Monthly Archives: November 2016

Nov 30 2016

Stein’s Great Fraud – Even Obama Says “We Stand Behind Our Election Results.”


Armstrong Economics Blog

Re-Posted Nov 30, 2016 by Martin Armstrong

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QUESTION: Hi Marty, there is something circulated around that if the three states being hand recounted by Stein are not counted by Nov. 13th that the electoral votes from those states will be void and thrown out and giving the win to Hillary. How plausible is this?

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ANSWER: That seems to be populated by Edward Foley, an expert in election law at Moritz College of Law at Ohio State University. That is very misleading. Yes the absolute deadline is Dec. 19th, 2016 when electors around the country must meet to cast their Electoral College votes. However, whatever the vote is on the 13th stands. Foley said: “That is a hard deadline and if a state were to miss that deadline, it would be technically in jeopardy of not having its electoral votes counted.” The likelihood of that would be below ZERO. A recount would by no means prevent that vote on the 19th. In fact, if the recount were not completed in time, then the people’s vote stands. Therefore, if the recount is not finished by the 13th, then the electors must vote accordingly.

If a state failed to vote by December 19th, you would really have a Constitutional Crisis that would compel the Supreme Court to enter. The people of that state would have just cause for bringing an action against the state officials and that could even be criminal. Moreover, the GOP would not allow that and stand ready to go to court.

The Green Party candidate Jill Stein has filed suit after Wisconsin declined to require county officials to recount the votes by hand, which is pointless especially when Pennsylvania is all electronic. What is she really doing? Her lawsuit could delay the process and she gets to keep all the money. Under state law, the recount must begin this week as long as Stein or another candidate pays the $3.5 million estimated cost of the recount by Tuesday. Meanwhile, Stein filed a lawsuit yesterday in Pennsylvania to force a recount there and her supporters began filing recount requests at the precinct level in Pennsylvania. She also plans to ask for a recount in Michigan on Wednesday.

By filing these suits, she must show clear and convincing evidence that the vote could change and there was some fraud. That really does not exit. She gets to keep all the money if she pretends to demand recounts but fails to get them. This appears to be a scam and without overturning all three states, nothing changes. Further proof that Stein is a con-artist is that even Obama has come out and said: “We Stand Behind Our Election Results.” This is the most dishonest scheme and on par with the corruption in politics. She only raised $3.5 million for her own election.

Stein is exploiting the nation for personal gain. Filing these lawsuits may actually prevent a recount, and then she can keep all the money and say she made a best effort as her site guarantees. This is really a total fraud and borders on criminal activity especially under consumer laws. She should be forced to return all money or go to jail. There is no evidence of such a fraud to warrant a recount and even Obama says there is no question about the vot

Nov 30 2016

Venezuelan Hyperinflation


Armstrong Economics Blog

Re-Posted Nov 30, 2016 by Martin Armstrong

venezulea-hyperinflation

The Venezuelean hyperinflation is the direct result of what happens when the general population loses all confidence in the government. The current hyperinflation is reminiscent of Germany’s hyperinflation following World War I, which was also the result of a Communist Revolution and the overthrow of the government giving birth to the Weimar Republic.  Venezuela’s currency has become virtually worthless as was the case in Japan when the people simply refused to accept any coins issued by the Japanese government. In that instance, each new emperor devalued the outstanding money supply to 10% of his new issues. This led to Japanese accepting Chinese coins, but not Japanese.

In just two months, the bolivar plummeted 50% in value after dropping beneath the psychological 2000 level for the first time. Where the Japanese relied upon Chinese coins, in Venezuela they are using U.S. dollars.  The same is starting to emerge in India after the government demonetized the large denomination notes.

Oil accounts for nearly 95% of Venezuela’s exports and composes 25% of the country’s overall economy. Many economists are blaming Venezuela’s socialist government for mismanaging budgets and over relying on oil-related industries. Acting as a typical politician, President Maduro will not take responsibility for the state of his country and is choosing to place the blame on an “economic war” being waged by overseas businesses predominantly in the U.S.

Venezuela’s troubles began in 2014 when the price of oil took a nosedive. Instead of moving to separate the country from its dependence on oil, the Venezuelan government lost the confidence of the people and was compelled to issue more money to pay its bills lacking revenue flow.

As the prices of goods continue to soar, shopkeepers in Venezuela have taken to weighing bolivars and the black market for alternative currencies – namely U.S. dollars — is becoming prevalent.

The key to hyperinflation is NOT the issue of money, but the collapse in public confidence. The drop in confidence then causes the government to print more to meet its expenses. The assumption it is the increase in money supply assumes people blindly just look at the quantity of money. It is the fact people ANTICIPATE the collapse and act accordingly, which then causes the government to increase the money supply.

Nov 30 2016

Gallup Poll: Trust Level of Mainstream Media Falls to 32%


Armstrong Economics Blog

Re-Posted Nov 30, 2016 by Martin Armstrong

gallup-poll-on-media

woodward-bersteing-watergateGallup first began asking if Americans trusted the mainstream media in 1972. America’s trust and confidence in mainstream media stood at its highest level back in 1976 at 72%. Of course, that was due to the investigative journalism regarding Vietnam, and naturally Woodward and Berstein, with the Watergate scandal. Following that period, the media began to attack the right with Reagan. By the late 1990s, the Americans’ trust in the media fell steadily into the low to mid 50% level.

Following 2005, the trust in mainstream media dropped into the mid 40% range. It has consistently been below a majority level ever since the 2007 economic decline. However, after the 2016 election and the extreme bias for Hillary, where virtually 99% of mainstream media deliberately tried to manipulate the people to vote for Hillary, the trust factor has collapsed to 32%. When they polled just conservative Republicans, it was 14%. So the 32% level is the average American.

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news-readerOur models on the confidence in American mainstream media using the Gallup Poll data projects a sharp decline into 2019/2020, which is the bottom of the current 8.6-year Economic Confidence Model. This will be 43 years from high. Note that 2007 was 31 years from that peak. It was 2007 and the collapse in the economy that has marked the collapse in public confidence in government and the media.

We should expect that the media will viciously attack Donald Trump in a futile effort to cling to some level of importance and to desperately try to demonstrate that they were not wrong with 99% of the media endorsing Hillary. But the media willingly conspired to make Hillary president. They will now try to vindicate themselves by trashing Trump at every possible chance. They will now fuel the civil divide and help lay the foundation for the collapse of the United States itself by turning left against right. Even the New York Post wrote that what they were witnessing was the end of journalism. They will do everything to try to change Congress in 2018. It appears that will be their last stand. The younger generation does not buy newspapers and magazines. Their end is near.

Trump summoned the mainstream TV media to Trump Tower for a meeting. Whether he can persuade them to stop the supporting of civil unrest remains to be seen. Lester Holt, Charlie Rose, George Stephanopoulos and Wolf Blitzer all headed to this private meeting. All have demonstrated outrageous bias and have disgraced the very purpose of a free press as they all tried to influence the people rather than report the news. Even Saturday Night Live made fun of how biased mainstream media has been.

Nov 30 2016

Erdogan Admits He is Engaging in War Against Syria


Armstrong Economics Blog

Re-Posted Nov 30, 2016 by Martin Armstrong

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Erdogan has admitted that he is invading Syria to depose Assad’s government. We reported back on August 25th, 2016 that this was the most likely outcome of his invasion on August 24th. Indeed, August has been the time for starting war. Joe Biden went to Ankara last week on a mission to repair U.S.-Turkey relations, but actually endorsed Turkey’s “Operation Euphrates Shield.” He also claimed that the U.S. provided air power. Obama may lack the support to invade Syria, but he has not given up his quest to create a Middle East War before he leaves office. If he can create a war now, Trump will be saddled with the crisis when he has said no to nation-building ventures like this one.

Given the fact Putin began bombing in support of Syria precisely to the day of the ECM, this highlighted that Syria will be a key focal point for this ECM wave and the War Cycle. So pay attention.

Nov 29 2016

Horseman Capital Asks “Is China Running Out Of Money”


Tyler Durden's picture
by Tyler Durden
Zero Hedge Nov 29, 2016 10:38 PM

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At the start of 2016, many financial pundits mocked Kyle Bass and a handful of other China skeptics for predicting that China’s economic difficulties, and accelerating capital outflows, would translate into a continued devaluation for the Yuan. Less than a year later, with the Yuan plunging to all time lows, just shy of USDCNH 7.00, they were right.

And, as Horseman Capital’s Russell Clark writes in his latest Market Views note, in which he asks if “China is running out of money”, adding that “if Chinese foreign reserves continue to fall and the PBOC wants to maintain control of the exchange rate, they will need to face some difficult choices,” the one most difficult choice facing Beijing may be the one which assures far more weakness for the Yuan in the near future: a devaluation.

Here are Clarke’s thoughts.

IS CHINA RUNNING OUT OF MONEY?

Since the global financial crisis, China has had a very strong currency, even with the recent devaluation of the Chinese Yuan.

China has a managed exchange rate. The People’s Bank of China (PBOC) has had to step in to the exchange market to buy any USD coming into China. To buy the USD coming into China, the PBOC has had to create CNY for this purpose. Typically, to soak up these new CNY, the PBOC has issued CNY bonds, as well as having very high reserve requirements on the banks to control the supply of CNY.

The PBOC is like any other bank, and it needs to match assets with liabilities. On the asset side, by far its biggest assets are foreign reserves. On the liability side are domestic deposits. For many years, foreign reserves were much larger than deposits, but now the gap is shrinking rapidly as foreign currency assets fall.

If Chinese foreign reserves continue to fall and the PBOC wants to maintain control of the exchange rate, they will need to face some difficult choices. First of all, it could raise interest rates to try and make the Yuan more attractive and reduce outflows. This however would be negative for growth, a priority of the Chinese Communist Party. The other option is to reduce the holdings of deposits at the PBOC. The large holdings of deposits at PBOC is driven by the very high reserve requirements of the Chinese banking system, and previous cuts in the reserve requirements have reduced deposits at least temporarily.

This leaves the PBOC with a dilemma. Raising rates will restrict growth but defend the currency, while cutting rates or reserve rates for banks will encourage more currency weakness. One way to think about how high interest rates need to rise to stop a currency from falling is to look at how weak a currency has been over the last twelve months. You then compare this to the difference in 10 year bond rates, and the movement in the exchange rate over the last 12 months to get an idea of the interest rates increase needed to attract US dollars. The idea is that if a currency has been weak, but interest rates are relatively high, then you are being adequately compensated. Conversely, if the currency has been weak, and the interest rates are relatively low, then rates will need to rise. Currently, it suggests Chinese 10 year rates need to be 6.5% higher, to halt currency weakness.

Given the large increase in rates needed to slow Chinese Yuan devaluation, devaluation must start to look like the more likely move. South Korea faced a very similar situation in 1997. In the mid-90s, Korean foreign reserves began to fall, like they are in China today. We have added Japanese foreign reserves to show that the fall in reserves was a Korean specific issue.

Like the Chinese Yuan, the Korean Won was a managed exchange rate that began to depreciate slowly then quickly.

Below we produce the same graphs, but replace Korea with China.

Given the huge increase in debt in China in recent years, such a rate increase seems very unlikely to me. Investors should be prepared for bigger falls in the Chinese Yuan.