The debate in Europe emerging is just unbelievable. The Socialists are trying to outlaw all speculation for in their mind it is speculation that is causing prices of commodities to rise. These attitudes against capitalism are just off the wall and this is what we need to fight against when everything turns down.
COMMENT: Marty; I find it really interesting how people try to pretend you are wrong and claim it is warm where they are or because of some fluke one day high in the Antarctic. It seems to me these people are the lowest on the totem pole and are not very bright. They are incapable of seeing the whole and are just Greta worshipers. Why are people, such idiots? Is there any hope for them? Or should we just write them off as not smart enough to even hold a conversation? There are also so many records broken for the past three years during each winter? They just never look beyond the headlines.
PB
ANSWER: I learned a long time ago from a friend who was a medical doctor that there were two primary methods by which people think. There is a linear thinker who can only see in a straight line. They are often the A student because they just memorize and are incapable of creativity. As the saying goes, they end up working for the C students who have the creativity and are dynamic thinkers who connect the dots and see everything around them. The B student typically takes a safe job with the government.
This winter is getting colder each year. I flew to Cancun to try to get warm and it was just in the 70s and was too cold to swim. This season has been smashing records for snowfall. I find it curious how these people send nasty emails to me yet are incapable of looking at the forecasts they cling to about global warming refusing to be objective. How about not bad considering the UN’s climate science body (IPCC) said in 2001 that snow would become rare! They had forecast in 2007 that Himalayan glaciers would melt away by 2035. They have come out and finally admitted that the forecast was unfounded. How about the forecasts: “Goodbye winter. Never again snow?” Der Spiegel, 1 April 2000. In 2007 they were forecasting all ice would be gone by 2012. A list goes on and on about every forecast these people have made has been wrong. They assume whatever trend is in motion will carry on forever. They never consider there is such a thing as a natural cycle.
You cannot reason with such people. They are incapable of rational independent thought. Above all, they offer no proof, just speculation based on linear assumptions. They have succeeded in destroying the European economy. Just watch the next 4 years
COMMENT: Now when everyone except politicians says Sweden is broke government increases the hunt for money.
27 January – Karlskrona municipality is measuring hedges and they threaten 650 homeowners with fine if they don’t cut it. The fine is 520 USD.
24 January – Dalarna municipality talking about a tourist tax. Tax for every night a tourist sleep. This money is for the things the municipality can’t afford. 31 USD per night.
8 January – Fee for storing trees by the road. Each application costs 300 USD.
With people who see what is going on the talk is about leaving Sweden. I know some that have left and my self is also leaving. Trying a new life in Finland. No daily news about rape, killing, cars burning and bombs exploding in the central part of towns. … but sadly they have the Euro.
Thanks for all that you do!
HL
REPLY: This is what we are witnessing on a global scale. Governments only look at what they need to pay the bills tomorrow. They are oblivious to the damage they are causing to the economy or that most revolutions begin because of taxation. They are no longer serving the public. They extort the public and it is increasingly becoming impossible to obtain a fair ruling in judicial systems around the world. They only see us as a revenue source. They no longer look at us as “we the people” who compose the nation, but merely the herd of sheep to be used for profit.
QUESTION: Do you agree with Bridgewater’s Bob Prince that the Boom-Bust Cycle is over? Have they made an offer to buy you out yet?
SH
ANSWER: Absolutely no way. His theory is that the tightening of central banks all around the world “wasn’t intended to cause the downturn, wasn’t intended to cause what it did.” Prince explained, “I think lessons were learned from that and I think it was really a marker that we’ve probably seen the end of the boom-bust cycle.”
That is an interesting take, but it reflects the typical investment manager focus. They tend not to pay attention to history and always assume that the financial world started as far back as maybe 1971 if not 1990. The boom-bust cycle that he refers to has been the classical economic expansion and contraction in economic activity. However, the very book I just published, “Manipulating the World Economy,” deals with this issue of central bank intervention. He seems to think that since the financial crisis and monetary easing has disrupted that cycle, that it has fueled the longest-running bull market in stocks.
This is why Bridgewater has had a terrible year in 2019. They have completely misunderstood the market and do not grasp the capital flows and how they drive markets. Indeed, Bridgewater Associates, the world’s largest hedge fund firm, had a very difficult 2019 because of this view. The firm’s flagship Pure Alpha strategy was essentially flat in 2019, with Pure Alpha 18%, the more leveraged version, falling 0.5% for the year, according to an investor in the funds. It has been this fundamental focus which is why they missed the bull market.
The repo market is already proving the idea that the boom-bust cycle is dead. Interest rates are pushing higher and the Fed is desperate to try to prevent that rise. You cannot defeat the business cycle. Even Paul Volcker admitted that much (Rediscovery of the Business Cycle). Many people have thought that governments have killed the business cycle. They have ALL BEEN PROVEN to be wrong!
No, I have never met Ray Dalio that I remember. If I did, it was just in passing perhaps at some cocktail party. Bridgewater is not a client so the idea of some offer is not even plausible. It is one thing to take in a partner, it’s something entirely different to sell everything to some private firm which would then have exclusive use. That is not my goal and I would not live long enough to spend some mythical billion-dollar sell-out. Sorry, that is not my agenda. I would like to see Socrates help to better manage the world economy, not make money for a bank or hedge fund exclusively.
QUESTION: Mr. Armstrong, a goldbug told me you were wrong that paper currency did not begin with the Civil War. I told him you have written plenty of times about the continential currency. I believe you said somewhere that paper currency did begin in America. Am I correct in that statement?
PC
ANSWER: Ironically, the very first paper money in America was issued in Canada. In 1685, the colonial authorities in New France (Quebec) had no coin. A military expedition against the Iroquois, allies of the English, had failed and tax revenues were down as traders circumvented the taxes by dealing with the English. This predates the official first paper money issue of February 3, 1690, by the Massachusetts Bay Colony. This paper money issue was used to pay for its war in 1689 when the British demanded that Americans fight the French in Canada. Lacking coinage to pay the troops, the government issued certificates to the troops in lieu of paying them with coins.
Lacking coins, New France printed various face values on playing cards and affixed a seal to them. When the king’s ship arrived, they redeemed this “playing card money” in cash. This system was brought to an end after 1686, but it was necessary to return to it during the period 1689-1719. In 1714, card money equivalent to a value of 2 million livres was in circulation. Some cards were worth as much as 100 livres.
The king later returned to using playing card money in 1729 when the merchants demanded it due to the shortage of money. This issue of playing card money used white cards without colors. They cut or had their corners removed according to a fixed table. The whole card was worth 24 livres, which was the highest sum in playing card money. Depending on the number of corners that had been cut off, this is what determined the face value.
The first paper currency in what is now the United States was issued in 1690 in Massachusetts Bay. Because of the collapse of the Continental Currency, the United States did not issue any paper money until the Civil War. There were private bank issues which are known as broken bank note era from the 1840s. But the federal government did not issue paper money until the Civil War to fund its expenses
QUESTION: The argument that man has caused global warming and that sea levels will rise is evidenced by many places that were on the sea are now inland such as Pevensey Castle in Essex. Would you address that argument? Is there any credence to this?
Thank you
GJ
REPLY: They believe that Pevensey Castle was built about 1800 years ago on the coast of the English Channel, south of London, in South Essex. The castle was originally constructed by the Romans on the shoreline back in 230 AD. The Saxons came along and built on top of that during 938 AD extending into about 1066 AD. The ocean retreated from that region as it has risen in other regions. The ancient city of Alexandria is mostly underwater in Egypt and is part of the Seven Wonders of the World under the sea.
It is very nice to argue that the sea level has risen and then, of course, they blame humans. The New Jersey Pinelands is proof that most of the state was underwater. Pine trees grow there because there is no fertile soil for farming, except cranberries in water bogs.
All of this is very nice. It proves nothing because there are earthquakes that also impact the land and in some cases it causes it to rise, and in other cases, it sinks below the waves. There is even Bimini Road underwater off the coast of Bermuda that people argue probably leads to a lost civilization below the waves — maybe even Atlantis. There are examples you can show on both sides. I do not believe this is proof one way or the other, simply that the environment changes and it has obviously NEVER remained the same.
The economies of France and Italy shrank in the fourth quarter of 2019. There is stagnation in Europe. Negative signals are also coming from the Far East. The German auto manufacture, which is the backbone of the German export-economic model built upon the old mercantilist system (selling goods to other people), is also in a bearish position. Production of cars, the largest export product in a German manufacturing sector dependent on exports, has fallen by about 16% over the past year. In the first half of 2019, German auto production is down 12% year-over-year. In fact, German auto production has hit a 23 year low. Then add the climate change insanity that Europe has adopted and they clearly seem poised to induce economic suicide in Europe.
While the politicians are only concerned about cementing Europe as a new federal state, the very idea of the European Project is proving them very much wrong. With Britain exiting the EU, they will find a huge hole in their budget which Germany will not agree to. This means that either the EU breaks up, or they are compelled to raise taxes on the remaining member states. Germany will still demand austerity and remain against a consolidated debt or a national debt for the EU especially one that runs perpetual deficits.
We are entering a new long-term business cycle wave that began for the European Project in 2008.83, but the Global Economic Confidence Model has also turned here on January 18th, 2020. As you can see, we are headed into a Euro turning point of 2021.73. The pressure of maintaining the Eurozone will intensify as we now head into 2021. Indeed, 2021/2022 will be a critical turning point in world currencies.
Despite all the yelling and threats on top of forecasts that Britain will fall apart without the EU, the markets do not reflect such a doomsday outlook. We do see 2021 and 2023 as important targets for turning points. The critical level will still remain at the 8250 level. If that is breached, then the political crisis in the EU will begin. The departure of Britain will leave a major hole in the budget of the EU which wants to fund its own army. As pressure rises on other members to chip in more money and raise taxes on their citizens even further, the European Project will remain a serious threat to the entire world economy.
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