Government first imposed taxes on alcohol and cigarettes under the claim that they were trying to make people stop for their own good. But as always, as the governments became addicted themselves to the tax revenue, then they looked to tax soft drinks in Philadelphia to prevent people from drink too much sugar, and New York tried to them impose a tax on  electronic cigarettes.  In New York, the Democratic Governor Andrew Cuomo lived up to the Democratic motto – tax everything. Only the fact that the GOP-controlled Senate in New York, the Republicans rejected Cuomo’s plan to tax the liquid used in  electronic cigarettes. Government always pretends to be raising taxes to help people, but it is always a huge lie.

Now all the fuss over the environment and the push to electric cars has a tremendous problem in cities such as how does someone pug in their car when they live in a tall apartment building? But the other side of this coin is the same problem governments have faced with declining revenues from cigarettes.

It seems that nobody publishes a simple statistic to reflect how much taxes on fuel represents in the total budget of the European Union. There is plenty of information on how much tax on fuel countries charge. But when it come to how addicted government is on those fuel taxes seems to be something nobody wants to reveal.

Average price of oil for the last 20 years is 0.98 Euro per litre. In the EU average consumption of petroleum is 12,530,000 barrels a day in 2016. Therefore, taking this very low average price we arrive at the following:

1 BBL = 158.99L

Therefore multiplying this together we get the amount of litres of consumption of petroleum products per day.

1,992,144,700

Multiply this by 365 to give the yearly total

727,132,815,500

Multiplying this by 0.98 (conservative figure of the average price of oil for the last 20 yrs)

712,590,159,190 Euros of sales of Petroleum.

Multiplying this by the average tax rate of approximately 60% of the pump price is taxation, we then arrive at EU countries recoup approximately 427,554,095,514 per year in TAX revenues from fuel. Now let is take that as a percentage of total tax revenue in the EU and we arrive at 427,554,095,514 TAX on petroleum products within 5,877,506,000,000 in total 2015 Tax revenues of all 28 member states, and we finally arrive at 7.27% of total TAX revenues.
The cost of going Green to the state budgets is going to be huge. This will lead to tax hikes in other areas to make up the shortfall. Then add the rise in interest rates and we are looking at the next 4 to 5 years of a true crisis in funding government. We can expect electricity to rise in taxation dramatically and this will impact people in their apartments in cities who do not even own a car.

QUESTION: Mr. Armstrong, looking at the analysis of Socrates on gold we see that the Momentum is bullish, trend is bullish, cycle trend is bullish, but Long term is bearish, how does that square with your call that Gold is going up to $5,000.00 when the long term is bearish.

Thank you.

ANSWER: Looking very long-term is different from the relevant time frame. Gold has not broken out and I have given the number where that becomes a possibility. We are not yet there. Events on the horizon are the critical issue. The world is not ready yet and the stock market also reflects this pending threshold. Socrates comment is thus concerned with the immediate outlook and until gold gets through key points, there is no breakout. The extreme target is not due on this cycle but the next.

QUESTION: Do you use astrology as one of your inputs as to cycles? There are, as you most likely know, financial astrologers who have tracked the patterns of planets that co-incide with market movements.

ANSWER: No. I am fully aware that some people use that and I have been told sometimes it lines up with our targets once in a while. Our model is strictly correlating hard data – nothing subjective. Following the movement of capital is the breadcrumbs through the forest.

My personal goal is to step back and let the computer write the reports and forecast the world.

The Dow has bounced slightly as to be expected, but we are now in a consolidation pattern for the balance of the month. Just pay attention to the Global Market Watch for it has been doing an excellent job at calling the turning points so far.

DJIND GMW 8-22-2017

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The clouds have not lifted from the heart of the financial center within the European Union on the continent. The origin of the next crisis is unseen yet in plain view if your care to look. Ten years since the financial crisis of 2007-2009, the core fundamental problems in the banking sector have not yet been resolved and still fester beneath the surface. Indeed, following the collapse of the investment bank Lehman Brothers, a financial tidal wave swept the world. The collapse of the mortgage backed securities market in the States, set off a contagion where the crisis spread at a rapid pace around the world. European banks tried to compete with New York adopting similar carefree lending. In the end, the Draconian measures from Brussels and constantly adding regulation to all levels of business mixed with tax increases, prevented the economy itself from truly recovering only further preventing a bank recovery.

The Federal Reserve had pumped in $250 billion into its big banks and Hank Paulson, I believe, allowed Lehman and Bear Sterns to collapse to reduce competition for Goldman Sachs eliminating two of the five investment banks. The entire affair was set in motion by the Clinton repeal of Glass-Stegall at the recommendation of the father of negative interest rates, Larry Summers.

In Germany, the second-largest bank, WestLB, and Hypo Real Estate (HRE), which had been the largest real estate finance provider, vanished from the financial landscape as did Lehman and Bear Sterns. “HRE and WestLB were the most difficult cases,” remembers Christopher Pleister, the head of the A bailout fund was created in Germany that ran between 2009 to 2014. The fund involved nearly a dozen banks putting in more than €200 billion of equity, guarantees and protective shields.

They are still “too big to fail” and “too big to jail” so nothing has changed on that score. For until the money pots are full again for a bailout fund, the risks are there for the next crisis to be far worse this time. The interdependence between states and their banks has not changed. Government still need the banks to exist themselves. Consequently, national interests prevent the crisis mechanisms from truly policing the practices and the banks are actually disappearing from the market as regulation destroys liquidity in the financial markets. The back offices have growth to exceed the front office doing the business, raising costs dramatically. When the next financial crisis comes, there is a serious question as to can the system hold again?

While every financial crisis typically emerged from an origin that is overlooked or not anticipated, the fundamentals causes are usually the same. There is no appreciable risk management that comprehend cycles and each crisis is typically set in motion by the solutions applied to solve the previous crisis. This is the true over-arching issue that is never considered because those applying the solution lack any comprehension of the dynamics of the economy as a whole.

The solution of negative interest rates has set in motion a coming crisis in pensions. As banks now anticipate that the ECB will finally reverse its policy and raise rates, they are dumping government bonds by the truck-load. Higher rates simply means a bond crash. Even the portfolio of the ECB will loss countless billions.

So while banks are “too big to fail” and “too big to jail”, government is not “too big to fail” since they depend upon people buying the debt which never ends, yet they may be “too big to jail” since they will never prosecute themselves, but they are not exempt from revolution be it non-violent or violent as history proves.