IMF Criticizes Germany for its Chronic Trade Surplus?


QUESTION: Mr. Armstrong; I know you say you do not advise the IMF. But whatever you write, they follow and repeat. So they are following your blog at least and they implement whatever you say. This is very curious. They are now saying that Germany’s export model economy is threatening the world economy. You were the first to even differentiate domestic compared to export model economies. Do you care to restate that you do not advise the IMF?

GP

ANSWER: I do not deny that probably every government is reading this blog. That is the way it goes. They have realized that we not merely advise institutions, but we also report on trends that are not the subject matter of mainstream media. That said, we DO NOT HAVE any consulting agreement with the IMF. I have met personally with IMF board members. Yet keep in mind that does not mean that boards are unanimous in their decisions or beliefs.

What you are referring to is the IMF’s chief economist Maurice Obstfeld, who pointed out writing in the newspaper Die Welt (The World), further expansion of the German trade surplus would put financial stability at risk. He wrote that Germany’s continuing high trade surpluses are making Germany responsible for the increased crisis risks for the global economy with respect to trade disputes. He has also stated that there are no immediate threats to excessive trade imbalances in Germany. What he is talking about is with respect to global trade imbalances are promoting protectionist tendencies.

Keep in mind that everyone looks at the Current Account. I have stated numerous times that the Current Account also includes investment in buying government debt. The German Current Account surplus is now declining. Much of this was being driven by the internal capital flows within Europe moving to Germany as a hedge against the collapse of the Euro where the trade became the assumption that they would end up with Deutschemarks when the Euro collapsed.

Germany’s Current Account surplus peaked in 2015 at 8.9% of economic output. Last year it was still at the 8% level. The IMF classifies this 8% level as risky. This is by no means a sign that the Germany economy is booming. Actually, it has been the currency that has accounted for more shifts in manufacture than anyone would guess. The rise in the Euro from 82 cents to $1.60 between 2000 and 2008 was significant. By 2017, The German car manufacturer BMW actually produced 1.98 million passenger cars and light trucks built in the United States and were exported from there in the USA – not Germany. If we look at the dollar value of BMW exports from the USA, this accounted for $57.04 billion of U.S. international trade. BMW has actually become the largest manufacturer component that is being produced in the United States – not Germany.

Donald Trump has criticized Germany for its high trade surpluses. The USA is Germany’s largest export market. The current account includes the exchange of goods and services between states as well as the movement of capital. I have stated before that if we allocate trade according to the flag the company flies, then the USA has over a $2 trillion trade surplus. Are the BMWs exported from the USA German or American trade? They are creating American jobs, but the cars say BMW and people think they are imported.

Germany is using an old world mercantilist philosophy and assumes that an export-driven economy is THE number one objective. This is why German politicians were in favor of the Euro. It was Helmut Kohl who really pushed for the Euro to eliminate the FOREX risk to increase German exports. The IMF is repeating perhaps my observations of the Domestic v Export model economies. The shift to this focus seems to be driven by the trade dispute and negotiations with Trump. I am not so sure they are actually going as deep as I have with respect to the economic structure of economies. We all cannot have trade surpluses. Someone has to have a trade deficit. This is their focus whereby I and looking at the structured design. I am writing that for China to become the Financial Capital of the World, they MUST abandon the Export Model of Germany and shift to the Domestic Model to expand its economy that then supports the world as does the USA currently. Slight difference.

 

ECM & the Cycle Inversion?


The Economic Confidence Model (ECM) is a global business cycle. The entire world economy NEVER peaks and bottoms together. This latest turning point of July 12th, 2018 (2018.529) has apparently provided a MAJOR warning that we just could be moving into a major Cycle Inversion from the perspective of the United States. What does that mean? It means that the USA may be moving into a serious high in 2020 against a backdrop of a decline for the world insofar as liquid assets (non-fixed). The China share market has just lost its status as king of the mountain in Asia as Japan has once again reclaimed that lofty position from a value perspective.

The ONLY markets, currency and economy moving against this global bearish trend into 2020 has been the United States. The Dow Jones Industrial Index broke out above the simple Downtrend Line, whereas we do not see this in Europe or Asia.

When we look at the array of world currencies, it is hard to mistake the fact that the dollar is rising. The ONLY other currency to benefit has been Canada. This is reflecting a shift in global capital flows to North America. Canada has been to some extent benefited by its proximity to the United States and has offered some diversification for European and Asian capital outflows.

When we look at the Canadian share market index (TSE), we can see that the July 12th turning point produced the highest closing during July. By the time we reach the World Economic Conference in Orlando on November 16-17, 2018 (Friday & Saturday), we will be approaching the Pi turning point on November 22/23rd, 2018 the next week. Besides the US mid-term elections, we are facing a very critical people in Europe. November is lining up to be an important turning point in the currencies. This is shaping up to ensure that the Orlando WEC event will be a hot topic this year and we hope to strategically set the stage for the balance of the ECM wave from there onward into 2020.

Understanding The Dollar Strength


 

It is fascinating to watch how the bias in people just ensures not just that a sucker is born every minute to replace the one that wises-up, but there are suckers who never learn from experience and cling to their ideas no matter how much it costs them. The U.S. dollar has been climbing against major currencies for several months, with the dollar index .DXY up is trading up about 2.84% for the year. It is true that the dollar has strengthened since late 2015 as the Federal Reserve began raising interest rates against a background of steady economic growth, slowly rising inflation and the lowest U.S. unemployment rate since the 1960s. But the strength in the dollar is more than just interest rates. It is the prettiest of the three ugly sisters as they say – US – Europe – Asia.

The Fed has raised rates twice this year and is expected to raise rates a couple more times by year end which may attract more foreign capital into the U.S. dollar with monetary policy remaining loose to very insane in Europe and Japan. We have the ECM, which has destroyed the European bond market, frozen like a deal in headlights. It is trapped and it realizes that it has been buying the debt of member states who are now addicted to excessively low-interest rates. If the ECB actually stops buying, we are looking at a major debt crisis in Europe as interest rates explode exponentially. However, their policy of austerity has really oppressed the Greek economy and now they have their eyes set on Italy which will more likely create a revolution before the Italian accept going the way of Greeks – quietly into the night.

In Japan, there to they have wiped out the bond market. The government actually bragged that they bought 97% of the government debt auction. Hellow? That’s a good thing? The Bank of Japan has reduced debt purchases for a third time in June 2018, taking advantage of the recent stability in bond yields and the yen. At least Japan is reducing its purchases whereas the ECB talks a good game, but cannot actually do anything. The attempt to force austerity by the EU upon southern Europe is tearing the system apart.

 

 

The dollar bottomed in February 2018. It has yet to elect a Monthly Bullish Reversal. Trump has been unusually vocal about the dollar, unlike most Presidents, following more in the footsteps of Treasury officials. Trump has publicly been criticizing the dollar’s strength several times. He obviously thinks a lower dollar is better for trade. But the markets are going against Trump. You cannot “Make America Great Again” without also strengthening the dollar especially when we still have insanity in Europe economically and Japan still in never-never-land.

In a CNBC television interview, Trump said he was concerned about the potential impact of a stronger dollar on American exports. He also broke tradition by criticizing Federal Reserve policy on raising interest rates, saying it takes away from the United States’ “big competitive edge”. Trump has had no problem with deficit spending hoping it would reduce the dollar to support trade and therefore jobs. While investors and traders have been concerned about the spending, they have been forced to attribute some of the gains to the Trump administration’s tax cuts which are bringing capital home. On the other hand, they see the tax cuts as widening the fiscal deficit, and that they expect leads to borrowing more on the government’s part. Then Trump’s imposition of import tariffs against China, Europe, Mexico and Canada, they generally think will contribute to inflation. But they fail to grasp that Trump is using Tariffs to force a better trade deal.

So hang on to your hat. The strength behind the dollar CANNOT be analyzed simply by looking at the domestic situation. We are in a position of capital flight on a global scale. All these arguments add up to nothing when capital begins to flee from one economic crisis to another. Remember Herbert Hoover’s words from 1931. When we begin to see the first crack in Sovereign Debt, both in Emerging Markets and inside the EU, it will be Kattie-bar-the-door!

Why Marxism Cannot Work


Published on Apr 28, 2016
Marxist Feminsm, Marriage & MGTOW: https://www.youtube.com/watch?v=LY7No… Support my work on Patreon: http://ow.ly/3ymWFu PayPal Donations Welcome. Click here: http://goo.gl/NSdOvK Help Support My Channel. Buy Computing Forever Merchandise, Mugs, Hats, T-Shirts: http://ow.ly/3v3TWq Images in this video sourced are royalty free, creative commons, public domain from Wiki images & http://Pixabay.com Sign up to our Monthly Newsletter to receive exclusive FREE Computing Forever video and blog content: http://goo.gl/YKq7ZK SUBSCRIBE TO THIS YOUTUBE CHANNEL: https://www.youtube.com/user/LACK78 KEEP UP ON SOCIAL MEDIA: Twitter : http://twitter.com/lack78 Facebook : https://www.facebook.com/ComputingFor… Google+ : LACK78: http://goo.gl/k4gWsg Google+: Computing Forever: http://goo.gl/Q8gZpY ALL MY TECH BLOGGING NEWS CONTENT:http://computingforever.com MORE VIDEO AWESOMENESS: http://youtube.com/daveknowsstuf

Concern About Influencing Markets


QUESTION: Thank you very much for your blog and all the knowledge that you pas on.
You are well known in many circles and I would think have great influence in the inner circles and behind the curtain. Now then your computer forecasts can sway a lot of people because of that. If you were to advice in advance of a major market crash you could be accused of starting a panic or worse. So my question is would you do it or sit on it and explain later?
Retired in Canada.

AW

ANSWER: No. We have ALWAYS provided forecasting regardless of the consequences. The Computer itself is writing the analysis on over 1,000 instruments daily. Everyone knows that there is no human writing these reports. Besides that, there are those behind the curtain who want the real forecast even though it may be against them. I have been on the phone with central banks during a crisis when they have asked me does it look like they will need to intervene. So you will be surprised. Even they want the truth when it counts.

I am not doing mainstream media interviews that would ever appear as a headline that the market will crash tomorrow or something like that. ONLY is such information appears in the mainstream media does it raise a red flag.

Fed Upgrades Economy to Strong


The talk behind the curtain remains that the Fed is still under pressure to PLEASE don’t raise rates. The lobbying continues from the IMF, ECB, and Emerging Markets. Meanwhile, the Fed leaves rates unchanged, but it upgraded its view of the US economy to ‘strong’ which remains a signal that the Fed is still prone to raise rates if the stock market continues to rally.

The Federal Open Market Committee voted unanimously to keep the target range for its benchmark rate at 1.75 percent to 2 percent. Still, the committee said that “economic activity has been rising at a strong rate,” which is a more bullish view than the June characterization of “solid” growth. Consequently, this statement also noted that household spending has “grown strongly.”

The bottom-line remains clear. The US economy is holding up the entire world and lowering taxes has helped to bring capital home and attract foreign capital as the USA remains actually a tax haven outside of the world reporting system agreement