Trump has surrounded himself with a few people who believe that a new Bretton Woods conference will be necessary and they wrongly believe that a return to a gold standard will be beneficial. What they fail to comprehend is that we have had many gold standards in the past and they all failed. Why? Because government can borrow and as long as they can do that, fixing the money supply will not create utopia. It will go bust in a huge way just as the Swiss tried to peg their currency to the euro to prevent the capital inflows.

In terms of gold being involved, this is indeed a throwback to barbarous relic of the past because the financial system does not match the idea of gold being money. The problem has never been whatever we use as a standard. The real problem is the people who manage government.

The most direct solution is simply to eliminate all borrowing. The Roman Empire lasted for 1,000 years simply because they didn’t have the modern option of debt financing. There were no Roman equivalent to government bonds. The government owned all the mines. They effectively funded their operations by about 80% tax collection and 20% was funded by the creation of new money. This was a very significant burden on the Roman economy, which was pre-industrial for the most part and at least 75% of its economy was involved in the production of agriculture. Virtually all the taxes and rents raised by the imperial government were spent on the military. The military consumed about 80% of the imperial budget in 150AD.

The next key resistance in the Dow stands at 20,324. Of course, the major channel resistance stands at the 20,703 level while support is to be found at 19,568. The Weekly Projected Bullish Reversals are  20,475.23,  20,518.80, 21,882.34, and 22,188.86. These are the What-If numbers so they may change if we make a new weekly low.

Timing, we still see the risk that this week may produce the February high. Caution is necessary. February and April are the key targets on the monthly level here in 2017. Nonetheless, this still does not appear to be a major high from a long-term perspectiv

China has called all Bitcoin exchanges to a closed door meeting looking to shut down the flight of capital from China. China is looking to deal with the expected trade confrontation with Trump and looking to shut down the flow of capital that has been putting a downward pressure on their currency. We can see that the US dollar has risen for 35 months and this will be seen as a currency war by Trump for his advisers from Goldman Sachs are clueless assuming markets can simply be bullied or manipulated with power.

Our sources are also hinting China may tighten the quotas on importing gold even more since their actions last November (see FT). China is trying to curb the flight of capital which has contributed to the greenback’s rise for 35 months. However, with Europe tottering on the edge, the next country to withdraw from the EU may set off a collapse of the euro and that will only cause a surge higher yet in the dollar impacting China negatively with regard to trade disputes.

The EU leadership is really trying to make Great Britain pay dearly for voting to exit the Community. Like the socialists in American, it’s our way or no way. The left may call the right the “deplorables” but the left are the “intolerables” who refuse to ever consider they might be wrong.

The EU think that is they can make it so bad for Britain, nobody else will leave. They refuse to examine why there is rising discontent within Europe. They refuse to let go of this dream of a federalized Europe to eradicate national identities along with sovereign rights.

The EU intend to be it a mistake that the British will regret and fall to their knees. This attitude is consistent with the constant endeavor to explain all the shortcomings of the EU as insignificant and irrelevant, thereby closing their ears and mind to any possible reform. The EU constantly repeated motto of a federalized Europe will less the risk of war but nobody else takes this seriously outside of Brussels. The “European Project” is creating the resentment that fuels war. With this policy in place, the Community has refused to listen to anyone but themselves. This has led to small issues festering and creating resentment which grows into a huge problem and Brexit that has spun Frexit and all the rest.

The EU refuse to even listen to the British and chose to ignore the speeches of the British Prime Minister, Theresa May. The PM May has announced a clear separation and rejected all interim solutions by the EU, which ultimately would still lead to a dependency upon Brussels. Britain demands that each nation must decide for itself who can immigrate. Just because Merkel allowed the refugees in to help her polls should not subjugate other nations to have to endure a vast influx of something they never voted for.

Britain is not willing to surrender all domestic law to that of the EU. Indeed, EU law is no longer to be applied in Britain. Here we have the EU demanding Ireland retroactively charge Apple taxes simply because their tax rate is less that the highest EU member. That is surrendering everything sovereign to Brussels. Laws are only to be decided by the British parliament – not Brussels. Jurisprudence is a matter for the British courts not the European Court.

Britain is to leave the EU internal market and the EU Customs Union and seeks a free trade agreement to be concluded between the EU and Great Britain. The EU seeks to punish Britain for rejecting its dream. The EU forgets that Trump is now in and a trade deal with Britain will no longer be at the back of the cue as was the case under Obama.

Free movement of people, together with the free movement of goods, free movement of services and the free movement of capital, are the four fundamental freedoms which are regarded as the foundation of the EU. The free movement of persons justifies the right of all EU citizens to settle in the Union and to accept work. However, this has not worked as smoothly as presumed. The cost of living is significantly different throughout the EU. Eastern Europeans, mainly from Poland, have infiltrated Britain working for less money creating competition for domestic workers while foreign companies use cheaper labor in the East to undercut domestic companies on their home-turf.

As the economy turns down and deflation prevails, the threat of foreign jobs is being addressed throughout Europe. Add to this the refugee crisis and you have a power keg throughout Europe waiting to go off.  In view of the high unemployment in almost all countries, domestic citizens have ALWAYS turned against foreign workers as the easy scapegoats for the economic decline. This only merges with the high taxes reducing disposable income.

The EU leaders have nothing to say about the criticisms. They have no clear statement to challenge what is going on. The regulatory nightmare and outright rage that is rising among the people is simply ignored by Brussels. The legal uncertainty with the British exit on the banking system is something nobody even wants to speculate about. How do bail-ins works in Europe if abandoned in Britain? So while the EU thinks by punishing Britain they will discourage others from leaving, they are seriously mistaken. The dream of the EU is dead. It should have remained just a trade union – that was it.

What the Trump Administration is clueless about the ability of the EU to hold it together, they fail to grasp that talking the dollar down will just not work if the political structure of the EU is breaking up.

In the earliest days of the Republic Rome’s taxes were quite modest, and were not direct, but were a property tax or a wealth tax on all forms of property, including land, houses, slaves, animals, money and personal effects. The basic rate was just 1% and sometimes it would occasionally rise to 3%. This was to fund the pay for the army during war. The tax would often be rebated to the people out of the spoils of war. It was levied directly upon individuals, which required the government to conduct a censuses. We have the Biblical account in Luke 2.1-5 where it reads that Caesar Augustus (27BC-14AD) decreed that the Roman Empire should be taxed and that everyone had to return to his own city to pay taxes. So Joseph and Mary returned to Bethlehem and there Jesus was born. In Egypt, we know that there was a 14 year cycle to the census from the time of Augustus. The inhabitants of Egypt were required to submit a declaration to local authorities containing the names, ages, and other identifying information of all co-inhabitants. Indeed, many declarations have survived on papyrus. There are a consistent run of documents showing every census between 33/34AD and 257/258AD, with evidence that this cycle extends back to 19/20AD at the very least.

Direct taxation was impossible in the Roman Empire so there was no income tax. Property taxes were more efficient and could be administered by census. Income taxes were not possible simply because there was not such mechanism at that point in time. Local communities would decide for themselves how to divide up the tax burden among their citizens.  There were the hated Tax Farmers who would pay the tax to the state for a region and then they had the right to collect taxes. States today have taken past-due taxes and sold them to modern Tax Farmers to collect. Britain did that selling the student loans for pennies and the Tax Farmers collect and chase students. The Romans would sell the right to collect taxes to the highest bidder and how they collected the tax was not really the concern of the state. They also had the responsibility of converting provincial taxes, which were often collected in-kind taking property be it grain or animals, and then they would convert those assets into coin to pay the state. The Tax Farmers had to provide sufficient revenues to repay their advance to the state plus enough to cover the opportunity cost of the funds, the transactions cost of converting collections into cash, and the remainder was their profit. In fact, tax farming was quite profitable and
was a major investment vehicle for wealthy citizens of Rome.

Augustus ended tax farming that had dominated the Republican days due to complaints from the provinces of exploitation. The provinces were becoming deeply indebted. Cicero tells us that Brutus saw no problem exploiting others for profit. Brutus was a Tax Farmer and bid for the governorship of Cyprus. It was during this time period that Brutus enriched himself by also skimming taxes and then lent money to Ariobarzanes I (96-63BC) of Cappadocia (modern day Turkey) at 40%, well above the legal lending rate, which was confirmed by Cicero’s documents on Brutus.

The Augustinian tax system was far less progressive than the Republic. The shift moved to a flat tax type of assessment which was based on wealth and population. Tax Farmers had limited times to collect taxes, so they tended to extort the rich for that was easier than converting pigs and chickens from the poor. The Augustinian tax systemgreatly reduced the “progressivity” that is indicative in an income tax today. The Augustus flat tax was thus indexed so to speak to growth in taxable capacity where communities were only liable for a fixed payment. Thus any increase in income accrued entirely to the people as a whole and did not have to be shared with Rome. Individuals knew in advance the exact amount of
their tax bill and that any income over and above that amount was entirely theirs. This tax system promoted economic growth rather than the explotive system of the Republic. Indeed, the civil war supported Julius Caesar because of the burden of taxes and the exploitation of Tax Farmers.

The flat tax of Augustus created the biggest economic boom in Roman history. Augustus once said “I found Rome a city of bricks and left it a city of marble.” Indeed, Augustus commissioned several large marble structures, some of which took 40 years to complete. There was evidence that massive marble blocks were constantly being moved through the city, causing congestion in the streets.  Marble-paved public spaces began to appear where marble was previously reserved for sacred temples and houses of the elite. The flat tax system really did create the economic boom as people turned to peace and business – Pax Romano.

The benefit of the Roman Empire was also free trade and freedom of religion until the late 3rd century AD.

QUESTION: Dear Mr. Armstrong, Is silver currently showing more strength than gold, and therefore likely to move beyond gold in this phase? I’m not a technician but it looks that way to me.

Thank you for all you share.

M

ANSWER: Yes. This is one of the critical factors that must turn to signal a real bull run is coming. We did elect a Weekly Bullish in silver on Friday but not gold. However, we did get a Minor Monthly Bullish at the close of 2016 both in gold and silver. For a real bull market, we need the silver/gold ratio to break 60:1. It is currently in the 69:1 range. Here is a chart with 200 years of data for this ratio. A bull market requires BOTH metals to rally. Gold may have more trouble since it is being tracked by all governments. You cannot mail it outside the country nor jump on a plane with 10 ounces. Silver may become more viable if the world actually moves to electronic currency. So this ratio should start to come in after 2017.

All the hype about demand and who is buying or not, is just irrelevant. The key factor for every MAJOR rally is bringing in the general public. The people who follow metals religiously really do not count for much. They simple make rallies and declines in the short-term. It is when you convince the general public to rush in and buy because they are suddenly concerned about the government, the banks, or even the currency collapsing.

I have stated many times, that QE would not be inflationary because they were buying in bonds that were not necessarily in domestic hands. China sold their long-term and shifted maturities to 5 years or less. Then the banks complained they had no place to park money so the Fed created excessive reserves that reached almost $2.8 trillion. So the money they presumable pumped into the economy never made it. The banks still parked it at the Fed instead of bonds. Creating excess reserves defeated the entire idea of stimulus. I cannot contemplate how anyone capable of rational thought would assume this would be inflationary. The Fed bought the bonds, the bank then handed the cash back to the Fed and then the Fed paid them interest. If anyone can explain why you would thing you injected money into the system when it never left the Fed?

ELIZABETH WARREN blasts Trump saying ‘Wall Street bankers and lobbyists … may be toasting each other with Champagne’ after he ordered the Department of Labor to review the rule that was to go into effect come April. Warren is really clueless. She fails to comprehend that sometimes government regulation is very bad. Indeed, I have argued for years that the SEC and CFTC should be merged into a single agency for that is the source of all bad advice.

The average individual has to have the expertise of a hedge fund manager to sort out all the offering from funds. Hedge funds are offshore because they cannot exist domestically complying with conflicting regulations from the SEC and CFTC. Domestically, you have specialized funds NOT because that is best for individuals, but because of too much conflicting regulation.

If Warren cares so much about people, privatize social security. Stop robbing the lower classes claiming they government is investing for them when all they do is stuff it with their own bonds. The rich get richer because of investments. Yet Warren will not look at excess government regulation that prevents citizens from investing for their future.