Tag Archives: Obama Domestic policy

Mar 1 2017

The Obama-Boehner Debt Crisis


Armstrong Economics Blog/Sovereign Debt Crisis

Re-Posted Mar 1, 2017 by Martin Armstrong

Boehner-Obama

The debt deal struck by President Barack Obama and the then House Speaker John Boehner back in October 2015, was done purposefully to ensure that the debt crisis would not unfold under Obama and the Democrats.  John Boehner never saw a government role of red tape he never cherished.  The debt deal was absurd that the $20 trillion mark for the US debt ceiling as of March 15, 2017 would become permanent. Sure, on the one hand this could lead to a severe budgetary crisis this summer if the Democrats try to use this to discredit Trump since the media will blame Trump and not Obama.

The March 15, 2017 (Ides of March) date will be used by the media to try to stop Trump tax cuts. As always, politicians put-off whatever they can to keep hiding the truth to create fake reality and the press chimes in. This date marks the end of the debt deferral scheme struck by Obama and Boehner. When this delay expires, the deficit limit is supposed to be frozen at $20 trillion. It then becomes a law AND SOME PEOPLE ARE ALREADY TOUTING THE END OF THE WORLD. Of course, without reform and debt restructure, this cannot become reality. A rise in interest rates alone will increase the servicing and blow-through the debt ceiling. So expect a lot of yelling and incrimination – but at the end of the day, they will still have to raise the debt ceiling – AGAIN! Welcome to 2017!

SovDebtCycle-86-R

Yes, this debt crisis is right on time with our forecast made decades ago. Of course, the politicians will be faced with the collapse of socialism. Where will the money come from to keep all of these programs going? The Democrats will call for a massive tax increase as if that will produce something different than a Great Depression as Europe has inflicted upon the Greeks. Honestly, politicians should NEVER be allowed to play with spending. They cannot manage anything and their self-interest of pretending to do a job while lining their own pockets should be a criminal act.

Everything could come to a halt and the Democrats will then try to blame the Republicans. This is how government works – always create a crisis and blame the other party. Obamacare is falling apart as more and more insurers bailout, costs skyrocket, and Social Security goes off the cliff. The Democrats will try desperately to prevent tax reductions for they are closet communists because they want to control your assets with a backdoor where the multinational corps can pay for exceptions. The deficit limit must then be further increased, but oddly enough, Trump is probably the best person to deal with a debt crisis. Trump will at least understand the debt and has previous spoke about restructuring the debt.

All this chaos can reach havoc proportions in the debt markets, but the stock market can be the biggest benefactor for parking money when bonds are not a wise choice. Obama pushed the biggest tax increases for Obamacare off into 2017 to prejudice the next president. Last September I wrote: “Come 2017, we are likely to see Obamacare also collapse.”  Obama has done a tremendous amount of damage as did Boehner. They created the Veteran Health Crisis not paying to take care of the troops and instead gave them a suicide crisis hotline to call rather than healthcare. The lethal combination of backroom dealing has left Trump with little room for action unless he makes a real reform. Just watch how even the press will not attribute everything to Trump.

Trump inherits a pre-programmed time-bomb and Obama has organized protests to try to make sure Trump is blamed for everything Washington created since World War II. The Democrats want to prevent Trump from lowering taxes on companies and citizens, build walls and add border guards to stop the drug trade and increase security authorities because of terrorism. Trump vowed to do more for the veterans when the Democrats cut everything they could in the VA and military. Then there is Trump’s plan to cut off funds to intervening in the world and spend that money home on an infrastructure program.

So as the National Debt is reaching $19,979 trillion, debt has more than 160% since 2000. Under Obama, there was a massive expansion of new debts on the order of nearly $10 trillion dollars taking advantage of cheap interest rates. Obama increased the debt more than the past 43 US presidents combined in nominal terms. Nevertheless, the USA has the only economy that is viable in the West. The American banking system is not shaking as is the case in Europe.

The US economy is holding up the world for about 70% of the US economic output is generated by domestic consumption. If the American consumer stops, Europe and Asia collapse in overall economic growth. So the debt crisis looming on the horizon depends entirely up how bad the Democrats and the press try to spin this to hurt Trump, but they will shoot themselves in the foot. This time, the mainstream media will more likely than not create a serious economic decline in public confidence by trying to pin all the blame on Trump. On top of all this, Moody’s downgraded 24 governments during just the first half of 2016. The rating agencies will downgrade the USA now only because Trump is in office and they do whatever the establishment tells them to do.

Feb 28 2017

NY Teamsters Pension Becomes First To Run Out Of Money As Expert Warns “Pension Tsunami” Is Coming


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Feb 28, 2017 5:15 PM

The New York Teamsters Road Carriers Local 707 Pension Fund has won the unfortunate award for “First Pension to Officially Run Out of Money.”  According to the New York Daily News, and a host of angry former truck drivers who’ve had their pension benefits slashed, the Pension Benefit Guaranty Corp. (PBGC) has officially been forced to step in and take over payments to retirees of the Local 707, albeit at a much lower rate.

Teamsters Local 707’s pension fund is the first to officially bottom out financially — which happened this month.

“I had a union job for 30 years,” Chmil said. “We had collectively bargained contracts that promised us a pension. I paid into it with every paycheck. Everyone told us, ‘Don’t worry, you have a union job, your pension is guaranteed.’ Well, so much for that.”

“It’s a nightmare, it has just devastated all of our lives. I’ve gone from having $48,000 a year to less than half that,” said Chmil, one of five Local 707 retirees who agreed to share their stories with the Daily News last week.

“I don’t want other people to have to go through this. We need everyone to wake up and do something; that’s why we’re talking,” said Ray Narvaez.

Of course, the Teamsters 707 and other Teamster pension boards attempted to submit plans that would have cut benefits in order to prolong payments to retirees but those plans were universally rejected by the Obama administration…better that the pensions just run out of cash completely.  Per Pensions & Investments:

The Obama administration is in denial about the necessity of cutting pension benefits under the Multiemployer Pension Reform Act of 2014 to try to put distressed multiemployer plans on sounder financial footings and make them more sustainable. It must face reality and order the Treasury Department to stop blocking action.

So far the department, required under the act to approve proposed reductions, has rejected proposals by the Teamsters Central States, Southeast & Southwest Areas Pension Plan and the Road Carriers Local 707 Pension Fund.

Ten plans total have applied for cuts, including the New York State Teamsters Conference Pension and Retirement Fund, Syracuse, whose Aug. 31 application is too new to be listed on the Treasury’s website.

The Road Carriers 707 application stated that the plan projects it will become insolvent in February — only about five months away — absent suspension of benefits.

As desperate as the plan’s financial situation appears to be, the Treasury denied the application.

And while the Local 707 pension was the first to dry up, it certainly won’t be the last…

Also on the brink of drying up are the pensions for two Teamster locals — 641 and 560 — in New Jersey, union officials said. Plus 35,000 Teamster members upstate who are part of the money-hemorrhaging New York State Teamsters Pension Fund.

Bigger than all of New York’s Teamster locals combined is the Central States Pension Fund — another looming financial disaster that could leave 407,000 retirees without pensions across the Midwest and South.

Teamster

 

Meanwhile, under the maximum benefits provided by the PBGC, many former Teamsters, like Ray Narvaez, said their monthly retirement checks have been slashed by two-thirds.

Then Narvaez, like 4,000 other retired Teamster truckers, got a letter from Local 707 in February of last year.

It said monthly pensions had to be slashed by more than a third. It was an emergency move to try to keep the dying fund solvent. That dropped Narvaez from nearly $3,500 to about $2,000.

“They said they were running out of money, that there could be no more in the pension fund, so we had to take the cut,” said Narvaez, whose wife was recently diagnosed with cancer.

The stopgap measure didn’t work — and after years of dangling over the precipice, Local 707’s pension fund fell off the financial cliff this month. With no money left, it turned to Pension Benefit Guaranty Corp., a government insurance company that covers pension.

Pension Benefit Guaranty Corp. picked up Local 707’s retiree payouts — but the maximum benefit it gives a year is roughly $12,000, for workers who racked up at least 30 years. For those with less time on the job, the payouts are smaller.

Narvaez now gets $1,170 a month — before taxes.

Of course, as the Central States Pension General Counsel notes, the real “pension tsunami” will come when the massive “municipal and state plans go down next.”

The same crisis now hitting Local 707 has been stewing among numerous Teamster locals around the country for the past decade, he said, and that includes in upstate New York.

The trucking industry — almost uniformly organized by Teamsters — has suffered enormous financial losses in its pension and welfare funds due to a crippling combination of deregulation and stock market crashes, Nyhan said.

“This is a quiet crisis, but it’s very real. There are currently 200 other plans on track for insolvency — that’s going to affect anywhere from 1.5 to 2 million people,” said Nyhan. “The prognosis is bleak minus some new legislative help.”

And it’s not just private-sector industries that are suffering, he added.

“Municipal and state plans are the next to go down — that’s a pension tsunami that’s coming,” he said. “In many states, those defined benefit plans are seriously underfunded — and at the end of the day, math trumps the statutes.”

We’re looking at you Illinoi

Feb 28 2017

US Economy Grew 1.9% In Q4, Unexpectedly Missing Expectations Despite Stronger Consumer Spending


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Feb 28, 2017 8:48 AM

Following a series of better than expected GDP-feeding prints, consensus had expected Q4 GDP to tick higher in the first revision released today, rising from 1.9% to 2.1%. However, that did not happen and instead, the revised print came in unchanged at 1.9%. Notable underlying revisions include: an upward revision in consumer spending, both in services and goods; a downward revision to business investment, mostly in intellectual property products and equipment; and a downward revision to state and local government spending, primarily in structures.

Despite the headline miss, the revised data showed a solid rebound in Personal Consumption Expenditures, which rose 3.0%, higher than the 2.6% expected; furthermore, printing at 2.05% annualized, Consumption alone was higher than the overall GDP of 1.86%.

The reason for the miss was a decline in Fixed Investment which slid from 0.67% to 0.51% as initial CapEx reads appear to have been weaker than expected, coupled with a negative revision to both Private Inventories, down from 1.00% to 0.94% and the contribution from Government, which subtracted another 0.15% point.

 

Net trade remained flat, and was the biggest detractor from Q4 growth, taking away some 1.7% as the Q3 surge of exports to China was offset.

Of note: PCE prices failed to hit the expected 2.2% increase in the quarter, rising 1.9%, after increasing 1.5% in Q3, thus giving the Fed some more breathing room before hiking. Additionally, core PCE rose 1.2%, after rising 1.7% in the prior quarter, suggesting to Janet Yellen there is still some price slack, and the possibility of a rate hike may be more remote.

For the year 2016, real GDP increased 1.6% , compared with 2.6% in 2015. The increase in real GDP in 2016 reflected increases in consumer spending, residential investment, state and local government spending, exports, and federal government spending. These contributions were partly offset by declines in private inventory investment and business investment. Imports increased.

Feb 28 2017

Q1 GDP At Risk As Trade Deficit Balloons Near 9 Year Highs


Tyler Durden's picture
by Tyler Durden
Re-Posted From ZERO HEDGE Feb 28, 2017 8:45 AM

On the heels of a disappointing revised Q4 GDP print, the US trade balance for January printed a $69.2 billion deficit. This is the second largest deficit since August 2008 (slightly smaller than the March 2015 plunge) as the dollar surge has not helped.

The biggest driver the deficit increase was  4.8% MoM increase in Consumer Goods (notably Auto exports rose 9.3%)

The $69.2bn deficit is considerably worse than the $66.0 billion expectations, and is lower than the lowest analyst expectation.

Certainly not a good sign for Q1 GDP expectations.

As BofAML notes, combining trade data with inventories for January, this slices 0.2pp from Q1 GDP tracking, leaving us at 1.8% for the quarter.

The USD strength has not helped…

 

So time for another rate hike to reverse that recent drop in the USD and stymie the US economy even more via its trade d

Feb 28 2017

China CIPS v Western SWIFT System


Armstrong Economics Blog/China

Re-Posted Feb 28, 2017 by Martin Armstrong

Dollar-Yuan-Transfer

COMMENT: Marty; Some people are trying to claim that China in bypassing the Swift System, they are undermining the dollar. The latest absurd statement is that Japan will bypass the dollar and SWIFT System to transact using China’s CIPS system in inter-bank settlement. I really had to laugh at how ignorant this statement is for it would mean Japan will no longer sell anything in the USA. It seems that these people so desperate to kill the dollar clutch at anything and we just laugh in the trading rooms. I think you should address this statement for the naive people out there who are clueless as to real international trade.

RPD

REPLY: Yes, I agree, You are right. The average person out there may read these headlines that are written by people without a single day of real world experience. They seem to confuse clearing and investment and their analysis is always against the dollar. They try to create a myth that somehow the Yuan will kill the dollar, which is what they said about the Euro. CIPS v SWIFT is about clearing – not investment money and it has no impact about parking money. The The crisis in BitCoin has been created by more that 90% of the volume has been in China as it was being used to get money out of China into dollars. Let’s set the record straight – SWIFT (Society for Worldwide Interbank Financial Telecommunication) is by no means a U.S. dollar exclusive system. Visa International supports approximately 180 transaction currencies, thus enabling the processing of international transactions – NOT exclusively dollars all through the SWIFT system! Twenty-six currencies can be used in the net settlement between Visa International and the participating members, the choice of currency being decided by each member involved in the settlement.

Ever since China began to set up a competition to the Western financial institutions back in 2013, there have been countries in the East dealing with China who have begun to use the CIPS System. That makes perfect sense when you are dealing with China. However, that does not mean that CIPS can compete with the SWIFT System with regard to trade in the West. Japan joining CIPS is by no means to the exclusion of SWIFT.

The SWIFT is an industry-owned limited liability cooperative society set up under Belgian law – not US Law. It is controlled by its member banks (including central banks) and other financial institutions. SWIFT’s business is to supply secure messaging services contributing to greater automation of financial transaction processes and to provide a forum for financial institutions to address issues of common concern in the area of financial communication services.

SWIFT was founded in 1973 by 239 banks from 15 countries. Since then, there has been a steady increase in the number of financial institutions and countries connected to SWIFT. By the end of 2002, more than 7,400 financial institutions from 198 countries were connected. There are three categories of SWIFT users: members (shareholders), sub-members (ie subsidiaries controlled by members) and participants. Members can benefit from all the services offered by SWIFT, whereas participants only have restricted access to a range of services that relates to their business.

SWIFT participants include securities brokers and dealers, investment management institutions, fund administrators, money brokers and various other institutions, mainly from within the securities business. By the end of 2002, SWIFT provided services to 2,203 members, 3,079 sub-members and 2,183 participants. The average daily value of payment messages on SWIFT is estimated to be above €6 trillion. National Bank of Belgium (NBB), which is the central bank of the country in which SWIFT’s headquarters are located, acts as lead overseer of SWIFT, supported by the G10 central banks. The NBB is responsible for the day-to-day oversight relationship with SWIFT – not the Federal Reserve.

Visa International operates through SWIFT and it is a private association owned by 21,000 financial institutions worldwide. It consists of six regional divisions: Asia-Pacific; Canada; Central & Eastern Europe, Middle East & Africa (CEMEA); European Union; Latin America & Caribbean; and United States. Membership is limited to deposit-taking financial institutions and to bank-owned organizations operating in the bank card sector, such as Carte Bleue in France and Servizi Interbancari in Italy. The Visa International Base II system clears transactions and facilitates settlement. Visa International supports approximately 180 transaction currencies, thus enabling the processing of international transactions – NOT exclusively dollars! Members can choose to receive their transaction reports in any of these currencies.

Twenty-six currencies can be used in the net settlement between Visa International and the participating members, the choice of currency being decided by each member involved in the settlement. The necessary foreign exchange operations are executed with two banks, one located in London (Barclays) and one in New York (Citibank).

The attempt by China to set up CIPS to compete with the SWIFT System is political and not purely economic. This idea that Japan and China will not participate in SWIFT is absolutely absurd. That would mean even credit cards would not be valid in the West.

Feb 28 2017

Gold for the Close of February


Armstrong Economics Blog/Gold

Re-Posted Feb 28, 2017 by Martin Armstrong

GCNYNF-M March Targets

QUESTION: Marty, you said towards the end of the bear market in gold, it will start to align with the stock market. Are we approaching that period since this has been gold and stocks both rising opposite of what the goldbugs have been forecasting?

LWR

ANSWER:  Yes. We are running out of time for the downside in gold. This does not say we are breaking out right now. In fact, the next Benchmark was the February 27th, which we published in the 2016 Gold Report. We would need to close February above 1306 to imply that a breakout is unfolding and a closing below 1255 today will still be bearish. Gold is moving into a tight range where technical resistance stands at 1286 area and support at 1230.

The rise in gold is unfolding despite the rise and expected rise in interest rates. Likewise, gold has been rising with the US share market. This is part of the tangible asset rally as capital begins to drift away from public sector debt. A collapse in confidence means ALL tangible assets rise – not just gold.

However, we are still basing. The rally does not yet appear to be sustainable. A closing today below 1255 after trading above that right on the Benchmark day no less, warns that we are preparing to change trend, but it is just not right now. Let’s see the closing for February.

Feb 27 2017

Greek Government is 40% of GDP


Armstrong Economics Blog/Greece

Re-Posted Feb 27, 2017 by Martin Armstrong

athens-acropolis

QUESTION:  Hello, I do not understand what Martin say about the fact that the Greek debt doubled when it changed into euro. Indeed, if the currency is twice the value of the old one then all your debt will double as Martin said. However all your assets will double in value too. So it is the same situation as before. I may miss something, could you please explain me what I am missing ?

Best regards,

ANSWER: Yes, private assets rose in value in Southern Europe as the euro rose from 80 cents to $1.60. However, this tended to produce deflation, not inflation as prices rose eliminating competition for tourism etc. reducing sales. The point about the public debt doubling was the fact that this was previous debt, not current, and government has no real performing assets. To service the debt that doubled, they also then began to raise taxes more aggressively and this then was much like strip-mining the economy. Servicing the previous debt increased dramatically reducing the ability to continue spending on various sectors as previous debt servicing was increased.

Germany benefited from the Euro because they were manufacturing products and selling them into Europe and did not have to worry about currency fluctuations. I helped the Japanese to sell their products globally by showing them that they had to price their products in the local currency and then take the FX risk home to manage. They beat the Germans who were pricing their cars always in Deutsche-marks so a Porsche doubled in value in dollar terms between 1970 and 1980 just due to currency – not inflation. The movement of creating a euro was to eliminate currency risk so the German manufacturers could sell their products throughout Europe.

Greece’s top three main industries are tourism, shipping, and industrial products. By joining the Euro, Greece lost the attraction of a cheap holiday for tourists and shipping prices rose. Greece is nowhere near attaining those manufacturing characteristics, and is often one of the smallest in this regard compared to Germany, Japan, and China. However, the Greek-owned fleet of ships remains where it has been for a very long time, at the TOP of the global ranking of shipowning nations. Joining the Eurozone has hurt Greek shipping increasing its cost and opening the door to competition. China is moving upwards rapidly in shipping, and potentially could overtake both Greece and Japan (the second largest) to become number one shipowner within a decade. Greece has not benefited from joining the Eurozone and this has been the greatest myth which has hurt the Greek people tremendously.

European tourism began to move outside the Eurozone for vacations because it was cheaper. Greece has an economy with a public sector accounting for about 40% of GDP and with per capita GDP about two-thirds that of the leading Eurozone economies, this has contributed greatly to its debt crisis. Tourism provides 18% of GDP, so joining the Euro was a complete disaster for tourism and when the government is 40% of GDP and produces nothing to export, the debt crisis simply escalates. The likelihood of Greece have to exit the Eurozone is growing tremendously by the day.

Categories: Greece
Feb 26 2017

Global Market Watch – Knee Jerk Events


Armstrong Economics Blog/Training Tools

Re-Posted Feb 26, 2017 by Martin Armstrong

GC-GMW-Knee Jerk Low

QUESTION: Marty; The GMW was saying it was a knee jerk low the day before the week closed. Do you have to wait for the week close?

KW

ANSWER: Technically yes. The comment is as of the close of that time level so in the case of Knee Jerk Events, it is forecasting in reality that the event (high or low) will hold. It also depends upon how the event unfolds on the Weekly to Yearly level. You can get that Knee Jerk low show up early in the week and then rally into the close of that week with all the time it saying it is a Knee Jerk event. The important aspect is that the event is being identified as a Knee Jerk rather than a capitulation and change in trend. That is very important.

What we have been building is a database of the GMW whereby each pattern number is recorded with the event that follows. We are then running systems on that to see if it is possible to produce a highly accurate forecast of say when event #10550 takes place #11870 follows.

We are always looking at more in-depth means of analysis that is testing the boundaries of forecasting.

Feb 26 2017

French Government to Track Everyone, Everywhere


Armstrong Economics Blog/Uncategorized

Re-Posted Feb 26, 2017 by Martin Armstrong

French Cafe

COMMENT: Martin, it happens now, as you wrote,  all of each french citizen will be registered, fingerprints, adress, Job, banking account..they want to own us..Hell on earth

ANSWER: Yes. As of Tuesday, February 21st, the registration requirement that they said were only to be applied to Yvelines and Brittany, it will be extended to all of France by the end of March.
Friedman-14I have stated many times, as government enter this phase of the Sovereign Debt Crisis, they will be looking for ways to get more aggressive in extracting revenue from us. This is simply what they do. It is always our fault – NEVER THEIR’S – when they go broke. My old friend Milton Friedman, said it best:
“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.”
When you put people in charge of government, their livelihood then is dependent upon extracting money from you and this is why we call them “Public Servants” for they produce nothing.
The only possible way to solve our crisis is to consult History. That reveals a plain and simple fact. No person should rule in government for more than ONE TERM. There should be absolutely NO POLITICAL DONATIONS.
Lobbyists own politicians because they must run term after term to keep their jobs. They need money for that so they are corrupt prostitutes and sell themselves to the highest bidder. This is why they, and the Press, hate Trump. He did not have to beg for any money so he owes nobody. That is dangerous to them so the press will paint him as a madman to help maintain the corrupt system that they have become the pillar propping up the whole thing.
We must eliminate career politicians, end political donations, and criminalize journalists who engage in propaganda to undermine our freedom.
Feb 25 2017

Knee Jerk – Reaction – Temp Events


Armstrong Economics Blog/Training Tools

Re-Posted Feb 25, 2017 by Martin Armstrong

GC-GMW-Knee Jerk Low

QUESTION: Hello, could you explain the differences between “Knee Jerk v Spike v Temp v Reaction Events” ? They are all Timing indications I guess? regards.

Knee Jerk Low

ANSWER: When the computer is classifying something as a Knee Jerk high or low, it means it is a one-time-unit event. A Reaction High or Low has not penetrated the previous event and is at least a three-time-unit event. A Temp High or Low is normally a brief trend greater than three-time-units.

Here is the Global Market Watch on gold. You can see it correctly forecast two Knee Jerk lows, which proved to be correct. It is the GMW which eliminates personal opinion and is based solely upon pattern recognition. This is neither technical nor cyclical based. This is something altogether unique and represents true Machine Learning Intelligence.