What About Croatia?
QUESTION: Hi, Mr Armstrong, when You said “they will confiscate 10% of everyone’s accounts in Europe” did You mean also Croatia?
Regards
ANSWER: Sorry to say – you will be included. This was one of the factors that also persuaded Ukraine to turn away from Europe. The problem is this mixture of German austerity (deflation) and the French inherent socialistic philosophy, is producing a lethal combination that I have to say threatens the survival of the European Union. The New World Order that one government would eliminate war was absolutely brain-dead. War can also emerge from social unrest – not just kings playing a game.
European Confiscation
QUESTION: Martin, I read with alarm the blog post this morning about the coming 10% tax to be imposed on European accounts. I’m an American with an IRA managed by a SEC regulated private Swiss Banking firm with my funds in an Austrian branch of a Swiss Bank. I report the account on my tax returns every year. Not trying to hide anything here. Just want to avoid loss of funds for no good reason. Is it time to bring it back to the states?
ANSWER: When they took the funds in Cyprus, the EU did not distinguish between European, American, or Russian accounts. I cannot honestly answer that question for it would be just a guess on my part and I do not guess with people’s lives. We all have an opinion, but that is not fact. So my only way of judging the risk is based upon their past performance. It is better to be safer than surprised. Perhaps if they had a subsidiary or branch outside of Europe, that might help moving the account to there. But the Swiss are vulnerable to threats from Germany and France. They have not shown the backbone they should have taken, but then again, they could have been cutoff from trade with the EU, which was a threat. They would then lose all their other industries. The Swiss chose to sacrifice the banking industry and they did a good job wiping that out.
European View – Switzerland v USA
QUESTION: Hello,
One question: will a European’s money and shares held in Switzerland be safe from the IMF European bank bailout proposal?
Thanks
KR
ANSWER: Switzerland has two risks. First, it has the biggest stockpile of euros of any central bank because it was trying to hold down the franc. It stands to lose big time when the Euro declines. Secondly, the Swiss have given up everyone. If France and German demand accounts, they will hand them over. They already agree to take taxes out of other Europeans. So why risk the uncertainty of Switzerland? The best way is to get off the grid which is why people have been buying art, real estate, coins, and diamonds. Europeans have been big buyers of US real estate.
Diamonds the New International Money?
Everyone has heard that the diamond industry is a monopoly controlled by the De Beers Family of Companies. That perception has been the standard response because they in fact had such a monopoly beginning in the mid-1800s. That actually came to an end in 2000. There has never been a commodity exchange for diamonds largely because of this monopoly status and the fact that diamonds vary so greatly in quality.
De Beers controlled the supply of diamonds in an effort to control prices. After 2000, the monopoly collapsed. However, the diamond industry is still considered a “oligopoly,” with a few companies still controlling the supply of most of the diamonds available. The lack of standardization is perhaps the primary reason diamonds are still not traded on an exchange, which does make it much more difficult to use them as money for that does hurt an item’s liquidity. The producers like to escape from price volatility, but that does not alter the cycle with respect to demand.
Yet diamonds still have something the precious metals do not. They do not set off metal detectors and you can wear a $100,000 diamond without a problem. Nonetheless, unlike gold or silver, diamonds vary significantly from one stone to the next and that makes them difficult for simply using as money. With variations in carats, cuts, and charities, it would be difficult to standardize a product for the purpose of being traded on an exchange has been the main argument. However, it could be done, if the producers and buyers really desired. Bond Dealers deliver various issues against a futures contract and there are real estate contracts that are just as complex lacking standardization.
The derivatives market often does not actually take delivery of a physical commodity. This arrangement is highly suitable for a diamond contract if the industry supported it. The role of the commodity markets is to allow producers and users a method to hedge price risk. But this also broadens a market and expands liquidity. There are plenty of stores offering to buy gold for they sell it to a central buyer who refines it and sells it into the market. He can do so locking in his price to ensure his profit selling the risk to investors.
Commodity producers and consumers normally use exchange traded commodities to lock in prices of items they will bring to market or purchase from the market at some point in the future. Commodities that are popular among hedgers, include, the agricultural commodities as well as livestock and the various metals and energy markets with financial markets taking the bulk of trading these days in bonds and shares. It is this formation of an exchange supported by producers and consumers with speculators and investors buying and selling the risk that creates a marketplace and liquidity. Without the requirement of taking delivery of the physical commodity, risk can be bought and sold between the four types of players giving depth to the marketplace. The purpose of such exchanges has often distorted as just “paper contract” and that somehow distorts the commodity value. In truth, without such a market there would be no stores buying gold from the public if they could not resell the scrap gold at some guaranteed price.
Diamonds are ripe for the creation of a market and to expand liquidity, that will have to take place. So why has it not happened? There have been numerous attempts in the past to create such a market. Some argue diamonds are not a real commodity for they lack a utility value. The same can be said of gold. Both are commodities based solely upon their aesthetic value dependent upon human desirability. Diamonds and gold are unlike most other commodities, for they are rarely used in any industrial process, while their biggest use comes in the production of jewelry. The argument has been that besides jewelry manufacturers, what types of hedgers would even want to lock in prices of diamonds? The only way to expand the market is to institutionalize it. Speculators will then look to benefit the most from a diamond derivative, as they would have an opportunity to trade diamonds without physically “trading” them. But this will expand the liquidity and help diamonds become a more common store of value for the new age of metal detectors.
To use diamonds right now, you either have to go with standard grades for jewelry, or you need the investment grade with certification. It is either low-end or the top end. Anything in between is susceptible to serious problems at resale.
Advice to Europe – Part II
The big money has been buying Art, Real Estate, and ancient coins that are an international market. If you cannot get stock that is liquid, you need other “movable” assets be it coins or diamonds. Real Estate is not really movable. Fine Art has jumped more than 25% on the top end. Even retail sales in Britain were so robust they may have exceeded 2006 levels. It appears the big money is moving out of Europe getting off the grid as rapidly as it can.
Advice to Europe
QUESTION: Hi Martin,
Happy New Year 2014. Please keep up the fantastic work you are doing for all of us! It is a blessing that there are people like you, when in Europe we are cursed with hopeless politicians as Hollande and a Marxist IMF boss.
One question, you wrote the following in one of your last postings:
‘My advise to Europe – move as much as you can buying US stocks for now and even take delivery of the share certificates to prevent them from finding accounts in New York and demand they too be handed over. Hollande will come up with that one you can bet. He will weaken Europe and destroy the future of generations yet to come.’
I have asked several brokers if there is a possibility of delivery of shares or share certificates, and unfortunately each time the answer has been ‘no’. What broker(s) would you recommend for European people? Should we move to international brokers, that keep your money in non-european banks? Do you know any broker who will support delivery of share certificates? Thanks for your reply!
Kind regards, H
ANSWER: I will call some brokers I know personally to see what can be done. I can say things are different from they were before 2007. Large firms have international desks and will not allow you to even open an account with a local broker in the states. This is all about taxes and reporting these days. I will make an effort to see what I can do given there are so many European readers.
Japan & the Truth About Fukushima Daiichi nuclear power station
I have received a many requests about Japan and the Fukushima Daiichi nuclear power station disaster. I have many friends there and it deeply concerns me that the failure of the government to seal that site like the Russians did is threatening the world and Japan itself. The reports of radiation hitting the West Coast of the USA are alarming and the debris that has been floating toward the USA is another issue unreported. However, the great concern is the secrecy laws imposed in Japan. Governments do not imprison people for criticizing officials unless there is really something they are trying to suppress. This in itself seems to be confirmation of our worst fears.
A Source from Japan Writes:
Below is directly from the japan times – basically under new laws rushed through by Abe in dec 2013, an individual can be indicted for conspiracy if he/she goes after a politician or official. An official in this context means any high ranking official at TEPCO. There is huge and widespread distrust of the govt/TEPCO’s handling of the situation – people are now scared to step forward – this is from a very wide range of friends and not one of them believes the govt on this issue.
The introduction of this law is the biggest erosion of free speech in japan in my lifetime. If you are Japanese there is no effective remedy, add to this that voter turn out is extremely low (I don’t know of anyone that votes) and this is a picture that won’t change.
This is from the Japan Times:
Prime Minister Shinzo Abe told a news conference on Dec. 9 — three days after his Liberal Democratic Party and its coalition partner New Komeito enacted the state secrets law in the Upper House’s plenary session (night of Dec. 6) — that he will explain in detail the law in order to assuage people’s fears about it. The law is to be promulgated today.
He also said that the scope of secrets will not go beyond that currently defined by the government and that the law will never threaten people’s ordinary lives.
Abe must have been taken aback by the public’s strong criticism of the law. According to a Kyodo News poll, 54.1 percent of respondents said the law should be revised in the next ordinary Diet session in 2014, 28.2 percent said it should be scrapped completely, and 70.8 percent felt uneasy about the law.
When such a large portion of the public agrees on anything, the government should listen. Apparently because the law was forced through the Diet without sufficient debate or consideration, the approval rating for Abe’s Cabinet has fallen 10.3 points since last month to 47.6 percent — the lowest since it formed in December 2012. The disapproval rating surged to 38.4 percent, up 12.2 points.
People should not be duped by Abe’s misleading rhetoric. The simple fact is that whatever explanations he may give about the law, its content and nature will not change now that the law has been enacted. If Abe wants to give detailed explanations about the law, why did his administration not set aside enough time for thorough Diet deliberations? If it had done so, more problems about the law would have been exposed to the public’s eyes.
According to lawyer Yuichi Kaido, it was only at 11:45 a.m. on Dec. 5 that the Abe administration disclosed a 92-page clause-by-clause description by the prime minister’s secretariat of the law at the request of former Social Democratic Party chief Mizuho Fukushima. This omission on the part of the administration clearly shows how it makes light of a democratic process based on thorough discussions.
The Abe administration made 11th-hour proposals to set up oversight bodies. But they will be made up of bureaucrats and will not have power to examine the content of each specific designated secret. Abe said that transparency concerning designation of secrets will be secured, but he gives no evidence to back up his argument.
Abe’s contention that the scope of secrets will not expand is a smokescreen. It conceals the fact that under the law, heads of administrative bodies have discretionary power to designate information related to security, diplomacy, counterintelligence and anti-terrorism as special secrets without effective, third-party independent oversight — thus virtually without limits.
In this connection, what the standing committee of the Catholic Bishops’ Conference of Japan pointed out in its protest statement is important. It said that while information disclosure is the basis of democratic decisions, the law, whose definition of special secrets is extremely wide and vague, will put the administrative branch of government above the Diet, which under the Constitution is “the highest organ of state power” and “the sole lawmaking organ of the state.” And the law will carry the danger of limiting the Diet’s “right to conduct investigations related to government” as guaranteed by the Constitution, thus threatening the constitutional principle that “sovereign power resides with the people.”
As the committee also pointed out, there is a danger that the defense minister will designate as special secrets the Self-Defense Forces’ use of weapons and joint military missions with the United States in foreign countries — actions prohibited by the Constitution — thus undermining the constitutional no-war principle.
Abe’s contention that the law will never threaten people’s ordinary lives is also groundless. Under the law, people could be accused of “conspiracy” for discussing whether to approach government officials for information that happened to have been designated as special secrets, or accused of “incitement” for just asking officials to release such information.
The law’s definition of terrorism is so wide that state authorities could regard as acts of terrorism political, civic and other activities by citizens aimed at persuading the government and other organizations or people to consider their opinions or demands, and thus monitor, investigate or suppress their activities even before such activities become public.
It cannot be overly emphasized that the law undermines freedom of the press, people’s right to know and freedom of expression.
Kaido, the lawyer, noted that Frank La Rue, U.N. special rapporteur on the promotion and protection of the right to freedom of opinion and expression, and U.N. Human Rights Commissioner Navi Pillay regard the law as running counter to Article 19 of the U.N. International Covenant on Civil and Political Rights of 1996, to which Japan is a party. The article in part says, “Everyone shall have the right to hold opinions without interference” and “Everyone shall have the right to freedom of expression; this right shall include freedom to seek, receive and impart information and ideas of all kinds, regardless of frontiers, either orally, in writing or in print, in the form of art, or through any other media of his choice.”
Kaido’s call for attention to the covenant is important because it explains in a concrete manner what constitutes freedom of expression as well as refers to concrete methods people can employ in order to express their views and opinions.
The definition of terrorism in the state secrets law includes this phrase: “activities that force political and other principles or opinions on the state and other people.” One can clearly see that a loose interpretation of this definition could be used to suppress people’s attempts to express their views and opinions through various means, thus violating Article 19 of the covenant.
The secrets law is moving in exactly the wrong direction. As Kaido points, the law does not include any provisions to protect whistle-blowers. Whistle-blowers acting out of conscience should not be restricted, but rather given a larger public forum and stronger protection under the law. The fear that if the law takes effect, information about problems at nuclear power plants will not come out seems tenable.
December 6, 2013, should be remembered as the day that the LDP and New Komeito enacted a law that could undermine not only the freedom of press and expression but also other various constitutional principles.
Citizens, realizing that the law is based on a shaky and feeble legal foundation, should use various means available such as sending letters to lawmakers, issuing statements, making speeches, organizing study meetings and taking part in demonstrations to make clear that they will not accept the revival of some falsely glorified past in which Abe seems to believe — a past in which the Japanese public was deprived of the right to know what the government was doing.
History Repeats – Even for Popes
It is being reported that millionaires are now starting to curb their donationsto the Catholic Church because of the Pope’s Marxist views that are clearly anti Capitalism and freedom. Unfortunately, those in religion never understand that there is a difference between equal right and equal wealth.
What Pope Francis has said is dead wrong, supports theories that killed more people than anything else throughout all time, but he is by no means alone in history. On May 16th, 1931 in the middle of the Sovereign Debt Crisis, the Pope at that time called for the same action failing to realize that it was the unsound finance of governments that blew up the future of so many people no different from we are going through once again today. If anything, it seems when government gets in trouble, the Pope routinely comes out and misunderstands the economy and the causes in motion. I suppose this is another issue that simply cannot be changed. It is impossible to show a Pope he is off base and should stick to religion and just as impossible to get politicians to ever admit they are the problem – not the people.
The Coming 2014 Expropriation of 10% of Everyone’s Accounts
Anyone who thinks it is a fantasy that government will simply just confiscate 10% of everyone’s accounts in Europe better have another look at the fool they see in the mirror staring back at them. This IMF solution is traditionally French and is really coming because the people in charge are effectively Marxists and this idea came from the IMF under the control of French ideology. They will expropriatethese funds to save a banking system that they screwed up and will never reform anything because they are incapable of admitting any mistake.
These European government officials really are playing a dangerous game that is inviting total chaos, civil unrest, and may set themselves up for invasion. Instead of Napoleon invading Russia (1812.479), it may be the other way around when they smell weakness.
Let me make this very clear. I have many French friends and they know the people in charge are just Marxists. Adam Smith wrote Wealth of Nationsbecause he visited France to investigate Physiocracy that argued agriculture was the only real wealth. Karl Marx did not come up with Communism himself. He was more of a socialist. He did not advocate confiscating all property. It was the French movement of a commune at the time that convinced him their way was better. It was Engels who steered Marx into Communism. These ideas have emerged from France and this is why we have some of the most insane ideas still emerging from this country. There is a core philosophy among some that this socialism is correct.
The IMF proposal to expropriate everyone’s accounts in Europe will happen. The consequences could be absolutely the collapse in confidence that will be off the charts. Why should people trust government ever again or any bank for that matter?
My advise to Europe – move as much as you can buying US stocks for now and even take delivery of the share certificates to prevent them from finding accounts in New York and demand they too be handed over. Hollande will come up with that one you can bet. He will weaken Europe and destroy the future of generations yet to come.
Long-term (decades) v Short-Term Investing
QUESTION: “If gold and silver are such a bad investment, why are there so many “we buy gold and silver” shops opening up in my town (Dallas, TX)? Shouldn’t they have gone out of business being on the wrong side of this trade?”
ANSWER: No. That really has nothing to do with anything. Whatever they buy they sell quickly to a scrap buyer. That person buys from all the retail stores and then refines the gold and sells on the exchange or to the refiners such as Engelhard who do the selling on the exchange. It is nothing more than the margin spread.
Gold and silver are commodities. There is a time to buy and a time to sell. Nothing goes up forever and nothing goes down forever. As gifts for little kids, I have always given them $20 gold coins for birthdays, Christmas, whatever. Over the long-term it will probably work out. But if you are an investor, well you cannot hold on to positions in anything for decades hoping it will rise again. That is like throwing your capital away. Gold and silver have been the worst performing investments since 1980/ That does not say they will remain the worst. Their day is coming, but keep in mind, government is well aware on their potential for an underground economy. They have tolerated Bitcoin for this get people indoctrinated to the cashless society they also envision for tax purposes.
One reader writes:
no wonder they want everything electronic: the following is from my tax acct.’s newsletter:
IRS sends notices about “possible income underreporting”
Form 1099-K is a new information return sent to businesses by “payment settlement entities” reporting the amount of credit card and other electronic receipts that were processed for the business.
The IRS also receives a copy of Form 1099-K and cross checks the reported amounts with the business’s total income reported on its tax return. Where the numbers don’t seem to make sense, the IRS sends notices to businesses telling them they “may have underreported gross receipts.” Notices go on to say “This is based on your tax return and Form(s) 1099-K, Payment/Merchant Cards and Third Party Network Transactions that show an unusually high portion of receipts from card payments.”
The IRS has sent thousands of letters labeled “Notification of Possible Income Underreporting” to small business owners. The notification project is ongoing as part of the IRS’s campaign to deal with the “tax gap,” the difference between taxes owed and taxes actually collected.
Iceland – The First to Fall – The First to Rise
QUESTION:
Greetings from Iceland!
Thank you for all the material you post on your blog! I wish I had come across your writings 40 years ago instead of just recently. Does your model include data and predictions for Iceland? Did it predict the collapse in 2008? What is the outlook for the next few years here? Is the worst behind us or yet to come?
Keep up the good work!
Best regards,
HHH
ANSWER: Yes. Iceland was the first to go. What I have learned from the study of the GLOBAL economy rather than DOMESTIC theories, has been fascinating. This is why I say the US will be the LAST to fall. Britain abandoned the gold standard on September 19, 1931, when speculative attacks on the pound forced Britain entirely off the gold standard. As soon as that took place, Britain immediately began to recover. This was noticed by George Warren. He was ridiculed as the “farm economist” to somehow discredit him as not being a “real”economist. However, it was that British recovery that enabled Warren to convince Roosevelt to devalue the dollar in 1934 when his entire Brain Trust was against the move.
The difference I have learned from correlating the entire world has been that it isNOT all simultaneous. This is a huge complex system of interconnections and you push on one and you can then see the trend in motion. Iceland was first, which people tend to dismiss and just isolated. Then Greece goes in 2010 and we begin to see how then capital looks around and saw Portugal, Spain, Italy and even France.
The way my forecasts have been so correct or so many things is not because of some luck or unusual gift of opinion. It is simply realizing that everything is connected and the trend in motion will sweep through everything in due course. Gold had to decline from the 2011 high because the cycle was turning and stocks had to reverse and rise.
People do not understand the forces of DEFLATION and INFLATION. Warren saw it in his mind’s eye. Why is there DEFLATION? It is this shift away from Private Assets and the sudden rise in demand for cash. The purchasing power of money then rises and assets must then fall. INFLATION is when the purchasing power of money falls and the valuation of assets rise. It is simply wrong to defineINFLATION as a rise in the quantity of money for that is purely a primitive understanding that is isolated to a closed economy purely from a domestic viewpoint. The increase in money supply of the Fed produced NO surge in inflation. As long as people keep defining INFLATION and the rise in the supply of money, they will never understand the economy. INFLATION can unfold even without an increase in money supply if the people lose confidence in government and thus that will transfer to money.
The financial crisis of 2008 was devastating no doubt. In 2008, with the EUR/ISK rate surged from 90 krónur to the euro in January to 305 krónur to the euro in October 2008. This impacted the liquidity issues of Iceland’s three large banking groups — Glitnir, Kaupthing, and Landsbanki. In November 2008 the Icelandic Parliament passed an act amending the Foreign Exchange Act of 1992, granting the Central Bank of Iceland the authority to issue new Rules on Foreign Exchange. On November 28th, 2008, the Central Bank of Iceland (CBI) issued new Rules on Foreign Exchange, replacing them on December 15th, 2008 by a second set of rules.
As for Iceland, you will be the first to rise economically being the first to fall. You did imprison two bankers – the first to do so, But your mortgage structure presents problems. Taking mortgages and indexing them to the rise and fall of the currency on world exchanges did not help for long-term stability. This transfers the risk to the people where their mortgages can rise in real terms.
As far as its debts because of the banks, it should simply default. If no one would lend to the country, that would be fantastic. It would force fiscal responsibility. But that is not what happens, Spain and France were serial defaulters. Yet people still kept lending again and again. So I would not worry about that. Default and walk away. The world will then look at you from a fresh start.
Pravada Predicts Russia will Restore Soviet Union by 2025
Russian Pravda is reporting that the Soviet Union will be resurrected by 2025. The truth about this, unfortunately, Europe is collapsing because of the socialism and the destruction of any future for the youth. Pravda this time is actually not spitting out wild propaganda. Russia will rise and become a very formidable power even on the economic front. They will be to Europe what the Germans were to Rome.
The disarming of Rome was accomplished by the unsound economic finance. Once the pension go, who will even join the army? Politicians are only concerned with keeping power – not for the welfare of society. They are the biggest threat to our future for even a blind man can see what they are doing is a failure. Even Obamacare they try to paint as a huge success for it now has 1.1 million people signing up out of 317 million. But the added costs and all the nonsense regulations introduce and the new taxes, are far more than if they just made the medical bills of so few people.
Honestly. If these people had twice the life jackets on the sinking Titanic, they still could not figure out how to distribute them. They are leading the world into real chaos and as the Cycle of War turns up – this is all unfolding on schedule. Just crazy.
Turning Risk Management on its Head
QUESTION: Hello Marty; I am looking forward to your training conference. Will you be going over your Risk Management program you use to demonstrate in Tokyo in addition to Strategic Trading? Is that up and running again? BTW: it would be great if you came to Tokyo for a conference.
Cheers;
JG
ANSWER: That is the module I am working on so hard. The RM.EXE program was amazing. Yes, this is one module of the program that reviewed markets worldwide for the big movers.Backing into Risk Management and turning it on its head allows you to see the greatest risk for an existing position, but the greatest gain for a new position.
It is true that understanding Risk Management is vital to you survival for Strategic Trading. Far too often people do not understand the risks, get into a position, and then bail out at the lows of a reaction only to watch it rise again. You have to approach the whole this entirely different. If you understand the game, then you can play – otherwise you will be just prey.
I do miss Tokyo. I still eat Japanese Sashimi at least twice a week.
All the best
Marty