It’s looking like a Hung Parliament and the polls got it wrong again in Britain. The Conservatives appear to be 12 seats short of the 326 to rule with a majority vote. Theresa May is facing a serious backlash over her shocking election campaign gamble after an exit poll suggested that her snap election roll of the dice has completely failed to pay off. Where before the BREXIT vote was purely conservative, Corbyn had to brace that but then he turned to the youth and gold massive turnout in some areas 75%. London itself is filled with a lot of students. Corbyn appealed to them promising healthcare and tuition promises and thus was tapping into a reservoir of people who would not normally vote.

This election illustrated the entire problem we have been warning about. We are facing a generational battled. Ironically, the youth do not quite realize that voting labour was a vote for the very neo-Marxist policies that have created the crisis we have in pensions going forward. It has been this type of promising manna from heaven with promises to make the rich pay for it is exactly the same policies of Hollande in France, which proved so disastrous. Yet the old saying; Ah to be young again, but know what I know now comes to mind. What the youth have done looks very well like fulfilling what our computer has been projecting – the fall of the British pound long-term.

The problem with this Corbyn Hung Parliament is the fact that his own party pretty much wrote Corbyn off and wanted him to resign after the last election. Since this time he made it really a personal battle, he is unlikely to back-down and will be pushing a Marxist agenda. Ah, how the wheel of fortune revolves. This Corbyn Hung Parliament now casts a huge doubt over the negotiations for BREXIT. We ran our model fearing that this could be the outcome or if Corbyn would actually win pulling off a surprise victory for Labour. It came back and said SELL Sterling! It is very curious how markets never lie and they show you the trend if you listen to them rather that try to fit their movement to a predetermined outcome. While our computer did show the Conservatives would win, something was wrong since the outlook for the pound was bearish – not bullish.

Socrates Pro Version wrote in the pound concerning the Long-Term:

“Diagnostically, my wide-ranging projection recognizes that the major low in British Pound Spot took place back in 1985 completing a 52 year decline, but we have seen lower highs with each thrust upward leaving the major high intact as of 1959. We have not elected any Yearly Bullish Reversal from the major low of 1985 warning that we remain in a bearish long-term trend. Only an annual closing above 24280 would signal a change in long-term trend. There has been a post low rally after 1985 moving upward into a key high during 2007. Nonetheless, the market has undergone a reaction back to the downside for the past 9 years. This has warned that the overall trend of this market remains bearish since it has been unable to make higher highs. There remains a long-term risk of a decline extending into 2017 or as far out as 2020 in real terms adjusted for inflation. Unquestionably, there remains a risk that we could see a complete monetary reform as early as 2018 going into 2020 or the latest 2032 insofar as a change in the currency base system. This is likely to follow a Sovereign Debt Crisis which should begin to erupt by 2018.”

Our model has been showing that the major resistance stood in the 134 zone both on the Monthly and Weekly levels of our model. Just to achieve a positive signal, we required a monthly closing ABOVE 12954. Socrates has been writing: “Critical resistance still stands in this market at 12954 and a break above that level on a monthly closing basis would warn of a continued advance becomes possible.”April closed precisely one tick beneath at 12953. This was perhaps the first hint that there would be trouble ahead. May exceeded the April high intraday, but it also fell back to close at 12889. How Sterling has dropped sharply to the 127 level on the news of a Hung Parliament. How it now closes today will be the market speaking loudly so listen.

Since the computer has been warning that Sterling can fall back to the 1985 low at $1.03, it was hard to reconcile this with the polls calling for a major landslide for the Conservatives. This is Corbyn’s chance for the big time and you can expect he is going to really muddy the waters because he really believes in Marx. The distinction between Brexiteer and Remainer stands a real chance now of fading away. Battles would still rage on, however, yet the terms and methods of restoring British independence will be completely thrown into the air. Eurocrats  in Brussels now face the prospect of an entirely different negotiating team in the event of a cobbled together coalition, which would also need time to thrash out its own Brexit strategy.

Our own interaction with British institutions and corporates has been interesting. Many who were against BREXIT and saw that as the end of the world, flipped their position and said hey – they is pretty good. After accepting BREXIT, now the terms are up in the air thanks to May misreading the discontent rising among the youth. We have also warned that revolutions come from the youth, not from the old establishment who have too much to lose rocking the boat.

Corbyn is a full blown neo-Marxist who would love to convert Britain to a modern version of Communism. Instead of guaranteed minimum wages, he wants maximum wage limits. He has been preaching the same old solution – just rob the rich, which Hillary was preaching while stuffing her own pockets. The problem is the big numbers he hears that CEOs make is stock options typically more so than salary. Nevertheless, in his mind if everyone is reduced to the same wage, somehow that will solve everything. Nobody should earn more than he thinks is appropriate. His policies would be the final straw that ends Britain as any type of financial capital whatsoever. The talent will be on the first plane to New York or Hong Kong. With Corbyn in Britain and the EU insanity on the Continent who wants to outlaw short-selling, the pound will not survive even to be a hedge against the Euro.

The real question is somehow the market is always correct and forecasts the future with extreme precision. The pound could never elect a single Weekly Bullish Reversal which all stand above 13400. Yet the first Weekly Bearish Reversal is 12772 on the cash. If that is elected tomorrow, then the markets are warning that this is going to be a very hard road for Britain. The absolute critical technical support for this week’s closing lies at 12748.

We can see from both the arrays on the pound against the dollar and euro, that the computer projected a turning point for this week. It also generally warns of higher volatility next week. So pay attention to the Weekly Bearish Reversal at 12772.

“The British response to terrorism has to change,” said Prime Minister Theresa May on Sunday in a speech after the new attacks in London. She said: “There is, to be honest, far too much tolerance of extremism in our society.” PM May made her announcement at 10 Downing Street making it clear: “When it comes to overcoming extremism and terrorism, things have to change.” She announced potential changes to anti-terrorism laws. She further made it clear: “We can not give this ideology the safe space it needs to breed – but that’s exactly what the internet and the big companies that provide internet-based services provide. We must work with Allied democratic governments to reach international agreements to regulate the cyberspace to prevent the spread of extremism and terrorism planning.”

May could very well achieve a 64 seat majority. We asked our computer to do a What-If  forecast if Corbyn won the election for Labour. This would probably be the best short in a very long time.

QUESTION: Mr. Armstrong, when you were here in Barcelona, you said that Catalonia would vote to separate from Spain. Most thought you would be wrong. I myself confess I was not sure you would be right. Well you were right, or your amazing computer was correct, and the fever to separate only grows bolder. Do you still see this and the ultimate end of the EU?

ANSWER: Yes, but this is a process that is slow. The speed will being to pick up next year and it appears to be increasing in velocity between 2018 and 2022. El Pais ran a story: “Catalonia to immediately declare independence if no referendum held” with the leaked excerpts from what appears to be the Catalonian regional government’s road map to independence. The secret document included a plan where the region would unilaterally break away from Spain if Madrid tried to prevent its citizens from holding a referendum on independence in the fall. The proposed question is straight forward:

“Do you want Catalonia to be a state that is independent from Spain?”

I reported back in 2015 that Barcelona was preparing to issue its own electronic currency. Since then, the city is still moving forward with a plan to introduce its own currency, despite warnings from Spain’s central bank. The new so-called “social currency” would be used to buy local goods and services at a discount while having a one to one parity with the euro. This is plan B in order to set up for separation. Catalonia is the richest region in Spain and is supporting the rest of the country. So it is very much like Margaret Thatcher once warned, that Socialism works until you run out of other people’s money. That is exactly what is taking place in Spain. They have been bleeding Catalonia dry.

The real question is what will Spain do? Spain is the Eurozone’s fourth largest economy. It is distinctly on the verge of breaking up. Spain and the EU seem intent upon not letting that happen. If there is any attempt by force from Madrid under the pretense of a police action, then the gloves will come off.

Madrid will take drastic actions, including that will most likely first attempt to invoke article 155 of the constitution, which will effectively put an end to all forms of Catalan self governance. Will the people tolerate that? This will not merely strengthen the resolve of Catalan separatists, it could very well lead to a civil war erupting between 2018 into 2020, but the latest we should see the separation is by 2022.

The previous Spanish Civil War took place between 1936 and 1939 lasting about 3 years. It broke out when the Spanish army in Morocco led by General Francisco Franco, rose up against the democratically elected Republican government, presided over by Manuel Azaña. Typically, there will be a divergence and split within the military. That is how these things erupt. We may see this in the USA also around 2022, which may be a contagion at that time. The potential for the collapse of the EU looms on the horizon for 2022.

Back in October 2015, we reported that “in response to the refugee crisis, the German city of Hamburg has enacted a new law that will enable the government to seize vacant commercial properties to provide temporary housing for refugees. The law will go into effect next and will last until March 2017. Despite the additional measures, many refugees will die of exposure during the cold German winter.”

Hamburg authorities confiscated six residential units in the Hamm district near the city center. The city is now renovating the properties and will rent them against the will of the owner to tenants chosen by the city. Worse yet, all renovation costs will be billed to the owner of the properties.

Hamburg is still at it and this raises serious questions about the right to property in Germany. The measure is obviously unconstitutional, but exactly why it has not been stopped raises even more concern. Those who seriously think the Euro will be fine since Macron won the French election remind me of the old joke about the optimist and the pessimist who are blown off the top of a 100 story building in New York City. The pessimist immediate begins to pray for forgiveness. The optimist as he is passing the fourth floor says: “Well, so far so good!

The democratic decision-making process actually dreaded by many politicians as too much work. France’s new president, Emmanuel Macron, would like to be able to make decisions in the social field without the hassle of discussion. And so the Parliament, which was to be elected in June, was to give Macron the authority to conclude reforms with his decrees. This requires a majority. Whether Macron’s new party, “La République en Marche”, reached this goal, it is questionable whether the other parties want to give their power to the president. It appears eliminating the right to vote is becoming much more in fashion.

Emmanuel Macron has shown just how inexperienced he is when it comes to international trade. Both Berlin and Brussels have rejected Macron’s central platform in his election campaign that all government purchases should be made from exclusively European companies. They realize that while Le Pen cheered “France First”, Macron called that nationalist, he proposed European Nationalism. Germany needs open markets to retain its current account surplus. Without that, Germany fears its economic power will collapse. Macron’s proposals are rejected already behind the curtain. Hence, the French people will find he is their Obama – great expectations for change, but no leadership leads to the same old status quo.

Macron’s “Buy European Act” was his a central promise during his campaign. Macron’;s entire plan was to solve unemployment with protectionism but not exclusively for France, but for Europe. Macron’s formula was to be that only companies that have settled at least half of their production in Europe would qualify to sell goods to the government. He calls this the plan that would protect Europe in this new age of globalization.

At the end of the day, the difference between Le Pen and Macron was a sense of power. Le Pen realized the authority of the president ended at the French border. Macron, thought he really would have a say in Brussels and Berlin. Ah, what fools we mortals can be