Euro & Its Rise with Deflation
QUESTION: Dear Mr. Armstrong,
You have not reported on the sinking Dollar for a while. Is this just one of the phases of competitive devaluation between the majors with the US selling or is it China liquidating. With the Euro in a mess, the Swiss banks cracking and the $ falling where is the sense of it all and how much further can the Dollar fall from here.
Thank-You,
PF
ANSWER: No, the Chinese are not liquidating dollars, they are shifting from PUBLIC to PRIVATE assets. They will curtail accumulating dollar reserves and invest more domestically. Nobody is buying Euros right now outside of Europe. The number for the Euro have not changed. Keep in mind that the higher the Euro moves, the greater the economic decline. The Swiss have shot themselves in the foot. This is a question of timing rather than price. We will have a report on world currencies very soon.
The greater the economic decline, the more deflation and the higher the Euro. But the numbers remain unchanged.
Global Market Watch Dec 11th
The Global Market Watch has been posted for the close of December 11th, 2013.
Anonymous Reporting From Ukraine
REPORTING FROM UKRAINE
We will not disclose who is reporting directly from Ukraine for security reasons that should be obvious.
So… oops they did it again – by night, at the best tradition of KGB.
The Ukrainian riot police are moving against protesters and are using tear gas and batons. They are driving people out of the center of Kiev slowly and confidently. Traffic police are now stopping cars from entering the city center, and new riot police are approaching everyone. The generals promise not to beat people, but just allow the “city workers” to “clean up the perimeter” is what they are claiming. But officials are in fact detaining protesters, beating them, and they are arresting them.
One protester Nikita Petick posted to his Facebook page from the paddy wagons through mobile device: ”Sos, I was detained.” ”They beat all brutally. This is hell. We tried for this not to happen – everything. Forgive me. Guy next to me broke down. the police they just don’t care.”
The West has tended to misreport what is happening there. The reports were that these are protesters angry about Ukraine not joining Europe. However, what is going on is the real seeds of revolution. All these people in the square came there just because they realized how far all this corruption and “family” thing really goes in government. They feel it is not normal to live in fear, that anybody can be fired or even beaten and jailed for things they didn’t do just because they become inconvenient for someone powerful. They see there is not even the smallest chance for economic development when any business has to bow to a “big daddy”…so it cannot continue like this.
The people are unbelievably united in this respect. Even those living in the east of Ukraine that are pro-Russia, even those who voted for Janukovich before, everyone is united against a corrupt government. They all see that it is very wrong now and if they don’t speak about it now, maybe afterwards there will not be a possibility even to speak about it (like in Belarus). We owe it to the courageous demonstrators to speak the truth about what is happening in Ukraine.
Why Switzerland Is A No Go
COMMENT: “Switzerland is caving in all over the place. I just got notified the IRS wants to look at my 2008 return because I was a partner in a company back then that had a perfectly legitimate business account at UBS back then. Statute of limitations is up on my return, so I have reason to cooperate with the IRS, but I am afraid of triggering an audit if I refuse to comply.”
L
REPLY: The Swiss bureaucrats thought they cut a deal with the US and drew the line in the sand at 2008 where any Swiss bank is liable to the IRS for Americans who did not pay taxes. The account need not have been personal. You only had to be listed as a partner having some interest whatsoever. It is a total disaster.
The value of Swiss banks have collapsed. You cannot buy a bank there any more because it is not what they have on their books right now, but what they may have had back to 2008. You can buy a bank for perhaps $10 million that was a $100 million in value before 2007. But The bank is liable to the US for fines with no limit if they say some American didn’t pay their taxes. The only thing being sold are current assets from one bank to another. The model of small private banks has collapsed in Switzerland for they lack any ability to make money. They cannot risk dealing with Americans and Germans, French, and British are not far behind. The bureaucrats have sold the country out and are incapable of comprehending what they have done.
Then they pegged the Swiss to the Euro. They have the biggest asset book of any central bank buying tons of euros to keep the Swiss franc from rising or their industries have threatened to leave. The losses the Swiss central bank face on the horizon are massive.
Switzerland is handing over records of Americans back to 2008 on a wholesale basis. Any American involved in any business in Switzerland is persona non grata. This hunt for money is destroying the world economy on a massive scale. When this cycle turns down in 2015.75, you will see a major real estate crash in Switzerland and volatility will rise sharply because liquidity is collapsing as capital is UNABLE to invest freely around the world except through some fund.
Clients from Switzerland tried to open accounts with a broker at Merrill Lynch who was familiar with our models. Merrill Lynch would not allow them to do so for they were non-American and thus had to go through only their international desk. Clearly, this smells of internal regulations to make sure whatever a client does is reported to their government for taxes. The accounts were not set up when you just call orders into a desk you have no idea who you are dealing with.
The internal compliance at firms is reducing international investment on a grand scale. The West is imploding because they are all hunting money in every direction. They cannot see that this is seriously undermining the entire economic free markets. Socialism is destroying everything.
Looks like China, Dubai, and Singapore may be the benefactors of this madness. Now, even Switzerland is giving up everyone in sight.
Bubble in Stocks?
The Amazing thing is people are already talking about this is a BUBBLE that is unsustainable. They are now claiming household income is down 4% yet the S&P 500 is up 70%. They are incapable of any real analysis. The RETAILinvestor is NOT involved in this market. There is no wild speculative fever. They are obsessed with this being a bubble purely based on new highs with no regard for the pattern.
There has to be a Phase Transition for a Bubble. That requires a near doubling in the value within often the last year. We have new highs in the DAX as well. Why? Is the European economy doing well? No way!
Capital is fleeing from PUBLIC to PRIVATE. This is capital preservation – not wild speculation. Pension funds are moving into equities. Central banks are even putting out their reserves to be privately managed. The IMF is proposing taking 10% of all accounts in a bank in Europe. They are arguing for a SuperBank in Europe that will have the power to directly tax people in Europe and no nation can stop them.
HELLO! Just where is the wild speculation these people are yelling about that make up a bubble?
Middle East Backs Dollar Not Euro For New Currency
The Middle East is planning to form their own monetary union with a single currency pegged to the dollar – not the euro.The states of Saudi Arabia, Qatar, Bahrain and Kuwait are planning a new single currency as members of the Gulf Cooperation Council.The new currency will be pegged to the U.S. dollar rejecting the euro, which is falling to third place in world trade.