Shift will now turn toward MOVABLE assets

High-End Real Estate Starting to Enter Crash Mode

Posted Nov 30, 2017 by Martin Armstrong

The high-end market in Connecticut is starting to decline. The hedge fund manager Stanley Druckenmiller bought his estate in 2004 for $23 million. He had it on the market for $31.5 million. The best offer he got was $25 million. He took the money and ran. Smart move! With a real estate tax of about $154,000 annually, looks like a break-even deal after 13 years.

The high-end real estate boom is now turning sour. We are looking at property values declining in London, Australia, New Zealand, Hong Kong, New York, and even Miami. The shift will now turn toward MOVABLE assets as capital departs from the fixed asset class.

Why Iran is a Major Threat

Posted Nov 14, 2017 by Martin Armstrong

The Yemeni Civil War is an ongoing conflict that began in 2015 between two factions. Each is claiming to constitute the Yemeni government. This is really a proxy war between Saudi Arabia and Iran. The Houthi forces control the capital Sana’a who are allied with forces loyal to the former president Ali Abdullah Saleh backed by Saudi Arabia. They are opposed by Yemen’s Shiite rebels who are loyal to the religious government of Abdrabbuh Mansur Hadi, based in Aden, supported by Iran.

To grasp what this is all about, one must understand Islam. Saudi Arabia in Sunni that boils down to a separation of church and state. They are fighting the Shiite forces of Iran, which believe that religion should control the state. Therefore, the ballistic missile fired by Yemen’s Shiite rebels toward the Saudi capital was manufactured by Iran as if this should be any surprise given that Iran is their backer.

This conflict in the Middle East is religious based. This is similar to the threat of Russia back in the Cold War days when Nikita Khrushchev ruled Russia and the ideology that Marxism would conquer Capitalism was the entire issue. Here we have Iran which is similarly a threat to the world political structure because this is where religion should rule the state. Christianity went through that where the state was ruled by religion and to circumvent religion, kings appointed their political allies as priests, bishops, and cardinal. That led to the Investiture Controversy which was the major conflict between the Pope Gregory VII and the Holy Roman Emperor Henry IV during the 11th century.

Emperor Henry declared Pope Gregory was no longer pope and the Romans should choose a new pope because of political disputes. When Pope Gregory heard of this he excommunicated Henry IV, declared he was no longer emperor and absolved his subjects from the oaths they had sworn to him. This was the battle of kings to control the Church for political gain.

Even if we look at England and Henry VII’s break with the Catholic Church, one need only just look before the headline. Henry’s Queen was  Catherine of Aragon (1485–1536) who was the aunt of the Holy Roman Emperor Charles V (1500–1558) and was originally Charles I of Spain. Charles V had imprisoned the Pope Clement VII (1478– 1534) following the Sack of Rome in May 1527. Correct, the Holy Roman Emperor invaded Rome to take control of the Church and imprisoned the Pope. There was no way Charles V would allow Henry VIII to annul the marriage with his aunt. Once again we have evidence of kings controlling religion for political purposes.

What is unfolding in the Middle East is similar to the war between Protestants and Catholics, which was really for political and economic power. The corruption in the Church was not the design of the Pope when it had been the kings who appointed people in their domain to run the Church – not the Pope. Nothing could illustrate this point more than the case of Saint Thomas Becket (c. 1119–1170), who was a personal drinking buddy of the King. When he appointed him as Arch Bishop of Canterbury, he suddenly found religion. He then stood up to the King and he was slain right at the Altar.

This is a similar nature where here it is the religious Shite seeking to take control of the Middle East and overthrow kings. The recent Saudi Arabia incident of shooting down the Iranian missile on November 4th, 2017 near Riyadh’s international airport, illustrates just how confrontational this really is. Why Obama cut any sort of a deal with Iran given their political beliefs, is truly beyond contemplation

China Open Gold Trade in Yuan as Proxy for the Yuan

Posted Nov 14, 2017 by Martin Armstrong

China keeps moving gradually to open up their economy to international forces. The People’s Republic of China has expanded the trade in gold in yuan and thus the internationalization of the national currency is moving closer. Gold merchants from the industrial metropolis of Shenzhen have been trading their yuan gold at the Hong Kong Stock Exchange since last week. Previously, this was only possible for Hong Kong gold traders. While some immediate claim this is China attacking the dollar, they are completely ignorant of international capital necessities.

This new connection between Shenzhen and Hong Kong follows the Hong Kong-Shanghai agreement reached in July 2015, which allowed Hong Kong dealers to trade gold in mainland China for the first time. Trading gold in yuan has one primary advantage. It is not going to unseat the dollar, it is all about trying to make the currency free-floating on the world market. Because gold can be traded in yuan, the common converter becomes gold between that and the dollar. It is NOT really a gold trade as much as it is an indirect means to trade the currency.

To unseat the dollar requires a place to PARK big money in yuan. That does not exist right now. That day is coming after 2031. This is another step in moving toward a free-floating yuan contract. Essentially, this is a formal proxy for a free-floating yuan and will replace the Bitcoin trading that has been used as the proxy to get money out of China

Fall of Byzantium resulting in the financial capital of the world moving to India

Interest Rates will Double

Posted Nov 10, 2017 by Martin Armstrong

QUESTION: Mr. Armstrong; Thank you for an excellent conference. I have been attending since 2011. Each time you deliver a different conference and they are always better than the last. I could not help to notice on Zero Hedge they ran a piece about a Harvard University’s visiting scholar at the Bank of England who claims:

“We trace the use of the dominant risk-free asset over time, starting with sovereign rates in the Italian city states in the 14th and 15th centuries, later switching to long-term rates in Spain, followed by the Province of Holland, since 1703 the UK, subsequently Germany, and finally the US.”

Besides claiming to calculate the 700-year average real rate at 4.78% suggesting that rates will rise sharply when your models are 5,000 years, the two ridiculous statements are a 700-year average as if this really means something in the near-term when rates have been below that for nearly 10 years, and second the statement that he traces “the dominant risk-free asset over time.” You have demonstrated that moving averages are not valid in forecasting and that government routinely defaults.

You forecast at the conference that rates would rise very rapidly as we move into the Monetary Crisis Cycle. When I returned home to Greece, the latest news here is that so many people do not even have the money left to pay taxes. Is this part of the first stone in the water that sets off the waves of the Monetary Crisis Cycle?

ANSWER: It is very nice to trace 700 years and come up with the average of 4.78% by switching to the dominant economy as the financial capital of the world moved. However, starting the study in the 14th century skips the crazy part. There was the Great Financial Crisis of 1092 in Byzantium. This was really a watermark event that set in motion the decline thereafter. This study of moving from Spain to Holland, UK, Germany, and then the USA, is interesting, but regionally biased.

The fall of Byzantium resulting in the financial capital of the world moving to India – not Spain. That is why Columbus set sail trying to get to India, which was the financial capital of the world after Byzantium.

We hit a 5,000 year low. The Reversals we provided at the conference show we are looking at a near doubling in rates when we cross that number.

No government should be allowed to fine people PERIOD! You should be ordered to pay to a charity of your choice

Ferguson Riots Have Another Face – Police Raise 23% of Revenue in Fines

Posted Nov 6, 2017 by Martin Armstrong

The town of Ferguson made headlines as riots appeared. Who will not forget the police with military gear acting like an invading army. Many supported the police and much of the Black Lives Matter movement began there. The story nobody wanted to tell was that the police of Ferguson have a real attitude problem that sparked the riot. That is because they are trained to raise money for the town. Ferguson uses police and the Courts to prey on its residents to raise money and 23% of its entire budget is based upon writing tickets and handing out the maximum fines. They then jail people who can’t pay.

Ferguson expects to raise $3.09 million of projected $13.26 in revenue from fines and fees. They use the police to raise money. For example, an unmowed lawn in Ferguson will be fined between $77 and $102, though in some other cities it’s a $5 offense. Take a 2-week vacation, and you have a ticket when you come home.

This is the entire problem. No government should be allowed to fine people PERIOD! You should be ordered to pay to a charity of your choice – but not to the government. Remove the “money” from their incentive and we will return the rule of law to what it should be – justice.

Trump’s Tax Reform

Posted Nov 3, 2017 by Martin Armstrong

These days, US President Donald Trump is pushing his number one agenda of his term in office – major tax reform. Trump has been meeting with some of his own party senators seeking approval for the planned tax reform he is hoping will be signed by the end of December at the latest for a Christmas present. The negotiations on the details are in the final stages. If the reform is very real indeed, and make no mistake about it, this would be a tremendous triumph for Trump and for the nation as a whole. Trump has the potential to take the United States counter-cyclical (cycle inversion) that would actually put a tremendous amount of pressure on the rest of the world.

There are some who are concerned about removing the tax deduction for state income taxes. Deducting state income taxes from your Federal taxes has been quietly talked about behind the curtain for some time. It was also one factor in my own relocate out of New Jersey to Florida. The elimination of the deduction for state and local taxes will be a major death blow for the high taxed states like California, New York, New Jersey, Connecticut etc..

The states have been effectively double-dipping. I remember when the New Jersey state income tax was put in. The politicians said it would cost you nothing because you could deduct it from your federal taxes. Essentially, it was the way for the state to covertly get more money that they were not accountable for. That game is coming to an end. If Trump eliminates that deduction, then and ONLY then will the people start to hold the states accountable for the first time EVER! Repealing it would increase federal revenue by $1.3 trillion over the decade

Deductions would remain for mortgage interest and charitable contributions. Additionally, the standard deduction would nearly double to $12,000 for individuals and $24,000 for married couples