Sovereign Debt Crisis Beginning
Argentina has bluntly stated it cannot make the next bond payment. The exist fees being attacked to long-bond funds is also the realization that our models are spot on. I am off to urgent meetings in Europe. All I can say is our phone has been red-hot. Equities are rapidly becoming the new international gold and safe-haven.
To all those sending emails on this subject and can it be stopped, the answer is of course, if there were no politicians. But this is Adam Smith in real life. They will only turn to our solutions WHEN there is no other choice. It would be against human nature for these people to say yes, you are right, let’s do something now. They will cling to power to their last dying breath. Fine, I would do whatever I can, but it is just not time. They have to bleed out of every possible orifice before they will ever yield. I truly wish I was wrong. But this is NOT my opinion – it is simple the fact of history. They will NEVER do the right thing for the country when they hold the power. They will blame the people and seize more power because that is always the answer to them.
Canada – the Sneak Preview
COMMENT: Mr. Armstrong -
The Liberal majority was no surprise – they are still the best political machine in the province. They promise no deficit in 2 years – well that’s smack in the middle of 2016, so good luck with that.
What worried me was the militant advertisements by the Ontario Provincial Police Union that I heard every day on the radio commuting to and from work: they promised a breakdown of law and order in the province should the Conservatives take power and cut back on the civil services.
This brings into focus your analysis on the fall of Rome where the soldiers would rob from the citizenry to maintain their income and pensions. I expect the police unions are going to strongarm the government in the years ahead and we’ll be expected to pay.
REPLY: This unfortunately is very true. The unions have destroyed the ports of New York and Philadelphia. You just do not see ships go there any more. Unions have basically destroyed whatever they get their hands on for the days when they were needed for working conditions are gone so today it is all about just grabbing more and more money. New Jersey will have its credit rating reduced because the unions refuse to give anything back. They demand higher and higher taxes so they can live large. This is how governments implode. Their costs exceed revenue and the deflationary spiral destroys the country. Portugal was the major currency of Europe until Spain discovered the wealth in the Americas. Then Spain crashed and burned. Both countries were reduced to the third world status. This same process is underway. Going to negative interest rates is typical in these age of deflation.
Nonetheless, this phase will come to an end and volatility will rise from the ashes. Rumors of its death are greatly exaggerated to cite Mark Twain. The central banks in trying to stimulate buying in bonds will find when the trend shifts, they will be unable to sell long-term debt like they once did. This will be aid the asset bubble as more and more capital flees from government.
Google – The New Bank – Rollover BitCoin & Banks – Its the Internet Revolution
The real birth in electronic money is not Bitcoin, but Google Wallet. Standing in line at Starbucks you will see the under 25 crowd pay with their cell phones. Sorry, but Google is already there. Bitcoin cannot compete nor will traditional banks. Just as Amazon reduced book publishers to a subservient role at their direction, and book stores went out of business, while the internet is rendering newspapers obsolete, the trend to pay attention to is Google Wallet, which is targeting the traditional banks.
Google has launched in the US market its electronic purse known as the Google Wallet. This form of electronic money enables users to pay for the internet as well as a rising number of stores like Starbucks. However, Google Wallet also allows you to send and receive money. In Europe, the search engine already has a banking license and could start at any time. Because Google’s Android operating system runs on many smartphones, the company has the ready market globally.Google Wallet has the best conditions to establish their electronic money in Europe including Germany and Switzerland than any other system. The younger the generation, the greater the market share Google already has in place. Extending their business into banking will be much easier than anyone anticipates. Google is poised to emerge as a bank that nobody seems to quite appreciate at this time.
Apple’ latest iPhone is also equipped with a fingerprint sensor. The strategy in product development is clear. With this technology, your cell phone can become the most secure credit card because it will require your fingerprint to function. Apple is using this technology in its music platform iTunes that again is used in a greater proportion as you move down the age group..
Facebook is also applying for a banking license in Ireland. They intend to offer banking using its vast worldwide online network throughout Europe. We are looking at a younger generation moving rapidly to electronic money much faster than the older generations even think is possible.
We will see Google and Facebook emerge with electronic accounts for a client-base that will increasingly move away from brick-and-mortar banks rendering them obsolete just as Amazon wiped out a lot of bookstores. A Camera shop that has been here in my neighborhood for 40 years is closing at the end of June. When I ask why? The response was they cannot compete any long with their expenses.
Banks are dinosaurs and are simply incapable of competition. They are as incapable of competing as the local camera store or the newspapers that cater to the older generations, not the younger. This is a wave of Creative Destruction that is in part contributing to the rising systemic unemployment as technology renders many jobs obsolete.
The Internet giants of Google, Apple and Facebook already have the millions of customers established. They are tracking their buying behavior precisely. They can target customers like never before and making the next step in banking to lending will be a breeze. Credit applications are already being approved electronically in minutes. This makes much of the banking staff redundant.
Moving to electronic money is being aided by this technology shift. So while the older generation pray for Bitcoin, the real money is in the hands of Google, Apple, and Facebook who do not have to sell their names to get people to trust them and like PayPal, you can keep your account in your home currency and pay in whatever currency you desire.
Companies will ne moving more and more toward this shift in money. Once we see Google, Apple, and Facebook move to the next big step of lending, say goodbye to the banks of old. If someone online buys a book or bids for something on Ebay, his Internet company might will simply then offer you the right loan. Consumer loans are relatively set formulas and computers by default calculate the risks and decide approve of not.
In Germany just over a 25% of all Internet purchases is now being paid for using the Ebay’s subsidiary PayPal, with estimates in volume exceeding almost 150 billion euros. Ebay’s subsidiary has startled the financial industry and offers credit. You can link a credit card to the account and charge that card automatically.The German banks are too traditional to even contemplate how to compete.
As the economy turns down, banks will be unable to comepte with rising costs in a down market. In Germany, the Samwer brothers who have the online shoe retailer Zalando added Lendico, which has a similar concept like Lending Club. This is part of the internet revolution that is as significant as the industrial revolution was back during the 19th century. Banking is a rapidly collapsing industry just as newspapers. Mainstream news will not be around much longer for the younger generation pay no real attention to them and shows like MSNBC and FOX are really just propaganda selling their political views rather than reporting a fair and balanced news service. Banking will be unrecognizable in another decade.