In a 1992 case, the Supreme Court refused to require that mail-order retailers collect sales taxes from buyers in other states. For a quarter-century, that has given the online retailers a competitive advantage over brick-and-mortar stores. The States are broke and they are pushing to compel everyone online to collect sales taxes for them. We are looking at a complete nightmare. There are sites where people make arts and crafts and sell them. Suddenly, everyone would be legally required to file tax forms every month in all 50 states even notifying them they sold nothing to one of their citizens.

Legally, this will absolutely destroy the internet in one swift decision. Some states are particularly onerous and quite frankly even I would have to consider that people in certain States would have to be blocked from purchasing anything from us.

The only solution for us would be to simply close up shop in the USA and move everything offshore. There would then be no way for individual states to demand we collect their taxes from a foreign country.

When we moved to Florida, there was a mistake made in shifting our taxes on employees. The amount we failed to pay was $74. The penalty was $125 and then there was a late fee of $33. The tax owed with penalties and interest came to $236 on $74. Can you imagine simple mistakes by retailers can wipe them out! If the Supreme Court rules in favor of the States, all they care about is money. To hell with the economy. This is how the governments will destroy Western Civilization. There is never any consideration of reform. It is always scheming new ways to get more. They never solve the problem, so they constantly hunt for new ways to rob the people to pay their own salaries and pensions.

Counter-Party Risk

Last week (2^nd of February, 2018) ESMA (European Securities and Markets Authority) published the results of its second EU wide stress test for CCP’s (Central “Clearing” Counterparties). These tests are conducted under EMIR (European Markets Infrastructure Regulations) and were first published back in April 2016. There are sixteen CCP’s currently under this structure with around 900 clearing members, which includes multiple entries belonging to one group.

The result of this second test, under greater regulatory risk measures, found that using the test samples at different stages throughout 2017, two of the 16 would have problems under the credit stress test. Market volatility always acts as a platform for this kind of scenario so if they failed in 2017, what will they do in 2018! The volatility we forecast for this year should already be making you nervous.

Having years of actual trading experience, it is the fear that just one counterparty is experiencing problems occurs way before the clearing houses are even aware is what will drive volatility! The overnight repo market, collateral management triparty flow, and individual share price action are the early indicators of risk. Once these start to move you can forget about the end of day obligations to clearing counterparties, the money has already gone. There are always going to be problems when the derivative market sizes become multiples of the underlying.

This is how the credit risk is just pushed up the food chain. Initially, a brokerage is pushed up to the bank/exchange members, the exchange to other clearers and the bank pushed up to the central bank, the central bank is the currency. A collection of central banks (possibly the EU and the ECB) and exchanges results in global demand for the reserve currency. What could possibly go wrong!

QUESTION:  Marty, Friends and Princeton Economics Staff,
I’ve certainly had a Hate and Love relationship with you over the past few years.!
I’ve travelled a path that has been financially stunting and painful on the markets for the last 10 years.
I’ve felt like that guy that just keeps donating to the markets and not ever understanding why things go down, when I think UP?!
You guys are doing the world a great service. Please continue, so people like me can change things for the better!

My Question is…
do you ever think about the people that lose on the other side of your trades?
The ones that are talked into rubbish investments by the banks and institutions?
I was one of them and I’m sure most of your readers have to admit some of the same at some point!? (its been quite the ride!)

Thank You for your service Marty .

Please. never get disheartened by the nay Sayers.
Please don’t bow to the institutions and RICH MEN/Women that want you for themselves!
You said a few things in Question Time at the Hong Kong Seminar that solidify your humanity and service to this world and I appreciate that.
Take Care and I hope to attend another seminar and shake your hand this time (You are a Bit of a rockstar at the cocktail party) I am a stand to the side kinda guy.
Yourself, Your Family and then the and then the world. That is my promise Marty.
Better the world…
Alex…

ANSWER: We have all been on the losing side of a trade. The critical point is understanding why you were wrong and NOT blaming other people. As long as you blame the bankers or some manipulative cabal, you are not admitting that you were wrong. The only way to advance is to accept your mistakes and then learn from them.

You are making that first step by admitting you were wrong. That is really the first step on the road to successful trading. The old saying, you can lead a horse to the water, but you cannot make him drink. The world is speaking to us. We just have to learn to listen. The gold promoters, bankers, brokers, and government, all pitch a scenario that benefits them. No different from the used car salesman who tells you every one was driven by a little old lady only once a week.

We are looking at hopefully Singapore

QUESTION: Hey Martin, … My question is: is there an influence of the Dow at this moment on the cryptocurrency market and the precious metal market? As you say, gold is not ready yet… Will the possible correction of the Dow play the confidence game and scare a lot of markets off?

ANSWER: Yes. With Dow declining, we are failing to see a rally in cryptocurrency or gold and the long-touted flight to quality is not unfolding as most have expected.

When Equities typically decline, people run to the government bonds, and this we call the Flight to Quality. Others have touted that gold would soar when the stock market crashes. That too has not unfolded. Others have forecast that the dollar will collapse when the stock market crashes. Hm, even the Euro has declined.

What nobody seems to be talking about is what happens when the crisis is confined to government? Is that when gold rises? But then what about stocks? When CONFIDENCE collapses in government, the Flight to Quality becomes the opposite of tradition sell equities and buy bonds. Even when gold was rising moving up into 1980, bonds were declining.

So what is going on this time? We are in the midst of the Transition from the confidence in government to the private sector but nobody seems to understand what is unfolding. This is why we are getting mixed signals and strange relationships.

People will invest in the private sector and sell government bonds, smelling a default in the wind.We are more than likely going to get the first kneejerk reaction, where equities will DECLINE and people will rush into government bonds, even with negative yields. This should create the final bubble top in debt, and then it will reverse in a Flash Crash type move. Traditional people will buy bonds and lose a fortune. Others will sell their stocks at the lows and jump on short positions. This will set the stage for a crazy period that comes around every so often, measured in hundreds of years

QUESTION:

Property values in Illinois are collapsing thanks to the State being over the edge with its fiscal mismanagement. The state employee pensions are bankrupting the state and are now destroying the value of property in the States as a whole. We previously warned back in 2015: “This is why it appears that real estate will peak with this turn on 2015.75. Some areas will be hit very hard; Illinois will be a disaster for their Constitution states that government pensions cannot be reduced. This means they will raise taxes dramatically, destroy their economy, until eventually entering bankruptcy. The next four years will be devastating with tax increases in many areas.”

Now as property taxes keep rising, property values are collapsing. The state is experiencing NET MIGRATION outward and this is a major problem. Those who own hoses in Illinois better get out of the state before you find you can never sell your property. Just follow the signs – it’s not that hard. They haven’t yet put up road-blocks to prevent people from leaving. But expect an exit tax to shake you down if you leave soon.

QUESTION: Hello Martin:

I was quoting you while speaking to a friend from a similar recent post where you stated that interest rates were at 5,000 year lows.

They asked me where you got data going back 5,000 years and of course I was at a loss to explain. So my question is: does such actual data exist?

“How can you have such an even with interest rates at 5,000 lows and governments unable to fund themselves? ”

Just one more thing: if Socrates was female and I was a bachelor, I’d be coming to her door every five minutes with another bunch of roses,,,,,

ANSWER: Interest rates are one of the areas along with money that we have historical records back to the start of recorded history. There is even a great data source based in part on the work of by Sidney Homer and Richard Sylla – History of Interest Rates. We have the full account of that research on the site under History.

Our work incorporates that data source and we have added additional material uncovered from historical records.

QUESTION: Marty; Just wow. You called the day of the high and then said the market would make a new low yesterday, a directional change would take it back up and that was the low. I do not understand why the world is not knocking down your door. Then again, I guess they did that’s why they overwhelmed your site trying to buy-in. You once said that the cycle can extend into 2032 and an indication of that would be a correction from 2018. You said at the WEC that it did not necessarily mean we would break last year’s low. So is that what is unfolding? Is everything extending from 2021 to 2032?

KS

ANSWER:  The Global Market Watch called the event perfectly. It called for a Waterfall and noted the January high was Important. It picked a similar pattern on the Quarterly level. It came back and identified yesterday as a low as well. This proves the computer did this all by itself. When it picks up patterns, you know it is not biased and there are no human emotions involved. Human judgment is where the mistakes come into play.

We have a turning point in 2020 which has been there on point for years. With 2018 being a Panic Cycle Year, there is the risk of a 2020 low and then you extend the rally out into 2032. This would be indicated by electing a Monthly Bearish Reversal and we must penetrate last year’s low of 19,677.94. However, because this is a Panic Cycle Year, you often take out the high and low or the year before. We have made a new high. So that means if we breach last year’s low, then we end up with a hard recession into 2020 in alignment with the Economic Confidence Model. Under a flat model, yes 2020 would be a low. But is that too easy?

So no, we cannot yet rule out a 2020 low. It all depends upon breaking 198,677.94. If that unfolds, then we are in for a major economic crisis on the Monetary Crisis Cycle going into that which began here in 2018 and goes into 2021 when it goes completely nuts. This means we are treading water right now. Yes, we will go back to new highs. There is no doubt about that. Those who are calling this a super bear market are using flat models as always. They are simply taking the past and overlaying that on the present and proclaim the end of the world as always.

It is far more complicated than that and they have no clue of Cycle Inversions of the impact of Superposition effects injected from external markets. To get some super bear market means cash would swing into government bonds and out of equity. Gold should be rising yet it fell also on its Benchmark. Everything is not aligned with the classic super bear market. How can you have such an even with interest rates at 5,000 lows and governments unable to fund themselves? There is much more at stake than meet the eye.

I am rushing and writing right now the long-term scenario and providing the arrays out for the next 12 years. I will let everyone know as soon as it is out.