Tag Archives: #CALEXIT

Dec 22 2017

Trump Tax Reform Causing Panic in Europe & Asia


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Dec 22, 2017 by Martin Armstrong

While the American press keeps pushing the class warfare along with the Democrats, outside the USA there is a major panic taking place on a grand scale. I have been called into meeting in Europe and even in Asia all deeply concerned about the loss of competition with the United States due to the Trump Tax Reform. Naturally, the American press would NEVER tell the truth how cutting the corporate tax rate will upset the powers that be around the globe.

A German study warns that its economy will be among the losers in the face of the Trump Tax Reform, which they warn will fuel the tax competition between America and Europe, but also the study leader, Christoph Spengel from the Economic Research Institute ZEW, came out and told Reuters:

“In addition, competition between EU members for US investment will increase; Germany is the loser.”

German Industry is already screaming. They want the Solidarity Surcharge terminated. That was put on for the unification and was never lifted, as is always the case. Without the surcharge, the German corporate rate would be 28.2%, still well above the EU average tax rate of 20.9%.

To finance the reunification of Germany a surcharge, the government taxed all taxpayers on their income tax withholding and corporation tax. The assessment basis was the income tax or corporation tax. This became known as the Solidarity Surcharge and is currently 5.5 % of the relevant assessment basis. Therefore, the effective corporate tax rate in Germany has been 33.7%. Of course, the Solidarity Surcharge is no longer is really needed to pay for the unification. But as always, once a tax is imposed, the government just can’t let it go.

The taxation levels in Germany were always much higher. When I was working on corporate restructuring helping companies select where to set up inside Europe for the birth of the Euro, I never placed any manufacture in Germany. I sent them to Britain for the net tax was 40% less. If they did not need skilled-manufacturing labor and just the best tax rate, I put those companies in Ireland. Never did I recommend anyone to move to Germany or France.

The advice I gave to those in a position to put the counter-reform in motion was straightforward. I advised them to ELIMINATE income tax completely. The political cover should be that they are adopting the original structure of the United States whereas only indirect taxation was permitted prior to 1913. A few mouths dropped. But they underst6ood the advice I was giving if they really wanted to compete.

Dec 21 2017

66% of the Economy is Already Electronic & 99% of Money is Electronic


Armstrong Economics Blog/Cryptocurrency

Re-Posted Dec 21, 2017 by Martin Armstrong

QUESTION: I loved your mention of how our money is not “printed”. You are THE ONLY financial expert to mention this. And you can’t understand our economy without understanding Electronic Money. I researched this 3 or four years ago and came up with, .003 physical currency vs the rest as Electronic Money. I later stumbled across an article on the same subject by an economics professor who put the ratio at .0003 physical. SO, who/where/how much/ and by who’s authority is E money created? E money is how the economy is propped up, and the amount is in TRILLIONS UPON TRILLIONS.

ANSWER: That is about correct. However, it is actually much worse. About 40% of the value of the paper currency of the United States circulates outside the USA. In fact, about 40% of the debt is also held outside the USA.

Moreover, the bulk of the money is not just electronic already, but people failed to understand the change in the debt structure. Why do governments even borrow money when they have NO INTENTION of ever paying anything back? Once upon a time, before 1971 under Bretton Woods, it was illegal to borrow against government bonds. That was when the theory emerged that it was LESS INFLATIONARY to borrow than to print. The bonds were not part of the money supply. However, post-1971, you could borrow freely against government bonds. It no longer made any difference to print v borrow.

Today, on average, 50%+ of the national debts of most countries is accumulative interest payments. When Federal paper money began, it was really circulating bearer bonds in the United States. In fact, the reverse of the notes displayed the interest you would earn holding that currency.

When the government switched to DEMAND notes, dropping all interest payments, this is when the dollar was fondly referred to as a “Greenback” meaning there was nothing but green ink on the reverse side and no table of interest payments.

This is when the dollar became paper money and no longer was actually a circulating form of a bearer bond. The government paid interest to encourage people to accept the paper currency and it was introduced during the Civil War to pay for the costs.

All this hype about BitCoin and electronic money is a bit strange since most money is electronic. The only distinction that BitCoin actually has is its claim as an alternative form of money separate from legal tender, which means the government will accept that currency in payment of fines or taxes.

The bulk of all purchasing transactions are by plastic cards which are comprised of 66% of all in-person sales, with nearly half of them, or 31% are made with debit cards. Welcome to the electronic currency economy. It’s here already.

Dec 20 2017

Trump Tax Reform Passes – This Will be The Greatest Boost to Small Business in more than 30 years


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Dec 20, 2017 by Martin Armstrong

The House just passed the tax bill in a final vote after a procedural hiccup relegated the bill back to the floor for a second vote. The Senate passed the bill early Wednesday morning along party lines. The tax bill is on its way to President Trump’s desk now, slating the tax overhaul package to take effect in the new year. This sets up the GOP for its first major legislative win in Trump’s first year as president. They never accomplished anything before even when they had the power.

Dec 20 2017

Swiss Market Index – Third Time a Charm?


Armstrong Economics Blog/Stock Indicies

Re-Posted Dec 20, 2017 by Martin Armstrong

QUESTION: Mr. Armstrong; I attended your 1992 Zurich Institutional Seminar when the Swiss Market Index was trading just below 200. You gave your projection for the high in 2007 would be 9500.0. We sold that high at the bank and the market peaked at 9548.1. The market rallied back to 9537.9 in 2015 and we sold it again. I left the bank as you know and have retired with your turn in 2015. You have always said that if a market knocks on the door 3 times, it is going to go through. My question is, do you think this will hold true in Switzerland?

Keep up the excellent work. The world really needs you.

ABR

ANSWER: Yes. The next resistance target will be 11000-11200 level if we break through the 2007 high. Enjoy your retirement. Of course we never really stop thinking about the markets and the world. I suppose it is a curse of the trade.

As far as “The world really needs” me; that’s what I am afraid of. Getting drafted at my age is not exactly my idea of retirement. So I hope you are wrong on that forecast.

Good fortune.

Dec 20 2017

Did the Economic Confidence Model Pick the Trump Tax Reform?


Armstrong Economics Blog/ECM

Re-Posted Dec 20, 2017 by Martin Armstrong

 

It is very interesting how the 2017.9 (Nov 24/25) turning point on the Economic Confidence Model has marked a most astonishing political event. The House passed their version of the Trump Tax Reform on Thursday, November 16th, 2017 just 8 days before the ECM target. Then on November 29th, 2017, the Senate passed a procedural vote on the Trump Tax Reform bill that allowed debate to begin on the measure with a final vote which came on Saturday, December 2nd, 2017, which was 8 days after the ECM turning point making it the dead center between the two votes.

People have asked me constantly how in the world did I ever discover such a model that has worked amazingly? I have written before how I discovered this list of panics while doing research in the Princeton University Firestone Library. The time span was 224 years and the number of events was 26. I sought to simply see what the average was and that came out to be 8.61538461538. I had absolutely no idea how significant that number would prove to be.

As I observed this cycle, I was blown away by how accurate it had been. It was even accurate to the very day. That to me seemed very unlikely and strange. At first, I believed it was just a stroke of luck – a coincidence. But the more I observed the repetition to the day was taking place around the globe. The number of days in an 8.6-year cycle was 3,141 which was Pi (x 1000). That, of course, was the perfect cycle.

I will be republishing my work on this astonishing discovery. For now, the amazing regularity of this model is simply there for all of us to observe and wonder at the regularity of the world around us.

Dec 19 2017

Did US Interfere in the Russian Elections in 1999?


Armstrong Economics Blog/Russia

Re-Posted Dec 19, 2017 by Martin Armstrong

COMMENT: Mr. Armstrong, It appears obvious why your film the Forecaster was banned in the USA by Netflix and others. Besides showing the corruption in the American Justice system by Judge Castel, Owen, and Kenan, and the corruption of protecting than bankers, the film exposes the plain fact that the United States interfered in the Russian elections back in 1999. They were the very reason Putin got into power.

No wonder nobody will address this issue. The front-page story in the Washington Post Friday that claimed America’s security is at risk because President Trump refuses to accept findings of U.S. intelligence agencies that Russia interfered in our 2016 presidential election is shocking. Why won’t the press ever report your story? They are too busy trying to overthrow Trump.

KD

REPLY: If the Forecaster appeared on American TV as it has in Canada, Europe, and Asia, then the press would have to face the fact that the Russian elections were the target to try to take over that country forcing Yeltsin to step down. They steered the $7 billion wire through Bank of New York to blackmail Yeltsin to prevent him from running for election in Russia in 2000.

The question has always been was it simply the bankers trying to take over Russia, or was the US government also involved? The bankers at Bank of New York pleaded guilty and got 6 months house arrest with of course no jail time.

The Court Transcript in the Bank of New York case reads:

“Ultimately, as alleged in the information, a total of more than $7 billion of funds was deposited in and transmitted through the Benex, BECS and Lowland accounts at the Bank of 16 New York.”

Lucy Edwards plea transcript id/pg 34 of 84

Dec 19 2017

Government Power & the Inversion Delusion


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Dec 19, 2017 by Martin Armstrong

COMMENT: The Trump Tax Cut,…
Having read your blog now for a couple years, it seems that the problem is squarely upon “why” we have or need Government. To that end, it all hinges on the relationship of Person to Government. What we have now is: People are subservient to Government. There will be no solution to the human condition until the opposite is true: Government must always be subservient to the People. Bad Government leads to crash and burn.

This inversion of priorities is readily seen in the entire tax “reform” effort. It is all about maintaining Government revenue streams. Slavery of the People is acceptable. Until the enslavement of man is terminated, there is no change in the trajectory of civilization. If we start from a different premise, say No Person Can be Obligated to pay more than 10% of income in taxes (of any form: Federal, State, Local, etc.), only then will the control freaks be tamed. A look at history reveals that mentally ill people gravitate to power. It indicates a soulless existence.

Sadly, foolish people have been allowed to manipulate the judicial leg of Government, to up-end the whole point of a US Constitution:

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

There is a reason “Posterity” is capitalized, and “ourselves” is but a lowly pronoun.

REPLY: You are absolutely correct. Thomas Paine recognized this inversion process and opens his Common Sense with it. He explained that government believes it is the country and not the people. Once that takes place you see the results. They put Martha Stewart in prison for lying to an FBI agent. Yet government can lie to us all the time and that presents no crime because they view us and the ruled, not the ruler.

Government always begins as a benevolent entity to further the common good. The problem emerges with a Republican form of government. Once you politically elect a “representative” of the people, the system is doomed. A true Democracy, as in Athens, took the form that the head of the household was the person who voted “representing” everyone in that household from the wife and children to the servants and slaves. They distorted this to say women had no right to vote. They really did not need such a right BEFORE socialism since there was nothing the state could do to them. Once we introduced income taxes and socialism, then every person was taxed, not just the household, and regulation began to control the behavior of every individual. Everything was inverted.

The only type of government I would like to see is a return to Democracy where we call can vote from home on a bill and each bill must stand alone with no covert attachments. Income Tax is no longer necessary since the government never pays off the debt anyhow. Rome lasted for 500 years with minimal inflation just creating new money to pay their own bills.

Dec 18 2017

Trump Tax Plan to Allow Small Business to Expand


Armstrong Economics Blog/Technology

Re-Posted Dec 18, 2017 by Martin Armstrong

QUESTION: Hello. You mentioned that the tax cut will allow many companies to expand and hire more staff. At a WSJ forum, Gary Cohen asked a group of CEO’s if they would expand or hire more workers with the corporate tax cut and less than a dozen raised their hands. Some have commented that the savings will be used for stock buybacks and bigger bonuses instead. Which do you think will happen?

Thank you for your blog, it is very helpful.

JS

ANSWER: The businesses that Cohen put that question to were big public business. The big public businesses only employ about 38% of the private sector workforce while small businesses employ 53% of the workforce. Indeed, over 99% of employing organizations are small businesses and more than 95% of these businesses have fewer than 10 employees.

I have probably advised more of the biggest corporations in the world than anyone. The bigger the business grows, the more it becomes like government. The boards are taken over by lawyers, accountants, and political tokens. The original entrepreneurs are usually expelled from boards because they are far too innovative than corporate America.

I had a front-row seat in Radio Corporation of America, where I began my career in computer engineering (software & hardware). Most people are unaware that RCA was a leader in computers. The board of directors thought the computer would be like the radio, which made the company. Everyone during the Great Depression wanted a radio to listen to FDR’s Fireside Chats. Then, RCA had all the government contracts for World War II.

By the 1960s, RCA had the main-frames tied up. They had installed their machines around the world in government installations. They wanted me to go to the most remote outpost and the tour of duty was 1-year and one-day. Thule was top secret back then. The location was the frigid northwestern coast of Greenland and was the U.S. military’s most isolated base. This was the home to one of the Pentagon’s primary tools for keeping an eye out for intercontinental ballistic missile launches from Russia. I turned down the post and that ended my career in computers at RCA.

RCA sold its computer division to IBM and Univac. They kept the servicing contracts of these big installations. However, they thought the computer would decline in price like the radio into crystal sets so they believed they were being smart and sold what they thought was the peak. RCA is now just a subsidiary and no longer a leader in the computer sector. Oh, how the mighty fall.

Why do big companies buy small start-ups? Because the bigger the company becomes, the less innovation they possess. They have to go out and buy start-up to expand. All expansion of technology comes from the bottom moving up. It does not come in the other direction.

The big companies will bring back their cash and some will take-over small companies. Others will use the cash to buy back their stock. It is also like funds management. Give me $100 million and it is easy to produce 50%+ returns annually. Give me $10 billion, the sheer size cannot be traded efficiently as a small amount of money and performance will collapse to a normal level and sometimes 5-8%.

Small companies do the bulk of the hiring, while the big companies contract and impose all sorts of restrictions. The economic growth comes predominantly from small business – not big corporates. So the response Cohen got is absolutely normal. The big contract and the small are the entrepreneurs.

Dec 18 2017

British Parliament Chaos as Tory Rebels Try to Stop BREXIT


Armstrong Economics Blog/BRITAIN

Re-Posted Dec 18, 2017 by Martin Armstrong

The Tory Rebels in the UK Parliament joined forces with Labour and the Remain Camp to defeat BREXIT in reality. They claim that Parliament will now vote on the BREXIT deal, but in reality, they have created an open door for more uncertainty and economic chaos.

The Tory rebels were Mr. Grieve, Heidi Allen, Ken Clarke, Jonathan Djanogly, Stephen Hammond, Sir Oliver Heald, Nicky Morgan, Bob Neill, Antoinette Sandbach, Anna Soubry and Sarah Wollaston. Another Conservative MP, John Stevenson, abstained from voting in both lobbies. Meanwhile, two Labour MPs, Frank Field, and Kate Hoey voted with the government.

The amendment was authored by former attorney general Dominic Grieve and was championed by other pro-Remain campaigners. The fact that the Remain camp indeed remains delusional about the economics of the entire mess is beyond contemplation. This seriously calls into question why there is no qualification to be a politician. They are ignorant of the fact that the GDP of Britain peaked in 1973 and has declined ever since joining the EU. Are they just stupid or corrupt? Britain is disliked in Brussels and has lost just about every case to defend Britains in the EU Court. Yet these people are oblivious to reality.

Nicky Morgan revealed their true motives when he tweeted:

“Tonight Parliament took control of the EU Withdrawal process.”

These Rebels have seriously undermined the process and the Prime Minister. Granted, PM May does not know how to negotiate. Britain holds all the cards. It should go for a HARD BREXIT and watch Ireland and Brussels crawl. The Germans will be on the phone to Brussels calling them an idiot since Britain is Germany’s biggest market for their cars. Already German cars sales in Britain have dropped sharply and diesel cars have become almost not salable.


Meanwhile, the cash Pound closed last week at 13323 leaving it neutral to bearish on our yearly models for now. As we enter 2018, the resistance will fall to the 145 to 151 level. The Pound Sterling thus still remains in a vulnerable position against the dollar.

Looking at the Pound against the Euro, it closed last week at 88200. The Yearly Bearish Reversal rests at the 82800 level. Our pivot point for resistance in 2018 will be 88120. This makes this very interesting. A closing above that means the Euro can still rally to exceed the 2016 high of 94150. A closing beneath 88120 will be a sign of weakness for the Euro and BREXIT will still unfold.

Support will be at 78800 in 2018 and resistance will stand at the 93100 level and that appears to be very firm.

Dec 18 2017

Trump Tax Reform & Charitable Donations


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted Dec 18, 2017 by Martin Armstrong

QUESTION:  Hi Marty,
I have been reading your blog daily for the last few years, as well as the archives. I just read your explanation of the difference between the house and senate versions of the tax cuts. The only thing that baffles me is not including charitable giving as a deduction. It seems to me that many people will stop giving what they can’t deduct. Then all these charitable organizations will then end up hat in hand pleading funds from the government. I would think it would be less expensive to the government keep charitable deductions than not.
ANSWER: Both plans keep the charitable deduction and the property tax deduction will be capped at $10,000. Your assumption that people donate simply because they get a tax deduction is wrong. All the donations of the famous millionaires like Rockefeller were before the income tax. I personally bought computers for everyone at the grade school I went to and put in the necessary educational software. I never took a deduction because something that big ends up only causing an audit.

I have never known anyone to donate large sums only because they get a deduction. Donations are typically made because you have a passion for something not because you get the deduction. Under that theory, nobody would care who you gave money to. Even when we sold my mother’s house, we donated most of the furniture and they give you a slip[ for a deduction, but it’s just not worth the hassle to use it.

The big donations that get written off are usually from estates.