QUESTION: Hello Marty. I so appreciate your blog and Socrates, which is helping me steer through these crazy markets. I’m a Canadian taking care of all my family’s investment accounts, and knowing what’s coming down the road, I’m very concerned I’m going to take a misstep, especially with my children’s accounts. I haven’t been doing this long enough to have experienced a monetary crisis anywhere. What I can’t get my head wrapped around is what to do longer term from the Canadian perspective. We all have both USD and CAD funds in our accounts. I plan to increase the USD portion while the CAD is down. I’m also buying US investments in CAD (unhedged) to catch the rise in currency. But when the USD peaks and the crash and burn begins, my assumption is Canada has a boom in metals commodities while oil crashes due to lack of demand and we also go into recession due to lack of exports to the US and so lower employment. So what is a Canadian’s smart move when the USD peaks……cash out our USD investments and turn back to CAD and invest in commodities, etc. or would I be better off staying in the USD and buying inverse etfs and commodity stocks/etf’s that aren’t available on the TSX? Just trying to get a handle on what ultimately happens to Canada in all this. Thanks so much for any insight you may have on this topic.
ANSWER:We are in the staging process right now and that means we must push everything to the limit. In the case of the C$, that major point remains well above the market at 8840 level. It will require a monthly closing above that level to reverse the trend creating a bull market for the C$.
In order to create these big moves, we absolutely must push everything in a counter-trend move to its extreme in order to trap everyone and that provides the fuel for the next great wave. Everyone gets so convinced about any trend with just a brief rally like euro, pound, C$, gold or oil. This is how markets suck people in to lose money. Trends are defined not by a single market, but by a group of markets that all are interlaced and confirm one another. This is the entire purpose of allowing access to our Global Market Watch so you can visually see the global trend unfolding together.
We are approaching the point-of-no-return when people wake up and begin to lose confidence in government. Until that happens, we remains treading water. The Dow has not broken out until the Phase transition begins. This is also why the metals rally but fail to really make impressive new gains.
Where has Outflows from USD gone for the past year ?
Posted Sep 18, 2017 by Martin Armstrong
QUESTION: Re: Am i certain about the Strong Dollar?
Hi Marty, great blog posts and response. I think after reading this blog posts, the question on everyone’s mind is, what is causing the outflow of capital from the USD? And where is capital concentrating in right now? Is it the Euro? The Bunds? Gold?
And when do you see the outflow will stop and reverse?
ANSWER: There has been outflows to Emerging Market debt by pension funds in the States for the past year. They have been trying to compensate for the lower interest rate returns by going more risky. We have been call on this issue more than once.
Then there has been the expectation that the ECB will end QE and Europe will boom. We can see that the DAX for the past year has risen in dollar terms. We have seen a tremendous outflow into the European share markets, but not so much into the debt issues.
Gold has been minimal because that is the retail side, not a target for institutional money. They need income, not storage fees. They will participate in gold stocks, but not stockpile bullion.
German Hyperinflation & What They Do Not Teach in School
Posted Sep 14, 2017 by Martin Armstrong
QUESTION: Dear Marty
Following your blog is a good way to counter the propaganda in our society.
Today you stated:
‘This was the fate of the hyperinflation in Germany. It was NOT the Quantity of Money theory, it was the fact that there was a 1918 Communist Revolution in Germany where they had even asked the Communist Russians to take over Germany. It was the collapse in CONFIDENCE that led to the hyperinflation.’
Living in the UK, with German friends, I do not know any person who is aware of this and they would not believe that Germany nearly became communist if I told them. This is not taught at school anywhere.
Can you point me to some literature or other sources where we can find out more about what happened with the communists in Germany and elsewhere in Europe? I know they are making a resurgence at present (Think the EU!)
Thanks for all you do
ANSWER: Curious. I know that in Germany they do not really teach the details of the rise of Hitler. But he was the ultimate reaction to the events of the 1920s. There is a good book on the subject, but it is in German – Die Deutsche Revolution 1918/19. I have explained this revolutionfor this is why Germany overthrew Emperor Wilhelm II who was compelled to abdicate. There are photographs of the civil war that took place at that time.
This was the Weimar Republic, which was the revolution and the end of Prussian emperors. The revolutionary period lasted from November 1918 until the adoption in August 1919. But what also seems to be omitted from many accounts taught in school, is the simple fact that the German government interfered in the Russian Revolution and was instrumental in creating the Russian Revolution.
The German Imperial Government feared that Russia would enter the war. The rising communist movement was anti-war. Germany saw a chance for victory by supporting the anti-war sentiment of the Bolsheviks. Germany permitted Vladimir Lenin to travel in a sealed train wagon from his place of exile in Switzerland through Germany, Sweden and Finland to Petrograd. Since the start of the February Revolution in Russia, Lenin was trying to figure out a way to get back into Russia. Germany aided that assuming he was anti-war and would keep Russia out of World War I. Within months of arriving, Lenin led the October Revolution in Russia and the Bolsheviks seized power and indeed Russia withdrew from the world war. According to Leon Trotsky, the October Revolution would not have succeeded without Lenin.
With the success of the October Revolution in Russia and the Dream of a new Marxist Utopia, the Germans entered into a civil war and invited Lenin to please take Germany. Clearly, the scheme of the Imperial German government had backfired. It not only was instrumental in creating the Soviet Union by turning over Russia’s socialist transformation decisively into the hands of the Bolsheviks, its plan led to the overthrow of its own hold on power. This is all recorded in contemporary newspapers (see New York Times Nov 11, 1918).
Hyperinflation thus unfolded in Germany because those with money saw what Lenin had done in Russia and sent whatever wealth they had to other places, particularly the United States. The Weimar Republic then just printed money to pay reparation payments and the entire system collapsed
QUESTION: Marty; there is another documentary on the Abacus Bank and how they were singled out and charged for the 2007-2009 crash. While they said this was a tiny banks for immigrants that was too Small Enough to Jail, I found this offensive that they said it was the first bank to be indicted since 1991. Not even Matt Taibbi ever would report on your case and your film was blocked in the USA because it opened the door to political intervention into Russia by the banksters. I believe HSBC and Republic Bank were charged criminally in your case so there was another banks charged after 1991 but nobody will report it. Am I correct? Has Steve Jame or Matt Taibbi ever contacted you?
ANSWER: As far as I am aware, neither Matt Taibbi nor Steve Jame ever contacted me. You have to look at what and how they prosecuted the bank in my case. The bank did not plead guilty, it was the holding company that owned the bank – Republic New York Corporation. Then they steered the case to the only Federal Judge who was blind – Richard Casey (who died shortly thereafter). The judge just listened and could not read the truck load of papers to even know the full story. Republic plead guilty promising to make everyone whole and the government allowed them to buy our notes, pocket the profit differential of almost $400 million that was ours which explains the alleged $1 billion turns into $650 million.
When I realized the government was protecting the bank, I did an interview with the Japanese press and told all the Japanese that they had better file suit against the bank or they would never see a dime. They listened. Then the government ran to court to put a gag order on me to PREVENT me from helping my clients. You just can’t make up this degree of corruption. Nobody in the press ever reported that one. The author of Too Big to Fail, Andrew Ross Sorkin, was a journalist for the New York Times. He came to see me about Judge Owen changing the transcripts and told me he was doing the same to Frank Quatrone. The New York Times did not let him report that judges in New York were changing transcripts which is in itself a crime.
True, the movie was rated a 10 in Europe, blocked in the USA, and has even been shown in Japan. It will appear on German TV in October. Yet, every American newspaper, TV station, and even NetFlix, who first accepted the film and suddenly pulled it, has done everything in their power to suppress the truth from the American people. You just cannot make up this stuff.
Welcome to the land of the free and home of the brave where propaganda is free to prevail over the truth when it goes against New York. The banks pay huge fines and nobody goes to jail BECAUSE the government wants the billions of dollars in fines. It’s either you jail bankers, with no huge fines since the individuals don’t have that kind of money, or you go for the corporate shell and the big bucks. Abacus Bank was small enough to jail BECAUSE they did not have the big bucks to pay off the government.
I have been reading your blog for over a year now. Your posts are a superb read and one of the first things I check every morning before leaving for work! Although I admire your work and writings a great deal, I’m sometimes surprised by the level of certainty you seem to have about how things will unfold in the future. You stated multiple times now that ‘only a rising dollar will break the world monetary system’, but with more and more countries trying to bypass the dollar system, how will the dollar ever get to the strength that is needed to do so? Will the world monetary system break for sure, or is there an alternative ‘softer’ transition possible on a global scale?
Thank you for your insights!
B (from Belgium)
All the governments of the entire world can try their best to create some new currency to dethrone the dollar. They will fail just as Europe has failed with the Euro, You can denominate oil to peanuts in some other currency but that still will never put a dent in the dollar. Why? It is capital flows than count and trade is minimal. When you cash out of your commodity, where do you put your profits? Oh back into dollar denominated instruments?
The failure of Europe was to create a single debt. Instead, capital must still pick and choose between the Eurozone members and who do they trust more to buy their bonds. Just look at the interest rate differentials. They are all denominating their debt in Euros, but their credit ratings differ just as they do among the States that compose the USA. Germany wanted a single currency for trade, but they did not want to consolidate all the debts in Europe. Hence, we ended up with a single currency that could never become a major currency with no central core.
China will replace the dollar but only AFTER 2032. Until then, they must still work on establishing the Rule of Law so that capital will park in yuan with confidence. Denominating oil in yuan or euro means nothing. Where will you park your cash? That remains dollars for major institutions. There is no alternative. Even the Japanese yen is not a free currency because the government retained control over anyone anywhere issuing and debt in yen without government approval.
In general, Europeans are still trapped in World War II thinking that a stronger currency means economic boom. When all the currencies were wiped out by the war, politicians used the currency value in Europe as a reason to prove they were doing a good job. So the historical bias in Europe has been dominated by the perspective. The USA was a third world country during the 19th century. It was the “emerging market” for European investors. It was virtually bankrupt in 1896 and it was World War I and II that raised the USA to the richest country in the world by 1950 holding 76% of the total world gold reserves. That was accomplished not by Marxism, political economic manipulation, or anything any politician enacted. It was create SOLELY and EXCLUSIVELY by capital inflows because of Europe running around destroying itself.
Above is a chart of the capital flows from 1960 to 1990. It was the US net investment that rebuilt Europe – not Marxism adopted by European Politicians in response to the Russian Revolution in 1917. The capital concentrated in the USA and then moves back to Europe as investment. It was the USA that rebuilt Europe – plain and simple.
We have reached a 5000 year low in interest rates. The ECB owns 40% of all Eurozone government debt. If any central bank is in danger of collapsing it is the ECB. Raising rates will create a huge whole in their balance sheet. Then the true cost of QE will be exposed. Why do you think Draghi is dragging his feet. He knows stopping to buy the debt will cause rates to rise because the governments will be forced to find real buyers. Only a complete fool would rush in where the ECB is withdrawing.
There is no one who wishes this forecast will be wrong than me. Then I can retire, say goodbye to the world and fade into the sunset. Everyone knows I do not need the money. We do not even sell advertising on this blog. We do not force you to register and then bombard you with endless emails trying to sell you something. I too have family. I fear for their future – not my own. I would much rather say its time to Beam Me Up Scotty than having to deal with nonsense I cannot prevent. This is not my personal opinion. The ONLY time we get monetary reform is when the dollar RISES, not declines. Hey, if the dollar declines, then interest rates will continue to travel negative, gold will collapse, the stock market will implode, and Trump will emerge as the best president in history creating massive new American jobs exporting everything not just blue jeans, rock & roll, and US corrupt law. Emerging markets can keep borrowing dollars with no end, dumping commodities than are at excess supply, and everyone will be perpetually happy – the euro will be strong at last and magically the ECB can just keep European governments on life support without end.
Unfortunately, governments are broke. They are hunting people with any money at all and that creates a disincentive to invest, rising unemployment, and civil unrest turning the poor against the rich instead of the poor asgainst the politicians who have created this mess. The negative interest rates harm the poor and middle class where the rich can export their money and invest outside their country to preserve wealth.
No, I am said to say this is the net result of merging all global trends – not my opinion or preferred outcome. I am not even making this forecast just to scam you into buying some book by hyping the situation. My only incentive is to save my own family. As I said, if this was just for me, I would quite now and go enjoy life while I am still in reasonable shape to explore the world.
Love your blog and the insight you have given all your readers. However I am wondering that when you say the markets are going to become more volatile – how does that effect the trigger that sets off the dominoes ??
what i mean is, if the economy around the world hits rough water; what is the rogue wave that sinks the ship? is it a quantity/ volume of capital money that shifts, or is it a short circuit due to political turmoil?
I read that the whole 2008 “crash” was triggered by 500 billion dollars, which is minuscule amount of the total USA GDP. But i have also read from your blog that Germany has 5X its GDP in synthetics on the book !
*IF the markets are more volatile, does that mean there is LESS threshold due to a minor tremor in the gov or markets?
your insight on how volatility increases with regards the tipping point, and WHY the tipping point may happen would be of great interest.
N From Canadaor
Markets crash when the majority are long and anything can spook them because there is a lack of new buyers coming in to carry the market higher. Some longs try to sell and they find a lack of bids. The crash comes when you hit the no bid and market-makers withdraw. That is the sharp increase in price volatility that is different from volume volatility. With price volatility, there need not be major volume – just a gap and a lack of bids. The event need not even be real – just a rumor.
The panic unfolds because of price movements rather than volume. When large gaps appear WITHOUT supporting news, even professionals sell because they cannot make a decision in a vacuum.
QUESTION: Mr. Armstrong; At the cocktail party in Hong Kong I am the one who asked you how China should proceed to make the yuan a reserve currency. You said the rule of law must first protect property and surprisingly you said to issue commodity contracts redeemable in gold. Well, everyone knows whatever you seem to advise China does and very fast. The news is they will now do exactly that. Start a oil contract redeemable in gold. Can you explain why you took this position? You were surrounded at that moment and did not explain in detail why oil should be redeemable in gold.
ANSWER: It was not based upon the rise or fall of gold. The objective is to establish the yuan as a reserve currency until we reach the Monetary Crisis Cycle conclusion. The logical step is to try to boost the yuan as a redeemable reserve currency with stability. You either PEG it to the dollar (unwise for political reasons) or you “LINK” it to gold – but do not PEG it to gold. If you attempt to PEG the yuan to gold, that would fail for you are making the same mistake as Bretton Woods. The only possible way is to “LINK” it to gold but on a floating exchange rate. That way you are encouraging confidence in the yuan allowing it to be redeemed on a floating basis with gold. Hence, the political risk of the currency is reduced for it could become possible that the currency system breaks apart and politically currencies could be politically frozen and non-redeemable.
This is a long-term structural reform. Do not expect it to be a real game-changer just yet. There will be hype, of course, but we are looking at structural reforms that will take some time. Naturally the hype will claim this is the end of the “petro dollar” for they will use any excuse to call the dollar down. They do not understand that ONLY a rising dollar will break the world monetary system. A lower dollar will buy everyone a lot more time because most foreign borrowing is in dollars. They also are living in the past. The USA is not a net exporter – not an importer.