Iraq has been accused of employing strong-arm tactics to make American military contractors operating in Iraq to pay exorbitant income taxes. They are running to Trump complaining that this is hampering the fight against Islamic State extremists – of course.

The Iraq government is demanding millions of dollars in taxes that these contractors earn providing services in Iraq. Iraqi government officials have refused to issue, or have delayed, the delivery of work visas to employees of companies that refuse to pay income taxes. They are running to Trump crying that the Iraqi authorities have held up delivery of essential supplies, such as food, fuel, and water according to The Associated Press.

Interesting how the hunt for taxes is impacting everything. Of course, any foreign company doing business in the USA has to pay taxes to the USA on what they earn. Why should this be any different?

QUESTION: Mr. Armstrong; Thank you for an excellent conference. I have been attending since 2011. Each time you deliver a different conference and they are always better than the last. I could not help to notice on Zero Hedge they ran a piece about a Harvard University’s visiting scholar at the Bank of England who claims:

“We trace the use of the dominant risk-free asset over time, starting with sovereign rates in the Italian city states in the 14th and 15th centuries, later switching to long-term rates in Spain, followed by the Province of Holland, since 1703 the UK, subsequently Germany, and finally the US.”

Besides claiming to calculate the 700-year average real rate at 4.78% suggesting that rates will rise sharply when your models are 5,000 years, the two ridiculous statements are a 700-year average as if this really means something in the near-term when rates have been below that for nearly 10 years, and second the statement that he traces “the dominant risk-free asset over time.” You have demonstrated that moving averages are not valid in forecasting and that government routinely defaults.

You forecast at the conference that rates would rise very rapidly as we move into the Monetary Crisis Cycle. When I returned home to Greece, the latest news here is that so many people do not even have the money left to pay taxes. Is this part of the first stone in the water that sets off the waves of the Monetary Crisis Cycle?

ANSWER: It is very nice to trace 700 years and come up with the average of 4.78% by switching to the dominant economy as the financial capital of the world moved. However, starting the study in the 14th century skips the crazy part. There was the Great Financial Crisis of 1092 in Byzantium. This was really a watermark event that set in motion the decline thereafter. This study of moving from Spain to Holland, UK, Germany, and then the USA, is interesting, but regionally biased.

The fall of Byzantium resulting in the financial capital of the world moving to India – not Spain. That is why Columbus set sail trying to get to India, which was the financial capital of the world after Byzantium.

We hit a 5,000 year low. The Reversals we provided at the conference show we are looking at a near doubling in rates when we cross that number.

Trump’s tax reform to cut the corporate income tax rate from 35% to 20% will be a huge boost for the economy and place tremendous pressure on the rest of the world. But already we have Republicans playing games for personal careers. They want to postpone the cut for corporations until 2019 AFTER, of course, the 2018 mid-term elections. As always, they are afraid that the Democrats will point to the rich and regain seats.

The longer they delay, the greater the economic decline. This may be the fundamental behind our model which targeted November for a temporary high. Nonetheless, our Energy Models have peaked on the Daily level suggesting that we are still not really in a serious overbought position. That implies a correction is possible, but not a major crash and change in long-term trend.

The Trump Tax Reform is in part inspired by the Flat Tax idea of lowering the rate and eliminating deductions. Alimony, or spousal support, is often part of divorce agreements when there’s a big discrepancy in earnings between the two parties and the marriage has endured for more than just a few years. The idea of some “gold-digger” marrying a rich guy and then walking off with 50% of his wealth is really the stuff of fictional legend. Things acquired before a marriage are not suddenly 50% of the potential “gold-digger’s” new found wealth.

What is interest is the whole problem with alimony. In 2015, according to the data from the Internal Revenue Service, an estimated 598,888 taxpayers claimed the alimony deduction on their Form 1040. Those deductions came off the top of one’s income. The IRS reported that total of more than $12.3 billion was deducted in 2015 for alimony payments.

Here is where the problem comes in. The IRS tries to match the deduction for on the opposite side the spouse must declare it as income and that is subject to tax. According to a 2014 Treasury report, when they tried to match the deductions they discovered there was about 20% less being reported on the receiving end.

Under the elimination of deductions, alimony payments may disappear. That will seriously impact divorce settlements going forward and may result in others going back to court to ask for reductions. What may come to light is those spouses who have not been declaring the alimony. Could become interesting.

I had a friend who remained married and lived together he said because (1) it was too expensive to get divorced, and (2) nobody wanted custody of the children who were draining the resources in perpetual school loans.