Tag Archives: Keynesian Economics

Oct 30 2017

Catalonia (Catalunya) – Legal or not Legal


Armstrong Economics Blog/SPAIN

Re-Posted Oct 30, 2017 by Martin Armstrong
There are many who write in from Spain supporting Madrid against Catalonia. The core of their argument is that the call this movement an independent “socialistic movement” and they argue it is not at all but democratic.
“There’s indeed a strong independence feel in Catalunya, they have been like this for centuries although they never really were able to achieve a country status. … But one cannot claim to be democratic if you plan to force a secession with an election attended by less than half the people who can vote. Most people agreed on the national court’s decision that the referendum was illegal and supported the court rule by no attending to vote, they were 58 percent of the registered voters, those who were against the decision were able to vote anyway.”

Catalonia is an autonomous region in north-east Spain with a distinct history dating back almost 1,000 years. It is a wealthy region that has its own language, parliament, flag and national anthem. It also has its own police force and controls some of its public services.

Maximum of Barcelona

Historically, during the 12th century, Catalonia was taken under the same royal rule as the neighboring kingdom of Aragon. Catalonia has been part of Spain since its genesis in the 15th century when King Ferdinand of Aragon and Queen Isabella of Castile married and united their realms. Nevertheless, the history of Barcelonia extends back into ancient time. It was Maximum of Barcelona (409-411AD) who rose up to be independent of the collapsing Roman Empire.

This idea that Catalonia somehow belongs to Madrid in perpetuity is rather strange. Spain itself did not exist as a country until the marriage of Ferdinand & Isabella during the 15th century. There are coins issued in Barcelona which predate Spain. Back in the 11th century, the Iberian peninsula was divided into three kingdoms; (1) Caliphate of Córdoba in Taifa, (2) The kingdoms of Leon, (3) and The Kingdom of Pamplona and the County of Barcelona. Historically, Barcelona was not conquered by the Arabs who dominated most of Spain during the 11th century. From that period onward, Barcelona has always harbored a sense of independence from the rest of the Iberian peninsula.

So why such intensity against Catalonia? On October 27th, 2017, the Catalan parliament declared independence, in a 70-10 vote. That seems to be a clear majority vote. Granted, this came after an independence referendum on October 1st, 2017, in which just under 90% of Catalan voters backed independence, however, turnout was only 43%. That was, in part, because Madrid sent in troops to try to prevent the vote. Now Madrid has called for a new vote after dismissing the Parliament and thus appears to be setting the stage for a rigged election no different than Russia taking Crimea. The West sanctions Russia for such tactics but not Madrid?

The Supreme Court decision is used by Madrid to claim there is no right for Catalonia to separate. That is clearly a violation of human rights and it is the very same argument the King of Britain made against America so I suppose the United States is a totally illegal entity as well. Someone should serve notice to Trump to hand power back to London and surrender.

Oct 29 2017

GREXIT – Will Greece be Better off or Worse?


Armstrong Economics Blog/Greece

Re-Posted Oct 29, 2017 by Martin Armstrong

GREXIT

QUESTION: I just read an article about Grexit and the MoU that expires in the summer of 2018. Let’s assume Greece exits EU and the Euro, what would happen to Greece and it’s people? What hardships would Grexit bring to the Greek people and what could individual Greeks do to prepare themselves for these hardships?

Thanks for your blog.
Greetings from Greece!
Cheers,

J

ANSWER: Things will be much brighter once Greece gets out of the Euro. Brussels is desperately trying to keep Greece in the Eurozone for their survival, not what is best for Greece. The major data is published by various agencies that are directly or dependent upon government and they will always champion staying in the Eurozone. If you look beyond those headlines, you see a different picture. Most of our clients in Britain who were against BREXIT, now report that things are much better. The manufacturing industry experienced a job boom in the last quarter. Compared Q3 2016, the job market data with that for 2017 showed that the manufacturing sector witnessed a 24% increase in advertised vacancies over the past 12 months. Jobs have been created in Britain at a faster pace since the BREXIT vote, despite the headlines of the fake news.

I have explained before that when Britain abandoned the gold standard in 1931, they instantly recovered from the Great Depression. This was the case study that George Warren used to demonstrate to Roosevelt that the dollar had to be devalued to reverse the economic decline. Maintaining the gold standard back then was the equivalent of “austerity” imposed upon Europe by Germany. Everyone just gets this whole issue of currency and the Quantity of Money dead wrong. The Austrian School of economics predates the massive government debt era. Today, the government is the biggest borrower within society and they compete against the private sector reducing economic growth.

The refugee crisis alone has devasted Greece. The London Financial Times reported in June that bookings were off as much as 70% for tourists. Greece has to suffer refugees that have devastated its tourist business and that has been one of its primary economic sectors.

Bring on GREXIT and you will stop the refugees as well if they cannot get into the EU by going to Greece. The rest of the EU will not help Greece of Italy pay for these refugees. There is no benefit to remaining in the Eurozone. It is time to slam the door of Brussels.

Oct 28 2017

Spain Demonstrates to the World Democracy Means Nothing


Armstrong Economics Blog/SPAIN

Re-Posted Oct 28, 2017 by Martin Armstrong

 

The Madrid government sacked Catalonia’s president and dismissed its parliament on Friday, hours after the region declared itself an independent nation in Spain’s gravest political crisis since the return of democracy four decades ago. The Spanish Prime Minister Mariano Rajoy, who seems to think he has the power of Franco, called for new elections and fired the Catalan police chief. The crisis in Spain is a reflection of the crisis in the EU as a whole. This unprecedented dictatorial array of measures to seize control of the administration in Barcelona is so undemocratic, it is guaranteed to send warning signals to many other regions of the EU especially Italy.

Oct 27 2017

Gold Better in Euros than Dollars?


Armstrong Economics Blog/Euro €

Re-Posted Oct 27, 2017 by Martin Armstrong

QUESTION: G’day guys.
Thanks for a great seminar in Hong Kong!
I’m reading through your 1 world currency report and find it very interesting, going back to primary school teachings about barter systems and some funny monetary acceptances that have been in place many years ago. Like 14.5 kg copper plates as a currency only back in the 1600’s in Sweden. Or 1-ton barrels of tobacco. Very interesting and tough to carry in your wallet.
The major teaching I received from the Hong Kong Seminar was to look at the currencies (something I’ve had plenty of lessons dealt over the years trying to trade) in regard to products and assets in the many different countries around the world.
My question now we are seeing bitcoins and possibly diamonds and other mediums we are not yet aware of yet replacing gold as a new vehicle to move cash or wealth into a better performing countries assets.
With the collapse about to occur in Europe and Britain included monetary wise. Instead of buying gold in relation to USD one should buy gold against the Euro’s or Pounds when the time is right?
Or has a gold lost its lustre today and the contagion to gold may not occur to the extremes that have occurred in the past?
Will Europe money tell the story? The smart money is moving to the DOW. Will it return to gold when the people lose their confidence?
Thanks for the interesting and new way of looking at the markets Marty. I’m doing better with Socrates though still a novice.
Take care and wish I was coming to the next conference. Hope it’s a beauty.
A

ANSWER: Gold has lost its movability aspect as they hunt money for taxes. Twenty years ago you could hop on a plane with a briefcase of gold with no problem. From that perspective, gold has lost its international portability. This is obviously why people are turning to diamonds, rare ancient coins, and the like – movable assets. We are even witnessing real estate starting to decline now in New York City. The high-end real estate market (not the low-end) was making new highs as big money was trying to get off the grid. Realtors were reporting to us that the major of such high-end deals were all for cash – no mortgages.

Gold would certainly be a better hedge against the Euro than the dollar. It has outperformed the dollar because you always have to look at the currency. However, money will NEVER shift from the stock market all into gold. Everyone has their pet investment in what they feel comfortable. Gold is a retail product – not institutional. The Institutions can trade ETFs, gold stocks etc., but they will never take possession of gold.

What we are facing in truth is a currency reset. That means that ALL tangible assets rise against the currency in whatever country we are talking about. The goldbugs always hate the dollar and many of them have turned away from gold and into cryptocurrencies.

You will always have people who will prefer stocks, others gold, and others real estate, That is just the way it is. To each their own.

Oct 26 2017

Cars Sales Dropping as Taxes Rise


Armstrong Economics Blog/Europe’s Economic History

Re-Posted Oct 26, 2017 by Martin Armstrong

The demand for cars has been declining rapidly in Britain and that is impacting German car sales rather sharply. All price levels in cars have been declining, not just the high end. The sales figures for small cars and the medium class have already declined significantly in the last few months. Now the losses are also becoming apparent in the case of expensive brands, especially for the German car manufacturers.

As taxes have risen upon the average person and this hunt for more tax revenue unfolds globally, this is what creates the recession and deflation. It a strange paradox for many as they see deficit spending rise. Many have a hard time comprehending that if the money supply increases, how can there be deflation? It is always the bottom-line. If you keep raising taxes, you will reduce the standard of living, and that in turn comes back and results in lower economic activity.

Oct 26 2017

The Way to the Future – Cryptos Move Over


Armstrong Economics Blog/Technology

Re-Posted Oct 26, 2017 by Martin Armstrong

The Maldives has introduced what may become the next innovation. Maldives Immigration has introduced a new type of ID card that replaces your credit card, passport, drivers license and healthcare insurance card all wrapped up in one. The next step will be to put this on a biochip and insert it into your skin so a thief would have to cut your arm off to steal it. Guess we are getting closer to the Minority Report. Hm

Oct 26 2017

China Moving to Take the Lead in Technology


Armstrong Economics Blog/China

Re-Posted Oct 26, 2017 by Martin Armstrong

China is moving rapidly to advance and take the lead in technology from the United States and they will accomplish that in the years ahead. China is moving very fast on every front. China is moving faster on quantum communications and computing and they are embracing real Artificial Intelligence that is being ignored by the powers that be in the US government.

We were granted our business license in China BECAUSE of our technology while the USA keeps trying to suppress technology advancement in our field. That means the government even had to review the conflicts with the USA and dismissed them as all other nations as being “stitched up” as one put it in Europe.

The regulators in the USA have one policy – if the big boys do it it’s OK. They are Too Big to Fail, Too Big to Jail, but big enough to hire government employees. Anyone else has to be regulated when the regulators do not even understand what they are doing. The bottom-line policy at the US regulators – if they do not understand it, regulate it out of existence. You are not allowed to compete against New York City.

In the United States, there remains over regulation because the government is clueless about technology. The next crisis will be really worse than 2007-2009 because they have chased so many from the marketplace with fines and regulations that make no sense. The SEC has had to announce strengthening rules for their own people in trading on inside information. The more regulators we have the more corruption that exists. I have stated before, when I was managing positions for the Onassis estate in commodities, I had the larges physical position in Platinum. It took six months to get permission to trade at that level way beyond exchange limits and when I picked up the phone the first time, everyone already knew the size of my position. So much for regulators. Today, positions of managers over $100 million in assets must be reported to the SEC. You can bet that i8nfo is handed out under the table.

In quick succession, China in recent months has utilized a quantum satellite to transmit ultra-secure data, inaugurated a 1,243-mile quantum link between Shanghai and Beijing, and announced a $10 billion quantum computing center. The USA cannot even compete with this level of technology yet. We have been a full green light on our systems. There is no question that China will be the dominant economy after 2032.

Oct 25 2017

New Zealand to Foreigners – Get Out!


Armstrong Economics Blog/Australia & Oceania

Re-Posted Oct 25, 2017 by Martin Armstrong

The New Zealand Prime Minister that took the country back into Marxism, has fired its first shot across the bow.  The Labour party have formally signed a coalition agreement, introducing all new policies focusing on climate change, regional development, and poverty which translates into hunting the hated rich. Thirty-seven-year-old Jacinda Ardern, a member of the New Zealand Labour Party, became the world’s youngest female leader. Hillary must be crying in her martini.

Nevertheless, PM Ardern has just fired the first shot across the bow and this is a serious warning that foreign investment better cross New Zealand off the list of places that will be up-and-coming.  She has banned foreigners from buying property in New Zealand. The first proposal was to ban any migration to New Zealand as well. That they had to back off of given the refugee impression and that would have agreed with Trump – OMG!

She thinks banned foreign property ownership will cool off the property market. The problem will be, a property crash. When home values decline, people feel they lost money and they spend less. With rising property values, people feel they are better-off and spend more assu8ming they have equity even if they do not borrow against it.

She may be the youngest female leader in the world, but she also is clueless about economics.

Oct 25 2017

Diamonds replacing Gold?


Armstrong Economics Blog/Gold

Re-Posted Oct 25, 2017 by Martin Armstrong

 

There has been an effort to use diamonds in place of gold since you can travel with them without setting off metal detectors. But the real problem has been the untrained eye can easily be fooled. The Singapore Diamond Investment Exchange (SDiX), has launched a new product they hope to compete with gold. Perhaps this may have some traction, but again, it is hard to see how this will really compete with gold unless someone is trying to move money from one country to another.

Oct 25 2017

Saudi Arabia in Search of Cash


Armstrong Economics Blog/Middle East

Re-Posted Oct 25, 2017 by Martin Armstrong

 

QUESTION: I read your blog about the Saudi’s potentially selling a large private equity position from China in Aramco rather than accessing the public markets. You have pointed out the need for the Saudi’s to modernize their economy to be less dependent on oil income and to monetize that resource for capital improvements/diversification, but how do they do that without giving away to much control over their oil resources to China?  Wouldn’t a single significant stake by a private investor (country in this case) give up to much control over their single greatest resource (at least for the immediate future)?  I’m thinking of the disaster that is Venezuela as an example of the poor employment of foreign investment.
ANSWER: I fully understand your point. However, the Saudi’s need money. They spent too much money expecting oil to be $200 forever. They are now starting to issue bonds. Saudi Arabia has peaked economically and looks at UAE and sees the diversification. But Saudi Arabia would have to relax their religion. Here is a picture I took on the beach in Abu Dhabi. They are tolerant of Western Culture. You cannot create a world economy without separation of church and state.
Venezuela has always been a ruthless dictatorship. The wealth from oil never made it to the people.