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Uncertainty is the Mother of Volatility

QUESTION: Well you called this year the political year from hell. You got that one right again. Between trying to figure out the politics in the US, we have Britain in turmoil and Italy trying to figure out if they should stay or go. Hungary becoming more defiant and Sweden swinging to the right. You are the best at forecasting this sort of crazy stuff. You got BREXIT right and Trump’s victory. I can see your model looks at the economics and predicts a response that becomes political change. So what does this all mean?

KD

ANSWER: Regardless of your political persuasion be it for or against any of these political issues, the importance is really the impact upon CONFIDENCE. If you are for or against Trump, we still have one thing in common. We just want stability and some sense of the future to bank on. For example, if Trump were to go down, the impact upon the world market could be very dramatic and how we then stage ourselves to survive this type of financial chaos is critical. It is the same situation in Europe. If Italy pulls the cord to get out, the Euro cannot survive. What I hear from Behind the Curtain is that the ECB may be forced to cut its bond purchases by 50% and there are even those demanding Quantitative Easing MUST end by the end of the year. Draghi has DESTROYED the bond markets in Europe. Stopping QE will result in interest rates going up dramatically.

As I have said, Trump is the Counter-Trend or FALSE move. I fear what comes afterward be it now or in 2020.

…click on the above link to read the rest of the article…

The Real Difference Between Left & Right

 

QUESTION: Mr. Armstrong; You have worked with politicians worldwide and both sides. What is your opinion of the politics that has emerged post-Great Depression?

LM

ANSWER: The major difference between the socialism supported by the Democrats/Labour in Western Society is that to them the individual has no value, it is the collective society, which they then elevate themselves to rule. Conservatives believe in the individual has rights and value and that the state is to serve the people. In the eyes of socialism, it is not the individual but the collective society which is the value and they are qualified to rule from above. The socialist always seeks to control others and in so doing, the individual is always sacrificed for the collective state. It is not what your country can do for you personally, it is the teaching that you as the individual are to be sacrificed for the greater good of the whole which is controlled by the politicians – i.e. former the Soviet Union.

Nevertheless, the socialist always pretend that they are on your side. They have flipping everything upside down. Your personal well being is only possible by surrendering your individuality to the state. It is what they have done with Death Insurance. The insurance companies could not sell Death Insurance, so the reversed it and called it Life Insurance. Like fire insurance protects against fire, life insurance does not protect you from living forever. They reversed the label to make you feel proud how much Death Insurance you own. Socialist did the exact same thing. They get people to surrender their individuality to the state and always blame the rich when your quality of life declines.

Keep in mind that career politicians even on the right also support the government against the individual. Thomas Paine in Common Sense took the position.

…click on the above link to read the rest of the article…

USA Declares it is not Subject to International Law

The United States is on a major confrontational course with the International Criminal Court (ICC) in The Hague. The White House National Security Adviser, John Bolton, threatened entry bans and other sanctions against court judges and prosecutors if they dare to try to prosecute any US citizens for an investigation into possible US war crimes in Afghanistan. Bolton made it very clear that the United States would NEVER cooperate with the Hague Tribunal and it regards the international court as an “illegitimate court” for the ICC is only good when it prosecutes non-Americans for war crimes.

Indeed, Bolton virtually declared war on the Hague and said that the United States and Israel, with other allied states, would put immigration bans and judges and prosecutors of the ICC, and it would also freeze any potential assets of Hague lawyers in the United States. Part of the issue is their interpretation is begin expanded as to what is a crime of aggression. According to the ICC, “crime of aggression” means the planning, preparation, initiation or execution of an offensive action that by its nature, severity and scope constitutes a manifest violation of the Charter of the United Nations by a person who is actually capable to control or direct the political or military action of a state. In other words, the USA could not invade Syria or Iraq for that matter. Any attack actually violates the prohibition of violence in Art. 2 No. 4 of the UN Charter, which is also a customary international norm. The generally accepted exceptions to the prohibition of violence are:

  • Military coercive measures authorized by the UN Security Council pursuant to Art. 39, 42, 53 UN Charter
  • Measures in the exercise of the right to self-defense under Article 51 of the UN Charter, which is also a norm of customary international law.

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2016-18 Big Chill – NASA Confirms Global Cooling?

What I find really distasteful is how the media is so corrupt that all they want to do these days is to manipulate us into mindless drones. All we hear is Global Warming and they seem to be paid to push this just as they have done in Canada to tax each house $1,000+ to solve Global Warming? It should come as no surprise that the very same news source they have used for their Global Warming pitch has reported the greatest global two-year cooling event of the last century just occurred. Their data from February 2016 to February 2018 showed that the global average temperatures declined 0.56°C. The last two-year decline was 1982-1984 with a drop of 0.47°C, which took place during their favorite stint to justify global warming era. (see NASA Goddard Institute for Space Studies (dataset accessed 2018-04-11 at https://data.giss.nasa.gov/gistemp/).

Then we have the Global Warming crowd trying to dismiss the Big Chill claiming it is really Global Warming causing an increase in volatility of temperatures. Here we go again with FAKE NEWS data. The global temperatures are by no means becoming more volatile and if you run the data through a standard measurement we use in markets to gauge volatility, you are immediately confronted with the monthly global average temperatures since 2000 is only about 65% of what it was from 1880 to 1999. They simply refuse to just accept that there are cycles to EVERYTHING!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Meanwhile, in South Australia has seen temperatures plunge 10 degrees making this the coldest September morning in 23 years and coldest morning this late in the year in more than 50 years of records. This corresponds to the snow in Africa confusing the animals completely. It would be nice if the news just reported the news for perhaps we just might prepare like Joseph warned the Pharaoh. With all this FAKE NEWS, they may with hindsight be responsible for the deaths of millions if we have a famine without preparation.

Fake News is Unbelievable – When is Enough going to be Enough

A TV reporter is caught acting pretending the wind is so strong in Florence while two people in the background are casually walking by. Besides that, the wind is coming from behind him and he is acting as if he is fighting against the wind from from the opposite direction. Hurricane Florence was downgraded to Category 1 before it made landfall. Instead of reporting the truth, the media seems desperate for attention and viewership that they are exaggerating and outright reporting propaganda. The media is so intent upon handing the country back to Democrats, there is not a single piece of news that they are now turning it against Trump claiming Global Warming is the reason for Florence. We can’t even just get honest weather reports without a political slant and manipulation.

The Washington Post has used the Hurricane Florence as an excuse to turn it against Trump reporting he is “complicit” on climate change and this storm is basically all his fault. Surely if we just taxes every house $1,000 a year as in Canada for the Global Warming Tax storms like this would NEVER happen again is the implication.  The Post wrote:

YET AGAIN, a massive hurricane feeding off unusually warm ocean water has the potential to stall over heavily populated areas, menacing millions of people. Last year Hurricane Harvey battered Houston. Now, Hurricane Florence threatens to drench already waterlogged swaths of the East Coast, including the nation’s capital. If the Category 4 hurricane does, indeed, hit the Carolinas this week, it will be the strongest storm on record to land so far north.

President Trump issued several warnings on his Twitter feed Monday, counseling those in Florence’s projected path to prepare and listen to local officials. That was good advice.

…click on the above link to read the rest of the article…

 

Clinging to Old Theories of Inflation

QUESTION: Mr. Armstrong, I think I am starting to understand your view of inflation. It is very complex. I think some people cannot think beyond a simple one dimension concept as you often say. So I am trying to be more dynamic in my thinking process. Here you point out that when debt is collateral it is the same as printing money but worse because it pays interest. Then you point out that hyperinflation takes place not because of printing money but because a collapse in confidence and people then hoard their wealth which reduces the economic output and that compels a government to print more to cover expenses. So there is a line that is crossed and kicks in that collapse in confidence as in Venezuela. This is very interesting but complex. Is this a fair statement?

ANSWER: You are doing very well. You are correct. Some people cannot get beyond an increase in money supply is automatically inflationary one-dimensional thinking. If that was true, then why did 10 years of Quantitative Easing by the ECB fail completely to create inflation given that theory? It is like brainwashing kids with global warming ignoring all evidence to the contrary.

There is yet another dimension that you have to add to this complexity. The BULK of the money is actually created by the banks in leveraged lending. If I lent you $100 and you signed a note that you would repay it, then the note becomes my asset on my balance sheet. I can take that to a bank and borrow on my account receivables. In this instance, just you and I are creating money. Now let a bank stand between us.

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Beware of Political Uncertainty

QUESTION: Mr. Armstrong; I take it your concern over Trump from the market perspective is the sheer uncertainty that is evolving. How do you see this playing out for the world economy?

Thank you. I agree. These people who hate Trump just hate him so passionately.

MRU

ANSWER: Markets do not like UNCERTAINTY. These people who want to see Trump gone have no clue what may result in the aftermath. My concern is global. This is far beyond Trump. We have chaos in Turkey, Argentina spilling over into other Emerging Markets. We have politicians trying to punish Britain and German companies asking what are they just nuts in Brussels? Britain is the BIGGESTmarket for Germany cars in Europe. We have building uncertainty in Southern Europe. We have the head of Australia playing the game of musical chairs. We have new political parties emerging in Canada and Ireland. We have private debt concerns in China. We have South Africa following the mistakes of Zimbabwe and we have major change sweeping the Middle East. The discontent in Iran is building toward yet another revolution and in Japan, Abe Economics is failing. South America is in turmoil which has spread even to Mexico.

In all honesty, throughout my career, there have been places that are in turmoil and it was crystal clear where capital would move. I honestly have to say I have NEVER witnessed a period quite like this. There is no place that is a safe haven at this point. The entire world is just coming unglued. All we can do is now rely on the computer for personal opinions will be renders probably the most dangerous things upon which to base forecasts.

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Emerging Market Debt Crisis – A Reality Check

QUESTION:  Hello Martin … I follow emerging markets closely and one thing I note is that the size of the sovereign forex-denominated debt burdens are quite small relative to GDP except in the case of Argentina (48%). Everybody else, including Turkey and Indonesia) is 11% or less. How can you have a debt crisis if everybody is clearly able to service their debts? That’s what confuses me. Today the Bloomberg EM dollar debt index is at 6.05% — whereas in 1998 it was 17%! That is saying the risk is still fairly subdued no?

Thank and regards,

MC

ANSWER: There are at least three major factors that are not calculated in this perspective. The dollar debt rises exponentially in the cost to service that debt as the currency declines. It was that very relationship which sent Germany into hyperinflation during the 1920s. Germany had to print more money to make reparation payments and the more they printed the worse it became. If you look closely, Turkey’s external debt has grown 10% just in the past year alone as its currency has declined and interest rates have risen.

Next, we have the rising interest rates which add to the crisis further undermining the economy. The interest must be paid in terms of the foreign currency. Also, keep in mind that they have also issued external debt in euros.

The third dimension of Emerging Market Crisis is private. In the case of Turkey, in particular, this debt crisis differs significantly in one very critical manner. We are not looking at purely as crises fueled primarily by government debt. Much of the private debt of corporations have also borrowed in dollars and euro. This makes the crisis very problematic. There can be no IMF bailout for all the outstanding private debt in foreign currencies.

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Don’t Cry for Me Argentina – It’s a Global Debt Crisis

QUESTION: Mr. Armstrong; Our government here in Argentina has told us we should expect more poverty and there is no hope for the future. Socrates has been amazing on its forecasts on our currency. There are enough of us down here who would sincerely ask would you consider advising Argentina to straighten out our economy and nation? You have forecast this emerging market crisis long before anyone else and your solution video on YouTube is very thought-provoking. If we can demand the government meets with you, would you do it?

KRD

ANSWER: The sone maybe Don’t Cry for Me Argentina, but it applies to the entire world for what happens in Argentina is merely the beginning of the global debt crisis. We can see from the chart that the dollar has been soaring. However, the Array picked August as the Panic Cycle and that has been spot on. Unfortunately, it does not look like this is going to calm down. We may be headed into a real Emerging Market crisis by October.

The reason why we are able to forecast such events well in advance is rather common sense. As I have said before, every solution to a crisis sets the stage for the next crisis. The Emerging Market debt crisis is unfolding because central banks in the USA and Europe lowered interest rates to “stimulate” the economy and they have no idea about how an economy truly functions. This is all based upon Keynesianism which is in turn based upon an isolated theory of the economy. They never consider that you lower interest rates and there are pensions who simply need higher rates to break-even. Then emerging markets issued debt in dollars with higher yields for the pension funds bought it assuming there was no currency risk.

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Civil Unrest for 2018/2019 Post Election Cycle – The End of the United States?

QUESTION: I have followed you for many years and read you daily. To the point, I was looking at the riots in LA 1n 1965 and then the riots in 1992, that being 27 years so I divided that by 8.6 and got 3.14, so I backtested 27 years and found more race-related riots etc. Does this mean we will see riots in 2019?

TM

ANSWER: Yes. Our model is broader, and it extends back in time much further and incorporates all countries. This sort of civil unrest will rise in 2019 after the election cycle. It will not be just a race issue. It will be politically oriented and broader. Nonetheless, the Democrats will portray Trump and the Republicans as racists for the election fueling the fire of both race and class warfare.

We are preparing a report for the election cycle. This year is crazy. There are so many people in Congress calling it quits. The Republicans who will be defending 40 open House seats this fall compared with the Democrats’ 20 all because of retirement announcements. Even Speaker Paul Ryan told his colleagues he would not seek election. What is going on is that there are those in politics who see the handwriting on the wall. Politics is doomed. Those retiring seem to comprehend that incumbents may lose this round for the Trump Revolution is spreading even to the Democrats with Alexandria Ocasio-Cortez, the 28-Year-Old Democratic in New York they call the  “Giant Slayer” because she was a bartender and unseated Representative Joseph Crowley, a 19-year incumbent, and Queens, New York’s political stalwart who had not faced a primary challenger in 14 years.

While the Democrats are cheering and claiming with 40 Republicans retiring it proves that Trump has destroyed their party. Of course, this is their perspective always focused on the hate the rich.

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Cyclical Synchronization & the Global Economy Make Manipulation Impossible

A metronome is an instrument to measure the time and that the musicians use for their work. One of the most curious phenomena is observed when different metronomes that have a different frequency between themselves end up synchronizing perfectly. This symbolizes what I find so fascinating in the world economy. No nation stands alone. This is why even contagions appear in the world economy. However, it also makes my point that politicians can promise whatever to get elected, but they are indeed powerless to separate a nation from a global synchronize.

Below is another fascinating experiment with wave motion and frequencies. There is just a lot more behind the curtain than people realize and despite all the conspiracy theories, it is IMPOSSIBLE to manipulate anything and alter its trend. The best someone can do is move in within the range of “noise” but it cannot adopt a counter-trend move to the synchronization. The proof of this statement is the failure of Communism as well as Keynesianism. Any attempt to return to a fixed exchange rate will always fail for the same reason. You cannot eliminate the business cycle.

The Rumors are that Turkey Will Default

The rumors running around is that Turkey will default as Erdogan decides to move to align with Iran and Russia and leave the West behind. While there have been speculative attacks on the Turkish economy and US tariffs and sanctions have been detrimental, the initial causes of this growing monetary problem are really all internal. Erdogan’s management of the economy has been a disaster. He has pretended to borrow too much money from foreign investors to stimulate the economy. It is true that the total debt rose to over $450 billion, about half of GDP. Turkish exports and the current account deficit rose to $50 billion. This has led to rapid inflation that has been at least an annual rate of nearly 7% on average during the last ten years. In truth, Erdogan was really trying to build the economy to fulfill his dream of reestablishing the Ottoman Empire and emerge as at least the dominant power over the Middle East.

Unfortunately, Erdogan is stubborn and he really has no way out. He wants his cake and consumes it all at the same time. The rumors running around the trading desks are that he will pull the plug and turn his back on the West. By doing so, he can then justify defaulting on the debt of the “corrupt” West who wants to subjugate Turkey. That will be the justification spin of things. It looks like this will remain volatile into October.

Discretion in the Hands of Every Government Agent = Tyranny

There has been an interesting case of an American Muslim woman who had her phone seized by border guards as she returned home to the United States from a trip to Switzerland. The guards just seized her phone and she had to file a lawsuit to get it returned after 120 days. Meanwhile, they refuse to confirm or deny that a copy of her phone was made and shared with any other agency. This is part of the problem with the rule of law – there is none! Government agents can do whatever they desire and it is always your burden to hopefully find a judge who will at least acknowledge you have any rights at all.

Most people will never think of various crimes by the British that led to the American Revolution. Then there was the No Taxation Without Representation slogan. But the act that perhaps began the Revolution was illegal search and seizure.

Otis-James

The legal case that became the seminal beginning of the American Revolution was Entick v. Carrington and Three Other King’s Messengersreported at length in 19 Howell’s State Trials 1029. This case was the start of the American Revolution and was also based upon an abuse of the king’s agents. The action, dated November 1762, was for trespassing and interfering with the plaintiff’s dwelling by breaking open his desks and boxes and searching and examining his papers.

George III (b 1738; 1760-1820) became king in 1760. In February 1761, Parliament enacted the Writs of Assistance that was challenged in court in Boston, Massachusetts. These were writs that empowered every agent to do as they liked and were no different from how agents act today at their discretion. The Writs of Assistance allowed the king’s agents to search anything they suspected.

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Real Estate & Understanding The Role of Debt

QUESTION: Dear Sir/Madam

Thank you so much for what you all do.

I was just reading today’s Blog 17-08-2018 –  ‘ Real Estate – Leverage – Transition to the Reset ‘.   The bit I did not understand was where it was written  ‘ Keep in mind that as the currency declines, then the repayment cost of a mortgage declines. One the one hand, mortgages will be unavailable but those who hold the mortgage lose the most ‘

My question is when the Reset happens in which way will the mortgage holders lose the most even if the repayment cost of a mortgage declines ?  I live in the UK

thank you so much

ANSWER: Since I posted that chart from Socrates that illustrates real estate, many people have written in to ask where can they find that on Socrates. This is part of the pro version that will be released WE HOPE for the WEC this year (see Socrates Newsletter just sent out). Here are the real estate markets covered by Socrates at this time.

What I mean when I say that those who hold mortgages lose in such a situation of a decline in the purchasing power of a currency is basic. The city of Detroit suspended its payments on bonds in 1937. They resumed in 1963. Now they say they never defaulted. However, they paid back with cheaper dollars. The holder of a mortgage or a bond charges interest which is supposed to be more than the inflation rate. When inflation exceeds the interest rate, then you are paying back with cheaper dollars.

Take a life-insurance policy. If you bought one in the 1940s and it was for the huge amount of $5,000, after funeral costs of say $1,500, you left your heirs a sizable chunk of money.

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TRUTH is so precious that she should Always be attended by a Bodyguard of Lies

QUESTION: Do you support the unilateral withdrawal of the US from the Iran deal?

ANSWER: Iran has no intention of actually conforming with that agreement. But that is really a side issue. There is a significant displeasure with the religious government in Iran among its own people. No nation is ever 100% left or right. There will always be dissent against whatever government is in power. This rising discontent has appeared since the Arab Spring. The Iranian Revolution of 1979 will be followed by another counter-revolution probably in 2022. Iran has suppressed its people for far too long and it will rise up in yet another revolution. The government is at war in the Middle East against Saudi Arabia because of a political-religious philosophy. They seek to export their beliefs to others and that is the problem. If they would just adopt live-and-let-live policy things would be much calmer.

I do not support the USA sticking its nose into everything. This is the inherent problem when you have military establishments. As I have said before, the days of Empire Building are gone. China, Russia, and the USA have no desire to occupy each other. Both Erdogan and Iran are still clinging to this idea of reestablishing Empires. The major powers are engaged in proxy wars. It really makes no sense to intervene for it only inspires hatred.

Franklin Roosevelt lied to the people to get into World War II because the American people were isolationists. You have to understand that you MUST always separate the PEOPLE from the Government and its POLITICIANS.

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Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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