The results of the Italian election is just starting to sink in. The rise of comedian Beppo Grillo to Italy’s most successful politician, who won 32.7% of the popular voted compared to Merkel winning 32.8% in the German election.  Following the election on March 4th, Grillo’s “five-star” party took by far the first place. Brussels is still in shock and trembling as its mood has changed from he is just a joke to “OMG! This threatens the very existence of the EU”.

Grillo’s party sharply criticizes the EU, and above all, it questions the very purpose of Euro. The skepticism in the EU’s founding country Italy where they signed the Treaty of Rome, is rather amazing that those still focused on domestic issues in the USA are clueless about the threat to the Euro.

The threat Italy poses to the Euro stems from Brussels’ refusal to aid Italy with the refugee crisis and the outrageous demands that the increased expenditure for the refugees must be deducted from other expenditures to stay within the EU demanded guidelines, This has maintained a serious deflationary atmosphere in Italy and Brussels simply ignores the economic impact of what their policies have imposed. Italy’s public debt amounts to €2.2 trillion, and the risk of this debt going into crisis undermines the entire existence of the Euro. This is the direct result of the failed structure of the Euro I have warned about from the outset. (see 1996 reports)

Brussels tries to blame the misconduct of banks and takes no responsibility for the failed design of the Euro or for EU legislators and the European Central Bank, which have also played a profound role is turning Italy against Brussels. Swapping the old debt into Euro that then doubled in value, created a massive wave of deflation that 10 years of flooding the economy with money by the central bank has produced nothing but undermined then the pension system throughout Europe.

The world is lost, yet politicians fail to even understand that they are lost in their misconceptions of economics. The peak in the Euro came precisely in 2008 and ever since we have witnessed the erosion of economic confidence. The peak of the first 8.6-year wave into this new cycle for Europe came 2013.13 and then the low was 2017.43. We are now in a wave due for its peak in 2021.73 and by that turning point, we will see the Euro under tremendous pressure if it can even survive. There is no doubt that by 2030.33, that the Euro will probably not exist. The complete failure of the design is a profound mistake that is tearing Europe apart

QUESTION: Mr. Armstrong; It is obvious that you have indeed been behind the curtain for your knowledge of even global politics is amazing. Kim Jong Un is here in Beijing. You said he would back down. You said the risk of war lies in the Middle East, not Korea. Your model calls the markets. You said the Dow would bounce for two days and then turn down. Even that took place today. Where do you begin and the computer ends?

UGH

ANSWER: That is a hard question to answer. The computer can show me the region for conflict. That is determined by cyclical trends for each region yet at times it is augmented by a combination of capital flows. Picking things like the fall of communism back in 1989 and picking when the Berlin Wall would fall were based cyclically on the outcome of that trend. That was 72 years from the Russian Revolution of 1917. That was the perfect target for the volatility models within the ECM. Both converged so it made it really a piece of cake.

The collapse of the Soviet Union came in 1991, that was a simple 2-year reactionary process all within a cyclical forecast. Now, the collapse of the Russian bond market which set in motion a major contagion and the Long-Term Capital Management debacle was determined from a capital flow and cyclical perspective. That came 8.6 years following the fall of the Berlin Wall. When that forecast made the front page of the second section of the FT, that is when even the CIA came. They suddenly realized that our model could forecast the rise and fall of nations. But that is also when the bankers began to complain to the CFTC and SEC that I was “manipulating” the world economy because they were all long Russian bonds and blamed me for their losses using the FT article as proof. They said I had too much “influence” rather than consider the possibility that just maybe we were able to forecast events that they thought bribing politicians would prevent.

The above chart is calculated from the day the Berlin Wall fell – November 9th, 1989. Our forecast for the fall of the Russian financial system in 1998 was 8,6 years from the fall of the Berlin Wall. But look at the dates beyond that 2002 (low in the US market post-DOT.COM Bubble), 2007 (the peak in the world economy & start of real estate meltdown), 2015 (Russia invade Syria, Refugees welcomed into Europe by Merkel, start of the rise in interest rates at the Fed), and the dates to come are 2019, 2024, 2028, and 2037.

This is the collapse of socialism which is the collapse of pensions and will result in a new monetary system. We will see 2019 as a financial crisis and 2024 as a rise in commodity prices.

Each domino is set in motion by the previous. Yes, my experience behind the curtain allows me to understand the real risks, but the model defines where they are and the computer will continue to write reports when I am gone.

While Trump is being portrayed and the insane President hellbent on destroying world trade, the truth is the tariffs on steel and aluminum account for 0.2% of GDP or just 2% of actual trade flows of $2.4 trillion. On top of that, every president at least since Jimmy Carter has imposed protectionist tariffs on some portion of trade flows. Indeed, Trump has an old-world view of trade as just about every world leader. They look at trade only from a job perspective and NEVER from the viewpoint of the consumer. Anytime a country imposes a tariff to stop what they think is “unfair” competition, in reality, they are creating unfair competition. Why pay $3 for a head of lettuce if you can import it for 25 cents? This only makes the consumer pay more reducing their standard of living. Nobody ever looks at that side of the coin.

In Switzerland, we have the perfect example of the old saying – a little bit of knowledge is dangerous. We have activists who are clearly living in a world they comprehend no less than the financial system. These people have managed to get a referendum on changing in the financial system with the same promises of Karl Marx that this will end all financial crisis to come forever. The referendum is scheduled for June 10th, 2018 after they got 100,000 signatures. The organizers are calling this the Full-Money Initiative. They understand that the bulk of the money is actually created by banks through lending. Their solution is to bar private banks from lending on any leveraged basis by setting limits on lending. They will be unable to lend money beyond what they actually have on deposit. They cannot create money by new loans. This is the most stupid Idea I think I have ever heard. They have no idea what the Full-Ramifications will be of such a proposal.

The promoters are advertising this will make the monetary system more secure and preventing financial crises. “Now we are stepping up our efforts to explain to people where their money really comes from and what the risks are in the old system,” said Emma Dawnay, a member of the organizing team, according to Reuters. They are promoting this Sovereign Money Initiative to stop the financial crisis cycle that they have no idea of how such events are even created.

According to their plan, banks will only grant loans to the extent that they have previously received funds from savers, other institutions or the central bank. For the creation of money then only the central bank would be responsible. However, she rejects that their initiative will create an economic upheaval introducing tremendous uncertainties. Clearly, she is qualified for government service because this is the precise attitude which creates the very thing she is pretending to prevent.

Obviously, she may have a Ph.D. in other fields, but that does not qualify her for anything else. She thinks that banks lending money which leverages the system is the CAUSE of a financial crisis so she wants to hand the power to create all money to the government – the very people who are incapable of balancing a budget or managing even a bubblegum machine. When they are out of bubblegum, they just go steal some more and open shop again since they spent all the money they took in before.

Government is the single biggest borrower in society. So how will they sell their debt without creating more money?  Then we have the problem that if the government has to create the money and approve all loans, then politics will enter the scene and you will be unable to borrow if you are part of the opposition. Andrew Jackson destroyed the Bank of the United States BECAUSE they lent money to the opposite political party to defeat him. There was no magnanimous effort to save the country.

Then this idea shows truly their underlying ignorance for if you cut off lending, well guess what! They will be unable to sell their homes and the value will crash because the only buyer will be someone with cash. The town I grew up in, Maple Shade, New Jersey, was once the suburb of Philadelphia. The real estate developer was Barlow who built his mansion (pictured here) in town where my parents met before World War I.

One of my father’s friends had cash during the Great Depression. He bought most of Main Street back then for pennies on the dollar for there was a shortage of money with no bank lending. This is precisely the outcome of this Sovereign Money Initiative if it actually passed. Switzerland would be the greatest short of all time. No bank would survive and the government would suddenly find NO BID for its new debt.

These people are dangerous for they are just like those who want to shut down the Federal Reserve with simply stupid ideas that demonstrate they too fail to understand even how the world economy functions. The first world financial crisis took place in the Panic of 1857. This was the first Panic to appear as a global contagion. The 1720 collapse of the Mississippi Bubble in France and Southsea Bubble in England was a contagion set in motion within Europe. However, the 1857 Panic was set in motion by the declining international economy because of the interconnectedness of the world economy during the 1850s. The financial Panic began in late 1857 in Britain when the Palmerston government circumvented the requirements of the Peel Banking Act of 1844, which required gold and silver reserves to back up the amount of money in circulation. In that instance, the government lifted restrictions because the banks were in trouble.

Of course, then there is the example of the Silver Democrats. They thought that they could raise the price of silver about world levels thanks to the silver miners who bribed them. They soon discovered that people were bringing their silver to the States where it was over-valued and used it to buy gold and export it back home. They kept this arbitrage up and then the Panic of 1893 began and by 1896, J.P. Morgan organized British banks to lend the USA $100 million to prevent it from complete bankruptcy in 1896. President Cleveland was a Democrat and he warned that his own party had imposed unsound finance. The same type of people who could not understand the world monetary system accused Morgan of making a profit on the deal. They refused to see that their ideas were brain-dead back then as well. They preferred to blame Morgan for their own stupidity.

Financial Panics are global contagions. This movement is Switzerland would destroy the country and the depth of the depression would be far worse than the Great Depression. There was such a shortage of money back during the 1930s, that cities began to issue their own scrip to try to save the economy and allow people to economically carry on, which they could not due to the contraction in the money supply. Contracting the money supply as these people propose, would send asset values to virtually zero in Switzerland. They reject any such criticism because they just do not want to believe this solution is completely brain-dead.

History proves one thing – stupid people really mess up the world and then blame others. I keep warning, we are all connected. No country can move counter-trend for their will rapidly find their crisis comes from a contagion outside their control. Even communism failed despite its attempt to maintain isolation. Economics wins at the end of the day. Both Keynes and Marx have seriously inflected the world.

When the Weimar Republic first began following the 1918 Communist Revolution, they issued coins assuming they were now in control. The 50 pfennig coins were struck between 1919 and 1922. There were no precious metal or even bronze coins struck during the hyperinflation that began from August 1922 to November 1923. The coinage of the Weimar Republic between 1922 and 1923 were all struck in aluminum.

During a hyperinflation, the only real currency to hold on to some value is the coinage. The price of raw materials rises and as such, the coins become worth more as scrap metal than they so as coins from a legal tender perspective, but this is AFTER the hyperinflation – not during. The stories that people saved their copper coins and were able to spend them with a higher value than paper are really just stories. The coinage of the Weimar Republic was aluminum, not even copper.

I do know that AFTER the event when confidence returns to the economy, then the base metals will start to rise in value because the economy is expanding once again.

The Rentenmark was a currency issued on October 15th, 1923 to stop the hyperinflation of 1922 and 1923 in Weimar Germany. The largest denomination was just 50 pfennig. It was struck in Aluminum-Bronze.

Those who ask about coins surviving the hyperinflation, the answer is NO. You can save them from the pre-hyperinflation, but during such an event, not even the old coins will buy you a cup of coffee