When the stock market crashed in 1929, followed by the bonds into 1933, we saw a minor bump in the stock market. As this occurred during a Public Wave, are u suggesting during our current Private Wave, we will see bonds collapse first 2020+, as capital flees into the stock market for a peak in 2022/2023? How will European bonds collapse when the ECB continues QE? Or will the catalyst be one or two large bank ( DB), or country failures (Italy), or Brexit?
Who ranks in importance?
Thank you?
ANSWER: One of the fascinating aspects of what we face is clearly the sovereign bond markets. The ECB and the Bank of Japan fund their government debts without end, and they have both destroyed their bonds markets. I will have to run back to Europe because things are just getting really crazy there. The ECB cannot sell the bonds it has already bought. They have already stated that as bonds mature, they will reinvest that money aside from any new purchases because there is no market. Since they have destroyed their own bond markets, we are UNLIKELY to see a crash if there are no bids and offers. They will simply pretend that sovereign debt is perfectly fine.
What we should expect to see is private sector debt decline as rates rise. The premium of private over government will widen simply because the government debt is not a free market number. I can say that there are a lot of people in various governments who are contacting us these days. This shows there are people who are deeply concerned that this is not going to end very nicely.
As far as which is more serious, BREXIT or an Italian exit, it will be the latter and not the former. Why? Italy was a founding member of the euro and it uses the euro. Therefore, Britain never joined the euro thanks to Maggie Thatcher. Italy leaving the euro will be far more devastating to the euro itself and will complicate matters since the ECB is saturated with Italian debt. There are a lot more ties that have to be cut besides trade, as is the case in Britain.
QUESTION: Hi Mr. Armstrong…Thanks for trying to settle our confusion re: Griffin’s “Creature” You make a distinction between Gov’t mandated debt & Fed helicopter money. But isn’t debt still just debt?
Also, you seem to be saying the Federal Reserve is a necessary evil (maybe not even evil), & that central banks & fractional reserve banking are a fair & honest system. All very confusing.
I believe you could more easily enlighten our Neanderthal economic brains by simply describing your version of a near perfect monetary system, that’s also immune from political interference. Maybe call it “The Armstrong Guide to Perpetual Prosperity”
We’re NOT mocking you. Would love to see this as would 99% of your readers.
Wishing you a long & healthy life. We need you.
HS
ANSWER: I understand this gets confusing because people have taken one tiny stone and assume the entire mountain is the same. The Fed was created to be funded by the banks themselves to effectively be their bailout institution. As I have written before, the Fed “stimulated” for it was authorized to buy ONLY corporate paper when banks could not lend. Because of WWI, the politicians directed the Fed to only buy government debt and never returned it to its purpose. It is nothing like what it was designed to do.
There is no such thing as Fed Helicopter Money. That is another absolute absurd proposition. The Fed can create elastic money, but it is effectively backed by the debt they purchase. The entire Quantitative Easing was by NO MEANS the creation of money out of thin air. They were buying in government debt which is in itself simply money that pays interest. The Helicopter Money these people argue was supposed to create hyperinflation only revealed that the people who call it that actually have no idea what they are talking about. They pretend that the money was just created with no backing. But it was buying in government debt. The REAL MONEY supply is not simply cash, it includes the entire national debt BECAUSE debt is now collateral and can be used in the economy. The economic reality was simply moving money from your left pocket to your right. The supply remained the same. That is why Quantitative Easing failed to work. The real creation of money is the debt and the difference is significant for it is money that pays interest requiring the creation of ever more debt.
The PERFECT monetary system is one in which there is no debt. Rome lasted for 1,000 years BECAUSE it had no debt. It did use MMT insofar as it created money each year to fund itself. The great debasement took place during the 3rd century when Emperor Valerian I was captured by the Persians in 260 AD and forced to be a slave to the Persian King. That broke confidence in the government; people freaked out and began to hoard everything.
The first criteria are TERM LIMITS and the elimination of any power to borrow. No spending bill may be merged with another. Every bill must stand on its own and the people must vote by a computer on each bill. They cannot be passed without more than 50% of the people voting. Therefore, we restore a DIRECT form of Democratic government. There may be no law that is based upon any religious belief or seeks to impose any restriction upon any race, gender, or sexual orientation. Some people will object. But we must understand that we have to protect even people we disagree with in order to protect ourselves. There can be no exception to basic rights. Arnaud Amalric, prior to the massacre at Béziers, was reported to have said: “Novit enim Dominus qui sunt eius,” which is a direct translation of the Latin phrase “Kill them. For the Lord knows those that are His own.” It is not our station to sit in judgment over others pretending to know what God wants. That is his role, not ours. Laws should never be allowed to be written for the purpose of forcing the belief of one group upon another as we have today with the left v right.
Next, we must eliminate all forms of Direct Taxation (income tax), which requires people to report to the government even to confirm you are not rich. All taxation MUST be indirect as the Founding Fathers intended. The people will pay taxes based upon their consumption. Naturally, raw food and rent should be exempt. Then you cap the government expenditure at a max of 5% of GDP, not to exceed the population growth rate.
Money is simply the medium of exchange. It is NEVER a reservoir or store of wealth. It is merely the unit of account that is no different from a language. If someone says something to you in German, you immediately try to translate it to your native tongue to understand what they said. Money serves the same function. We call Trump a billionaire, not because he has cash in the bank, but because people look at his assets and translate them into money to judge his worth. That is the role of money. We must understand and embrace it. Only then can we comprehend a monetary system.
These are just a few of the necessary elements. The crisis is NEVER the quantity of money. It is those who seek to rule us from above. Direct reform at the powers that be and the monetary system will quickly fall into line. There is no possible “perpetual prosperity” because everything is connected and nature also plays a role in the business cycle. Marx to Keynes have all tried to create the perfect system that will produce endless prosperity. That is an impossible fictional dream.
I cannot stress enough that Mario Draghi has really destroyed the European economy on an unprecedented scale. I know people who worked on trading desks years ago when Mario Draghi before he was head of the ECB, was there to observe how things operated. His policy of perpetual low to negative interest rates is a barbaric ancient theory based on the assumption that if you make it insanely cheap to borrow, people will run out and buy everything. He has kept this failed theory up for 10 years without success. He owns the bulk of sovereign debt in Europe; he cannot sell or even stop rolling over without causing a major debt crisis among member states. The ECB is trapped and incapable of managing the economy whatsoever.
Add to that the fact that Draghi never considered the impact upon those who saved all their lives to retire and suddenly discovered their life savings earned nothing. He leaves the ECB in October. But the May elections are approaching and the stress his Quantitative Easing has inflicted upon Europe is causing a ripple effect within the political discontent. With the economy turning down hard once again into 2020, he has no means to even try to pretend he can manage the economy. We are headed into a NEW ERA in which the belief in central banks and government being in control is about to collapse before our eyes.
We are witnessing a real major crisis unfold. Of course, this will make our Rome WEC probably the most interesting for Europeans and how to survive this Draghi’s nightmare. Where there is such confusion, there is a tremendous opportunity as well for those who understand the events. There are always winners and losers when history is in the making.
Most employers provide vacation and sick leave. However, most employers do not allow sick days to roll over from one year to the next. The norm is to often cap at a certain number of days or hours. In the private sector, most employers do not allow employees to accumulate sick leave. Paid sick leave is part of the benefits package for 85% of full-time workers and 74% of all U.S. workers, according to a March 2018 survey by the U.S. Bureau of Labor Statistics.
Government employees receive benefits that are simply unavailable to those of us who actually produce something in the economy be it a good or service. There is no federal law requiring employers to offer paid sick leave, but as of 2018, 10 states and the District of Columbia require employers to provide some form of paid time off for employees who are sick. Even some cities enacted laws, including San Francisco, that require employers to provide a certain number of paid sick days. However, federally, the Family and Medical Leave Act (FMLA) allows qualified employees to take up to 12 weeks of unpaid leave under certain circumstances.
In the case of governments, they simply bestow upon themselves benefits that are bankrupting their governments. California’s government has been allowing employees to accumulate paid sick leave to the point they are being handed checks in excess of $400,000 for paid sick leave they never took. More than 450 state workers took home six-figure checks when they left their jobs last year in 2018. The record was one check for $456,002. He is by no means the only person to exceed $400k. Add to the fact that these people have NEVER contributed to their guaranteed pension and it is not hard to imagine that this house of cards is rapidly collapsing.
The cost of government is doubling because they have to pay out pensions for people retiring and then they must hire someone to replace them. Now they are paying two people. This is simply unsustainable and it is the key to understanding the pending collapse in government. Capital will flee the PUBLIC sector and run to equities where you are not taxed on gains until you sell the assets. That is, of course, what Elizabeth Warren wants to tax. Gains that you have on assets before you ever sell anything. Curious, that you are the hated rich if you have income greater than $250,000 in a year. Hm!
Canada has been selling off most of its remaining gold reserves to the general public. They have been selling gold coins and reaping better prices than dumping 400-ounce bars to bankers. The figures from the Bank of Canada and Finance Department show that the country held 77 ounces at the end of February. They sold over 21,000 coins in February. Through most of 2015, the country’s gold reserves stood at more than $100 million. US. Finance Department figures show that Canada sold 41,106 ounces of gold coins in December and another 32,860 ounces of gold coins in January.
That left Canada holding 21,929 ounces of gold in its reserves as of the end of January, and as mentioned, all that is left now is 77 ounces after February. The official statement was:
“The decision to sell the gold was not tied to a specific gold price, and sales are being conducted over a long period and in a controlled manner.”
“The government has a long-standing policy of diversifying its portfolio by selling physical commodities (such as gold) and instead investing in financial assets that are easily tradable and that have deep markets of buyers and sellers.”
Behind the curtain, governments do realize that eventually they must move to a cashless society in order to retain power. This is fueling the debate behind closed doors on how to address the monetary system. As we hear about MMT on this side of the curtain, behind it there’s a question as to whether money really needs the banking of this “barbaric relic” of the past, as John Maynard Keynes once called gold coins, and many are starting to regard him as right after all. Of course, this is self-serving, for they have really screwed up the finances of all governments on this journey down Socialist Lane.
The author of more than a dozen books, Dr. Sowell is now a senior fellow at the Hoover Institution. In his newest work, Intellectuals and Society, he will discuss why so many disasters of our time have been committed by experts or intellectuals. You may remember FDRs Brain Trust which according to later studies is a prolonged the depression by several years. The wiz kids at the pentagon under McNamara who managed to mess up the Vietnam War, you can run through an impressive list of things, of disasters brought about by people with very high IQ
QUESTION: These economists who propose this MMT claim that since the U.S. borrows in its own currency, it can print dollars to cover its obligations, and can’t go broke. The theory has won converts among freshman Democrats like Alexandria Ocasio-Cortez as a way to finance such social policies as the Green New Deal and Medicare For All. There seems to be something seriously wrong here. You have taught me to see the world as a whole. I think these people have blinders on and do not take into account foreign ownership of US debt. Would you comment on that aspect, please?
JG
ANSWER: Very good. Yes, we are all connected and these people behind MMT are idiots. This is the same old story that we can just print our way out because we owe money to ourselves. That is a nice naive theory which reflects the ignorance of those behind MMT. At the end of 2018, foreigners owned about $6.2 trillion of U.S. debt or approximately 42% of the total national debt. Meanwhile, the American public/institutions held $16.1 trillion and 23% of the national debt. The sheer numbers available from the government prove what they are saying is NOT TRUE!!!!!! Their theory that MMT is possible because we borrow from ourselves is just absurd.
They assume that we can borrow indefinitely and just print money to cover the expenses. The fallacy here involves the simple fact that 39% of the debt is held by foreigners. That reality exists BECAUSEthe dollar is the reserve currency as Europe is drowning in its socialism. Federally, the states have income taxes but not a consumption tax. In Europe, you have an income tax that is higher than the USA by at least 20%, and then on top of that you have a 20% VAT consumption tax. Additionally, there are mountains of municipal taxes and all sorts of regulations and fees. The USA has the biggest consumer economy because the consumer is left with nearly one-third more of their income as disposable to spend compared to Europeans. Add the fact that the USA also has NEVERcanceled its currency and therefore the US dollar is used internationally. About 60% of American dollars all circulate outside the United States. Clearly, MMT would also disrupt the entire world economy.
The theory that QE proves them correct is seriously wrong. The world is in a deflationary trend. The dollars are in HIGH demand because it is going nuts everywhere else. The increase in the supply of dollars has NOT been inflationary because the world is sucking them up. They do not understand the demand is global, not domestic. Remember the Money Plane? Skids after skids were being shipped outside the USA of $100 bills to supply the demand worldwide. When that demand shifts, their entire theory of MMT will blow up in their face.
QUESTION: Marty, just reported this past week America’s trade deficit hit a record $891 billion while, in the same week, unemployment report fell to 3.8%. Does this refute the conventional economic belief that trade deficits take away jobs and output?
Cheers, TGM
ANSWER: What is reported as trade is not simply trade. The numbers are all screwed up. It tracks actual goods as well as services and that includes capital flows. The accounting system is set up in such a way that capital investment buying bonds, stocks, and real estate go into the Capital Account. However, all dividends and interest earned by a foreigner on US assets then are accounted for in the Current Account. It is the Current Account that people report as trade which is not correct because it also includes interest and dividends. Thus, the more foreigners invest in a country, the more it will erroneously appear to be expanding the trade deficit as interest and dividends flow back on their capital investment.
QUESTION: Marty,
Big fat question for you regarding the UK and the SNP.
You seemed to support Scotland breaking away from the UK in 2014, but since then you’ve voiced your concern on the socialist policies of the SNP. I share that concern, as do a growing number of people here, in not so sunny Scotland.
Unfortunately, SNP seems to have introduced a few more taxes into the system in the last year. One of which is that the higher tax band in the rest of the UK has been raised to 50K, whilst in Scotland, it has been kept at 43k. The other latest tax is that if the company you work for have parking spaces and you drive to work and park your car there, you can be hit with around £450 per year.
Looking back on the history of UK general elections, the SNP hit a high point in the October 1974 general election, polling almost a third of all votes in Scotland and returning 11 MPs to Westminster. They then dropped to under 6 seats till the 2015 election, where they went from 6 seats (in 2010) to 56 in 2015. You could argue the rise to 56 seats was due to the fact people either wanted independence or voted for them as they were happy to be led by them in Scotland but not wanting to be independent. They dropped to 35 seats in 2017, primarily due to people being fed up with the independence record being regurgitated over and over.
To summarise then, the large rise in ’74 followed by a big drop in its support at the 1979 General election, followed by a further drop at the 1983 election. Will we see this again? Big rise in 2015, followed by a large drop in 2017 and the same again in the next election?
Personally, I think the tax rises will take a big toll on their support and they will get hammered in the next election.
Many thanks for your thoughts and wisdom.
G
ANSWER: I love Scotland. Every time I flew in to Edinburgh to do an institutional conference for a day, I was introduced as a 7th generation Scotsman – never an American. The separatist movement is separate and distinct from the SNP, which is one step to the right of communism. I was living in London when “Braveheart” came out. I remember going to the movies there, and on the way out everyone was saying how some member of their family was Scottish.
That said, the SNP socialist policies are brain dead and this idea that they must remain part of the EU is beyond stupidity even for someone who is dead mentally. There is absolutely no economic validity to remaining inside the EU. The British have NEVER won anything of significance in the European court. What will it take to make the British realize that they are not really welcome in the EU for resentment remains that it was the Brits who saved Europe from both Napoleon and Hitler.
The Scots voted for independence in a referendum which was clearly rigged by London and the EU. But that was the prelude to BREXIT, which the government is doing its best muck up again over this unwarranted fear over trade. The economy will turn down very hard in Europe in 2019 into 2020 before bottoming. This will alter the politics ahead rather significantly. In Brussels, they will be blaming the Brits, while the Italians will begin to voice their opinion that the Brits got it right after all.
Cyclically, the United Kingdom that was first created back on May 1st, 1707, under Queen Anne (1707.331). On the 309.6 year cycle of the Economic Confidence Model, we arrived at 2016.9315. The BREXIT vote took place on June 23rd, 2016 (2016.476). A referendum on Scottish independence from the United Kingdom took place on Thursday, September 18th, 2014 (2014.715). That meant the Scottish vote was 307.384-years from inception. This was cyclically a confirmation that BREXITwould, in fact, succeed in 2016.
However, the true Scottish Separatist/Nationalism Movement actually began back in 1934 during the economic hard times of the Great Depression. It was in 1934 when the Scottish National Party (SNP) was founded, making its primary goal the future independence of Scotland. The party gradually began gaining ground after World War II, which was propelled by the discovery of rich oil resources in the North Sea during the 1970s. Then in 1974, the SNP won 30% of the Scottish vote and 11 seats in Parliament after campaigning on the slogan “It’s Scotland’s oil!”
Of course, the first major step toward Scottish independence came in 1995. The first and greatest reason for creating a Scottish Parliament in 1999 was that the people of Scotland demanded and deserved the human right to democracy. The UK Government’s white paper on Scottish devolution, Scotland’s Parliament, was published in July 1997. It set out proposals for a new Scottish Parliament and drew heavily on the Scottish Constitutional Convention’s 1995 (see the report: Scotland’s Parliament, Scotland’s Right).
A referendum was held on September 11th, 1997 to ask the Scottish people whether they wanted a Scottish Parliament and whether it should have tax-varying powers. In that 1997 referendum, the Scots voted in favor of devolution of powers, which meant that although Scotland remained part of the United Kingdom, its government gained a broad range of new powers. It would have the power to set its own tax rates as well. Among these new powers was also the right to control education and healthcare. This lead to the creation of a Scottish Parliament for the first time since it was dissolved in 1707. At the peak of the economy in 2007, the SNP won an upset victory in the Scottish parliamentary elections, ending some 50 years of Labour Party dominance. Then the SNP leader Alex Salmond became the first elected minister of Scotland. He won a second term in 2011 and was able to use his party’s historic mandate to secure approval for a referendum on independence for Scotland.
It took just two 8.6-year cycles from 1995 to the beginning of the separatist movement in 2012. In 2012, Salmond and British Prime Minister David Cameron signed an agreement to hold that referendum in 2014. Subsequent negotiations lowered the voting age in the referendum for 16 and determined that it will pose a single question: “Should Scotland be an independent country?”
The problem the SNP faces is they have mixed up independence, socialism, and remaining in the EU rather than the UK. In this regard, they have truly lost their way and do not comprehend either trade of the fact that socialism is collapsing right in front of their face.
QUESTION: Mr. Armstrong; Your movie the Forecaster was on TV here in Scandinavia. That introduced me to your research. When I discovered your film was on TV in Europe, Canada, and Asia, but not the United States, that merely confirmed the corruption in New York. Here in Finland healthcare is comprehensive and it is taking down the government. On Friday, the government in Finland collapsed after it was unable to reform healthcare. Every aspect you have written about is unfolding. Why will mainstream media not report your success?
UVH
ANSWER: Healthcare is destroying Western Civilization for the costs are far too high. Because they have been subsidized by the government, they have not been subjected to the normal business cycle. They just always have their hand out in uptrends and down. The government in Finland resigned on Friday after they failed to come up with reform to cut costs in healthcare. Between that trend and government pensions, these two forces are putting pressure to keep raising taxes and lowering the standard of living for everyone else. This is what I mean that we are in the stages of a collapse in socialism. There should be no government pensions where people have not contributed anything toward their future. Healthcare MUST be cut off and forced to be competitive. Obamacare was all about cheating the youth and forcing them to pay for healthcare they did not need to reduce costs for those who did need it. This is the hallmark of socialism – how to live off of other people’s money.
As far as the press is concerned, the prevailing view is that they very much understand it is all about CONFIDENCE. A market crashes and the head of state comes out and tells the people everything is fundamentally sound. Can you imagine if he went on TV and announced the economy is going to completely collapse for 2 years? People would panic. The prevailing belief is that even in the face of collapse, you must always point in the other direction.
Mainstream media will not report something that would warn of such a crash. The government would be on the phone and ask what are they doing? So it is not some conspiracy against me personally. They are not ready to publish such information. The Wall Street Journal published this chart of the business cycle ONLY when the low was coming into play to restore confidence. They will publish what I have had to say ONLY at the bottom and then tell the world this is the guy who predicted the collapse, and now he says it is over. In 1987, we forecast that the low would hold and new highs would unfold by 1989. Larry Edelson in the movie even talked about that. This was when brokerage houses were offering $100,000 for me just to speak for a few hours telling everyone I forecast the market crash and was now forecasting new highs. So it was to their advantage to bring me out.
Here is a short video clip of an introduction by TIR securities back then in London for that very purpose.
That is just the way it works. It is not a personal conspiracy outside the United States where, yes, the press defends the banks so they cannot report what I have to say. I have even written for the Wall Street Journal. While I have not submitted any Op-eds ever since I seriously doubt that would publish it. Perhaps I should try just to prove that point.
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This is a library of News Events not reported by the Main Stream Media documenting & connecting the dots on How the Obama Marxist Liberal agenda is destroying America
ANSWER: I love Scotland. Every time I flew in to Edinburgh to do an institutional conference for a day, I was introduced as a 7th generation Scotsman – never an American. The separatist movement is separate and distinct from the SNP, which is one step to the right of communism. I was living in London when “Braveheart” came out. I remember going to the movies there, and on the way out everyone was saying how some member of their family was Scottish.
Centinel2012 