Armstrong Economics Blog/Economics
Re-Posted Apr 10, 2019 by Martin Armstrong
QUESTION: Dear Mr. Armstrong,
I have a question that might interest not just me but also other blog Readers:
In your blog Posts you write that you expect that we will have a hard landing going into 2020.
My question is: What does that mean for the Dow? Do you expect the dow to correct into 2020 more that 20%.
Thank you for your work and best Regards,
A
ANSWER: The hard landing is economic and will have its greatest impact outside the USA. While central banks have sold US Treasuries in an attempt to keep the dollar down, the private sector has been pouring assets into the USA and particularly the Dow. Our capital flows have tracked a significant shift in global capital flows into the USA especially from Europe. That should come as no surprise given the chaos in BREXIT as well as the May elections.
We still do not see a major correction in the Dow. We have been undergoing a shift from public to private assets on a global scale. Therefore, the hard landing will be more economically based and central banks will try to do something, as in lowering rates, but they have run out of bullets. The Fed has tried to back off on rates after buying into the problem of a hard landing outside the USA. The ECB has been on its hands and knees, pleading with the Fed not to raise rates when they will have to continue their QE programs or face sovereign debt defaults.
Preferred v Ordinary Shares
Armstrong Economics Blog/Q&A
Re-Posted Apr 10, 2019 by Martin Armstrong
QUESTION: Hi Martin,
What are your thoughts on preferred shares? Especially the ones with good quality DBRS ratings. Will they survive the downturn or will they fail?
Thx
FS
ANSWER: Ordinary and preference shares are a claim on corporate earnings and assets. Dividends for ordinary shares may be irregular and indefinite, whereas preference shareholders will receive a fixed dividend which will accrue usually if the payments are not made in one term. Ordinary shareholders are in a riskier position than preference shareholders since they are the last to receive their share in the event of liquidation. That may not be a concern in a blue chip company. Nevertheless, they also are open to the possibility of a higher dividend during times when the firm is doing well in contrast to preferred shared with fixed income.
Preferred shares can be looked upon as a hybrid debt where you have a claim on the assets, but like a loan, it has a fixed rate. Ownership of preference shares offers advantages and disadvantages. On one hand, it provides a higher claim on earnings, assets, and fixed dividends. On the other, it limits voting rights and the possibility for growth in dividends in times when the company is financially sound.
The good companies will generally survive. This is a collapse in government – not the private sector
Trump’s Agenda is Officially Dead
Armstrong Economics Blog/Politics
Re-Posted Apr 10, 2019 by Martin Armstrong
We should not expect Trump to get any of his agenda items through Congress. Trump’s promises to replace the Affordable Care Act, invest in infrastructure, and cut middle class taxes have been essentially shelved. The Democrats refuse to cooperate on anything in hopes of using that against him in 2020. What this really means illustrates my concerns. Government has simply ceased to exist and all we have is a couple deadlocked in a bitter divorce.
This reminds me of the best scene on this subject from “When Harry met Sally” and how bitter a divorce can be. This is what politics has degenerated to and it is in line with our computer’s forecasts that this is the end-game for Western civilization. There is just no going back. Government is now a battle to see which side can destroy civilization first. Websters’ defines civilization as “refinement of thought, manners, or taste,” none of which we can see in Washington anymore.
The entire purpose of civilization is everyone coming together because the sum is greater than the individuals. Today, we have reverted back to the individuals and there is no longer any cohesive sum that is greater. We have devolved backwards and it will take the crash and burn of government before we can rise from the political ashes with hope of a new government structure that once again respects the liberty of the individual.
While the Democrats have officially killed the Trump agenda, what they fail to understand is that this is also the destruction of their agenda as well. There will no longer be a government of ALL the people, it is now a government of us v them. That is how civilization dies. It defeats the entire purpose of forming societies. Politics has become a confrontation to impose tyranny upon your opponent. The very core of socialism is to deny individual freedom. The state comes first – the individual second. Everything the American Revolution stood for is now completely overturned.
Creepy Smallville Actress Allison Mack Pleads Guilty to Being Sex Slave Mistress in NXIVM Case…
April 8, 2019
Creepy is too soft a description for the behaviors Ms. Allison Mack attested to in court today. According to her guilty plea Ms. Mack plead to a racketeering conspiracy and direct racketeering. However, her action within the ‘racketeering conspiracy‘ is far worse than the disingenuous legal terminology.
Ms. Mack recruited people into a sex cult, then helped organize blackmail material that forced her recruits to engage in sex cult behavior with Keith Raniere which included the branding of victims as sex slaves. Everything about this is cult activity is deviant in the most extreme.
Ridiculous apologetic phrases like: “I now realize I was wrong“, sound absurd when contrast with this sick and demented behavior.
As if there was ever a possibility at the beginning of an evil collaboration to NOT REALIZE blackmail, sex trafficking, occult branding and forced manipulation of people was wrong. Whiskey-Tango-Foxtrot… this type of sociopathic disconnect is really alarming.
NEW YORK – A teary Allison Mack pleaded guilty to two federal counts Monday in the NXIVM sex-cult case.
“I have come to the conclusion that I must take full responsibility for my conduct and that’s why I am pleading guilty today,” said a choked up Mack, who admitted to one count of racketeering conspiracy and one count of racketeering.
Mack attended court in dark relaxed-fit pants and a creamy mock-neck sweater. She kept her hair in a bun and sported leopard sneakers, as she had at her last court proceeding.
At the beginning of her allocution, Mack explained in part what drew her to NXIVM. Many of the members were “wonderful people and some of whom, I now realize, were not.”
“I joined NXIVM … to find purpose,” she said of the group, which was headed by co-defendant Keith Raniere. “I truly believed I found a group of individuals who believed as I did.”
“I believed Keith Raniere’s intentions were to help people,” she said. “I was wrong.”
Prosecutors allege that NXIVM, an Albany-area organization that offered costly self-help classes, contained a secretive sect called DOS that “operated with levels of women ‘slaves’ headed by ‘masters.” (read more)
This stuff is evil. Almost beyond comprehension.
Fear of Inflation & Sterilization
Armstrong Economics Blog/Economics
Re-Posted Apr 9, 2019 by Martin Armstrong
QUESTION: Mr. Armstrong; you were friends with Milton Friedman. Do you agree with his view that the Great Depression was caused in part by the Fed refusing to expand the money supply? Isn’t Quantitative Easing expanding the money supply yet it too has failed to create inflation. Would you comment on this paradox?
Thank you for your thoughtful insight.
P
ANSWER: Yes, this certainly appears to be a paradox. This results from the outdated theory of economics which completely fails to grasp the full scope of the economy and how it functions. This same mistake is leading many down the path of MMT (Modern Monetary Theory) which assumes we can just print without end and Quantitative Easing proves there will be no inflation. They are ignoring the clash between fiscal policy carried out by the government and monetary policy in the hand of the central banks. This is a major confrontation where central banks have expanded the money supply to “stimulate” inflation. Governments are obsessed with enforcing laws against tax evasion and it is destroying the world economy and creating massive deflation.
In 1920, Britain legislated a return to the gold standard at the prewar parity to take effect at the end of a five-year period. That took place in 1925. Britain based its decision in part on the assumption that gold flows to the United States would raise price levels in Britain and limit the domestic deflation needed to reestablish the pre-war parity. In fact, the United States sterilized gold inflows to prevent a rise in domestic prices. In the 1920s, the Federal Reserve held almost twice the amount of gold required to back its note issue. Britain then had to deflate to return to gold at the pre-war parity. Milton saw that the Fed failed to monetize the gold inflows, fearing it would lead to inflation. So what we had back then was the opposite roles. This predates income tax being applied to everyone so there was no hunt for taxes on the part of the government. The scale was tipped because the Fed was imposing deflation by sterilizing the gold inflows.
Conversely, following World War I, France had counted unrealistically on German reparations to balance its budget. When they did not materialize, it used inflation as a tax to finance expenditures. In 1926, France pulled back from the brink of hyperinflation. Unlike Britain, France’s inflation had put the old parity hopelessly out of reach. Consequently, France returned to gold but at a parity which undervalued the franc. Fearing inflation, France sterilized its gold inflows to prevent a rise in prices declining to monetize the gold.
Therefore, all the theories behind MMT are once again wrong for they are only looking at one side of the equation. Today, simply stashing money in a safe deposit box is illegal and considered to be money laundering. The government can justify itself in confiscating your assets even after you paid your taxes.
Therefore, in the ’30s, Milton’s criticism of the Fed was justified because there was no massive hunt for taxes from the fiscal side. Today, we have the fiscal policies hunting capital resulting in a contraction economically (declining in investment) while you have QE just funding the government – not the private sector. It is a different set of circumstances today v 1930s.
America’s Public Schools are a National Disgrace Teachers Unions & Democrats Being the Main Culprit
“AOC” Dancing Socialism into the Hearts and Minds of Young People Everywhere
Austria Moves to Tax Online Companies
Armstrong Economics Blog/The Hunt for Taxes
Re-Posted Apr 8, 2019 by Martin Armstrong
The EU has been unable to agree on taxing the internet. As a result, Austria went ahead and passed its own digital tax this week on revenues earned by online companies in their country. The entire problem with this type of taxation is the burden of accounting. This means that the online world will be forced to file taxes in every country with a matrix of tax rates and specifications. Small business will be the ones impacted the most and they will more likely just ban their products for sale in various countries.
Governments are going broke. They will never stop to look at the ramifications their actions have caused within the global economy.




