AK Global

Very simple episode where we candidly share our frustrations with gold bugs and Austrian economists. While we are frustrated we share their core views of the world and think they have it right except for bitcoin. Enjoy.

Source material: https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch02.htm

1. Centralisation of the means of communication and transport in the hands of the State.
   1. Radio communication unregulated until The Radio Act of 1912
      1. formally known as "An Act to Regulate Radio Communication" (37 Stat. 302), is a United States federal law which was the first legislation to require licenses for radio stations
   2. The Radio Act of 1927 (United States Public Law 632, 69th Congress) replaced the Radio Act of 1912
      1. increased the federal government's regulatory powers over radio communication
      2. oversight vested in a newly created body, the Federal Radio Commission (FCC)
      3. first legislation to mandate stations show they were "in the public interest, convenience, or necessity" in order to receive a license
   3. Communications Act of 1934
      1. “The act established a legal basis for regulating wired and wireless communications on a nationwide and worldwide basis. The Federal Communication Commission was founded because of the act; it replaced the Federal Radio Commission. Because of the act, the U.S. government could regulate new media technologies such as television and mobile phones. Moreover, the act permitted the regulation of commercial communication corporations such as private radio and television companies.”
   4. 6 companies control all US media https://www.businessinsider.com/these-6-corporations-control-90-of-the-media-in-america-2012-6
   5. List of administrations in control of transportation by creation date https://en.wikipedia.org/wiki/United_States_Department_of_Transportation
   6. The Federal Aviation Administration (FAA) regulates all aspects of civil aviation
      1. Its powers include the construction and operation of airports, air traffic management, the certification of personnel and aircraft, and the protection of U.S. assets during the launch or re-entry of commercial space vehicles.
2. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan. 
3. Equal liability of all to work. Establishment of industrial armies, especially for agriculture. 
4. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country. 
5. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, &c, &c. 
   1. https://en.wikipedia.org/wiki/Education_in_the_United_States
   2. By state law, education is compulsory over an age range starting between five and eight and ending somewhere between ages sixteen and eighteen, depending on the state. This requirement can be satisfied in public schools, state-certified private schools, or an approved home school program.

Description:

In the current zeitgeist we are told that “capitalism” is failing us as well as being responsible for the increasing wealth gap between the “haves and the have nots.”  In this episode we focus on the US primarily. We will use the 10 planks of Karl Marx’ Communist Manifesto (1848) to try and ascertain if the US truly is a capitalist nation or if it is far more Marxist in character than people are often lead to believe.

Topics include:

Communication

Transportation

Education

Bitcoin

Source material: https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch02.htm

1. Abolition of property in land and application of all rents of land to public purposes. 
2. A heavy progressive or graduated income tax. 
   1. https://files.taxfoundation.org/20170804133536/Average-Effective-Tax-Rate-on-the-Top-1-Percent-of-U.S.-Households.png;
   2. effective tax on the 1% reached a plateau just before 1950 of about 45%; however, rates have remained elevated since that time
   3. https://files.taxfoundation.org/legacy/docs/fed_individual_rate_history_nominal.pdf;
      1. list of marginal tax rates 
         1. https://qz.com/74271/income-tax-rates-since-1913/
      2. effective tax rates based on income, use 56,516 household income average US
3. Abolition of all rights of inheritance. 
   1. https://taxna.wolterskluwer.com/whole-ball-of-tax-2018/historical-estate-gift-tax
   2. use inflation adjuster by picking a number by decade
4. Confiscation of the property of all emigrants and rebels. 
5. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.  https://www.marxists.org/archive/lenin/works/1917/ichtci/04.htm “What, then, is the significance of nationalisation of the banks?... Only by nationalising the banks can the state put itself in a position to know where and how, whence and when, millions and billions of rubles flow. And only control over the banks, over the centre, over the pivot and chief mechanism of capitalist circulation, would make it possible to organise real and not fictitious control over all economic life, over the production and distribution of staple goods, and organise that "regulation of economic life" which otherwise is inevitably doomed to remain a ministerial phrase designed to fool the common people. Only control over banking operations, provided they were concentrated in a single state bank, would make it possible, if certain other easily-practicable measures were adopted, to organise the effective collection of income tax in such a way as to prevent the concealment of property and incomes (ostensibly due to the ability of the national bank to keep track of who receives the money); for at present the income tax is very largely a fiction.”

1. Precursor to cashless society
2. Federal Reserve chartered in 1913

News regarding the repo market has seemingly died down as of late; however, things have become far more interesting despite the lack of headlines.  In this episode we give you an update on the current state of the repo market with special attention to the Fed’s extension of term and overnight purchases.  In addition, we briefly discuss the reigniting of QE (quantitative easing) in the form of treasury purchases by the Fed. At the end we dive into just how and why the Fed's policies are dangerous, and describe how bitcoin and gold are better to build a financial system on.

Links:

Fed links

https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements/repurchase-agreement-operational-details

https://www.newyorkfed.org/markets/opolicy/operating_policy_190920

https://www.newyorkfed.org/markets/opolicy/operating_policy_191004

https://apps.newyorkfed.org/markets/autorates/tomo-results-display?SHOWMORE=TRUE&startDate=01/01/2000&enddate=01/01/2000

Why this is QE

https://www.seeitmarket.com/qe-by-any-other-name/

Balance sheet

https://fred.stlouisfed.org/series/WALCL

In this second part of AK5 Kent and Ansel finish up the discussion about the Repo market and dive into related topics regarding the future.

Topics include:

USTs becoming toxic

Wealth effect of dollars

Bitcoin flipping gold

Expat choices

Investing in Russia

Population and demographic trends

Links: https://www.thestreet.com/investing/fixed-income/fed-extends-repos-until-nov-4-dealers-brace-for-193-billion-in-treasury-sales-15116925

https://www.newyorkfed.org/markets/opolicy/operating_policy_191004

https://fred.stlouisfed.org/series/WALCL

https://www.seeitmarket.com/qe-by-any-other-name/

https://www.cnbc.com/2019/10/08/powell-says-the-fed-will-start-expanding-its-balance-sheet-soon.html

The repo market has been in the news lately with the Fed intervening for the first time since the 2008 financial crisis to shore up liquidity problems.  We explain how the repo market works, go over the timeline of events in the market thus far, and discuss its wider implications.

Topics include:

What a repo is and why it’s important

The role of the Fed

Timeline of events

Future projections

Links: https://www.investopedia.com/terms/r/repurchaseagreement.asp

https://realinvestmentadvice.com/who-could-have-known-what-the-repo-fiasco-entails/

https://www.newyorkfed.org/markets/opolicy/operating_policy_190920

Since the 2008 financial crisis stock buybacks have been at historically elevated levels. These levels have accelerated at an even greater pace since the Trump Tax cuts. In this episode we explain what stock buybacks are and the consequences of this poorly understood corporate policy.

Topics include:

What stock buybacks are and how they work

A short history on stock buybacks

Decrease in stock ownership by households and individuals

Majority of stocks owned by wealthiest Americans

Executive compensation packages

Margin and corporate debt to GDP at all time highs

Unintended consequences of stock buyback policy 

Links:

https://realinvestmentadvice.com/wp-content/uploads/2019/04/Stock-Buybacks-2019.png

https://www.investopedia.com/articles/02/041702.asp

https://finance.yahoo.com/news/7-reasons-stock-buybacks-illegal-172253787.html

https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx

https://finance.yahoo.com/news/the-richest-1-own-50-of-stocks-held-by-american-households-150758595.html

https://www.nytimes.com/2018/02/26/business/tax-cuts-share-buybacks-corporate.html?module=inline

https://www.nytimes.com/2019/02/25/business/stock-market-buybacks.html

https://fred.stlouisfed.org/series/BCNSDODNS

https://www.advisorperspectives.com/dshort/updates/2019/08/20/margin-debt-and-the-market-up-0-98-in-july

In this episode we discuss monetary policy in Japan and its long term consequences.  We also look at the relationship between the yen and the dollar, gold, and bitcoin.

Topics include:

MT Gox

The Japanese Yen

Japan’s debt to GDP ratio

Japan’s money supply

Demographic concerns in Japan

Intervention in the markets by the Bank of Japan 

Links:

https://en.wikipedia.org/wiki/Mt._Gox

https://www.macrotrends.net/2550/dollar-yen-exchange-rate-historical-chart

https://goldprice.org/gold-price-charts/20-year-gold-price-history-in-japanese-yen-per-ounce

https://tradingeconomics.com/japan/government-debt-to-gdp

https://fred.stlouisfed.org/series/MYAGM3JPM189N

https://www.zerohedge.com/news/2019-04-17/bank-japan-now-top-10-shareholder-50-all-japanese-companies

In this episode, we discuss the inversion of the US Treasury yield curve as well as the flattening of other global yield curves.  A discussion on the ramifications of yield curve inversions follows. 

Topics include:

US Treasury yield curve inversion

Yield curve in Japan, Germany, and France

Explanation of what the yield curve is and why it’s important

Possible responses by the Federal Reserve to the yield curve inversion

10 year sovereign bond rates globally

Links:

https://tradingeconomics.com/united-states/government-bond-yield

https://tradingeconomics.com/japan/government-bond-yield

https://tradingeconomics.com/germany/government-bond-yield

https://tradingeconomics.com/france/government-bond-yield

https://realinvestmentadvice.com/wp-content/uploads/2019/08/Fed-Rate-Cuts-Yield-Curves-Recessions-081619.png

https://tradingeconomics.com/bonds

In this episode, we discuss negative interest rates and the implications of the negative interest rate policy recently pursued by Denmark’s Jyske Bank.

Topics include:

Global negative yielding debt

EU pensions mandate to hold negative yielding sovereign debt

Ways to avoid negative interest

Negative interest rates in Denmark

Negative interest rates in Switzerland

Links:

https://www.marketwatch.com/story/that-near17-trillion-pile-of-negative-yielding-global-debt-its-a-cash-cow-for-some-bond-investors-2019-08-22

https://www.youtube.com/watch?v=ElxmkyQkbbU

https://www.businessinsider.com/jyske-bank-denmark-negative-interest-savings-over-million-2019-8

https://www.reuters.com/article/us-ubs-group-negative/ubs-plans-to-charge-rich-clients-for-swiss-cash-deposits-idUSKCN1UQ26A