In a depression : Sell liquid asset, buy depressed illiquid assets

Posted Aug 30, 2019 by Martin Armstrong

QUESTION: Hi Martin.. thanks so much for all your world/economic content and perspective. I was reading a comment you made recently concerning real estate mortgages. In the comments, you suggested carrying a low fixed-rate mortgage rather than paying off the property.

My question is what happens when a financial institution goes bust. You’ve taken out a mortgage on your house and deposited the excess money from the mortgage in your bank account. Doesn’t this expose you to bankruptcy risk? If the bank collapses you could potentially lose what’s not covered by FDIC insurance. In one case the house is paid off and the money is out of the banking system. In the second case, the money is held in the banking system and is at risk. Or am I missing something?
Cheers,
Bob

ANSWER: If you have cash at a bank, then you have the risk of the bank failing. However, if you are the borrower and the bank holds the mortgage, then as long as you are current on your payments it cannot foreclose. It will typically sell its assets to raise cash so your mortgage could be resold to another bank or an investment pool.

The problem you will have in a crisis is that real estate is illiquid. When I was growing up, a friend of my father owned virtually the entire main street in town. I recall talking to him and he said that he bought the entire main street in town back in 1937 because he had cash and bought it for 10% of its 1929 value.

If you borrowed and have the cash on the side, you will be in a far better position to sell liquid assets and buy the house at a discount if the bank is in trouble.

Categories: Real Estate 

2016 is 7 years up and that warned we could indeed see even a slingshot type of move

Can the Dow Crash with Little Retail Participation?

Posted Sep 18, 2016 by Martin Armstrong

 

QUESTION: Hi Martin,

thank you for your great work with Socrates and especially for presenting the Indicators for us whom are still outside of the Trader Level.

I have some question about the recent sell off in the DOW. True, it was really time for a correction/drop. But the retail investors are still on the side-lines and the interest rates are lowest ever in history. To sell off the DOW on fears of increased rates and slower GDP growth is one thing, but then what? Where to run? Interest rates are close to zero. Bonds will loose much of their value when interest rates go up. Gold does not yield. Real Estate has already topped.

You are so right that the hunt for yield will soon be transformed into the hunt for preservation of value.

So we are back to the DOW anyway, right?

Do you see in Socrates Indicators that this Phase Transition may emerge already in the end of 2016?

Kind regards,

HJ

ANSWER: You are correct. There will be no choice but to run into equities. With the European banking crisis looming on the horizon, real estate on the high-end has been targeted by governments around the world passing various laws against foreign ownership from making it criminal in Australia to demanding 15% of the sales by a foreigner in the USA is seized by the IRS, this does not leave a lot of room for big money to get off the grid.

Then there are the mandates by countries that pension funds MUST be invested in government bonds. This negative interest rate is creating the next major crisis. As a matter of law, these funds cannot even divest all government bonds in many countries. We are looking at a crisis far worse than any derivative or banking crisis. It is the Pension Crisis that nobody talks about. This is the political crisis that is bringing socialism to an end.

You are correct, gold offers no yield for income, only capital appreciation. That does not provide a base for institutional money to park, besides storage problems. But here to, government are tracking all buying and selling of gold. Only the institutions had to turnover their gold in 1934. Individuals could hold their gold at home in a sock drawer. So this distinction has always existed between big money and individual investors. Gold is for the individual. It cannot satisfy institutional money on a yield perspective and it cannot be protected by an institution. Consequently, gold is eliminated from a major institutional portfolio, which limits that type of investment into directing it into gold stocks for some yield.

All of that said, you are also correct about retail participation. That remains at historic lows for a bull market. So many people were hurt in 2007 to 2009, that they are reluctant to step back in. There can be ABSOLUTELY no major crash of 1929 proportion despite the choir of analysts all claiming “SELL” for it will go to anywhere from 50% to 10% of current value. Such a move just does not seem plausible.

Nonetheless, our accumulative Energy Models reached the overbought stage that nearly matched our next target objective. That warned that we were getting toppy and a brief correction was likely. Likewise, the accumulative energy in 2009 at the low went seriously negative also warning this was overdone on the downside.

We will be issuing a special report because 2016 is 7 years up and that warned we could indeed see even a slingshot type of move. That means you have excessive bearishness and the pros will short the market. They are typically trapped and will then panic to get out.

Despite the claims that the bankers are too big to fail, too big to jail, and too politically controlling in Washington, keep in mind if Trump wins, we may see reality hit the bankers in the face. Without Hillary, they are in big trouble for the next loss may be their’s to keep. The “pros” are not the star traders, they are the political manipulators. The entire Glass Steagall Act was proposed BECAUSE of Goldman Sachs.

Goldman Sachs got caught up in the whole bull market just like everyone else. Under the leadership of Waddill Catchings who led the firm into joining the hot market by now creating an “investment trust” where he saw that a giant fund could maximize profits by buying and selling stocks. He promoted this as a business that was professional and the profession was investing.

The “investment trust” was sort of the domestic “hedge fund” of its day. Everyone was jumping into the game. Catchings just got caught-up in the whole thing and was very bullish going into the high of 1929. He gave this new entity the name: Goldman Sachs Trading Corporation. The deal was that Goldman Sachs would be paid 20% of the profit and the stock was offered at $104 per share. It jumped to $226 per share, that was twice its book value. This would be the very same mistake that became exposed in the Crash of 1966 when shares in mutual funds were then traded on the exchange allowing them to be bid up well beyond their asset value.

The whole bullish atmosphere was very intoxicating. Just three months into the fund, Goldman Sachs arranged for a merger of the trust fund with Financial & Industrial Corporation that controlled Manufacturers Trust Company that was a giant group of insurance companies. This doubled the assets of Goldman Sachs Trading Corporation taking it up to a staggering near $245 million. This was huge money in those days. The trust now, exploded and the assets under control are said to have exceeded $1 billion back then. Goldman Sachs expanded the leverage going right into the eye of the storm that was about to hit starting on September 3rd, 1929. In the summer of 1929, Goldman Sachs launched two more trusts Shenandoah and the memorable Blue Ridge. The shares were over ­subscribed and Shenandoah was offered at just $17.80 and it closed on the first trading day at $36 per share. Blue Ridge was even more leveraged and the partners at Goldman Sachs put pressure on everyone to buy as a sign of support. The leverage was astonishing for with just about $25 million in capital, now there was more than $500 million at stake.

The disaster was monumental to say the least. Goldman Sachs Trading Company, whose shares had stood at $326 at their peak, fell during the Great Depression to $1.75. They fell to less than 1 % of their high value. The loss suffered at Goldman Sachs on a percentage basis was far worse than at any other trust. In fact, of the top trusts, Goldman Sachs had lost about 70% of everyone else’s losses combined.

So sometimes the bigger they are, the harder they fall.

Same conditions setting up today as was the case in 1927. See Dow Chart. Corporate debt is the only alternative

Posted Mar 30, 2016 by Martin Armstrong

Janet Yellen signaled that the Fed is grappling with the problem I have been warning about; the dollar has become the de facto only real currency and the Fed is indeed becoming the world’s central bank. Yellen has admitted that the Fed is being lobbied by everyone to surrender its domestic policy objectives to international. This is precisely what took place in 1927. Yellen stated that the Fed should worry less about inflation domestically than about global growth risks. While pointing to the slowdown in China and depressed commodity prices, Europe is a real basket case. She used the words that the Fed must consider “caution is especially warranted” when it comes to raising interest rates. This has put most Fed watchers off to expecting any possible rate hike into retirement as they expect nothing before September. The BREXIT will most likely be rigged because it is exactly opposite of what they are telling the Brits that they will be isolated and the economy will collapse if the exit the EU. Nobody says Britain did fine before it joined only in 1973 or that it is the other-way-around; with BREXIT, Europe will fail. This heated issue in Britain is most likely the final nail in the coffin. Britain will collapse with the Euro and should have just handed its sovereignty to Brussels. Europe will never reform so it will be all go down together. The political risk in Europe is tremendous and Yellen cannot prevent that with simply interest rates.

It is ironic that it is also the same conditions setting up today as was the case in 1927. The Fed back then lowered US rates to try to deflect the capital inflows to help bailout Europe. The markets eventually backfired and capital shifted pouring into the USA doubling the US share market despite doubling interest rates to try to prevent the crisis they helped to create. This all led to the 1931 Sovereign Debt Crisis and those economic declines resulted in political chaos. In 1933 FDR came to power. But so did Hitler and Mao. That was all made possible because of the collapse in government debt. We are in the very same position today and the Fed is surrendering domestic policy objective for international concerns.

What is astonishing is just how brainwashed society has become. They cheer lower interest rates as if this will eventually work to stimulate the economy and markets. Interest rates decline with economic declines and rise with economic booms. The analysis on TV is just ass-backwards. When a stock is doing well, the price rises because there is a bidding war. Mr. Larry Summers, the father of negative interest rates, admits he cannot forecast anything. Yet he advocates manipulation without any understanding the consequence of his theories in pure stupidity and remains clueless as to history or how markets even move. We can see that the Fed raised rates from 3.5% in 1927 up to 6% in 1929 and the stock market doubled on capital inflows. The Fed cannot lower US rates to prevent a crisis in Europe or to reverse the Chinese economy no less bring a bid back to commodities when the economy is not expanding. As the stock market rises, Congress will criticize the Fed for making the rich richer, and the Fed will then be forced to return to domestic policy objectives raising rate to try to stop the rally. Yet the rally will begin to take off when the public at large begins to realize government is in trouble. This is part of the 4 elections coming with the Year from Political Hell.

The risks and the reality that the Fed has lost any real ability to manage the economy have become so real, it is slapping people in the face and still they cannot see it. The Fed has little conventional monetary policy ammunition to counteract a downturn at this time. Larry Summers’ negative interest rates are destroying the fabric of the global economy. Far too many pension funds are unfunded and many countries in Europe by law require they be managed conservatively and invest EXCLUSIVELY in government bonds. The risks of total meltdown beginning in 2017 are on the horizon.

Yellen has inherited a complete nightmare. This decision to delay the long-awaited liftoff from a zero interest rate illustrates that the world economy is totally screwed. There is a lot of speculation about why the Fed seems so reluctant to “normalize monetary policy”. However, besides the normal issues such as low inflation, weak wage gains, and strong job growth, the real issue nobody seems to look has been the fact that government are now crack addicts on life-support with negative rates. A hike will increase the Federal deficits of all countries globally. The smart institutional clients coming to our World Economic Conferences have shifted their portfolios selling government debt and moving to blue-chip corporate. Corporate debt is the only alternative to government debt in crisis and emerging market debt other bought thinking they have no risk since it is dollar denominated. When government debt goes bust, you get absolutely nothing and they can change the law at any given moment. They can re-denominate your debt holdings as well as extend the maturity and there is absolutely nothing any bondholder can possible do.

SELL GOVERNMENT BONDS & SHIFT TO BLUE-CHIP CORPORATE BEFORE IT’S TOO LATE

Depression currency - Wörgl Experiment in Austria

Alternative Currencies of the Great Depression

Posted on December 22, 2015 by Martin Armstrong

QUESTION: Mr. Armstrong, have you ever heard of a short lived Wörgl Experiment in Austria? It was shut down by the Austrian Central Bank they say because it was successful. Have you looked into this experiment they claim defied deflation and inflation?




ANSWER: Yes. This was by no means an isolated instance. True, it was touted as the “Miracle of Wörgl” during the Great Depression. A very similar “experiment” took place in the United States when over 200 cities issued their own currency. You have to understand the dynamics of the period. This was the very age of AUSTERITY where the assumption was that the collapse was due to a lack of confidence in government so they increased tax collection and cut spending, which unleashed both deflation and a dwindling money supply. This led many cities to create their own money due to the lack of money in circulation that was impacted by hoarding.

The Wörgl Experiment began on July 31, 1932, the very month that the Dow Jones bottomed. The experiment involved issuing “Certified Compensation Bills” that were was a form of local currency known as Scrip or Freigeld. The monetary theories of the economist Silvio Gesell were applied by the town’s then mayor, Michael Unterguggenberger. What differed with Gesell’s idea was that the currency would expire. Believe it or not, there are some government’s looking into currency that expires. Since World War II, Europe has issued currency that expired roughly every 10 years. This forced people to bring out the old currency to be swapped and thus prevented hoarding.
The central part of Gesell’s idea was how to stop the HOARDING of money. This is why FDR confiscated gold. He too saw the problem of people hoarding money and not spending it. This is part of every economic decline. If there is no CONFIDENCE in the future, people save more. This is simply human.

 

Nevertheless, the Wörgl Experiment resulted in a growth in employment largely because they had to use the money. This allowed the local government projects to all be completed, which many called a miracle, for it appeared to defy the depression in the rest of the country. Inflation and deflation are also reputed to have been non-existent for the duration of the experiment. But this was simply the result of money expiring so there was no purpose in hoarding “money” or shifting it back to “asset” appreciation as in a hyperinflation.
Despite the appearance of success, the Wörgl Experiment was terminated by the Austrian National Bank on September 1, 1933.

Recent history of gold

Did Gold Survive the Depression?

Posted on September 25, 2015 by Martin Armstrong

Some people totally confuse gold and money. During the Great Depression, we were on a gold standard. During a decline, ALL assets will decline against whatever is money, just as money declines during a boom. You need to separate MONEY from gold or you will never understand how the economy functions and you will buy gold when you should be selling. If you do not get this one right, forget it. You are not ready to invest.

If bronze or cattle were money, they would have risen against gold. It is MONEY vs. ASSETS — not gold. Today, gold is a commodity and it is tracking the commodity group as it is tracking silver. Gold moved opposite of silver between 1929 and 1932 only because it was then MONEY. So if you think a crash means that gold will rise, you are in for a very rude awakening.

You are doomed if you cling to the idea that gold will rise simply because stocks decline. Gold was DEVALUED in 1934 since gold was MONEY. What it could purchase for $20.67 then cost $35. The government confiscated gold and moved to a TWO-TIER monetary system with gold used exclusively for international settlements, not domestic.

Gold rose in purchasing power between 1929 and 1932 simply because it was MONEY at that time. The gold promoters do not understand that gold is no longer money, and therefore it will not rise in purchasing power in the event of a crash. The promoters do not talk about the event where government confiscated gold. They focus on the fact that gold rose in value from $20.67 to $35 without explaining that everything rose between 1934 and 1937, and then fell with the crash of 1937 when MONEY rose in value. Devalue whatever is MONEY and all assets rise, be it real estate, stocks, or commodities. This is what took place even during the German hyperinflation. It is ASSETS against MONEY, regardless of what it might be at that moment in time.

Today, gold will decline with commodities against MONEY, and then it will rise when people lose confidence in government after realizing that there is a Sovereign Debt Crisis. You better get this one right. Inflation soared during the OPEC crisis, but we ended up with cost-push inflation rather than demand; gold declined from 1974 into 1976 by about 50% and MONEY rose in purchasing power. All the classic nonsense from fiat to the end of the dollar was banter as gold fell 50%. If we look at how gold has performed when it is not MONEY, we can start to sort out the bullshit from reality.

Gold declined with each economic downturn from the OPEC crisis, the 1980 high, and the post 1987 crash. The Dow also rallied into 1980, as did silver, real estate, and just about every other commodity. The correlation between gold and all other assets was opposite of the Great Depression.

Gold broke out and rallied from our 2007 peak in the Economic Confidence Model, and stormed higher into the bottom of that wave in 2011. Here we saw gold perform as the “safe haven” but the gold promoters brainwashed everyone with their fiat nonsense. Here is one comment from a seriously brainwashed victim who can only see the world through the eyes of gold and fascism: “And BTW, 50 years from now, this will be seen as a dollar bubble. This can be detected only in relationship to metals and commodities, but this has been masked by paper to the degree that you simply refuse to look at it.” He does not understand the role of money and pines for Marxism where money is always the same value and the business cycle does not exist. People like this dream of perfect utopia where we are all mindless drones walking around in a perfect fog. They refuse to understand that MONEY is just a unit or account and a medium of exchange that everyone must agree on. You can tell the world that metals are money, but when you are starving and trying to convince someone who does not believe in your religion to give you food in exchange for metals — good luck.

MONEY is solely what another will accept because they know someone else will accept it from them. You cannot dictate to the world what you think should be money. This is not a bubble where metals will replace the dollar. This is a bubble in government. Regardless of what becomes MONEY after this event, the dollar will not be the reserve currency and has nothing to do with paper. It has to do with politics. As Milton Friedman said, “If you put government in charge of the desert, within a few years there would be a shortage of sand.” It really does not matter for you are focusing on the wrong piece in the puzzle.

Did gold rally because of fiat? No. Gold rallied because the banking system was collapsing. These people kept buying gold, swearing QE1-3 was inflationary, and lost all the way down because they failed to comprehend that this is not a battle against fiat.

Gold declined with every dollar rally when it was NOT MONEY and just a commodity, yet it rallied when there was a risk of banks failing — not QE1-3. This clearly illustrates what the “safe haven” really is.

Those who preach of a return to the gold standard are one mark short of being declared insane. They live in the past and are incapable of understanding economic evolution. Bretton Woods failed because they fixed gold at $35 but increased the amount of issued dollars. A two-year-old could have figured out that such a system would collapse. ALL attempts at fixing money have failed, right down to the Swiss/euro peg. So what collapsed was the GOLD STANDARD, yet people WRONGLY think that returning to some gold standard will stop the volatility and create the perfect world of Marxism by eliminating the business cycle. The problem was not the gold standard: it was the politicians. Returning to a gold standard today will not solve anything without political reform.

Gold cannot and has not prevented any financial crisis by creating a fixed standard. Bretton Woods was not the only gold standard to collapse. Historically, any attempt to create a “standard” is the same as creating a peg. We live in a free market and that means everything rises and falls with the business cycle. Absolutely NOTHINGon a fixed standard can survive as everything fluctuates. Governments rise and fall because of the very same stupid mistakes.

During the 14th century, Florence had the very same type of two-tier system that was the foundation of Bretton Woods. Gold served for international settlement and silver was used domestically. Companies even had to keep two sets of books, and wages were paid in silver. The price of silver rose sharply against gold, leading to deflation and rising unemployment. The people rioted, stormed the palaces of the bankers, and set fire to them.

Gold WILL RISE along with stocks and commodities against whatever is money. The “safe have” will return ONLY when the public questions the survivability of banks and government — not fiat and inflation. If you disagree, then keep buying for the wrong reason just as the Japanese did for more than 20 years. This is the outcome we face, so stop the nonsense. Gold cannot possibly react as it did between 1929 and 1932 against everything else because it is not MONEY, nor the unit of account or the medium of exchange. So get over it. It will be time to buy gold for the right reason — not for fiat or this hatred of the dollar. That is like blaming your wife because you got into an accident driving to work. Get on point if you want to survive this game. This is the real world, not fiction. If you create a theory, it better work every time or it is just propaganda.

If you insist on unrealistic outcomes, as they say, a fool and his money are quickly parted. We are in the middle of a major crisis. ALL assets will rise against MONEY, provided we do not go all the way to a Mad Max event for then only food will have value.

Far too many people assume capital will only move to gold. That is not true for BIGMONEY cannot move to gold and never will. They cannot store it and it produces no income flow. Gold is for individuals, not BIG MONEY. The second misconception that one person wrote in is that “wealth cannot simply vanish; it would go somewhere, hoarding or otherwise.” This is simply not true. Money is the unit of account that measures wealth and that rises in falls in value. Even gold is being measured in dollars (the unit of account). Wealth is simply a valuation at an instant in time. When the stock market or any asset crashes, the valuation evaporates. It is NOT a zero sum game, as in futures, for there is no contract with only one side; there must always be two sides – long v short. Wealth in every other form is simply a valuation that evaporates — it does not transfer to someone else.

Gold rises ONLY when there is uncertainty about government or the banking industry. It will not keep pace with inflation and its fate is tied to the commodity sector. Some people will send hate mail over that simply because they WANTto believe something else.

Julius Caesar understood that and said that people believe only want they want to believe. He was correct. There is no convincing a Democrat he should be a Republican or vice versa. You will believe gold is money and shut out everything to the contrary, or you will have an open mind and comprehend that money is whatever the majority accept at that point in time.

Poste

The Long Depression – the First Great Depression

Posted on July 16, 2015 by Martin Armstrong

What actually constitutes the Long Depression has been debatable, for at first it was called the Great Depression, and then that title was transferred to the 1930s. Consequently, some limit the term Long Depression to the worldwide price recession beginning in 1873 and running through the spring of 1879. Six years is not exactly a “long” depression, that in our analysis is 26 years – the typical maximum period which Japan entered following 1989.95. Europe appears to be completing a 13 year depression from 2007 into 2020 thanks to austerity – deliberate deflation to support bondholders.

Domestic analysis of the  Long Depression event of the 19th century USA centered on the Panic of 1873, which the inflationists/Silver Democrats dubbed this financial crisis the Crime of 1873. Of course, this view ignored the global economy and this set the tone for a 26-year economic depression plagued by numerous financial panics that finally culminated in the Panic of 1893, which were devastating to say the least and the Panic of 1899 with the peak in US interest rates reaching nearly 200% in a situation similar to Greece today.

Unfortunately, as always, analysts try to reduce everything to a single cause and effect plus they wear blinders like a horse only looking at this six-year period 1873-1879 with exclusive domestic analysis. Much of this contraction of this period was traditionally attributed to a monetary contraction leading to the resumption of specie payments in 1879. This was an extremely narrow view for this had the impact of introducing austerity, but that was at the end of the period. The bubble going into the event peaked with the Panic of 1869 and the birth of the Transcontinental Railroad on May 10, 1869, and of course the Gold Panic where Jim Fisk attempted to corner the market forcing gold up in price. The scheme was that when the USA would return to a gold standard they would have to accept the market price. You can watch the old black & white film Toast of New York on this event which inspired me as a kid to explore financial history.

The Transcontinental Railroad spawned a wave of innovation that unfolded as creative destruction. Mail order companies began to develop. Previously in 1845, Tiffany’s Blue Book (the jeweller) was the first mail order catalogue in the United States.  However, after the development of the Transcontinental Railroad, what emerged was the internet of the 19th century whereas trains now opened the continent as a market. By 1872, Aaron Montgomery Ward of Chicago, produced a mail order catalogue for his Montgomery Ward mail order business. Like Amazon today, Montgomery Ward began selling over 20,000 items in a 540-page catalogue directly to customers reducing prices and eliminating local stores, exactly as Amazon has eliminated local bookstores.

In 1986 in Toronto, Irish immigrant Timothy Eaton founded T. Eaton Co. The first Eaton’s catalogue was a 34-page booklet issued in 1884.  However, it was Richard Sears who began a business selling watches through mail order catalogs in Redwood Falls, Minnesota in 1888. By 1894, the Sears catalog had grown to 322 pages, offering sewing machines, bicycles, sporting goods, and even automobiles that produced from 1905–1915 by Lincoln Motor Car Works of Chicago.

The period of the Transcontinental Railroad lead to creative destruction event similar to the internet today whereas on one level the economic numbers looked good, yet unemployment was gradually rising. The price deflation was caused by innovation, as well as a decline in demand, laid the seeds for Marxism that people supported for they did not understand what was happening. They blamed industry and this fueled the development of unions as well in addition to working conditions. Hence, it was this period of a Long Depression that ignited social change insofar as it was a shift in employment to from agriculture to industrialization. Employment within agriculture was 70% in 1850, which declined to 40% by 1900, and would ultimately crash to 3% by 1980 all because of innovation from fertilizers to the combustion engine.

This economic evolution of the real Long Depression (1873-1899) created a “depression” for many as unemployment rose yet monopolies grew as did corporate profits for many in the right field. It wiped out Philadelphia as the financial capitol of the United States and J.P. Morgan would move that to New York City with his innovation. From this highly volatile period, as we are entering today, what emerged of socialism/Marxism that burst to the surface producing Coxley’s Army which marched upon Washington following the  Panic of 1893. It was this march that led to the idea of socialism for FDR took most of the demands first argued by Coxley that government should create jobs for the unemployed. This led to the Antitrust Legislation and the Progressive Movement of Teddy Roosevelt.

Coxley’s March became the subject of Lyman Baum’s Wizard of Oz –We’re off to see the wizard the wonderful wizard of Oz (Congress) following the Yellow Brick Road (gold standard & austerity). This economic event created serious change.

So those who argue that there was great expansion, yet ignore the social and global impact of the Long Depression, became commonplace. Today, the drive once again for austerity risks tearing Europe apart at the seams. This is what Brussels is dangerously doing and the surrender of Greece exactly opposite of their election and referendum mandate threatens to create civil war for this policy of austerity will once again destroy the social fabric of Europe.

Yes, there was an extraordinarily large expansion of industry, railroads, and physical output during the Long Depression fueled at the same time as a wave of creative destruction, but at the price of shifting trends within employment as we are seeing today with the internet. People lacking new skills to make the transition will be left behind and will blame something other than the trend which is typically corporations. So we once again have people looking at corporate profits and excess cash levels, yet there is rising unemployment, not to mention politicians demanding to raise minimum wages, and the introduction of Obamacare that provide the incentive to replace such workers with robots or client automation – “Press 3 to speak to…” etc.

The Long Depression was a conflict between innovation and the clash between Silver Democrats funded by silver miners to inflate for their benefit that caused silver to be overvalued leading to silver imports and gold exports. The Silver Democrats thought they could force the price of silver higher to 16:1 to gold and Europe would have to accept the higher prices but the reverse unfolded. They sent silver to the USA and exchanged it for gold which to them was undervalued. By 1896, J.P. Morgan had to organize a gold loan to prevent the USA from going bankrupt. This led to the famous speech of President Grover Cleveland who could see the world in a connected manner. He observed that capital could flee the nation or hoard and refuse to invest as we are witnessing today. But labor, he warned, could neither flee nor hoard itself. Therein lies the danger we face today for social change.

Grover Cleveland also said of taxes that it was unjust for a government to tax the people beyond what was necessary for it becomes “ruthless extortion and a violation of the fundamental principles of a free government.” Hillary Clinton’s economic plan, force corporations to raise wages – not reform government and reduce payroll taxes which is in the hands of politicians. Wages are not. We are plagued by people who want to rule the world yet are clueless about how it functions.