Tag Archives: Illinois credit now “Junk”

Sep 13 2017

The Coming One World Currency


Armstrong Economics Blog/Foreign Exchange

Re-Posted Sep 13, 2017 by Martin Armstrong

QUESTION: Dear Marty,

I sure would appreciate any thoughts you have on rumors making the rounds that the International Monetary Fund has tipped its hand, in part via its June 2017 “Fintech and Financial Services: Initial Considerations” IMF Discussion Note, and intends to replace the US Dollar as the global reserve currency as early as January 2018 (probably later) with its decades-old Special Drawing Rights by converting the “foreign-exchange reserve assets” into a global currency using Distributed Ledger (Blockchain) technology.

It is only a matter of time until US hegemony built upon its reserve currency status (as well as other factors) goes the way of T. Rex. And, I have long believed that, while DLT (Distributed Ledger technology) is not going away, that it will be the IMF/Central Banks/Sovereigns who will end up creating their own horse in this reserve currency race that will win based upon “global” legislation and regulation … but 2018 is right around the corner.

GH

ANSWER: No. This is really rubbish. I can’t believe how many people are writing in asking about this subject matter. Nevertheless, a new one-world currency is coming. It will be different from what anyone imagines. But so many people hate the dollar because they see this as keeping gold down. You better understand what is really taking place before you start making a wish.

What makes the dollar the reserve currency is the national debt. It is the only game in town to park big money. All of these conspiracy theories that hate the dollar so much fail to understand that the USA is not trying to keep the dollar as the reserve currency. It was the Plaza Accord that encouraged Europe to join together to create the Euro to compete with the dollar. The USA has also tried to convince Japan to relax its regulation to freely allow the yen to participate in the world economy. Yes, the yen floats. However, nobody could issue a bond in yen without the approval of the government even in London between two private parties.

The SDR cannot replace the dollar by January 2018. What a joke. Yes the IMF is making a pitch to be placed in charge of a new one-world currency. I had argued originally for the SDR back in 1980s when the IMF was a legitimate agency. Time and money has corrupted the IMF and it is now just a political ploy.

Here is the letter I received from the White House back in 1985 rejecting the idea of the SDR. This, they argued, would mean the surrender of sovereign power as has been demanded in Europe. Today, I would not recommend the SDR. We see the tension created by trying to force the Euro upon all of Europe. This is NOT a one size fits all.

I am preparing a special report on this which will include the whole future of block-chain. It will be ready before the WEC in November. A new one-world currency is coming. There is no doubt about that. The market forces will make that reality. That is the dollar rally – not decline.

Sep 12 2017

Legal Tender Money v Fiat


USD $,

Armstrong Economics Blog/USD $

Re-Posted Sep 12, 2017 by Martin Armstrong

US$-Oh-No

QUESTION: 

I wonder if you would care in a future blogpost to cast some light on the following?

The sole ‘legal tender money’ in the final analysis is the FRN (Federal Reserve Note — coins aside) collateralized by the Fed’s assets.All other ‘money’ is private bank credit money or suchlike,including Money Market Funds and other said-to-be money-like instruments.Despite the aspersions that surround Fiat money it is in toto a small number — around $1.6 bn. However there are promises to pay in FRN on demand.

Does that last fact account for the talk about banning cash ( ie the FRN) ?

Like the promise to pay in Gold it seems impossible to pay in the FRN were that ever to be demanded in size. De Gaulle ended the gold-on -demand offer so could something similar could happen to the FRN ? Back then Gold rose against all assets — ditto the FRN ?

I hope you are reading this in some comfortable place, given the atrocious weather in Florida.

Best Rgrds

Bill

Aquinas

ANSWER: Most money is actually created by the private sector through leverage and bank loans today. This is why when there is a crash, the contraction takes down banks for it is the leverage that collapses. When you have a debt based system, then the monetary system becomes leveraged. With the fall of Rome, the Catholic Church adopted the Sin of Usury thanks to Saint Thomas Aquinas and his 20 volume work, Summa Theologica.

Hammurabi-StellaThere has never been actual tangible money issued by any government that was worth strictly its metal content. It was always valued greater than its intrinsic value. Even the first coins issued by any government took place in Lydia, located in modern Turkey. They used gold simply because that was the private medium of exchange. The first step was simply to create a standardized weight for in the Bible they talked about weighing the silver to make payment. When the king began to stamp his seal on money, fiat began. People used metal and wheat as a medium of exchange. The legal code of Hammurabi specified prices in wheat and silver. The king attempted to regulate the economy, but he did not borrow money nor did he issue coins.

The definition of fiat as stated in Merriam-Webster dictionary reads:

Definition of fiat

  1. 1:  a command or act of will that creates something without or as if without further effort According to the Bible, the world was created by fiat.

  2. 2:  an authoritative determination :  dictate a fiat of conscience

  3. 3:  an authoritative or arbitrary order :  decree government by fiat

Fiat is anything dictated by government. It need not be limited to paper money. Historically, even gold and silver became fiat once government decreed its value. Above, we can see the coinage of Lydia was reduced in weight to expand the money supply to pay for war. This was fiat – the government dictating the value of money.

Therefore, these scenarios about fiat money are so grossly exaggerated. All money is fiat when issued by a government. Even gold coins were fiat since the value was set by government and there was also a profit to coin money.  Rome funded itself about 80% by owning the silver and gold mines and they took the metal, coined it, and paid their bills. So even that was fiat since they declare its value. CONFIDENCE in the government of Rome was first shaken by Maximinus and his declaring that all wealth belonged to the state. Then the final straw came in 260 when the Emperor Valerian was captured by the Persians. Suddenly, Rome was vulnerable and then see the collapse in the currency.

As far as legal tender is concerned, that means it is acceptable by government to pay taxes and fines. What good is it that all your money is in BitCoin and you have to pay taxes when the government does not accept it?

This entire argument about fiat and money should retain a store of value is nonsense. That has just NEVER been the case historically. We live in a business cycle with booms and busts. To argue that money should be constant is Marxism. You cannot have it both ways where your house gains in value yet money itself remains constant. How is such a relationship even possible? They are mutually exclusive of one another.

The entire system rests solely upon CONFIDENCE. You would only accept a gold coin in payment solely because you know someone else will accept it from you. With that degree of CONFIDENCE, nothing would be acceptable.

The only thing that will retain a barter value at all times has historically been food because you need it to live.

This is why I say that the Monetary Crisis Cycle comes into play when we have a collapse in public CONFIDENCE. It really has nothing to do with the quantity of money. We have witnessed massive increases in money supply by Quantitative Easing without an uptick in inflation. People have hoarded money – not spent it. When they shift their CONFIDENCE from government to the private sector, then they will see to spend their government money and move toward tangible assets. Many have been doing that with real estate.

Therefore, the leverage creates the real money supply. The physical supply of cash is tiny. The government is trying to reduce that even more to gain taxes. Bankers are in favor of eliminating cash for it would also prevent bank runs in the traditional sense.

Sep 12 2017

Am I Certain About the Strong Dollar?


Armstrong Economics Blog/USD $

Re-Posted Sep 12, 2017 by Martin Armstrong

QUESTION: Dear Mr. Armstrong,

I have been reading your blog for over a year now. Your posts are a superb read and one of the first things I check every morning before leaving for work! Although I admire your work and writings a great deal, I’m sometimes surprised by the level of certainty you seem to have about how things will unfold in the future. You stated multiple times now that ‘only a rising dollar will break the world monetary system’, but with more and more countries trying to bypass the dollar system, how will the dollar ever get to the strength that is needed to do so? Will the world monetary system break for sure, or is there an alternative ‘softer’ transition possible on a global scale?

Thank you for your insights!

B (from Belgium)

ANSWER:

All the governments of the entire world can try their best to create some new currency to dethrone the dollar. They will fail just as Europe has failed with the Euro, You can denominate oil to peanuts in some other currency but that still will never put a dent in the dollar. Why? It is capital flows than count and trade is minimal. When you cash out of your commodity, where do you put your profits? Oh back into dollar denominated instruments?

The failure of Europe was to create a single debt. Instead, capital must still pick and choose between the Eurozone members and who do they trust more to buy their bonds. Just look at the interest rate differentials. They are all denominating their debt in Euros, but their credit ratings differ just as they do among the States that compose the USA. Germany wanted a single currency for trade, but they did not want to consolidate all the debts in Europe. Hence, we ended up with a single currency that could never become a major currency with no central core.

China will replace the dollar but only AFTER 2032. Until then, they must still work on establishing the Rule of Law so that capital will park in yuan with confidence. Denominating oil in yuan or euro means nothing. Where will you park your cash? That remains dollars for major institutions. There is no alternative. Even the Japanese yen is not a free currency because the government retained control over anyone anywhere issuing and debt in yen without government approval.

In general, Europeans are still trapped in World War II thinking that a stronger currency means economic boom. When all the currencies were wiped out by the war, politicians used the currency value in Europe as a reason to prove they were doing a good job. So the historical bias in Europe has been dominated by the perspective. The USA was a third world country during the 19th century. It was the “emerging market” for European investors. It was virtually bankrupt in 1896 and it was World War I and II that raised the USA to the richest country in the world by 1950 holding 76% of the total world gold reserves. That was accomplished not by Marxism, political economic manipulation, or anything any politician enacted. It was create SOLELY and EXCLUSIVELY by capital inflows because of Europe running around destroying itself.

Above is a chart of the capital flows from 1960 to 1990. It was the US net investment that rebuilt Europe – not Marxism adopted by European Politicians in response to the Russian Revolution in 1917. The capital concentrated in the USA and then moves back to Europe as investment. It was the USA that rebuilt Europe – plain and simple.

 

We have reached a 5000 year low in interest rates. The ECB owns 40% of all Eurozone government debt. If any central bank is in danger of collapsing it is the ECB. Raising rates will create a huge whole in their balance sheet. Then the true cost of QE will be exposed. Why do you think Draghi is dragging his feet. He knows stopping to buy the debt will cause rates to rise because the governments will be forced to find real buyers. Only a complete fool would rush in where the ECB is withdrawing.

There is no one who wishes this forecast will be wrong than me. Then I can retire, say goodbye to the world and fade into the sunset. Everyone knows I do not need the money. We do not even sell advertising on this blog. We do not force you to register and then bombard you with endless emails trying to sell you something. I too have family. I fear for their future – not my own. I would much rather say its time to Beam Me Up Scotty than having to deal with nonsense I cannot prevent. This is not my personal opinion.

The ONLY time we get monetary reform is when the dollar RISES, not declines. Hey, if the dollar declines, then interest rates will continue to travel negative, gold will collapse, the stock market will implode, and Trump will emerge as the best president in history creating massive new American jobs exporting everything not just blue jeans, rock & roll, and US corrupt law. Emerging markets can keep borrowing dollars with no end, dumping commodities than are at excess supply, and everyone will be perpetually happy – the euro will be strong at last and magically the ECB can just keep European governments on life support without end.

Unfortunately, governments are broke. They are hunting people with any money at all and that creates a disincentive to invest, rising unemployment, and civil unrest turning the poor against the rich instead of the poor against the politicians who have created this mess. The negative interest rates harm the poor and middle class where the rich can export their money and invest outside their country to preserve wealth.

No, I am sad to say this is the net result of merging all global trends – not my opinion or preferred outcome. I am not even making this forecast just to scam you into buying some book by hyping the situation. My only incentive is to save my own family. As I said, if this was just for me, I would now go enjoy life while I am still in reasonable shape to explore the world.

Sep 12 2017

Reality of the Dollar


Armstrong Economics Blog/USD $

Re-Posted Sep 12, 2017 by Martin Armstrong

QUESTION: Hello Mr Armstrong.

I understand the logic of the weakness / strength of currency that you outline from time to time in your modelling of the global crisis.

You omit to explain the importance in the pace of change in the value of a currency; for instance Venezuela and Argentina according to your explanation of the dollar weakness ought to have benefited from a free falling currency. They are both exporters of natural resources that receive foreign exchange for their exports. Can you please elaborate on this difference? The US dollar is of course not free-falling, but for the global reserve currency, it has fallen precipitously year to date.

My second question concerns the groundhog mentality of a lot of commentators about the dollar and its safe haven status. I wonder why it is that when a group of large countries decide to exclude the dollar from their transactions, it would have nothing to do with that currency’s weakness?

You say the US is an oil exporter; well it does export oil, and it also imports oil of the a different grade to the one it exports. In addition, is it just a coincidence that countless countries with oil assets have been invaded and/or sanctioned in the last 70 years? Persia, Iraq, Libya to name but a handful of energy nations, and let’s also throw in the case of the opium trade coming out of Afghanistan and which has the fingerprints of the US all over it.

I would appreciate not hearing an explanation about the need to spread democracy, human rights and being the honest broker as the reason the US holds 800 bases around the world and is currently the process of agitating to cause harm to the middle east, eastern europe and the south china seas.

Many thanks for your voluntary service to readers, especially the historic aspect of your memos, which are quite fascinating.

Best regards

CAL from Switzerland

ANSWER: Your proposition that the “pace of change” in the value of a currency when it collapses in such places as Venezuela and Argentina ought to have benefited from a free falling currency, is an interesting question that truly reveals the importance of CONFIDENCE. True, Trump and his predecessors since Ronald Reagan have preferred a weaker currency to stimulate foreign sales and thus the theory is such a policy will increase jobs. This is seriously flawed as always because of this one-dimensional analysis attempt to always reduce everything to a single cause and effect.

The value of a currency at its base is constructed upon CONFIDENCE in the government. If you do not TRUST the government, you simply will not accept their currency. This has been the case throughout history. I have pointed out how the Emperor of Japan lost the CONFIDENCE of the people and as such they would no longer accept his coinage. Japan stopped issuing coins for nearly 600 years because each emperor devalued the outstanding coinage to be 10% of his new coins. Thus, people would not accept Japanese coins for they could become worthless  on the whim of an emperor. They reverted to bags of rice and Chinese coins – not Japanese.

Therefore, a weak currency will stimulate foreign sales provided you TRUST the government. Lacking that, the currency simply goes into a free fall and becomes worthless. This was the fate of the hyperinflation in Germany. It was NOT the Quantity of Money theory, it was the fact that there was a 1918 Communist Revolution in Germany where they had even asked the Communist Russians to take over Germany. It was the collapse in CONFIDENCE that led to the hyperinflation. We saw the same thing in every instance of hyperinflation for that is the free-fall when people not longer trust government. It has never been the Quantity of Money and this is also why the Quantitative Easing policy of the ECB has failed.

Likewise, you will see the same impact in interest rates, which are the reflection of future inflation. Rising interest rates will attract capital inflows but only to a point where CONFIDENCE is maintained. If CONFIDENCE in government collapses, then interest rates soar reflecting the risk factor in the Survivability  of government.

Consequently, all of these theories are not linear. They operate on a BELL CURVE. It is like my mother always said – too much of a good thing can be bad. A cookie or ice cream may taste great. But you cannot eat only cookies and ice cream. There is a limit to all things before the BELL CURVE comes into play.

 

Your second question as to why when a group of large countries decide to exclude the dollar from their transactions, it would have nothing to do with that currency’s weakness? This is simple. The strength of the dollar is based on capital flows, not trade. There has been the safe haven issue that dominated World War I and World War II because the USA really cannot be invaded. The USA was nearly bankrupt in 1896 when JP Morgan had to lend it $100 million in gold. By the end of WWII, the USA then had 76% or the world gold reserves because (1) it manufactured everything for Europe and provided food, and (2) capital fled to the States lacking security in Europe.

China and Russia and complain about the dollar all they want and attempt to denominate commodities in their own currencies. But trade is a tiny fraction of international capital flows. This is why the Euro has utterly failed to become a major reserve currency that even China liquidated and drastically reduced their Euro holdings because there was no central government debt. Anyone investing in Euros still had to pick and choose among the Eurozone debt and they selected Germany. Just look at the differentials in interest rates within the Eurozone. This reflect the same differences between the States in the USA compared to the Federal debt.

China understands what is necessary to create a reserve currency. They are opening a bond market to investors. This takes time. China must establish a solid rule of law in order to provide CONFIDENCE for foreign capital to park money in their currency. This is exactly what Europe has failed to do because Germany does not trust the other governments.

Your attempt to brush aside the fact that the US is an oil exporter tends to show more of a bias. The point is from the 1970s when OPEC embargoes were put into place, the USA was a major importer because oil was cheap. As with everything, raise the price and you will create the alternative, solar, wind, and fracking. As far as wars and the invasion of Iraq, do not confuse political corruption of Cheney with the state of the nation.

Your request that you “would appreciate not hearing an explanation about the need to spread democracy, human rights and being the honest broker as the reason the US holds 800 bases around the world and is currently the process of agitating to cause harm to the middle east, eastern Europe and the south china seas.” I have stated countless times that we are in a Crisis in Democracy and we by no means live in a Democracy – this is a Republic. I have been warning we are in a Private Wave since 1985 and governments only care about power, not human rights by any means. They are bankrupt and as such they are destroying the world economy by hunting money for taxes. You are in Switzerland. The Swiss secrecy was because Hitler made it illegal to have money outside of Germany. Today, the Swiss have given up everything that made it a safe haven. Fund managers are leaving for Singapore because the Swiss have adopted EU regulations. There is no longer an advantage to a Swiss account and they have given up everyone from Americans to Germans and Italians. Swiss secrecy is over. That ends the Swiss Comparative Advantage of David Ricardo.

Nevertheless, historically, ONLY those currencies of the dominant military power have EVER been the reserve currency. So you may not want to hear about the 800 bases etc, but you cannot escape the fact that part of the reserve status of any currency is the military power. When Athens became a major power after defeating the Persians, it was the Athens Owl (tetradrachms) that was being imitated in Europe, Asia, and in India.

We find Indian imitations of Roman gold aureus spanning more than 100 years. They are not counterfeits in the sense of trying to create gold plated coins, but they were of equal or greater metal content yet struck in the image of Rome because people TRUSTED the Roman currency in India just as people will TRUST US dollars in Russia or China. The dominant military power is also the reserve currency historically.

As for the decline in the dollar, we need the false move to set the stage to break the back of the world monetary system. ONLY then will we see a new reserve currency emerge. That will NOT happen with a lower dollar. A dollar rally will create sovereign debt crisis outside the USA and reduce trade exports for the USA, and the hunt for taxes will continue to reduce world GDP as today 2% is regarded as fantastic growth when 6% was the optimum in the 1980s.

Sep 11 2017

The Target Week of 9/11 Storms to North Korea


Armstrong Economics Blog/Nature

Re-Posted Sep 11, 2017 by Martin Armstrong

Tampa 1921

QUESTION: Marty, You said in Orlando last year you ran your models on where to locate in Florida and said a big one was due in 2017. Now with your target coming into play for the week of 9/11 and the storm about to hit your area, do you think this target of 9/11 pinpointed both?

ANSWER: It is an interesting coincidence if such things really exist. I suppose we will not know until this week is over. As far as the storm, yes I ran the models and the best area was the Tampa West Coast of Florida. It is not immune. When I grew up, my uncle lost his house on the beach in New Jersey twice during the 1960s. New Jersey is also not immune.

As far as Catagory 5 Hurricanes, as I explained this was the 32nd since 1924 and it should have been the biggest (Pi Cycle). They were forecasting it would run up the East Coast and avoid Cuba. Without using their weather models, cyclically Cuba should have been hit. Likewise, the hit should have been on the West Coast. I did not select Tampa because it is one of the lowest 5 lying cities at virtual water level and is prone to flooding during a flash summer rain storm. I think Tampa would get hit perhaps more so than St Petersburg with respect to flooding.

However, the last direct hit was the Tampa Bay hurricane of 1921 which was a Category 3 (111 mph to 130 mph) hurricane.  In 1921, the combined population of Pinellas, Hillsborough, Pasco, Hernando and Citrus counties was 135,000. Today, it is 2.7 million. The Tampa Bay hurricane of 1921 (also known as the 1921 Tarpon Springs hurricane) is the most recent major hurricane to strike the Tampa Bay Area.

Our office is not on the ground floor. My home is concrete and elevated up one floor. We will just have to see what happens. I agree, it is coming the same target week we had in markets and North Korea. I suppose this is a reflection on Murphy’s Law – whatever can go wrong will go wrong all at the same time.

Sep 11 2017

Hackers Break Equifax – Big Time!


Armstrong Economics Blog/Corruption

Re-Posted Sep 11, 2017 by Martin Armstrong

Welcome to the reality of the Digital World and there are those in government who want to eliminate cash and force everyone into electronic deposits. Well the new data breach at credit bureau Equifax appears to have affected up to 143 million U.S. adults. On top of that, Equifax has been slow to deal with the issue. This is reminiscent of the real Insider Trading from the 1930s when directors realized the company was broke so they sold their stock before any announcement. Here we have the company’s chief financial officer and two other senior executives cashing in on almost $2 million of Equifax stock once they learned about the hack, according to Business Insider’s Mohammed Hadi and Bryan Logan.

The Equifax data breach may have really profound lasting effects . Because they may have access to your information on consumers’ credit reports, including their Social Security numbers, credit card numbers and driver’s license numbers, they could open credit accounts in consumers’ names. They then could file an income tax return and get a refund before you even file your taxes. The Federal Trade Commission warned consumers last Friday to file their taxes early — “as soon as you have the tax information you need, before a scammer can.”

The IRS doesn’t initiate any contact with taxpayers by email, text message or social-media channels requesting any information. If anyone is contacted, be very concerned and do not answer and questions or validate anything. Call an account ASAP.

 

Sep 11 2017

Price Gouging in Emergencies


Armstrong Economics Blog/Uncategorized

Re-Posted Sep 11, 2017 by Martin Armstrong

There are a lot of people claiming that price gouging should be criminal. What they fail to take into consideration is that price gouging is the only way to really allocate resources. The critics will claim that this is people taking advantage of others. However, gasoline prices were fixed and what happened was that everyone ran out and filled their cars just to have it and really did not use it. Those who wanted to leave couldn’t because there was no gasoline. I myself could not buy gasoline. I had a quarter tank and it was enough to get me to the airport only. So many others could not leave and many who tried ran out of gas and were stranded.

Had gasoline prices been allowed to rise, then those who were just hoarding gasoline would have thought twice if they were not going to use it. The same was true with water. When I went to the store last Monday, people were buying everything. There were people with two carts filled with water.

The view that price gouging will deprive some who cannot afford it fail to actually leave the theories behind and go into the real world during one of these things to watch how people truly behave. Price gouging will prevent people from hoarding which then deprives others at any price.

Categories: Uncategorized
Sep 10 2017

The Dow – To Correct or Not?


Armstrong Economics Blog/Dow Jones

Re-Posted Sep 10, 2017 by Martin Armstrong

QUESTION: Hello Martin,

last week i read on your blog about possible fall in Dow Jones, you said it’s possible that we could see biggest fall ever and that should start this September but today you sad you don’t expect major correction. I’m sure there are many readers on your blog who are confused about this topic same as i am so please if you can drop few lines about it for better understanding.

Thank you in advance.

M

ANSWER: No, I have said all along that this is by no means a reversal in trend – a correction yes, but one that does not breach the reversals. If we test the very bottom of the technical channel, we are really looking at perhaps an 8% correction at best.

What I have warned about is that Plan-B is a correction in currency terms outside of the dollar. This tends to produce a more shallow correction. We indeed have that correction in play since February.

There is absolutely NO WAY we are looking at some drastic correction that ends the bull-run. To do that, capital has to flee to government bonds, which does not appear to be likely. We will lay out the extreme points on the Private Blog

Sep 9 2017

The Long-term Cycle of Monetary Crisis


Armstrong Economics Blog/Energy

Re-Posted Sep 9, 2017 by Martin Armstrong

QUESTION: Mr. Armstrong, I have been following you for all my adult life and that has exceeded 20 years by now and am shocked to say, I found your article on how things evolve GOLD-Oil-Dollar.  I must say this is a eye-opening evolution you are talking about. Has this always been the case with things changing coming into play and then vanishing?

ANSWER: Absolutely. I have written about how gold vanished from use with the Dark Age following the fall of Rome. Gold did not reappear in coinage for nearly 600 years. The first gold coin to reappear in Britain came during the 13th century issued by Henry III.

The Gold Cups of Mycenae

The same thing took place with the Dark Age in Greece. This is when the Mycenae ruled known as the Heroic Period of which Homer wrote. Scholars thought it was just fiction written by Homer until the ancient city of Troy was discovered. Troy VIIa appears to have been destroyed by war around 1184 BC. However, scholars did not believe the writings of Homer because Homer was born sometime between the 12th and 8th centuries BC. He remains famous for his work The Iliad and The Odyssey. So once again there is about 600 years separating the Heroic Age and the Hellenistic Age.

If we turn to Japan, here too we find that the emperor abused his power to issue money and once again we find money vanish for about 600 years. Each new emperor devalued all previously issued coinage to 10% of his new coinage. People simply refused to accept coins because they were devalued and were no a store of value.

Therefore, throughout economic history we always have long-term structural reform. Do not expect either gold or oil to always be a valuable component. If you go all the way back to a Dark Age, governments collapse as does money because civilization reverts back to a tribal state and then the only value becomes food once again.

Naturally, both the dollar will vanish and oil will ultimately be replaced. Hence, the concept of the “petro dollar” has little to do with the value of the dollar itself. As I have stated before, people who keep talking about oil and the dollar are living in the past. The USA is now a net exporter – not an importer. That has completely reversed from the 1970s and the OPEC embargo. OPEC is just not really relevant any more for they have been unable to manipulate the price of oil.

I have stated many times, we have a counter-trend rally against the dollar as to be expected going at least into the German elections, which could carry on into the first quarter 2018. Nevertheless, ONLY a rising dollar will break the world monetary system. A lower dollar will buy everyone a lot more time because most foreign borrowing is in dollars. When that happens, then we will see the Monetary Crisis Cycle revise once again what we call money. Nothing is ever permanent. Remember that!

Sep 8 2017

Why Governments Expand the Gap Between Rich and Poor


Armstrong Economics Blog/Economics

Re-Posted Sep 8, 2017 by Martin Armstrong

QUESTION: Mr. Armstrong; You said at your Frankfurt the ECB policy of negative interest rates is actually creating a wider gap between the poor and the rich. Could you elaborate on that comment?

Thank you. Hop you come back to Frankfurt. You do realize that you get twice the crowds here than anyone.

OT

ANSWER: Lowering interest rates to negative was really brain-dead. The rich can move their move and export it to the USA. The poor, lack the sophistication and cannot export their labor no less their meager savings. The people who drive the economy have different roles. The rich provide the capital and create jobs. The middle class to poor are the people who form the foundation and it is their consumer spending that create the underlying economic growth. Attacking the rich always reduces investment and jobs, but lowering the interest rates to negative causes the rich to leave and the poor to middle class suffer lacking the sophistication export both their labor and savings.

The key message from President Mario Draghi’s press conference of the ECB was ro say he was getting ready to slow its QE stimulus, but he’s not in a rush.

Draghi tried to be as vague as possible, because he is trapped. He knows this cannot go on forever. He realizes that once he stops, the bond market crash and there is a risk that the Eurozone government are forced to pay real interest rates and that will blow out the entire EU budget system. Draghi does not know what to do. He confirmed that the governing council had begun ‘very preliminary’ talks about how the quantitative easing might be changed; how much longer it might run, and how much it might pump into the euro economy. He actually said:

“We will announce when we are ready. We think we are going to be ready for much of what we have to decide in October … if we are not then we postpone.”

This idea of lowering interest rates envisioned by Larry Summers, demonstrates that he knows absolutely nothing about economics. He has only read books and never rolled up his sleaves and had to work in the real world to be able to see what I am writing about. Why economic professors are ever allowed to play with the economy is beyond me. You would not ask someone to operate on your brain if they have never practiced surgery.