Tag Archives: $100.00 a barrel oil

Jan 23 2018

Refugee Migration Will Keep Wages Suppressed in Europe


Armstrong Economics Blog/Refugees

RE-Posted Jan 23, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; Here in Germany, one obvious consequence of the refugee migration has been that wages are declining for low-end jobs. I believe you had said that would be a consequence of the refugee crisis. Do you see this spreading throughout Europe?

KS

ANSWER: It is only common sense that if you increase the labor force in the low-end unskilled area, wages must decline. Every study that has ever been conducted on this issue has shown that is the logical consequence. This is indeed what caused the riots in Philadelphia against the Irish. Wages declines in the midst of a depression. Yes this trend will spread throughout the EU.

Jan 22 2018

Do Commitments of Traders & Inventories Really Matter?


Armstrong Economics Blog/Armstrong Economics 101

Re-Posted Jan 22, 2018 by Martin Armstrong

QUESTION: Do you think that the Commitment of Traders and reported inventories are relevant to gauge market performance?

ANSWER: The oldest game in town is manipulating inventories. Commodities can be stored at many places, but only selected facilities are on the reporting list. During the famous Buffet Silver scandal of 1997-1998, to justify taking silver up in price they had to make the inventories appear to decline. The easy way to do that was simple. Buffet bought the silver but in the London market – not COMEX. Thus, the silver was moved from New York to London and then everyone touted silver was in short supply as if it had been consumed like wheat.

Phibro had one of their paid analysts to call the Wall Street Journal to try to stop me from warning clients that silver was being manipulated. Their mistake was getting mainstream media involved. Once the Wall Street Journal reported I said silver was being manipulated, the CFTC had to call me. I can write on this blog whatever. As long as it does not appear in the mainstream press government can ignore it.

The CFTC called me and asked me where the “manipulation” was taking place. I told them it was out of their jurisdiction in London. They said they could make a call and I said that was what they had to do. The indeed called the Bank of England and all the silver dealers were ordered to appear in the morning at the Bank of England. Buffet would be found out and had to issue a public statement that he had amassed 130 million ounces of silver or about 25% of the world supply. He denied manipulating the market and announced that the company had taken delivery on 87.5 million ounces of silver, the remaining 42 million was on “call for delivery at varied dates until March 6, 1998.” The release went on to say that the he “is willing to defer delivery for a reasonable period upon payment of a modest fee.”

The press backed Buffet. Even Baron’s penned the “Silver Fox” concluding: “After that, silver prices will march on. For a while at least, Buffett’s play will continue to look golden.”

Of course, that was not the case even with buying 25% of the world supply.

 

Like the Hunt Brothers, with Buffet taking 25% of the world supply, he too could not force a bull market. This is telltale signs of a false rally which is indicative of manipulation. So commitment of traders and inventories are by no means fundamentals to hang your hat on for a guaranteed trade. They are more often than not used to get the sheep to buy in. You must also look around at other markets and how everything fits. You will notice that gold was not responding in sync with silver. If it was a true bull market, gold would lead the way.

Jan 22 2018

Central Bank Reserves – The Rise of the Yuan


Armstrong Economics Blog/Central Banks

Re-Posted Jan 22, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; I understand that your model shows that China will become the dominant economy post-2032. The IMF added the yuan to their SDR basket. Are central banks starting to use the yuan in reserves in a major way yet?

KD

ANSWER: Yes. The ECB (European Central Bank) converted a half-billion euros to yuan. So that is not what you would call major. This is a first step in the true internationalization of the yuan. The Bundesbank has also converted a small portion of their reserves. So it is starting. Reports that China was selling off US debt are false. The U.S. debt to China is $1.2 trillion as of October 2017. That’s 19% of the $6.3 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the $20 trillion national debt is owned by either the American people or by the U.S. government itself. What China and most governments have been doing is reducing their holding in maturity from 10 years down to 5 years or less.

Despite what everyone may believe, the ECB reserves rank only number 30 on the list among central banks with just 75.1 billion. China has the biggest reserves of all followed still by Japan. Other than Switzerland, no European country ranks in the top ten. This is a reflection of their status in world trade as well. It only follows reason that the Chinese yuan will become a wider used reserve currency as it also dominates trade.

Jan 22 2018

Why the Dollar is the Mainstay of the World Economy


Armstrong Economics Blog/BRITAIN

Re-Posted Jan 22, 2018 by Martin Armstrong

QUESTION: A friend told me the one pound coins I have from a trip to Britain last year were canceled. How can a government simply cancel its money?

KL

ANSWER: Oh yes. Britain canceled the one pound coins last October. They estimated that £400-450 million pounds became worthless overnight. Europeans routinely cancel their currency. This is another reason why the US dollar is the RESERVE CURRENCY in the world. While you have these people who hate the dollar all the time in the USA, outside, it is the mainstay. The dollar is used worldwide because it is trusted while other countries routinely cancel currencies. India made headlines last year cancelling their high denomination notes overnight. This may force people to pay their taxes and prevent them from hoarding cash. But it is also why the US Treasury and Board of Governor’s staffs estimate that nearly 60% of all U.S. banknotes in circulation, or close to $500 billion, is held outside the United States. There are more dollars outside the USA than inside. This is also why the USA is not pushing the electronic currency as hard as you see in Europe. There, they just want to cancel all the currency to get more taxes.

 

There was a 1996 article on this they called the Money Plane when everyday planes full of $100 bills were flying to Russia. They were shipping $100 million per day. This is why the dollar is the world’s RESERVE CURRENCY. The majority of it is used outside the country because everyone else cancels their currency routinely. The US currency has NEVER been canceled so the very first note from 1863 can still be spent although its value is way beyond its face. This is why the dollar is the mainstay of the world economy. It is the preferred medium of exchange in the cash world outside the USA. The dollar-haters do not step a foot outside the country and are clueless about the real role the dollar plays worldwide.

Categories: BRITAIN
Jan 21 2018

RULE #1 – Never Marry the Trade


Armstrong Economics Blog/Training Tools

Re-Posted Jan 21, 2018 by Martin Armstrong

COMMENT: Mr. Armstrong; The goldbugs hate you for calling the top and a bear market. To my surprise, I searched Money Week here in London and it came up with an article in 2008 confirming you also called the temporary high in 2008 before the slingshot up into 2011 and were off 4 days on a forecast made 10 years before. They wrote:

“I was asked to follow up on last week’s piece on the subject of the Martin Armstrong March 22nd turn date. It’s too early to say for sure, but it does look like we are enjoying the early stages of a bear market rally with the financials having bottomed on March 17-18, since when we’ve seen about a 10% move up. If this pans out, he was four days out. Given he made the prediction in 1999 or before, I think we can forgive him that. But I’ll keep you updated.”

Just wanted to say, they love you when you agree with them and hate them when you do not. Seems to be fair-weather friends.

REPLY: Well when you let your bias and prejudice dictate your expectations, you are bound to lose. But keep in mind, those that tout gold as pretending analysts are either selling gold or are trying to sell shares in some gold mine. That is a conflict of interest that blinds them intentionally or unwittingly. I do not care if any market goes up or down. The object is to trade it regardless of the direction. I am an old trader. The RULE #1 is never marry the trade. You have to be willing to buy as well as sell.

 

I am writing the gold report now. It will be out soon.

Jan 21 2018

Dollar Manipulation by China & Japan?


Armstrong Economics Blog/USD $

Re-Posted Jan 21, 2018 by Martin Armstrong

The two largest foreign holders of the US debt, China and Japan, reduced their holdings of US government bonds in November compared to October. While many are trying to say see, they are dumping US bonds, China reduced its holdings by 1% or $ 12.6 billion to $ 1,176.6 trillion and Japan reduced its positions by $10 billion to $ 1,084 trillion. I seriously doubt that the foreign US bondholders slightly reducing their holdings in November by 0.1% to $ 6,343 trillion qualifies as “dumping” dollar debt. What is taking place is politically attempting to help lower the dollar to ease trade friction with Trump.

The advice I use to provide to Japan to help reduce the trade friction was to buy gold in New York and sell it in London. The trade numbers could care less about the product actually being exported. It will reduce the trade deficit and make it appear that the US exports are rising. It is just an accounting ploy. Likewise, the booming exports of China were being manipulated by Chinese companies borrowing dollars in Hong Kong and then bringing that money into China and collecting 3 times that cost in interest. Headlines are always made on the numbers without understanding the accounting.

To ease trade friction, China and Japan will try to help push the dollar down to appease Trump. This time, their exports to the USA will decline in real terms between 2018 and 2020 as the world does move more into a recessionary phase marked by tighter consumer spending.

Jan 20 2018

Did Rights Decline as Governments Grew in Size?


Armstrong Economics Blog/Politics

Re-Posted Jan 20, 2018 by Martin Armstrong

Palace of the Doge Venice

QUESTION: In your study of history, would you agree with this quote? “In all of history, no government became more honest, less corrupt, or respected its citizen’s rights more as it grew in size.

 ANSWER: I would have to agree. The only exception to that of Genoa, but it was based upon a revolving head of state (Doge) for a period of one year. Therefore, the lack of career politicians created a model state. In the case of Venice, the Doge was appointed for life. Upon his death, all his assets were frozen and then an investigation began to review all his dealings. No heir received anything until the slate was clean. As long as a government grows in size, it does so only at the expense of the people.
Jan 19 2018

Politically Correct Trading – A Whole New Challenge


Armstrong Economics Blog/Training Tools

Re-Posted Jan 19, 2018 by Martin Armstrong

QUESTION: Martin.. I have been trading /investing for over 20 plus years.

How can one be in the markets and survive if the “biggest  Safest  Banks”  in Canada are failing even today to not only fill a trade or give you a reliable quote but even to even give you an accurate account balance!

ANSWER: This is a growing problem being caused by (1) excessive regulation and (2) the juniorization of staff. Institutions have been firing people with experience to reduce cost replacing them with entry people. This is becoming widespread throughout Europe and sets the stage for a very dangerous situation. Covertly, there is an assumption that those with experience should be removed and juniors put in place and they will not fear the crash as experienced traders and that will help eliminate short positions against the government.

On top of these issues, we then have the problem of aggressive governments trying to defend themselves forcing even institutional trading to be politically correct. If the market goes down, the regulators will begin hauling in traders for interrogation. This is an exceptionally high risk in Europe.

Politically Correct Trading

Individual non-Americans can open accounts in the USA. Americans are turned away overseas. So for the individual, you do have to be concerned especially about dealing in Europe. The more any government interferes with the free markets, the greater the risk that your funds will be frozen and you will not be able to trade. It just may come down to having once again to trade “politically correct” to avoid being targeted.

I am currently working on coding my synthetic correlation model I use to use in the Middle East back in the 1980s. The problem then was rather different. We were advising one Islamic Bank where the board made the decision to open in Turkey. However, the currency was in a perpetual decline. This is the chart from the materials handed out for the 1985 World Economic Conference. The problem back then was the lack of any market to hedge the Turkish Lira. We had to create a synthetic model correlation cyclically to tackle the hedging project we were given. That was one of the most interesting projects of my career – hedging something that did not trade.

We are bringing this model back into play because there are rising concerns among our European clients that if they hedge against the decline of the Euro and government bonds in the EU when the collapse unfolds, they will be targeted for undermining the government. The way to avoid this and be “politically correct” traders, is to once again create synthetics correlated with time.

With the hostility in Europe eliminating the ability to short government bonds in a pathetic attempt to prevent the collapse of the EU bond market, it is paramount that we resurrect our synthetic models in order to be “politically correct” in trading what will no doubt turn into a witch-hunt once again.

I wrote in the Greatest Bull Market in History in the 1930 chapter, that the witch-hunts began subtly. One of the first targets was a young trader named John Pope.

One such early victim was a young broker named John W. Pope who was only 32 at the time. He reportedly had been a soft-spoken chap, quite independent, and a student of values. He firmly believed that stocks always sought their values up or down. In 1930, John was accused of forcing Fox Films down, as it was alleged that if he had not been short the stock would not have plummeted as far down. The New York Stock Exchange summoned the young fellow before their board of governors. They interrogated him in a way that Time magazine called a “harrowing trial by statistics.”[1] John W. Pope pulled out his charts and his studies of Fox Films and demonstrated that the stock had been seriously overvalued in comparison to historical measurements. The board found no malicious reports of rumors started by Pope, and his documentation as to why Fox Films had been overvalued won the day. He was completely exonerated, but this would be a dangerous trend that eventually led to the witch hunts of the 1930s.

[1] “Business: Trial by Statistics” Time (New York, NY) Dec. 22, 1930.

The founder of that company, William Fox, was summoned to the US Senate. They failed to show he was short against his own company. Never satisfied that government could ever be wrong, they then prosecuted Fox for tax evasion on a single transaction out of thousands. I explained in the Greatest Bull Market in History:

The bear-hunt continued … Gray [Prosecutor] summoned William Fox, once the proud owner of Fox Films. William Fox, upon his arrival in Washington, became ill. Fox’s doctor claimed he had an attack and stated that he believed Fox had diabetes.  But Gray, depraved, perverse and suspicious a person as he was, held true to his character. Gray simply wouldn’t believe him. Gray hired a physician to check Mr. Fox’s condition with orders to report directly to Mr. Gray. When that doctor also reported that William Fox was seriously ill, Gray still refused to believe it and then hired a third doctor ordering him to check the condition of this Mr. Fox. All three doctors agreed that Fox was very ill.

Gray still scoffed at the situation and proceeded with his case against Fox without his being present to raise his defense. Gray charged Fox had “wrecked” his former companies through stock market activity. He revealed countless details of his stock transactions right down to how much his daughter had owned. But all the evidence which Gray had compiled did not show Fox as a bear-raider but as a dead and battered bull. Gray was still not satisfied. Gray uncovered what he called a fraud. Gray accused Fox on one transaction out of several thousands of willful fraud again while Fox was still confined to his bed. Fox had dealt in the name of his company as well as in his personal name from time to time. Gray charged that on one transaction Fox had deducted a loss incurred in the market which he claimed the company had originally paid for.

The Committee naturally flaunted this in the face of the press and then announced that they were turning Mr. Fox over to the IRS. Mr. Gray took much pleasure in announcing publicly that “the recovery of evaded income tax will offset the expense (of the proceedings) 100 times,” as they voted to continue the investigation despite having failed to turn up the illustrious bear who had supposedly destroyed the market and perpetrated the Depression upon the entire world.

Jan 19 2018

Cryptocurrency & the Race for Money


Armstrong Economics Blog/Cryptocurrency

Posted Jan 19, 2018 by Martin Armstrong

QUESTION: You have talked about bitcoin and are rightly skeptical as we all should be, yet creative destruction rolls on. What insights do you have to share about the Dapps and Ethereum? In reading your blog for several years now you have truly opened many peoples minds. Thank you for your insight!

KS

ANSWER: If you want to trade Bitcoin, use the futures. The futures market will bring stability to the price and open the door for hedging what is otherwise at times an illiquid market. Understand one thing. This is all part of the shift from Public to Private. Cryptocurrencies are marketed as some magic money that will be free of the fiat world of government. That is total nonsense for governments will by no means allow that to happen. Nevertheless,  this is part of the same anti-government movement that brought Trump to the White House, BREXIT, Catalonia uprising, Ukraine revolution and so on. This is the rise in the stock market and the shift of capital from government bonds to equities. This will all end in a monetary crisis event perhaps as soon as 2021.

Keep in mind that Coinbase had to give up everyone’s name to the IRS and they sent out notices warning people they better claim their profits because the IRS will be looking to audit anyone trying to hide their gains from taxes. The technology of Bitcoin is inferior to other currencies. I believe in the end, we are moving toward electronic money but the governments will control it. This idea that somehow it is safer because it is outside the central banks is really nonsense. So is gold, commodities, real estate, and shares. There is a huge void with respect to counterparty risk in the cryptocurrency world and the fees to use this stuff are outrageous. I do not see this as a viable situation moving forward in time. It also requires a power grid. Take that out and you have nothing. The good old tangible things will always survive. If society collapsed, electronic money in all forms may not survive. Also remember that today only about 4% of all transactions take place in paper money. We already live in an electronic monetary system.

Jan 19 2018

The Hunt for Taxes Brings Down Governments Every Time


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Jan 19, 2018 by Martin Armstrong


COMMENT: Mr. Armstrong; I live in Germany. I wanted to send my father €200 for Christmas. I had to prove where the money came from. It does seem as if there is a major gap between those trading the euro for big banks and the people. I left Romania for freedom. Everything that I fled from has seemed to follow me to the West. Those who cheer the rise of the euro seem oblivious to the reality on the street. We have no real government in place here since nobody won a majority. The clash between freedom and oppression is playing out in silence. I fear this will just explode all of a sudden as it did behind the Iron Curtain.

PB

REPLY: You are not alone. I have several Russian, Hungarian, and Ukrainian friends who all express the same concerns. The fact that you fled to freedom and then see the very aspects of government that made you flee in the first place have taken hold in the West is all part of the cycle. This is simply how Empires, Nations, and Citystates collapse. They are always the same – a constant search for more power to retain their control. Then it all snaps. That comes typically when a government can no longer feed its own workforce to keep the people in check.

Revolt of the Heraclii 608-610 AD of Carthage

Emperor Phocas (602-610) persecuted the Aristocrats (rich) seeking taxation causing capital to go into hiding and the VELOCITY of money to decline. His reign did more than any other to begin the process of a significant decline of the Byzantine Empire. His tyrannical treatment of wealth led to a rebellion that began in North Africa by the exarch of Carthage, Heraclius in 608AD, who had been a leading and respected general under the previous emperor Maurice Tiberius (582–602).

This tax rebellion that began in Carthage, spread throughout the provinces. The funds were thereby raised to put together a considerable effort under Heraclius and his son. This major effort gathered a massive fleet that sailed toward the capital Constantinople. When they reached Constantinople, the gates were opened and Phocas was handed over. He was promptly executed being abandoned, and his statue he had constructed in the Hippodrome was now publicly burned. The young Heraclius was crowned by the Patriarch and began a new dynasty as Heraclius (610-641AD). His father did NOT assume the role of co-emperor showing his motives were to simply save his nation.

What most people do not know about history is the fall of government typically comes from tax rebellions. Michael IV the Paplagonian (1034-1041AD) raised taxes excessively setting in motion the collapse in VELOCITY of money once again as people hoarded their wealth creating the essential element to the destruction of an economy as you see in Europe today. Once capital begins to hoard and hide from the government tax collectors, the beginning of the end appears. In the case of Byzantium, this was set in motion by a tax hike and aggressive tax collection. The Slav population of the Balkans rebelled against the taxation. Michael IV himself was present to put down the tax rebellion oppressing the people and pillaging what they had.

The heavy taxation had also contributed to the demise of the small landowner. Thus, the higher the tax rates, the less production took place. The Empire had begun a vicious downward economic spiral that was not understood. Isaac I, Comnenus (1057-1059) embarked on a mission to strengthen the Byzantine Empire. His fatal mistake was one of finances. The treasury was depleted. The gold coinage had been debased, and the high taxation did nothing but send the economy into a downward spiral. Unable to tax the people, they began to run out of precious metal. Isaac I now did what so many other rulers had done before him; i.e. Napoleon, Henry VIII, and all Communists. He confiscated Church property with no other option. The Patriarch protested, and Isaac had him arrested and put on trial on trumped up charges of heresy. The Patriarch died before judgment or trial, yet the people were so outraged, Isaac I was forced to abdicate and go to a monastery.

What people do not credit is the Muslim conquest of Byzantium with the fact that they had the support of most Jews and many Christians. Why? The Muslim government eliminated the abusive taxation of the Byzantine Empire that was plagued with tax rebellions all the time. The Jewish revolt against Heraclius was part of the Byzantine–Sasanian War of 602–628. This was the final attempt by Jews to gain autonomy in the Land of Israel prior to modern times.