Tag Archives: Hunt for Taxes

Jun 7 2019

Trump v Federal Reserve – Why?


Armstrong Economics Blog/Interest Rates

Re-Posted Jun 7, 2019 by Martin Armstrong

QUESTION: Good afternoon Martin,

Do you gander that President Trump is aware that a higher dollar will cream the economy and is doing all he can to fight that trend?

Maybe he is reading AE but like other politicians still thinks he can manipulate the economy?

Trump is battling the Fed over interest rates. What does it mean for your money?

MDC

ANSWER: Trump does realize that there has been a flight to the dollar. I believe his bashing the Fed to lower rates is inspired by the hope of keeping a lower dollar for trade. I do not believe higher rates are on his radar with respect to the markets. He is probably seeing briefings of the rise in rates and what is taking place with the national debt.

As far as what does it means for your money: the trend from public debt to private will be accelerated by this trend. I believe that the Fed will try pegging rates with caps rather than engaging in QE as Europe has don

Jun 7 2019

Mike Pence Outlines Tariffs Will Commence Until Mexican Behavior Improves….


Re-Posted from The Conservative Tree House on June 6, 2019 by

During brief press remarks following a USMCA speech in Pennsylvania, Vice President Mike Pence outlined the current status of “talks” between the U.S. and Mexican officials.

The vice-president affirms several times that President Trump is “firm in his position” to see Mexico step-up and do more to stop the mass migration of illegal aliens from Central America.  If you think about it, against the context of the USMCA, the Trump position to confront Mexico is absolutely the right approach.

Mexico wants the USMCA trade agreement, and they want to be united with the U.S. and Canada on trade and collaborative economic benefits.  However, simultaneously Mexico has repeatedly said it will not join the “Safe Third Country” agreement held by the United States and Canada, where asylum seekers must apply for refuge in whichever country they first arrive in, as each is considered safe.

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[It’s worth noting that Pence is likely under a lot of pressure from Tom Donohue and his friends within the U.S. Chamber of Commerce. Pence deserves credit for standing up to his traditional tribe.]

Jun 7 2019

There’s No Such Thing As An Unregulated Market


Published on Nov 16, 2017

We all want the safety and dependable quality that “regulation” is supposed to provide. Government can provide it to some extent, but markets can do it better, if we let them. Howard Baetjer of Towson University explains.
Jun 7 2019

The International Unit of Account


Armstrong Economics Blog/World Trade

Re-Posted Jun 6, 2019 by Martin Armstrong

QUESTION: I only recently learned of your material and am still digesting it. I appreciate that you encourage critical thinking. I hope you find my questions of the same spirit.

In your recent article “Are Two-Tier Monetary Systems a Possible Tool?”, you illustrated how South Africa’s experience could provide an example for nations wanting to untangle their domestic currency from global obligations (i.e., US dollar, presumably others too).
Would you mind elaborating on this concept in relation to the following questions?

My questions:
1) For this 2-tier approach to work, must every nation have a 2-tier money system, or would it suffice to have only the major players do so (i.e., USA, EU, etc)?
2) If every nation had a 2-tier money system, then how would that compare and contrast to a “global SDR” or some other global, non-national currency acting the reserve currency?

I suppose what I am really asking is: Imagine a collection of nations and each nation has a 2-tier system. The nations agree to use each other’s “external” tier when dealing with each other and keep the “internal” tier for solely domestic purposes. Instead, now imagine that same collection of nations decided they would each use a global, non-national currency (SDR or otherwise) as the global reserve currency.

What similarities and differences would these 2 different approaches yield? Are there certain conditions where 1 approach would be desirable over the other approach?

I find this subject both intriguing and very relevant, so I would like to hear your insight.

Thank you for the new (to me) material.

C

ANSWER: During the 19th century, it was common to issue a “trade dollar” with China who used the silver standard initially by using the Spanish 8 reals known also as pillar dollars. The US issued trade silver dollars and domestic silver dollars of different weight. All of these nations were issuing a two-tier currency to facilitate trade with China.

During the 14th century, there was also a two-tier monetary system. Florence used the gold florin for trade, but domestically, wages and commerce took place in silver. Companies were required to keep two sets of books by regulation.

A two-tier system can be used to isolate foreign capital inflows. Switzerland was suffering and that eventually broke the peg. The foreign capital was not looking to buy assets in Switzerland, they were just converting euro to Swiss and parking the money. Therefore, a two-tier system would have allowed the flow of capital to concentrate in what we would call the Financial Swiss Franc (FSF). This peg would have not been necessary and they could have even imposed negative interest rates or zero rates to deposits in the FSF. Any trade for produces could have then been delegated to the Swiss franc and the peg would not have been necessary.

We would not need a system where everyone had a two-tier currency and traded against each other. The new International Unit of Account (IUA) would be a basket of currencies and your local currency would then trade against that. You would need to allow contracts and debts to be contracted in this IUA freely, as takes place today in US dollars. This would by no means eliminate FOREX risk.

Insofar as a global SDR, the problem would be the calculation and then the IMF has been notorious for corruption. Would some nations put pressure to alter the formula because of a financial crisis?

I would say that the formula must be fixed and based on the total percentage of international trade a given nation wields. It should be subject to revision only once every 5 or 10 years at fixed terms.

The primary reason I would design the system in this manner is that the Federal Reserve has already become the central bank of the world. The Fed has lost the ability to manage its own economy because the IMF and others lobby it not to raise rates because that would adversely impact their currencies. There should be an IUA so that a central bank can manage its own economy without impacting others because they will be prohibited from issuing debt (public or private) in a foreign currency — only in an IUA. There would be no sovereign debt issued by the agency controlling the formula. The reserves of central banks would then be only in IUA terms.

Already, capital flows globally when it sees opportunity, and in this manner, it acts as an arbitrage tool. If real estate looks cheap in one country, the capital will flow in. Australia, New Zealand, and particularly Vancouver are fighting this trend. There will be a natural cycle to it and there is no need for changing laws to try to stop it. The Japanese were big buyers during the 1980s, even buying Rockefeller Plaza in New York. As their economy turned down, they resold it and exited.

Jun 7 2019

Schengen Agreement Dead – Killed by Refugees


Armstrong Economics Blog/European Union

Posted Jun 6, 2019 by Martin Armstrong

COMMENT: Dear Martin,
you are once more right with your view’s. EU’s Schengen agreement is going to die. From May 1st on, anybody in the EU has to carry an “A1 Certificate” if he or she is going on a business trip to avoid “social insurance fraud”. If not, you could be fined by up to 10.000,00 Euro.
Best regards
AC

REPLY: The cornerstone of the EU was to be the freedom of movement to create the United States of Europe. This became known as the Schengen Agreement to create a borderless Europe signed on June 14, 1985, between five of the then ten member states of the EU. It proposed the gradual abolition of border checks at the signatories’ common borders. Measures proposed included reduced speed vehicle checks, which allowed vehicles to cross borders without stopping, allowing residents in border areas the freedom to cross borders away from fixed checkpoints, and the harmonization of visa policies. However, this Schengen Agreement did not come into effect until March 26, 1995 (1995.232). It eliminated border checks among its members and allowed foreign visitors to travel throughout the area using one visa.

Britain has been preventing those non-EU citizens with Schengen visas from freely crossing the border into Britain. Someone from Ukraine with an EU visa cannot travel to Britain and subsequently to many former British Commonwealth states, such as the Bahamas, even for a vacation. Switzerland also is experiencing an anti-EU immigration trend.

This is what they always do. They cannot repeal the Schengen Agreement, for that would defeat the entire premise of the EU in creating the United States of Europe. They are using health insurance to prove you are really a citizen or legitimate resident of your country. It is always the same — wordsmithing. This is not my simple opinion. The Schengen Agreement was dead once they allowed the refugees into Europe.

Jun 7 2019

Which Roman Emperor was Really “the Great”


Armstrong Economics Blog/Ancient History

Re-Posted Jun 6, 2019 by Martin Armstrong

QUESTION: Why Constantine the Great?

Mr Armstrong,

Of the 170 or so Roman emperors from 27BC to 476AD only one carries the title “the Great” and that is Constantine(r.306-337AD).
Would you have chosen another Roman emperor for this distinction in preference to Constantine?

JR

ANSWER: Constantine was given the title “the Great” because of his use of Christianity as his means to power. His mother Helena was a devout Christian. However, Constantine did not accept baptism until he was on his deathbed. He claimed that he had a vision where God showed him the sign of the cross and to put that on the shields of his army when they were outnumbered 2 to 1. It was a great tale. The truth was that the opposing army was mostly Christian and it was a great strategy. This gold medallion shows Constantine with the sun god Sol.

Constantine used Sol because he began to emerge as the supreme pagan god known as Sol Invictus (invincible sun which appeared every day). There was a tetrarchy set up by Diocletian (284-305 AD) where there were two emperors and two vice presidents, so to speak, named Caesars. Constantine used Sol and then Jesus Christ to justify his civil war in both instances by saying there was but one god above and there should be but one emperor on earth.

As far as who I would say was truly the best emperor, it would have been Marcus Aurelius (161-180 AD). You must understand that the title “the Great” or “Magnus” was often used for those who waged major wars and won. It did not mean that they did some magnanimous act. Pompey (106-38BC) was called “Magnus” for his victory in the civil war and not for his humanity. His success as a military commander in Sulla’s second civil war resulted in Sulla bestowing the cognomen Magnus, “the Great,” upon him.

Jun 7 2019

President Trump Remarks – 75th Anniversary of D-Day, Normandy American Cemetery, France – 5:00am Livestream…


Re-Posted from The Conservative Tree House on June 6, 2019 by 

Most of the events commemorating the 75th Anniversary of D-Day will take place in the very early morning hours today.

President Donald Trump and First Lady Melania Trump will attend the 75th anniversary of D-Day at the Normandy American Cemetery in France. President Trump, along with French President Macron and other world leaders, will honor the Allied troops’ maneuver that led to the turning point of World War II.

NBC Livestream Link (live 5am) – Euro News Livestream Link (live now)

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Jun 7 2019

Day #4 Schedule – President Trump Attends 75th Anniversary of D-Day Memorial – France


Re-Posted from The Conservative Tree House on June 6, 2019 by 

Ireland (IST) is 5 hours ahead of U.S. Eastern time (EST). France (CEST) is 6 hours ahead of U.S. Eastern Time. Today President Trump and First Lady Melania will be traveling from Doonbeg, Ireland to Colleville-sur-Mer, France, for a commemoration ceremony on the 75th anniversary of D-Day. [♦5:00am EST / 11:00am CEST broadcast]

Departing Colleville-sur-Mer the first couple will travel to Caen, France, for a bilateral meeting and working lunch with French President Emmanuel Macron. The President and First Lady will then fly back to Shannon, Ireland and spend the evening at Trump International Doonbeg, Ireland.

2:05am EST / 7:05am IST THE PRESIDENT and THE FIRST LADY depart Trump International Doonbeg en route to Shannon Airport, Shannon, Ireland, Doonbeg, Ireland

2:25am EST / 7:25am IST The PRESIDENT and THE FIRST LADY arrive at Shannon Airport, Shannon, Ireland

2:35am EST / 7:35am IST THE PRESIDENT and THE FIRST LADY depart Shannon Airport en route to Caen – Carpiquet Airport, Caen, France, Shannon, Ireland

4:00am EST / 10:00am CEST THE PRESIDENT and THE FIRST LADY arrive at Caen – Carpiquet Airport, Caen, France

4:10am EST / 10:10am CEST THE PRESIDENT and THE FIRST LADY depart Caen, France, en route to Normandy American Cemetery Landing Zone, Colleville-sur-Mer, France, Caen, France

4:30am EST / 10:30am CEST THE PRESIDENT and THE FIRST LADY arrive at Normandy American Cemetery Landing Zone, Colleville-sur-Mer, France

♦5:00am EST / 11:00am CEST THE PRESIDENT and THE FIRST LADY participate in the 75th Commemoration of D-Day, Colleville-sur-Mer, France

6:00am EST / 12:00pm CEST THE PRESIDENT and THE FIRST LADY participate in the Omaha Beach Briefing and Fly-Over Viewing, Colleville-sur-Mer, France

6:10am EST / 12:10pm CEST THE PRESIDENT and THE FIRST LADY participate in a viewing of the Normandy American Cemetery, Colleville-sur-Mer, France

6:25am EST / 12:25pm CEST THE PRESIDENT and THE FIRST LADY depart Colleville-sur-Mer, France, en route to Caen – Carpiquet Airport, Caen, France, Colleville-sur-Mer, France

6:45am EST / 12:45pm CEST THE PRESIDENT and THE FIRST LADY arrive at Caen – Carpiquet Airport, Caen, France

6:55am EST / 12:55pm CEST THE PRESIDENT and THE FIRST LADY depart Caen – Carpiquet Airport en route to the Prefecture of Calvados, Caen, France

7:10am EST / 1:10pm CEST THE PRESIDENT and THE FIRST LADY arrive at the Prefecture of Calvados, Caen, France

7:30am EST / 1:30pm CEST THE PRESIDENT participates in a bilateral meeting with the President of the French Republic, Caen, France

8:05am EST / 2:05pm CEST THE PRESIDENT participates in a working lunch with the President of the French Republic, Caen, France

8:50am EST / 2:50pm CEST THE PRESIDENT and THE FIRST LADY depart the Prefecture of Calvados en route to Caen – Carpiquet Airport, Caen, France

9:05am EST / 3:05pm CEST THE PRESIDENT and THE FIRST LADY arrive at Caen – Carpiquet Airport, Caen, France

9:15am EST / 3:15pm CEST THE PRESIDENT and THE FIRST LADY depart Caen – Carpiquet Airport en route to Shannon Airport, Caen, France

10:50am EST / 3:50pm IST THE PRESIDENT and THE FIRST LADY arrive at Shannon Airport, Shannon, Ireland

11:00am EST / 4:00pm IST THE PRESIDENT and THE FIRST LADY depart Shannon, Ireland, en route to Trump International Landing Zone, Doonbeg, Ireland, Shannon, Ireland

11:20am EST / 4:20pm IST THE PRESIDENT and THE FIRST LADY arrive at Trump International Doonbeg Landing Zone, Doonbeg, Ireland

~ Day Four Concludes ~

Jun 7 2019

Beijing Doubles Down Against Western Business Interests…


Re-Posted From The Conservative Tree House on June 5, 2019 by 

When President Trump began confronting China on trade practices, there was always a likely totalitarian Chinese response. The inevitable response when confronting the duplicitous dragon is always an attack; it’s the only way Beijing knows how to respond.

Last week Beijing threatened to take action against any corporation who would be perceived as working against the interests of the state.  This week communist Beijing begins doing exactly that:

(SCMP) China’s antitrust regulator slapped a US$23.6 million fine on Ford Motor Company’s Chinese venture for restricting sales prices in its hometown, taking the second such action against US carmakers in three years as trade tensions deteriorated between the world’s two largest economies.

Changan Ford Automobile, the 50:50 venture between Michigan-based Ford and Chongqing Changan Automobile, must pay a penalty of 162.8 million yuan (US$23.6 million) – equivalent to 4 per cent of the venture’s annual sales in Chongqing – for a business practice that restricted retail prices since 2013, according to a statement by the State Administration for Market Regulation.

The antitrust fine on Changan Ford is the latest salvo by China after the commerce ministry’s Friday announcement that it was compiling a list of “unreliable” foreign companies and individuals deemed to be hurting Chinese interests. (read more)

The Red Dragon is doing what the Red Dragon does. Thus we enter the phase when corporate interests, particularly multinationals, recognize at its core China is a communist state-run, controlled-market, system.  All western businesses engaged with China are now at risk of retribution from the communist state.

China is counting on the prior western investment being so significant that a corporation will be reluctant to withdraw.  However, in this outlook Beijing seriously underestimates the free market because communist controlled China doesn’t understand the action of a inherently free market.

The first loss is the best loss. If walking away from an investment provides more financial security and stability than attempting to retain a grip on a tenuous position – corporations will walk away.

The reaction from China is immensely predictable; and creates a downward spiral. If any corporation is perceived as working against the interests of the state; the state will take control of the corporate interest. What western business interest would want to do business within China when that reality is the landscape of every economic decision?

Meanwhile President Trump, Secretary Wilbur Ross and USTR Bob Lighthizer are not backing down from the confrontation.  GM and Volvo, both with major financial investments in China, had requested relief from U.S. tariffs.   Here is where the sharp side of Ross and Lighthizer comes into play:

WASHINGTON/STOCKHOLM (Reuters) – The United States has rejected separate requests from General Motors Co and Chinese-owned Volvo Cars for an exemption to a 25% U.S. tariff on their Chinese-made sport utility vehicle models.

GM, the largest U.S. automaker, and Sweden’s Volvo both said they were aware of the respective denials of their nearly year-old petitions. Both companies had not raised the sticker price to account for tariffs, which came into play last July.

The denial of GM’s petition for its Buick Envision came in a May 29 letter from the U.S. Trade Representative’s office saying the request concerned “a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.” (read more)

Trump, Lighthizer and Ross are sending a very deliberate message.  If you crawled into bed with the Dragon, don’t look for us to help make your bed more comfy… deal with it.

As Wall Street and the multinational corporate community see that Trump is not going to assist anyone, even an American company who made a previously bad decision to invest in China, that awareness becomes a part of the corporate risk management equation.   Again, more pressure to exit the risk matrix that is now Beijing.

Meanwhile President Trump strategically engages with Tiawan and offers $2 billion in weapons to the arch nemesis of Beijing.

WASHINGTON (Reuters) – The United States is pursuing the sale of more than $2 billion worth of tanks and weapons to Taiwan, four people familiar with the negotiations said, in a move likely to anger China as a trade war between the world’s two biggest economies escalates. (read more)

Now, many pundits -vested in selling Wall Street positions- immediately begin to stoke fears about this economic confrontation leading to a military war with China, but that is nonsense.

The only way China would be able to deploy it’s military, as a cloaked weapon to assist the economic war, would be if hostile U.S. military action toward an actual Chinese geographic interest was part of the equation.  That dynamic doesn’t exist.  [Note: this potential need was always the reason for China retaining manipulative control of North Korea as a proxy province.]

So long as President Trump continues hitting China on purely economic issues; and there’s every reason to believe he will; Panda can only hit back using economic tools it controls.  The U.S. has far more economic leverage than China in this dynamic. [Note the brilliant Trump foresight of U.S. and Japan relations.]

Thus President Trump only has to position U.S. policy to benefit non-engagement with China (see Huawei); and China will respond by destroying any affiliated business they view as participating in, or supporting, the adverse policy [see Fed-Ex]. Beijing cannot help itself. The dragon will act as a dragon will act.

President Trump has positioned this geopolitical trade reset perfectly. Trump is applying Chairman Xi’s own “us -vs- them approach” toward confronting China. The supply chain investment Beijing needs to sustain itself is now being controlled by elements outside China. Beijing responds by attacking those in the international community who control the investment.

This will not end well for China.

Watch as time goes along and more companies, and nations, slowly walk toward the exits with China. There is just too much inherent financial risk.

Jun 7 2019

No Deal – U.S. and Mexico Officials Fail to Reach Agreement on Border, Immigration, tariffs…


Re-Posted from The Conservative tree house on June 5, 2019 by 

According to recent reporting, officials representing the U.S. and Mexico have failed to reach an agreement on measures to stop the flood of migrants traveling through Mexico.  As a result of the scale of the crisis, and without an agreement from Mexico to stop the worsening problem, President Trump has announced tariffs on imported goods from Mexico will start June 10th.

A hastily called press conference by Mexican officials is pending.  Livestream Link

Predictably Mexican President Lopez-Obrador is unwilling to stop the migration from Central America.  There are strong indications the Mexican government does not control the border region as Mexican drug cartels are in charge.

Last month U.S. Customs and Border Patrol report 144,278 people were apprehended attempting to cross the U.S. southern border in May alone.  The region is in crisis.

(Source Link)

Posted on June 5, 2019 by 

According to recent reporting, officials representing the U.S. and Mexico have failed to reach an agreement on measures to stop the flood of migrants traveling through Mexico.  As a result of the scale of the crisis, and without an agreement from Mexico to stop the worsening problem, President Trump has announced tariffs on imported goods from Mexico will start June 10th.

A hastily called press conference by Mexican officials is pending.  Livestream Link

Predictably Mexican President Lopez-Obrador is unwilling to stop the migration from Central America.  There are strong indications the Mexican government does not control the border region as Mexican drug cartels are in charge.

Last month U.S. Customs and Border Patrol report 144,278 people were apprehended attempting to cross the U.S. southern border in May alone.  The region is in crisis.

(Source Link)