Republics are the WORST form of government

The End Goal

Posted on May 22, 2014 by Martin Armstrong

COMMENT: Marty, the blog has been spot on recently… thanks so much for your efforts.  As time goes on, it may be beneficial for you to re-share both lesser and more well known historical examples for how society has instituted meaningful non-violent political change.  Perhaps later down the road readers could somehow coordinate by geographic location (some type of social media I guess) since that could form a basis for a like minded grass roots groups.  A time is coming when we’ll have to move beyond writing and phoning our politicians, and showing up at city counsel meetings.  Let’s hope for peaceful solutions saving the day. Thanks again.  Jeff

REPLY: I would like to see something like that happen. However, we must keep in mind that we require the crash and burn. Society moves through waves of Creative Destruction. We must see the system collapse and that will then set the stage for a rebirth. The object is to be there when that happens. This will be the moment of truth. Society will swing either toward more authoritarian or toward real democracy.

We need the true checks and balance of the people divorced from career politicians. Eliminating direct taxation will eliminate the corruption and lobbying of politicians to carve out exclusions. Republics are the WORST form of government for they ALWAYS become the most corrupt. Even a king is better for he is either a madman or a saint – he cannot be bribed on the whims of people or chance.

Eliminating direct taxation, which the founders of the US did originally, it will eliminate the need to hoard cash offshore. Eliminate direct taxation and you will lower the cost of labor. Eliminate unions that serve no functional purpose and only promotes higher wages without improving skills. To get ahead, people have to keep pace with technology or be outdated in the workforce watching their labor value depreciate. If people understand the technology cycle they will grasp the idea that they must increase their value by expanding their skills.

India - major high form in 2017

 

Posted on May 20, 2014 by Martin Armstrong

Reply

QUESTION: Mr Armstrong, first let me thank you for the wonderful service you are performing to common people like me. I used to be strong believer of conspiracy theories and a gold bug but something did feel right until you came along and explained how things really worked.

I’m an Indian software professional working for one of the conservative NY banks. I can see that the bank is laying off a lot of people quietly and I can see your many observations about the market and the investment banks are indeed true.

My question is on the Indian elections which happened recently. Mr Narendra Modi has won by a landslide and this is kind of victory margin was only possible due to the unfettered corruption of the previous government.I can clearly observe your theory of people raising against corruption everywhere, in this election verdict.

India is expecting Mr Narendra Modi to work economic miracles. But as you had mentioned Emerging markets are going to slide further into economic depression so has India already turned the corner, or are is it going to slide further. What are the options for investment in India for the next 5 years.

Thanks

SJ

ANSWER: India is following the forecast we made 2 years ago in Bangkok. I pointed out that there was a double top and that India would breakout to the upside. The government has been way too corrupt and the central bank has been following the traditional nonsense misreading the capital flows and trying to stem the tide. As a nation begins to prosper, it ALWAYS begins to import goods and it also invests its income outside the home country. This causes the current account to decline into negative territory yet it is reflective of a boom, not a bust. The same mistakes were made by Australia in the 1980s. They expected the currency to decline because of a current account deficit yet it rallied. They were totally confused by this development. The Australian Associated Press did an article on me at that time bluntly stating that I was teaching Australia about its current account and how it really functioned.

We distinguished India from the rest of Asia including China. This market should have risen and it has done so. We may yet see the major high form in 2017. I will actually be speaking there in Mumbai come this September 2014. BTW – Indian is my favorite food.

China - Property market will crack after 2015.75

China’s Hard Landing Is the Envy in the West

Posted on May 15, 2014 by Martin Armstrong

Reply

There is growing evidence that  the Chinese property market will crack after 2015.75 when public confidence drops sharply worldwide. The first signs of deterioration are evident today. China has been the envy of developed nations with real GDP growth averaging almost 10% for the last quarter century, only dipping below 5% briefly with the Japanese crisis in 1989-90. Developed countries would rejoice with what the Chinese classify as a “hard landing”.
While the market appeared to shrug off China’s first corporate default by Shanghai Chaori Solar, defaults among Chinese property development and trust companies could reverberate throughout the economy. Given capital controls, the Chinese have limited investment opportunities thus citizens have invested savings in real estate and high yielding trust products.  Generally, real estate accounts for about 33% of fixed investment and 16% of GDP growth. Trust companies have provided financing to companies unable to obtain loans from the banks: real estate development and coal miners.
As in any market, prices are dependent upon investor confidence. Nothing will cause the housing market to crash faster than investor losses that fuel the human reaction of a decline in confidence. Sales dropped 5.2% yoy during the first quarter according to the National Bureau of Statistics. Residential housing sales dropped 18.4% month on month in April, down 18.1% yoy according to Homeline, one of China’s largest real estate agencies.
There is a widespread pessimism starting to surface in China about the housing industry because of weak sales. The Guang Real Estate Group, based in Shenzhen City, Guangdong Province, has admitted that the company failed to deliver some projects to homebuyers on time due to financial pressures.
Trust product maturities accelerate this year.  Over the past years, trust assets have risen 50% annually, to an estimated $6 trillion. Chinese trust companies have supplied credit outside of the banking system largely to coal miners and solar developers. Many coal miners have debt ratios exceeding 100%, and weak coal prices have hurt profitability. A couple of miners have already experienced financial difficulties meeting maturities. China Cinda Asset Management, an SOE established to buy back bad loans from big banks, warns trust defaults could “explode.” The mainland’s bad debt is on the rise. China Cinda Asset Management is warning that a default peak season for its gigantic trust products sector is approaching after years of rapid yet questionable growth.
Tightening credit costs are raising debt costs for companies. SOEs formerly able to obtain financing at a discount are now a premium to the PBOC rate. Small rate rises could have significant impact given high leverage and short duration of Chinese companies. The Chinese renminbi has depreciated almost 3% since the first of the year.
At the same time corruption allegations of executives have risen, some related to the bad loans. With every downturn, the borderline deals go bad and this creates the image of fraud even when it is not, which in turn fuels the crisis even more causing capital to decline.

Inflation – One Size Does Not Fit All

Posted on May 13, 2014 by Martin Armstrong

QUESTION: Hello Mr. Armstrong,
I just watched your Greg Hunter interview and had a question that several other commenters had.

How can you say we have no inflation, when simply a trip to the grocery store proves that wrong?

The average price of a home prepared meal has risen substantially since QE began.

How do you reconcile this? 
BG.

ANSWER: We are experiencing asset inflation insofar as high-end real estate. But real estate is not in the CPI – they replaced that with renting. The average home is rising only in some areas and that is also caused by a long of foreign capital influx.

The food prices are rising due to straight up shortages and weather. This has nothing to do with QE for if it did, then you would see the metals rise as well.

Monetary inflation under the theory of an increase in money supply is indicative when EVERYTHING is rising in price from wages, housing, commodities, and assets. This was seen during the 1970s and is not yet present in the USA. That does not say we will not yet see that in the future.

The point is simply this. The dollar is being now used globally so the supply of dollars is really world-wide and not purely domestic as you would see in Canada or Mexico for example. You have to look at inflation very closely. There are three primary types not just one. I have explained this before. Do not confuse inflation with a single dimension. There is a lot more going on and the implications are greater than meets the eye.

Public bonds will collapse but private assets will rise.

Understanding the New Era we Face – No More General Terms Apply

Posted on May 13, 2014 by Martin Armstrong

QUESTION:  In regards to the “Crash or Collapse” post you just put up, we kind of wonder what you meant when you wrote at the end “This will not be like anything seen in past 200 years”

We were wondering, was that in regards to a crashing market or
crashing Bond market? I thought you said in the past ( since I read
all your stuff) that markets will suffer after Oct 1st, 2015 as well.

N

ANSWER: This is the way capital moves. HYPERINFLATION is just the extreme movement of capital when CONFIDENCE in government collapses. It is not gold that rises by itself, but ALL tangible assets. I have explained many times that the new currency issued in Germany to restore confidence (Rentenmark) was backed by REAL ESTATE. That was accepted by the people.

When I say this will not be a crash like anything we have seen in 200 years, it is because this will be a flight to private assets – not government. So public bonds will collapse but private assets will rise. We saw the sovereign bonds collapse in 1931. They just went off the boards. However, the USA was not in that category so the US debt survived.

Nevertheless, the spread between US Treasuries and AAA Corporate paper declined. Smart money began to realize that if GM goes bust, there are still some assets there to be divided up. When a government goes bust, there is zero. Why government debt is considered “quality” when no government has EVER survived is one of the greatest con-jobs in history.

We see people buying up real estate at the top end. Collectibles are taking off in price. The famous silver decadrachm of Akragas (modern day Agrigento, Sicily) is a masterpiece of ancient art that was struck at a time of great turmoil in Sicily, just prior to a Carthaginian invasion in which Akragas itself was virtually destroyed in 406 BC. This coin was sold at the Sotheby’s auction of the Nelson Bunker Hunt Collection in 1990. It realized the record price of $ 572,000 at that time. It was sold for 2’300’000 CHF (about $2.5 million) by Numismatica Ars Classica in Zurich at Auction 66 on October 17, 2012.  Today, it would probably exceed 3 million CHF.

People have been asking me if I can offer any high-end coins. Not really. But I have put the word out if there are any hoards found give me a call. Asset Inflation is running high as capital tries to get off the grid. Overall; inflation did not match the expansion in money supply by the Fed as most people think it should have, while food has risen solely due to shortages in supply – not monetary inflation – substantially different from commodities in general (i.e. gold).

Therefore, this will not be a crash where bonds rise and assets fall to dust. We are in a completely different sort of spiral. We do not face inflation in the classic sense. Food is rising due to shortages, general commodities are declining, while assets rise. We have to pay close attention to these distinctions – it is no longer general terms.

Dow to new highs after November ?

Will Government Confiscate Assets

Posted on May 13, 2014 by Martin Armstrong

QUESTION: If the public is racing to buy assets (real estate, coins, etc) will the government not try and confiscate everything we have, for the good of us all, to “help with our debt”?

Thanks. SD

ANSWER: There is no real precedent for confiscating everything other than communism and the crazy antics of Maximinus, who they killed in rather short-order. Nevertheless, the movement of assets like gold that use to flow between nations may not be possible given the metal detectors and the laws that presume money laundering if you try to take more than $10,000 without telling the government.

The system is going to collapse. This is simply unsustainable. The only question remainsTIMING. You have to understand that the confiscation of gold was to fund the New Deal by the government realizing the profits from its devaluation of the dollar.

The US share market is breakout out to new highs again. This is reflecting the shift in capital. The more analysts keep calling for a crash, the higher it seems to move. There remains the question if we will move back to new highs after November or invert into a cycle low for 2015.75. If that were to happen, then the entire bull market will be extended and we will see the total confusion of bond defaults. For now, the market remains poised for new highs into at least June as we explained at the conference.

Movable and Tangible assets rise- Cycle inversion ?

This is the REAL trend. After 2015.75, we will see capital still confused. The flight to quality will initially be to short-term paper of the USA, but that will give way as well. However, we have more than $25 trillion globally in bonds (short/long) and that is a huge reservoir of capital to shift. This idea that government debt is “quality” will give way to reality.  That means we will see tangible assets rise precisely as we see during a hyperinflation within a peripheral economy.

The daunting question is formulating when the cycle will flip from Public to Private. The major low intra-day is 2009. However, the lowest annual closing is 2002. Under most conditions, a 7 year rally would have produced a high in 2009, but that was overpowered by the ECM and the business cycle inverting that into a LOW. This is suggesting that we are in the inversion process.

A 26 year target from 2002 brings us to 2028. That is the next low on the 8.6 year wave. The Pi target will be 31.4 years  from 2002.85 giving us 2034.25 after the 2032 peak. As you can see, we are starting to line up with the lows in the ECM. This is part of the inversion process. Gold rallied AFTER 2007.15 and peaked with the low in the ECM 2011. Its rallies are lining up with the lows.

It is sad to say, but this process was unfolding going into the Fall of Rome. Here we have a picture of 1929. This was the culmination of a Private Wave in which we are in right now. The 1929 target was the equivalent of 2032. Note that at the end, equity did better than bonds.

We are entering this phase. The bulk of analysts keep saying the stock market will crash and burn. The gold bugs say buy gold. The conspiracy people see some new currency emerging like bit coin that is even less familiar to people than gold. Yet none seem to grasp that if we are headed into the worse part of this economic storm, how is some new currency going to emerge? Sorry, it is back to old-school. Getting off the grid with a diversification between movable and tangible assets.

That means capital will flow to the dollar since the USA cannot be easily invaded as can even Japan and Europe when politicians seek to find external enemies. This will most likely be the last and final 3rd rally due to war that sends the dollar to record highs. This implies tangible fixed assets have a chance of surviving in the USA requiring less of a mix for movable compared to Asia and Europe.