Tag Archives: BREXIT

Jul 7 2017

Country Risk & How it is Critical to Investment Flows


Armstrong Economics Blog/Rule of Law

Re-Posted Jul 7, 2017 by Martin Armstrong

QUESTION: Dear Martin:
How does this affect cash flow to and within the USA? (China Bond market)
Rich
ANSWER: It does not alter anything just yet. Most of the capital outflow from China has been its own people trying to get cash out. They were using BitCoin to accomplish that.
This is a first step in the process. It will take time to develop and the next step will be to maintain a stable and important rule of law. In order to attract capital, there must be a stable and honest rule of law. Once the rule of law crumbles into bias and corruption as we see today, this is part of the risk of investment. Edward Gibbon wrote in his classic, Decline and Fall of the Roman Empire:

“…the intolerable weight of taxes, rendered still more oppressive by the intricate or arbitrary modes of collection; the obscurity of numerous and contradictory laws; the tedious and expensive forms of judicial proceedings; the partial administration of justice; and the universal corruption, which increased the influence of the rich, and aggravated the misfortunes of the poor. “

Book III, Chapter 34

Country Risk is a critical part of international investment. In assisting international companies with decisions where to locate plants or open up operations, the first criteria is always “Country Risk” which is all about the stability of the Rule of Law. How can you invest in any country if there is no reliable legal system to secure contracts or property?

Contract Law began in Babylon. Hammurabi’s legal code required all agreements to be written down. This put an end to false claims. When we talk about investing in Europe, we do not even consider “Country Risk” because it is assumed the Rule of Law is stable.

Consequently, China will surpass the United States and the West because our Rule of Law is collapsing. Courts rule in favor of government routinely and once that happens, no property is secure any more. They are just confiscating cash presuming it is criminal in some way be it taxes or otherwise and they do not have to prove anything. This is demonstrating that the West will not be able to survive long-term without a security of property. Hence, you can see it coming. If China respects property rights, then capital will migrate to Asia and leave the West due to the lack of a Rule of Law

Jul 7 2017

Macron to Reduce French Parliament by One-Third


Armstrong Economics Blog/France

Re-Posted Jul 7, 2017 by Martin Armstrong

The new French President Emmanuel Macron has proposed reducing the size of the French parliament by one third. He is intent upon surrendering the sovereignty of France to Brussels and when the full scope of his “profound changes” are understood by the people, his agenda may result in a dramatic rise in civil unrest in France. At least 35% of the population wanted to leave the EU, not surrender entirely to it. The way to deal with opposition is to deny them a voice. Macron said:

“Until now, we were on the wrong track – we preferred rules to initiative,” Macron, who has a massive mandate in both presidential and parliamentary elections, told deputies during a 90-minute speech. “We cannot have before us five years of half-measures. It’s a profound transformation that the French demand. Let’s embrace it.” 

“I am convinced that this measure will have positive consequences for the quality of parliamentary work. This reform is essential.

Jul 6 2017

Illinois – Poster Child for the Coming Sovereign Debt Crisis


Armstrong Economics Blog/Sovereign Debt Crisis

Re-Posted Jul 6, 2017 by Martin Armstrong

Illinois House had voted 72-45 to pass a 32% income tax hike as government refuses to address the real issue of a never-ending need for more and more tax revenue to keep state employees rolling in their pensions. The governor vetoed the tax increase and he was overridden.

There is absolutely no hope for Illinois. Just sell its debt for there is no long-term fix for this state or any state for that matter. We are facing a major Sovereign Debt Crisis at the state and municipal level that will eventually bring down governments on a wholesale basis.

The policies of just tax’em til they die and they tax their heirs is coming to an end. Governments will collapse and the only solution is to limit government by a new constitution that it may not consume greater than 15% of GDP on a federal, state, and local level combined. Employment should primarily be outsourced and private entities should bid to run various departments. That will eliminate government pensions, which is the monumental source of the real crisis.

We can do this, but we have to crash and burn first. Government will NEVER simply surrender power without a fight.

 

Jul 6 2017

North Korea – ECM & War


Armstrong Economics Blog/War

Re-Posted Jul 6, 2017 by Martin Armstrong

It was just one day after the first test of an intercontinental rocket by North Korea, that the US demonstrated military strength and threatened further sanctions against the isolated state. We have to understand that we are dealing with a pampered buy Kim Jong Un who will never yield to sanctions and counter-measures of rocket tests.

Donald Trump has classified North Korea as the major threat to the USA – not Russia. The US requested an urgent session of the UN Security Council in New York last week. The leadership in Pyongyang threatened the USA with further weapon tests and boasted that North Korea would never abandon nuclear weapons.

The division of Korea between North and South Korea was the result of the Allied victory in World War II in 1945, ending the Empire of Japan’s 35-year rule of Korea. The United States and the Soviet Union occupied the country, with the boundary between their zones of control along the 38th parallel. The United States supported the South, and the Soviet Union supported the North, and each government claimed sovereignty over the whole Korean peninsula. American troops occupy southern Korea, while the Soviet Union occupies the north, with the dividing line being the 38th parallel of latitude, which was established on September 8th, 1945 (1945,68). This arrangement proves to be the indirect beginning of a divided Korea which will lead to the Korean War in 1950.

The Korean War (1950–1953) left the two Koreas separated by the Korean Demilitarized Zone (DMZ) in the later part of the Cold War and beyond. However, the collapse of the Soviet Union in 1991 deprived North Korea of its main source of economic aid. Without Soviet aid, North Korea’s economy went into a economic free-fall in 1992 pretty much in line with the Economic Confidence Model calculated from the birth of the 38th Parallel.

By this time in the early 1990s, Kim Jong-il was already conducting most of the day-to-day activities of running of the state. Meanwhile, international tensions were rising over North Korean’s quest for nuclear weapons. Former US president Jimmy Carter made a visit to Pyongyang in June 1994 in which he met with Kim and returned proclaiming that he had resolved the crisis. However, Kim Il-sung died from a sudden heart attack on July 8, 1994, three weeks after the Carter visit. His son, Kim Jong-il, had already assumed key positions in the government, succeeded as General-Secretary of the Korean Workers’ Party.

The US government confirmed for the first time that North Korea on July 4th actually tested an intercontinental rocket (ICBM). The test represents “a new escalation of the threat to the United States, our allies and partners, the region and the world,” said Secretary of State Rex Tillerson. He announced “tougher measures” against Pyongyang. Meanwhile, Kim said this was a “gift package” for the US on its Independence Day.

From a timing perspective, 72 years from the birth of the 38th Parallel brings us right here to 2017. The War Cycle brings us to the last date being 2020.9

Jul 5 2017

Arrogance of California Knows No Bounds Governor Brown Still Committing Treason against the Constitution


Armstrong Economics Blog/Politics

Re-Posted Jul 5, 2017 by Martin Armstrong

 

The Governor of California is just insane and out of control. Besides the boasting that California is its own country free to enter into treaties with Europe against the Constitution, now Governor Brown is restricting the freedom of movement of its citizens creating a list of States within the USA that California is imposing a travel ban. Here we have Governor Brown banning travel for which he had the audacity to criticize President Trump. Brown either belongs in a prison for Treason or an insane asylum. The jury should decide. This man is unqualified to be governor and is dangerous.

In January, California Attorney General Xavier Becerra announced the state would no longer fund employee travel to four states – Kansas, Mississippi, North Carolina and Tennessee. Now, with Alabama, Kentucky, South Dakota and Texas added to the list after each passed laws California officials described as discriminatory towards the LGBT community. So in other words, any state that disagrees with California should be put on the their Travel Ban.

Freedom of movement under United States Constitution is governed by the Privileges and Immunities Clause which states, “The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.” This issue was decided back in 1823 in an appellate decision Corfield v. Coryell, 6 Fed. Cas. 546 (1823). The freedom of movement for American citizens has been judicially recognized as a fundamental Constitutional right.

Additionally, the Commerce Clause of the Constitution, empowers Congress “to regulate commerce with foreign nations, and among the several States” not Governor Brown. Once again, he is usurping federal powers and overruling the Constitution. He is simply out of control.

Let’s put this in perspective. He yells that Russia deprived him of Hillary because they were trying to “influence” the election. Well, imposing sanctions on other states who disagree with California is trying to also “influence” the people of those states to kneel before the altar of Governor Brown who seems to want to dictate to the world how they should live. Governor Brown is imposing sanctions on other states for disagreeing with the will of California which is the same policy of the West imposing never ending sanctions on Russia for taking back the Crimea, which was their’s to begin with? California has no right whatsoever to impose any sanction upon another state within the USA nor restrict the movement of any citizen to travel among the states. He cannot impose any sanction against another state for disagreeing with his flavor of laws. His view that other states are anti-Lesbian/Gay infringes upon their freedom of religion when they do not outright discriminate against the LGBT community.

Governor Brown seems to have lost it. His arrogance is off the charts and this is just unacceptable. He is lucky I am not president. I would cut off all federal funding for California until they comply with the constitution.

What’s next? Governor Brown imposes requirements upon cars to be electric and bans all citizens from driving to California with a car that does not meet California standards in accord with Paris? Just secede, invite Hillary to be the President of California, and be done with it. Those who disagree with Brown’s politics, the West Coast of Florida  still has the sunsets, no income tax, and far less regulation.

Jul 5 2017

Just Give the Government Your Money & Shut-Up


Armstrong economics Blog/Corruption

Re-Posted Jul 5, 2017 by Martin Armstrong

COMMENT: Dear Marty

I’m doing business w companies in Holland.

So I go there with a colleague to visit one of the factories outside Amsterdam. We rent a car and drive there. Everything is fine and all. No problems with traffic, finding our way or so …

After leaving Amsterdam back home it takes about 4-5 months we get a speeding ticket? We ask for proof us speeding, like a photo or so, but they do not even answer. It goes so far they send it to a collector agency here in Sweden and we call them asking for proof of some sort us speeding when driving in Holland. But they cannot help us. They say they only collect and if we will not pay they will register us in Sweden for this. So we pay. We do not want our business to get soiled.

After this it takes 6 months and we then get – from Holland – a speeding ticket for going the other way when driving to our business meeting???!

Obviously this is a scam!!! We did not pay and have no intention paying either.

So what do you think happens then? When going for a new business trip and we have a short stop at Schiphol airport – my colleague gets stopped in customs switching planes? (He was the one driving when we got the tickets) They arrested him for not paying the speeding ticket …. But luckily they let him go but said if he visited Holland again they would arrest him for sure and there would be a trial. So no business with Holland anymore. And no visits either.

Too bad ….

 

 

/C

 

ANSWER: Yes, the same process is happening in Italy, France, and Germany. It is indicative of governments going broke. They cannot see that they are destroying civilization because of their mismanagement.

These European governments are sending tickets with no explanation or proof and demanding fines of else. They are exploiting tourists and destroying their own vital business. Why travel on vacation to someplace you will be harassed? They turned over a ticket I got in Rome to a collection agency and I too told them no way. This is the biggest scam going on in Europe became they have speeding cameras and no police ever pull you over for anything. There is no explanation. No photo. No evidence. NOTHING! Just send us money or else they just threaten you with jail time and absolutely no proof of anything. They are far worse than the Mafia.

This is why I no longer recommend renting any car in Europe. It is just cheaper to hire a driver for a trip or use taxi/Uber. Then they are harassing Americans pulling you over looking for cash. In the late 1970s, I went through Checkpoint Charlie in Berlin. They forced you to buy East German marks at 1:1 with West German. Then you got into town and nobody you taken them. Even the government run hotel demanded West German marks.

I left with the same amount of East German marks I was forced to buy. I was just going to keep them as a reminder. Then trying to get back through Checkpoint Charlie, the last station of several they went through how much money you had on you. The woman pulled a rope and bell went off and two guards came and grabbed me by the arms and took me to a shed at the beginning. They took all my money and told me to sit. Waiting for over an hour, I got up and asked can I go. He then handed me a slip and said they only confiscate and I had to take that to the central bank the next day to get my money back. I then remarked – “And you say you are not capitalist?” I then had to start over and go through all the stages to get out. They kept the money.

Welcome to the new world we are emerging into. They are all the same. Just give them the money and shut-up.

Jul 5 2017

China to Open Bond Market to Foreign Investors


Armstrong economics Blog/China

Re-Posted Jul 5, 2017 by Martin Armstrong

QUESTION: Mr. Armstrong; it is becoming obvious that China follows your advice to the last letter. That makes sense when you were the western adviser they flew in to Beijing during the 1997 crisis. You told them to bypass the primary dealers and demand to buy US debt directly and they did within 30 days. Everything you have advised they have done and now they have opened the bond market to foreign investors. Is this the step that makes China surpass the West?

ANSWER: Yes. It is a process. Europe would not listen to my warning that unless they consolidated the debt of all member states, then the euro could never compete against the dollar. In order to the Chinese yuan to become an actual reserve currency, there must be a bond market that is secure into which foreign capital can park. This was the missing link in Europe.

The fools who pretend to be analysts and kept saying that the Yuan will defeat the dollar by merely trading commodity in yuan terms, are truly without any comprehension of how the world economy function since they have no experience in the field whatsoever. You can price oil in yuan, but without a bond market, you instantly transfer your profits to dollars to park in Treasuries.

Without a viable bond market, no currency can become the reserve currency and compete against the dollar. It does not matter what you price in yuan, it still requires a trustworthy place to park your money.

Jul 4 2017

The Coming Revolution – the Next 4th of July


Armstrong economics Blog/Politics

Re-Posted Jul 4, 2017 by Martin Armstrong

 

There is a revolution coming that is engulfing the world. Governments are broke and are taking drastic measures to stay in business. Not all revolutions are bloody. There have been revolutions such as that in Russia when the army stood down and would not fire upon the people. Even in Saudi Arabia, there is talk of revolution and civil war as a rift within the Royal family has been unfolding and the army is by no means united behind one faction.

Whether a revolution comes with the blood that feeds the Tree of Liberty as Thomas Jefferson put it, really is determined by the army. The European Union is desperately trying to create an army which is power. The question would eventually emerge, will the EU send its army against a member state because it seeks to leave? The golden rule of political-revolutions can be stated simply by the victor:

We have defeated the enemy of the people;

We Occupy their Hill of Power;

We have become the enemy once again.

 

We reached the peak in government 2015.75. Ever since that fateful turning point, the press has become so corrupt, the politics has collapsed, traditional parties are declining and the rise in discontent is global. Between here and 2032.95, the world around us is changing. It will be out with the old, and in with the new. The driving force is always economic

Jul 3 2017

Freedom of Speech Comes to an End in Germany


Armstrong Economics Blog/Germany

Re-Posted Jul 3, 2017 by Martin Armstrong

 

The most anti-democratic law perhaps ever to pass any Western Government just pass in the German Bundestag last week. Even the opposition Social Democratic Party (SPD) votes to suppress free speech and it is all geared to end criticism of government. This new law obligates the operators of social networks to block off anything that they themselves view “might be” criminal within 24 hours of receipt of the complaint. Other illegal content must be “deleted” or “blocked” within seven days.

The problem is rather simple. It boils down to there is no judicial determination as to what might be criminal and there is nothing specifically deemed to be criminal in the act. The word “criminal” is left totally undefined. Traditionally, the foundation of law in a free society is known as DUE PROCESS. This concept comes from the Bible. When Cain kills Abel, God knew what he had done. Nevertheless, he (1) summoned him, (2) asked him his side of the story, (3) judged him, and (4) sentenced him. It is presumed that God knew what took place, yet he still allowed Cain to explain and defend himself.

“Where is Abel your brother? And he said, “I do not know: am I my brother’s keeper?” And He said, “What have you done? Listen! your brother’s blood cries out to me from the soil. And so, cursed shall you be by the soil that gaped with its mouth to take your brother’s blood from your hand. If you till the soil, it will no longer give you strength. A restless wanderer shall you be on the earth.”

This is Due Process of Law, which is increasing under attack by all governments. The Guantanamo Bay detention camp is a prime example of how the U.S. government is violating international law and the foundation of Due Process. The so-called terrorists they keep there are never provided the right in court to defend themselves. There is no evidence to put them on trial, do the government just keeps them locked-up with no Due Process of Law because they will not admit what they have done.

Lindsey Graham, ranking member of the Judiciary Committee,  is an outright traitor to everything held to be fundamental to freedom. He sponsored the bill to indefinitely imprison people, deny them a lawyer, and deny them any right to defend themselves whatsoever. Graham has rejected the very principle of Due Process of Law that even God provided to Cain when he knew what took place.

The Bundestag has just opened the door to the same violation of international law all because there is a major pension crisis in Germany that the politicians are attempting to hide prior to the election. Thus, exactly what is a “criminal” is left to the imagination. There is no right to be charged, no right defend oneself, you are summarily silenced. Private companies are now replacing courts of law. It is their decision what is now criminality. There is no right to be heard in a court of law anymore. They can now arbitrarily shut down anyone speaking content they “think” the government would not like. Now we have third parties acting as judges and juries all because the government does not like social media networks. These private companies must also decide on their view of what is “criminality” of the reported content within seven days.

Then these private network operators are required by this law now to provide users with a directly accessible procedure for transmitting complaints. Therefore, anyone who disagrees with what is being said can now file a complaint, the network must fear if the government would not like it, and judge the provider within 7 days and shut them down.

If a complaint management is not established immediately (before the election), a fine is threatened. Then if you dare wish to appeal and you will be fined five million euros against a person responsible for the appeal. The fine itself can be up to 50 million euros against the company itself if it does not now censor everything being written in social networks.

This outrageous law is clearly “unconstitutional” in Germany and it is an affront to everything regarded as a core principle of free speech and a free society. Only the AFP objected with every other party lining up to silence any opposition. The law delegates the distinction between criminal acts of hatred, satire and freedom of expression to social media giants such as Facebook and others with huge fines for non-compliance with each incident. At  50 million euros per incident, then can bankrupt the biggest social network within a single week.

We should take a moment of silence to remember what freedom once was. These people in power no longer represent the people. They are becoming the worst enemy of freedom everywhere

Jul 2 2017

Financial Flagellation – Illinois Budget Deadlines Passes Without Action…


Re-Posted from The Conservative Tree House on July 1, 2017 by

Utilizing some Bloomerberg and Zerohedge reporting – treeper SeekerofTruth provides a nice recap of Illinois financial self-flagellation.  Charging head-first into the abyss:

SeekerOfTruth – June 30 came and went and the Illinois legislature did nothing. So the courts have stepped in now.  Bloodbath coming. Fun to watch if any news outlets would report on the story. The bloodbath of decades of liberal policies and corruption.

“From Horrific To Catastrophic”: Court Ruling Sends Illinois Into Financial Abyss.

By the end of Friday – the last day of the fiscal year – Illinois legislators failed to enact a budget, and while negotiations continued amid some glimmers of hope and lawmakers planned to meet over the weekend, the failure marked a continuation of the historic impasse that’s left Illinois without a full-year budget since mid-2015, and which, recall, S&P warned one month ago will likely result in a humiliating and unprecedented downgrade of the 5th most populous US state to junk status.

Then came the begging.

According to Bloomberg, on Friday Illinois House Speaker Michael Madigan, a Democrat who controls much of the legislative agenda, pleaded with rating companies to “temporarily withhold judgment” as lawmakers negotiate. “Much work remains to be done,” the Democrat said on the floor of the House Friday, before the chamber adjourned for the day. “We’ll get the job done.”

… However, in a “shocking” development, just hours remaining before the midnight deadline to pass the Illinois budget, and Illinois’ imminent loss of its investment grade rating, federal judge Joan Lefkow in Chicago ordered Illinois to come up with hundreds of millions of dollars it owes in Medicaid payments that state officials say the government doesn’t have, the Chicago Tribune reported.

Judge Lefkow ordered the state to make $586 million in monthly payments (from the current $160 million) as well as another $2 billion toward a $3 billion backlog of payments – a $167 million increase in monthly outlays – the state owes to managed care organizations that process payments to providers.

Friday’s court ruling, which meant that the near-insolvent state must pay an additional $593 million per month, may have been the straw that finally broke the Illinois camel’s back.

“Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Comptroller Susana Mendoza, a Democrat, said in an emailed statement after the ruling.

As a result of the court decision, “payments to the state’s pension funds; state payroll including legislator pay; General State Aid to schools and payments to local governments — in some combination — will likely have to be cut.”

Also, without a budget that includes borrowing to pay down the bill backlog, Illinois by August will run out of money for key expenses for the first time since the stalemate began, according to Comptroller Mendoza. That means school funding, state payroll, and pension payments could be affected, she said. There won’t be enough money for these mandated or court-ordered payments.

she said that payments to bond holders won’t be interrupted (more below).
As noted above, Mendoza said that this won’t jeopardize debt-service payments, however she probably should have added “for now.” For now, Illinois hasn’t missed any bond payments and state law requires it to make monthly deposits to its debt-service funds.

===> Missed bond payments and the state goes into default. If bonds are moved to junk status many bond funds will have to sell the bonds because many mutual funds do not allow any or much junk rated bonds in the fund.

PS. This is the real number 1 news story in the country right now. And almost nobody even conservative sites are reporting on it. Muh Russia narrative needs to be replaced with Illinois policy and legislative failures as the number 1 story all over in the country. Illinois is the not so shiny example of the policies that the MSM so longs for and preaches as good every day.

Nothing will likely be done until this does become a national story and people see just how stupid Illinois people are. Right now they can save some face but not if this becomes headlines all over. This is no longer a kick the can further down the road situation. They only have until the end of summer until the can falls into the abyss. Then schools will not open and more importantly Teachers Union people will not be paid.

Bond payments missed and the state instantly goes into debt default and that activates financial legal processes.  (link)

They’d better get things straightened out quick, they’ve got a library to help fund…