Posted originally on Aug 1, 2024 By Martin Armstrong
There has been so much disinformation and sensationalizing of Quantitative Easing that this has led to academic economists who lack any trading experience to propose Modern Monetary Theory for its seems nobody actually comprehends what the hell is really going on. Much of the problem stems from this ancient theory that if you increase the quantity of money, then inflation will follow. This all predates massive government debt.
Much of this Quantity Theory of Money has its origins in Sir Thomas Gresham (1518-1579), who represented the English Crown on the Amsterdam exchange. People would not lend money to England because Henry VIII was debasing the currency to be able to repay his loans. He confiscated the Catholic Church and started the Church of England all because he was broke and confiscated wealth from the Catholic Church in England. Gresham became an adviser to Henry VIII’s successor – Elizabeth I. Thus, Gresham’s Law became bad money drives out good money, or the undebased currency.
These theories, which even gave rise to Austrian Economics, were all pre-collateralized debt of governments. There was no such market for posting sovereign debt as collateral to borrow or trade in markets. The economic models all changed, but academics have never understood traders. Lacking that experience, you will never see the actual trends.
Where Gresham observes from trading that debasing the money caused higher quality money to be hoarded when the foreign exchange value between currencies was ENTIRELY based upon the metal content, John Law (1671-1729) was also a trader on the same floor of the Amsterdam Bourse. He observed what has become the theory of Supply and Demand. It took two traders to witness how the market moved to develop these ideas. Both men were self-taught since the field of Economics did not begin until 1902. Not even John Maynard Keynes nor Adam Smith held decrees in economics.
The other self-taught economist who was also a trader was none other than David Ricardo. At the tender age of just fourteen, David entered his father’s business, but in 1793, he set up his own operation and made a fortune as a trader on the London Stock Exchange. Ricardo’s most important work was Principles of Political Economy and Taxation (1817). This book deals with all the controversial questions of political economy at the time: value theory, economic growth, rent, etc.
His other works include The High Price of Bullion (1810), which was the origin of understanding deflation; David’s Essay on the Influence of a Low Price of Corn on the Profits of Stock (1815); Proposals for an Economical and Secure Currency (1816); and the Plan for a National Bank (1824).
Ricardo is most famous for his ‘Theory of Comparative Advantage’ and ‘Rent’, which effectively argued that, for example, Saudi Arabia could grow lettuce in a desert with tones of water that might cost $10 to grow when it can buy it for 50 cents elsewhere. Thus, a nation should exploit what it possesses with a Comparative Advantage rather than squander its resources and restrict free trade.
Quantitative Easing (QE) does not increase the Supply of Money—it is only a maturity swap. Today’s total money supply includes debt, unlike during the pre-19th century. This has erroneously given rise to Modern Monetary Theory, for they pointed to QE and said there was no inflation, so we could just print without repercussions. It was merely a swap of maturities when you finally realize that debt is now money that pays interest as paper money began during the Civil War.
When paper money stopped paying interest, the term “Greenback” emerged, meaning there was no interest payment schedule on the reverse, just green ink. Paper money began as essentially debt or bonds that circulated as cash.
If your Definition of Money is Wrong – So is Everything Else that Follows
Posted originally on Jul 26, 2024 By Martin Armstrong
The government insists that the economy is fine, thriving perhaps, and has asked the public to pay no mind to their current financial situation. No one, aside from those living off government assistance, are better off now than they were four years ago. Americans cannot be gas lit into believing the economy is sound when every social-economic group is suffering.
Americans have already lost confidence in the economy and, therefore, in the government.
A recent poll by Affirm found that 3 in 5 Americans believe the US is in a recession, and most believe that recession began in March 2023. Another poll from Guardian/Harris found that 56% of Americans feel that the recession has already arrived. Seven in 10 Americans have reported that they are unable to save for the future. About 68% of respondents from the Affirm poll believe inflation has caused the recession, but few realize what causes inflation.
Credit card debt has reached an all-time high, with 8.9% of balances falling into delinquency as of May 2024. Bankruptcies are on the rise both personal and corporate. A CNN poll discovered that 39% of Americans worry that they may no longer be able to pay their bills. The poll saw similar sentiments during the Great Recession when 37% of Americans feared the next round of bills. Moody’s Analytics believes that household spending has risen $925 per month compared to three years due to inflation. Sixty-five percent of respondents said that the cost of living crisis is the most significant issue our nation faces. Politicians would be wise to focus on domestic issues as the people are on the brink.
Americans are spending more on less as economic conditions have begun to impact the average person’s quality of life. CNN also reported that 35% of adults are taking on second jobs to combat the price of living. Sixty-nine percent are spending less on entertainment, a correlation we have seen with corporate bankruptcies primarily rising in non-essential sectors. Another 41% say they cut down on driving to save on energy costs. Sixty-eight percent of American families have had to cut back on grocery spending, despite US Treasury Secretary Janet Yellen denying food inflation entirely.
Bidenomics failed. We are in a recession but not a depression. People hoard when they fear for the future, and that is happening not only as a result of economic conditions but geopolitical tensions and war will cause people to spend less. Then, to fund these wars and other spending packages, the government raises taxes, which is always recessionary. The computer had long warned that the American economy would turn down in May 2024 and not resurface until 2028.
I noted that real estate in the United States would turn into a buyer’s market in May 2024 going into August 2028 in a reversal from the buyer’s market we’ve experienced since 2020. The 2007 high on the Shiller Index was the precise day of the Economic Confidence Model. So far, all the indicators have confirmed that we should have a recessionary trend into 2028 with this turn in the model on this wave.
The National Association of Realtors finally agreed that we are now amid a buyer’s market after June posted the lowest number of sales for 2024 despite a notable rise in inventory. Home sales fell 5.4% in June from May, when the market flipped, to 3.89 million units. This figure is also 5.4% lower than home sales in June 2023.
Gone are the days where buyers would forego inspections and entering bidding wars where the listing price was by no means the final sale price. Inventory from June 2023 to June 2024 has risen 23.4% to 1.32 million available units. Inventory is still a challenge, as are housing prices. The median home cost $426,900 last month, marking a new record-high as well as a 4.1% annual increase.
Homes on the lower end of the spectrum have been keeping averages down. Single-family units between $200K and $350K rose 50% in the past year, according to Realtor.com. There are more homes available now than there have been since May 2020, when sellers reigned supreme. Mortgage rates are far higher than during the 2020 era, and Americans are seeing their available funds dwindling. It is harder for potential buyers to enter the market.
Smart money views mortgages as an alternative to unsecured government debt. Cash remains king with 28% of buyers who have the means opting to forego mortgages entirely, and often can decline high insurance premiums as well. We are also witnessing a mass migration from blue states into red states and should expect prices to decline where there is a dampened demand. It is difficult to view real estate from a national perspective in the United States as demand is up in red states as people continue to leave increasingly oppressive policies regarding taxation, crime, education, and business. If you were thinking of buying a new house right now, lock in the interest rate, for with war on the horizon, long-term rates will rise.
Low-income Americans are in such dire straits due to the elevated cost of living that lawmakers are making changes to the tax code. No, naturally, the politicians are not voting to decrease taxes for those who can barely get by. Instead, they’re permitting Americans to pull a mere $1,000 out of their retirement accounts without penalty.
Those withdrawing emergency funds from a 401K will need to explain their hardship to their employer, but employers do not need to approve the withdrawal. The government will tax the $1,000 if it is not paid back within three years and no additional emergency withdrawals may be taken out until the money is paid back in full.
The economy is shifting into a world of haves and have-nots as the middle class diminishes. A January 2024 survey found that 60% of Americans had less than $500 in liquidity, with only 12% possessing over 12%. The debt vortex is unforgiving and all too many Americans have become trapped in a cycle of perpetually servicing new debt, similar to our Federal Reserve.
A Vanguard study found that 3.6% of the 5 million retirement accounts on record made an emergency withdrawal in 2023, moving upward from 2.8% the year prior. Bank of America and Fidelity reported similar findings last year on a quarterly basis. These people may be subjected to a 10% tax due to the early distribution because chances are they will be unlikely to pay back the funds. Credit card debthas reached a historic high in the US among every income level, so this last resort option has become unavoidable for many.
This program is an insult to the American people who contribute to our system with nothing in return. These same people who do not have a mere $1,000 for an emergency are paying into the giant Ponzi scheme that is Social Security with each paycheck. They must pay for Medicare and Medicare even if they will never use the services. They’re likely subject to an income tax depending on their state regardless of income level. If accounting for a population of 335 million, the average American has paid about $522 in taxes toward Ukraine alone. The US is paying about $1,700 per month per illegal migrant welcomed in by the open border policy.
Then Uncle Sam comes around every April and gives the lowest paid Americans a tax refund check, failing to acknowledge that they preventing those Americans from earning interest on that money that they desperately needed. It is a grand lie that the socialist-leaning politicians care about the working man when their social programs and handouts guarantee tax increases on everyone. It is a shame that those attempting to do right by society and not leaning entirely on government assistance are punished by our tax code.
Japan remains the largest holder of the US as of May 2024, holding $1.186 trillion in Treasury securities and 14.7% of all foreign-owned US debt. China has been selling off its holdings in an urgent effort to distance itself from the US, but is currently the second-largest holder of US debt, carrying about $767.4 billion as of March 2024. I largely speak about China’s debt holdings because they were the top buyer of US debt before the political landscape changed.
Within a mere four years, China sold off 30% of its holdings or over $250 billion in US debt. This assisted the yuan in general as China was able to use the exchange rate to buy yuan when the currency depreciated. China seemed to be assisting Trump years ago in lowering the dollar to ease trade frictions. That is no longer the case here as the United States enacted economic warfare against Russia, pushing it off SWIFT, confiscating private assets, and implementing countless sanctions. The United States did all of this to Russia without officially being at war. Who is to say the same would not happen to China under the excuse of Taiwan?
Negative interest rates were a huge mistake for Japan. Unlike China, Japan aims to strengthen ties with the US. The nation drastically increased its holdings of US debt in 2023. US bonds seem safter than the low-yield returns provided domestically in Japan. Funds are moving out of Japan and into the US. They see US debt as relatively safe as they have a strong alliance with the US and the yield are simply higher.
The advice I used to provide to Japan to help reduce the trade friction was to buy gold in New York and sell it in London. The trade numbers could care less about the product actually being exported. It will reduce the trade deficit and make US exports appear to rise. It is just an accounting ploy. Likewise, the booming exports of China were being manipulated by Chinese companies borrowing dollars in Hong Kong and then bringing that money into China and collecting three times that cost in interest. Headlines are always made on the numbers without understanding the accounting.
I received the question of why I speak about China’s purchases and not Japan’s. Again, I speak primarily of China’s offloading of US debt because that is a larger issue. China has not slowed its pace of offloading US Treasuries and this becomes a problem as the debt crisis will come to a head when there is simply no one willing or able to buy US government debt. The Fed desperately needed China’s participation as its plan was to roll over its debts perpetually. They simply cannot pay off $34+ trillion and counting. Japan and the UK cannot compensate for the loss of Chinese purchases.
Posted originally on the CTH on May 25, 2024 | Sundance
This is interesting. Only a very small segment of the U.S. electorate seemingly understands the ramification of a dollar-based central bank digital currency (CBDC) for the USA. There is also evidence the Russian sanctions were created as the starter fuse for the CBDC process.
WASHINGTON DC – […] Crypto-friendly legislation moving through Congress in the last two weeks drew a surprising level of bipartisan support, surfacing household names such as Senate Majority Leader Chuck Schumer and former House Speaker Nancy Pelosi as unexpected allies, while suggesting that crypto skeptics like Sen. Elizabeth Warren may soon be isolated on the issue.
[…] Republicans who were already aligning themselves with the crypto world are leaning into the embrace even further. Former President Donald Trump is increasingly pledging to support the interests of digital asset traders, and he’s starting to accept campaign contributions in crypto. (MORE)
“The Order directs the U.S. Government to assess the technological infrastructure and capacity needs for a potential U.S. CBDC in a manner that protects Americans’ interests. The Order also encourages the Federal Reserve to continue its research, development, and assessment efforts for a U.S. CBDC, including development of a plan for broader U.S. Government action in support of their work. This effort prioritizes U.S. participation in multi-country experimentation, and ensures U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values.” (WHITE HOUSE)
That announcement was less than 2 weeks after Russia moved into Ukraine.
Posted originally on May 22, 2024 By Martin Armstrong
There is something really wrong at the International Criminal Court. It has been taken over by the Neocons and is violating international law and its own jurisdiction. I had dinner with the ICC, and they were appalled at what was done to me. They expressed how they “wished” they could have charged the judges and prosecutors as well as politicians involved and viewed me as a whistleblower against the bankers and Neocons. I had that dinner, I believe, back in 2012. They said they LACKED THE JURISDICTION to bring charges against NON-MEMBERS.
Here is a list of their members. The United States refused to sign because it did not want it to be charged in a court it did not control. Look closely; you will see that NEITHER Russia nor Israel are members of the ICC. They have NO jurisdiction whatsoever with regard to crimes of aggression, and for that, both states must be members. That is why the prosecution of Putin was clearly a fraud and obviously orchestrated by the Neocons. The charge against Putin and Maria Alekseyevna Lvova-Belova was really a stretch, alleging he was responsible for the war crime of unlawful deportation of population (children) and the unlawful transfer of population (children) from occupied areas of Ukraine to the Russian Federation (under articles 8(2)(a)(vii) and 8(2)(b)(viii) of the Rome Statute). This was to take children out of the war zone, and they turned that into a war crime of aggression that did not require membership. This was really politically motivated, showing the ICC is a joke. When none of the nations tied to the crimes are ICC Treaty signatories, then the task of contracting the ICC to investigate falls to the United Nations Security Council.
Now, the ICC is acting under political pressure again. Palestine became a special member, so here, there is jurisdiction over only one country. These arrest warrants are for Prime Minister Benjamin Netanyahu of Israel and Defense Minister Yoav Gallant. They have also issued warrants for Hamas leaders Yahya Sinwar, political chief Ismail Haniyah, and Mohammed Diab Ibrahim al-Masri, the leader of Hamas’ armed wing, also known as Mohammed Deif. The pressure was that ICC is controlled by the West and is irrelevant. This idea that they can use JUSTICE to stop wars is really absurd. You can have a law against murder, but in the heat of passion, nobody calculates if I do this, I can be charged – the act without thinking about the consequences.
The charges, in this case, are different from non-members. They would face a sentence of up to 30 years in prison and possibly life. Being a member state, they would be under a legal obligation to arrest any of those charged if they traveled to any of those 124 countries, which means Europe. That obligation to arrest them demonstrates how internationally the ICC actually threatens world war by preventing any diplomatic conferences. For example, Putin canceled his plans to attend the BRICS summit in South Africa in the apparent light of Pretoria’s obligation to arrest him.
The ICC’s charges here should not be confused with another similar case pending against the state of Israel, namely the charge of genocide leveled against it by several nations. Among others, South Africa has spearheaded a case before the International Court of Justice (ICJ) based on the high number of casualties in Gaza.
Since Palestine is a member, they should immediately arrest Hamas leaders Sinwar and Deif, who are in Gaza, but Haniyah resides in Qatar, which is a non-member. Will Palestine comply? Israel is not a member and does not have to comply. If the ICC charged Macron in France, is the country then obligated to arrest its own president contrary to its own laws? This introduces the paradox of the ICC questioning if it is even valid under international law. It acts as the supreme authority as if it were a one-world government, which has always been the aspiration and dream of the United Nations.
Some argue that this prosecutor had no choice because Palestine is a member of the ICC and the criticism has been that they are the puppet of the West after the Putin nonsense. So he has charged Netanyahu to politically vindicate the ICC. However, what he has unleashed is breaking the European ties and support for Israel. ICC arrest warrants against Israeli officials he can cleverly use to interfere in the entire backing for Israel. Israel’s European allies could be forced to terminate their relationship with Israel or risk being indicted in the ICC for aiding criminals.
If Palestine now refuses to turn off Hamas leaders in Gaza, then they too would be in a conspiracy, and Europeans who support Palestine could be forced to cut all ties. This illustrates that this idea of the ICC was clearly never well thought out, that they would never prevent war with justice but could promote war with arrest warrants that prevented diplomatic negotiations. For example, Putin can no longer even attend G20 meetings. When you cut off all diplomatic communications, then the ONLY alternative is war. The ICC should be terminated. Like NATO, which exists ONLY for war, the ICC dangerously breaks down the possibility of peace with its political interference in international relations.
For political propaganda purposes, the European countries supported the ICC arrest warrant against Russian President Vladimir Putin for purported transporting children, not atrocities in Ukraine. I have videos captured by Ukrainians showing the crucifying of Russian soldiers and setting them on fire. Accounts from French volunteer soldiers who left Ukraine witnessed Ukrainians shooting the heads of Russian prisoners of war for fun. The ICC has refused to charge anyone on the Ukrainian side for war crimes. They never charged the British or Americans for war crimes in Iraq.
Karim Khan is the Chief Prosecutor at the ICC since 2021. He is a British lawyer whose father was born in Mardan, Pakistan. Issuing an arrest warrant for Prime Minister Benjamin Netanyahu of Israel when Israel is not a member is outrageous on the pretense that Palestine is a member. But he got away with it and issued the political arrest for Putin, ensuring there could be no diplomatic meetings, and everyone cheered. If Putin flew to America for a White House meeting and flew over France, do they have the right to send up jets to intercept Putin’s flight and shoot it down if they refuse to land?
This is what I have warned about precedent. He got away with Putin and will obviously abuse his power against non-members, and the ramifications can be dramatic from a political perspective; sure, Israel will not cooperate, and neither will the United States. Will Palestine really arrest and hand over Hamas’s leadership? But what will the members in Europe do now? If they send any support to Israel or Palestine, if they do not comply, they can be charged under the conspiracy theories. The ICC can easily hurl the world into international war over their pretend authority that nobody ever thought through the true consequences of this one-world government approach.
A new film, War and Justice, is about the ICC. It also highlights the jurisdictional issues.
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The ICC has abused its power and should now be disbanded.
Enough is enough!
About the Film:
The International Criminal Court (ICC) seeks arrest warrants for Israeli Prime Minister Benjamin Netanyahu and Hamas’s leader in Gaza, Yahya Sinwar, for war and crimes against humanity.
The award-winning documentary WAR AND JUSTICE by directors Marcus Vetter and Michele Gentile about the ICC in The Hague couldn’t be more spot on. It will have its German theatrical release on June 6, 2024. The film will be shown in the presence of Luis Moreno Ocampo, the first Chief Prosecutor of the ICC, and Herta Däubler Gmelin (former German Minister of Justice), followed by a live Q&A in Tübingen. Due to the events in Israel/Palestine, the directors continued filming after the world premiere at the Munich Film Festival and edited an the final version that sheds light on the role of the ICC in the current Gaza war.
WAR AND JUSTICE is a fascinating documentary that tells the 25-year history of the International Criminal Court (ICC) in its mission to end the most serious crimes against humanity. In recent years, the ICC has made a name for itself by issuing an arrest warrant against President Putin. On October 7, 2023, Hamas carries out a horrific massacre of Israeli civilians. Israel responds with the largest offensive on the Gaza Strip to date. ICC Chief Prosecutor Karim Khan travels to the Middle East and announces that he will prosecute any kind of war crimes on both sides.
WAR AND JUSTICE focuses on Karim Khan, the current Chief Prosecutor, and Argentine lawyer Luis Moreno-Ocampo, who was appointed the ICC’s first Chief Prosecutor in 2003 and whose case against the junta in his country was the subject of the Oscar-nominated feature film “ARGENTINA: 1985“.
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