Tag Archives: Keynesian Economics

Jul 31 2018

World Trade & Who Needs the Flash Cards?


Armstrong Economics Blog/World Trade

Re-Posted Jul 31, 2018 by Martin Armstrong

 

The Independent reported that an EU Official said that Juncker used ‘‘brightly coloured, simple flashcards” to explain trade to Trump during the meeting. The EU official said ‘each card had at most three figures about a specific topic. While these remarks are deeply offensive, what they really reveal is how much EU officials prefer to promote propaganda as well and create their own FAKE NEWS to distract people from reality. It has been Europe that delayed the TTIP deal and made it completely unworkable. What they are NOT explaining to people is that there is another MAJOR PROBLEM with the EU structure being exposed by trade negotiations and why Britain who run as fast away as possible.

All 28 EU countries have a common external tariff, which is collected by the national customs authorities. This is then paid into the EU budget. This tariff produces around €20 billion euros per year. Now enters the great disparity of economics. Germany produces 25%+ of that tariff – some €5 billion. It was true that the goal of the EU was to eliminate tariffs and champion free trade among member states as takes place in the USA. This is where we get this slogan of the “single market” for the more than 500 million EU citizens.

That all sounds very nice. The dirt is always found swept under the rug. Creating a “single market” was beneficial primarily for Germany who has an export-economic model. Germany’s car business is its lifeblood. It survives by selling cars to the world. So naturally, the euro was a dream come true for Germany. The euro and single-market eliminated FOREX risk for its customers and German producers which would result in more sales. That was a win-win for Germany, as the sales pitch went.

However, the creation of a single government has introduced a lot more problems that nobody bothered to consider. Germany clearly dominates the foreign trade of the EU. It exports to the world beyond the EU. Without Germany, the EU would flounder and be saddled with trade deficits. However, now we introduce the EU government. Suddenly, Germany cannot conclude its own trade treaties outside the EU. Everything must be negotiated by Brussels through the customs union.

Now we begin to look beyond mere currency. I have warned that one-size does not fit all as people had expected would emerge from creating a federalized EU. The second largest player in the EU is France. Because of crazy unions and socialism that has dominated France, the French are not the bastion of production and instead have a perpetual foreign trade deficit. Its socialistic policies have produced chronic protectionist policy that results in higher wages and higher costs of production that are simply uncompetitive even within the EU. Therefore, France is always at odds with Germany when it comes to trade deals for the EU.

In actual negotiations under the Obama Administration on the TTIP deal with the EU, the process dragged on from 2013 to 2017. Each of the 28 member states had their own protectionist issues. This delayed negotiations endlessly and it demonstrated that the EU structure really did not work. Each country wanted its own deal, but it had to negotiate collectively. So France could prevent Germany and likewise other members could block France. This is the reality of what President Trump walked into. The audacity that Juncker had to explain trade to Trump with flash cards was probably the most arrogant statement I have ever read from a government that is clueless. Trying to negotiate trade with the EU when its own 28 member states fight with each other is impossible. Already, Trump offered to eliminate all tariffs. Germany licked its lips. France said NO WAY!!!! Who needs the flashcards?

The only possible tactic that Trump could take to break this deadlock was to threaten wholesale tariffs. The Europe-wide tariffs were the only possible way to deal with the situation that probably still will not lead to some universal commitment to real free trade on either side of the Atlantic. It is Europe that is burdened with protectionism that has for decades put up a significant renaissance against free trade.

Trump’s favorite slogan, “America First,” has gained all the headlines and people PRESUME he is starting some protectionist war. In reality, there is NO free trade whatsoever and this issue of trade is like someone who punches you in the face, but the police charge you with assault for hitting the person in retaliation and ignores any evidence that they hit you first. TTIP was a complex mess and by no means would it actually create free trade. It was all about protectionism simply labeled free trade. The EU structure is hopeless. It wants to pretend it is a “single market” but it cannot negotiate any trade deal because it is 28 members who have to unanimously agree and that took 4 years to reach TTIP and a complete mess.

Of course, the media generally at large just like to bash Trump. Why bother explaining the real nightmare of tariffs and duties which are merely tariffs in sheep’s clothing.

Jul 30 2018

What is a Superposition Event


Armstrong Economics Blog/Training Tools

Re-Posted Jul 30, 2018 by Martin Armstrong

Socrates wrote about a Rare Superposition Event took place last week in the Dow. They can take place at all levels of time and can be on a closing basis or on an intraday basis. This is the 43rd such event on the weekly level in the Dow since 1914. You can read more about them in our Research section.

Jul 30 2018

Magnitsky Act & the Strange Backdrop


Armstrong Economics Blog/Corruption

Re-Posted Jul 30, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong – thanks for your efforts on providing us with links to the Magnitski video. I began watching the video last night and then came back to it this morning and was truly amazed that the link was no longer active.

I’m curious. Was Magnitski ever charged with anything and or why were they holding him? Yes, you are living proof that one can be held without a charge, but in your case, they wanted something. What is it that they wanted from Magnitski? Perhaps it’s obvious and I’m hoping you can fill in that void.

Again, thanks for the efforts to provide us with a different ways to look and understand our world!

Best regards,

Steve
ANSWER: The director of the film, Andrei Lvovich Nekrasov, obviously began the film believing Browder. The more he dug into the film, the more the alibi of Browder did not make any sense. What he failed to do was actually investigate Hermitage Capital beyond 2000. If he did, he would discover that Browder was a MINORITY shareholder and Edmond Safra was the MAJORITY through Republic National Bank. Only after Safra was murdered, probably by Putin for allegedly blackmailing Yeltsin, then in the takeover of Republic National Bank, HSBC did not want to have anything to do with Hermitage Capital from an ownership perspective. They became the manager & trustee of the fund, which was very unusual to wear two hats if not unethical. That is when Browder gained his MAJORITY shareholding.

I believe Magnitsky was being held not just simply because of tax fraud in Russia by Hermitage Capital, but also for its involvement in the blackmail of Russia which ended up involving the Bank of New York $7 billion money-laundering case. CNN Money reported on September 1st, 1999 before everyone removed the theft from the IMF: “[They] funnel billions of IMF money meant to help transfer Russia’s communist economy into a capitalist one through a private company called Benex Worldwide Ltd. Eventually, the money went into and back out of Bank of New York (BK) and Republic National Bank, a unit of Republic Bancorp (RBNC), as well as several institutions in Europe, including the Union Bank of Switzerland AG and Deutsche Bank AG and its Bankers Trust Unit.” Nekrasov has had his hands full just trying to get the film shown. He is up against tremendous obstacles to shutting it down by Browder. (let’s see how long it takes them to remove the CNN story which states what I have been saying for years, they got Yeltsin to take funds from the IMF)

This is just the tip of the truth behind the entire case. I believe Magnitsky was being held in hopes that he would give evidence against the entire affair and that went beyond just tax evasion. What is really strange is that Browder resigned his American citizenship to escape worldwide taxation, yet he is able to get John McCain to sponsor his Magnitsky Act trying to get his money back from Russia. The US government has used the Magnitsky Act to demonize Russia and Putin and it has kept adding people to the list who cannot come to the USA even though they have NEVER been tried, charged, and had no connection with Magnitsky whatsoever. There is obviously duel purposes being served here and those in Congress just overlook Browder and his history

Jul 30 2018

Refugees Storming Ceuta Border to Get Free Welfare


Armstrong Economics Blog/Refugees

RE-Posted Jul 30, 2018 by Martin Armstrong

The rush to get into Europe for free welfare has led to a land invasion of Spanish territory in Africa. Around 400 African refugees stormed the beautiful Spanish exclave Ceuta on the border with Morocco just on the African side of the Pillars of Hercules. They have climbed over the double barbed wire fence which are over 18 ft tall (6 meters). They attacked guards throwing corrosive Quicklime at them, which of course burns. Quicklime is not a very stable material. Due to lime being an alkaline product, contact with skin can cause full scale burning. Attacking the border guard to get in is certainly not the type of person you want to offer shelter to under these circumstances.

Ceuta and Melilla, also a Spanish exclave, are effectively the only EU external borders on the African continent. Therefore refugees are simply invading like barbarians but want handouts. More than 850 refugees had crossed the border to Ceuta in a single month. Spain has recently overtaken Italy in becoming the number destination for newly arrived boat people. Almost 19,600 people arrived in Spain since the start of 2018, according to the International Organization for Migration (IOM).

Categories: Refugees
Jul 30 2018

The Refugee Crisis – Germany Can’t Find 50% of those They Now Want to Deport


Armstrong Economics Blog/Refugees

Re-Posted Jul 30, 2018 by Martin Armstrong

Merkel’s nightmare is simply beyond description. Now that Europe is trying to at least deport some of these pretend “refugee” migrants from North Africa, the shocking reality is starting to surface. Now 50% of the “refugee” migrants cannot be deported from Germany because nobody can find them. According to a report, every second person to be deported is simply not found. By the end of May, of the about 23,900 announced repatriations, Germany could only find about 11,100 who were actually deported. Around 12,800 deportations that the government attempted could not be completed because the people could not be found. They have permanently infiltrated Europe and are not embedded deeply in the underground economy.

The entire movement in Britain where they called anyone who was against allowing wholesale “refugee” migrants into Britain were labeled “racists” and horrible people. There is now absolutely no way to even deport half of the migrants when the governments are absolutely clueless as to their whereabouts. These can be more than just rapists, now you have within this group the clear distinction of possible terrorists just waiting for the right moment.

The images of cute children were used to open the doors to Europe. But more than 70% were not families, but young men. Photos of boats from North Africa of migrants clearly show the lack of women and children. You would think that if this was a legitimate refugee operation, the people would have been limited to Syria and that ONLY families should have been allowed to enter. Was it really that hard to use a little common sense?

Jul 28 2018

The IMF’s SDR & Monetary Reform – Another Crazy Idea?


Armstrong Economics Blog/Monetary Reform

Re-Posted Jul 28, 2018 by Martin Armstrong

QUESTION: Hi Martin,
I am a long time reader of your blog and a big fan of the tools that you have developed for investors. Thanks for all that you do and I wanted to reach out and ask about your opinion of the thesis that ——-  outlines for the IMF implementing SDRs as world money during the next downturn? This type of scenario seems to make sense considering the current balance sheets of central banks and the current lack of demand for EU debt.
Nicky

ANSWER: I was in a discussion about that back in the 1980s (see the response from the White House rejecting SDRs). That was a day before the IMF became so corrupt. That was rejected countless times. The entire problem still stems from the cross-currency borrowing by nations. Even if the emerging markets borrowed in SDRs instead of US dollars, it really would not alter the world money system nor prevent a crash at the hand of a Sovereign Debt Crisis. What it would do is simply relieve the dollar marginally. The problem would emerge on how do you manage such a system. As long as governments issue debt, then once they issue that debt in ANY currency other than their own, RISK enters the game.

Even if we switched the reserve currency from the dollar to the SDR, the ONLY way to enforce it would be to restrict currency. For example, I could issue a bond in Japanese yen for years and sell it to you in Canada without it being approved by the Japanese Ministry of Finance. China still has currency controls where its people have to ask permission to send money out of the country. The only way to enforce an EXCLUSIVE SDR reserve currency would be for all debt to be denominated in SDRs. However, then every country would still have the risk of their currency fluctuating against the SDR.

The only way to practically reduce the risk is to prohibit governments from issuing debt in any currency but their own. That introduces yet another problem. Many pensions bought emerging market debt to get the higher yield, but they did so because they issued that debt in dollars to attract foreign buyers. As the dollar rises and rates rise, the value of emerging market debt declines and the risk of default rises as the US dollar rallies.

So you see, if we are really talking about revising the world monetary system, it is going to be far more complicated than simply replacing the dollar with SDR, gold, or clamshells as they issued during currency crisis of 1933.