Мартин Армстронг

[Mikhael]

I am referring to government – not markets. We can see the meltdown in politics going on. The left is fighting so desperately to stop Trump; if not impeach him. Let’s say they succeed in impeaching him. What would really happen? Trump won the majority of people in the country with the single exception of California, which is indeed La La Land. They would be the sixth largest economy in the world by themselves, but California does face some very serious economic issues. The majority of its economic growth has all been concentrated in Silicon Valley and San Francisco, leaving the state vulnerable just in case the tech economy sours. This is also creating a much wider gap between the rich and the poor than in most other regions in the country. When Southern California gets tired of complaining about Trump, you will see them turn against the North, demanding their money to pay for their lifestyle.

If the left were to succeed in getting rid of Trump, you will see the silent majority who put Trump in office because all they see is a constant dwindling future with the highest taxes and a declining standard of living suddenly not be so silent. They are NOT going to take this abuse of the left any more by people who just want to subjugate them and destroy the future of their children. The economics behind what put Trump in office is only going to get far worse.

When I was young, I was naive and stupid. I tried to turn the tide in Washington. I donated my time to keep my independence, never taking a dime for anything. Once you accept ANY money from these people, they own your soul. That is why every time crisis comes, my phone rings because they know I will tell them the truth and not what I am being paid to say.

Consequently, I simply gave up. I have worked behind the curtain for 40 years even testifying before Congress and answering questions in the middle of a panic. There is absolutely NOTHING anyone can possibly do to change the trend – IMPOSSIBLE. Let me explain what politics is all about and why the left should really embrace Trump to save their own ass for the future.

If I was to run for reelection and said vote for me because I saved your job, would you believe me? Chances are you would ask, how do I know I would even have lost my job? It is far better to allow a crisis to unfold, for then your emotions will be running high and you want revenge for your loss. That is when politicians will say: Vote for me, I’ll get the guy that did this to you!

Crash & BurnAs a result, there is nobody in Washington, Republican or Democrat, who would prefer to prevent a crisis when they will never receive a vote or any credit. It is always better to allow the crisis and then emerge as your champion. Therefore, the sad realization is that we simply must CRASH & BURN, for only then will anyone pay attention.

Keep in mind that this CRASH & BURN is government – not the private sector. Therefore, the danger lies in government assets – not private sector assets – stocks, real estate, and tangible assets.

[Mikhael]

The Left is fighting so hard to keep dominating everyone else, that it is hard not to see how society in starting to implode in the West. In Norway, the hunt for taxes has been so bad, they have now even been raising property taxes to include a dog house in the back yard.

Meanwhile in Greece, people are not taking property that is left to them because they cannot pay the inheritance taxes to accept the property. This was one of the final stages in the collapse of Rome. People just walked away from their property because of taxes.

[Mikhael]

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[Mikhael]

Tomorrow we end the first quarter of 2017. Politics on a global scale are the driving force. The failure of Trump and reform movements in Europe are the catalyst to send the stock market to record highs once again as people lose confidence in government completely and we then turn to just look how to park money. We cross that line moving beyond the point of no return where money pours into equities, not because of earnings, but because capital is fleeing from government and banks and it just needs a place to park. As we move forward, we will look at good stocks to park money to survive the political chaos on the horizon.

The historical high in the PE Ratio was in 2009 at the bottom of the crash – NOT THE HIGH! When you reach a point that you no longer trust banks, the currency, or government, where does big money go? Individuals can buy gold, but you cannot keep it in a safe deposit box in a bank if the banks can be seized. Big money parks in blue chips and tangible assets like real estate (if out of the path of war). The 2009 peak in the PE Ratio reflects that moment of a complete collapse in confidence. This is the key point we must understand. So, while I am focusing on politics, that is the fuel to ignite the collapse in public confidence. Nobody can stop this – not Trump, not Le Pen, or any other reactionary politician. We have crossed the point of no return because nobody is talking about restructuring the entire monetary system and debt system. That will not take place UNTIL we crash and burn. Nobody changes anything until they have to.

obama-change-we-can-believe-inWe can technically see that the Dow has broken-out on the Quarterly level. Support lies at the 19,230 level. The only way to make a serious correction requires the Dow to break the 17,000 area on a closing basis. Closing the quarter above 19,230 keeps the market positive from a broader perspective.

Keep in mind that Trump WILL FAIL! This much is inevitable. The trend is against him and you cannot fight the trend. People had such high hopes for Obama that he would live up to his promises and we would really see “Change We Can Believe In.” When everything he did was the same as Bush, that destroyed the confidence in the two-party system and set the stage for Trump as our computer was forecasting. He became effectively a third-party candidate with the Republican Party. Now, when he fails to reverse the global trend, where will people turn? Once you raise the hopes for change and Trump cannot deliver, all bets are off moving forward. That is when the stock market starts to rise for reasons that will confuse most. This is not the “Trump Rally” but the collapse in public confidence rally.

This is the Year from Political Hell on a global scale. This is all about capital flows and Trump is dead wrong on trade, the dollar, and whatever he does with the taxes, he better do it fast, for when the politics shifts again, they will only rise because governments; federal, state, and local, are broke and that will not change. Political change is sweeping Europe, Australia, and even in Asia.

This is the collapse in confidence in government and Trump cannot reverse that trend. In fact, Trump has raised hopes among the silent majority that things will change. His failure, especially on trade, will then sour the confidence in government completely, exactly as Obama. This is when civil unrest becomes really dangerous. The same is true in Europe. The loss of the extreme right in the Netherlands has only emboldened Brussels assuming this is just a short-lived “populist” movement that will die out. This defeats any possible reform movement and ensures we will crash and burn starting in 2018.

At the end of the day, the next level of resistance is still in the 23000 level. After that, we cross the threshold into a Phase Transition.

[Mikhael]

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[Mikhael]

The real crisis for Germany is the fact that either Merkel or Schultz offer any change. As such, we really cannot expect to see any reversal of fortune for the EU. We have to simply let this play out. It appears the crisis comes to a head in 2018.

We have to keep in mind that the worst scenario for Europe is no change. The loss of the challenge in the Netherlands breathed relief in Brussels. They think they will hold the ship together and this “populist” movement will die-out. The problem is this trend is emerging simply because of economics. The AfD has only a 15% chance of winning. That would only be possible by a major issue surfacing this summer regarding the Islamic Invasion. The no change means no reform and that means the fuse is still burning.

[Mikhael]

The International Monetary Fund (IMF) in Washington has published a Working Paper on “de-cashing” the economies and the implications. This paper clearly demonstrates that this is the direction we are headed into. It provides advice to governments who want to join in the latest thing – abolishing cash. IMF-Analyst Alexei Kireyev recommends in his conclusions:
“Although some countries most likely will de-cash in a few years, going completely cashless should be phased in steps. The de-cashing process could build on the initial and largely uncontested steps, such as the phasing out of large denomination bills, the placement of ceilings on cash transactions, and the reporting of cash moves across the borders. Further steps could include creating economic incentives to reduce the use of cash in transactions, simplifying the opening and use of transferrable deposits, and further computerizing the financial system."
The paper does not advocate eliminating cash. It merely goes through the plus and minus to such a policy. While governments are pressing this using terrorism as the excuse, you do not eliminate the entire monetary system of the world to even catch 100 terrorists and their camels. This is all about the collapse in socialism and the desperate need to raise money.

[Mikhael]

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[Mikhael]

The End of Quantitative Easing – Perhaps Now It Will Be Inflationary?
One of the greatest monetary experiment in financial history has been the global central bank buying of government debt. This has been touted as a form of “money printing” that was supposed to produce hyperinflation. That never materialized as predicted by the perpetual pessimists. Nevertheless, the total amount of Quantitative Easing (QE) adding up the balance sheets of the Fed, the ECB and BOJ is now around $13.5 trillion dollars, which by itself is a sum greater than that of China’s economy or the entire Eurozone.

QE-rIf QE failed to produce inflation, then ending QE may actually produce the inflation people previously expected. Where’s the strange logic in that one? Well you see, it really does not matter how much money you print, if it never makes it into the economy, it will not be inflationary.

The craziest think the Fed did was create excess reserves. The bankers complained that the Fed was buying the government debt so they would have no place to park their money. The Fed then accommodated them creating the excess reserves and paid them interest for absolutely no reason whatsoever. Almost $3 trill was parked at the Fed collecting interest so that $4.5 trillion of “printing” money never made it out the door. Hence, there was no inflation to speak of (outside of healthcare which always rises no matter what).

So how does stopping QE actually create inflation? The withdrawal of the Federal Reserve (Fed), the European Central Bank (ECB) and the Japanese central bank from the QE programs will lead to an increase in yields on the bond markets sending the financing costs for the states higher. This is predicated upon the notion that people will continue to buy government debt. Governments have increased their spending sharply because interest rates were effectively zero and the central banks were buyers. Now comes the moment of truth. Has QE undermined the bond market to such an extent that only a blind fool will buy government debt in an atmosphere of rising rates?

Moreover, other sectors of the global financial system have been seriously disrupted. For one, European banks were shipping cash to their US branches and also parking it at the Fed whereas the ECB was charging negative rates. Furthermore, of the $13.5 trillion on the balance sheets in central banks, they are now trapped and cannot sell that debt. This means they are themselves screwed and they have to wait for that debt to mature in order to reduce their balance sheets. They have no way out.

The Fed had a balance sheet of about $900 billion in 2008, whereas it currently stands at about $ 4.5 trillion. The Bank of Japan recorded an increase of 107 trillion yen in the same period of time to about 490 trillion yen or also about $4.5 trillion. Then we have the ECB which has more than doubled its balance sheet from EUR 2 trillion to EUR 4.1 trillion or also about $4.5 trillion.

The central banks bought the government bonds from the commercial banks and paid them money created out of nothing which is how the pessimist put it. In theory, that is elastic and if the government debt matures, it then evaporates from the balance sheet. Here comes the problem. The governments continue to borrow. With the central banks no longer buyers, then interest rates can rise faster than anyone expects because they will have to entice fresh buyers. If that fails to materialize, then we come to the Sovereign Debt Default crisis.

The Federal Reserve had recently announced that it would no longer reinvest its gains on government bonds that had matured into new US securities, resulting in a shortening of the balance sheet. Bills of $426 billion will be due at the Fed in 2018, and again about $357 billion a year later. So if the Fed will not repurchase that debt, then the amount of new debt coming to the market will DOUBLE.

The Treasury will be forced to find ways to absorb the additional supply if the Fed wants it’s cash back so the Treasury must find a lot more private buyers. The shrinking of the balance sheets represents the continued deflationary trend from a real economic expansion trend. The government will be competing for cash in an ever growing tighter economy.

The balance sheet of the Japanese central bank is likely to be expanded for a while as long as the targeted inflation target of 2 percent is not reached. The ECB’s balance sheet will continue to grow at least until the end of the year, as the borrowing program has been running until then. However, the negative effects of the balance sheet shortening of several central banks will mutually reinforce each other in 2018 and help to bring the financial crisis to a head for 2018-2020.

The withdrawal of the ECB’s purchases of securities that also included European corporate paper will lead to secondary effects even outside Europe and help to further maintain the deflationary aspects with respect to economic growth. This will serve to demonstrate the unintentional impact of this entire unorthodox monetary policy experiment.

Therefore, at this year’s WEC, we will be looking at this complex crisis. The inflation will be asset inflation – not demand inflation. So hold on – this is going to be the craziest ride in monetary history of human kind.

[Mikhael]

A Le Pen victory will actually provide a soft-landing for the EU and force it to begin to look at what it is doing so terribly wrong. A Macron victory will doom the EU to a complete collapse and a hard landing in 2018. Why? Brussels will wipe their brow and cheer the end of “populism” and that means they will continue down the same road without any reform. BREXIT should have sparked some internal review. Instead, they just blame the Brits and move on.