I was given a lecture in Toronto to our institutional clients years ago and the central bank of Canada came with ten people. It was an interesting session because the audience began to ask me questions about what the central banks were looking at to make their decisions. I would answer and then the audience would immediately turn to see their response. It was a really fascinating session that turned me into this quasi-spokesperson for the central banks. I would respond and usually swat down these absurd theories one after another. The head of the Bank of Canada I knew well and the whole table was unbelievable poker-players. They never flinched nor did you get any read from any body language. When it was over, I went up to them and apologized saying I hoped I did not insult them in any way. They reply was astounding: “Marty, I only wish I could tell these fools we do not look at this stuff!”

People attribute the central banks will also sort of theories you would think they were the all-powerful demigods of finance. Decoding what a central bank says is very important. Yet I find all the commentary to be so off the mark it is laughable. The new word the Fed likes to use is its increasing reliance on “transitory” factors to explain the past six-year problem of being unable to reach the Fed’s 2% inflation target. They explain the failure with “transitory price changes” in some components such as health care and financial services. That was in their minutes from the May 1-2, 2018 meeting. When you look closely, price changes become “transitory” on the downside as well as “transitory” when they move on the upside. Indeed, they love to explain trends as “transitory” for that avoids any permanent trend forecast.

All of this is really just designed to be a distraction. It is the code word they love to explain the “IDK” factor (I don’t Know) because of the weakening business cycle. Step back and plot the growth rate using the Fed’s data since 1947. There was an economic boom between 1960 onward with the “feel good” election of JFK. That peaked in 1978 in nominal dollar terms because we moved to a floating exchange rate system in 1971. Then the dollar soared from 1980 when gold peaked into 1985 creating a massive wave of deflation. As two factors combined, the rise in the dollar and the rise in taxation under the Clintons/Obama, the growth rate has been progressively declining.

Trump sees the trend. His tariff policy is correct insofar as he is trying to address the decline in those areas. However, tariffs are one-sided. He looks at the loss of jobs yet ignores the rise in the standard of living by allowing the consumer to get the best price. If the workers in those areas cannot compete, then lower the taxes for the workers in those industries to enable competition. DO NOT force consumers to pay more for something to subsidize expensive labor. Nobody ever looks at that solution.

The Fed is clearly using code words like “normalize” interest rates BECAUSE they see the crisis brewing in pensions. They are BY NO MEANS raising interest rates because of inflation or expansion in the economy that risks a bubble. The Fed understands the crisis that has resulted from the manipulated low-interest rate policies. They cannot come out and explain the reason rates are rising because we have a pension crisis. So they have used the term “transitory” to explain both ups and downs and “normalize” to warn the marketplace it will continue to raise interest rates and pretend it is about some “transitory” factor you cannot nail down to a hardline explanation.

Deutsche Bank has now been classified as a problem bank by FDIC and has been included in a list of banks to be watched. This is the biggest bank in Europe. It cannot be merged within Germany with Commerce Bank for there is just not enough equity to overcome the derivative losses. The only other candidate is BNP, but that is a French bank. This is where the fairytale of Euroland ends. They wanted to create a single currency, but they were unwilling to actually merge the economies. This is why our sources in Italy argue they are now an occupied country. They are dictated to but and request for help is rejected. This is what the “remain” crowd argue for against BREXIT?

A merger of BNP with Deutsche Bank would mean Germany is subservient to France. That is not “politically” acceptable. The entire “BAIL-IN” scheme was NOT because the government wanted to hold banks “responsible” but because a bailout of banks in one country would be seen as a transfer of money from one country to another. This exposes why the Euro is in serious trouble. There is ONLY the idea of a single currency and then Brussels will dictate what everyone else must do, but Brussels refuses to take responsibility for the debt and banking system of all of Europe.

From the very beginning when the committee in charge of creating the Euro came to our WEC in London, I warned that (1) there would be no single interest rate, and (2) without a debt-consolidation, the Euro would NEVER compete with the dollar and ultimately fail. The success of the USA was primarily (1) a single language, and (2) Alexander Hamilton consolidated all the debts of the member states making it the national debt federally. ONLY federal debt is at reserve status. Whatever California does is on them. Their bankruptcy does not threaten the entire country or the status of the dollar. California is no different from Bangladesh who also can issue debt in dollars. This proves the issue is NOT a single currency. The issue is the STRUCTURE!

In the EU, because the debts were never consolidated, then the failure of one brings down the whole because each member state is RESERVE status. The 50 states and municipalities in the USA can issue whatever debt they want in dollars and their status economically is no different than Bangladesh, Brazil, of Beruit issuing its debt in dollars.

There is the EURO CRISIS as Brussels has tried to be half-pregnant. That is why the Euro is doomed! It is STRUCTURE one for all (sometimes to a point) but one can take down all