Demise of socialism. Do not forget, Communism began in France

Over 5 Million Government Employees Strike Against Fall of Socialism

Posted Oct 12, 2017 by Martin Armstrong

In France, tens of thousands of people went to the streets for the first time in ten years in protest against Macron. All 5.4 million public employees went on strike. The protests are directed against the planned elimination of 120,000 official posts and the end of the welfare state as many see it. In addition, Parliament has authorized President Emanuel Macron to implement the disputed labor market reforms by means of regulations.

Macron’s battle against high unemployment does realistically look to relax the rigid labor law that is one-sided for the worker against companies under the theory of Marxism. Macron realizes that more flexibility must be provided to employers or they will not hire people – plain and simple. He wants to implement his controversial reform through ordinances, or what we would call executive orders in the States, and is therefore faster than the usual parliamentary legislative process. The parliament had to grant him the right of revise regulations, but by law. The law now allows Macron to revise regulations and at the same time fixes the outline of the reforms.Macron promises “more freedom” for companies and at the same time “more security” for workers.

Criticism of the reform comes from trade unions and left parties who cannot see the opposite side of the table. They say Macron has taken an entrepreneur-friendly policy and is dismantling the welfare state. This is what the strikes are all about. Once again, we are looking at the demise of socialism. Do not forget, Communism began in France and it was sold to Marx as a great idea. The idea of the commune emerged in the late 18th century

Taxes the Lynch-Pin of Civilization. Govt creates nothing to advance society or to increase GDP

Posted Oct 12, 2017 by Martin Armstrong

QUESTION: Mr. Armstrong: I find it disheartening the the more I try to advance my family to build a better future for them, the more I realize that the harder I work we do not really get ahead. I agree that taxes just keep moving higher and I am now looking for a job in my field to leave California. A friend of mine from school left Illinois and moved to Texas. He said he feels much better and is gaining ground instead of losing it. Has taxes been the driving force to create migration in advanced civilization?

ANSWER: Absolutely. I have written how Rome fell and just mapping the population of Rome you can see the fate of Illinois – people sell and just leave. It is different this times because under socialism, government has become abusive. When it came to integration, they sought to implement it by sheer force.

You simply can’t legislate the poor into prosperity by legislating the wealthy out of prosperity. Jobs are created by the wealthy who become wealthy because of their innovation as vision – i.e. Henry Ford, Bill Gates, Steve Jobs and so on. Government creates nothing to advance society or to increase GDP in any positive manner. It is a natural human response not to pay taxes and this is why taxes have been the number one reason for civil war and revolution. It is always resentful to pay taxes whereas to give money to help someone is rewarding. Taxes tend to support politicians and their pensions which they exempt themselves from everything from Inside Trading to Obamacare. If they must sell some asset to take a government job, it is tax free.

The great welfare state has produced a large segment of fraud and kept many people down since they would rather be taken care of than working to take care of themselves. Even in prison, many people are sentenced to 10 or 20 years and the first thing they do is commit a crime to get back in where they do not have to pay taxes and they are taken care of. You destroy people’s lives for such a long-period for non-violent crimes and then expect them to have a fulfilling life thereafter?

Clearly, New Zealand once had a program where if a woman was pregnant and she had no idea who the father was, the government provided everything right down to a free home. They ended up with the highest percentage of women who had no idea who the father of their child was. Naturally, they did and he would jump out the back window when the social worker visited. They got everything for free then.

Any of these types of programs divide and conquer. The government cannot give to anybody anything that the government doesn’t first take from somebody else.  When you reach a state where 50% of the people depend upon the other 50% to pay their bills, you end up with class warfare and bitterness. The is the cycle where civilization rises, peaks, and then crashes when government becomes the enemy of the people.

It’s the capital flows that are the key – not trade.

Will China take over US as the top Superpower

Posted Oct 3, 2017 by Martin Armstrong

QUESTION: I read a credible theory recently about China taking over US as the top superpower via economic pressures. Namely by replacing the US dollar with the Yuan as the standard currency for international trade. This shift is (supposedly) being enacted through 1) increased control over Developing countries through international lending from the New Development Bank, 2) increasing control over global oil via financial ties to Saudi Aramco and Russia’s Rosneft, 3) trying to denominate global oil transactions in Yuan through the Shanghai oil futures market & backing up the Yuan value with the massive gold reserves China has been accumulating.

My question is whether you see this strategy unfolding as a credible threat to usurping United States’ global domination by China and if so – what might the investment world look like during such a massive upheaval?

Thanks – love your blogs & insights!!

WM

ANSWER: China is on the rise and it will become the financial capital of the world after 2032. However, it has a long way to go. China can price every commodity in yuan and demand all trade deals are in yuan. That still will not displace the dollar. The center core issue behind the dollar ironically in the US National Debt. For now, this is the place institutions can park their money. You can trade in any currency, but where do you park you profits?

China will displace the USA as the financial capital of the world when (1) people begin to trust China as a place to park money. Bitcoin exploded because the Chinese were using it to get money out of China, which had reach 98% of trading. China has been steeping in against BitCoin to stop the capital outflow.

It’s the capital flows that are the key – not trade. The daily trading volume in FOREX alone has exceeded $5 trillion. Most investors are familiar with the stock market, yet they are unaware how small in volume share trading is compared to foreign exchange. The Forex market dwarfs the trading in equities and futures markets.

FOREX trade and investment capital flows DWARF trade flows. Absolutely nothing compares to the Foreign Exchange Markets.

Anyone can write a contract in dollars. You cannot do that in Japanese yen. If you issue a bond in yen you have to apply for permission back in Tokyo. All these argument are made up by the dollar-haters who are so desperate to find an excuse that the dollar will crash. It’s time will come. Just not yet.

Why would anyone buy European bank stocks?

Posted Oct 10, 2017 by Martin Armstrong

The European banking crisis is still brewing. The biggest problem rises from the rules that if a bank is in trouble, they just seize the bank and sell it for $1 and all the shareholders lose everything. This is having serious impacts on the European Banking System as a whole as I previously warned. The Italian bank Carige has had difficulty in trying to raise capital to meet requirements. If any bank cannot raise enough capital to meet the requirements, the European supervisory authorities can seize the bank in accordance with the new rules. Once again, the government solution is to make up rules that totally disregard the private reality. 

Why would anyone buy bank stocks in Europe today if the government can seize everything and shareholder get zero? Spain’s Banco Santander bought rival Banco Popular for €1. This is Brussels’s new system to rescue failing banks without burdening taxpayers or stressing markets. This was cheered around the world because the shareholders lost absolutely everything. The bank which was valued in the collapse at €1.6 billion was bought for €1. Why would anyone buy European bank stocks?

Democracy - buying the votes of groups to maintain the lifetime jobs.

Why is Congress at 31% & Trump at 41% Approval in the Polls?

Posted Oct 9, 2017 by Martin Armstrong

A root cause for Congressional ineffectiveness will be found in the simple fact that the exercise of good governmental judgment cannot possibly compete with re-election pressures. This is why term limits are ABSOLUTELY  MANDATORY if we ever hope to have a reasonable government. There is a substantial conflict between good government and corrupt ineffective government. Congress has merely been transformed into a school how to be corrupt and get away with it.

Congress has only at best a 31% approval rating against Trump at 41%. Democrats in Congress are at 29^ with Republicans at 36%. Nancy Pelosi is at 35% and Chuck Summer is at 23%. Yet CNN and the New York Times bash Trump as being so unpopular while they ignore Congress’ approval rating.

What is amazing is that people criticized Trump for lacking experience in government. Yet, politicians lack any skill set whatsoever to understand the real world. There is no advantage to the nation from lengthy political office holding for there is no empirical evidence that it has increased the knowledge or skill to run the nation. Unfortunately, the only skill or increased knowledge is confined to re-election techniques and how to raise money. This is always counter-trend to the public interest of running the nation. So much governmental expenditure is pressured by the re-election fervor that the real Federal deficit cannot be closed and the Federal debt will continue to skyrocket without end. These debt ceiling increases are a joke because they all just want to spend money so they get re-elected. That is using public funds for personal gain at the expense of our future.

From 1789 to 1855, members of Congress received only a per diem (daily payment) of $6.00 while in session, except for a period from December 1815 to March 1817, when they received $1,500 a year. Members began receiving an annual salary in 1855, when they were paid $3,000 per year.

1780s–1820s was the formative era when the good of the nation tended to be at least on the agenda when they earned just $6 per day when they showed up. The 1830s–1900s was known as the partisan era. This was followed by the 1910s–1960s known as the committee era which was a system of seniority that handed long-time Members of Congress more and more power and encouraged politicians of both parties to serve for long terms which has continued into the present time. This was augmented by the 1970s–present, known as the contemporary era, which is all about spending money to create socialism and buying the votes of groups to maintain the lifetime jobs in Congress.

All of this should be changed to one-term and out. Then we can get back to the formative age where country returns to the to of the list of important consideration

The EU is retroactively changing taxes.

EU is becoming a No-Go-Zone for Business

Posted Oct 6, 2017 by Martin Armstrong

The European Union has ordered AMAZON to pay about 250 million euros ($294 million) in taxes to Luxembourg, saying it was given an unfair tax advantage from 2003 because it paid less than they would have paid in France or Germany. The EU is retroactively changing taxes. This is a sure fire way of telling companies to get out of Europe. If no matter where you build your plant, if you would have been paying a higher tax in France or Germany, the EU says that is not fair and you have to pay more in BACK TAXES.

In restructuring companies, taxes were always NUMBER ONE after Country Risk. The EU has just made Country Risk paramount. Honestly, I would have to advise companies NOT to set up shop inside the EU. Best to go to the UK and pay any tariff than to be retroactively taxes because the EU is broke. This is introducing a whole new risk into the mix. The EU is becoming a no-go-zone for business

Gold – Dollar -Trade Deficits All Mixed Up

Posted Oct 6, 2017 by Martin Armstrong

COMMENT: Marty; I get these emails about gold and have to wonder how people can keep preaching the same thing for decades and never be correct once. Not they say in a very simplistic manner that  Politicians argued that endless trade deficits were immaterial because U.S. exceptionalism allowed America to do what it wanted. If foreign leaders refused to accept dollars for commerce as Saddam and Gaddafi did, the U.S. used its military might and CIA for regime changes. Even the strongest adversaries like China and Russia cannot compete against U.S. weapons of mass destruction, so they are increasingly engaging in currency wars of their own to protect their national sovereignty. Is the dollar in trouble as a result?

They seem to advocate the collapse of the USA is necessary so they can make money on gold. Like you said on Global Warming, they want to reduce the population so a good thing would be to stop having children without thinking the birth rate is down so pension are collapsing.

What you have shown is none of this nonsense is necessary for gold to rise and that trade is a tiny fraction of capital flows. Are these people just mindless? The dollar is the lynch pin holding everything together. Here in Europe we have a lot more problems than the USA. BitCoin crashed because the Chinese were fleeing to dollars trying to get their money out of China.

REPLY: This is the classic problem in analysis. You fit the fact to your predetermined conclusion. They keep praying for the collapse of the dollar to make gold go up. The problem is then, if everything collapses, what good is gold if you cannot spend it because nothing has survived?

Very strange theory. BTW, Saddam and Gaddafi did not reject dollars. I even managed money for Muammar Gaddafi TWICE. He had no problem pouring millions of dollars into accounts to trade. I also knew Milton Friedman who advised that a floating exchange rate would provide a check and balance on the system where fixed exchange rates . The trade deficit is offset by the capital account reflecting investment. In fact, if a foreign entity BUYS American debt, that inflow goes into the capital account – not trade account. However, the interest payments go out in the Current Account commonly called the Trade Account. There do not even understand the accounting.

The more foreign investors come into America and the repatriate their profits, the “trade deficit” will appear to get worse and it has NOTHING to do with trade.