The European markets are crashing from the currencies to the debt – even the Bunds. The smart capital is realizing that this is the end-game. Central Banks are in a state of absolute crisis. We are looking at the extreme volatility that is required to eventually create the slingshot. As we head into the end of the quarter, hedge funds are selling everything to raise cash. All those who have been listening to forecasts all based on the Quantity Theory of Money, including the central banks, are losing everything because they have utterly failed to comprehend the global economy and how it truly functions. You would think after 6 years of negative interest rates in Europe, the ECB buying the bonds because there is no free market left, they would realize that their forecasts of “cash is trash”were so old school from the days of the gold standard and fixed rates.

We as a society seem obsessed with repeating the same mistakes while expecting a different result. Mistakes are supposed to be how we learn, they are not a script for repeating perpetually.

Silver has broken last year’s low. All the European markets have tumbled. The worst possible move was just made. The Fed went all-in and the markets did not respond. Welcome to the Crash of 2020. We have a lot more interesting times just ahead

COMMENT: Martin –
I’m glad you had the opportunity to attend the gathering at Mar E Lago and I hope you had a chance to introduce yourself and your economic track record to president Trump. He is an ego-driven person who loves smearing dirt in the faces of his opponents unnecessarily, but he is business-oriented and I do think he less-dogmatic/ideological that many pols, open to practical ideas, and is working hard to try to reinvigorate America to the extent he know how.

My ears perked up last nite when over dinner my brother in-law claimed Trump said that he will move to restructure the national debt. Have events become dire-enough now that the time has arrived for you to offer your debt-equity swap proposition, and has Trump taken it into favorable consideration ? I hope so.
SC

REPLY: I have been meeting with heads of state since 1980. I was simply the largest adviser in currency and understood how things worked globally from a teenager. When I was 13, I traveled around Europe with my family from Sweden to Italy over the summer. I believe that taught me about currency for every country we visited you had to change your currency.  That was, I believe, my introduction to foreign exchange. So when 1971 came and the floating exchange rate began, I was familiar with the issue and simply applied my trading experience in commodities to the currency.

They did not teach currency in school. After all, everything was fixed. So when the first banking crisis hit in 1973, I just happened to know the executive VP and he called me asking if I would take a look at their currency problem. So from then on, I just had a reputation of being the guy institutions would call over currency questions.

I began meeting with the Reagan Administration and was asked for advice informing the G5 in 1985. That is when I wrote to President disagreeing with the proposal of the Plaza Accord. Because I was regarded as the currency expert, I simply was getting called in around the globe. People ask me all the time, how did I become the largest adviser in the world? I just would say as my secretary had a little stickman holding a sign on her desk – Shit Happens.

I was restructuring companies to create natural hedges offsetting currency risks in one country by a counter-trend set of assets in another. I was redirecting where companies should set up operations and what countries to leave. That led to Margaret Thatcher wanting to meet because she heard a rumor that some guy was behind setting up all the manufacturing plants in Britain. I happened to personally know her economic adviser, Sir Alan Walters. He said that was “Marty” and she wanted to meet.

I have been meeting heads of state my whole career. Some people have called me the Forest Gump of Finance. Whatever crisis hit, I was somehow called in. So it was a joke inside the company who would accompany to Mar-a-Largo. Then it has become a joke that with all the controversy that Trump met with a press agent of the President of Brazil who tested positive for coronavirus 3 days later, some of my staff said, of course, you had to be there for that one as well.

I am in contact with many around the world. I try to help wherever I can. I refuse to accept payments from any government. That actually increases my respect for those who are always trying to hand them bills, they also know that they will skew the advice to what they want to hear. With me, they know I am not for sale. I will always speak my mind and that much they know.

Even when I testified before the House Ways & Means Committee, they knew I had under contract the equivalent of 50% of the US national debt. That is also why the bankers have hated me. They try to manipulate markets and when they lose, they blame me because I refuse to join them.

I have enough to live out my days. It will not change my lifestyle. I try to limit what I do, not expand it. I am not 25. What I do is because I do not like what I see for my family. I get to say – Scotty, please beam me up! They are here and have to finish out their tour of duty. So my motivation has never been money. I have been blessed with the talents not to ever have to worry about that common problem.

For me, it is important to see how various heads of state act in response to various events. What is their thinking process for that to me leads to where they will take us in the future and what path we are walking down. I do not like the press. They often write without regard to what is really going on and are far too often biased in their view of people based upon political dogma. I prefer my own research not filtered by someone who I have to figure out their motive.

QUESTION: Marty, you recently said that there was a shadow repo market. Nobody has ever heard of this. In the Fed’s statement, there is a curious announcement that’s talking about coordinated swap lines. They also said: ” both a collateralized and uncollateralized basis, to support the provision of liquidity to households and businesses and the general smooth functioning of payment systems.” Is this the commercial paper you are talking about?

ML

ANSWER: Yes. They call this “coordinated swap lines” between central banks. It is the shadow uncollateralized Repo Market. They are now coordinating this with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank. In other words, the Fed is providing liquidity to other central banks. I have said before. They actually had red phones connecting the central banks after the Plaza Accord. I was sitting there in the room when one of those red phones started to ring. I just call it the shadow Repo Market.

The “uncollateralized” loans mean commercial paper other than government treasuries

QUESTION: Do you think there is some single plot behind this Coronavirus scare?

SH

ANSWER: No. It seems that there are a lot of people using this Coronavirus for personal political agendas. Illinois Tollway is now using it to implement All-Electronic Tolling as Precaution Against Spread of Coronavirus. You have others in Europe saying they should be nationalizing companies since they cannot be bailout under EU rules. Others are using it and blaming Trump as if any government can really prevent such a pandemic.

I do not think this is a single-minded plot. However, history also demonstrates that they will always take advantage of a good crisis. In Europe, the central bank is already at negative rates. There is nothing left for them to do. This is now turning to emergency political measures. The drive to use this as the excuse to eliminate paper currency is a side-benefit on their wish list and this does provide the excuse to justify that action.

Whatever measures you see, they rarely ever reverse. They tend to be permanent.