Debt is Only Money that Pays Interest


QUESTION: Mr. Armstrong; I listened to your interview with Greg Hunter on USA Watchdog. For the first time, I really understand that debt is money that pays interest. That is the real money supply which is leveraged. It is the interest that keeps expanding the debt and forcing taxes higher and higher until it can’t expand anymore. Is this the end game?

I only hope when this house of cards comes tumbling down, you will be there to help.

Please keep up your

PL

 

ANSWER: We will see interest expenditures exceed military next year in the USA. Only then will people perhaps begin to pay attention to what I have been saying. Can you imagine that the debt of all nations is about to explode with the slightest uptick in interest rates? We will be going over this issue at the WEC. Just look at Italy when rates soared from 0.3% to 2.5% in a single day. When I say interest rates can rise DRAMATICALLY, this is no joke. The Quantitative Easing in Europe and Japan have destroyed their bond markets. The central banks buy everything. The Bank of Japan bragged how they bought 97% of the new debt. Hello! That means there is no market!

People always ask me why I do what I do meeting with political governments around the world and I do not charge them a dime! The answer is simple. If I took money from them, then I would be beholding to them. Strangely enough, they call me because they know I will tell the truth. The research we put out is NOT for sale to the highest bidder to be manipulated to support some agenda like they do in everything else right down to Global Warming. Yes, there are governmental agencies that pay for Socrates. That is different from meeting with me personally.

I am called (1) because there is no conflict of interest and (2) our computer is tracking the entire world and its forecast cannot be manipulated. So do you want to call someone who you pay to fashion studies to support whatever political agenda you have today? Or do you really want to know when the shit will hit the fan?

 

 

Paper money used to pay interest during the civil war. Nothing has really changed. Debt is now just money that pays interest. We have returned full circle

Cryptocurrency Changing the World?


 

I do not know how else to say this. Cryptocurrencies are an ASSET CLASS and they are something to TRADE. All this stupid nonsense that they will revise the world monetary system with no pain and governments will be brought to the knees without firing a shot, I really do not know who makes up this nonsense. They clearly do not look at history nor do they understand human nature. We WILL crash and I hope the BURN then becomes possible where we get reasonable reform without the totalitarianism that is so common.

Cryptocurrencies are a trading vehicle – that’s it! It will by no means produce sweeping reform without the crash and burn. New ideas are adopted ONLY after a crash and burn. They called Keynes a nutjob and his ideas would be inflationary because the prevailing view was austerity. ONLY after the Great Depression did they turn to Keynes – NOT before.

As for the smartass remark, I am “too old” to understand the new age, I have been a programmer my whole life and what we have developed is still far ahead of the current norm. The last time I heard that remark was when I was an adviser to Temple University. Merrill Lynch was trying to see the way to leverage your returns which ended blowing up Orange County California and resulted in lawsuits of over $2 billion from various sources back in 1994. The scheme was to buy 30-year bonds, short 10-year against them, and capture the difference. Then leverage $1 million into $10 million and the tiny spread would double the interest rate on the original capital. The Temple Board told them I had to approve it. The analysts/salesmen flew in, showed me the scheme, I rejected it and warned them that if interest rates rose, the trade would explode in their face. Their losses would be reversed leveraged. They went back to Chicago, reworked the numbers, flew back and said see it would be a break even. I laughed, told them they assumed they would be able to get out of a trade that went bad without volatility. That was a fool’s game. I explained that this was the trust fund for the university they wanted to speculate with. I would not approve it. They then told the board I was “too old” to understand the “new way” to make money.

So the last time I was “too old” to understand the “new way” to make money was when I was 45. Human nature is always the same. When they have to say I’m “too old”, it means they have no legitimate argument to put forth. Such transformations of this magnitude take decades. NOT a single one of the big IT companies are doing ANYTHING with cryptocurrencies. Just trade it and be happy. Why put out this nonsense how it will change the world in a matter of weeks or months why that is absurd. They rejected Keynes. It took the collapse of the world monetary system before that adopted Keynesianism. There is NO POSSIBLE WAY that cryptocurrencies will just change the world without a CRASH & BURN.

When to Pull the Trigger


QUESTION: I am just a little guy who invests in mutual funds and a few stocks. Ever since I started reading your blog, I have felt a sense of comfort in knowing that eventually, everything will work out because all this has happened before. It is also nice not to feel like I am swinging blindly. Thank you for the peace of mind you have given me.
For a guy like me, is there a date that I should pull all my money out of the US stock market and invest in a mutual fund that is specific to China and the far east?

Or is it not that simple?

KB

ANSWER: Not yet. We have to first get through this readjustment through the Monetary Crisis Cycle. China will rise, but it is just not quite ready for prime time. Just stay away from bonds right now. Interest rates can soar faster than anyone can imagine. We see Italian rates rise from 0.3% to 2.5% in a single day. I have tried very hard to explain that sometimes it is the private sector in trouble, and at other times, the crisis is in government. You have the dollar soaring. So be mindful that the US stock market has not broken out in US dollars and the consolidation for the first half is not yet finished. Of course, if you are not US$ based, chances are you are now watching the US share market make new record highs.

The Rise in US Share Market in Foreign Currencies


 

COMMENT: I spoke this “pretend” analyst who use to be a goldbug and is now a cryptobug. Boy does he hate you. I really had to laugh for he said your computer is a fraud and your forecast on the euro was only correct because you organized it with central banks. I asked him who write more than 500 reports on every market around the world each and every day? He said you did with staff. I asked him, how many people would it take to do that? He had no answer.

I probably would have lost an equal amount in BitCoin buying it at the high based on his emails. Thank you for opening my eyes to see everything globally. It really has helped.

GHH

 

REPLY: I know. I use to get real hate mail from the goldbugs. Not it is the crypto people. Here is the S&P500 express in various currencies. You will note that the market is consolidating in US$ terms, but it is starting to breakout and make all time new highs in various currencies. This is what I mean that each and every one of us will act according to our own self-interest. That is Smith’s invisible hand.

I promised I would not leave anyone behind. Nevertheless, we do not do ANY advertising and prefer to keep the individual readership small. Our bread & butter is institutions. They, on the other hand, prefer no interviews with mainstream media and to shun advertising, It is a difficult road to following through the raindrops.

A Global Systemic Collapse – Opportunity & Risk


QUESTION: Mr. Armstrong; FX Street named you forecaster of the year for your Swiss franc euro peg forecast that also nobody else saw coming. I remember you were named here in Canada as Economist of the Decade for your calls during the 1980s with the 1987 crash and the crash in Japan. I by no means want to be on the opposite side of Socrates. My question is this. You have said that 2018 is just the beginning. This is all coming unglued very rapidly. Is this the Monetary Crisis Cycle and how the world will be torn apart is just a few years?

EM, Vancouver

ANSWER: Thanks for that magazine article. Can’t believe you saved it that long. Yes, when I say we can see a monetary reset as soon as 2021, this is no joke. There are critical points in a number of markets that I will reveal in Singapore. These are the lines in the sand. Once we cross them, there is no going back. This is a global systemic collapse. I cannot emphasize how serious this is going to be.

As long as you understand what is coming and we can draw that line very clearly without personal OPINION, then you will be just fine. Those who constantly believe in fairytales, well that will be a different story. I am not trying to sell you any investment be it land, gold, cryptocurrencies, or stocks. This is about INDEPENDENT research computer driven by just the facts – no agendas.

This is NOT some new age of KNOWLEDGE or Artificial Intelligence ruling the world. Those are complete nonsense. We have to crash and burn before we every reach some new age of reform.

The Euro Crisis is Unfolding on Schedule


 

The Euro Crisis is emerging rapidly. The 2Yr BTP Italy debt has jumped 150bp and is now wider by 2.50%. The ECB has been intervening BECAUSE as we have warned, there is NO BID. Interest rates for Italian debt have almost doubled in a matter of days. Who in their right mind will buy government debt when there is such uncertainty? I have warned that interest rates in Europe can skyrocket beyond anyone’s imagination.

The Euro is now down to 115 zone where critical support now lies. The dollar bears are getting slaughtered as usual for they have had their head in the sand and cannot see anything come from outside the country.

The absolute ONLY way to SURVIVE is to maintain a GLOBAL PERSPECTIVE. Yes, we schedule WECs around the cycles to make sure they are more interesting. Singapore will be no different. Welcome to the Euro Crisis, the fall of the West, and the rise of Asia.

Attendees will be receiving a very special report on the Rise of China

Euro Crisis Unfolds as Politics in Italy Views they are Now an Occupied Country


 

COMMENT: Mr. Armstrong; You do know that you have been the only analyst who has outlined how, why, and when the euro would go into crisis. You said 2018 would be the beginning. Well, it looks to be absolutely correct along with your political models.

Thank you for saving me a fortune

Cheers

JWP

REPLY: What you have to understand is that there are analysts who also saw this coming as well as many traders working in the banks of Europe. I was asked to do a short documentary of the crack of the Euro a few months back. I agreed. They could not find a SINGLE analyst in Europe willing to join me. Not that they disagreed, but for political reasons, they did not want to stand up and say the Eurozone dream was coming undone. No analysts at the top banks would dare come out and say what I have said and still hold a job. The ECM would have been on the phone and that analyst would be fired. Banks have to play the game and cannot rebel for if they do, the ECB will shut them off.

This is why we probably have MORE major Institutions who take our services than just about everyone else combined. They know we are INDEPENDENT and have no CONFLICT OF INTEREST. They need that critical view regardless if they agree or disagree. That is part of the course of being responsible. You must cover your ass as they say in this world. Major institutions cannot afford NOT to take our services if they hope to survive the years ahead. Only an INDEPENDENT worldview will survive the future. Personal OPINIONS will always fail because humans cannot track everything everywhere all the time. It is consistency that counts. Institutions do not follow he said she said nonsense.

 

 

Fundamentally, I have been warning that the separatist tide has been growing. The political view in Italy is a distinct point of view. My sources there have expressed it best that they see Italy has been invaded and it is now an occupied country under the Eurozone. They have been forced to take in refugees that are completely altering the culture of the country. To lose one’s culture and identity is by no means something to take so lightly as Brussels has done.

The bulk of analysts in America have been so bearish the dollar calling for the end of everything. They too have been utterly blind to the trend outside the United States. This is how and why OPINION is a very dangerous thing. Far too often, people prejudge things and refuse to accept that they just may be wrong. They cannot see the tidal wave of change no matter how tall it rises before it hits shore.

French Unions Protesting Economic Reforms in France as Always


 

 

In France, the Unions and opposition parties are rising up in protests denouncing a Macron-led overhaul of labor rules that would reduce worker protections and laws increasing police powers. They are alleging that Macron supports tax reform which favors France’s wealthiest and is working to tear down public services. They, of course, oppose any government plan making it harder for students to attend the public universities of their choice at government expense, more restrictive immigration laws, and the police methods the protesters consider “repressive.”

France has been the most socialistic country in Europe. Its laws have favored workers to the detriment of business. The result has simply been to lower economic growth and send its national debt higher. Macron realizes that France is headed into economic collapse. He is trying to modernize France and make it more competitive. Unions do not want to give up anything and are always demanding more.

It is not an easy task to try to bring reform in France. When uber showed up, the taxi drivers encircled Paris and barricaded the city blocking traffic and setting heaps of tires on fire until Uber was outlawed. Nobody ever looks at the other side. The consumer has a right to increase their living standard by choosing a cheaper service. These protests are all about maintaining uncompetitive advantages that lower the standard of living for the people as a whole and the economic growth of the nation.

Roman Tax on Estate Auctions was the Outrageous Level of 1%


QUESTION: Mr. Armstrong; You recently showed a coin of the emperor Hadrian burning tax records. Was there a tendency to always raise taxes as we have today to extreme levels? It seems that our government here in BC just assumes everything you have belongs to them. We should be grateful for what they allow us to retain. That is really the attitude here in Canada. Has this been the norm for governments in general?

KV

ANSWER: Actually no. This attitude toward tax level over 10% is the product of Socialism. Even the notorious Emperor Caligula abolished taxes placed on auctions. This was the norm was that estates were liquidated and the proceeds went to the family. Augustus put in this auction tax which was effectively like an Inheritance Tax. It caused a lot of tax protests. The tax level was the outrageous level of 1%. The next emperor Tiberius bowed to the pressure and cut the tax in half to just 0.5%. Then Caligula followed Tiberius and he issued this coin announcing that the abolished the auction tax altogether. Note that the coin has SC meaning it was sanctioned by the Senate.

Overall, Rome did not have any direct taxation on income and this was the model for the Founding Fathers of the United States where the Constitution forbid direct taxation. The Roman Empire only imposed indirect taxes. It was Augustus who added to the taxes on harbors and manumission the centesima rerum venalium.  Augustus imposed the 1% tax on the price of articles sold at auctions. There was the quinta et vicesima mancipiorum, or 4% tax on the price of every slave purchased but a 5% if you freed a slave. Then there was the vicesima hereditatum et legatorum, of 5% on all inheritances above 100,000 sesterces, which did not fall to the nearest blood-relations, and on all legacies. The freedom of the citizens from direct taxation following the victory of the Punic Wars continued unimpaired. Emperor Caracalla in 212 AD granted to all free subjects of the Empire the right of citizenship, but it did not abolish taxation as was the case for those in Italy. The customs tax was 2.5% and there was a religious tax on Jews of an extra two denarii a year for not supporting the temples. Diocletian (284-305AD) removed the last distinctions between the inhabitants of Italy and of other parts of the Empire by introducing into Italy the same taxation as obtained in the provinces.

I think we all would prefer an Emperor with low taxation than career politicians who never leave office either and want everything we earn.

The 8.6-Year Frequency is Within Nature


QUESTION: You have noticed that the 8.6-year frequency even allowed you to see that volcanic eruptions would begin in 2018. Are there other examples from history where you have found this to also be true or was Hawaii just unique?

PK

ANSWER: Oh, there are plenty of examples. Let’s take one of the most famous volcanic eruptions in history – Vesusius. Everybody has heard of Pompeii which was destroyed by the eruption of August 24th, 79AD. That eruption was so violent, it hurled stone and ash 20,000 meters (65,000+ feet) into the sky which then came down and buried Pompeii and Herculaneum. There is even a current song out on the destruction of Pompeii by Bastille.

However, there was a major earthquake 17.2 years before (2 x 8.6) which took place in 62AD which was devastating and also produced a tsunami. On February 5th, 62 AD a powerful earthquake that was probably a 7.5+ in magnitude occurred, with the epicenter at Pompeii. The Latin adviser to Emperor Nero (54-68AD) Seneca the Younger wrote a description of the event. Sheep died from falling rocks and statues were toppled. He even said some people lost their minds and wandered around in their madness.

This earthquake was as significant and 1906 San Francisco earthquake which destroyed much of the city. Like the 1906 San Francisco Earthquake led to the Financial Panic of 1907, which inspired the creation of the Federal Reserve by 1913, almost 8 years following that disaster, we see similar reforms in Rome which also included a monetary system reform. Pompeii at the time had a population of at least 20,000 and was a tightly packed city which was not particularly favorable for surviving earthquakes. Much of the city was constructed from bricks which then to crumble easily. Seneca reported that while Pompeii was severely damaged, Herculaneum had far less damage while Naples was barely touched. He described the earthquake in vivid terms:

What hiding-place will creatures find, where will they flee in their anxiety, if fear arises from below and is drawn from the depths of the earth? There is panic on the part of all when buildings creak and give signs of falling. Then everybody hurls himself headlong outside, abandons his household possessions, and trusts to his luck in the outdoors. What hiding-place do we look to, what help, if the earth itself is causing the ruin, if what protects us, upholds us, on which cities are built, which some speak of as a kind of foundation of the universe, separates and reels?

The sixth book of his Naturales quaestiones entitled De Terrae Motu (Concerning Earthquakes)

February 5th, 62AD a tsunami or tidal wave hit Ostia, the port of Rome. Whatever could go wrong for Nero would go wrong until he was forced to commit suicide in 68AD. At that moment in history, there were perhaps 300-grain ships in the harbor waiting to unload. These ships would arrive from Alexandria and Carthage once a year and had the vital grain supplies for Rome for the entire year. All of them were engulfed by the tsunami and their cargoes lost. This natural disaster created rioting in Rome for the people feared they would starve and the bankers were in a state of panic down the Via Sacra, the Roman version of Wall Street. Nero was forced to respond taking a political action that began his downfall in popularity. Nero in 62AD rationed the stored grain supplies to the people of Rome. He issued this coin in 64AD, two years later, announcing that the damage to the port had been repaired.

 

Back at Pompeii, the earthquake affected the demographics of the city. The rich patricians who used Pompeii as a summer resort decided to move elsewhere and a new class of merchants and traders took their place and rebuilt the city. Dedicatory plaque at the Temple of Isis. This plaque declares that Numerius Popidus Celsinus provided the money to rebuild the Temple of Isis after the earthquake. Indeed, the process of repair was slow and extensive. We can still see the repair work in the ruins today. There were projects such as the embellishment of the Forum and repairing the city’s water supply which was also destroyed. Nero also had to contribute funds for the rebuilding of Pompeii. Perhaps, his second wife, Poppaea Sabina was Pompeian and that is where her family was located. The Villa Poppaea is an ancient Roman seaside villa located between Naples and Sorrento. The villa itself is quite a large structure situated in the ancient Roman town of Oplontis which most of it also remains about 35 feet below current ground level under modern Torre Annunziata.  Evidence suggests that it was owned by Emperor Nero, and it is believed to have been used by his second wife, Poppaea Sabina (30-65AD), as her main residence when she was not in Rome.

Then on the night of July 19th, 64 AD, a fire broke out among the shops lining the Circus Maximus. In a city of two million, was suffering under a very hot summer. Despite the claims that Nero started the fire, he himself was miles away in the cooler coastal resort of Antium. The ruins of the Villa Nero are to be found on the sea about 35 miles north of Rome in the modern town of Anzio.

Nevertheless, the Great Fire of Rome was no ordinary fire. The flames raged for six days before coming under control; then the fire reignited and burned for another three days. When the smoke cleared, 10 of Rome’s 14 districts were in ruin. The 800-year-old Temple of Jupiter Stator and the Atrium Vestae, the hearth of the Vestal Virgins, were gone. Two-thirds of Rome had been destroyed.

Nero returned to Rome to organize a relief effort, which he paid for from his own funds. Nero’s contributions to the relief extended to personally taking part in the search for and rescue of victims of the blaze, spending days searching the debris without even his bodyguards. These are not actions of a man who would have deliberately torched the city. Even after the fire, Nero opened the royal palace to provide shelter for the homeless and arranged for food supplies to be delivered in order to prevent starvation among the survivors.

Tacitus, in one of the earliest non-Christian references to the origins of Christianity, notes that the population searched for a scapegoat and rumors held Nero responsible. To deflect blame, perhaps Nero or someone in the administration targeted Christians. He ordered Christians to be thrown to dogs, while others were crucified and burned. But the citizens of Rome did not believe that the Christians had anything to do with the affair and preferred the political forces in play used this to blame Nero claiming he was trying to deflect blame. What we must understand of this period is that everything was seen as a sign or action of the gods. Indeed, the Rev Jerry Falwell and Pat Robertson both said on national television that the terrorist attack of 911 on the World Trade Center was the act of an angry God who allowed the terrorists to succeed in their deadly mission because the United States had become a nation of abortion, homosexuality, secular schools and courts, and the American civil liberties union. Back then, this was seen as the gods were angry with Nero for killing his mother Agrippina and Claudius’s son Britannicus.

 

Therefore, with the Pompeii Earthquake of 62, the tsunami that destroyed the food supply, and then the Great Fire of Rome all within a 2-year period, the people turned against Nero who they saw was the reason the gods were angry. It was Nero who began the first debasement of the Roman silver coinage. We do not know the exact date, but we can reach an approximate date being late 63 AD to the very worst 64AD. Therefore, it clearly appears that Nero increased the money supply post-Pompeii Earthquake of 62AD. Then the Great Fine his by July 64 AD and the amount of coinage increased output by Nero more than doubled.

Meanwhile, a continued period of seismic activity began over the course of 17 years (two 8.6-year cycles) right up until 79 AD when Mt. Vesuvius erupted destroying the towns was dangerous. However, the small tremors were only seen as signs from the gods, and the eruption in 79 of Mt. Vesuvius was largely unexpected.