The hunt for money is moving into high gear in Germany. Prior to 2017, it was possible to buy gold anonymously in quantities up to €15,000. In 2017, this limit was reduced to €10,000. Now, Merkel has drastically reduced this limit to just €2,000 beginning in 2020. Any transaction greater than that amount requires the buyer to prove their identity and give their data to the gold trader.

While Merkel has allowed the refugees to pour into Germany, denying there are terrorists hidden among them, she has justified this reduction in anonymous gold purchases by arguing against money laundering to stop terrorism. This means that terrorist would be buying gold inside Germany, which on the other hand she denies letting them in to start with.

Merkel is not satisfied with imposing just a price limitation. She also wants to introduce the 50-gram rule, which would apply regardless of price. For physical gold buyers, this means they will not be able to buy a 50-gram ingot (1.60754 troy ounces) without the gold trader taking personal data and saving it for five years. This certainly applies if you tried to buy just two one ounces coins.

Merkel has formally justified this change in the laws on gold as a step in the fight against money laundering and terrorist financing. The government studies show that out of 77,252 cases registered in 2018 that suspected terrorism financing, only 175 cases involved precious metals.

Terrorism has been a real windfall for governments since 9/11. They have increased their powers globally and probably send thank you cards to the terrorists for handing them the excuse to create total financial surveillance that they use in the hunt for taxes.

The Merkel government has been making a concerted effort to introduce a total surveillance state and track the finances of its citizens. There is chaos in Europe with negative and punitive interest rates, high bank charges, and a declining euro. All of this is mixed with a prolonged economic recession in Europe since 2007 as we approach a 13-year decline in 2020. More and more Europeans are looking for ways to safely and anonymously invest their savings, which have been under direct assault by the government. This has been leading to the hoarding of US dollars and now the change in legislation on gold is only going to increase the switch to dollars.

QUESTION: Marty,
Sometime you compare today’s financial markets and economy to what was going on in the mid to late 1920s . Woodrow Wilson is even referenced concerning the flight of capital and of course that flight came to the United States.
You also say that the global markets and economy are unlike anything in modern history. I can only assume that you are referring to the artificial bond yields and prices due to central banks buying so much of the sovereign debt.
How is this period that same as the late 1920s and how is it different?
I am a huge fan of your work. Thanks for the blog and for Socrates!
NM

ANSWER: There was a flight of capital to the United States pushing the dollar higher for World War I. Woodrow Wilson was president 1913 – March 4, 1921. Wilson introduced a comprehensive program of domestic legislation at the outset of his administration, something no president had ever done before. Willson took a rather interesting view of tariffs. He argued that the system of high tariffs

“cuts us off from our proper part in the commerce of the world, violates the just principles of taxation, and makes the government a facile instrument in the hands of private interests.”

Tariffs were really an additional tax on consumers which Trump does not understand for he is looking only at jobs which is typical. Tariffs benefits only the producers by rewarding them with a higher income than the free market would provide. However, the other side of the coin on this issue was that Wilson also created the income tax. The Revenue Act of 1913 reduced the average import tariff rates from approximately 40% to about 26% and the revenue shortfall was to be be made up with income taxes.

Wilson created the Federal Reserve in 1913. He also moved for major legislation seeking antitrust legislation to enhance the Sherman Antitrust Act of 1890, which was really a response to the consolidation of railroads. The politicians saw mergers as destroying jobs rather than creating an efficient railway system. Wilson was also against the position that the USA should own colonies, and thus he promoted the independence of the Philippines. From 1914 until early 1917, Wilson’s tried to keep the USA out of the war in Europe. That did not sit well with the hawks in Congress.

All of that said, on the one hand we have Trump against war, as was Wilson, but in favor of tariffs as a tool to win free trade ignoring that they are really a consumer tax and protectionism for overpaid jobs. It was Wilson who told the Fed they had to buy US government bonds to prevent the yield from rising, which is sort of the problem we still have today. The Fed was originally designed to stimulate buying corporate paper directly when banks would not lend. Now the Fed stimulates by supporting government buying bonds from the banks who in turn still do not lend to support the economy in a crisis. The very idea why we needed the Federal Reserve has been completely reversed.

The primary difference today is the debt. The capital shifted into the USA and we see divergences between the highs and lows centered around World War I, whereas the 1929 and 1932 lows take place in both British pounds and dollars. For the World War I commodity boom, the US high was November 1919, whereas the British pound high was January 1920.

There was a major debt crisis in Europe, but not the United States. This is what wiped out Britain as it lost the crown of the financial capital of the world to the USA. This time, the debt crisis is systemic. The currencies are showing divergences as they did pre-World War I. But we have a socialist crisis whereas Western economies are collapsing unable to fund all the promises, as was the case with Communism in 1989-1991 in China and Russia. The central banks only keep governments on life-support and there is no direct stimulation of the economy. Every lesson from the past has been forgotten. We have put all the eggs in one basket (government) and we have politics in meltdown as republics are collapsing and the left v right is becoming much more intense which will, as always and without exception, lead to violence, civil unrest, separatist movements rising, and could result in revolutions which increases the risk of international war as politicians need a distraction from their failed domestic agenda.

It is just now our turn to rock & roll.

This will make for a very interesting WEC this year in Orlando.

QUESTION: Hi Martin
I recently stumped upon a documentary on Netflix about you and your model.
I then went on and watched some YouTube videos.
To me it makes totally sense that taxation does not work, but how can we change it. Do we need to become politicians?
We have a very high tax in Denmark. Base level around 39 percent and top level around 60. So it’s eminent to cajnge this in Denmark.
We have a quite new political party here called Liberal alliance. They promote a flat tax of 40 percent, and I think that makes sense…. But, they had such bad election and are so tiny now, they have no influence.
Everyone say we need taxes to have welfare. So how do we go from 60 to 0 percent in tax without sacrifice our welfare. And how do we convince people that it Wan work….. It will be some very tough months or years once the tax is not flowing to the hospitals etc?
I hope you can elaborate on these things.
DB

ANSWER: In building the model, I assembled data on everything I could find and then put it all together to see how and what made the world tick. I investigated tax rates to see how civilizations operated. I investigated what types of governments worked best and what always collapsed into oligarchies, then tyrannical entities, before collapsing into dust.

I read many contemporary historians directly rather than the modern interpretation of events, which have NEVER been unbiased. I discovered that inevitably people interpreted the past with a modern context. I found one of the funniest to be when they named the city of Philadelphia after the Greek meaning “brotherly love.” The founders were devoted Christians, and in their view, they loved their brother as they loved themselves. However, the real meaning in Greek meant incest — the brother was fooling around with his sister. Understanding the meaning in which words were used is critical to understanding history. You can NEVER read it in terms of a modern context.

The Romans generally had a 7% tax. They also had welfare. The difference was that they had NOcentral bank and NO national debt. They controlled the mines and simply minted coins to fund the government and its programs. The Romans controlled the mine Rup Tinto in Spain, which they won from Carthage in the Punic War. The amount of silver they mined from that location funded the government for decades.

The debasement began in 64 AD under Nero when Rome experienced the great fire and Nero had to rebuild the city. As the new silver was declining, we find the debasement. It was not an issue of vote for me and I will give you this or that. The debasement begins because the government funded itself with new money and the sources were running dry.

The problem we face is that it would have been far less inflationary to print the money than borrow it. We have a debt crisis that cannot be paid and the accumulative interest expenditures rose to reach at times even 70% of the national debt. Now that they have discovered NEGATIVE interest rates, they think they discovered a new way to tax people indirectly. They think we are too stupid to realize this is even a tax.

But fear not. We are heading into a Monetary Crisis of untold proportions. If the governments do not listen, they will create the biggest civil unrest in all of history. This is the collapse of socialism, for they have promised everything, funded nothing, and cannot keep raising taxes without causing the economy to collapse. This will undermine their entire tax system.

There are ways to deal with this crisis if we have the courage to first admit that we have a crisis. That is step one.