Sep 24 2015

Deutsche Bank – the New Lehman Brothers?

Re-Posted on September 24, 2015 by Martin Armstrong

The rumor mill has been nonstop. The crushing blow to Europe will be the failure of Germany’s biggest bank: Deutsche Bank. Just about every circle is quietly discussing how the bank is facing bankruptcy. The rumors have flown since March when Deutsche Bank failed the U.S. regulatory stress test, which was followed by the resignation of its head in June. A collapse of the Deutsche Bank is profound and very likely to impact Europe to the point that everyone behind the curtain is now calling for a new Lehman moment. Sources tied with the Fed’s decision not to raise rates fear that they will be seen as the cause of its failure. Germany clearly faces a major shock; if this combines with Volkswagen for the turning point next week, well, here we go again.

The potential financial chaos to the other side of 2015.75 is just mind numbing. Since Germany has been regarded as the primary driving force holding the euro and Europe together, one can only close their eyes to vision what comes in the aftermath. So pay attention here. These are critical indications within the core economy of Europe. We are not talking about Greece here. The structure of the euro undermined the entire banking system of Europe far more profoundly than in the United States, where reserves are only in U.S. federal debt, not the debt of all member 50 states. This is the major difference between European banking and U.S. banking.

Sep 24 2015

Will Gold Complete the September Rally?

Re-Posted on September 24, 2015 by Martin Armstrong

Gold’s rally into the target weeks for the ECM appear to be linked to the potential crisis in European banking. This has nothing to do with the dollar, fiat, inflation, or whatever. The only reason gold rises is the hedge against real crisis and uncertainty.

Gold may not be sustainable. We really need to see a weekly closing above 1188 to think that there is some sustainability short-term. We need that signal to reach the technical resistance in the mid-1200 level. We have a crisis in confidence and a crisis in German banking during the ECM target on Sept. 30/Oct. 1, which will shake the tree of public confidence on a major global level.

Sep 23 2015

Bubble Bubble Where is the Bubble

RePosted on September 23, 2015 by Martin Armstrong

It is fascinating that when I warn of anything using the word “CRASH” newspapers immediate report it as I am forecasting a crash in the stock market. This demonstrates that there is no consideration that government can also crash and burn – the perfect example of 100% confidence. Yes, if this week simply closes on the Dow below 16280, then we can be looking at that slingshot move I have warned about where in one year, we have a crash and a swing to the upside to new highs. These type of events are the ultimate mind game, but that is how they destroy the majority. As for those who write asking which investment will be safe – the answer is NONE.

While those who distort the events of the Great Depression to sell gold or whatever, keep in mind that commodities peaked in 1919 and bottomed WITH stocks in 1932. Real Estate peaked in 1927 followed by bonds when the Fed cut rates to try to help Europe, then everything reversed and stocks soared in 1929 and then crashed and burned into 1932 bottoming with commodities.

There was NO SINGLE INVESTMENT left standing – ABSOLUTELY NOTHING. So why the charlatans are trying to sell you newsletter with promises of if you just bought this letter you will make 20,000%, keep in mind this is a period of survival we are entering – not wild speculation. If you do not understand the nature of the beast, the beast will have you for lunch.

So what we have to grasp here is that this is a well organized collapse. Each sector will collapse and in turn set in motion the next. If we get this week-end closing below 16280, then we may be headed for a retest of the August low going into October.

This will be the most difficult period ahead to actually forecast so pay attention. We are entering a period of chaos that BEGINS with 2015.75, it does not end there with some crash. THIS IS BEGINNING not the END.

Remember, if the stocks decline into 2015.75, that should push more and more capital into government bonds completing the BUBBLE. This is by no means a BUBBLE in stocks, commodities, or the dollar. This is a peak in GOVERNMENT. This is not even a Kondratieff Wave based upon commodities. This is the 309.6 year cycle in government and unfortunately, the other side of 2015.75 is not looking very pretty. This not about just the collapse of Europe. This is the collapse of Western forms of government that aids the shift in the financial capital of world to China by 2032. These shifts in global economic trends are measured in hundreds of years and unfortunately, we have a front row seat. It’s Just Time.

The Future Rests in the Hands of the Youth

Posted on September 23, 2015 by Martin Armstrong

QUESTION: Hi mr. Armstrong,

I’m aware of your blog for almost a year and try to daily follow your posts. I’m from the Netherlands and also over here government and other officials try to make the people believe that we’re recovering from the economic crisis. There is no mention given about a coming debt crisis.

I as 23 year old student worrying about my future. Classmates and friends experience hard times to find jobs and start a family. In these times it is almost impossible to find a job paying a non slavery salary. Let alone the recent requirements to get a mortgage.

My question to you: how to deal with these developments in these turbulent times? What can i, as student with minimal savings, do to ‘survive’ the coming sovereign debt crisis and to life a fulfilling live?

Just go on with your posts! You’re opening a lot of eyes worldwide.

Best regards,

ANSWER: I have met with students in Paris and throughout Europe. The politicians cannot understand that they are destroying your future. All they can see is their need to retain power, but the high levels of taxes are so burdensome that they are preventing the creation of new jobs. The zero to negative interest rates has resulted in the elderly still working because they cannot afford to retire.

We are reaching the end of this noose around our neck that was placed there by Marx. It is interesting how in the USA they call me a “conservative”, yet in France, they call me a “liberal” because I am against authoritative socialism. The labels change, but the message remains the same.

Why did Marxism collapse? Because government cannot create anything new for that requires the freedom to act and imagine which is exclusively an individual trait. Government creates nothing. They are the great destroyer. Companies grow and become bureaucratic. In the process, they terminate the creative genius upon which all companies are found. A creative person is a NON-CONFORMIST. Consequently, they do not suffer regulation and bureaucratic systems. So in come the lawyers and the accountants who then eject the creativity from the board, exactly as Apple got rid of Steve Jobs. Once the creative person is gone, the company begins its slow death. At first, they buy startups and pay huge money to gain creativity. In the end, bureaucracy kills the corporation for the very same reason government destroys the economy and shrinks it, no matter what they pretend.

The is just one aspect that Marx could not see for there is no difference between a corrupt bureaucratic CEO running a company and a corrupt bureaucratic politician. Hence, socialism cannot survive for it lowers the living standard of the whole.

It is nice that we have social programs, but that came at a huge cost. Families were once tight groups for your children were your retirement since they took care of their parents in old age. Today, children no longer save to take care of their parents — that’s government’s job. Consequently, Eastern Europe and Asia (excluding Japan) are far better situated to cope with the future for they do not rely upon government. The distrust of government in former communist areas is many times as much of what you will find in Europe or North America, and indeed the majority rather than a minority. This will greatly insulate those regions from the worst decline compared to Europe and North America.

What you need to do is take back government. You cannot create a solution with the same line of thinking that created the current mess. The future belongs to the youth. Understand the devil you are dancing with. It is time to become politically active and challenge the establishment for that is the only way to save the future.

Many people do not appreciate what Thomas Jefferson defined as part of the entire No Taxation Without Representation issue. True, this began by the fact that taxes were not a right of the king and could only be authorized with the CONSENT of the people, which was given by their REPRESENTATIVES in Parliament. The “representation” was originally by the people for these representatives were NOT career politicians. We have lost ALL representation for politicians have become the career bureaucrats and thus exempt themselves from most of the laws they inflict upon the rest of us. So once again the system has evolved into career politicians whereby we have lost all real representation transforming us into the property of the state to be herded like cattle and taxed to sustain the bureaucrats. This was PRECISELY what led to the fall of Rome. As the bureaucrats (army) were not paid, they would nominal a new emperor and anyone who opposed saw their cities sacked and their inhabitants killed. This would be like Chicago invading New York because the employees of Illinois were broke.

While we may not yet be at that stage in the game since money is intangible for now, thanks to Marx, we are targeting the rich. Of course There was Maximinus I (235-238AD) whose reign lasted about 3.14 years. He simply declared ALL wealth within the Roman Empire belonged to the state (him) and paid rewards for anyone who gave information about someone hiding wealth precisely as governments do today – Germany & France paying bribes to Swiss Bankers to destroy their own country, US International Revenue Service paying rewards for reporting anyone not paying their taxes to such informants all precisely as Maximinis I operated.

Today, Jefferson-Sig we once again have taxation without representation for those in office never represent the people but only government interest. But Jefferson added another dimension. Jefferson saw a national debt as two evils. First there was the fiscal problem of debt and interest. However, there was also a philosophical problem that everyone seems to overlook and this is the origin of the crisis faced by the Youth.
Jefferson explained in a lettered dated September 6th, 1789 he wrote to James Madison stating that “the earth belongs ,,, to the living” and therefore “the dead have neither powers nor rights over it” whereby one’s parents had no authority to impose decisions upon their children and posterity who had no part in making them and that “every constitution,” “every law,” and every public debt should expire within a generation of its enactment. “If it be enforced longer,” he argued, “it is an act of force, and of right.” (PTJm 15:392, 396)

Therefore, I fully agree with Jefferson. You are burdened and your future has been predetermined for you are being taxed without any choice in the matter. You have been stripped of all your rights and your future has been stolen by socialists who wanted to live well by robbing you of your freedom and capacity to determine your own future. For this, you must become politically active. Taxation is evil, and we no longer need taxation since money is no longer a commodity. Money is purely representational dependent upon faith and confidence. Government should not be allowed to borrow, for money should be created for its expense limited to a percent of GDP that cannot be increased except in time of war if ATTACKED – not like a 100 years war to justify taxation.

Sep 20 2015

The FED is now TRAPPED Between the ROCK and the HARD PLACE

Yellen Is Trapped in the Worst Nightmare Ever

Posted on September 20, 2015 by Martin Armstrong

Yellen has inherited a complete nightmare. Thursday’s decision to delay yet again the long-awaited liftoff from zero interest rates is illustrating that the world economy is totally screwed. There is a lot of speculation about why the Fed seems so reluctant to “normalize monetary policy”. There are of course the typical domestic issues that there is low inflation, weak wage gains in the face of strong job growth, a hike will increase the Federal deficit and then there is the argument that corporations that now have $12.5 trillion in debt. All that is nice, but with corporate debt, our clients are locking in long-term at these levels, not funding anything short-term. Those clients who have listened are preparing for what is to come unlike government which has been forced to shorten the average duration of their debts blind to what happens when rates rise, which will be set in motion by the markets – not Yellen.

Fed is really caught between a rock and a very dark place. Yes, they have the IMF and the world pleading with them not to raise rates for it will hurt other debtors who borrowed excessively using dollars to save money. The Fed is also caught between domestic policy objectives that dictate they MUST raise rates of they will bankrupt countless pension funds and international where emerging markets will go into default because commodities have collapsed and they have no way of paying off this debt that has risen to about 50% of the US national debt.

By avoiding the normalization of interest rates (hikes), the Fed has encouraged government to spend far more than they realize because money is cheap. This will eventually light the fire under the economy helping to fuel the Sovereign Debt Crisis. There appears to be no hope for the Fed and they will be forced to raise rates only when they see asset inflation in equities. Then they will have no choice. This is the worst possible mess and the longer they have waited to normalize interest rates, the worst the total crisis is becoming for they will have zero control over the economy and once that is seen, holy Hell will break lose.

Sep 18 2015

There is no end to the ways the Government can Confiscate your Wealth

Sovereign Debts: How Defaults May Unfold

Re-Posted from Armstrong Economics Posted on September 18, 2015 by Martin Armstrong

In the Middle East, the banks are trying to convince the Gulf States to begin issuing debt even if there is no need to borrow, simply so they have a market to trade. Governments should never listen to bankers for this always becomes a conflict of interest with respect to national debts. The sooner government wakes up to the Sovereign Debt Crisis, the soon their particular country will be saved.

When you say we are entering a “Sovereign Debt Crisis”, people automatically assume that debt will just default. Governments NEVER like to admit a mistake, so an outright default may be limited to the emerging markets the further you move away from the core economies. What may also take place is the mandatory conversion of debt extending the maturity. You may buy 90-day paper and suddenly wake up to find that the government has converted 90-day paper into 10-year bonds. Always remember, they have the tanks and guns — never forget whom you are dealing with.

In Italy, the period 1919–1922 was one of very little progress on debt and deficit reduction. Despite a levy on wealth that was introduced to tax the rich, as always, the tax faced tremendous opposition as well as implementation difficulties. Consequently, Italian fiscal deficits remained high, and inflation increased along with the money supply rather significantly. The Italian government engaged in a mandatory debt conversion, known as “conversione forzosa” during 1926, which they would again impose during 1934. They forced debt holders to extend their debt by lengthening the maturity. This seriously impacted the full faith and trust in the Italian government. During the post-1926 years and then again after 1934, the mandatory conversione forzosa effectively was seen as a partial default by the government, which made it extremely difficult and costly to borrow on a short-term basis thereafter.

You must be careful in the post-2015.75 era. Owning even short-term government paper can result in a conversione forzosa, which is the usurpation of capital by sheer force. This is one form of default that people need to realize has also been a means of default. The City of Detroit suspended all debt payments between 1937 and 1963. Britain entered a moratorium in 1931 on its debt, resuming years later.

Consequently, defaults, suspensions, moratorium, and conversione forzosa are different types of defaults whereby you lose access to your capital. There are many different flavors of a Sovereign Debt Crisis.

Sep 13 2015

The last individual in Europe, a short story

Re-Posted from Jon Rappoport’s Blog originally posted on September 12, 2015 by Jon Rappoport

“The indoctrination effect, regarding the individual, is to make him think he no longer has an independent existence. Those who still have functioning minds are taught that ‘the individual’ was a concept that had a use at an earlier stage of evolution, when modern systems and structures were still developing—but ‘individual’ became an accurate synonym for ‘criminal’ when benign super-government took over…” (The Underground, by Jon Rappoport)

October 2, 2071, the Center of Centers, United Europe. Citizen G1435-X was brought into a secret conference room in the Department of Re-Education, Special Branch.

His interviewer held the title of Mental Health Representative of the People Level 14, or MHR. This is an excerpt from their conversation:

MHR: Are you aware of the size of the United Europe Government?

Citizen: I know that almost everyone I meet works for the Government in some capacity.

MHR: If you include corporations, which of course are in partnership with Government on many levels, the figure approaches eighty percent of the population.

Citizen: And there are the computers and robots, too.

MHR: The correct name is Machines for the Illumination of Everyone.

Citizen: What do you want from me?

MHR: That’s the whole point. There is no you.

Citizen: How can that be true? I’m sitting here.

MHR: No, that is an illusion. For convenience sake, an assumption is being made: ‘I am I and you are you.’ It facilitates this conversation. But in truth, we are one. We are in accord. We know the same knowing.

Citizen: Gibberish.

MHR: It would sound like gibberish to a disaffected part of the whole. A disaffected part, which is ‘you,’ simply needs to surrender. Then you will cease to be a diseased illusory series of thoughts.

Citizen: And this is official Government policy?

MHR: Of course. The culmination of all Government is the shared cosmic body. Another term for it is Universe.

Citizen: At one time, limited government was instituted to protect the freedom of the individual.

MHR: You mean at one time, an illusion was instituted to protect another illusion.

Citizen: I’m still me.

MHR: Against the entirety of Government? Do you realize how ridiculous that sounds?

Citizen: Where are you from? Where were you born? Where did you grow up?

MHR: These are all irrelevant questions. Even asking them is a violation of the law. They lead to making elitist distinctions favoring some over others.

Citizen: I’m not asking others. I’m asking you.

MHR: You’re assuming there was a time when I thought of myself as an individual.

Citizen: Didn’t you?

MHR: There are errors. People commit errors before necessary corrections are made.

Citizen: You’re evading my question.

MHR: Why do you hate everyone?

Citizen: I don’t.

MHR: You must.

Citizen: Why?

MHR: Because you refuse to merge with them.

Citizen: Merge? What does that mean? It’s a word that’s been twisted in the new language all of you speak. The phony language. Merge?

MHR: Oppositional Defiance Disorder. Language Aversion Disorder. Illusion Disorder. Individualist Disorder. You’re suffering from a host of mental illnesses.

Citizen: France, Germany, England, Sweden, the Netherlands, Spain. Do you remember those terms?

MHR: Of course I do. It’s part of my job. They’re on the Forbidden Words List. Only deranged persons insist on using them.

Citizen: What about the word ‘money’?

MHR: Also forbidden. The correct term is ‘credit’ or ‘allocation’.

Citizen: What about ‘freedom’?

MHR: That is a technical term. It specifically refers to alternatives methods of problem-solving a machine can opt for. It has no other meaning.

Citizen: You’re joking.

MHR: I assure you, I’m not. You undoubtedly believe the sentence, ‘An individual has freedom’ actually means something. But it was never more than a piece of propaganda.

Citizen: You have everything backwards.

MHR: You’re going to be entered in a program of re-education.

Citizen: It won’t work.

MHR: You’re not the first person to tell me that. You’ll discover, in the coming months, what ‘greater good’ means. You’ll also experience the joy of Oneness for All.

Citizen: How are going to manage that?

MHR: We’re going to connect your brain with the Kurzweil computer. You’ll download trillions of data that reveal the truth.

Citizen: Which is?

MHR: You and every other person in Europe are identical. You are, so to speak, copies of each other.

Citizen: And if I refuse to accept that?

MHR: You won’t have any data to the contrary.

Citizen: What?

MHR: The information we insert will crowd out whatever else is present in your mind. Think of what you now ‘know’ and believe as a lake. We will empty that lake into a huge ocean. Soon the lake will be invisible. For all intents and purposes, it will have disappeared.

Citizen: Suppose the opposite happens? Suppose the lake swallows the ocean.

MHR: Impossible. We will search out every word you use and provide new meanings. Proper meanings. Then you will think and speak according to the law.

Citizen: Do you believe I’m the only individualist in Europe? There is a rebellion underway.

MHR: Under what name? What is your organization?

Citizen: There is no organization.

MHR: That’s absurd. You would have to have an organization.

Citizen: Not true. That’s why you have a problem. If there were an organization, you could co-opt it. You could infiltrate it. You could offer it special favors. You could set it against other organizations.

MHR: The word ‘rebellion’ means an organized opposition…

Citizen: In your language it does. You think all human activity takes place in groups. But you’re wrong.

MHR: How could we be wrong? We control language.

Citizen: You control your language. But many individuals don’t accept your definitions.

MHR: There is only one language.

Citizen: Your language pertains to groups. But this rebellion, as I just said, has nothing to do with groups.

MHR: I don’t like where you’re going with this.

Citizen: Remember the French language? There are people who still speak it.

MHR: ‘French’ is a forbidden word.

Citizen: Keep telling yourself that. Remember a city called Vienna? Or Stockholm?

MHR: You’re not supposed to know those words.

Citizen: But I do. Vouloir, c’est pouvoir.

MHR: That language is outlawed.

Citizen: It loosely means, if you want something, you can get it.

MHR: I know what it means.

Citizen: So you speak French.

MHR: I have to, in order to know what is illegal.

Citizen: Do you remember the French writer, Albert Camus? And his essay, The Rebel?

MHR: The word ‘rebel’ is absolutely forbidden. It has no meaning.

Citizen: I beg to differ.

MHR: Rebellion equals mental disorder. The disorder is real. The rebellion is merely a form of compensatory behavior, a pretense.

Citizen: You think you’ve established a United Europe composed of androids, but you haven’t. That’s your pretense.

MHR: There is only one genuine human impulse: to do good for others. And the State owns that impulse.

Citizen: Do you know what you’re saying? How absurd it is?

MHR: The State must own it, in order to make sure the future is directed as it should be.

Citizen: So the State is defined as that entity which maintains all that is good.

MHR: Of course. How could it be any other way?

power outside the matrix

Citizen: Let me make an inference here. If the day dawns when all citizens adopt the new language, you will be able to forget the history you know: the old languages, the old cultures, the old cities. You’ll be able to forget the past.

MHR: Theoretically, yes.

Citizen: Will it make you happy to forget it, to let go of it?

MHR: Of course.

Citizen: I don’t think so. I think you want to be one of a small number of elite people who remember everything. I think you cherish the past. You want to possess it.

MHR: How dare you say that.

Citizen: You’ll be the rare person who can read Shakespeare, Goethe, Homer, Dante, Yeats. You’ll be a scholar in an invisible university.

MHR: I serve the cosmic body of the State.

Citizen: You serve only yourself and a few others. You want individuality, but you want to deny it to the rest of us.

—end of interview excerpt—

Apparently, at this point, MHR experienced an episode of some kind. Acutely elevated blood pressure, a burst vessel, a heart attack. The record is unclear…

Sources report that his interview with Citizen G1435-X was preserved in a secret archive, to be read by government leaders and understood as a cautionary tale…

Sep 12 2015

An Analysis of the Market last Week and What the Next Month may Bring

Re-Posted from Armstrong Economics Posted on September 12, 2015 by Martin Armstrong

It was a mixed session for Asia yesterday after what has been a very volatile week. The talk remains as to what China’s next move would/should be and “if” the FED were to move next week. Not just in Asia has this been the most awaited FED decision in years but it has been the hot topic just about everywhere. It was a clearer picture for core European Stock Indices with all closing lower on the day with 1% declines. The US did open lower but has rallied back up.

Next week’s long-awaited Federal Reserve meeting may not spur a wild market reaction, even if the central bank hikes rates for the first time in almost a decade. Economists are about equally split on whether the long-awaited move will come, though futures market trades are pointing to at least one more month of the Fed delaying its 0.25 percentage point.

The key that is really important is the trend. There is no question our model has been pointing to 2015.75 as the change in trend for interest rates. The Fed has been backed into a corner for unless interest rates rise (“normalization”), retire funds are doomed. The Larry Summer approach is of course one that benefits banks, not the population. He envision punishing people for saving money with charging them a tax (negative interest rates) to keep hoarding cash.

Therefore, we are not looking a just a 0.25% hike in rates, we are looking at reality hitting the Fed in the face. Do they take the irresponsible approach of Larry Summers? Or perhaps they realize you cannot punish people for existing and trying to save for a rainy day. The Fed will raise interest rates for they have no choice. If not next week, they can do it at any meeting monthly and they can call an emergency meeting any time as well,

Sep 12 2015

A Serious Proposal for a different method of funding government operations suitable for a technology based economy

The Federal government never has enough money and over the past decade they have created enough money, Dollars, that there is a title wave of them about to hit us; we need a different system that the politicians can’t subvert. This short post is a way to achieve that.

The following figures are taken directly from the following government reports: Bureau of Economic Analysis (BEA) monthly report of the GDP of the United States; Monthly Treasury Statement; the Bureau of Labor Statistics (BLS) monthly employment situation; The Monthly Statement of the Public Debt of the United States and the Department of Defense (DOD) Active Duty Military Strength Report. The Monthly Treasury Statement data is reformatted to calendar year format the government fiscal year format which runs from October to September so we can compare apples to apples.

First the Facts for 2014:

#1 The federal government currently spends almost $4.0 trillion a year ($3.885 trillion) of which some is derived from taxes & fees ($3.096 Trillion) and some is borrowed ($789.5 Billion). More on this subject later since the official GDP figures are different; so we use $3.2 Trillion here instead of the actual $3.9 Trillion, to be consistent with BEA numbers (explained later).

#2 There are some 151,012,000 people working for a living including ALL categories (the BLS does not count farm, self-employed and the military). This figure is the average for the calendar year 2014.

#3 If we assume there are 2,000 hours worked per year per person that equates to 302 billion hours worked per year. This is the only assumption used here and since many workers are part time this maybe an overstated number. Whether it is or not doesn’t matter to the discussion of the concept. It would only matter if implemented.

# 4 Therefore, if we divide the $3.2 Trillion spent by the Federal government by the 302 billion hours worked by all the citizens, that gives a ratio of $10.56 of federal spending per hour worked.

Now here is the concept:

The idea is based on an economic principle that my advanced econ professor taught me my senior year at Ohio University which is, basically just a form of a thought experiment. The principle is that if we make a change and the result of the change shows a result that is the same as before the change, then there was no real change in the output only a change in how we got there. The assumption then is that it makes no difference which method is used.

What follows is for federal spending only, state and local could also be added to this but that is too complex for this brief overview. This does include ALL revenue going to the federal government no matter the reason or program including social security.

#1 We eliminate ALL personal federal taxes and fees and ALL business taxes and fees as well which then reduces the governments’ income to zero (all borrowing is also eliminated).

#2 Simultaneously we reduce individual pay rates by the exact amount of the taxes they pay. For example if you were making $25.00 per hour but only taking home $20.00 per hour the change we make would be that you would now be making $20.00 per hour but paying no taxes so your take home would be the same as before $20.00 per hour (no change).

#3 Businesses would be required to reduce prices such that their income would be unchanged in a similar manner. So the net economic effect on the economy from this change (initially) would be zero since private and corporate spending would be exactly the same (no change).

#4 To compensate for this loss of revenue the federal government would be allowed to create fiat money (no real change from what they do now) at the rate of $10.56 per hour worked by the citizens. And since there would still be 302 billion hours worked by the citizens (no change) they could spend $3.2 trillion dollars (no change).

$5 The result is that there is still the exact same amount of money in the economy in both the current system and the new system. All we did is change the method of how it got from the worker to the government.

You can see we have made major changes but nothing has really changed, we just changed the method of how we got from there to here. So therefore we are in accordance with the economic principle we started this section with being true.

I think you can see the benefits to this kind of system and, of course the devil is always in the details; however I believe I have considered most of them and they are not major obstacles. I do agree that this would take a lot of re-education to the public but I think it could be sold especially after 2017.
The major benefits are:

#1 The federal government can only spend more money when there are more people working more hours. That is an incentive to promote growth not dependency.

#2 No one has to worry about paying federal taxes so all purchasing and investment decisions are based on economics not tax avoidance. This makes for a much more efficient economy.

#3 The federal budget is always in balance. No need to borrow money and this also forces international trade to be in balance since the government doesn’t need to borrow from foreigners.

#4 Lower prices for products produced here would make the US more competitive and since the take home income is the same internal growth would be immediate.

#5 We end up with a labor based currency which is a improvement over what we have which is debt based. It also takes gold out of the equation except possibly for international trade since the current system we have of pegged rates does not work. However, that is a different subject for other papers.

#6 There are no downsides other than some federal agencies would no longer be required, such as the IRS and the FED. So actually the federal government would need less money.

The Equations:

The equations shown after this discussion are used in national income accounting to calculate Gross National Product (GDP). To show how this works we present an example using the real numbers for 2014. Again this is a simple macro model and the details are much more complicated then what is shown here. However, that doesn’t matter since the principle is valid and all the details can be worked out.

Note the BEA does not count borrowed money and transfer payments are not shown as growth. The BEA’s G also includes state and local spending much of which is transfer payments from the federal government. This means that the BEA figures for “government” used to calculate the GDP are not the same as shown by the United States Treasury for federal spending and borrowing. We will use the BEA figure of $3.2 Trillion instead of the actual $3.9 trillion pulled from the economy by the federal government for 2014 in this exercise.

GDP = Y = C + I + G + (X – M)

GDP = Y = $17.7 = $12.1 + $2.9 +$3.2 + ($2.4 – $2.9)

Where C (consumption net of taxes C_N) can be defined as gross income (C_g) less federal taxes (T_F) or C_N= C_G– T_F

Where I (investment net of Federal borrowing or I_N) can be defined as gross investment (I_G) less federal borrowing (B_F) or I_N = I_G – B_F

Where G (government) can then be defined as government taxes (T_F) + government borrowing (B_F)

X is exports

M is Imports

Y = C_N + I_N+ G + (X – M) or

Y = C_N + I_N + T_F+ B_F + (X – M)

After the proposed change

C_G = C_N

I_G = I_N

G = Hours worked (H_W) * $10.56

GDP = Y = C_N + I_N + G + (X – M)

GDP = Y = C_N + I_N + 10.56 * H_w+ (X – M)

GDP = Y = C_N + I_N + (10.56 * .302) + (X – M)

GDP = $17.7 = $12.1 + $2.9 +$3.2 + ($2.4 – $2.9)

Obviously nothing has changed since in either the old method or the new method The GDP = $17.7 trillion. Properly packaged, presented and sold by someone would solve many of our problems and doesn’t hurt either conservative or liberal principles.

Notes and Comments:

Federal Spending is very different from what is generally shown or known, for example: The Monthly Treasury Report for 2014 (adjusted to a calendar year) Shows the Federal Government spent $3.585 Trillion dollars derived from $3.096 Trillion from taxes and fees and $667 billion from borrowing. However the National Debt during the same period went up by $789 Billion so there was additional cash needed for changes in payables and obligations and capital projects of $122 Billion. Therefore the federal government actually spent/used $3.885 Trillion in 2014 or 21.95% of the GDP.

Also as previously mentioned transfer payments to the states and cities i.e. block grants do not show as being Federal spending in GDP analysis. That is unfortunate since the federal government has strings attached which give them control of the money and that will get much worse after 2016 when the full force of the Affordable Health Care Act goes into effect.

The purpose of the quick review of my idea is to show that economically and monetarily this system works. It works because economics is about people and what motivates them. In one sense Karl Marx was right labor is the ultimate source of value, he was wrong in how to use that principle and that wrongness has lead to much suffering in the world as we tried to absorb his idealist thoughts (socialism) into the real world.

This proposed system is a method of merging both Adam Smith and Karl Marx while rejecting John Maynard Keynes completely.

Sep 10 2015

The Brzezinski/Obama Axis

Post By Prof. Paul Eidelberg

[September 23, 2009] Updated September 9, 2015 with a shocking epilogue]

Back in 1985, I wrote an article on Brzezinski for The Intercollegiate Review. Before citing some of the more relevant passages of that article, it should be borne in mind that Brzezinski, a political scientist, served as President Jimmy Carter’s national security adviser. One does not have to read Carter’s Palestine: Peace Not Apartheid to know that Carter is an anti-Semite. Brzezinski has earned the same reputation.

Not only has Brzezinski publicly defended the anti-Semitic canard that the relationship between America and Israel is the result of Jewish pressure, but he also signed a letter demanding dialogue with Hamas, whose charter calls for Israel’s destruction. It behooves us to understand the mentality of Obama’s [former] Middle East adviser.

Long before he became Mr. Carter’s national security adviser, Brzezinski rejected what he and most political scientists term the “black-and-white” image of the American and Soviet political systems. “This image,” he says, “is held by traditional anti-Communists.” Brzezinski thus affirmed he is not quite an anti-Communist. In fact, he deplores anti-Communism as “a relic of the Cold War, of the age of ideology.”

Not only did Brzezinski reject the “black-and-white” image of the American and Soviet forms of government, he rejects the very notion of good and bad regimes! Brzezinski is simply a moral or cultural (or historical) relativist, and relativism has certainly modulated Barack Obama’s mentality.

The influence of political scientists like Brzezinski is wide and deep. His relativism prompts him to negotiate with and appease terrorist regimes. With Brzezinski as his adviser, Obama will be more disposed to appease Iran and betray America’s allies, above all Israel.

Since Brzezinski is a relativist, he denies the existence of objective or trans-historical standards for determining whether the way of life of one nation, group, or individual is morally superior to that of another. (The members of the UN General Assembly must be pleased to hear this, despite the UN’s notorious record of condemning Israel without having ever condemned an Islamic state.)

Brzezinski’s relativism also makes him a “weather-vane” political scientist. He turns with the winds of power. Working in a pluralistic and egalitarian country like America – a secular society – he conveniently adopts tolerance as his operational principle on the one hand, and equality as his primary value on the other. He is quite at home with the moral equivalency that has shaped US foreign policy toward Israel and Islamic dictatorships.

Brzezinski views history through the lens of Marxism, which, despite its atheism, has much in common with Islam. Both Communism and Islam are universalistic ideologies that reject the idea of the nation-state. Both do not regard adherence to treaties between nations as obligatory. Both Communism and Islam are militaristic and expansionist creeds that do not recognize international borders. Brzezinski’s globalism is evident in Jimmy Carter. Under Brzezinski’s influence, Carter lowered the defense budget and pursued a soft line toward the Soviet Union. Obama is pursuing a very soft line toward Islam.

As a crypto-Marxist, Brzezinski deplores the nation-state. His book Between Two Ages: America’s Role in the Technetronic Era, declares that “With the splitting and eclipse of Christianity man began to worship a new deity: the nation. The nation became a mystical object claiming man’s love and loyalty. The nation-state along with the doctrine of national sovereignty fragmented humanity. It could not provide a rational framework within which the relations between nations could develop.” Brzezinski sees the nation-state as having only partly increased man’s social consciousness and only partially alleviated the human condition.

“That is why Marxism,” he contends, “represents a further vital and creative stage in the maturing of man’s universal vision.” Marxism, he says, “was the most powerful doctrine for generating a universal and secular human consciousness.” Embodied in the Soviet Union, however, Communism became the dogma of a party and, under Stalin, “was wedded to Russian nationalism.”

Although Brzezinski poses as a humanist, he makes a most inhumane statement by saying that: “although Stalinism may have been a needless tragedy, for both the Russian people and Communism as an ideal, there is the intellectually tantalizing possibility that for the world at large it was … a blessing in disguise.”!!! Brzezinski could as readily say: “Yes, Muslims slaughtered more than 200 million people, but Islam brought hundreds of Christian, Jewish, Zoroastrian, Hindu, and Buddhist communities under a single universal vision, that of the Quran”!!!

Brzezinski, a self-professed secularist, is an internationalist whose moral relativism contradicts the moral law or natural rights doctrine of America’s Declaration of Independence. His relativism and internationalism contradict the teachings of the America’s Founding Fathers, who endowed the United States with a national identity and character, as that which animated Abraham Lincoln. To put it more bluntly: Brzezinski’s political mentality, like that of countless other American academics, is anti-American. An Obama-Brzezinski axis has revolutionary significance. It may accelerate the de-Americanization and decline of the United States [as I warned six years ago.]

Epilogue September 10, 2015:

Obama’s nuke deal with Iran is the offspring of Brzezinski’s mentality.

Sep 8 2015

A Question of Money – Interest – Bankers

Re Posted from Armstrong Economics Posted on September 8, 2015 by Martin Armstrong

QUESTION:

Mr Armstrong, interesting article today, the story of the store of value (at least long term) has always confused me. One can look at saving accounts also as an asset as it yields the interest payment and one relinquishes the access to the money. No difference to bonds.

But your article causes some questions: as you stated before the FED buying bonds does not increase real money supply, so what caused the decline of purchasing power of money in the asset class of equities? Is it that the manipulating of interest rates distorted the actual confidence and time preference in the economy which can be measured by the velocity?

You posted earlier that the velocity has declined. People do not want to invest but save which is not an option for big money as it doesn’t yield any or very little return. Hence enterprises buy back shares and smart money has no other option.

Interest rate hike by the FED, eventually increasing retail participation, a cooling world economy, sovereign debt crisis and the flight to the Dollar. The outcome of your computer, a rise in US stock markets including a possible phase transition, seems comprehensible.

The only thing what leaves me with amazement is what do they really intend? I don’t believe that the families who run the banking system, operating for centuries in money business, do not understand that. I can only assume that for being protected by government the banking cartel buys the governments time and keep financing the deficits.

Best regards,

ANSWER: The problem in so many areas is that we can focus on one issue, but the answer is a complexity of variables. The history of interest rates has been provided on this site. Interest rates in a developed economy reflect the “option” value on the expected decline in purchasing power of money. If I expect it to decline by 5%, then I expect a profit and say want 8%. You in turn will pay the 8% only if you think you also can make a profit above 8% perhaps 10%+.

In an UNDEVELOPED economy, we transpose the depreciation risk of money with risk in general. Lacking any developed economy, one will lend only based upon the risk of getting repaid. Therefore, without a legal system, the risk is either the person or the political climate. When we look at the history of interest rates, I demonstrated that the rate of interest even within the Roman Empire increased the further you moved away from Rome. Hence, the lowest interest rates are in the dollar and they rise in other countries based upon perceived political risk. Greece’s interest rates are significantly higher than those in Germany. This is a reflection of political risk, not simple the future inflation rate in the Euro.

The Fed did not increase the money supply with QE easing and we have see that 9 months of QE in Europe has also failed to create inflation. What happened to the whole theory of the quantity of money impacting inflation? The problem lies in the definition. When US government debt was illegal to borrow against using it as collateral, then issuing debt DID NOT increase the money supply. When that was changed and you can post TBills as collateral to trade, then there is no longer a difference between debt and money.

The US government did not issue paper money after the Revolution until the Civil War. To encourage people to accept it (CONFIDENCE), it paid interest. In reality, this was a form of circulating bond. The term “greenback” referred to the issues that did not pay interest and were not purportedly backed by silver or gold. You turned it over and it was just green ink with no promises.

So the Fed buying in bonds did not increase the money supply and it failed to create inflation as expected BECAUSE it merely swapped bonds (money paying interest) with non-interest paying money (electronic entries). The bankers then complained so the Fed created the Excess Reserve Facility, where banks have nearly $3 trillion in cash. The SF Fed argues Milton Friedman said they should pay interest on reserves. That was only on the required reserves. The creation of the Excess Reserves totally negated the entire idea of stimulating the economy for the banks never lent the money out. It became a giant swap of bonds for cash deposits at the Fed which it then had to pay 0.25% interest.

So now turning to the VELOCITY of money, a decline here demonstrates that people are HOARDING cash (rising in purchasing power as assets decline), as well as banks (Excess Reserves). We have companies buying back their own stock further shrinking the supply of equities also fueling the deflationary spiral. The Excess Reserves at the Fed show just how much banks are hoarding cash.

Therefore, we can see the deflationary trend and the contraction right here. The US share market has been at the high-end of trading, but it did not breakout beyond our second target which was the 18500 on the Dow. The market indeed doubled as we warned coming out of the hold in the 6,000 level passing 12,000, which is the MINIMUM requirement to start a Phase Transition. We nearly tripled by the 2015.75 target beating our minimum doubling requirement, but this was still not a Phase Transition. Why? Retail participation has been at record lows in stocks. This is a bubble in government debt and why we are at 5000 year lows in interest rates.

Now top the conspiracy. “The only thing what leaves me with amazement is what do they really intend? I don’t believe that the families who run the banking system, operating for centuries in money business, do not understand that. I can only assume that for being protected by government the banking cartel buys the governments time and keep financing the deficits.”

Banking establishments are some of the WORSE investors throughout history. They always go bust and it is government that devours them every single time. Yes, the government has been protecting the bankers for they have also been fueling the debt assisting governments to borrow. Therein lies their own demise. EVERY major banking house have been destroyed by this very same flirtation with power. They are like moths attracted to the flame of a candle, hoping to dance by the light never realizing their wings may get burned.

The cycle has change. The wheel of fortune has completed its revolution. Governments are turning against the banks and looking to electronic currency. The days of rumored banking conspiracies is coming to an end as it always has. The banks will be a giant short. When the Sovereign Debt defaults become a contagion, the banks will not be supported by government.

Centinel2012

De Oppresso Liber

Tag Archives: IMF world bank

The last individual in Europe, a short story

The Brzezinski/Obama Axis

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