The Future is Financial Repression

The only way that inflation works is if people use the currency – coins, paper money, digital dollars – that is being inflated.  It does no good for the monetary authorities to debauch precious metals coins by stealing some of the gold or silver and replacing it with base metals, or for them to debauch the currency by making it up out of thin air and thereby diluting its value if people don’t hold the inflated currency.

The people being defrauded by inflation must participate in being fleeced by continuing to use the currency.  That is one of the reasons for legal tender laws and capital controls.  You must be kept in the game,  

There is another way that governments force their victims to be victimized.  It is by a practice called “financial repression.”  We have alluded to it from time to time but are impressed by this thorough description from Nick Giambruno at the International Man newsletter.  You can read more at the link, but here are a couple of excerpts from his article beginning with a definition by the International Monetary Fund:

“Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulations of cross-border capital movements, and (generally) a tighter connection between government and banks.”

More from the IMF:

“High public debt often produces the drama of default and restructuring.

But debt is also reduced through financial repression, a tax on bondholders and savers via negative or below-market real interest rates.

After WWII, capital controls and regulatory restrictions created a captive audience for government debt, limiting tax-base erosion.

Financial repression is most successful in liquidating debt when accompanied by inflation.”

An example we have shared of financial repression is for the government to mandate that a certain portion of your retirement account or insured bank deposits must be invested in U.S. government bonds.  This helps the Treasury sell bonds and you are required by law to submit to being victimized.   

International Man provides more examples of financial repression:

Capital controls. Mandates forcing banks, pension funds, and insurance companies to buy government bonds. Regulations that make government debt appear “safe” or “risk-free” on institutional balance sheets. Yield curve control. Interest rate caps. Restrictions on moving money abroad.

And countless other policies designed to trap capital inside the system and push it toward government debt.

For example, many countries have forced private retirement funds into unwanted government debt. I have no doubt the US government would do the same under pressure.

They could try to sell it to a scared and financially ignorant public as a safety measure—a way to help people protect their retirement savings by moving them into “safe” Treasuries amid a stock market collapse.

They could sell it with patriotic lies and push War Bonds, as they have done in the past.

They could mandate that a certain amount—say, 25%—of all new contributions to private retirement accounts must consist of Treasuries. For your own good, of course.

They could even forcibly convert existing assets held in retirement accounts into government bonds.

We can assure you that financial repression will play a much bigger role in America’s future.  But you must be willingly victimized by it.  If you move your wealth into the maximum safety zone of gold and silver, you are going on strike effectively.  You are refusing to let your capital by siphoned away by inflation.

If that sounds like a good idea, or if you would like to know more, speak with a Republic Monetary Exchange gold and silver professional.