Japan’s Monetary System is a Warning to Modern Society

Posted Oct 1, 2019 by Martin Armstrong

QUESTION: Mr. Armstrong; My friend who retired from the Bank of Japan told me you had recreated the monetary system of Japan and that was how you could predict the yen would go below par back in 1995 and again in 2011. Could you please publish the chart on the yen showing the full monetary system from the Meiji reform?

Thank you

AH

ANSWER: Japan has been through a truly wild ride when it comes to currency. The emperors would devalue the outstanding money supply when they came to the throne and reduce it to 10% of its former value. This allowed the new emperor to issue coins as if he were beginning anew. By the time the third emperor pulled this stunt, the people simply refused to accept the coins of the emperor ever again.

The Japanese resorted to using bags of rice as money and Chinese coins. Eventually, they also used ingots of silver or gold for larger transactions by the 18th to 19th century.

This is actually a very good reference point because Japan lost the ability to issue money for 600 years until the Meiji reform in 1870 when the yen was born. The last official Japanese coin issue was in 958 AD.

The Meiji Reform of 1870 set the yen at par with the US dollar based upon a silver yen which was the equivalent of the US silver dollar.

This is an important point because as governments today try to eliminate their currency in the hunt for taxes, people are hoarding US dollars exactly as the Japanese began to hoard Chinese coins. Governments should look well at what they are proposing for they can lose the confidence of the people and they will lose the right to issue money. They only way to prevent hoarding requires a universal abandonment of all currencies and their replacement with a single electronic one-world currency. But that system will fail like the Euro for a single currency imports and exports the inflation or deflation from the core economy. Not all nations are on the same side of the business cycle.

Climate Change That Ignores History

Posted Sep 30, 2019 by Martin Armstrong

Climate has ALWAYS changed from decade to decade.  There was major swings (volatility) during the 1930s. You had the dust bowl during the summer and in 1936 you had record cold. The 1936 North American cold wave which also hit Japan and China still rank among the most intense cold waves in the recorded history of North America. You cannot blame this on soccer moms driving the kids around town. Cars were a luxury in the 1930s still.

There is just no evidence of human-induced climate change. There is nobody willing to call them out on this nonsense with just showing the dramatic swings in temperature over the centuries.

Here is a piece that appeared in the Weekend Australian on the covert issues behind the curtain.

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It’s a well-kept secret, but 95 per cent of the climate models we are told prove the link between human CO2 emissions and catastrophic global warming have been found, after nearly two decades of temperature stasis, to be in error. It’s not surprising.

We have been subjected to extravagance from climate catastrophists for close to 50 years.

In January 1970, Life magazine, based on “solid scientific evidence”, claimed that by 1985 air pollution would reduce the sunlight reaching the Earth by half. In fact, across that period sunlight fell by between 3 per cent and 5 per cent. In a 1971 speech, Paul Ehrlich said: “If I were a gambler I would take even money that ­England will not exist in the year 2000.”

Fast forward to March 2000 and David Viner, senior research scientist at the Climatic Research Unit, University of East Anglia, told The Independent, “Snowfalls are now a thing of the past.” In December 2010, the Mail Online reported, “Coldest December since records began as temperatures plummet to minus 10C bringing travel chaos across Britain”.

We’ve had our own busted predictions. Perhaps the most preposterous was climate alarmist Tim Flannery’s 2005 observation: “If the computer records are right, these drought conditions will become permanent in eastern Australia.” Subsequent rainfall and severe flooding have shown the records or his analysis are wrong. We’ve swallowed dud prediction after dud prediction. What’s more, the Intergovernmental Panel on Climate Change, which we were instructed was the gold standard on global warming, has been exposed repeatedly for ­mis­rep­resentation and shoddy methods.

Weather bureaus appear to have “homogenised” data to suit narratives. NASA’s claim that 2014 was the warmest year on record was revised, after challenge, to only 38 per cent probability. Extreme weather events, once blamed on global warming, no longer are, as their frequency and intensity decline.

Why then, with such little evidence, does the UN insist the world spend hundreds of billions of dollars a year on futile climate change policies? Perhaps Christiana Figueres, executive secretary of the UN’s Framework on Climate Change has the answer?

In Brussels last February she said, “This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time, to change the economic development model that has been reigning for at least 150 years since the Industrial Revolution.”

In other words, the real agenda is concentrated political authority. Global warming is the hook.

Figueres is on record saying democracy is a poor political system for fighting global warming. Communist China, she says, is the best model. This is not about facts or logic. It’s about a new world order under the control of the UN. It is opposed to capitalism and freedom and has made environmental catastrophism a household topic to achieve its objective.

Figueres says that, unlike the Industrial Revolution, “This is a centralised transformation that is taking place.” She sees the US partisan divide on global warming as “very detrimental”. Of course. In her authoritarian world there will be no room for debate or ­disagreement.

Make no mistake, climate change is a must-win battlefield for authoritarians and fellow travellers. As Timothy Wirth, president of the UN Foundation, says: “Even if the ­(climate change) theory is wrong, we will be doing the right thing in terms of economic and environmental policy.”

Having gained so much ground, eco-catastrophists won’t let up. After all, they have captured the UN and are extremely well funded. They have a hugely powerful ally in the White House. They have successfully enlisted compliant academics and an obedient and gullible mainstream media (the ABC and Fairfax in Australia) to push the scriptures regardless of evidence.

They will continue to present the climate change movement as an independent, spontaneous consensus of concerned scientists, politicians and citizens who believe human activity is “extremely likely” to be the dominant cause of global warming. (“Extremely likely” is a scientific term?)

And they will keep mobilising public opinion using fear and appeals to morality. UN support will be assured through promised wealth redistribution from the West, even though its anti-growth policy prescriptions will needlessly prolong poverty, hunger, sickness and illiteracy for the world’s poorest.

Figueres said at a climate ­summit in Melbourne recently that she was “truly counting on Australia’s leadership” to ensure most coal stayed in the ground.

Hopefully, like India’s Prime Minister Narendra Modi, Tony Abbott isn’t listening. India knows the importance of cheap energy and is set to overtake China as the world’s leading importer of coal. Even Germany is about to commission the most coal-fired power stations in 20 years.

There is a real chance Figueres and those who share her centralised power ambitions will succeed. As the UN’s December climate change conference in Paris approaches, Australia will be pressed to sign even more futile job-destroying climate change treaties.

Resisting will be politically difficult. But resist we should. We are already paying an unnecessary social and economic price for empty gestures. Enough is enough

Societies did well without income taxes until 1913.

 Playing with the Facts to Fool the Majority

Posted Sep 27, 2019 by Martin Armstrong

QUESTION: What do you say about the difference between corporate socialism and democratic socialism. Thank you. Its all the buzz among those supporting Senator Elizabeth Warren.

LP

ANSWER: This is a very clever way of excusing the core issue. The Democrats preach raising taxes and then sell loopholes to the big corporations. The bankers donated to Hillary — not to Trump. This is a clever campaign assuming, as always, the people (the great unwashed) are just stupid.

The Democrats were against the flat tax because it would eliminate lobbying for tax loopholes. But more importantly, if we had TERM LIMITS and one-time-and-gone, that would eliminate lobbying for dangle money before politicians of BOTH parties for favored status.

Even a tax break to a corporation that they claim is evil will NEVER result in lowering the taxes for everyone else. It is great propaganda. We run trillion-dollar deficits. They could NEVER raise taxes enough to balance the budget. That would destroy all their jobs.

The people who believe this nonsense will NEVER listen to the truth because they are the very type of people who believe only what they want to believe. That is a sad statement of fact. Just look at the presidential elections and you will see only 3 presidents ever had between 60% and 63% of the popular vote. Obama won 51.1% of the popular vote compared to Romney’s 47.2%.

That is hardly a mandate. They know that 45% of the people will vote Democrat no matter what you say and 45% will vote Republican. At best, there is perhaps 10% of the people who are free thinkers and will actually listen and make a judgment. The rest do not count for they will never listen to reason on either side.

We can eliminate corruption with TERM LIMITS. A flat tax should be imposed for it is unjust and a denial of equal protection of the law to discriminate for any reason including wealth. Then, corporations should not be taxed and there should be no double taxation with dividends. The majority of corporations are owned by pensions of the people and whatever is made should simply devolve down to a flat income tax on the shareholders. Corporations provide the jobs that actually produce, while the government does not. I believe there should be no income tax. Societies did well without income taxes until 1913. Rome lasted 1,000 years without income taxes. The founding fathers knew that and prohibited direct taxation for it requires every individual to report to the government, which is wrong. Taxes should be returned to ONLY indirect. I think the founding fathers knew best.

Capitalism v Hybrid Capitalism

Posted Sep 27, 2019 by Martin Armstrong

COMMENT: Every ISM has failed. Maybe we are seeing the twilight of Capitalism.
China is a hybrid. Maybe that is why it will be the next world power.

CM

REPLY: People confuse capitalism with corruption. Capitalism is your freedom to choose. Corruption is when republics are available for sale to the highest bidder.

Unfortunately, the founding fathers believed the propaganda of Cicero who painted Julius Caesar as a dictator when he was a populares. The people supported Caesar against the corrupt senate of Rome which sold itself to the highest bidder.

I believe the ONLY way to correct our political crisis is to impose TERM LIMITS in Congress — one term and you are out. Just look at the Democrats. All they are doing is trying to undermine Trump. This is what career politicians do. They are not fighting for the people. They are only trying to undermine the opposition for more power.

Congress spends 70% of its time selling favors and trying to raise money for the next election. Term limits will end that. It will end the lobbying motto: “Do as I ask and I will fund your next election.”

Our judicial system is collapsing entirely. Nobody can prevail against the bankers in New York City. The courts will bend the law and ignore the Supreme Court entirely to protect the bankers who are the leaders of corruption and the harbingers of our doom.

China is a hybrid. The positive side of China is that the unelected leadership need not promise stupid things to maintain power. They can focus on the long-term plan for China. We do not need to adopt that hybrid, but we can achieve what was originally intended with term limits. End the corruption and we will at least have a real, free climate of capitalism.

Once government subsidizes anything, the prices rise because they know government will pay the bill.

Bernie Doubles Warren’s Wealth Tax to Win Votes

Posted Sep 26, 2019 by Martin Armstrong

The war on eradicating the rich is fully on. Bernie Sanders realizes that Elizabeth Warren is rising in the polls among liberal Democrats, and Bernie knows how politics works. “Vote for me and I will rob other people for you.” They are competing now on how high they could raise taxes for the rich. Warren’s proposed wealth tax would impose an annual 2% tax on all personal wealth above $50 million, so a family worth $100 million would owe 2% of $50 million or $1 million. The tax would rise to 3% for assets above $1 billion. Warren says her wealth tax would raise $275 billion per year, which she’d use to pay off student debt for millions, cover college costs for the majority of students, and finance universal child care. What she fails to explain is that this is NOT an income tax. This is on the portfolio value. So say you bought a stock for $100 and it soared to $1,000 and you find yourself in that class but you have no cash. You will then be forced to sell stock to pay the tax. But it does not end there. You must pay the same tax every year even it the portfolio was the same price. If you had that in government bonds, you would face the problem that with low interest rates, you cannot earn enough to even pay the tax.

Sanders has gone further, more than doubling Warren’s proposed tax rate on billionaires. The Sanders plan has a lower threshold for wealth, and higher tax rates. His plan has 8 different tax levels, starting with a 1% tax on wealth above $32 million. The rate would rise to 2% on wealth from $50 million to $250 million, with a top rate of 8% on wealth over $10 billion. Sanders says his plan would raise $435 billion per year, which he’d use to fund a single-payer health plan, more affordable housing, and universal child care.

How about we simply forgive student debt and call it a day? All of these proposals are about raising taxes and never looking at the subsidized problem in student loans and health care that was created in the first place. Once government subsidizes anything, the prices rise because they know government will pay the bill. They fund degrees that are worthless and universities are happy to take the money with no responsibility if the degree will ever land you a job. There is no free market competition whatsoever. Health care should simply be turned into a public utility. It will never be reformed in this manner by just paying whatever bills the government is handed.

January turning point on the Economic Confidence Model

Our Risk Assessment Meter is Now on Orange Alert

Posted Sep 26, 2019 by Martin Armstrong

There is a clear rising risk factor emerging from both politics and geopolitics as we move into the January turning point on the Economic Confidence Model. As the economy turns down and as we head into the 2020 presidential elections in the United States, we are facing rising risk factors on many fronts. The Democrats bashed Russia over the 2016 elections, blaming them for releasing Democratic emails that revealed the extent of their corruption. This has increased the tensions with Russia, rekindled the Cold War, and placed us at a far greater risk of war than at any time post-Vietnam.

There is pressure from the neo-cons to go to war with Iran. Iran has boasted that Saudi Arabia is willing fight to the death of every last American soldier.

There will be a steep economic decline for Europe in 2020

The 2020 Elections – Economics v Career Politicians.

Posted Sep 20, 2019 by Martin Armstrong

QUESTION: Hi Marty,
Been reading your blog for six years now and the clarity you have brought regarding cycles and predictability of human behavior is remarkable. My question is regarding the 2020 election. You have said economics drives politics and not the other way around. With the anticipated significant decline in the US economy in 2020, wouldn’t this normally make it more likely incumbents, including Mr. Trump will lose their seats based upon a declining economy? Or would the current voter trend of distrusting career politicians trump (no pun intended) the typical cycle of bad economic times ousting incumbents?
DJZ

ANSWER: Normally, a decline in the economy will often lead to a political change. In this case, our models DO NOT support the view that the US economy will be heading straight down into the elections of 2020. We see this as turning early in 2020.

However, this next wave will be a cost-push inflationary wave and we still see the economic decline in Europe and Asia continuing. There is dissent behind the curtain at the European Central Bank. There are those who have adopted our warnings and are voicing them in meetings that continually result in bond buying and negative interest rates. These policies are destructive to the economy and have failed to “stimulate” anything other than fiscal mismanagement among the political fiscal side of things.

There will be a steep economic decline for Europe in 2020, which will be its 13th year down from the 2007 high. There will be a continued flight of capital into the USA that will support the dollar and the underlying economy.

Turning to the political problem of career politicians v Trump, the Democrats seem to lack any candidate of substance. Elizabeth Warren’s advisors are the European team and they support Thomas Piketty who is a modern-day Marxist.

Even looking at AOC, she won, NOT because of her crazy ideas, but because, like Trump, she was not a career politician. Scherie Murray explains why she is challenging Rep. Alexandria Ocasio-Cortez (D-N.Y.). Our model on the 2020 election for the 14th district of New York shows this has had a run of 14 Democratic victories in a row since 1992 when the Democrat Carolyn Maloney first won. That means we could lose our most entertaining member of Congress this time around.

It will all depend on the closings for 2019

Reversals – Energy – A Different Dimension

Posted Sep 18, 2019 by Martin Armstrong

QUESTION: Hi Marty… I’ve been reading your blog for several years now.

I’ve been trying to understand the basics about your reversal system is with no luck.
Yet I’ve been trading stocks with only simple trend lines for years using basic tech A.

PS I still don’t even understand how the Federal Reserve works either… they don’t teach you that stuff in high school!

Yes, I’ve watched every video or post on reversals on your site and not getting it. I know I’m not that smart but I’m not that dumb either!

Can you pretty please post a very clear layman’s chart using a stock or a commodity with prices like gold to show us dummies so we “GET IT”

Thanks Marty….

A dumb Canuck

ANSWER: Look, the reversals are a black box and I keep it that way along with the Schema Frequencies. This is a physics solution to how the world ticks. It is not a simple moving average, stochastics, or one-dimensional formula. It is highly complex and many people have tried to reverse engineer it but have failed. They may think they have come close but they cannot account for the next number.

Traditionally, economists argue there is a business cycle, but nobody can forecast the cycle. Therefore, with tools of interest rates, taxes, and money supply, governments can manipulate the business cycle. The problem is that even Larry Summers admitted that he cannot forecast the economy. This stems from the problem of their failure to understand cyclical movement,to begin with. The Schema Frequencies resolve the complexity of cyclical movement.

The Energy indicator is against based upon physics and it exposes the true opposing forces at work irrespective of the superficial price levels. The key to this is looking for the divergence when prices are rising and Energy is declining. This is a warning signal that such a rally is NOT sustainable. Likewise, when prices are falling but Energy begins to rise, once more there is a divergence warning that the decline is losing energy and a low is near. Just look at this daily chart on gold. You can see the divergence as Energy peaked well in advance.

These indicators are not your standard variety of analysis. They are entirely beyond the one-dimensional analysis world for the markets are not only all connected globally, but the entire system is fractal. So we have a fractal relationship within each market and then a fractal relationship on a global perspective.

The models do all the calculations that are humanly impossible to carry out before a market even closes. It allows us to stand back and see the overview which then reveals the trends. Many have tried to prevent our forecasts. They have tried to ignore what this computer has been doing in hopes that I will die and that will be the end of it. I see this as a means to an end — to help society manage the business cycle without destroying our human rights and our freedom. I have to protect this because there are those who would use it behind the curtain for personal gain against the world.

Sometimes in life, we stumble upon something like the discovery of penicillin. It has saved lives. People just accept that and do not need to know the formula behind it

Prolonged economic recession in Europe since 2007 as we approach a 13-year decline in 2020

Gold Becoming Part of Money Laundering Laws

Posted Sep 17, 2019 by Martin Armstrong

The hunt for money is moving into high gear in Germany. Prior to 2017, it was possible to buy gold anonymously in quantities up to €15,000. In 2017, this limit was reduced to €10,000. Now, Merkel has drastically reduced this limit to just €2,000 beginning in 2020. Any transaction greater than that amount requires the buyer to prove their identity and give their data to the gold trader.

While Merkel has allowed the refugees to pour into Germany, denying there are terrorists hidden among them, she has justified this reduction in anonymous gold purchases by arguing against money laundering to stop terrorism. This means that terrorist would be buying gold inside Germany, which on the other hand she denies letting them in to start with.

Merkel is not satisfied with imposing just a price limitation. She also wants to introduce the 50-gram rule, which would apply regardless of price. For physical gold buyers, this means they will not be able to buy a 50-gram ingot (1.60754 troy ounces) without the gold trader taking personal data and saving it for five years. This certainly applies if you tried to buy just two one ounces coins.

Merkel has formally justified this change in the laws on gold as a step in the fight against money laundering and terrorist financing. The government studies show that out of 77,252 cases registered in 2018 that suspected terrorism financing, only 175 cases involved precious metals.

Terrorism has been a real windfall for governments since 9/11. They have increased their powers globally and probably send thank you cards to the terrorists for handing them the excuse to create total financial surveillance that they use in the hunt for taxes.

The Merkel government has been making a concerted effort to introduce a total surveillance state and track the finances of its citizens. There is chaos in Europe with negative and punitive interest rates, high bank charges, and a declining euro. All of this is mixed with a prolonged economic recession in Europe since 2007 as we approach a 13-year decline in 2020. More and more Europeans are looking for ways to safely and anonymously invest their savings, which have been under direct assault by the government. This has been leading to the hoarding of US dollars and now the change in legislation on gold is only going to increase the switch to dollars