We should see a new low this week in the share markets as concern over a rate hike hits the markets globally coming from the Fed and Hillary they have finally said on Sunday has pneumonia.

We will provide the timing arrays for this week on the Private Blog for client eyes only.

The Telegraph has come out stating bluntly “ECB’s Mario Draghi has run out of magic as deflation closes in.” The confidence level in central banks I have been warning will decline. This is the prerequisite for the Phase Transition that lies ahead. At  the very core of this entire collapse in confidence in all levels of government lies in the socialist philosophy of Marxist-Keynesianism blended with monetary theory.

All the gold promoters who hate my guts and have been insisting I am wrong, actually share the very same theory with Mario Draghi which has proven to be utterly disastrous. They have both assumed that increasing the money supply will produce inflation. On the surface, it sounds logical under the theory of supply and demand. It completely fails because supply may be definable, but demand is dependent upon human emotion. What happened to the hyperinflation that was supposed to engulf the world with quantitative easing? What both camps of gold promoters and central bankers have assumed using this theory, has only exposed their lack of understanding of both history and how the economy functions.

The only thing that matters is CONFIDENCE for that is what controls demand. You can increase the money supply, but it depends upon public confidence whether or not that will produce any inflation whatsoever. The 3rd century is the chaotic period of Rome when the money supply is dramatically debased. Yet strangely, this is also the same period that we find tremendous hoards of these debased coins being buried as as the British hoard discovered in 2007 with some 52,000 coins. So why hoard debased money if it is worthless? It seems to be a paradox indeed.

Between 235 and 268AD, there were 26 emperors. The political instability was pervasive. The collapse in confidence that sets off hoarding was the emperor Maximinus I who declares all wealth belongs to the state becoming one of the earliest Marxists if you will. He pays rewards to reveal anyone hiding wealth just as the IRS pays rewards today for reporting rich who also have money they are not revealing. This set in motion hoarding on a grand scale. This is stage one that destroys an economy. The hunt for money today is falling this precise course of action.

Once money begins to hoard hiding from government, the process is never easily reversed. The trust and confidence in being able to freely conduct business collapses. As government cannot pay the pensions it promises, the government employees become aggressive.  Today we have unions in New York and Chicago demanding the government tax the exchanges to pay their pensions as teachers and nurses having nothing to do with the exchange. During the 3rd century, trrops began hailing generals to be emperor so they would get paid. Then cities who supported a rival are sacked to pay the troops.

We see at this time Rome splits into three. So we have separatist movements as well. Here is a coin issued by Postumus, the first Gallic Emperor. Britain, France, and Spain separated from Rome as taxes rose. The reverse shows Postumus extending a hand promising restoration of order and prosperity. So we then have separatist movements as we are also witnessing today.

During this part of the economic decline, people hoard. They lose confidence in government so they hoard whatever money they have even debased currency. This gives way to inflation ONLY when they lose all confidence in government. Then they spend the money for the tangible assets. Before that point, DEFLATION prevails because they do not know what form of government will survive.

All the increase in money supply will not stimulate demand. We are in the throes of deflation as people just worry about tomorrow. When they reach the point and question the existence of government, then they will spend the debased money to convert it into tangible assets.

Over the past 3 years, Vancouver has seized at its airport $18.7 million in undeclared cash of which 70% has been from Chinese. The hunt for money is really outrageous that it is all about taxes and our property rights have been lost. All governments are acting like common criminals robbing people of their property claiming they have no right to travel with their own money. There is no crime just failing to tell them you have money on you.

The hunt for money knows no bounds. All countries are now engaging in the practice of just confiscating your money saying you have no right to move with your money whatsoever. This trend is very disturbing for where is the crime? If you made money in one country and didn’t pay taxes to them but left, why is it a crime to take your money to another country to spend it? Any excuse will now serve as the reason to justify being a common criminal. It is a shame, but this is how governments are degenerating into the dominant totalitarian states eliminating the most basic element of freedom, property rights. That is the major component that distinguish communist states from capitalism – the right to property ownership in the latter which is denied in the former. So we are supposed to be a free society, yet we are nothing remotely free. Government are trying to be just a little pregnant with communism enough to justify robbing people in the name of justice (just us).

The numbers are in. Banking as indeed seen its peak. Banks in Europe and the US have dismissed 100,000 people last year, the bulk after 2015.75 . The decline is just starting. We are even witnessing the decline in bank employment now in China as well. The high flying jobs in banking have seen their best days. Young bankers use to brag which bank they worked for in New York trying to impress girls. Nowadays, they tend to be silent since bankers are up there in the unfavorable perception with politicians. The bankers have become the most hated profession the world – topping even politicians and physics, so that is saying a lot.

With the ECB expanding its quantitative easing program to include corporate debt, European companies are now scrambling to issue as much debt as they can as cheap rates. These issue are selling BECAUSE it is assumed they have a guaranteed bidder being the ECB. At least this part of the QE is far better than buying government paper. Ferrovial Emisiones SA of Spain sold bonds maturing in September 2022. Schaeffler AG of Germany is now looking to sell €2.8 billion euros of securities. The German household product manufacturer Henkel AG actually issued notes with negative yields, which is again the flood of cash trying to buy German paper as the hedge against the collapse of the euro. Things are heating up in Europe on the debt scene.

QUESTION: Why are there so many Fed branches? It seems this is another way for government just to create jobs and pensions.

ANSWER:I wrote several times that the original design of the Federal Reserve would have been a good, stabilizing entity for the economy had the politicians left it alone. At first, to ease recessions and “stimulate” the economy, the Fed only bought corporate paper to provide liquidity directly to the economy.

Then World War I came and this short-lived mechanism was altered. Congress ordered the Fed to buy only government bonds so they could fund the war. They never put that system back in place, so today Quantitative Easing no longer works because the Fed ONLY buys in government bonds from banks who never lend the money out. The Fed embarked on then buying in mortgaged backed securities, again, to help the banks get rid of real garbage. Once more, there was no direct stimulation, for the banks hoarded the cash by depositing it at the Fed in excess reserves.

The second structural change to the Fed came at the hand of Roosevelt, who used the Great Depression as his excuse. FDR usurped all the power to Washington, eliminating the very purpose of the Fed to manage the regional capital flows. Each branch of the Fed maintained an autonomous structure to balance out the regional capital flows, which are ignored today. That meant that each branch maintained its own interest rates to either deflect excess capital (lower rates) or attract capital when there was a shortage in that region (higher rates).

These two primary structural changes to the Federal Reserve have eliminated the government’s power to properly manage the economy. It also feeds the conspiracy theories, for at first the Fed was a private entity funded by the bankers, not taxpayers. So today, people cook up conspiracies because the Fed still has the shareholder structure, but has become a government controlled agency all because Congress made these two changes and never restored the Fed to its original purpose – to act as a rescue fund for banks in trouble WITHOUT taxpayer money. We have SPIC insurance where brokerage houses must pay in for that insurance, which was the same scheme originally designed for the Federal Reserve.