Romans controlled the mines and simply minted coins to fund the government and its programs.

Can Government Prevent a Major Debt Crisis?

Posted Sep 12, 2019 by Martin Armstrong

QUESTION: Hi Martin
I recently stumped upon a documentary on Netflix about you and your model.
I then went on and watched some YouTube videos.
To me it makes totally sense that taxation does not work, but how can we change it. Do we need to become politicians?
We have a very high tax in Denmark. Base level around 39 percent and top level around 60. So it’s eminent to change this in Denmark.
We have a quite new political party here called Liberal alliance. They promote a flat tax of 40 percent, and I think that makes sense…. But, they had such bad election and are so tiny now, they have no influence.
Everyone say we need taxes to have welfare. So how do we go from 60 to 0 percent in tax without sacrifice our welfare. And how do we convince people that it Wan work….. It will be some very tough months or years once the tax is not flowing to the hospitals etc?
I hope you can elaborate on these things.
DB

ANSWER: In building the model, I assembled data on everything I could find and then put it all together to see how and what made the world tick. I investigated tax rates to see how civilizations operated. I investigated what types of governments worked best and what always collapsed into oligarchies, then tyrannical entities, before collapsing into dust.

I read many contemporary historians directly rather than the modern interpretation of events, which have NEVER been unbiased. I discovered that inevitably people interpreted the past with a modern context. I found one of the funniest to be when they named the city of Philadelphia after the Greek meaning “brotherly love.” The founders were devoted Christians, and in their view, they loved their brother as they loved themselves. However, the real meaning in Greek meant incest — the brother was fooling around with his sister. Understanding the meaning in which words were used is critical to understanding history. You can NEVER read it in terms of a modern context.

The Romans generally had a 7% tax. They also had welfare. The difference was that they had NO central bank and NO national debt. They controlled the mines and simply minted coins to fund the government and its programs. The Romans controlled the mine Rup Tinto in Spain, which they won from Carthage in the Punic War. The amount of silver they mined from that location funded the government for decades.

The debasement began in 64 AD under Nero when Rome experienced the great fire and Nero had to rebuild the city. As the new silver was declining, we find the debasement. It was not an issue of vote for me and I will give you this or that. The debasement begins because the government funded itself with new money and the sources were running dry.

The problem we face is that it would have been far less inflationary to print the money than borrow it. We have a debt crisis that cannot be paid and the accumulative interest expenditures rose to reach at times even 70% of the national debt. Now that they have discovered NEGATIVE interest rates, they think they discovered a new way to tax people indirectly. They think we are too stupid to realize this is even a tax.

But fear not. We are heading into a Monetary Crisis of untold proportions. If the governments do not listen, they will create the biggest civil unrest in all of history. This is the collapse of socialism, for they have promised everything, funded nothing, and cannot keep raising taxes without causing the economy to collapse. This will undermine their entire tax system.

There are ways to deal with this crisis if we have the courage to first admit that we have a crisis. That is step one.

Japan Still Declining into 2021

Posted Sep 11, 2019 by Martin Armstrong

QUESTION: When I saw your blog saying 2019 will be really crazy and chaotic year for Japan (Feb 2019), I was curious how bad it could be. It is always amazing to see how you and your Socrates turning point manifest in the real world. I was astonished when Japan restricted exports of critical materials used in South Korea’s high-tech semiconductor industry right after G20 Osaka Summit. A trade war is generally initiated by a deficit country. This decision was not only opposite but might lead to devastate their own industry and disrupt the world IT markets. It seems to be a political stance for the upcoming Japan Upper House election but connects further deep into friction between Korea and Japan history. Insane year for Japan indeed, thank you for your great work and efforts providing new perspectives to the world.

Q: With all that sovereign debt how do you see the future of Japan will be?

HJ Kim

ANSWER: Our forecast was covering economics, which then causes political responses. As I previously reported, the Bank of Japan (BOJ) Governor Haruhiko Kuroda publicly stated that it may maintain ultra-low rates for a further period of well over a year. However, he also warned against the idea of propping up the economy through unlimited money or printing to finance government spending.

The Bank of Japan is trapped. Its holdings of the national debt have reached nearly 50%. The BOJ modified its forward guidance or pledge on how it will guide future monetary policy. It stated that current very low interest rates will continue at least until the spring of 2020. Without the BOJ buying government debt, there is ZERO hope that interest rates will rise dramatically and a financial crisis will be in the making. The BOJ will keep rates low for an extended period of time for they have no choice. There is no way out of this nightmare and the real inflationary cycle comes when the majority wake up and realize that the emperor has no clothes, and that means the central bankers worldwide.

There remains a capital flight from Japan and the more they keep these policies up, our model does not show that their economy will recover. We are looking at the absolute low perhaps forming as early and the middle of 2020 but more likely into mid-2021. This will prompt the Monetary Crisis to spark political chang

USA had TARP, In Europe, the design of the euro was to deny creating a national European debt, therefore there could be no bailout

EU Parliament - How they Protect the Bankers

Posted Sep 10, 2019 by Martin Armstr

A number of people have asked me to comment on Bloom’s speech on the floor of the European Parliament. He is incorrect in attributing the insolvency of the European banks to fractional banking. They have blown themselves up because of derivative exposure, not actual lending.

The US banks survived and have prospered BECAUSE of TARP. The US government bought the toxic financial waste they created so the bankers got away with it again. In Europe, the design of the euro was to deny creating a national European debt, therefore there could be no bailout because that would mean the money would flow from one country to the another to bail out their banks. Hence, European banks still have the tonic financial waste on their books from 2007.

The central banks are ARTIFICIALLY manipulating interest rates down to try to save the banks, but this Quantitative Easing has not only failed, it has set the stage for the next financial disaster — the collapse of government pensions and private pension funds. These funds are regulated and it is mandated that they have government debt for that is “risk free,” so they claim.

The bankers sell the government debt so the politicians cannot let the bankers fail for they also fund their elections. This entire mess is not going to be held off much longer.

Russia trade which took down Long-Term Capital Management

The Club & Why the Majority Must be Always Wrong

Posted Sep 6, 2019 by Martin Armstrong

QUESTION: Mr. Armstrong; I did my own research on the 1998 Russian collapse. All the big names lost billions. Even the New York Times reported that George Soros lost $2 billion. You were the only one who made money so it made sense that you were named hedge fund manager of the year in 1998. My question is this. Since all the big names were involved in the Russia trade which took down Long-Term Capital Management, is this why you call them the “club” for they all do seem to be involved in the same trade?

DU

ANSWER: Correct. This is also why they try to prevent people from listening to me. They are convinced that the reason they lost was that I was too influential and had too many institutions listening to me. That absurdity is what they ran to the government with, so I was then accused of “manipulating” the world economy. They all lost after I warned them and refused to join in their takeover of Russia I believe I was given the nod by the Clintons. They told me they had the IMF in their back pocket and they would continue to fund Russia. I warned them that the IMF got their funding from governments and they were not going to back it.

The Russian financial crisis hit Russia on the 17th of August 1998. Our World Economic Conference was held in London that June. Our forecast was then published by the London Financial Times on the front page of the second section.

They did not give up. After they got the Federal Reserve to bail them out, they then focused on setting up Yeltsin and got him to divert $7 billion in IMF loans. Even CNN reported the money was stolen from the IMF.

CNN Theft of IMF Money – Sep. 1, 1999

Edmond Safra’s Republic National Bank ran to the Department of Justice and then reported that a $7 billion money laundering scheme just went through Bank of New York. They attempted to blackmail Yeltsin to step down and appoint their guy; Yeltsin then turned to Putin. It was the US bankers, with the support of the Clintons, who first tried to interfere into Russian elections. This is why Putin was not friendly to Clinton and said Mueller could come to question anyone in Russia he liked, provided Russia could question Americans including Bill Browder who was Safra’s partner in Hermitage Capital.

While “The Forecaster” was shown even on TV throughout Europe, Canada, and Asia, the question is WHY was it banned in the United States? If it was just a conspiracy theory, they could care less. When something strikes closer to home, they ban it.

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 

The Biggest Bubble in Modern Financial History

Posted Aug 26, 2019 by Martin Armstrong

QUESTION: You said before you were advising corporates to issue long-term bonds and lock in the low rates. Even the US Treasury seems to be following your advice and are looking at issuing 50 and 100-year bonds. Do you give governments the same advice?

DK

ANSWER: If asked, of course, I advise to issue long-term debt NOW at these absurd low rates. I also advise individuals to lock in fixed-rate mortgages.

Germany just tried to issue negative interest 30-year bonds with a total offering of 2bn€ of which they only sold 824million were purchased. This is showing that this whole theory of negative interest rates as seen its day. The US is now even considering issuing 50-year and 100-years bonds as interest rates plummet.

I have reviewed the buyers of these negative bonds which now amount to $15 trillion outstanding globally. What is actually taking place in the market is really dominated by punters rather than investors. In other words, the people have been buying them to flip assuming rates would just go lower.

The crisis on the horizon is MASSIVE!!!! These punters are going to get caught as they did with the Russian bonds when they collapsed in 1998 which led to the Long-Term Capital Market crisis. This is a game of musical chairs. Nobody thinks twice as long as rates decline. But the appetite for negative yields does NOT exist insofar as people actually investing in them.

Yields have dipped negative on short-term 30 days paper during panics. The 30-day TBills went negative several times from December 2008 onward. The reason was clear. Capital feared the banks so they were willing to park money at a slightly negative rate.

This also corresponds to capital parking in blue-chip equities which created the peak in the PE ratio at the bottom of the crisis.

The trend looks to be getting ready to change when the ECM turns. BUYER BEWARE!!!!
We may yet see the biggest bubble in the modern history of finance explode far worse than the 2007-2009 debacle.

How Civilization Collapses

1177 BC – The Collapse of Society System-Wide

QUESTION: I do not believe you have ever commented on Eric Cline’s book 1177BC, the year civilization collapsed. Do you think this is likely what we face or is this different?

WL

ANSWER: There were about eight civilizations that all collapsed with the exception of Egypt post-1250 BC. It was caused by a major shift in climate that led to droughts which resulted in the widespread famine that inspired migrations/invasions. This event of 1177BC was the Bronze Age equivalent to the fall of Rome, for they both were followed by a Dark Age.

Many have attributed this collapse of the Bronze Age to the Sea Peoples, which were most likely northern Mediterranean mass migrants due to the climate getting colder in Europe. Cline has put together a nice assembly of sources, but he missed the climate change. He assumed there was a migration southward. However, we can see the first dip to cold came about 1,800 years ago. We can see that the all-time high temperature was about 3,300 years ago.

The collapse of the Bronze Age was mostly complete by about 1100-1000 BC. Our computer has identified a 1720-year cycle beginning in the Dark Ages with the fall of Rome in 476 AD when the last pretend Emperor reigned (Romulus Augustus (575-476AD)). Our model highlighted the cycle between the Dark Ages of 1720 years which brings us to 1244 BC — right on target for the beginning of the collapse of civilization.

How Civilization Collapses
1) Collapse in centralized government
2) The rich flee and economic growth declines
3) The economy implodes without investment
4) Birth rates decline with population
5) People migrate and abandon urbanization

There were clearly natural disasters and invasions as well as civil unrest. But climate change was probably the primary cause of mass migration. The danger we have today is once again the mass migrations into Europe and the United States. However, if the climate turns sharply colder, we will have famine and that undermines the social structure. We already have the centralization of government & central banks on the ropes. The hunt for taxes will result in the hoarding of wealth and the decline in investment.

The birth rate has been collapsing and the final stage will be abandoning cities because of taxation like Chicago, Philadelphia, New York City, etc. Keep in mind the collapse will unfold over the course of probably 51.6 years before you reach rock bottom. It all depends upon the climate looking forward.