out of control due to these “financial repression” efforts, we will only be allowed to talk about it as it has been officially portrayed by the state and its “experts”.

T​he economy will be handled in the same fashion as the pandemic. You will find renowned economic experts relegated to the bottom of the feed or canceled and defamed. You will find reporters suddenly fired. You’ll be in violation of “Community Standards” and the fact-checkers will be out in full force courtesy of the Ministry of Truth.

Maybe this doesn’t happen. But I don’t see how it doesn’t, given the brain trust over at the Central Banks and their degenerate spending habits. Either way, you don’t need to go through this loop with the government to see what’s coming. Diversify your investments. Keep your wealth as far from desperate government clutches as you can. And protect your assets.

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