Tag Archives: BREXIT

Mar 13 2017

$21,714 For Every Man, Woman And Child In The World – This Global Debt Bomb Is Ready To Explode


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 13, 2017 8:13 AM

Authored by Michael Snyder via The Economic Collapse blog,

According to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars.  Other estimates put that figure closer to 200 trillion dollars, but for the purposes of this article let’s use the more conservative number.  If you take 152 trillion dollars and divide it by the seven billion people living on the planet, you get $21,714, which would be the share of that debt for every man, woman and child in the world if it was divided up equally.

So if you have a family of four, your family’s share of the global debt load would be $86,856.

Very few families could write a check for that amount today, and we also must remember that we live in some of the wealthiest areas on the globe.  Considering the fact that more than 3 billion people around the world live on two dollars a day or less, the truth is that about half the planet would not be capable of contributing toward the repayment of our 152 trillion dollar debt at all.  So they should probably be excluded from these calculations entirely, and that would mean that your family’s share of the debt would ultimately be far, far higher.

Of course global debt repayment will never actually be apportioned by family.  The reason why I am sharing this example is to show you that it is literally impossible for all of this debt to ever be repaid.

We are living during the greatest debt bubble in the history of the world, and our financial engineers have got to keep figuring out ways to keep it growing much faster than global GDP because if it ever stops growing it will burst and destroy the entire global financial system.

Bill Gross, one of the most highly respected financial minds on the entire planet, recently observed that “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”.

And he is precisely correct.  Everything might seem fine for a while, but one day we are going to hit the wrong bump at the wrong time and the whole thing is going to go KA-BOOM.

The financial crisis of 2008 represented an opportunity to learn from our mistakes, but instead we just papered over our errors and cranked up the global debt creation machine to levels never seen before.  Here is more from Bill Gross…

 My lesson continued but the crux of it was that in 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster. In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each. Capitalism, with its adopted fractional reserve banking system, depends on credit expansion and the printing of additional reserves by central banks, which in turn are re-lent by private banks to create pizza stores, cell phones and a myriad of other products and business enterprises. But the credit creation has limits and the cost of credit (interest rates) must be carefully monitored so that borrowers (think subprime) can pay back the monthly servicing costs. If rates are too high (and credit as a % of GDP too high as well), then potential Lehman black swans can occur. On the other hand, if rates are too low (and credit as a % of GDP declines), then the system breaks down, as savers, pension funds and insurance companies become unable to earn a rate of return high enough to match and service their liabilities.

There is always a price to be paid for going into debt.  It mystifies me that so many Americans seem to not understand this very basic principle.

On an individual level, you could live like a Trump (at least for a while) by getting a whole bunch of credit cards and maxing all of them out.

But eventually a day of reckoning would come.

The same thing happens on a national level.  In recent years we have seen examples in Greece, Cyprus, Zimbabwe, Venezuela and various other European nations.

Here in the United States, more than 9 trillion dollars was added to the national debt during the Obama years.  If we had not taken more than 9 trillion dollars of consumption and brought it into the present, we would most assuredly be in the midst of an epic economic depression right now.

Instead of taking our pain in the short-term, we have sold future generations of Americans as debt slaves, and if they get the chance someday they will look back and curse us for what we have done to them.

Many believe that Donald Trump can make short-term economic conditions even better than Obama did, but how in the world is he going to do that?

Is he going to borrow another 9 trillion dollars?

A big test is coming up.  A while back, Barack Obama and the Republican Congress colluded to suspend the debt ceiling until March 15th, 2017, and this week we are going to hit that deadline.

The U.S. Treasury will be able to implement “emergency measures” for a while, but if the debt ceiling is not raised the U.S. government will not be able to borrow more money and will run out of cash very quickly.  The following comes from David Stockman…

 The Treasury will likely be out of cash shortly after Memorial Day. That is, the White House will be in the mother of all debt ceiling battles before the Donald and his team even see it coming.

 With just $66 billion on hand it is now going to run out of cash before even the bloody battle over Obamacare Lite now underway in the House has been completed. That means that there will not be even a glimmer of hope for the vaunted Trump tax cut stimulus and economic rebound on the horizon.

Trump is going to find it quite challenging to find the votes to raise the debt ceiling.  After everything that has happened, very few Democrats are willing to help Trump with anything, and many Republicans are absolutely against raising the debt ceiling without major spending cut concessions.

So we shall see what happens.

If the debt ceiling is not raised, it will almost certainly mean that a major political crisis and a severe economic downturn are imminent.

But if the debt ceiling is raised, it will mean that Donald Trump and the Republicans in Congress are willingly complicit in the destruction of this country’s long-term economic future.

When you go into debt there are consequences.

And when the greatest debt bubble in human history finally bursts, the consequences will be exceedingly severe.

The best that our leaders can do for now is to keep the bubble alive for as long as possible, because what comes after the bubble is gone will be absolutely unthinkable.

Mar 13 2017

The US Government Now Has Less Cash Than Google


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 13, 2017 9:38 AM

Authored by Simon Black via SovereignMan.com,

In the year 1517, one of the most important innovations in financial history was invented in Amsterdam: the government bond.

It was a pretty revolutionary concept.

Governments had been borrowing money for thousands of years… quite often at the point of a sword.

Italian city-states like Venice and Florence had been famously demanding “forced loans” from their wealthy citizens for centuries.

But the Dutch figured out how to turn government loans into an “investment”.

It caught on slowly. But eventually government bonds became an extremely popular asset class.

Secondary markets developed where people who owned bonds could sell them to other investors.

Even simple coffee shops turned into financial exchanges where investors and traders would buy and sell bonds.

In time, the government realized that its creditworthiness was paramount, and the Dutch developed a reputation as being a rock-solid bet.

This practice caught on across the world. International markets developed.

English investors bought French bonds. French investors bought Dutch bonds. Dutch investors bought American bonds.

(By 1803, Dutch investors owned a full 25% of US federal debt. By comparison, the Chinese own about 5.5% of US debt today.)

Throughout it all, debt levels kept rising.

The Dutch government used government bonds to live beyond its means, borrowing money to fund everything imaginable– wars, infrastructure, and ballooning deficits.

But people kept buying the bonds, convinced that the Dutch government will never default.

Everyone was brainwashed; the mere suggestion that the Dutch government would default was tantamount to blasphemy.

It didn’t matter that the debt level was so high that by the early 1800s the Dutch government was spending 68% of tax revenue just to service the debt.

Well, in 1814 the impossible happened: the Dutch government defaulted.

And the effects were devastating.

In their excellent book The First Modern Economy, financial historians Jan De Vries and Ad Van der Woude estimate that the Dutch government default wiped out between 1/3 and 1/2 of the country’s wealth.

That, of course, is just one example.

History is full of events that people thought were impossible. And yet they happened.

Looking back, they always seem so obvious.

Duh. The Dutch were spending 68% of their tax revenue just to service the debt. Of course they were going to default.

But at the time, there was always some prevailing social influence… some wisdom from the “experts” that made otherwise rational people believe in ridiculous fantasies.

Today is no different; we have our own experts who peddle ridiculous (and dangerous) fantasies.

Case in point: this week, yet another debt ceiling debacle will unfold in the Land of the Free.

You may recall the major debt ceiling crisis in 2011; the US federal government almost shut down when the debt ceiling was nearly breached.

Then it happened again in 2013, at which point the government actually DID shut down.

Then it happened again in 2015, when Congress and President Obama agreed to temporarily suspend the debt ceiling, which at the time was $18.1 trillion.

That suspension ends this week, at which point a debt ceiling of $20.1 trillion will kick in.

There’s just one problem: the US government is already about to breach that new debt limit.

The national debt in the Land of the Free now stands at just a hair under $20 trillion.

In fact the government has been extremely careful to keep the debt below $20 trillion in anticipation of another debt ceiling fiasco.

One way they’ve done that is by burning through cash.

At the start of this calendar year in January, the federal government’s cash balance was nearly $400 billion.

On the day of Donald Trump’s inauguration, the government’s cash balance was $384 billion.

Today the US government’s cash balance is just $34.0 billion.

(Google has twice as much money, with cash reserves exceeding $75 billion.)

This isn’t about Trump. Or even Obama. Or any other individual.

It’s about the inevitability that goes hand in hand with decades of bad choices that have taken place within the institution of government itself.

Public spending is now so indulgent that the government’s net loss exceeded $1 trillion in fiscal year 2016, according to the Treasury Department’s own numbers.

That’s extraordinary, especially considering that there was no major war, recession, financial crisis, or even substantial infrastructure project.

Basically, business as usual means that the government will lose $1 trillion annually.

Moreover, the national debt increased by 8.2% in fiscal year 2016 ($1.4 trillion), while the US economy expanded by just 1.6%, according to the US Department of Commerce.

Now they have plans to borrow even more money to fund multi-trillion dollar infrastructure projects.

Then there’s the multi-trillion dollar bailouts of the various Social Security and Medicare trust funds.

And none of this takes into consideration the possibility of a recession, trade war, shooting war, or any other contingency.

This isn’t a political problem. It’s an arithmetic problem. And the math just doesn’t add up.

The only question is whether the government outright defaults on its creditors, defaults on promises to its citizens, or defaults on the solemn obligation to maintain a stable currency.

But of course, just like two centuries ago with the Dutch, the mere suggestion that the US government may default is tantamount to blasphemy.

Our modern “experts” tell us that the US government will always pay and that a debt default is impossible.

Well, we’re living in a world where the “impossible” keeps happening.

So it’s hard to imagine anyone will be worse off seeking a modicum of sanity… and safety.

Do you have a Plan B?

Mar 13 2017

“The Biggest Show Of Force Since World War II”: Japan To Send Its Largest Warship To South China Sea


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 13, 2017 9:24 AM

The tension over the disputed territory in the South China Sea is about to escalate to another level: according to a Reuters report, Japan is preparing to to dispatch its largest warship on a three-month tour through the South China Sea beginning in May, in “its biggest show of naval force in the region since World War Two.”

Japan Maritime Self Defense Force’s helicopter carrier Izumo

The 249 meter-long (816.93 ft) Izumo is as large as Japan’s World War Two-era carriers and can operate up to nine helicopters. It resembles the amphibious assault carriers used by U.S. Marines, but lacks their well deck for launching landing craft and other vessels.

While China claims almost all the disputed waters despite the regular complaints of other nations in the region, and its growing military presence has fueled concern in Japan and the West, with the United States holding regular air and naval patrols to ensure freedom of navigation, so far Japan’s territorial claims have involved the Senkaku island chain in the East China Sea; that however appears to be changing as Japan seeks to stake a military presence in the contested region.

The Izumo helicopter carrier, commissioned only two years ago, will make stops in Singapore, Indonesia, the Philippines and Sri Lanka before joining the Malabar joint naval exercise with Indian and U.S. naval vessels in the Indian Ocean in July, before returning to Japan in August.

Why create another point of Chinese antagonism over the region? “The aim is to test the capability of the Izumo by sending it out on an extended mission,” said one of the sources who have knowledge of the plan. “It will train with the U.S. Navy in the South China Sea,” he added, asking not to be identified because he is not authorized to talk to the media. A spokesman for Japan’s Maritime Self Defense Force declined to comment.

  Taiwan, Malaysia, Vietnam, the Philippines and Brunei also claim parts of the sea which has rich fishing grounds, oil and gas deposits and through which around $5 trillion of global sea-borne trade passes each year. Japan does not have any claim to the waters, but has a separate maritime dispute with China in the East China Sea.

 Japan wants to invite Philippine President Rodrigo Duterte, who has pushed ties with China in recent months as he has criticized the old alliance with the United States, to visit the Izumo when it visits Subic Bay, about 100 km (62 miles) west of Manila, another of the sources said. Asked during a news conference about his view on the warship visit, Duterte said, without elaborating, “I have invited all of them.”

He added: “It is international passage, the South China Sea is not our territory, but it is part of our entitlement.” On whether he would visit the warship at Subic Bay, Duterte said: “If I have time.”

Japan’s unexpected flag-flying operation comes as the United States is conflicted between taking a tougher line with China and making concessions ahead of Xi’s visit to Trump next month. Washington has criticized China’s construction of man-made islands and a build-up of military facilities that it worries could be used to restrict free movement. Beijing responded in January said it had “irrefutable” sovereignty over the disputed islands after the White House vowed to defend “international territories”.

As Reuters notes, Japan in recent years, particularly under Prime Minister Shinzo Abe, has been stretching the limits of its post-war, pacifist constitution and has been making aggressive pushes for a return to militarism. It has designated the Izumo as a destroyer because the constitution forbids the acquisition of offensive weapons. The vessel, nonetheless, allows Japan to project military power well beyond its territory. Based in Yokosuka, near to Tokyo, which is also home to the U.S. Seventh Fleet’s carrier, the Ronald Reagan, the Izumo’s primary mission is anti-submarine warfare.

Mar 13 2017

Sturgeon To Give May An “Ultimatum” As UK Preapres For Critical Vote Ahead Of Article 50


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 13, 2017 7:21 AM

Britain’s minister for leaving the European Union, David Davis, urged lawmakers not to hold back PM Theresa May’s ability to negotiate a Brexit deal in talks she could trigger as early as this week. Davis on Sunday called on lawmakers to vote to drop two amendments that were added to a bill authorizing the talks with the bloc’s other member states, saying May should be able to enter with no strings attached the WSJ reported.

On Monday the Brexit bill returns to the House of Commons, the U.K.’s lower house, for debate after the House of Lords said it wanted guarantees that EU citizens living in the U.K. could stay after Brexit and that Parliament could vote on the final terms. The final bill must be approved by both houses. Should the bill pass Monday, the government could invoke Article 50 as early as Tuesday according to weekend press reports, but negotiations in Parliament could last several days. The Brexit spokesman for the main opposition Labour Party, Keir Starmer, told Sky News he expects the government to trigger it on Wednesday or Thursday.

Even if the House of Commons votes in favor of the amendments, May is expected to keep her timetable of triggering by the end of the month. But it would underline how small her majority is in the lower house. Complicating matters is a tweet moments ago by BBG political editor Laura Kuenssberg, who reported that Scotland’s Nicola Sturgeon will give May an ultimatum: give Scotland a different Brexit deal or she’ll call for section 30, the indyref process.

On the topic of Brexit, Reuters reported on Sunday that David Davis is also drawing up “contingency plans” for Britain in the unlikely event it has to walk away from divorce talks with the European Union without a deal. Ahead of the start of Article 50 negotiations, which could be triggered as early as Tuesday, a committee of lawmakers warned it would be a serious dereliction of duty if the government failed to plan for the possibility of not reaching an exit deal. “I don’t think, firstly, that is remotely likely,” Davis told the BBC’s Andrew Marr Show, responding to the report. “It’s in absolutely everybody’s interest that we get a good outcome.”

Parliament’s Foreign Affairs committee warned that a breakdown in negotiations would be a “very destructive outcome,” causing economic harm to both sides as well as creating uncertainty and legal confusion for individuals and businesses.

 “The simple truth is we have been planning for the contingency – all the various outcomes, all the possible outcomes of the negotiations,” Davis said. “One of the reasons we don’t talk about the contingency plan too much is that we don’t want people to think ‘Oh, this is what we’re trying to do.'”

Asked when May would trigger talks, Davis declined to name a specific date. “Each date has different implications in terms of when it could be responded to by the (European) council … I’m not going to get into the details why, but there’s politics in terms of achieving success.”

Finally, for a frank, “on the ground” take on the current state of Brexit, here is an excerpt from Bill Blain’s latest Morning Porridge edition:

Mar 13 2017

Real Estate & the Financial Crisis


Armstrong Economics Blog/Real Estate

Re-Posted Mar 13, 2017 by Martin Armstrong

Financial Crisis

QUESTION: Hello Armstrong, Thank for you the great post “The Future – Putting it All Together”. It helps a lot to get a good overview, considering everything is connected. One question, you say “Real estate is nice for some part of a cash holding, but it is taxed to hold it and it is not liquid.” regarding where to put your money when it all comes crashing down with the Sovereign debt crisis. Is this just for risk management, considering we are currently in a long wave down from 2015.75 to 2032 in real estate? Referring to your forecast on the real estate market. Also is this model for the US only, or global?

Thank you!

ANSWER: There are two types of investment – the hedge and the speculation. The overall real estate is in a decline. A friend of mine in the business said more than 33% of the houses in New Jersey would all come on the market if prices ever got back to 2007 levels. The areas that has risen sharply when looked at closely are those attracting foreign capital. This is the hedge trying to get off the grid. They are often buying places and not even renting them out as in Scandinavia. We even see some of that in Dubai. This is money simply parking.

The real estate cycle peaked and it is headed down in terms of appreciation. This is the general market and not the high-end, although that has begun to turn down in many places often due to taxation of rising regulation as in Miami or Sydney Australia.

However, because of the Sovereign Debt Crisis, we will begin to see this surface with the Obama-Boehner Debt Crisis Crisis that pushed off into 2017 when they would not be accountable. As this starts to become more and more aware to the general public, that is when the confidence in currencies begins to drop. That appears to be on schedule for 2018.

All tangible assets will rise in value according to the decline in a currency. This will be “currency inflation” that is expressed by the old joke a man is frozen until a cure is found and he can be revived. He put his $1 million into stocks and calls his stock brokerage house upon his revival. They say his portfolio is worth $50 million. He jumps for joy until the operator breaks in and says he owes $1 million for the next 3 minutes.

When we swap to a new currency, then tangible assets will make that transition in value. It is not that you will make a profit, the name of the game is that you just break-even.

There are still some areas where there will be profit opportunities. Stay tuned for those

Mar 12 2017

Where to Keep Your Money


Armstrong Economics Blog/Basic Concepts

Re-Posted Mar 12, 2017 by Martin Armstrong

Hiding Money Matress

QUESTION: Mr. Armstrong, I am 82 years old and ask the question which is much on my mind—- Where is the best place to park cash in this very difficult time. Right now almost all of my cash is in money market funds with the returns very low, yet there is still risk of loss. I simply do not know what to do—I am too old to take big losses, not enough time to recover.

ANSWER: Right now stay in cash. We will most likely see a change come May.

Mar 12 2017

Why Canada will come to regret its embrace of refugees


Seems like a good deal… lol

Mar 12 2017

Global Leaders Rattle Their Sabers As The World Marches Toward War


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Mar 12, 2017 1:20 PM

Authored by Michael Snyder via The Economic Collapse blog,

Iran just conducted another provocative missile test, more U.S. troops are being sent to the Middle East, it was just announced that the U.S. military will be sending B-1 and B-52 bombers to South Korea in response to North Korea firing four missiles into the seas near Japan, and China is absolutely livid that a U.S. carrier group just sailed through contested waters in the South China Sea.  We have entered a season where leaders all over the globe feel a need to rattle their sabers, and many fear that this could be leading us to war.  In particular, Donald Trump is going to be under the microscope in the days ahead as other world leaders test his resolve.  Will Trump be able to show that he is tough without going over the edge and starting an actual conflict?

The Iranians made global headlines on Thursday when they conducted yet another ballistic missile test despite being warned by Trump on numerous occasions…

As tensions between the U.S. and Iran continue to mount, the semi-official news agency Tasnim is reporting that Iran’s Revolutionary Guard has successfully conducted yet another ballistic missile test, this time from a navy vessel.  Called the Hormuz 2, these latest missiles are designed to destroy moving targets at sea at ranges up to 300 km (180 miles).

Reports on the latest test quotes Amir Ali Hajizadeh, commander of the IRGC’s Aerospace Force, who confirmed that “the naval ballistic missile called Hormuz 2 successfully destroyed a target which was 250 km away.”

The missile test is the latest event in a long-running rivalry between Iran and the United States in and around the Strait of Hormuz, which guards the entrance to the Gulf. About 20% of the world’s oil passes through the waterway, which is less than 40 km wide at its narrowest point.

So how will Trump respond to this provocation?

Will he escalate the situation?  If he does nothing he will look weak, but if he goes too far he could risk open conflict.

Elsewhere in the Middle East, things are already escalating.  It is being reported that “several hundred Marines” are on the ground in Syria to support an assault on the city of Raqqa, and another 1,000 troops could be sent to Kuwait to join the fight against ISIS any day now.  The following comes from Zero Hedge…

While the Trump administration waits to decide if it will send 1,000 troops to Kuwait to fight ISIS, overnight the Washington Post reported that the US has sent several hundred Marines to Syria to support an allied local force aiming to capture the Islamic State stronghold of Raqqa. Defence officials said they would establish an outpost from which they could fire artillery at IS positions some 32km (20 miles) away. US special forces are already on the ground, “advising” the Kurdish-led Syrian Democratic Forces (SDF) alliance according to the BBC.

The defence officials told the Washington Post that the Marines were from the San Diego-based 11th Marine Expeditionary Unit, and that they had flown to northern Syria via Djibouti and Kuwait. They are to set up an artillery battery that could fire powerful 155mm shells from M777 howitzers, the officials said. Another marine expeditionary unit carried out a similar mission at the start of the Iraqi government’s operation to recapture the city of Mosul from IS last year.

Meanwhile, China is spitting mad for several reasons.  For one, the Chinese are absolutely furious that South Korea has allowed the U.S. to deploy the THAAD missile defense system on their soil…

China is lashing out at South Korea and Washington for the deployment of a powerful missile defense system known as the Terminal High Altitude Area Defense system, or THAAD, deposited at the Osan Air Base in South Korea on Monday evening.

The deployment of THAAD follows several ballistic missile tests by North Korea in recent months, including the launch of four missiles on Monday, three of which landed in the sea off the coast of Japan. Though THAAD would help South Korea protect itself from a North Korean missile attack, China is vocally protesting the deployment of the system, claiming it upsets the “strategic equilibrium” in the region because its radar will allow the United States to detect and track missiles launched from China.

Of course the U.S. needed to do something, because the North Koreans keep rattling their sabers by firing off more ballistic missiles toward Japan.

But it is one thing to deploy a missile defense system, and it is another thing entirely to fly strategic nuclear bombers into the region.

So if the Chinese were upset when THAAD was deployed, how will they feel when B-1 and B-52 bombers start showing up in South Korea?…

Earlier this week, trigger-happy Kim pushed his luck once more when he fired off four ballistic missiles into the seas near Japan.

Now US military chiefs are reportedly planning to fly in B-1 and B-52 bombers – built to carry nuclear bombs – to show America has had enough.

South Korea and the US have also started their annual Foal Eagle military exercise sending a strong warning to North Korea over its actions.

A military official said 300,000 South Korean troops and 15,000 US personnel are taking part in the operation.

The Trump administration has openly stated that all options “are on the table” when it comes to North Korea, and that includes a military strike.

It has been more than 60 years since the Korean War ended, but many are concerned that we may be closer to a new Korean War than we have been at any point since that time.

And of course our relationship with China is tumbling precariously downhill as well.  Another reason why the Chinese are extremely upset with the Trump administration is because a U.S. Navy carrier battle group led by the USS Carl Vinson sailed past islands that China claims in the South China Sea just a few weeks ago.

In China, the media openly talks about the possibility of war with the United States over the South China Sea.  Most Americans are not even aware that the South China Sea is a very serious international issue, but over in China this is a major focus.

And the U.S. military has recently made several other moves in the region that have angered the Chinese…

Also in February, the U.S. sent a dozen F-22 Raptor stealth fighters to Tindal AB in northern Australia, the closest Australian military airbase to China, for coalition training and exercises. It’s the first deployment of that many F-22s in the Pacific.

And if that didn’t get the attention of the Chinese government, the U.S. just tested four Trident II submarine-launched ballistic missiles during a nuclear war exercise, sending the simulated weapons 4,200 miles from the coast of California into the mid-Pacific. It’s the first time in three years the U.S. has conducted tests in the Pacific, and the first four-missile salvo since the end of the Cold War.

I can understand the need to look tough, but eventually somebody is going to go too far.

If you are familiar with my work, then you know that I believe that war is coming.  Things in the Middle East continue to escalate, and it is only a matter of time before a great war erupts between Israel and her neighbors.  Meanwhile, U.S. relations with both Russia and China continue to deteriorate, and this is something that I have been warning about for a very long time.

We should hope for peace, but we should also not be blind to the signs of war that are starting to emerge all over the planet.  Relatively few people anticipated the outbreak of World War I and World War II in advance, and I have a feeling that the same thing will be true for World War III.

Mar 12 2017

Real Estate – the Faces of Buyers


Armstrong Economics Blog/Real Estate

Re-Posted Mar 12, 2017 by Martin Armstrong

Housing Property Real Estate

QUESTION:  Dear Mr. Armstrong, as a daily reader of your blog I noticed the recent comment on the norweigian real estate market. You wrote that it was capital flight from the eurozone that made the prices go higher. Parking, not speculation, It seemed, in the light of everything, as a very natural development. As the Euro has been rising against the Krone, it would give Euro buyers some extra space to buy too. My question though is if the swedish real estate market is similar? Here in Sweden we have the common people buying too, with wages still pretty strong, fairly low unemployment and low interest rates on mortgages. This has resulted in highly leveraged households. Domestically “everyone” believes in rising real estate prices. Is this a bubble (with the majority preaching new highs), or is it similar to the norweigian situation?

Btw, I will, with excitement, attend your conference in Hong Kong this year.

Kind regards

PM

ANSWER: There are two distinct faces of real estate buyers. First, we have the capital flight as in Norway. They are using the property market as a place to park money. This is why they do not even both to rent them out. This trend has also engulfed most of the major cities such as New York and Miami where the IRS in the States demands that the true owner be revealed. In Australia, they made a criminal act for a foreigner not to disclose he owns property. We see the same in Toronto and Vancouver. The rural areas have not recovered from the crash in 2007-2009. In the States, this tends to be a bit steeper because it was the focus of huge leverage sold by the banks.

The other side of the market are the people who also are starting to buy property as a hedge using the low interest rates. The pessimism in Europe is reaching epic proportions. It is quickly becoming that the majority fear the breakup of the EU and the collapse of the Euro. This is also manifesting in the sharp rise in demand for physical paper dollars. First it was the fall of Communism 1989-1991. Then it expanded and has extended into Europe in general. Europe does not have the over-leveraged property that USA ended up with as a general rule. This is also reflected in the shorter mortgage duration in places like Canada and Europe. So at this point, any real gains in purchasing power may not really materialize in Europe, but it may appear to gain in nominal terms. Then there was the speculation that housing prices would rise because of the influx of refugees.

FED Money Base 2-2017

All of this said, the continued rise in demand for paper dollars outside the USA has actually surged after Trump was elected. The pattern clearly shows the trend has changed at the high is not isolated by a triple top. This warns from a pattern recognition perspective, that the monetary base will rise to new record highs.

Consequently, it is reasonably estimated that more than 40% of US paper currency now resides outside the USA. There are more than 300 million people traveling through the US border and there is no means to track the currency outflow in actual paper dollars.  When communism fell, dollars became the number one circulating medium of exchange in Russia and China. The Federal Reserve Bank of New York, in collaboration with Citibank and  Republic National Bank of New York of Edmond Safra, shipped out of the USA physical dollar bills worth $348 billion. The called it the Money Plane. There were even Congressional hearings on the exportation of dollars to foreign lands. History repeats because the passions driving mankind never change. We have witnessed the dollarization of the world economy.

The Federal Reserve in the States is well aware that the dollar has become a global currency and its demand outside the USA has been increasing sharply since 2007-2009. This we see this trend reaching a peak as early as 2020. The Fed itself states: “U.S. currency has long been a desirable store of value and medium of exchange in times and places where local currency or bank deposits are inferior in one or more respects. Indeed, as noted in earlier work, a substantial share of U.S. currency circulates outside the United States. Although precise measurements of stocks and flows of U.S. currency outside the United States are not available, a variety of data sources and methods have been developed to provide estimates.”

This also warns that the confidence in the euro among the average person in Europe has declined with the political turmoil.

Mar 12 2017

Will Trump Succeed? If he can’t fix DC than Nobody Can!


Armstrong Economics Blog/Politics

Re-Posted Mar 12, 2017 by Martin Armstrong

Trump Whtehouse

QUESTION: Do you think Trump is really a racist? I do not quite understand this. It seems like this has been manufactured simply because of his travel ban. Can you shed some light on this? Do you think Trump will really make a difference?

Thanks

MW

ANSWER: There is no evidence that Trump is a racist. This is hype to cloud the real agenda and that is to stop any reform in Washington. As far as Trump succeeding, I remain skeptical. Everyone is really against him on Capitol Hill. That includes Republicans. There is no difference between Republicans and Democrats for they both love to spend other people’s money.

This is really the left trying to sustain the status quo. Democrats talk a good game how they are for the poor, but then sell tax loopholes to special interests in return for financing their campaigns. Why would the bankers and hedge funds back Democrats if they were really against them?

The truth is nothing like the press and politicians try to project. We can see the trend toward this popular uprising because everyone knows something is wrong. I do not see the racism being alleged and Muslim is not a race anyhow. I have friends and staff who are Muslim and my staff work in Europe and come into the USA for meetings with no problem. If they were not allowed in because of their faith, I would be screaming loud myself. We have every race among our staff and female as well as male staff. So I have a vested interest in making sure there is no discrimination that would disrupt our staff or curtail business in any way.

The real issue is economics. I believe the election of Trump was a reflection of the uprising among the people and Trump happened to be at the right place at the right time. Do I support him personally? No. I am not naive nor a fool. I wish him well, but I doubt that his agenda will work for he lacks international trading and creating jobs in America with tariffs is not the answer. That will force the consumer to pay more – that is subsidizing manufacture and that goes against free trade where every country should pursue its comparative advantage (see David Ricardo).

Secondly, based upon my sources, I seriously doubt that Trump has the votes to get his Tax Agenda through. Plus we have the debt ceiling about to explode and that will hurt the dollar short-term defeating ultimately Trump for the press will turn this around and blame 50 years of spending on him.

What I do support is the people. They elected Trump because they want a change. This is the anti-establishment movement that is growing globally. This is what will bring the whole system crashing down. This is separate and distinct from Trump. So I am not a fool. Trump cannot reverse the inevitable. It would be nice to think he could, but he will fail, not for lack of trying, but because the system is the system. Yes I support that he was elected compared to Hillary. I also support that he has caused a lot of anxiety on Capitol Hill and has all the politicians talking about the rise in “populism” putting them on notice that everything is not just fine.