While Trump is being portrayed and the insane President hellbent on destroying world trade, the truth is the tariffs on steel and aluminum account for 0.2% of GDP or just 2% of actual trade flows of $2.4 trillion. On top of that, every president at least since Jimmy Carter has imposed protectionist tariffs on some portion of trade flows. Indeed, Trump has an old-world view of trade as just about every world leader. They look at trade only from a job perspective and NEVER from the viewpoint of the consumer. Anytime a country imposes a tariff to stop what they think is “unfair” competition, in reality, they are creating unfair competition. Why pay $3 for a head of lettuce if you can import it for 25 cents? This only makes the consumer pay more reducing their standard of living. Nobody ever looks at that side of the coin.

In Switzerland, we have the perfect example of the old saying – a little bit of knowledge is dangerous. We have activists who are clearly living in a world they comprehend no less than the financial system. These people have managed to get a referendum on changing in the financial system with the same promises of Karl Marx that this will end all financial crisis to come forever. The referendum is scheduled for June 10th, 2018 after they got 100,000 signatures. The organizers are calling this the Full-Money Initiative. They understand that the bulk of the money is actually created by banks through lending. Their solution is to bar private banks from lending on any leveraged basis by setting limits on lending. They will be unable to lend money beyond what they actually have on deposit. They cannot create money by new loans. This is the most stupid Idea I think I have ever heard. They have no idea what the Full-Ramifications will be of such a proposal.

The promoters are advertising this will make the monetary system more secure and preventing financial crises. “Now we are stepping up our efforts to explain to people where their money really comes from and what the risks are in the old system,” said Emma Dawnay, a member of the organizing team, according to Reuters. They are promoting this Sovereign Money Initiative to stop the financial crisis cycle that they have no idea of how such events are even created.

According to their plan, banks will only grant loans to the extent that they have previously received funds from savers, other institutions or the central bank. For the creation of money then only the central bank would be responsible. However, she rejects that their initiative will create an economic upheaval introducing tremendous uncertainties. Clearly, she is qualified for government service because this is the precise attitude which creates the very thing she is pretending to prevent.

Obviously, she may have a Ph.D. in other fields, but that does not qualify her for anything else. She thinks that banks lending money which leverages the system is the CAUSE of a financial crisis so she wants to hand the power to create all money to the government – the very people who are incapable of balancing a budget or managing even a bubblegum machine. When they are out of bubblegum, they just go steal some more and open shop again since they spent all the money they took in before.

Government is the single biggest borrower in society. So how will they sell their debt without creating more money?  Then we have the problem that if the government has to create the money and approve all loans, then politics will enter the scene and you will be unable to borrow if you are part of the opposition. Andrew Jackson destroyed the Bank of the United States BECAUSE they lent money to the opposite political party to defeat him. There was no magnanimous effort to save the country.

Then this idea shows truly their underlying ignorance for if you cut off lending, well guess what! They will be unable to sell their homes and the value will crash because the only buyer will be someone with cash. The town I grew up in, Maple Shade, New Jersey, was once the suburb of Philadelphia. The real estate developer was Barlow who built his mansion (pictured here) in town where my parents met before World War I.

One of my father’s friends had cash during the Great Depression. He bought most of Main Street back then for pennies on the dollar for there was a shortage of money with no bank lending. This is precisely the outcome of this Sovereign Money Initiative if it actually passed. Switzerland would be the greatest short of all time. No bank would survive and the government would suddenly find NO BID for its new debt.

These people are dangerous for they are just like those who want to shut down the Federal Reserve with simply stupid ideas that demonstrate they too fail to understand even how the world economy functions. The first world financial crisis took place in the Panic of 1857. This was the first Panic to appear as a global contagion. The 1720 collapse of the Mississippi Bubble in France and Southsea Bubble in England was a contagion set in motion within Europe. However, the 1857 Panic was set in motion by the declining international economy because of the interconnectedness of the world economy during the 1850s. The financial Panic began in late 1857 in Britain when the Palmerston government circumvented the requirements of the Peel Banking Act of 1844, which required gold and silver reserves to back up the amount of money in circulation. In that instance, the government lifted restrictions because the banks were in trouble.

Of course, then there is the example of the Silver Democrats. They thought that they could raise the price of silver about world levels thanks to the silver miners who bribed them. They soon discovered that people were bringing their silver to the States where it was over-valued and used it to buy gold and export it back home. They kept this arbitrage up and then the Panic of 1893 began and by 1896, J.P. Morgan organized British banks to lend the USA $100 million to prevent it from complete bankruptcy in 1896. President Cleveland was a Democrat and he warned that his own party had imposed unsound finance. The same type of people who could not understand the world monetary system accused Morgan of making a profit on the deal. They refused to see that their ideas were brain-dead back then as well. They preferred to blame Morgan for their own stupidity.

Financial Panics are global contagions. This movement is Switzerland would destroy the country and the depth of the depression would be far worse than the Great Depression. There was such a shortage of money back during the 1930s, that cities began to issue their own scrip to try to save the economy and allow people to economically carry on, which they could not due to the contraction in the money supply. Contracting the money supply as these people propose, would send asset values to virtually zero in Switzerland. They reject any such criticism because they just do not want to believe this solution is completely brain-dead.

History proves one thing – stupid people really mess up the world and then blame others. I keep warning, we are all connected. No country can move counter-trend for their will rapidly find their crisis comes from a contagion outside their control. Even communism failed despite its attempt to maintain isolation. Economics wins at the end of the day. Both Keynes and Marx have seriously inflected the world.

When the Weimar Republic first began following the 1918 Communist Revolution, they issued coins assuming they were now in control. The 50 pfennig coins were struck between 1919 and 1922. There were no precious metal or even bronze coins struck during the hyperinflation that began from August 1922 to November 1923. The coinage of the Weimar Republic between 1922 and 1923 were all struck in aluminum.

During a hyperinflation, the only real currency to hold on to some value is the coinage. The price of raw materials rises and as such, the coins become worth more as scrap metal than they so as coins from a legal tender perspective, but this is AFTER the hyperinflation – not during. The stories that people saved their copper coins and were able to spend them with a higher value than paper are really just stories. The coinage of the Weimar Republic was aluminum, not even copper.

I do know that AFTER the event when confidence returns to the economy, then the base metals will start to rise in value because the economy is expanding once again.

The Rentenmark was a currency issued on October 15th, 1923 to stop the hyperinflation of 1922 and 1923 in Weimar Germany. The largest denomination was just 50 pfennig. It was struck in Aluminum-Bronze.

Those who ask about coins surviving the hyperinflation, the answer is NO. You can save them from the pre-hyperinflation, but during such an event, not even the old coins will buy you a cup of coffee

QUESTION: Dear Martin

In my own study of cycles, I have observed that cycle inversions occur more often than not at a time when the trend in that time frame is starting to change.

Have you observed the same?

I look forward to your trader service.

Best Regards
HH

ANSWER: Correct. Cycle Inversions unfold routinely when trends are shifting. The fact that we are getting these cycle inversion now is definitely a precursor of what is coming between 2018 moving into 2021. When the same cycle has been producing alternate events and suddenly it begins to produce just highs, look out – for it is warning that the foundations are changing. This is what we are witnessing currently. We can taste it. With interest rates at historic lows, and you have the Japanese central bank buying 75% of the government bond market and the ECB owning 40%+ of all government debt, an uptick in interest rates is going to make the world economy simply go completely nuts

Timing is everything. When an economy turns, big projects that looked like they were going to be winners suddenly lose big time. That was the case when a world tour had been planned for the world’s biggest airship, the Graf Zeppelin, in 1930 just months after the 1929 Crash. In May 1930, the Graf Zeppelin floated over the Cape Verde Islands and slowed down stopping at the Porto Praia post office. When the ship had maneuvered to just the right spot, its crew threw a big sack of mail. To fund the voyage, they struck a deal to carry mail around the world which would be the first international air mail.

Over the next several weeks, the 775 feet from nose to tail Graf Zeppelin completed its first Pan-American tour stopping in New Jersey, Ohio and flying to Rio de Janeiro and then back over the Atlantic to Spain and its home country, Germany. A lot of publicity and fanfare accompanied the airship’s journey which was funded by carrying sacks of mail. This was the largest flying machine the world had ever seen. Its operating costs were proportionate, clocking at about $4 per mile back then which was a lot of money. Passengers paid very high ticket prices, but the ship could only hold about 20 people at a time. Passenger travel was not a lucrative venture. The Hindenburg ticket prices across the Atlantic was the price of a car about US$400.00 one-way and a round trip was US$720.00.

They also tried to charge admission fees to view it on the ground. That did not prove to be a winner either. The timing was very bad for the Great Depression was just getting started.

Instead, the Graf’s parent company, German Zeppelin Airship Works, decided to recoup costs by commissioning special stamps from the countries on the tour route. Only letters with these stamps on them would be accepted onto the airship, or so they announced. They promised to deliver these letters to their destinations around the world.

This was the only commercial transatlantic airmail option available at the time and was days faster than sending a letter by boat. Brazil, Bolivia, Germany, and Spain all made the Zeppelin stamps, and 93% of the proceeds from each stamp was funneled back into German Zeppelin Airship Works. Finally, after considerable debate, the U.S. Post Office decided to get in on the hype. They assumed that stamp collectors would want the stamps and they would never be used so they would pocket a fortune. The agreed to proceed and they went to designing and printing a run of Graf Zeppelin stamps all in a matter of just weeks. They called this a gesture of goodwill toward Germany, which was the new Nazi government. The pledged to also contribute 93% of all the revenue collected on stamps “used” on the flight to the Airship Works. They cleverly qualified the agreement expecting American stamp collectors would buy up most of the stamps for collections and that would go to the Post Office.

So on April 19, 1930, the Post Office issued three stamps, The  65-cent stamp covered the cost of a postcard one-way. The $1.30 stamp covered the cost of a letter one-way. The final stamp, the $2.60, it covered the cost of a letter being postmark over to Europe and then back again. However, because of the deepening Great Depression, collectors could not afford the $4.55 when a loaf of bread sold for just 9 cents. The Post Office printed 1,000,000 sets of stamps expecting a mad rush. They sold only about 227,000 zeppelin stamps total, and most of that actually did end up on mail delivered by the Graf Zeppelin and the lost an expected big windfall.

The worsening Great Depression undermined the entire trip of the Graf Zeppelin. It was a fantastic idea and it was a show of power for Germany after the hyperinflation of the ’20s and losing World War I. Timing is everything. A great idea foiled by the business cycle.