There are now officially more $100 bills in circulation than $1 bills. The interesting aspect is that when we dig deeper, what is revealed is the fact that the bulk of them are being hoarded outside the United States. This is very interesting for we see the same basic trend emerging from the dollar v other currencies. There is a shift to the dollar as the US economy continues to hold up the entire world.
Once again, even going back to 1995, estimates placed about $200 billion to $250 billion of U.S. currency was circulating abroad. That was more than 50% given the physical money supply even back then was about $375 billion in circulation outside of banks. More recently, the amount of US currency in circulation outside the United States has now exceeded 70%. The world is hoarding dollars for they fear the cancellation of their own currencies as talk of eliminating cash in Europe has escalated with the prospect of Christine Lagarde replacing Draghi.
As Americans have moved increasingly toward debit and credit cards, the rest of the world has been sucking-up US dollars beyond belief. Anyone who questions whether the US dollar is the reserve currency, well the cash is not being held by governments or central banks. The people are now hoarding US dollars at record levels. Having some cash might not be such a bad thing.
COMMENT: “Kamala Harris – Medicare for All”
Doctors’ incomes are such a small part of the issue. You might have mentioned the obscene theft that prevails for pharmaceuticals and medical devices, the bloated salaries of hospital administrators, facility fees attached to medical service bills. The disappearance of competition in the field due to rank and illegal monopolism. I could go on. And on. But I do think you know this stuff already.
FP
REPLY: Yes you are correct. Both hospitals and education have become corrupted because they are monopolies to a large extent funded by the government. Private practitioners are being driven out of business by hospital groups which are effectively like monopolies. They have become money-making operations. It is by no means about caring for the patients. It is how much can they make off of people these days.
Without serious reform and investigation into this trend, there is no hope of coming up with any plan that will help the people. As soon as the government promises to pay, there goes all credibility.
This is why I say the hospital groups must become more like public utilities. Until that happens, healthcare will only get more expensive until their greed prices these hospital groups out of existence.
People do not realize but Pharmaceuticals/Health Products are the #1 contributor as an industry to bribing Congress. They have given almost $4 billion to them to get this monopoly status. They sell drugs cheaper in other countries they lobby Congress to prevent Americans from buying the same drugs in Canada. This proves that our pretend “representatives” never represent the people first.
COMMENT: Dear Marty,
In your recent blog about BREXIT, and. “Remainers acting in self-interest”, you produced an ONS graph showing UK’s growth rates before and after joining the EU (previously known as the Common Market), and concluded: “Britain has NEVER received a fair deal since joining the EU”.
Surely you have overlooked a groundbreaking event in the early 1970s, which has shaped economic cycles and led us to where we are today: Nixon’s fateful decision to ditch the Gold Standard?
Regards,
Raj
ANSWER: No, the two are not connected. Bretton Woods collapsed on August 15th, 1971. The peak in Britain’s GDP came in 1973. Nixon closing the gold window was by no means discretionary. To the contrary, there was no alternative.
The gold standard failed as it always does. You simply CANNOT FIX the value of money. It was stupid to create Bretton Woods with a fixed exchange rate. Once again, people argue currency manipulation for trade when the free markets control the value of currencies today. China has tried to support the yuan, not suppress it for trade benefits.
The government cannot fix the money at some arbitrary value and then spend whatever they want, thereby increasing the supply of the currency while keeping the value to gold fixed. A grade-school child could figure out the inevitable collapse. I was called into the ERM Crisis for they overthrew Maggie Thatcher to try to take the pound into the coming Euro. They fixed the pound at absurd levels and they created Black Wednesday. I was called because again I warned this would fail but only Maggie would listen. They tried to fix the pound in the European Exchange Rate Mechanism and it blew up in their face.
Currency pegs all face the same fate. The British attempt to fix the pound after World War I was absurd. On September 20, 1931, Britain abandoned the gold standard. It was an event that has scarred political memories for two generations, for the financial crisis which preceded it led to the fall of the minority Labour administration and the decision by its leader, Ramsay MacDonald, to form the National Government with the help of the Conservatives. Electoral catastrophe followed for Labour, and many within the party never forgave MacDonald. Labour’s suspicion of the international banking community, which played a part in the government’s fall, dates from this experience, too.
The Swiss tried to peg the currency against the euro and that blew up. There is no exception in history. The fate of pegs is always the same because there is this thing we call the business cycle.
COMMENT: Dear Marty,
In your recent blog about BREXIT and the Yellow Hammer leak, you say: “British pound is still under pressure as the propaganda machine is in full force”.
Surely anyone can see is that the £ falls whenever no-deal propaganda is in the ascendancy, and £ rises when Remain or Brexit with a deal is trending higher???
R
REPLY: This is the same thing as when the pound was not going to join the euro. The propaganda was that the pound was going to collapse and Britain would not be able to export unless it joined the Euro. I cannot tell you how many companies we had to rescue from shorting the pound out of fear it would collapse. The propaganda even convinced the top German auto manufacturers, Mercedes, and they shorted the pound for two years worth of sales. The exact opposite took place. We were called in to reverse all the hedges that lost $1 billion because of that nonsense. They then set up a meeting with the board of Daimler which was separate back then. The board had passed a resolution that once a hedge was taken they would let it run. We made back the $1 billion for Mercedes and the last day of the fiscal year, Daimler and Mercedes were merged to hide the $1 billion loss at Daimler.
Despite all the propaganda that desperately tried to say Britain should ditch the pound and join the euro, what occurred was exactly the opposite of the underlying trend. The euro declined religiously into May 2000 before a sustainable rally took place. The number of short positions against the pound sterling was staggering. It felt like we became simply a British firm in those days putting out fires the bankers all started with their recommendations to short sterling.
With the propaganda machine, we are once again in the very same position with the same absurdity that the pound will crash and Britain will sink below the wave if they do not surrender sovereignty to Brussels. They always preach the same doom and gloom about trade playing the same scenario with the same pitch we heard back in the 90s. They just roll out the same BS every single time.
I have been warning about the hunt for taxes. You must realize that the worst is unfolding at the state and municipal levels of local governments because they cannot create money as is the case at the federal levels. Therefore, they pass draconian laws and enforce insane things just to raise money.
In New Jersey, I was given a parking ticket in a private parking lot. Of course, it was illegal. They know you will pay the $35 rather than take a whole day off from work to fight an illegal ticket in the first place.
Marlton, New Jersey, one of the most corrupt towns in the state, set up roadblocks during Rush Hour. I was caught up in these unconstitutional money grabs twice. You have to show your license, registration, and insurance card. Missing anything and you were sent to another line for your $125 ticket. Sure you can fight it. You will spend $125,000 and win.
They know lawyers charged way higher than any other profession to ensure you cannot actually fight illegal actions by the states. This is part of the cycle and it will end in civil unrest. Welcome to the end of this wave of the Economic Confidence Model.
Italy is one of the key economies within the EU. In the past several years, driven by both economic challenges and unfettered immigration challenges, the populist revolt has gained ground. Interior Minister Matteo Salvini, a nationalist-minded politician, has won the hearts of Italian voters. Matteo Salvini is a proud Italian populist.
Several months ago Matteo Salvini challenged current Prime Minister Giuseppe Conte to hold a snap election; and followed-up with continued pressure on the Italian government by advancing populist positions of economic patriotism, sovereignty and tougher immigration rules.
Amid a revolt against globalism writ large, it was not accidental that Nancy Pelosi traveled to Italy recently with a coalition of U.S. leftist politicians to organize a strategy to fend-off Salvini and assist Prime Minister Conte. Pelosi is an opportunist. Part of the plan for Conte to hold power was a shift within his party (Five Star Movement or 5sM) to form an alliance with the Italian left-wing Democratic Party (Pelosi’s ideological allies).
To pull off their plan, Conte and the Democratic Party would align; Conte would then resign and hold the snap election where 5sM and the far-left Democratic party would re-elect him. This approach would strategically counter the 36 percent of support currently held by Matteo Salvini (the League). Today Giuseppe Conte resigned.
(Wall Street Journal) […] Prime Minister Giuseppe Conte announced his resignation in a speech to the Senate on Tuesday, blaming far-right Interior Minister Matteo Salvini for causing a political crisis as Italy looks to draw up a challenging budget to keep its parlous finances on track.
[…] Leaders of 5 Star are exploring the only plausible alternative to snap elections the League would likely win: a new coalition government with their longstanding foes, the mainstream center-left Democratic Party. Talks in coming days could show whether such a coalition is possible or early elections are needed.
Italy’s power struggle is a symptom of Europe’s continuing political upheaval after a decade of crises including the economic depression in the periphery of the eurozone and the pressures of rising immigration from poor and war-torn parts of Africa and the Middle East.
[…] The political upheaval has gone further in Italy than in most other EU countries. In March 2018 elections, Italy’s mainstream parties suffered a heavy defeat. In a country tired of economic stagnation and ineffectual political incumbents, one in three Italians backed 5 Star, while the League won 17% of the vote. Since then, however, 5 Star has struggled in government and its support has halved, while Mr. Salvini’s tough stance on immigration has helped double support for the League.
If Italy holds early elections, Mr. Salvini could become the first leader of a major EU nation who comes from a self-described populist party to the right of Europe’s mainstream conservatives. Mr. Salvini, an avowed admirer of Russian President Vladimir Putin, has challenged the EU’s rules on fiscal discipline, accusing Germany and France of hypocritically breaking the rules while imposing austerity on Italy. Some League officials have advocated Italy’s exit from the euro, although Mr. Salvini says it isn’t on his agenda. (read more)
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In the background of all of this we have: (1) Italy’s involvement in “spygate” and the U.S. intelligence operations in/around Joseph Mifsud (Malta). (2) The pending Brexit at the end of October, a threat to Pelosi’s ideological group. (3) The possible defeat of Canadian Prime Minister Justin Trudeau, another threat to Pelosi’s ideological group; and (4) the economics of Trump’s trade strategy, more threats to Pelosi’s scheme team.
Speaker Nancy Pelosi is traveling the world in an attempt to block rising nationalism, and the consequences of economic trade deals therein, wherever possible. Her domestic political interests in the 2020 election are predicated on stopping the deglobalization process underway by President Trump.
QUESTION: Hello Mr Armstrong. I read your blog daily, and i can t say thank you enough.
on interest rate, you say market rallied when they got the rumors of roosevelt devaluating the dollar creating a currency inflation. am i wrong when i understand they feared losing money so they bought tangible assets?
best regards from France
M
ANSWER: Correct. Tangible assets are always the hedge against a decline in the currency. This is why gold has been rising more so in other currencies than US dollars.
QUESTION: Mr. Armstrong; You seem to be the only person who distinguishes private interest rates v public. Has the marketplace gone insane along with Trump demanding 100 basis point cut by the Fed? I find it curious how they only quote the same people in the press who seem to preach the government position all the time. They constantly try to ignore you in the press and even Wikipedia distorts everything and fails to mention the banks pled guilty and had to repay your clients. Just so biased. Now they say deep negative rates are no problem. They only say what the government wants them to say. Will this all end very badly?
KN
ANSWER: There is ABSOLUTELY no historical evidence that negative interest rates will ever stimulate the economy no less are they even viable. This wipes out pension funds where many around the world are obligated by law to buy government paper. Social Security in the USA is 100% in government bonds. It is beyond comprehension where all these people cheer negative rates as if this is a good thing. The US share market declined with the rate cut, it did not rally.
People are convinced that an INVERTED YIELD CURVE foretells of a recession. They have no idea about capital inflows. Even in Thailand, which has benefited greatly from the China-US Trade War shows that its currency has been the RARE exception rallying against the dollar. That may change now if the dollar closes above the July high here at the end of August.
I am in Asia right now. The greatest fear is that China will send in troops to squash the protests in Hong Kong. Many fear this will be another Tiananmen Square. I would not go that far. The solution would be a political one and to repeal the extradition order. People do not fear that a wanted Chinese will flee to Hong Kong and be protected, but that they could be extradited to Beijing and put on trial for things they did or said in Hong Kong.
This is sending capital to the USA and the same capital flows from Europe and doing the same thing. That capital is now incentified to buy US debt looking for more rate cuts and their bonds will appreciate. It takes a sublime idiot not to see this trade. They are punting – not actually buying negative yields for the long-term. This seems to be coming to an end in 2020.
As I have stated many times, DO NOT EXPECT the official rates to rise outside the USA. All other central banks are trapped. They cannot afford to allow rates to rise and blow up government budgets. This will widen the gap between public and private debt. Back in the ’30s, as governments defaulted, smart money fled to private AAA corporate bonds. We will see the same trend here again, but at the same time, banks will look to the future with tremendous uncertainty and will NOT be lending so easily. Expect rates to rise on credit cards where they make their money and long-term mortgages. If the banks cannot resell the long-term debt mortgages, rates will rise widening the gap with the government.
Chairman Powell is not is a nice place. He cut rates NOT for the USA, but because the rest of the world is imploding and Europe shows no signs of reversing their policy. If Powell lowers the rates 50 or 100 bp, domestically people will be taking this as confirmation a recession is coming and the stock market will continue its decline.
Powell is in a no-win situation. This is the FIRST time in history the Fed cut rates at the top of a market and instigated a decline rather than cutting rates in response to a decline. This only proves the Fed’s actions are concerned NOT for the domestic economy, but primarily for Europe and Asia second.
This going to make for a HIGHLY unusual WEC this year. We are breaking historical ground. There no way for this to end but VERY badly. They do not want people to read this blog. They want to keep people accepting the government narrative.
Come September, Draghi at the ECB will make loans to Eurozone banks on a long-term basis at rates less than the short-term lending window. The objective is to encourage banks to lend money to businesses. Nobody thinks about letting businesses bypass the banks mainly because the banks are in such a vulnerable state because Europe never took the toxic assets out of the banks as did the USA. To do that would have meant that some countries would have been bailed out more than others so they cut rates and hoped for the best which never happened.
The world economy is crashing BECAUSE of negative interest rates. These insane people have REFUSED to consider that this entire idea of lowering interest rates to stimulate the economy will NEVER work. You are wiping out pension funds and the elderly who are a vital part of the economic base. They keep using the same theories that are decades old and have ALWAYS failed each and every time.
Just look at the Great Depression. Lowering interest rates FAILED to reverse the decline. The market rallied when the rumors proved correct that Roosevelt would devalue the dollar creating currency inflation. Lowering interest rates has NEVER worked even once, yet they keep trying the same theory over and over again because they cannot think of anything else to try.
COMMENT FROM UK: On the subject of Phillip Hammond and Brexit, this is just the latest in a long list of pro-elite politicians who are looking to protect their career interests by aligning with the globalist system.
Blair made hundreds of millions, Brown and Darling bailed out the banks and then went to work in the financial sector and failure that is Nick Clegg is now an exec at Facebook. Theresa May will no doubt have her payday coming. These politicians are selling out their country but seem to think they have morality on their side.
K
REPLY: All of these politicians who are for the REMAIN side, which included Theresa May, all have a self-interest which is counter-trend to their own country. They like the establishment of the political class to be left alone.
This is a chart that speaks 1,000 times that Britain has NEVER received a fair deal since joining the EU. This is data from your own government which I have not altered. The peak in GDP took place in 1973 just before Britain joined the EU. There was a major faction that believed joining the EU would create a global economy that would surpass the USA. That never happened because each member state can veto what any other state tries to do. There are 50 states in the USA. They have no say if Washington wishes to do a trade deal. If every state had a seat at the negotiation table as they do in the Eurozone, nothing would ever get done.
All I can say is the EU is a dictatorship for nobody at the Commission level ever stands for an election. As such, this is a politician’s greatest wish – power without accountability. And then they have the audacity to criticize China or Russia for a lack of Democracy?
The recent polls in Britain show that the people are MORE AFRAID of Labour and Jeremy Bernard Corbyn than they are about BREXIT!
I have created this site to help people have fun in the kitchen. I write about enjoying life both in and out of my kitchen. Life is short! Make the most of it and enjoy!
This is a library of News Events not reported by the Main Stream Media documenting & connecting the dots on How the Obama Marxist Liberal agenda is destroying America
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