COMMENT: I saw you in front of the Bank of England. Then within a matter of days, the pound crashes. You may not be a household name but you are in the circles that matter. So did you orchestrate the reverse trend in the pound?

OD

REPLY: No! The pound crashed simply because it was on schedule. My mere presence in London did not signal the end of the pound rally. I was there for some very important meetings with clients regarding other matters, not to help the Bank of England sell the pound. I do get rather tired of being blamed for everything. What you fail to grasp here is that there are very few of us with international experience. Local economists do not cut it and it seems that nobody else with hedge fund experience who has actually traded billions of dollars when a billion used to be a lot of money is around for consultation. They were trying to make another documentary about such things and nobody else was willing to appear because they feared to speak publicly about the fate of the Euro.

I get called because I tell the truth. I do not twist my view to what they want to hear just to get paid like some actor putting on a show. It is what it is. I have intimate knowledge of many aspects because when they were creating the Euro the commission in change all attended our WEC in London that year. I have been called into just about every crisis since the mid-1970s.

You cannot get in the door if you have ANY conflict of interest. I no longer manage money so there is no concern about insider trading that I will profit from the info from a closed-door meeting. It is as simple as that. I also sign confidentiality agreements to ensure that sensitive names and positions are not disclosed.

I did NOT meet with the Bank of England to orchestrate the shift in trend in the pound. The markets are bigger than me, and bigger than the Bank of England and ALL the central banks combined. Remember the Louvre Accord? That is when the central banks came out and tried to stop the decline in the dollar going into 1987. NEWS FLASH!!!! They failed! So, what happened? They called me again since I was the one warning them in 1985 they would unleash volatility.

Everyone knows my work. You cannot manipulate an individual market because we are all connected. Capital flows around the global financial system like a bottle on the ocean current.

I am called by governments and institutions, not for my OPINION, but because the computer is the only thing in the world that monitors the entire political-economic landscape and has a proven track record for almost 40 years.

You cannot manipulate any market beyond the normal channel of daily noise. You cannot make gold rise or fall if it is out of sync with the rest of the world. Those who keep poisoning the minds of people on that do so because their theories are wrong and have been since 1971

Argentina has just raised interest rates to 40% trying to support the currency. I have explained many times that interest rates follow a BELL-CURVE and by no means are they linear. This is one of the huge problems behind attempts by central banks to manipulate the economy by impacting demand-side economics. Raising interest rates to stem inflation will work only up to a point and even that is debatable. The entire interrelationship between markets and interest rates has three main phase transitions and each depends upon the interaction with CONFIDENCE of the people in the survivability of the state.

PHASE TWO: Raising interest rates will flip the economy as Volcker did in 1981 ONLY when they exceed the expectation of profits in asset inflation provided there is CONFIDENCE that the government will survive as in the USA back in 1981 compared to Zimbabwe, Venezuela, Russia during 1917 or China back in 1949. In other words, if the nation is going into civil war, then tangible assets will collapse and the solution becomes assets flee the country.

In the case of the USA back in 1981, the high interest rates worked because we were only in Phase Two where there was no civil war or revolution so the survivability of the government did not come into question. Hence, Volcker created DELATION as capital then ran away from assets and into bonds to capture the higher interest rates. Then and only then did rates begin to decline between 1981 into 1986 reflecting the high demand for US government bonds, which in turn drove the US dollar to record highs and the British pound to $1.03 in 1985 resulting in the Plaza Accord and the creation of the G5 (now G20).

So many people want to take issue with me over how the stock market will rise with higher interest rates. It is a BELL-CURVE and you better begin to understand this. If not, just hand-over all your assets to the New York bankers now, go on welfare and just end your misery.

Here are charts of the Argentine share market the currency in terms of US dollars. You can see that the stock market offers TANGIBLE assets that rise in local currency terms because assets have an international value. Here we can see the dollar has soared against the currency and the stock market has risen in proportion the decline in the currency. I do not think there is any other way that is better to demonstrate the BELL-CURVE effect of interest rates than these two charts.

To those who doubt that the stock market can rise with rising interest rates, I really do not know what to say. Keep listening to the talking heads of TV and all the pundits who claim only gold will rise and everything else will fall to dust. Then we have the sublime blind idiots who never look outside the USA and proclaim the dollar will crash and burn not the rest of the world so buy gold and cryptocurrency you cannot spend and certainly with no power grid.

PHASE THREE

Is when no level of interest rate will save the day. Capital simply flees the political state for the risk of revolution or civil war means that tangible assets which are immovable will not hold their value such as companies and real estate. This is the period that Goldbugs envision. At that point, the value of everything will even move into the extreme PHASE FOUR where even gold will decline and the only thing to survive is food. There, the political state completely collapses and a new political government comes into being.

The UAE government came under tremendous pressure by the dealers that the VAT was killing their business. The government has responded dropping the VAT (Sales Tax) on gold, diamonds, and precious metals for investors. Taxing such products is, in reality, taxing money the same as if it bought bonds or stocks. Not everyone buys stocks just as not everyone buys gold. Taxing gold and not stocks is a form of investment bias

QUESTION: Mr. Armstrong; You have said that Brexit is good for Britain and that the financial center could never move to Paris or Frankfurt and survive. Can you elaborate on that topic for us Brits?

GS

ANSWER: It is amazing that the politicians are so clueless and the heads of the banks are far too often just talking politics. London is bigger than all the financial centers in Europe COMBINED! Because of regulation being consolidated in Britain, it even beats New York City – a fact that is often overlooked. The United States has SEVEN regulatory agencies that compete with each other for power compared to one for Britain. London still wins hands down.Neither Frankfurt nor Paris even has the infrastructure to function as London does

The Cologne Institute of German Business sees in the planned European deposit insurance is simply incapable of proving protection against a bank crash in Europe. The EU deposit guarantee is simply not practical under any concept of austerity. The Eurozone still has inherent significant risks in the balance sheets of European financial institutions. This is primarily because where the USA took the bad loans from the banks and stuffed them into Freddie and Fanny, in Europe, the bad loans are still on the books of the banks. Systemically, this has been the leading problem why Europe has been unable to recover and Quantitative Easing merely robber savers of their income and it failed completely to stimulate the economy. Banks were still reluctant to lend and people would not borrow if they did not have confidence in the future.

The proportion of bad loans is so different between the individual banks that a joint deposit guarantee leads to a permanent transfer mechanism. This is a complete disaster and pulls the EU apart. As the worse banks are in Southern Europe, Northern Europe will see this as a bailout for the South. Therein lies the very crisis and why the structure of the Eurozone from the outset has been such a complete disaster. All national debts of member states should have been consolidated and that should have become the European National Debt. Thereafter, member states should have been on their own. But that common sense design was ignored for political purposes. Any consolidation of debt was seen as a bailout for weaker member states. This inherent disparity simply remains intact with no solution in sight.

The recapitalization costs for eliminating non-performing loans (NPLs) just in Cyprus will still consume 2.4% of GDP in that member state. In Greece, any recapitalization will cost 2% of GDP and in Italy 0.8%. The disparity among members smacks of transfer payments which have been a sore subject behind the design of the Euro. A closer look at Italy reveals that more than 10% of the balance sheets of Italian banks constitute bad loans. The cost to bailout Italy is put at €189 billion while Spain comes in around €100 billion and even France will be €85 billion. In Germany, the bad loans amount to about €48 billion

While nobody wants to talk about it, the obvious issue is why has Deutsche Bank not been merged with Commerzbank? The bad loan problem a derivatives problem would simply not be solved even by such a merger.

Is it any wonder why politicians have looked to bail-ins rather than bailouts

QUESTION: You said the US had a two-tier monetary system under Bretton Woods. Can you explain that one, please?

DHJ

ANSWER: When Roosevelt confiscated gold, he created, in reality, a two-tier monetary system quite frankly as the medieval city of Florence. The Great Financial Panic of 1344 was when the value of silver rose dramatically blowing out the silver/gold ratio. Silver was used locally for the normal people. Their wages were paid in silver. The gold florin was used for international trade and companies had to keep actually two sets of books with accounting in each separate currency.

When Roosevelt confiscated gold, he devalued the dollar from $20.67 per ounce of gold to $35. Gold remained the unit of account for INTERNATIONAL transactions. While the last silver dollar was at first still minted, it was decided to end that production as well. Therefore, the last U.S. silver dollar to be struck was that of 1935. Nonetheless, the government then maintained silver as a backing for the currency domestically and issued Silver Certificates until 1963.

When the price of silver was rising with just about all other commodities during the early 1960s, the pressure was mounting on the financial system. President Kennedy authorized the abandonment of silver as a backing for the currency. He allowed the silver certificates to be redeemed for silver bullion. However, the minimum lot accepted for redemption was 5,000 for this was the size of the silver bars.

Therefore, in 1963 is when we see the beginning of the end in the two-tier monetary system. Between 1964 and 1971, the gold standard remained intact until President Nixon was forced to close the gold window ending the convertibility of dollars to gold internationally.

So, you see, the United States maintained a two-tier monetary system like Florence, silver for domestic use and gold for international trade. The difference was that when the silver/gold ratio broke, people were laid-off and unemployment soared. The people stormed the palaces of the bankers, plundered them, and then set them on fire.

A new technology is underway in the construction of the first robot cargo ship. This will be the first unmanned cargo ship to set sail. It is being constructed by Rolls-Royce. There is a catch. The international laws on shipping were set in place because of unions. As is, international shipping law states that ocean-going vessels must be “properly” crewed. What is the definition of that “properly crewed” will be something for the courts to decide. If a robot can construct a car, does that mean it is not a proper car? Therefore, fully autonomous, unmanned ships may currently not be allowed in international waters under the present interpretation, but that is definitely something subject to challenge in a legal proceeding.

As such, the Yara Birkeland, its official name, will operate close to the Norweigan coast at all times for now between three ports in the south of the country. If that goes well, then look for this to become a new challenge to the interpretation of old Marxist union laws.