Speical Guest: Jim Puplava, is the Founder, President & CEO of the Puplava Financial Services (PFS) Inc. group, and Puplava Securities Inc. He is also chief author and host for the Financial Sense Newshour. His companies manage $400 million for more than 825 clients (as of December 31, 2012). Puplava's website at financialsense.com was named a "supersite for alternative investing" by The Globe and Mail, Canada's largest-circulation national newspaper
Jim Puplava was one of the first researchers to go public with the concept of Financial Repression and the Financial Repression Authority wants to recognize him for this. After studying the writings of Rogoff & Reinhart, Jim Puplava identified shortly after the Financial Crisis the fact that policies of Financial Repression had been used after WWII with success and began writing and talking about them. He was a long voice on the subject.
The difference today and the previous situation after WWII is:
- The US is n o longer on Gold Standard (we now have a Global Fiat based currency system),
- Most developed economies have record Debt-to-GDP levels,
- We now have record levels of Derivative and Securitization which didn't exist after WWII,
- Globalization has changed the level of financial interconnections and dependency.
Jim Puplava suggests:
"Financial Repression in essence is a tax on savers! Savers are getting real negative interest rates (before taxes). The work of Keynes advocated robbing savers to the advantage of the government. The losers are savers while the winners are debtors and the government"
- Winners: Debtors
- Losers: Seniors (they are the savers)
Public is Unknowingly Contributing to Financial Repression
The stock market has seen a net $60-$80B go into the stock market since the rally began after the financial crisis. "The vast majority of individuals have been going into bond funds which by the way is part of the plan of Financial Suppression".
"Most investors have gone through two bear markets in the last decade where stocks lost 45%. They are now closer to retirement than they used to be and don't want to go through that again!"
As such they missed out on a historic market rally. "If they had held the course they would be ahead. The vast majority of people kept their money in savings because the headlines were scary."
"The media did an exceptionally poor job of explaining what was going on in the financial markets. Instead of telling people they needed to capture or take advantage of what Financial Repression was putting into place. Financial Repression supports growth type assets like stocks and commodities (initially coming out of 2009). This is how you re-capture (the prior market draw-downs). That is not what happened."
A Broad Ranging Discussion
The broad ranging discussion in the 35 minute interview include:
- Market drivers of Corporate Buybacks and broad Central Bank buying,
- Outlook for bond rates,
- Why Warren Buffet has 90% of his investments in equities,
- The scope of taxation on savings and what it means to future retirement planning,
- Economic growth and top line growth is not there so corporations are doing "rational allocation of capital". This is presently driving corporate policy.
- Fiscal Policy is missing from the governments economic agenda,
- Critically important is the impact of demographics and changing Millennial buying patterns,
- Financial Repression will likely go on for a couple more years before it inevitably breaks.
... and more
Video: Financial Repression Authority with Jim Puplava