Aloha! Just gonna keep this short! Is financial repression the same as fiscal repression? Fiscal is all about government revenues and taxation if you believe in dictionaries. You always hear politicians talk about the government's "fiscal house". They ask if it is "in order"! Financial applies to markets. America is touted as a "free market economy" and it is always sold as the largest "financial center" in the free world, but we all know there is no such thing as "free"! Not lunches or markets! Never really has been and never will be. It's kind of like the American Dream concept. It's only a dream if you look past the 30 years of debt servitude and the life long drama of emotional servitude that comes from family. The word "dream" certainly can take on biblical interpretations of mass delusions.
It's easy. The other and most oft overlooked repression is "taxation". Without a doubt if you vote for big government you are voting for "big taxation"! As a former IRS agent I can attest to the constant changes in tax law since the 1980s when I was locked and loaded that have helped to diminish the lifestyles of all American classes, rich and poor! Certainly you can say that if you are rich you can avoid paying your fair share since you can afford to buy lawyers and offshore production and revenues. But "buying lawyers" and "moving offshore" are not without huge costs, so indirectly the rich are paying their share only they aren't paying the IRS and indeed they may end up paying more in the long run once those offshore governments get desperate enough to nationalize more and more production.
Karl Marx never saw democracy in a favorable light. Democracy in the long run seems to collapse into socialism as he says. I think it has in many respects. He also did not look on bankers as a wise choice to control the means of production. Hmmm … KARL FOR PRESIDENT! I mean if we're gonna do Socialism lets do it right! C'mon the top Dem Presidential leader is under investigation by the FBI. Look what Ford did with Nixon. Politics corrupts and corrupt politicians corrupt absolutely! The hallmark of the USSR was "corruption". Isn't one Mafia enough?
In the beginning we had no career politicians in office and voting was restricted to property owners. America was at that time called a Republic. What has changed?
If you want a simple definition of "financial represssion" then I would say that "financial repression is career politicians financed by career bankers". Change that dynamic and you change the world!
Similarly, it promotes massive increases in leverage. Buying a $1MM apt complex all cash at a cap rate near 6% yields $60.000 NOI; however, with 75% LTV on a $4MM apt project, the nominal CF to equity might be double that… and the buyer says hey, now I have a $4MM basis for appreciation on my $1MM equity and say $100,000 ADS cashflow, so my COC is 10% or 8% or whatever, and a 10% overall property appreciation is a 40% increase in equity. Say the apt building then doubles in price due to OAR compression and slightly higher income and they refi out to keep the leverage maxed-out and buy more units/projects albeit at higher prices and 4% cap rates. Along with that, you get the investor with $1MM whose purchasing power is diminished, so buying something all cash is less attractive. Home prices also rise which lessens effective demand, so .gov loosens the reins on lending standards and prices inch higher which again impact affordability and drive up rents. I can remember 8% cap rates and 15% COC income rates.
If you go back and research the 2008 financial crisis, the RE Investors that got killed were highly levered regardless of the purchase price and timing/date of acquisition. Similar scenario to the old lady who bought a house in Berkeley for $40,000 and eventually lost it with a $600,000 mortgage she could not service. Regardless of rates, .gov would be wise to lower LTV ratios… but they won't.
In My model Kaimu, the Government has the printing press. It can print up all that it needs. However, the government needs to get everybody out of bed every morning to do stuff.
Therefore it has to drain liquid out of the economy, to motivate everyone. That is what taxes are for. To remove liquid from the body. The government couldn't care less about the paper. In the old days it was burned, these days they just press delete.
So this "balancing the budgie" thing is all about how much the government wants to get done.
In a civilization that has all it's needs met and any further busyness would be counter productive. The busy work needs to be curtailed. (environmental damage, over consumption)
I assert therefore that there is an inverse correlation between the amount of money in the hands of the consumer and his motivation. Finland is saying "enough already" by dropping money into everyone's bank account.
However the curve is not linear. Too little money is also a big demotivator. Therefore there's a sweet spot on the curve that if reached will give just the right amount of motivation. Not too hot and not too cold.
EDIT: Of cause on a curve with a maximum there would be two sweet spots, not one. The maximum would be the point of maximum busyness. Which is what we want to avoid.
EDIT 2 : My assumption is that the PTB are motivated to produce maximum benefit.
Amerman's basic point is inflation taxes remove any real gain to capital investing. Let's extend this then and ask why anyone would create and build a business only to be taxed into a real loss? That's truly insane if we follow Amerman's argument. I have tried for years to get others to see that government is stealing capital by not factoring inflation into "profit taxes". For some reason the human animal doesn't want to see this. This is why societies die. I haven't gotten to the point of how to tap into Amerman's Wealth Flow but assume it is some kind of real estate that is tax favored on capital gains and income. To this I say why can't government change those tax rates to extract more capital from real estate investors after it killed the production entrepreneur?
"Banks counterfeiting freshly printed money" is not a sensible statement. Banks loan money against their reserves at the Federal Reserve but do not loan these reserves. Having reserves that are a fraction of their loan book has been the name of the game for years. This has been perfectly legal and acceptable for years. No counterfeiting has been involved.
The Fed exists to keep the commercial banks healthy and alive. This is the basis of the capitalist system. The amount of money in the system is not fixed. It floats up and down. The price of money also floats up and down. Inflation is the key to growth but it must be controlled in a capitalist system.
Amerman's explanation of financial repression is an eye-opener (where have I been? I've probably been calling it something else instead of what it really is, and thinking it was an accident of the system, ha!). His analysis of game theory applied to social security retirement benefits was another eye opener. So I signed up for the series of emails on "wealth flows" which describe the inflation pickpocket, hidden taxes, debt cycles/supercycles, real returns on real estate, etc. Although there are some additional eye-openers there, I must admit the idea of excess leveraging increase post-tax capital gains does not sit well with me right now.
Amerman analyzes home mortgages taken out in the 60's, 70's, and 80's and evaluates the transaction strictly in terms of profit. He ignores the real prosperity of having a home as a secure, stable place to live. He also ignores the health benefit of sleeping well at night knowing that you & your family have a home that is not owned by the banksters and subject to outside forces. Americans have gotten into big trouble treating their homes as ATMs, and assuming that real estate will always go up. We're about to get "spanked" again, when the housing bubbles in Denver, San Francisco, New York, Texas…
We're somewhere in the Ka-Poom deflation/(hyper)inflation cycle. Probably at the "Ka" deflation stage (which has hit commodities but not yet affected most consumer goods and real estate). Perhaps he's correct that we should become highly leveraged in real estate, so the inflation that occurs during the "Poom" phase will miraculously wipe out our debt and leave us wealthier than before. But that doesn't sit well with me. Nicole Foss preaches a better strategy: get out of debt, don't take on any unnecessary new debt right now, and find ways to build personal resilience.
I'll add that reducing monetary income (while increasing non-monetary income and real prosperity) are powerful ways to reduce taxes with much less exposure (risk).
