Speaker 1: For over 150 years, the U.S. has quietly used a tactic known as financial repression to shrink its debt, without ever having to raise taxes or slash spending. This approach forces everyday citizens to unknowingly bear the cost. And with today's escalating financial crisis, it's a method we're likely to see more of shortly. So, if you're not ready for what's coming, you might just find yourself picking up the tab. Oh, and if you enjoy dodging government tricks as much as we do, hit that like button and And don't worry, subscribing won't add to your tax bill...YET. Financial repression is a collection of tools that allow governments to reduce debt without the political backlash of austerity measures or tax hikes. In ancient times, kings running out of gold had to either stop spending or forcibly take wealth from citizens, often leading to revolts. But today, with central banking and fiat currency, governments can sneakily extract wealth without most people realizing it. When they do notice and try to protect their assets, financial repression makes it difficult to do so. Governments typically turn to financial repression when they're facing a debt crisis and are at risk of defaulting. For many countries, this happens when debt reaches around 90% of their GDP. For larger developed nations, this threshold can be closer to 120%. The U.S. has reached this dangerous level before, notably after World War II, and we're back there again today. Financial repression helped the U.S. climb out of that post-war debt, and it could be used again now. Once debt gets too high, every dollar the government borrows starts to produce less and less economic growth. At extreme levels, each borrowed dollar can even shrink GDP, making it impossible for the government to keep up with debt payments. Historically, governments have used financial repression in various forms. One famous example is Executive Order 6002, issued by President Franklin D. Roosevelt, which outlawed the ownership of gold by American citizens. Citizens were forced to exchange their gold for paper dollars. Once the government had the gold, it changed its value, printing more dollars and inflating away some of its debt. This type of tactic shifted the burden to ordinary Americans, whose dollars lost value due to inflation. The Federal Reserve has documented many examples of financial repression in U.S. history, including during the Civil War, when banks were forced to hold government securities. This meant banks had to loan money to the government at interest rates below inflation, transferring wealth from citizens to the state. One common tool used in financial repression is negative real interest rates. This happens when inflation outpaces the interest on loans, meaning lenders lose purchasing power over time. For example, if you loan someone $100 and they repay you $105 a year later, but inflation has raised the cost of goods to $110, you've effectively lost money. In this case, the government, as the borrower, benefits from the wealth transfer. You might wonder, why would anyone lend money at negative real rates? The answer is simple. They don't have a choice. Realists often force banks to lend at these low rates, as they did during the Civil War and in the 1940s through yield curve control. This artificially keeps borrowing costs low, but hurts lenders in the long run. This isn't just historical. For much of the last two decades, real yields have been negative, meaning wealth has continuously flowed from citizens to the government. Recently, real yields have turned positive again, which is why the U.S. is in a financial bind. When the push comes to shove, they'll likely revert to using financial repression to fix the problem. There are already talks about removing current limits on how many U.S. Treasuries banks can hold. This would allow banks to lend unlimited amounts to the government, essentially turning them into money printers. The Federal Reserve also has mechanisms in place to prop up the value of government bonds if their prices drop, ensuring banks won't lose money. But this might not be enough. The IMF has warned that in a crisis, governments may need to impose capital controls, measures that prevent people from moving their money out of the country. In fact, the IMF's research suggests countries that had strict capital controls in place before a crisis fared better than those with open capital flows. So how can you protect yourself before capital controls kick in? Here are some practical steps to consider. 1. Purchase physical gold. Buy physical gold and store it in private vaults outside the U.S. This strategy isn't about avoiding taxes, but rather keeping some of your wealth out of the system and off the government's radar. If you sell gold for a profit, you'll still owe taxes, but the government won't know you own it. 2. Avoid using cash. Don't try to hide cash overseas or in a foreign bank account. That's reportable and could get you into trouble. Gold and other non-reportable assets are better options. 3. Store bitcoin in cold storage. Bitcoin is one of the few assets that governments can't easily control. They can regulate the exchanges where you buy and sell it, but they can't shut down bitcoin itself. Keeping your bitcoin in cold storage, away from the financial system, could protect your wealth when capital controls hit. 4. Keep one foot in the system. While you should protect your wealth, don't completely withdraw from the financial system. Moves like this often create opportunities for profit. If you're too far off the grid, you could become a target. Stay involved in the system just enough to capitalize on mispriced assets or industries. As always, thanks for watching. Be sure to take action before financial repression ramps up. With that said, thanks for watching and until next time.