The only thing about international trade is that someone cannot have a trade surplus without another experiencing a trade deficit. We all cannot have trade surpluses simultaneously and we have to begin understanding this reality. The net capital movements around the world are showing clear signs that things will be intensifying and the net capital movement is headed for the dollar – but that does not mean day one. Sure, many will point the finger at Trump and blame him for a trade war etc., but in reality, the net capital movements are intensifying for reasons that have nothing to do with trade. Ushering in Trump will also have a profound impact upon Europe and now Merkel’s greatest challenge will be to hold the EU together for its core design was to enhance German trade by eliminating currency risk.

The insane policies of Angela Merkel combined with Mario Draghi in the ECB punish healthy companies with negative interest rates and reward companies that should be bankrupt by buying their junk bonds while trying to maintain this bail-in policy for the banks in the face of Quantitative Easing that helps bankers not the average person. This leaves one wondering whatever happened to common sense. Draghi thinks bailing out banks (depositors) is bad and buying junk bonds is a stimulus, which is beyond rational thinking even when totally drunk on New Year’s Eve. Undermining the people and allowing their money to vanish is exactly opposite of Quantitative Easing. His policy should be the exact opposite. The whole idea of insuring banks came from the Great Depression because people lost confidence in banks. Once the people lose that confidence, the entire economy will collapse and people hoard their money causing the velocity to collapse. This QE policy is only matched by the insanity of Prime Minister Narendra Damodardas Modi in India cancelling the currency overnight when India is an 80% cash economy. He never even asked the opinion of the central bank. Unbelievable! The lesson from the Great Depression was people hoarded their cash and refused to deposit into banks because they failed. The whole idea of insurance was to give the public confidence to use banks. With bail-in becoming law, from Canada to Switzerland, you really have to wonder how politicians cannot see what they are doing. The bottom-line is clear – it’s all about them and not the people.

The markets are the best indicator of the future for it is the only place people get to really vote without political shenanigans. Net capital movement is showing that the big money is starting to wake up. The capital movements are showing that there is a growing realization that Merkel will be defeated in 2017, and Le Pen may actually win in France while her conservative opponent is openly saying that the refugee policy of Angela Merkel was “absurd” and a “tragedy.” The French conservatives will now oppose Merkel’s refugee policy, and have begun to adopt Le Pen’s position. In Italy, there is a growing movement to follow Britain and the elections will bring in a sweeping anti-euro movement followed by a referendum to exit the Eurozone.

Meanwhile, under the pretense of fighting crime, the EU intensifies its hunt for cash focusing, among other things, on the cross-border transport of cash. The epicenter of capitalism is passing in its despair and in the absence of solutions to fiscal management. The quest to end the use of banknotes is just one more step toward their goal — totalitarianism. Instead of admitting this system is broke and incapable of being sustained, these people will not reverse their policy because the solution is terminating much of their power. They will be kicking and screaming as they are dragged into the light.

The trading of stocks of the Italian bank Monte Paschi had to be suspended from trading. The planned capital increase failed to raise the cash from the public and it is clear that it will take a lot more cash than expected. The ECB will have to blink. If they let the oldest bank in the world fail as a bail-in, there will be a run of the banks throughout Europe. They will not be able to stop the hoarding of cash unless they take the same measure as India — just cancel the currency overnight (which you can bet is being considered when faced with a major bank run in Europe). However, the anti-cash agenda of the Indian government is causing serious damage to the economy. The forced digitization of payment transactions does not work in many places and India is one of them when its economy is 80% cash. This was really a stupid move by the Prime Minister.

Meanwhile, gold held the support, the Dow elected two Daily Bearish Reversals, Crude elected two Minor Yearly Bullish Reversals warning of a test of $60, and the Euro fell to bounce off of its Yearly Bearish Reversal at 10365 reaching 10352 and then failed to elect it. With the US share market up for 7 years in 2015, a pause in trend seems likely failing to elect some critical numbers in various markets. Of course, the long-term remains unchanged. The markets are reflecting something far bigger at stake. Trump is bringing in hope of repairing the economy with consumer confidence at a 13 year high. Optimism is in the air, but this cannot alter the long-term trend without reforming the debt crisis as we have laid out. Only then can we postpone disaster a little while longer.

So strap yourself in tight. This is going to be a wild ride. We are still facing the total collapse of socialistic systems. So cheer up, this might be the best day of your life if you open your eyes and comprehend the global trend. We will be doing a special report reviewing the year-end closings and what the forecasts will be for 2017.

COMMENT: Hi Martin,

Not everyone hates the rich, for without them the lower class would have nothing.

What people are angry about are the disgusting bonuses to bankers after they failed everyone whilst hard working people with small businesses were the ones robbed and still being robbed via taxation.

Some wealthy people deserve what they earned, the bankers who sank everything through feeding this greed mentality during the housing market crisis however deserve nothing.

If a company or an individual goes bankrupt, they lose everything, but the bankers were rewarded for their foolishness and that’s where the hatred really began in this current time.

Regards
A

REPLY: You are correct. Unfortunately, the assault in Germany upon the Jews began after people directed their anger at the Jewish bankers. That anger then spread to Jewish business owners, and then, what the hell, get all the Jews.

The bankers are a special class today because the big boys are the primary dealers who the government needs to sell their debt. If we stopped borrowing, then the bankers would lose their clout. Absolutely everything is wrong with how the New York bankers have taken the reigns of power in Washington.

My concern is the very loose way we deal with terms as a society. The Occupy Wall Street movement targeted stock brokers — not bankers. I myself walked out of our office, at the time in Philadelphia, and was off to a meeting in a suit and tie. The Occupy Wall Street protest was at City Hall right in front of my office. When I walked out, one protester yelled at me, “You corporate liberal!” I just looked totally amazed. What was that supposed to even mean? I was a corporate businessman who gave the company’s money away? I just laughed. They yell slogans but they do not understand what they are protesting or that they are yelling at the wrong people. That can easily turn very ugly.

Trying to understand forecasting will be critical as we move forward. The HUGE turning point appears to be 2018 and that is most likely when things will start to come unglued. How do I even make such a statement? This is not a claim that I make based upon some gut feeling. I arrive at this statement not by looking at some domestic fundamental or speculation on what Trump might do or not. It is not based upon my contacts behind the curtain. This is simply looking at Socrates and nothing else.

So how do I arrive at that statement? It is the process of understanding that everything is connected. I have argued against the conspiracy theorists who claim gold is not up because it have been manipulated by the bankers. I have fought against the “real” manipulations and warned clients when they are in action. But the bankers are not capable of manipulating a market counter trend – nobody is. We have had 8 years of quantitative easing by Mario Draghi without any success. Not even a central bank can manipulate the economy no less a single market. The entire Plaza Accord was the gathering of 5 countries to try to manipulate the dollar lower for trade. The US Treasury and Federal Reserve Bank could not pull that off. Why listen to such nonsense about gold is manipulated to prevent a rally? These types of nonsense PREVENT you from understanding how the world really works.

When I warned the White House back in 1985 and trying to manipulate the dollar lower creating the G5 would increase the volatility and lead to a crash in 2 years (1987), the White House responded and said they disagreed that volatility would increase.

Of course, when the 1987 Crash hit, the Brady Commission was forced to request my work. My greatest accomplishment was to prevent them from taking crazy sanctions against the market plays when the real cause was the G5.

 I was advising the equivalent of about 50% of the value of the US National Debt at that time. The Japanese to ease trade restrictions, had been buying US debt and owned bout 33% of the US national debt at that time. I warned the Treasury that to lower the value of the dollar by 40% as the Plaza Accord said that was their goal, the would set off a crash and higher volatility because foreign investors will be forced to sell and exit the dollar. Yes, the value of exports would look good to foreign consumers, but US assets would also look like a sell. Capital will move to the most advantageous location globally because we are all connected.

On May 28th, 1997, again I wrote to then Robert Rubin who was Secretary of the Treasury. Rubin was doing the same thing and trying to talk the dollar down criticizing the Japanese. Our models were warning of another crash and indeed it hit within just a few weeks of my letter and became known as the Asian Currency Crisis. The Asian financial crisis was a period of financial crisis that gripped much of East Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. Indonesia, South Korea and Thailand were the countries most affected by the crisis.

It was Tim Geithner who responded in just 4 days.Our model has been well known behind the curtain for decades. When the Asian Currency Crisis hit, I was invited to China to meet with the central bank.

By monitoring the world, what emerges is the overall trend. Trump won not by some isolated fluke. We put that forecast out years in advance and it did not matter the flip-flopping polls or how much money Hillary spent. Our computer saw the trend forming decades in advance. The Catalonia vote in July 2016 to separate from Spain followed by BREXIT was showing you the global trend. Once you understand that NOTHING takes place in isolation, you can see the trend coming before it arrives.

Our forecast that gold would peak in 2011, the US share market would rally to new highs made back in 2011 that Barron’s thought was nuts, and that the euro would collapse, were all connected. If one unfolded, the other HAD to follow. Once you see that the world capital flows dictate the outcome of everything, then investing and trading becomes a lot easier.

So why do I try to teach people? Because I can say buy or sell. Most people will not do so unless they agree and/or have confidence in that conclusion. The way to invest securely demands you have confidence in you action.

COMMENT: Mr. Armstrong; I want to thank you for you have been correct on every market demonstrating that everything is explicitly connected. What you have taught me is more than just trading a single market to make money. You have taught me how to see the world and connect the dots. I can see the light. You cannot be correct on gold, S&P to one point, the Euro, Dax, Trump, Brexit and China, without creating such a tool to monitor everything.

Of course, I met someone who is obviously incapable of understanding markets at all. He said you are not a forecaster because you say on the one hand the market can go up and it will tell us, but on the other hand it can go down and it will tell us. When I said you just have to look at the Reversals and your long-term timing has been impeccable and it does not change every week. He has no idea about markets and expects someone to say just buy or sell with no interest in learning about anything. I tried to explain to him but it goes in one ear and out the other. Yes he was a goldbug and when I said what about 1362, he acted like you never said that. I see what you mean that the majority of people are followers incapable to learning anything. We need such fools to trade against. I get that now. Don’t bother trying to convince them. Just trade against them like the bankers do.

I understand why they went after you and even why they tried to say you manipulate the world economy when the bankers lost. I found it interesting how that guy in the move checked you out and Goldman Sachs said they thought they could take you out trading against you but you usually won. Nobody has been able to accomplish what you have. The fact the press does not utter a single word about your accomplishment only further shows how deeply corrupt the entire system has become. One would think the New York Times or the Wall Street Journal would be touting your accomplishments to say may be there is a better way. They do not because they are part of the problem to maintain society in check for government.

Please keep up the good fight. You truly have made a light go off.

I do not know how to say thank you enough.

SD

REPLY: It is very good to hear from so many people who are starting to look at the world in a connected manner. I have been behind the curtain for more than 30 years advising multinationals and governments from Europe to Asia. No one has had more of a front row seat than me on a global level. This has revealed to me that we are all connected and it is indeed Adam Smith’s Invisible Hand that guides everything. True, the press do not want to interview me because if the Invisible Hand works, then how can we manipulate the world? It’s all on autopilot guided by the divine grand design of everything. How would government function if politicians could not promise the impossible and people remain ignorant of that fact? The press cannot report our forecasts. They simply cannot do so without confronting the hand that feeds them.

We stand at the threshold of a new dawn. I took that picture of the sunrise over Central Park in New York. It reminds me how insignificantly we are to even think we can alter the grand design of how everything works from the economy to the climate.

COMMENT: The 91 year old woman who had her $12,000 deposit declined in Kristanstad, Sweden, and the money confiscated by the State is a sad tale. Perhaps you might want to identify Kristanstad, as a town in Sweden, for those of us who do not readily identify Kristanstad, a town of 35,000 souls with Sweden.

BTW I love your blog.

REPLY: Sorry – my bad as they say. This is Sweden. The notes were the old obsolete notes that she had saved over the years. If she could not prove she saved these notes, the government refuses to accept them. Just more confiscation because ALL governments now PRESUME we are all guilty and it is our BURDEN to prove we are innocent. This is the peak in socialism. It has nothing to do with helping people, it is all about helping government.

The “obsolete” is not the issue. Even obsolete notes are redeemable. This is standard in Europe. One pound notes in Britain from 1970 have been cancelled. Only the US does not cancel old currency. They are still redeemable. Even Australia redeems old cancelled banknotes. The Swedish Riksbank states on their site:

The Riksbank redeems all Swedish banknotes that are invalid, as long as there is no suspicion that they may be linked to a crime, for instance a cash-in-transit robbery.

The year 2017 will bring us a step closer to eliminating physical money through governments assault on the underground economy. I previously reported that Europe had moved forward to make payments electronically on an instant basis. The same system is being turned on next year in Australia. The entire reason the Founding Fathers of the United States prohibited direct taxation was to protect our liberty. Today, governments need to know absolutely everything, and once they eliminate physical cash they will have the their dream — the quest for the secret of the philosopher’s stone. They naturally take no responsibility and instead successfully shift the blame for their mismanagement to the rich. They claim they would have no problem if everyone paid every penny on taxes. Of course, it does not matter how much tax they collect — it will never be enough.

Eliminating physical money will lead, they believe, to the philosopher’s stone. By changing the banking system to instantaneous transfer, they can eliminate physical money and track everything we do all the time. There will be the surrender of all liberty and the termination of our civil liberties. This is how empires collapse.

The Associated Press ran a story reporting: “Congressional Republicans are planning a massive overhaul of the nation’s tax system, a heavy political lift that could ultimately affect families at every income level and businesses of every size.” The interesting aspect is that the headline reads:

GOP: Cut taxes, change brackets; but what about deficits

There is zero discussion about constantly borrowing year after year. The presumption here is that governments can borrow all the time and someone will buy, even if negative, and the world will keep on going. They assume that this is OK and that deficits are all right as long as we fund them.

Absent from all of this basic assumption is the reality of history — whenever a government borrows, they ALWAYS default.

Most people are living in the past. Prior to 1971, the US government borrowed money but it did not create new money, as it could not be used for collateral to borrow against. In the 1960s, if you bought an E-bond, you could not go to the bank to borrow against it. You had to cash it out. Post-1971, you could buy T-Bills and use them as collateral to fund your trading. Debt has become money that pays interest.

The bulk of the “real” money supply is created through the velocity of money and borrowing. When a bank lends money, it is creating electronic money without printing. If you borrow $1,000 and they lend it to you by using $1,000 from someone else, then two people have accounts that say they each have $1,000 but the actual money created by government was still just $1,000.

Consequently, during the early days of the Roman Republic, public taxes consisted of modest assessments on property, which were primarily tangible assets that included slaves, land, homes, animals, personal items, and monetary wealth. The tax rate under normal circumstances was 1% and sometimes would rise as high as 3% during periods of war. Taxes could not be collected on personal income for there was a lack of a valid census.

Julius Caesar ordered the first real census that was conducted street by street. He knew there was much corruption with people on the welfare rolls who did not exist. Caesar ordered a census whereby the check each property and who was living where. The rolls were greatly reduced after knocking on every door to collect a census. About 80% of Rome was funded by taxes, and 20% of the annual budget, on average, was covered by new coinage. This did not produce 20% inflation.

Roman citizens were free from any direct taxation. Rome’s income came primarily from war indemnity, booty, mines, port duties, and rental of public lands. The provinces were subjected to tithes, which was one tenth of annual produce or earnings. In 187 BC, the Roman treasury refunded the taxes imposed during the Punic wars. Women were then declared tax-exempt in Rome. However, in just two years, by 169 BC, people had been avoiding taxes by putting property in their wife’s name. This led to legal reform when a man was not allowed to pass his property to a woman beyond 50% of his worth. After 167 BC, taxes were exempt if you lived in Rome itself. This contributed to Rome becoming the largest city in the world, which was not matched until London during the 19th century Victorian Era.

After the capture of Syracuse in 211 BC in Sicily during the Second Punic War, Rome adapted the tax system created by King Hiero that imposed a tithe on the agricultural produce of most Greek cities on the island. The reforms of Diocletian had eliminated the special tax-free status enjoyed by Rome.

There is little doubt that Rome funded its deficits by owning the mining resources, thereby enabling the creation of money to cover its expenses on about 20% of the budget on average. As resource dwindled, debasement began, but not aggressively until the Emperor Valerian was captured and enslaved by the Persians. That was a fundamental shock to the confidence of Rome and the people began to hoard significantly. This is also when Christianity took off for as people prayed to their gods. When no relief from barbarians took place, they turned in greater numbers to Christianity. The greatest period of Christian persecutions was during the 3rd century AD. It was the collapse in confidence that created the collapse in the monetary system.

We are playing with fire if we think the deficits must be covered by borrowing more and more money that pays interest. It is time we review history closely. Stop the borrowing and monetize the deficit rather than pay interest and engage in quantitative easing that never makes it down to the people anyway. Up to 70% of the national debt has been accumulative interest which NEVER helped anyone but bondholders of which 50% have been non-Americans.

Government forces Social Security to be invested only in government debt, despite the acknowledgement that the rich get richer ONLY by investing, which government prohibits the average person from doing. Then we borrow their money and pay no interest, yet pretend to be magnanimous by handing them a refund check as if we were Santa Claus.