“Financial Repression” Is Being Authorized

We have to accept the fact that the financial powers that be – the IMF, World Bank, Bank for International Settlements (BIS), assorted central banks, and your local government – are ready to rob you.

by Paul Rosenberg

 

While I don't think anyone really knows when it will happen (“normal” people have no view behind the central bank curtain), it appears that serious financial problems threaten us. And I say that because the people who do have a view behind the curtain are preparing draconian measures.

Here's why I say that:

In June of 2014, the International Monetary Fund (IMF) published a horrifying paper, called The Fund’s Lending Framework and Sovereign Debt. That paper, in turn, was based on one from December 2013, called Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten.

Major media ignored this, of course.

The December 2013 document, right at the start, says that “financial repression” is necessary (bolding mine):

The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression.

It continues:

As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.

So, in order to fix debt overhangs, financial repression is not just an option, but required.

That’s not my interpretation; those are their words.

And, of course, they’ve already had a trial run, when they stole funds directly from individual bank accounts in Cyprus:

  • March 16, 2013: Cyprus announces a bank holiday and sets the terms of a “bail-in” to save the banks: 6.75% of all bank balances under €100,000 and 9.9% of balances larger than €100,000 will be confiscated. In honest language, the word for that is “theft.” People screamed, of course, and the government hemmed and hawed for a number of days.
  • March 24, 2013: People are permitted to withdraw €100 at a time from their bank accounts.
  • March 25, 2013: A bail-in deal is announced. Accounts with over €100,000 lose either 40% of their money (Bank of Cyprus) or 60% of their money (Laiki bank).

And, as usual, a number of very rich people and companies were permitted to withdraw their money in full, regardless of the “bail-in.”

The IMF report goes on to say:

Governments can stuff debt into local pension funds and insurance companies, forcing them through regulation to accept far lower rates of return than they might otherwise demand.

… Domestic defaults, restructurings, or conversions are particularly difficult to document and can sometimes be disguised as “voluntary.”

The paper that they slipped out three weeks ago adds this:

The Fund would be able to provide exceptional access on the basis of a debt operation that involves an extension of maturities.

That means that 30-day notes can be instantly turned into 30-year bonds.

Further Examples

  • In 2009, the government of Ireland swiped €4 billion from their National Pensions Reserve Fund in order to prop up their insolvent banks. The following March, they stole the remaining €2.5 billion for another bail-out.
  • In November 2010, the French parliament took €36 billion from a reserve pension fund, to pay the debts of a “social” fund.
  • Also in November 2010, the government of Hungary effectively took 2.7 trillion forints ($13.5 billion) from 3 million retirement accounts.
  • The government of Poland nationalized one-third of future contributions to individual retirement accounts. That money will almost certainly disappear into the state treasury, robbing savers of some $2.3 billion per year.
  • In August 2010, the US Departments of Labor and the Treasury held joint hearings, deciding how best they could take control of all assets in IRAs and 401(k) accounts. The decision was that they’d replace them with “Treasury Retirement Bonds.”

What Do We Do?

First, we have to accept the fact that the financial powers that be – the IMF, World Bank, Bank for International Settlements (BIS), assorted central banks, and your local government – are ready to rob you.

When the time comes, all their usual sucker-bait will be pulled out: “It only hits the rich,” “We have to trash the economy to save it,” “We must all sacrifice,” “It’s for the children,” and so on.

All the right-thinking people on television will wring their hands and say it’s the only way out. Perhaps they’ll even let a bank or two crash for good effect.

But in the end, they aim to steal your money. Governments and the big banks will continue unharmed.

Understand that these people are running insolvent systems and have only two real choices:

  • Reform their system and relinquish power.
  • Start grabbing the only big pile of portable wealth remaining: your retirement money.

I don’t think any of us believe they’ll take option number one.

 

PAUL ROSENBERG is a founder of Cryptohippie and the author of the Free-Man's Perspective newsletter