Newly Appointed NEC Chairman Larry Kudlow Talks Trade…


Replacing Gary Cohn, today is day one for Larry Kudlow to hit the airwaves as President Trump’s new Chairman of the National Economic Council.  This will be an interesting dynamic to watch.  In essence, Kudlow’s job – whether he admits it or not, is to remove the clenched grip of U.S. Chamber of Commerce President, Tom Donohue, from the republican trade and business position.

With multinational trade confrontations now taking center stage, Kudlow is going to have to slowly shift the GOPe political minds into a modern Trump-era where Main Street U.S.A. is the priority.  Wall Street needs to shift to domestic investment if they desire to remain beneficiaries.

President Trump is immovable on his trade and economic agenda. Period; end of story. Ask Gary Cohn or any other member of the disassembled manufacturing council advisory board who quit last year because POTUS Trump just wouldn’t heed their duplicitous and high-minded advice. Do you remember candidate Trump mentioning the endless talking to nowhere that he has not time for? Yeah, that.

President Trump has a 30-year-developed plan and strategy for the U.S. to recapture economic power. Commerce Secretary Wilbur Ross, Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and key trade strategist Peter Navarro are carrying out that plan.

Anyone thinking they would somehow disrupt three decades of trade planning by POTUS Trump is too funny to give typeset space.

POTUS would cut off his own hand before he would change direction on his economic strategy.

Remember: “America First”.   Titan-minded Trump is the most committed economic influence agent in the history of American politics.

The National Economic Council (NEC) is an entity demanded by the formal traditions of the Office of the President. The council assembles, meets, discusses, hold conferences, invite guests etc. However, for POTUS Trump it’s an exercise in formality run mostly by professionals who benefit from the indulgences of membership.

The NEC has no more influence on Trump’s economic plan than any chosen Country Club has influence over his skills on the golf course.  But it looks good.  And that’s it.

Chairman Larry Kudlow will be working overtime amid the financial-class cocktail party circuit to share an entirely different economic when it comes to trade and investment.

 

Commerce Secretary Wilbur Ross Discusses the Big Picture Trade Confrontation With Duplicitous Panda…


U.S. Commerce Secretary Wilbur Ross appears on CNBC earlier today to talk specifically about U.S-China trade resets, confrontation and negotiations.  Secretary Ross cuts right through the chaff and countermeasures and gets right to the primary issues.

When questioned about the myriad of downstream issues, Secretary Ross stays focused on the big picture.  GREAT INTERVIEW (there are multiple segments where it’s almost impossible not to laugh during Wilburine’s gnat-swatting):

Heaven or Hell?


 

British Lab Admits They Cannot Confirm Russia was the Source of the Poison in the Spy Case


Russian has called upon the Hague’s executive council of the Organisation for the Prohibition of Chemical Weapons (OPCW), to challenge the allegations of Britain that it was responsible for the poisoning of the double-agent. British scientists at the Porton Down have admitted now that the nerve agent used to poison cannot be traced to Russia. Nevertheless, they have stated that the poison had been identified was a military-grade novichok nerve agent, which they maintain was most likely deployed by a nation-state. The UK government has quickly responded claiming that prime minister, Theresa May, had always been clear that the assessment from Porton Down was “only one part of the intelligence picture”. There seems to be some back-peddling but clearly, there is a p[re-disposed attitude toward Russia probably because government social programs are failing and they will economically need an external enemy soon.

France Embracing Austerity?


The old-school ideas of economic theory will ensure that Socialism collapses and very hard at that. The Germany influence upon Europe has infected the mindset of most northern Europeans. French President Emmanuel Macron has come out an made public debt one of the key points of his policy. Macron is supporting austerity and thus the EU’s guidelines. The French statistics office, Insee, reported that new borrowing during 2017 for France was 2.6% of GDP. The worker unions, in general, are starting to mobilize. Public debt is still high and employee protection is now severely limited and this is a dangerous cocktail that will inspireFrench civil unrest. Nevertheless, France has been criticized by the EU for its high level of new debt within the Eurozone. Thus, the country had twice been given more time to fix its budget. Under the Maastricht Treaty, the new debt of an EU state may not exceed 3% of GDP. New borrowing last year was 3.4%.

The entire problem here is the theory that an increase in the deficit spending will be inflationary. Yet after nearly 10 years of Quantitative Easing, this entire theory has been proven to be just nonsense. There are so many loaded assumptions hidden at its core that one must wonder how rational people still believe in a theory that cannot be proven by history. France is where the entire theory of Communism began. It was the French Communists who persuaded Karl Marx to abandon pure socialism.

With Macron embracing austerity and the guidelines of the Maastricht Treaty, we are watching the gradual collapse of socialism. All the promises of government to provide the safety-net are crumbling before our eyes. Austerity supports the bondholders against the people. This will also fuel the rise of class warfare as we head into 2022.

Asset Allocation


QUESTION:  Hi Martin,
First of all I enjoyed your 2018 Share Market Report and I am looking forward to your video updates. I am one of those retired investors with a typical 50% equities and 50% bonds portfolio. In your recent blog you stated, “The biggest losers have been the asset allocation followers. They assume they cannot forecast the future so they spread their assets hoping that the traditional 60% equities will make up for the losses on the 40% bonds.” Since both equities and bonds prices have rallied since 2009. Is this the time to change our portfolio mix to raise our equities percentages over bonds (my bonds are one year US treasuries). If so what should our portfolio mix be going forward?
Thank you for your guidance!
KC

ANSWER: I really cannot wait to launch Socrates. Answering these questions depends entirely upon (1) your currency base, and (2) the country in reference. There will be a great divide between US government debt and that of Europe. The dividing line appears to arrive in 2019. For now, US debt will be the best performing and the short-term debt will have the least risk of a Forced Loan Conversion, which has taken place in Europe before post-World War II. A “Forced Loan Conversion” is a phrase I coined to identify what happens when a government cannot repay its debt. Italy simply decreed that short-term paper such as 90-day bills were converted to 10-year paper. There is no risk of short-term US debt going through a Forced Loan Conversion.

The Italian government engaged in a Forced Loan Conversion which was a mandatory debt conversion, known as “conversione forzosa” during 1926, which they would again impose during 1934. They forced debt holders to extend their debt by lengthening the maturity. This seriously impacted the full faith and trust in the Italian government. During the post-1926 years and then again after 1934, the mandatory conversione forzosa effectively was seen as a partial default by the government, which made it extremely difficult and costly to borrow on a short-term basis thereafter.

Governments are concerned about appearance. They will mere engage in Forced Loan Conversions to be able to say with a straight face that they are not defaulting. Therefore, the shorter paper will have the greater risk in Europe from 2019 onward. Additionally, interest rates will be on the rise as pension funds fail and smart money continues to migrate from Public to Private debt.

Any asset allocation to bonds MUST be private!!!!!!! A government can default or suspend debt and will never be prosecuted. Private companies do not have that luxury. The traditional asset allocation models will all blow up. We are in the process of helping some very huge portfolios to shift in preparation of what is to come.

President Trump Joint Press Conference With Baltic State Leaders – 1:30pm Livestream…


You might remember in July of 2017 when President Trump attended the “Three Seas Initiative” in Warsaw Poland. The bigger goals and objectives were/are building relationships with Baltic nations aligned with the same freedom outlook. President Trump committed his administration to free, fair and equitable trade with the Baltic partners.

2017 – “Let me be clear about one crucial point. The United States will never use energy to coerce your nations, and we cannot allow others to do so,” President Trump said at a press conference flanked by European leaders. “You don’t want to have a monopoly or a monopolistic situation.”  (NBC article link)

Today President Trump is hosting many of the same leaders at the White House. There will be a press conference at approximately 1:30pm EST.

UPDATE: Video Added

WH Livestream LinkABC Livestream Link – Alternate Livestream Link

Two Examples of Mexican Government Officials Blackmailing U.S. by Threatening Flood of South American Immigrants…


With the migrant march from South America, mostly Hondurans, gaining more media attention, it is also important to revisit last year’s threats -from Mexican officials- which preceded their current year complicity.

♦  In August of 2017 President Trump and Commerce Secretary Ross were discussing their trade efforts within NAFTA and renegotiation with Mexico/Canada on a trilateral basis.  However, the U.S. administration said if it doesn’t work, they’d scrap the 3-way NAFTA deal and go one-on-one with individual bilateral agreements.  In response, Mexican Economic Minister Ildefonso Guajardo threatened to flood the U.S. with South American illegal aliens, criminals and gang members as leverage:

MEXICO CITY (Reuters) – Mexico could pull back on cooperation in migration and security matters if the United States walks away from talks to renegotiate the North American Free Trade Agreement, the Mexican economy minister said in a newspaper report published on Thursday.

“If they do not treat [us] well commercially, they should not expect us to treat them well by containing the migration that comes from other regions of the world and crosses Mexico,” Guajardo said. “Or they should not expect to be treated well in collaboration with security issues in the region.” (LINK)

However, Mexican Minister Ildefonso Guarjardo’s threat was mild compared to a threat in January 2017, when another Mexican official promised to flood the U.S. with South American drugs and gang violence:

♦ In a stunning segment on Fareed Zakaria’s CNN broadcast January 29th, 2017, Mexico’s former foreign minister, Jorge Castaneda, states the Mexican government was willing to counter U.S. President Donald Trump policy by unleashing drug cartels upon the U.S. border.

Watch, and more importantly LISTEN, to his words at 02:10 below (Prompted):

 

This was the most politically explosive admission by the Mexican government in the past decade.  Even Fareed Zakaria realized what was being threatened and quickly attempted to redirect the conversation.

Mr. Castaneda was openly admitting a willingness to promote drug trafficking.  Additionally, Jorge Castaneda is so proud of the threat, he posted a video of the discussion on his own YouTube page.

Dollar Hegemony – Real or Sophistry?


QUESTION: Mr. Armstrong; I really wish I found you sooner. A friend of mine has been telling me to listen. He bought the Dow at 17,000 and sold it 26,000 on your advice. He paid off his house and has told me – see, I told you so. I get these emails from the gold community who seem to never give up on every day will be the start of a new rally. This latest one also paints the United States as “dollar hegemony” and they claim that the US expanded greatly following the fall of the Soviet Union. They say China has woken up making money on trade with America. They now say the dollar will collapse and China will be the new world order so buy gold and sell the dollar.

These people seem to have no morals. They sleep perfectly fine raking in the money from people like me robbing us of our savings and preventing us from participating in the real economy as we should. Is there any real dollar hegemony or is this also just hot air?

WH

ANSWER: No, it is total nonsense and you are correct – it is designed to rob people of their life savings. There is no “dollar hegemony” for that assumes that the USA is somehow imposing the dollar upon the entire world by sheer will. History shows that the USA has pursued a policy of lowering the value of the dollar for trade purposes. Even the Plaza Accord in 1985 was a deliberate attempt to lower the dollar and it was at that meeting when the USA argued that Europe needed to create a single currency to compete with the dollar.

There is no competition with the dollar and that is the problem. The Fed wanted to raise interest rates back in 2014 but was lobbied by everyone not to. The Fed has lost control of the local economy because the domestic policy has been suppressed by international policy. The IMF, Europe, and emerging markets all pleaded with the Fed NOT to raise interest rates regardless of the domestic policy objectives.

This is complete sophistry and the arguments of people who really have no clue about how the global economy functions. I have been in meetings in Washington where I have been asked how to PREVENT the dollar from being the reserve currency. The answer is simple. There is no law that the USA can pass to bring about such a result.

It is coming. That will be the Monetary Crisis. But every such crisis has resulted in the dollar rising. That will bring the new monetary system. Not a lower dollar

Is There a Cycle to Religion?


QUESTION:

Mr. Armstrong,

 With the rise and fall of civilizations comes the rise and fall of religion. Are we due for a new religion to be born, or to have a rapid growth of popularity? Christianity grew rapidly during the fall of the Roman empire, and with the persecution of believers, where are we today in this cycle?

Thank you for your education. I’ve read your blog since I was in high school and realize how life is governed by cycles. Some weeks are rough, some are fantastic, but it all regresses to the mean eventfully.

CO’C

ANSWER: Oh yes. There is a Cycle of Religion that prevails throughout all cultures. It is clearly tied to economics and the business cycle. I am sure some people will naturally disagree with that one, but it cannot be removed from the business cycle itself. Religion has so often inspired war with some even called Holy Wars. The dominance of a given religion has turned with the economy. The rise and fall of civilizations have been clearly linked to religion. Even if we go back to the Stone Age, we find graves with goods place in there with the deceased with obvious demonstrations of love as well as a belief in an after-life.  Burial rites characterize religion and extend back into the Middle Paleolithic, as early as 300,000 years ago, coinciding with the first appearance human communities.

Religion is an integral part of the entire human society. But keep in mind that this goes beyond the simple shifts from Paganism to Christianity and the rise of Islam. There are cycles within each as there are cycles in Asian cultures and religions all tied to the business cycle. The English Civil War was the Protestants against the Catholics which ended up beheading the King. The Puritans seized power under Oliver Cromwell who placed his own portrait on coins wearing a wreath as if he were a Roman Emperor. The Puritans outlawed kissing your wife in public, plays, all sports, and celebrating Christmas. They were so strict that the Protestants rebelled and overthrew the Puritans. It was the Puritans who infected the United States for they were the Pilgrims. This illustrates that there were subcycles within the same religion and the cycle does not always involve Christianity against Islam or Pagans.

During the 3rd Century, as the Roman Empire was economically imploding and the barbarians were at their gates, this is when the persecutions of the Christians became common. The Pagans believed Rome was being punished because the Christians were not worshiping the gods. When the Christians became the majority inspired by the economic collapse of Rome, then they turned against the Pagans and persecuted them. We see collections of ancient sculptures many are beheaded and defaced. This was the Christians assuming and sculpture was a god.

 

If we look at China, we can see quite easily how religion and the business cycle were interlinked even in Asia. The Chinese emperor was seen as being handed the Mandate of Heaven (天, Tian). The Chinese economic, political, and religious doctrine that supported the rule of the Emperor of China was a belief that heaven embodied the natural order and will of the universe. Therefore, it was this natural order that gave the mandate to the ruler of China for he was the “Heavenly Son” of above. In order to maintain that philosophy, if the emperor was overthrown, this was interpreted that the ruler was unworthy, offended the universe, and had therefore lost the mandate. They also believed that natural disasters from earthquakes, famine to floods were all signs from Heaven that the emperor wronged the Heavens and such disaster would often justify revolts of the people.

We see how this belief system interpreted the fall of China to the Mongolian invasion. Genghis Khan began the conquest of China with just raids in 1205 and 1207 across the border. However, by 1279, Kublai Khan had established the Yuan dynasty in China crushing all resistance, which was the first time in history that China came under the rule of a foreign or non-native power.

Most people in the West know little about the history of China. They saw the movie the Last Emperor and assumed that the Emperor ruled until the Communist Revolution in 1946. In reality, following the outbreak of the Wuchang Uprising against Qing Dynasty rule in 1911, the revolutionaries elected Sun Yat-sen as the “provisional president” of the transitional government, with the Republic of China officially established on January 1, 1912. More like the UK, the Chinese Emperor was not eliminated, just the political-economic power. It was against this republican form of government that the Chinese Communist Revolution was launched in 1946 following the beliefs of Karl Marx. Finally, on October 1st, 1949, Mao Zedong proclaimed the establishment of the People’s Republic of China ending the Emperor forever.

 

There is nothing that is exempt from cycles be it the economy, seasons or even religions. The Hindus believed their religion and gods are invincible not much different from the Romans. Hindus were prosperous, powerful, and became economically very rich and therefore known as was Rome or the United States. They believed that would last forever as every society does. They believed they are special, which is also a common theme. They believed that their gods were in charge of the world as well as the universe. Their culture and community also experienced a very difficult time adjusting to the reality of their collapse. Like the Romans, the Hindus also believed that their gods would bring all good things back and restore them to their former glory. Some resorted to extreme devotion and concluded the same as the Pagans of Rome that their fall was because there was not enough devotion.

In the United States, Rev Jerry Falwell and Pat Robertson came out and said that God was angry and punishing New York allowing the terrorists to succeed on 911. They said God allowed the attack because of “abortion, homosexuality, secular schools and courts, and the American civil liberties union.” (see Guardian). This is the standard reaction when fortune shifts. Many will blame some group that God is punishing the entire community because of these people. This human response was the same in the Hindus as it was among the ancient Romans and Greeks.

Socrates was sentenced to death for corrupting the youth and offending the gods. It is not clear whether he believed in just one God or many. The Greek word Plato used in the original text is “θεός” (theos) which is translated to “God” or “the deity”. Nevertheless, “θεοί” is the plural form of “θεός” and Plato also used this in sections of his Phaedo. Plato does indeed use both the singular and plural forms in the text.

 

Christianity went through dark periods of the cycle of religion. Because Roman bathhouses were communal and were places one went to even for prostitutes, when Roman fell, bathing was then connected with sin. Mathematics also became associated with the Devil. The entire idea that the Earth was flat and the center of the universe emerged from the idea of heaven and hell and there had to be an up and down. Bruno was burned alive for saying the Earth revolved again the Sun. The Church jailed Galileo (1564-1642) for believing the same concept. The knowledge that came from the fall of Constantinople in 1453 introducing schools brought the West out of the Dark Ages. But this took time. Christopher Columbus had maps that came from the East and set sail to discover America in 1492, about 40 years following the fall of Constantinople.

Every religion undergoes a cycle of change. It does not matter which religion we are talking about. Nonetheless, this is tied to the business cycle. When economic decline hits, we see rising civil unrest as one group blames the other for their ways and non-devotion.

Islam and Christianity preached a level of equality, which provided a flat social structure as distinguished from a class system. This was the foundation of capitalism for people were allowed to change their professions at will and new converts to their religions were welcome. Hinduism, on the other hand, has a rather strict ordered and hierarchical structure of society. This structure was flexible at the beginning and the ancient texts contain examples of people changing their castes. Over time, this flexibility was lost and the caste began to be decided at birth.

Islam regarded stealing severely where Christianity was more forgiving, but the government and Christain Fundamentalism turned to the unforgiving policies that have led the United States to have almost 25% of the total world prison population when it has only 4.4% of the world’s population. People are imprisoned for any offense whatsoever. If you drive on federal property and do not have your drivers license on you, you MUST go to jail and will be given typically a sentence of 30 days. When John Ashcroft was Attorney General under Bush, Jr., he imposed his unforgiving religious belief system upon the nation. Prosecutors would not get credit for a mere conviction. The defendant MUST do some jail time. It was Ashcroft who has turned the United States into the most anti-Liberty nation on the face of the Earth. Nobody imprisons people for every offense no matter how minor than the US Federal Government.

Islam and Christianity both demand absolute faith in their own version of God. Hindus are much more tolerant of what you should believe, but conversion to Hinduism is more difficult than that to Islam/Christianity. In polytheist Hindu system, if you want to bring in your god, then it is just one more idol in the already crowded temple of Gods. Hinduism offers a rich variety of texts and encourages debate as well as the pursuit of knowledge. Hinduism and most other Eastern religions, tend to believe that humans are part of the environment and that animals and plants should all be respected. Western religions, including Islam and Christianity, tend to accept the principle that humans are created in the image of God and are therefore a superior species on the planet which was created for humans.

So there are differences in philosophy between East and West. In the East, they tend to believe in cycles as part of nature where in the West the core starting point was linear. That said, there are cycles in the belief system but there are also cycles within each religion.