Armstrong Economics Blog/Interest Rates
Re-Posted Aug 20, 2019 by Martin Armstrong
QUESTION: Mr. Armstrong; You seem to be the only person who distinguishes private interest rates v public. Has the marketplace gone insane along with Trump demanding 100 basis point cut by the Fed? I find it curious how they only quote the same people in the press who seem to preach the government position all the time. They constantly try to ignore you in the press and even Wikipedia distorts everything and fails to mention the banks pled guilty and had to repay your clients. Just so biased. Now they say deep negative rates are no problem. They only say what the government wants them to say. Will this all end very badly?
ANSWER: There is ABSOLUTELY no historical evidence that negative interest rates will ever stimulate the economy no less are they even viable. This wipes out pension funds where many around the world are obligated by law to buy government paper. Social Security in the USA is 100% in government bonds. It is beyond comprehension where all these people cheer negative rates as if this is a good thing. The US share market declined with the rate cut, it did not rally.
People are convinced that an INVERTED YIELD CURVE foretells of a recession. They have no idea about capital inflows. Even in Thailand, which has benefited greatly from the China-US Trade War shows that its currency has been the RARE exception rallying against the dollar. That may change now if the dollar closes above the July high here at the end of August.
I am in Asia right now. The greatest fear is that China will send in troops to squash the protests in Hong Kong. Many fear this will be another Tiananmen Square. I would not go that far. The solution would be a political one and to repeal the extradition order. People do not fear that a wanted Chinese will flee to Hong Kong and be protected, but that they could be extradited to Beijing and put on trial for things they did or said in Hong Kong.
This is sending capital to the USA and the same capital flows from Europe and doing the same thing. That capital is now incentified to buy US debt looking for more rate cuts and their bonds will appreciate. It takes a sublime idiot not to see this trade. They are punting – not actually buying negative yields for the long-term. This seems to be coming to an end in 2020.
As I have stated many times, DO NOT EXPECT the official rates to rise outside the USA. All other central banks are trapped. They cannot afford to allow rates to rise and blow up government budgets. This will widen the gap between public and private debt. Back in the ’30s, as governments defaulted, smart money fled to private AAA corporate bonds. We will see the same trend here again, but at the same time, banks will look to the future with tremendous uncertainty and will NOT be lending so easily. Expect rates to rise on credit cards where they make their money and long-term mortgages. If the banks cannot resell the long-term debt mortgages, rates will rise widening the gap with the government.
Chairman Powell is not is a nice place. He cut rates NOT for the USA, but because the rest of the world is imploding and Europe shows no signs of reversing their policy. If Powell lowers the rates 50 or 100 bp, domestically people will be taking this as confirmation a recession is coming and the stock market will continue its decline.
Powell is in a no-win situation. This is the FIRST time in history the Fed cut rates at the top of a market and instigated a decline rather than cutting rates in response to a decline. This only proves the Fed’s actions are concerned NOT for the domestic economy, but primarily for Europe and Asia second.
This going to make for a HIGHLY unusual WEC this year. We are breaking historical ground. There no way for this to end but VERY badly. They do not want people to read this blog. They want to keep people accepting the government narrative.
Armstrong Economics Blog/Central Banks
Re-Posted Aug 20, 2019 by Martin Armstrong
Come September, Draghi at the ECB will make loans to Eurozone banks on a long-term basis at rates less than the short-term lending window. The objective is to encourage banks to lend money to businesses. Nobody thinks about letting businesses bypass the banks mainly because the banks are in such a vulnerable state because Europe never took the toxic assets out of the banks as did the USA. To do that would have meant that some countries would have been bailed out more than others so they cut rates and hoped for the best which never happened.
The world economy is crashing BECAUSE of negative interest rates. These insane people have REFUSED to consider that this entire idea of lowering interest rates to stimulate the economy will NEVER work. You are wiping out pension funds and the elderly who are a vital part of the economic base. They keep using the same theories that are decades old and have ALWAYS failed each and every time.
Just look at the Great Depression. Lowering interest rates FAILED to reverse the decline. The market rallied when the rumors proved correct that Roosevelt would devalue the dollar creating currency inflation. Lowering interest rates has NEVER worked even once, yet they keep trying the same theory over and over again because they cannot think of anything else to try.
Armstrong Economics Blog/BRITAIN
Re-Posted Aug 20, 2019 by Martin Armstrong
COMMENT FROM UK: On the subject of Phillip Hammond and Brexit, this is just the latest in a long list of pro-elite politicians who are looking to protect their career interests by aligning with the globalist system.
Blair made hundreds of millions, Brown and Darling bailed out the banks and then went to work in the financial sector and failure that is Nick Clegg is now an exec at Facebook. Theresa May will no doubt have her payday coming. These politicians are selling out their country but seem to think they have morality on their side.
REPLY: All of these politicians who are for the REMAIN side, which included Theresa May, all have a self-interest which is counter-trend to their own country. They like the establishment of the political class to be left alone.
This is a chart that speaks 1,000 times that Britain has NEVER received a fair deal since joining the EU. This is data from your own government which I have not altered. The peak in GDP took place in 1973 just before Britain joined the EU. There was a major faction that believed joining the EU would create a global economy that would surpass the USA. That never happened because each member state can veto what any other state tries to do. There are 50 states in the USA. They have no say if Washington wishes to do a trade deal. If every state had a seat at the negotiation table as they do in the Eurozone, nothing would ever get done.
All I can say is the EU is a dictatorship for nobody at the Commission level ever stands for an election. As such, this is a politician’s greatest wish – power without accountability. And then they have the audacity to criticize China or Russia for a lack of Democracy?
The recent polls in Britain show that the people are MORE AFRAID of Labour and Jeremy Bernard Corbyn than they are about BREXIT!
Armstrong Economics Blog/BRITAIN
Posted Aug 20, 2019 by Martin Armstrong
The report that paints the darkest possible scenario for Britain without ever mentioning that 60% of its trade is outside the EU and that any attempt by the EU to punish Britain will destroy the German economy which is preparing for a very deep recession since Britain is its #1 trading partner in the EU particularly for autos.
This Yellow Hammer report leak is clearly a scaremongering edition and not serious research. It is just a propaganda piece for that purpose. It claims that transport disruption will be 50%-85% of lorries travelling across the Channel may not be ready for French customs. The EU is likely to harass Brits with immigration checks at border posts. Medicine supply chain may be disrupted for up to six months across the Channel. The supply of certain types of fresh food will decrease.
The EU will slap tariffs on British fuel imports so they forecast financial losses and the closure of two refineries resulting in about 2,000 direct job losses. And as far as Northern Ireland is concerned, the UK would impose the “no new checks with limited exceptions” but they report claim this will be unsustainable.
There is no mention that trade negotiations with the rest of the world cannot take place inside the EU because any member can veto a UK trade deal with anyone.
The British pound is still under pressure as the propaganda machine is in full force. A further decline in the pound into October will far outweigh any tariffs the EU could possibly impose. Everyone looks at the dire future for Europe while they fail to look at the EU. Germany is imploding economically. The German economic philosophy has always been the old-school Mercantilist view to sell more stuff to everybody else than you buy.
While Germany is all about austerity, it has over-taxed its people and has declined to create a domestic consumer market preferring the export model which has resulted in the German people having almost the lowest net worth in Europe. While the economy is #1 inside the EU, the wealth does not pass to the people. A no-deal BREXIT will hurt the EU far more than it will hurt Britain and that is the absolute TRUTH!!!!!!!!
Link to Graphic with Explanation HERE
When we see that justice is measured, not by due process, but by compulsion (Mike Flynn); when we see that in order to invoke our sixth amendment right to due process, we need to obtain permission from men who rebuke the constitution (FISA Court); when we see that justice is determined by those who leverage, not in law, but in politics (James Comey); when we see that men get power over individual liberty by graft and by scheme (Robert Mueller), and our representatives don’t protect us against them, but protect them against us (SSCI); when we see corruption holding influence and individual liberty so easily dispatched and nullified (Eric Holder); we may well know that our freedom too is soon to perish…
This is no small thing, to restore a republic after it has fallen into corruption. I have studied history for years and I cannot recall it ever happening. It may be that our task is impossible.
Yet, if we do not try then how will we know it can’t be done? And if we do not try, it most certainly won’t be done. The Founders’ Republic, and the larger war for western civilization, will be lost.
But I tell you this: We will not go gently into that bloody collectivist good night. Indeed, we will make with our defiance such a sound as ALL history from that day forward will be forced to note, even if they despise us in the writing of it.
And when we are gone, the scattered, free survivors hiding in the ruins of our once-great republic will sing of our deeds in forbidden songs, tending the flickering flame of individual liberty until it bursts forth again, as it must, generations later.
We will live forever, like the Spartans at Thermopylae, in sacred memory….
According to the White House:
President Donald J. Trump spoke by telephone with Prime Minister Boris Johnson of the United Kingdom earlier today to discuss a wide range of trade and economic issues. Prime Minister Johnson also provided the President with an update on Brexit. The President expressed great enthusiasm for his upcoming meeting with the Prime Minister at the G7 Summit in Biarritz, France. (link)
The G7 is being held August 24th – 26th. The word of a tentative post-Brexit U.S-U.K trade agreement was first released last week. The potential construct has the assembly of mutual benefit and follows a plan previously recommended by President Trump to Prime Minister Theresa May.
Aides to Trump and Johnson are laying the groundwork for an announcement on the issue when they meet on the sidelines of the G-7 summit in France. Such a statement could outline a road map for negotiations and how the two countries envision their future trade ties, the official said.
The timing of it — during the G-7 and at their first meeting — would be intended to demonstrate a united front between the U.S. and the U.K as Trump and Johnson gather with European leaders, including German Chancellor Angela Merkel and French President Emmanuel Macron.
CTH could see the outline of what President Trump had in mind back in 2017. If my suspicions are accurate, it’s a stunning maneuver but also difficult to explain. Think of it like a U.K. version of the NAFTA fatal flaw where Britain is positioned like Mexico/Canada, and the U.S. is positioned like China. There would be massive, beyond stunning, economic up-side for Britain.
What Trump and Johnson could construct is a bilateral trade deal between the U.S. and the U.K that has genuine reciprocity and negligible trade barriers. Like a trade freeway between the U.K and the U.S, but only between the U.K. and U.S.
With the EU no longer able to influence trade agreements involving the U.K. European companies, and countries (Poland, Hungary etc.) could get tariff-free access to the U.S. market by operating out of Britain, or using transnational shipping through Britain.
Simultaneously, the U.S. could ship tariff free into the EU (to a receiving EU corporation, or EU subsidiary of a U.S. corporation) by exporting to Britain. The UK would be the hub for massive economic activity between North America and Europe.
If France (the EU) is charging Canada a high duty for imported Canadian cheese; Canada, through the USMCA pact could ship to a holding company in Britain who would then transfer product (duty free) to the receiving French company who is operating in the U.K, and distributing in France. [A French company in the U.K. would receive in the U.K without the French (EU) duty.]
Eventually all corporations in the EU, who wanted to do business with North America, would start operations in the U.K….. OR, the EU would have to drop it’s one-way tariff policy (ie. the Marshall plan is ended). Think about the leverage this creates.
Of course this process would completely change the trade dynamic in Europe; and completely change the trade dynamic between Europe and North America. So how would Trump and Johnson start? Answer: Establish an interim tripwire to measure success. Hence you get this phrase:
“[…] Such a deal could last for something like six months, the official told reporters.”…
Of course an interim deal… because the EU bloc will respond to it… so a reevaluation at six months, prior to any massive investment outlays, is exactly what a CEO would create.
Donald Trump isn’t a politician, he’s working through a plan for what he views (we agree) is bigger than any ideological aspects. “Economic Security is National Security.”
After the G7, President Trump and First Lady Melania are scheduled to travel to Poland as the special guests of Polish President Andrzej Duda and his wife Agata Kornhauser-Duda.
Lots of supporters in nearby Denmark are trying to get President Trump to visit while he is in the area…
Fresh from the same Dept. of Energy and EPA that gave us: toilets that don’t flush; light bulbs that don’t light; dishwashers that don’t wash; plant-based fuel that burns like carrots; and paper straws that dissolve in liquid…. Now we get this:
[…] Energy Star, the federal program from the DOE and the Environmental Protection Agency, said the coolest you should keep your home is 78 degrees when you’re home.
When you’re at work or away, the program recommends setting it at 85 degrees. When you’re sleeping, Energy Star said to set the thermostat at 82 degrees. (link)
Setting the thermostat at 82° at night is well recognized grounds for divorce. I swear these administrative state progressives are going to have us force-fed sustainable algae cakes if this keeps up.
“I see we’ve decided to give up on sleeping. Or going home for that matter. Or having pets that aren’t native to the rain forest.” (link)
“I’ve already embraced a dying Earth, so I keep my central air between 67-72 at all times.” (link)
“I’d be laying there making a giant sweat angel in my bed” (link)
““New report shows these as the recommended temps for smelling like an onion.” (link)
“I have no idea how my ancestors survived deserts. If the thermostat in my house showed a number that started with an 8 I would call the police” (link)
But seriously…. given the track record for current energy efficient standards and how they end up being actually applied to life (toilets, dishwashers, lightbulbs etc.) it’s darned frightening to think the Feds believe 78° (when home), 85° (when away) and 82° (when sleeping) is a reasonable cooling standard.
Insta-misery; aka living in hell.
Watch out California…. Pretty soon you might not have options when the proletariat mandates the installation of compliance regulators inside the A/C system.
CTH suspected this was going to happen. This was predictable if you have followed the fracture between Main Street (Trump) and Wall Street (multinationals). Remember, there are trillions at stake. This news today is part of the battle.
Here’s the cut through the BS motive behind the multinational association of Business Roundtable CEO’s (these are all pure Wall St.) suddenly saying “social responsibility should be put above profit“…
NEW YORK (Reuters) – Top CEOs say companies should put social responsibility above profit. Corporate America is responsible for providing economic benefits to all, not just its investors, the Business Roundtable group said on Monday.
The group’s “statement of corporate purpose” was signed by the heads of more than 180 U.S. companies, including the CEOs of Amazon.com Inc (AMZN.O), American Airlines (AAL.O), the largest airline in the world; and JPMorgan Chase & Co (JPM.N), the biggest American bank.
Although largely symbolic, the group’s statement goes against a roughly 30-year-old viewpoint that corporations exist to serve shareholders. (read more)
This is self-serving and highly manipulative decepticon double-speak. They haven’t changed their view on ‘stewardship’, not one bit. They are stewards for self, and by extension they were ultimately stewards for their shareholders. However, their allegiance was/is always to the bottom line; the “international” bottom line.
The multinational corporations that make up the Business Roundtable are the same multinationals who exported jobs, destroyed manufacturing industry in the U.S., and created the rust belt. These are the Wall Street multinationals who benefited the most from purchased political policy over the past 30 years.
What they are doing now, ties directly into what Nancy Pelosi is doing.
The Democrats and big multinational business interests are now in alignment. Their common adversary is President Trump. Pelosi, Schumer et al, have spent years blaming corporate greed for all the ills within society; while simultaneously taking billions from their trough. It was always a con; it is part of the UniParty aspect of DC.
Now Pelosi and Schumer need to use their commonality with the Big Club to attack their common adversary: President Donald Trump and his Main Street America-First agenda.
The forecast long-term interests of the Multinational Roundtable means they need to align with the social proclamations of Pelosi’s Democrats.
They will do this fake metamorphosis by shifting from “shareholder” stewardship (those who own stocks), to “stakeholder” stewardship (those who purchase their products and demand a seat at the table to influence corporate ideology).
That’s the motive for the change in position.
According to their strategy, as soon as President Trump is removed everyone goes back to their former activity. Business as usual for UniParty, and business as usual for the Big Club.
If these U.S. corporations were concerned about “social responsibility” they would pack-up their overseas operations, invest in the United States economy, and join with President Trump in trying to maximize the benefits to Main Street. But that ain’t their plan….
Their plan is to retain their overseas investments and fight against U.S. policy that undermines their multinational business models. Ergo they need to re-brand, put on the mask of social justice, and find alignment with Democrats toward the united objective.
That’s what they are doing, and it is brutally transparent if you understand the fight.
Cue an Example:
Do you think Peter Schiff and his Euro-Pacific investment firm might be uniquely exposed to capital losses while the economy of Europe and China shrinks?
President Trump’s economic plans and trade activity is 180° in opposition to Peter Schiff’s entire portfolio. If Trump is successful, if the USA wins, Schiff goes out of business.
This is the battle we’ve been waiting for. This is the USA -vs- the Multinationals who almost destroyed Main Street and the U.S. middle-class. President Trump is the only candidate who would have waged this fight…
There are trillions at stake.
…”complicated business folks, complicated business”…
“Operation Fear” is the globalist, multicultural, left-wing operation aimed at trying to stop Brexit by any means necessary. The promoters of Operation Fear include almost all EU and British media along with U.S. political EU allies such as Nancy Pelosi, the Big Club Republicans, Wall Street multinationals and the U.S. Chamber of Commerce.
We are moments away from watching all of the U.S. Democrat presidential candidates deliver their narrative enhancement aimed at supporting the collectivist argument. No threat is as significant to their ideological interests as deglobalization, nationalism and the sovereign respect for self-determination. [See: U.S. Rivkin Project roadmap]
Against the October 31st Brexit deadline, Operation Fear is about to go into fully weaponized narrative distribution. Predictably the deployment will likely be the largest psychological war carried out in the modern era.
Understanding how Operation Fear is carried out in Sept/Oct will prepare U.S. voters for a similar deployment in the 2020 presidential race. As a consequence what is about to happen in Great Britain is well worth paying close attention to.
LONDON (Reuters) – British Prime Minister Boris Johnson will deliver his message on Brexit to French President Emmanuel Macron and German Chancellor Angela Merkel during visits this week, a government spokeswoman said on Monday.
“Ahead of the G7 the prime minister believes it is important to speak to the leaders of France and Germany to deliver the message that he has been setting out through the phonecalls he’s had with leaders and face to face,” the spokeswoman said.
“It is likely they will discuss other issues: foreign policy issues, security issues and so on, but clearly Brexit will form a key part of both bilateral meetings.”
Johnson’s spokeswoman repeated that there can be no formal negotiation with the European Union until the backstop, designed to avoid a hard border on the island of Ireland, has been dropped. (link)
♦U.S. Speaker Nancy Pelosi has already planted her flag of Brexit opposition around the Ireland -vs- Northern Ireland border. It’s a disingenuous position; transparently a ridiculous excuse; but that allows her to give the appearance of not interfering while the actual her objective is ABSOLUTELY to interfere.
♦The corporate leftist social media will also engage. Twitter, Facebook, Instagram and similar media sites will begin pushing down (or eliminating) pro-Brexit content, and pushing up the anti-British pro-EU positions across all engagement. The objective will be to give the impression that Brexit is not supported.
For the historic reader, you will find strong parallels to the Soviet propaganda campaign around Polish independence and the Solidarity Movement. In this era the Social Media groups will play the role of the soviet propagandists, and British citizens will metaphorically be the Poles.
♦Hopefully Nigel Farage and/or the Brexit party have proactive rallies planned where the Brits can assemble and publicly show the scale of their support. [*Hint*Hint*] Openly visible public support is the easiest way to refute the media propaganda narrative. [See Trump rallies circa 2016 throughout] It is harder for the psy-op engineers to refute what is openly visible to the eye and ear.
♦ Mainstream media activity around Brexit in September/October is where we are likely to see the approach deployed in the U.S. for the 2020 election. They’ll likely be developing strategies and testing out which social engineering approaches work best. Cue a current audio/visual example to highlight the approach:
(Daily Beast) Donald Trump’s Twitter habit has caused no shortage of controversy during his presidency. Now, Democrats are hoping to turn it into a liability for his re-election.
One of the party’s top think tanks has been privately encouraging lawmakers and candidates to attack the president for failing to deliver on the promises he made because he’s too consumed by social media.
It is, undoubtedly, the first case of a campaign tactic geared towards turning a president’s online behavior into a liability; though rarely has a president’s reliance on—and use of—a media bullhorn been such a defining personality trait. Those pushing it have offered new polling data to bolster the idea that the argument will move voters. (read more)
♦Internet Service Providers throughout Europe, but especially in the U.K., will play a significant role in Sept/Oct deployment of the leftist plan behind “Operation Fear”.
Anticipate widespread manipulation of internet travel based on the ISP provider network and subscription. The networks will block content that is adverse to Operation Fear, and in some cases will direct -or redirect- the internet user to content far away from the intended destination.
♦Search engines like Google will have operators and engineers working 24/7 to specifically maintain and deploy algorithms intended to impede any search query that would be flagged as pro-Brexit. Malware code will be inserted by the engineers at strategic times to disrupt website content adverse to their agenda. The Brexit party content will be targeted for disruption, and elements within central government agencies will open doors for assistance therein.
It will be worthwhile to watch how all of the EU operations are carried out; and pay particular attention to the reports of the type of manipulation that we will see. Being able to map all of the ideological efforts will allow us to formulate plans and strategies to avoid similar deployment when it takes place next year in the U.S.
CTH has a significant amount of U.K visitors. I can assure you that we will do everything in our power to assist our British friends as Operation Fear places them under siege in the next 60 days.