Category Economic Subjects

Jun 21 2017

Welcome to Deflation


Armstrong Economics Blog/Economics

Re-Posted Jun 21, 2017 by Martin Armstrong

People are just starting to grasp why deflation is also present in the USA. Despite all the screaming about Quantitative Easing, most remain confused why hyperinflation has not taken place. Most are obvious to the fact that there is a dynamic process involved that is a lot more complex than traditional economics teaches in school. Sorry, but the quantity of money theory does not work. It is way too simplistic and this has led to massive confusion. Even the central bankers are staring to call for help.

The latest news that Amazon was buying Whole Foods saw a plunge in retail and grocery stocks. Amazon put book stores on the list of bankruptcy victims and we see similar troubles for Sears, the company that made its name using the railroads to deliver goods by mail order. The deflationary tone has been in place since 2015.75 and it is a combination of problems one of which is the technology advancement. Many people see the advance of robots displacing jobs. However, the reason unemployment rose dramatically to 25% during the Great Depression was not from the collapse of industry. It was (1) the advancement of technology with the combustion engine that wiped out agricultural jobs (aside from the horse industry) and (2) the vast dust bowl which then wiped out farms entirely.

The Amazon takeover of Whole Foods is highlighting this technology shift. The jobs of the future will be more in the technology programming area. All the office spaces I looked at for moving our office were, without exception, law firms closing down. Lawyers are now far too common and we are seeing the saturation reducing the once high paying jobs that enticed kids into law school.

Cyclically, everything evolves. Retail stores are declining and Amazon has been opening showrooms rather than stores. You get to go touch the product and it will be delivered to your home. They are also bringing in fully automated stores. You will have an app on your phone, walk into a store, take whatever you want, and your card will be billed as you walk out the door. There go the store clerks.

Things are changing rapidly. The high cost of labor because of Obamacare has been destroying a lot of jobs. The first thing your account tells you is not to higher employee number 26. Technology is helping to reduce the high cost of labor, which is being driven up because of taxes and healthcare which the employee never sees.

Improving you skills for the future is absolutely paramount to survive

Jun 21 2017

Top Executives of Barclays Charged


Armstrong Economics Blog/Corruption

Re-Posted Jun 21, 2017 by Martin Armstrong

The British Serious Fraud Office (SFO) has brought charges against Barclays and four former executives surrounding the Qatari investment during the 2008 financial crisis. You may remember at the time Lloyds and RBS were offered UK government support with certain strict conditions attached. However, Barclays declined the government offer and instead turned to Qatar which eventually became the biggest single shareholder, with around 6%.

The rumor around the financial markets at the time was that the UK government offer was better for the shareholders (unqualified) but the restrictions imposed meant that no board members would receive bonus payments until monies had been repaid. Talk at the time was that faced with that proposition of spending bank money to secure future bonus payments – the board declined the UK Government offer and went with the Qatari investment. The SFO also charged former top Barclays executives after investigating a two-part fundraising that included a $3 billion Barclays loan to the Qatar Gulf state.

The men are the most senior bankers ever to be charged in Britain for alleged crimes during the financial crisis. They face jail sentences of up to 10 years if found guilty.

Jun 19 2017

Suicide Over European Banking Crisis


Armstrong Economics Blog/Banking Crisis

Re-Posted Jun 19, 2017 by Martin Armstrong

Greece-Pensioner-2

The European “bail-in” rules have been cheered claiming taxpayer money will be spared. However, many seniors bought bank bonds for their retirement. In the rescue of the small Banca Popolare d’Etruria, a retiree who had lost more than 100,000 euros worth of bonds lost everything and committed suicide. There have been many such events that do not always make the press. In Italy,  the death of a pensioner who also committed suicide after losing his life savings as a result of a controversial move by the government to rescue four banks. The 68-year-old hung himself at his home in Civitavecchia, a port town near Rome, after the so-called “save banks” plan wiped out €100,000 in savings held at Banca Etruria, one of the four lenders included in the government rescue deal announced on November 22nd, 2015. There was the 23-year old who committed suicide over £8000 in debts for student loans. A Greek pensioner who was 77-years old committed suicide in central Athens shooting himself with a handgun just several hundred meters from the Greek parliament building in apparent despair over his financial debts.

The government have made promises and socialism was all about protecting the people from the evil capitalists. But the politicians became the capitalists and now all the promises are being reversed or modified. The crisis we face ahead is so many people believed in what they told everyone. What happens when they discover it has been just a lie?

Jun 16 2017

France Police Hunting Tourists To Shake Them Down


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Jun 16, 2017 by Martin Armstrong

COMMENT: Mr. Armstrong; I had the wonderful experience of flying to France to see my son going to school there. Upon my arrival, I was immediately commandeered by the French police asking me how much money I had. I didn’t even get out of the Paris airport. I was not dressed elegantly; just jeans. I wanted to send you this not because reading what you write and experiencing it are two different things.

Thank you for what you do

GK

ANSWER: Yes. France is going nuts. They are stopping trains that pass through France and searching people’s bags for cash. And this is where they want the financial markets moved to from London? I would not have any account there. They cannot be trusted

Jun 15 2017

Merkel Wants G20 Global Taxation of Internet


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Jun 15, 2017 by Martin Armstrong

Markel is calling upon the G20 to regulate the internet. While she if pretending to be concerned about cyberattacks, which no regulator can prevent, you have to look into the finer details. Chancellor Angela Merkel called for a global regulation sayying: “Industry 4.0 will have to go through the process that we have already gone through at the World Trade Organization (WTO) with real trading operations that we have gone through in the G20 process with financial market regulation.” 

She noted that the “concerns” include “cyberattacks, the responsibility of social platforms to tax issues in international trade, and growing concern in the world Of policy. “

In other words, she wants to tax all sales on the internet. So anyone from Germany buying anything anywhere would have to pay VAT and every online merchant would have to comply with global regulation. Additionally, governments are increasingly becoming concerned about blockchain technology and the avoidance of taxes.

As always, government pretend to be concerned about security, but it is always about the money. She also wants to shut down anyone who talks against government in the social media.

Jun 15 2017

EU Wants to Order All Euro Trading Moved from London to Paris


Armstrong Economics Blog/European Union

Re-Posted Jun 15, 2017 by Martin Armstrong

The European Union is preparing the legal basis to take over London’s extensive trading business with euro derivatives. This is just another complete failure of bureaucrats to comprehenmd market function. Perhaps they should also outlaw euro trading in the USA and Asia. That would be real smart. Then they can all sit down and play cards with euro themselves and guarantee it will never be anything to anyone else no less convertible worldwide.

The EU Commission wants to withdraw the multi-billion-dollar derivatives market from London after leaving the UK from the European Union. Transactions with securities settled in euro should then be transferred to the European Union if the relevant clearing house plays a key role in the financial system with its trading volumes. Their draft law is still in draft form. It is the testament to just how stupid bureaucrats can really be. They have already outlawed naked shorting of the government debt to prevent a crisis in sovereign debt. They fail to comprehend that in the middle of a crash, they ONLY people buying are shorts. No shorts = flash crash and no bid.

You just can’t get more brain-dead than this.

 

Jun 13 2017

Annual Growth Rates Have Dropped from 13% to 2% Since 1947 but Bill Gates Blames Robots?


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Jun 13, 2017 by Martin Armstrong

Then we have workers being replaced by robots along with driverless cars. Here too, thanks to the elitists like Bill Gates, who suddenly wants to be an economist, he comes up with the solution that the government should tax robots as if they are workers. This, he proposes, would prevent the depletion of the government of much-needed income tax revenue.

First of all, robots are killing jobs because taxes and demand for benefits are going crazy. healthcare costs are consuming the net disposable income and government taxes, and the combination are conspiring to lower annual economic growth rates dramatically. Real GDP growth rates have been declining every since World War II and the dawn of big government. These people just do not get it. They are the problem. GDP annual growth has declined from 13% down to 2%. Just where has big government helped?

The solution to those in government is always more taxes and more government. Never even once will they entertain conducting a real study on economic growth. For then, you would discover the shocking truth that it now takes two wages to support a family that once took just one in 1940.

Taxes keep rising and the standard of living declines. Socialism is all about government helping itself to the spoils of class warfare handing crumbs to the people at the bottom to make them believe they are doing something other than filling their own pockets.

 

Mady DELVAUX

Mady Delvaux, a member of the European Parliament from Luxembourg, proposed back in 2016 in a report suggesting governments should recover lost tax revenue from workers displaced by automation and redistribute it to people in need. In short, she proposed a tax on robots. The problem is that the people in need are governments. Luxembourg ia a country you really want to stay far away from. It has the truly insane debt of almost $7 million per capital. No other government is that far beyond comprehension. No wonder she is desperate to propose taxing robots. I am surprised she hasn’t figured out a way to tax animals as well. Delvaux has said “Bill Gates is a great man and more intelligent than I am.” His proposal to tax robots is insane.

I find it amazing how everyone thinks they can be an economist and change society to right what they think is wrong. Why doesn’t Bill Gates start giving medical advice as well. The economy is not some toy to play with for these type of people are ignorant of how complex the economy truly is. I have stated many times, it is as complex as a rain forest. Every species is interconnected. Exterminate one and you wipe out the food source for another.  Even a koala bear typically inhabit open eucalypt woodlands, and the leaves of these trees make up most of their diet. Eliminate these trees and you will kill off that species. The economy is also a delicate complex entity. These people have never bother to study the economy and follow Marx insofar as if you think you can change the world, just hand it to government. We are far more interconnected that any of these people even dare to think.

Well Mr. Gates, I needed 240 employs in the 1980s and 1990s to maintain databases and collect everything around the world. I can do that an the push of a button today. So perhaps we should tax the entire internet and the computers you make along with your software became I can do myself with an assistant what it took 240 people to do 30 years ago. Perhaps you should be taxes retroactively for destroying jobs with technology.

 

Jun 11 2017

SEC Statute of Limitations Applies to Disgorgement


Armstrong Economics Blog/Rule of Law

Re-Posted Jun 11, 2017 by Martin Armstrong

Justice Sotomayor in the Supreme Court just held that the 5-year statute of limitations for penalties under 28 USC 2462 applies to SEC disgorgement claims. This is a monumental decision for in every case the SEC claims they has disgorge you back to birth. In KOKESH v. SECURITIES AND EXCHANGE COMMISSION decided June 5th.

Because disgorgement sought by the Securities and Exchange Commission operates as a penalty under 28 U.S.C. § 2462, in that it is imposed by the courts as a consequence for violating public laws and for punitive purposes, any claim for disgorgement in an SEC enforcement action must be commenced within five years of the date the claim accrued.

This is a major decision that would prevent many of the abuses that the SEC has carried out for decades.

Jun 10 2017

Illinois In Deep Financial Trouble


Armstrong Economics Blog/Sovereign Debt Crisis

Re-Posted Jun 10, 2017 by Martin Armstrong

Illinois Comptroller Susana Mendoza was ordered to make a “substantial” dent in a $2 billion backlog of bills owed to Medicaid providers. The courts ruled that according to the State Constitution, it cannot reduce the pension payments to state employees. What is happening in Illinois is indicative of how governments are imploding and why I am warning get out of all State and Muni-debt before it is too late. Since State and local governments cannot “print” (create) money, they are forced to borrow and raise taxes. Consequently, they have hit the ceiling in tax resistance. What is happening is people are gradually migrating because there is absolutely no hope for states like Illinois. The only way out will have to be bankruptcy and a default on all the pension promises.

A federal judge has now intervened ordering the Comptroller to now prioritize who it pays. This is turning into the clash of titans – the epic battle between medical expenses that constantly rise regardless of the business cycle and state employees demanding pensions. Caught in the middle are the average middle class American who is being exploited from both sides. The judge now ordered the state to pay up towards Medicaid to keep doctors and hospitals from cutting off care for the low-income families that rely on the program.

I have often pointed out the fate of the city of Mainz. They had their technological boom with the invention of the printing press there. The politicians couldn’t wait to spend tax money assuming the business cycle would never end. So they spend the money before the taxes were due and borrowed against future tax revenues. The debt quickly became a Ponzi scheme issuing new debt to pay off the old as we are doing today. The interest kept rising so they just raised taxes. The rich began to leave and the city was quickly left with the people who didn’t really pay taxes. The bubble burst when they could not sell the next new issue of debt to pay off the last one. The city defaulted. The Pope excommunicated the politicians. And eventually the city was simply sacked and burned to the ground.

Politicians are the scourge of human society. They are the great destroyers of civilization and the instruments of war. People champion gold standards as if this would solve anything. The common fault is not what we call money, it is always, and without exception, those who we put in charge of it.

Meanwhile, Moody’s and S&P have both downgraded the general obligation debt of the state of Illinois as of June 1, on a combination of a state government budget impasse and a seemingly unstoppable unfunded pension obligation that has now ballooned into at least a $130 billion shortfall. You better get out of the State before it is too late. Property values will decline further because of the tax burden.

Jun 9 2017

ECB In Serious Trouble


Armstrong Economics Blog/Central Banks

Re-Posted Jun 9, 2017 by Martin Armstrong

The European Central Bank (ECB) left its stimulus programs and record low interest rates unchanged. Pundit was seeing some cyclical signs of what they hoped was a spreading recovery in the 19 countries that use the euro currency rather than just a bounce in anticipation of tourist season. The ECB dropped any wording that it could lower interest rates further, which is a claimed sign of greater confidence in the economy, but in reality, is more of a reflection of it being trapped in desperate nightmarish measures.

The proposal to do a Euro Bond in the form of an Asset Backed Security (ABS) as they did with the mortgages that blew up in 2007, is a reflection of trying (1) to bailout the ECB, (2) provide funding for governments when the ECB stops buying since it owns 40% of Eurozone sovereign debt, and (3) a compromise with Germany who is against surrendering the power to issue debt to Brussels. The policies of Merkel have been to maintain the single currency at all costs, but there will be no single debt.  This is very much a policy of being just a little-bit pregnant.

The central bank’s announcement kept important wording that its bond-buying stimulus program could be stepped up if the economic outlook worsens. This is not very likely, it is simply a statement of denial that the ECB is trapped and in trouble. The entire policy has utterly FAILED to stimulate the economy and has only kept governments on life-support. When the plug is pulled, will their heart stop? That all depends upon finding buyers of government debt to (1) take up the slack that the ECB was buying 40% of all debt and a greater proportion of new debt. Remove the biggest bidder, and you end up with a NO BID crisis