Crash & Burn & the Sixth Wave


QUESTION: Martin, as all members do, I really do thank you and appreciate you for your knowledge and insight. I am a business owner – Real Water and do approximately $10 million in annual sales right now. As a concerned citizen, I have also run for political office and was elected to the Nevada State Assembly in 2015. With Republican control, our legislature pushed through the largest tax increase in our State’s history in the name of more money for education (I led the opposition against the tax, but failed in preventing it). Of course, our latest school ratings came out and we are still ranked at the bottom – 50th. More government is NOT the solution!

I completely understand we are headed for a financial crash and burn. You have frequently stated that the only reason you are doing what you are doing is for your posterity. Other than personal preparation, extra food, don’t be in bonds, etc., what do you believe is the most beneficial thing we can do to help our country come out of the crash and burn with more freedom and limited government (like our Founders so emphatically intended) as opposed to the other potential of totalitarianism that you frequently warn us about? What is the most effective way to rally the troops so to say to help push our civilization in the proper direction?

To an elevated lifestyle,

 

ANSWER: The Government always thinks that throwing more money at something make it better. I have NEVER seen where that has EVER corrected any such trend. The problem lies in the total mismanagement. Governments are simply incapable of operating even a bubblegum machine. They completely fail to understand the economy, human nature, or society as a whole. The only way to actually correct such a problem is to privatize. That installs actual management and employees must actually perform. Government unions demand benefits and they negotiate with themselves. This is why the entire socialist agenda is collapsing.

I had a friend who was a postmaster. He had to tell an employee he would be checking on them a day before to ensure they were doing their job. The union made them provide notice so the employee would not actually be caught doing anything. This is how government unions have destroyed themselves and society. This is what we are headed into a crash and burn because governments do not respect the people and assume we are an endless supply of revenue.

All government agencies should be privatized and then the services they provide would actually work. Going to the New Jersey Division of Motor Vehicles was a case study in how not to run a government. The people were nasty, you would wait in line and they would be having a conversation with the next employee about what they would do after work and actually make you wait even 5 minutes while they did this right in front of your face. The attitude was WTF do you want now. Just absolutely nasty and hostile. No supervision and nobody even forces them to actually work. Always a horrible experience – not just one time. Ask a question and you NEVER got a straight or correct answer.

It is a structural management problem. There is no accountability and you can look at any government agency and you will see the same pattern. Increase the budget and there is NEVER any actually change. They cannot improve because there is a lack of management ability.

What does the Crash & Burn look like? It all depends upon how long we have to wait to achieve it. If we get the start of a Crash & Burn in 2021, then there is real hope of a soft-landing. If we are looking at stalling and refusing to change as taxes continue to rise, we will see that last wave of totalitarianism and then what comes AFTER 2032 is a very hard landing. That type of decline historically results in civil war and/or revolution.

All I can offer is what has happened before historically. My personal opinion would be just a guess and that is not what clients want to hear. So the sooner the better and the longer this is stalled the worse it gets.

This hostile attack against Trump is symbolic of the bureaucracy fighting to keep its power. They think if they can get Trump out of office, they will return it back to normal with a career politician. They are seriously wrong for the people voted for Trump because they are fed up with the system as is. This was not a personal popularity contest that Trump won. It is the rising tension of the people. There is no going back. This can only lead to a confrontation between the left and right. Choose where you want to live based upon the political orientation of that area. The area I live in was conservative which voted overwhelmingly for Trump. That is a bit safer than a left area for they ultimate come after you because they see you are the problem, why things are not going their way.

Euro Members to INCREASE debt before the ECB stops buying!


 

Reliable sources are reporting that the European member states are going to rush out debt to try to lock in the low-interest rates before they start to rise and the ECB is still buying very aggressively. We are likely to see new issues of debt to increase before the ECB stops buying

Is Draghi Really Ending QE?


Mario Draghi said the euro-area economy is strong enough to overcome increased risk,  and therefore this justifies the European Central Bank’s decision to end bond purchases bringing to an end a decade-long failed experiment. The truth behind this statement is starkly different than being portrayed in the press. Draghi also pledged to keep interest rates unchanged at current record lows until his personal term is finished next year. There is the contradiction for if the ECB stops buying debt, who will do so at artificially low rates of interest?

Draghi knows full well that he has utterly destroyed the bond markets in Europe. The ECB has also made it clear that they will REINVEST when the bonds previously purchased mature. The Federal Reserves has taken the opposite position and will NOT reinvest allowing their balance sheet to shrink.

If the economy is that strong, then why not end the QE right now? The fallacy here is that this has nothing to do with the economy. The ECB has simply had the member states on life-support. Interest rates will soar in Europe on long-term debt or there will be no buyers. Pension funds cannot buy 10-year bonds at even 3% when they need 8% to cover liabilities.

The statement by Draghi is creating a total paradox. You cannot keep short-term interest rates where they are and charge negative rates for deposits and simultaneously end QE and expect to sell bonds to the public at insanely low levels.

The press interprets this as the ECB with ending QE because they are “betting that the euro-area economy is robust enough to ride out an apparent slowdown amid risks including U.S. trade tariffs and nervousness that Italy’s populist government will spark another financial crisis” reported Bloomberg. What is seriously omitted here is that the member states will be UNABLE to sell long-term debt at these low levels to the private sector and the free market will send rates higher. This means that the states will have to then raise taxes to stay within the EU criteria and that will further suppress the European economy.

We are simply at the end of the road of this complete insanity. So buckle up. Get ready for the ride of a lifetime and make sure you keep your hands and feet safely inside the vehicle. Is the ECB risking a total collapse in public confidence when they discover you cannot keep rates artificially low and end QE simultaneously

Malaysia Looking to file Lawsuit Against Goldman Sachs?


May was an important turning point in Southeast Asia. The corruption that has engulfed the previous Malaysian government centered around a sovereign wealth fund involving Goldman Sachs has rocked the entire Malaysian peninsula. The national debt, which was believed to have been $170 billion, appears to be more like $250 billion of 80% if the national GDP.

Prime Minister Mahathir Mohamad was sworn in on May 10th. When his aides first entered the government offices, they were confronted with a shocking sight. There were garbage bags filled with shredded documents intermixed with left-over food half eaten thrown everywhere. It was clear, the previous government sought to destroy all the evidence of their corruption.

The new finance minister discovered computers that even the highest-ranking bureaucrats could not access. Computers were set up to prevent access by anyone other than one or two people. Evidence of massive corruption was what turned the election on May 9th, 2018.

Goldman Sachs’ role, I wrote back in 2015, has been highly criticized in the Malaysian media and political circles after it emerged that 1MDB sovereign wealth fund paid hundreds of millions of dollars to the bank for helping it raise $6.5 billion in three bond deals in 2012 and 2013. Goldman Sachs earned around $590 million in fees plus commissions and expenses from underwriting the bonds, according to Reuters. The reported fees are highly excessive, nearing 10% when such fees are typically only 1% in bond underwriting.

There is now talk about filing suit against Goldman Sachs for its role in this scandal. The likelihood of filing a lawsuit against them in New York City being successful is probably zero. They will have to deal with the most corrupt court perhaps in the world that is notorious for protecting its local banks – Southern District of New York and the Second Circuit. My recommendation is to petition the Supreme Court to bring the suit in Washington DC that they will NEVER receiver a fair trial in New York City and they should get on the phone to Donald Trump to start applying political pressure

Do We Really Borrow From Only Ourselves? Does the Debt/GDP Ratio Means Anything?


QUESTION: Mr. Armstrong, the famous economist Paul Krugman says that debt is ok when we owe it to ourselves. He calls it “deficit scolding” as he wrote in the New York Times. Would you like to comment on this statement?

GH

ANSWER: Paul Krugman seems to lack any historical understanding of how nations rise and fall. Anyone who claims debt is OK and can be infinite because “we” owe it to ourselves is clueless. He wrote in the article you referred to that “we have a more or less stable ratio of debt to GDP, and no hint of a financing problem.” The debt to GDP ratio is interesting but totally irrelevant. China’s debt to GDP stands at 250%, the USA at 103%, and Greece buckled at 186%. Obviously, this ratio is rather meaningless as a forecasting tool. I have published this chart on call money rates previously. In my studies, I quickly discovered that you cannot reduce the cause of any effect to a single issue. We can see that the peak in call money rates took place during 1899 and it was the lowest in 1929 when the Great Depression hit. You can’t even claim that if interest rates hit some magical level the stock market would crash. The world is far more complicated than just this one-dimensional approach to everything.

Capital flows were fleeing the USA in 1899 so interest rates went higher with a shortage of money. In 1929, the capital was in the USA for it rushed here because of World War I. The inflow of capital created an excess so the peak in call money rates was lower than 1899 when capital was fleeing. We even have the world of President Grover Cleveland from the Panic of 1893 commenting on the net capital outflow because of the “unsound” financial policy of the Silver Democrats.

The greatest mistake in the analysis is always trying to reduce any effect to a single cause. The world is a complex mechanism. It is indeed like a rainforest. There are countless species and each is interconnected. Exterminate one and you will find that it was the food source for another which dies. That species, in turn, was the food source for yet another and so on. The world economy is equally complex. This is why I say we are ALL CONNECTED. Create a war in one region, we may not be involved with troops, but the capital flows shift.

Everything is interconnected. There is no single cause and effect. Looking at GDP debt ratios is pointless. This is also why fundamental analysis is notoriously wrong. The majority tries to reason the future based upon this one-dimensional analysis and they NEVER got it right. I have posted this video clip of Larry Summers before. He is asked why can’t you guys ever get it right just once. His excuse is blunt. The economy is extraordinarily complex like the weather. He argues nobody can forecast the direction.

For anyone to say that debt can be infinite when we owe it just to ourselves is a fool. At times, 70% of the national debt has been accumulating interest payments. A national debt is the single greatest way we transfer wealth among citizens as well as nations. I kept yelling on Capitol Hill that Quantitative Easing would fail, it would not “stimulate” the economy for a very simple reason. The assumption that the Fed would buy 30-year bonds and then the banks would lend into real estate with lower interest rates was crazy. The debt is NOT owned by exclusively Americans. China was smart and it sold the 30-year bonds and swapped to 5-year or less paper. The money was transferred out of the country. To pretend this is a debt we “owe” ourselves is just fantasy.

Even domestically, if I am the lender and you are the borrower, then you are paying me because you borrowed the money. Your wealth is transferred to me because you could not wait to buy something for cash. Sorry, I believe Adam Smith was someone who tried to observe HOW things actually work instead of trying to support a predetermined conclusion.

Joseph T. Salerno: This is Why Socialism is a Negative Sum Game


Published on Nov 7, 2017

Joseph T. Salerno (born 1950) is an American Austrian School economist who is Professor of Economics, Chair of the economics graduate program in the Lubin School of Business at Pace University, and Academic Vice President of the Ludwig von Mises Institute. In this talk with Jeff Deist he talks about why socialism is a negative sum game. Full clip, creative common licenced: https://www.youtube.com/watch?v=HBIkj… — This channel aims at extracting central points of presentations into short clips. The topics cover the problems of leftist ideology and the consequences for society. If you like the content, subscribe to the channe

Mandatory Sick Leave for Temps, Part-Time & Just Commission Employees


The State of New Jersey just keeps making it more expensive to operate a business in the state. New Jersey has now become the 10th state to adopt mandatory paid sick leave. It goes into effect on October 29, 2018. Giving sick leave to employees has been generally a standard in America. What these new regulations do is go much further. All employees, whether temporary, part-time, full-time, salaried, hourly or paid on commission, must now accrue one hour of sick leave for every 30 hours worked. Employers may cap an employee’s sick leave accrual and use at 40 hours per benefit year.

The crazy thing is hiring a temp worker because someone else is out sick or on maternity leave now involves given such a person also gets sick leave benefits. Then the employer and employee may mutually agree to a payout in the final month of the benefit year of 50% or 100% of the employee’s unused sick time. If unused time is paid out in full, carryover is not required. If 50% is paid out, the remaining 50% will carry over. If the employee does not want to be paid out, or the employer chooses not to offer this option, all unused time will carry over up to 40 hours.
Employers may grant sick leave up front in a lump sum. When using the lump sum method, employers may either pay employees for unused sick leave at the end of the calendar year or allow carryover. With lump sum plans, whether to pay out or allow carryover is the employer’s choice – the agreement of the employee is not required. In no case will time be forfeit, unless it is in excess of the carryover limit of 40 hours.

This is now extending benefits to people who are not regular employees. Retail stores hire workers just for the Christmas season. That means they will need to account for sick leave and carry this over if the person returns for a temporary job in the future year? The accounting this imposes on small business is just insane. Of course, politicians want to pretend to be caring for the people when in fact they may be reducing job opportunities for them in the end. Automated registers are showing up everywhere. A grocery store to Home Depot have registers you scan in your own purchases, pay, and leave. The more regulations, the more we will see auto-registers expand into many retail operations to solve the rising regulation and costs.

And they wonder Why New Jersey is #2 State behind NYC with net-migration leaving and business as well?

Ancient Bankers Testing Methods for Counterfeits


QUESTION: Mr. Armstrong; You have mentioned that when money was gold and silver in ancient times, there was the problem of shaving the genuine coins as well as counterfeiting them. I have seen counterfeit shield for US fractional money during the 19th century, where there examples such as that to distinguish genuine from counterfeit coins?

PS Your site is fascinating. The wide range of subjects covered is real food for the mind.

Cheers

PY

ANSWER: No, there were no examples as was the case with the counterfeit shields that were produced and sent to the banks in the United States.

What has survived are commercial weights such as this one from our collection in the shape of an amphora from ancient Athens. This is rather heavy weighing 319.50 grams so it was not used for coins, but a standard weight in commercial transactions.

Above is an Exagium, which is to weight and verify coins. The was the weight of a gold solidus so one would test the coin against this weight.

The Greek banks tended to put test cuts directly into the coin to ensure it was real. It is common to see this type of test cut deep into the Athenian silver Tetradrachms. In Contrast, the even ancient bankers relative to the Athenians more than 200 years before would place a stamp on the edge of the coin of that banker. Here is a coin from Lydia who nine banking marks showing the coin saw a lot of circulation.

The Roman bankers used a different method. Instead of cutting the coins the bankers would us a test punch mark. Some appear to have been more elaborate and the punch mark was probably their initials so they knew they tested the coin previously.

By the Middle Ages, this problem of dealing with counterfeit gold and silver coins is what began banking. You would deposit your coins in the bank and then this began gyro banking. You would effectively write a check transferring money from your account to another. There was no testing of every single coin to complete the transaction.

This was the real impetus behind banking to reemerge after the Dark Ages

Using People from the Past to Support Nationalism


QUESTION: Mr. Armstrong; I am curious given your passion has been history you have explored things nobody seems to have. What has impressed me is how you pull history together in such a logical way you make it come alive. My question is the origin of Germany. We were taught here in school that Germany traces its origins back to the Battle of the Teutoburg Forest in the year 9AD. What is your take on this subject if you care to answer.?

PVB

ANSWER: Yes, I am aware that Germany traces its origins back to the Battle of the Teutoburg Forest of 9 AD, but it is really political propaganda. It was not until 1871 when Germany became a nation-state. That is when most of the German states unified into the Prussian-dominated German Empire. Nonetheless, the famous battle in which Germanic tribes annihilated the advancing Roman army has been used for political agendas over the centuries. The battle is actually believed to have taken place near Kalkriese, northeast of Osnabrück, but the battlefield has not been confirmed. The Germans did ambush the Romans in a tight geographic area between a hill and a moor. It is well documented as a disaster even in Roman literature. Some 18,000 Roman troops were slaughtered by the Cheruscan Chieftain Arminius and his allies whose name was changed to Hermann to make him a local hero.

Arminius has been propagandized as Hermann the German and this battle has been interpreted as being the birth of Germany as a nation-state. All of the coins found at the location confirm the time period. The coins discovered at the location to the early years of the first century AD during the time of Emperor Augustus. There were also coins of late Republican time period that were still in circulation. However, we date a site by the latest coins discovered.

The defeat of three Roman legions under the command of Rome’s Germania governor and General Publius Quinctilius Varus by Arminius is a true account. It is also a fact that the Romans never again attempted to establish settlements in Germany following the Battle of the Teutoburg Forest. He was the son of Sextus Quinctilius Varus who was quaestor in 49 BC and defended Corfinium when Julius Caesar (100-44 BC) besieged the city during the civil war against Pompey. Sextus was forced to surrender the town, was pardoned by Caesar, but immediately betrayed him and fled to Africa, where Caesar’s deputy Curio was fighting against Pompey’s allies. Sextus did his best to win over Curio’s soldiers to abandon Caesar’s cause. Despite the fact that Curio was defeated in Africa, Caesar won the civil war. Sextus did not return to Rome since it was not Caesar’s policy to pardon a person twice. It is not known whether he was involved in the plot to assassinate Caesar. We do know that Sextus was involved at the battlefield of Philippi, where the new leaders of the Caesarian party, Marc Antony, and Octavian, defeated the last republicans oligarchs. Sextus then asked one of his freedmen to kill him.

How his son Publius Quinctilius Varus rose to power under Augustus is not known. Clearly, he was not held to account for the sins of his father. He clearly accepted the end of the Roman Republic, in contrast to his father. What is known from that period is that the Civil War did divide families as well. Publius, nonetheless, became a personal friend of Octavian/Augustus and associate of Tiberius. He was given Syria as his province in 7 BC during which time he issued this provincial coin. While serving as the governor of Syria, Varus guarded the borders against the menace of Parthia and violently suppressed revolts in Judaea and Samaria, when it was learned that they had been apportioned to Herod Archelaus in the will of Herod the Great. The military operations in these regions are sometimes known as “Varus’ War.” Varus, however, is best known for his role in events after he returned from Syria and took up a command in Germany in 6 AD. During 9 AD, he led three legions against the German tribes at the Teutoberg Forest. He was killed and the legions annihilated in one of the greatest military disasters of Roman history. There is a surviving gravestone in the Bonn museum which clearly confirms that there was indeed a Varus war supporting the Roman accounts. We do know that the event took place.

The background of the German hero, Arminius (Hermann), is not widely explained in German folklore.  Arminius had actually received a Roman military education and had Roman citizenship. He even commanded an auxiliary German cavalry attached to the Roman army before deserting and switching his allegiance. We do not know why he took this step. Some believe that he merely entered the Roman military to learn the tactics to defeat them. Clearly, Arminius who has been portrayed as the heroic liberator who created the German nation was crafted by Martin Luther to support the liberation from the Roman Catholic Church. The story supported his political cause. During the mid-20th century, the National Socialists in Germany further enhanced this concept during the Third Reich raising Arminius as the .heroic liberator who created Germany. This myth has been used over the centuries whenever it was needed to support the rise of nationalism.

Exactly where the battle took place is not precisely known. The Kalkriese Museum was to begin a three-year excavation project to try and get some answers. This is where numismatic archaeological evidence is playing an important part in the current research. Coins help to date an event, but a battlefield would have more coins than usual. There is no absolute proof where the battle took place at this location. There have been no inscriptions of the 19th or 18th or 17th legions discovered.

The new excavation authorized in 2017 hopes to discover some piece of a helmet with an inscription or a plaque with the name of a unit. There are also stamped artillery bolts that can often be used to also confirm legions and/or events. The Roman would use a slingshot to propel bullets. Typically, these bullets are marked allowing for the identification often of specific legions.

Coins are a very important part of documenting history. There are bronze coins of Augustus that have countermarks “VAR” which has often been attributed to Publius Quinctilius Varus. As pictured above, Varus had the authority to issue local provincial coins in Africa Proconsularis as well as in Syria. His name appears in the legend and in some cases also with his bust. Since he had the authority to issue local coins, he may have had the authority to countermark imperial coins that were worn in the West as well, yet no such local coin exit issued by him in either Gallia or the Rhine border region. Therefore, local coins issued in the name of Roman officials seem to be common in Eastern Provinces under Augustus most likely because of the difference in culture led them to retain their own monetary units.

Nonetheless, there are countermarks known in the Syrian province on local provincial coins when worn that have been attributed to Varus. These are noted in Greek Imperial Countermarks numbers 658 and 659 that show “VAR”,”PVAR” and “QVAR” inscriptions. These appear to coincide with Varus’ term of office as governor of Syria. This has been used to infer that the “VAR” countermarks on bronze coins of Augusts found in the region of Germany are attributed to Varus. It was a common practice to counter-stamp bronze coins that were worn. In some instances, the coins are devalued. Here is actually a barbarous imitation of a Roman sestertius of Claudius (41-54AD) that is severely worn and the coin was a Sestertius with the countermark “DV” meaning it was devalued to a Dupondius – half the original value. Therefore, the “VAR” countermark is most likely certifying the value remained unchanged.

It was also a common practice for the legionaries to burying their money in the ground before a battle. These are hoards not of individuals, but the pay for the army. The dead would have been stripped of their armor and any coins would have been taken and the bodies were left to rot in the forest and provide food for the animals.

In early 2017 a hoard of more than 200 silver Roman coins, all dated prior to 9 C.E., were found in the Kalkriese area where the battle is suspected to have taken place. This was probably not the funds buried by the legion representing their pay. It is unlikely that Varus possessed any authority to actually strike coins as a moving military mint. That has been a common practice mostly of usurpers and during periods of civil war. In such cases, the actual dies have also been discovered. Here is a die of Gordian I (238AD) who survived only 21 days.

During 2016, University of Osnabrück archaeologists discovered eight Roman gold aurei east of Bramsche. This opened up the speculation that perhaps Bramsche might be the sight of the battle. The coins were of the early type struck prior to 9AD depicting Augustus on the obverse, with his grandsons Gaius and Lucius on the reverse. There were some other minor bronze denomination coins also found at this sight. Bramsche has been nicknamed field of gold by the local citizens who have found gold coins in this area before. Back in 1987, there was the discovery of 162 silver coins and three Roman slingshots bullets. None of the coins discovered at this site date after 9AD. However, other than the slingshot bullets, there has been no military objects found at Bramsche. Some argue that the gold coins were lost by officers attempting to flee the massacre.

Germanicus (15 BC – 19 AD)  who was the grandson of Marc Antony and Son of Antonia, he was, therefore, the brother of future Emperor Claudius and the father of future Emperor Caligula, obtained his name for he led the legions to Germany after the defeat of Varus. Germanicus’ troops campaigned against the Germanic tribes for six years during the aftermath of the Battle of the Teutoburg Forest. According to contemporary accounts, Germanicus found the battlefield and buried the human remains which included skulls nailed to trees.

Now, the question is rather simple. Is the reinvention of a former Roman soldier Arminius transformed into Hermann and founder of Germany, which did not become a nation-state until 1871, a unique rewrite of history? The answer is absolutely no way. Here is a gold medallion of Constantine I the Great (305-337AD), the man who declared Christianity the official state relgion of the Roman Empire. Look closely and you will see that Constantine pictures himself with the Roman god Sol. To the pagans, this was a political propaganda piece. Sol Invictus was becoming virtually the supreme god.

Constantine’s propaganda was all about defeating the reforms of Diocletian who established the Tetrarchy whereby emperors would retire and be replaced with their second in command. Therefore, picturing himself with Sol was a political statement suggesting that there should be only ONE emperor. Constantine supported Christianity using the same political agenda that there was one god so there should be only one emperor.

Those who seek power often rewrite history to argue what they are doing is really being heroic like some former person in history. They change names, facts, and even timelines to justify their actions. It has been a practice that prevails throughout history.