2015 World Economic Conference Nov 7/8 Princeton, NJ
We will be holding the Fall World Economic Conference in the States in Princeton, New Jersey the weekend of November 7th and 8th. We are in the process to trying to nail down the venue and dates for the European World Economic Conference for late November to early December most likely in Berlin. We will then go over the best strategy and where to invest to survive the coming crazy 4.3 year period. We will look at world capital flows and global share markets, currency, and all commodities bringing the global picture together so we can see the trend ahead.
We have exceeded 500 in reservations already. Those who are contemplating wanting to attend, we ask that you please make a reservation now. With the advent of the film showing in theaters throughout Europe and requests are coming in from everywhere in Europe as well as Moscow, we want to make sure that our regular client base secure a seat before there are none. Doing two events back to back is a lot of work and I am not getting younger here. So this is not 1987 where I can do three weekends in a row because everyone is trying to get in due to the crash. So this will be a limited event one-time only on each side of the Atlantic.
Bank Portfolios Reflect Bubble for 2015.75
For the first time since 2008, banks are rushing into government Treasuries (PUBLIC) holdings faster than corporate/consumer loans (PRIVATE). Bank portfolio holdings have been a key component in monitoring the shifts between PUBLIC and PRIVATE CONFIDENCE. These shifts from government securities to private holdings within bank portfolios is an important leading indicator of the rise and fall in CONFIDENCE. Normally, this will flip to government (PUBLIC) when we have a recession and PRIVATE will be on the rise into the peak of the economy. We can see this traditional relationship with the major decline into the bottom of the ECM in 2011.
Look closely now at 2014. Holding of government debt (PUBLIC) is rising rapidly faster than we have ever seen historically during a non-recessionary economic trend. This is CONFIRMING the concentration of capital into PUBLIC paper for the peak in 2015.75. Typically, this should be declining as you would normally be producing a bubble in some PRIVATE aspect within the global economy. To see this relationship flip at this point in the cycle is a very serious confirmation that this bubble will be in government paper not private.
Under a normal business cycle model, loans as a rule are more profitable than Treasuries. Consequently, banks traditionally prefer lending to portfolio investments in government bonds. During the mid-2000s, the above chart shows, bank holdings of Treasury and Agency securities fell marginally while the year-on-year growth rate of commercial and industrial loans soared above 20%.
This PRIVATE to PUBLIC holdings reversed during the Great Recession which is what we call the Flight-to-Quality. This current return to PUBLIC holdings growing faster than PRIVATE for first time since the 2008 crash would normally warn that we are headed into a recession and interest rates would drop with lessor demand and the Fed would lower rates going with the trend trying to “stimulate” a hopeless collapse in CONFIDENCE to inspire borrowing. In this case, there is no huge collapse in thePRIVATE holdings, just the PUBLIC are now exceeding PRIVATE. This is a reflection more of a bubble in PUBLIC debt.
When we turn to consumer activity, we see that they increased their borrowing in February reaching a record high. A closer look reveals yet another trend shift. The record high in consumer loans has been driven by a large jump in auto and student loans. The drop in oil prices and the harsh winters has resulted in more car sales and students keep turning to education praying that more degrees will make them employable which has failed to work as 60% of college grads cannot find employment in the field of their degree. The Federal Reserve reports that consumer borrowing expanded $15.5 billion in February following a $10.8 billion gain in January. The February increase pushed borrowing to a fresh record of $3.34 trillion, but it is just not exactly as it may seem.
Nevertheless, while on the surface one would say consumer loans are at record highs, looking closely reveals that car and student loans combined have offset a second monthly decline in credit card borrowing. This is showing a weaker trend than the numbers would otherwise suggest. This is deeply concerning for the peak in the economy for this wave is indeed a dead-cat-bounce – very shallow recovery.
Banks have been reducing their dealing lines. They can no longer manipulate markets as easily as they once did for quick plays in interest rates and commodities (except you know who), and this is also reflected in the sharp rising in PUBLIC paper holdings. As liquidity collapses, the other side of 2015.75 is starting to appearEXTREMELY DANGEROUS for a collapse in CONFIDENCE will cause steeper flash crash than at any point in recent history. Dealing lines being cut in London and New York is reflecting this sharp drop in liquidity and the increase in volatility.
How Absurd – Banks Should Not Lend More than Liquidating Value of an Asset?
QUESTION: Mr Armstrong, there are those who advocate that banks simply cannot ever lend beyond the liquidation value of its assets and that if the bank is threatened with insolvency then you unwind the loans and you eliminate a banking crisis.
Do you think this is a viable solution?
Thank you
Hank
ANSWER: No. That is pretty naive and totally absurd. What is the liquidating value of any asset? During a recession, that may be 60% of the face value. In a depression, that may be 10%. That cannot be standardized and merely reflects sophistry for that person may think they understand banking, but they are really clueless. That is like some guy trying to write a book on how it feels to give birth. If you cannot pre-define with certainty the liquidation value of any asset during a panic, then how is it possible to set some sort of arbitrary value? How absurd!
2015.75 – Peak in Corruption? Dark Age of Socialism
The 2007.15 Peak in the ECM set in motion a profound sea-change within the economy on many levels. It was the beginning of the decline in economic power of the West and the shift in economic power to the East. Liquidity has failed to return and every office building I drive by even today has a sign out space for rent. Government has been systematically destroying business by their greed for taxes. You have the people blaming fractional banking as the cause of everything that they might as well add into their conspiracy Global Warming and then we have those who hate corporations and claim they don’t pay enough in taxes when they pay corporate income tax, a dividend tax to pay out, and then the shareholder has to pay tax a third time on the same money received as a dividend. On top of all this, we have the socialists who want to hand all power to government as if they are actually honest blokes.
Governments are run by primarily one profession – lawyers. Consequently, they will attack every industry except their own. They never see themselves as the problem. Starbucks spends more on healthcare than they do on buying coffee to resell. Then we have the hospital medical profession (not local doctors) which are corporate conglomerates who say the hell with the Hippocratic Oath that requires a new physician to swear to uphold specific ethical standards. These medical conglomerates are run by bean-counters and lawyers. They are only about increasing profits and they do not want to take care of anyone for free in accordance with their Oath. So they bribe other lawyers in Congress to introduce Obamacare and fine anyone who does not have insurance. In the first draft, they wanted you to be imprisoned if you did not buy insurance and the hospital had to care for you. Great ethical perspective.
Government is incapable of reform that benefits society because it is dominated by lawyers who protect their own profession. If injuries were predefined that say you lost an arm distinguishing between your dominant, then they could not argue before a jury that somehow your arm is worth more than another’s. If you are injured and that deprives you of the ability to continue to earn what you have been earning, then that should be the limit to compensation.
Government is for sale. The proposal I have made for political reform that there should be no political contributions and this should be funded by the state was actually something JFK argued because he saw outside money coming in to buy candidates to support Israel having nuclear weapons. Supposedly, the Israeli lobby approached JFK. It was because of this meeting that JFK wanted to work for a law that would have the U.S. Treasury pay a set and equal amount for all politicians running for president. That effort failed. Political reform is the least likely to be embraced in Washington.
The Obamacare will destroy more jobs for now it clearly makes sense for business to move toward automation and then you will eliminate the healthcare costs. In the 1980s, we gave healthcare to the whole family. It was not that crazy. Today, that will become taxable income as of 2016. Obamacare will destroy even more jobs than anyone imagines and then the greed of the state has police handing out tickets to kids shoving snow. These people are destroying our civilization at the core.
We are at the threshold of major sea-change in the economy. Even during this past month the United States lost its dominant political role as the underwriter of the global economic system. It is becoming obvious that China will exceed the US as the leading world economy and that handwriting is on the wall. The US tried to throw its weight around telling its allies not to join with China. Nevertheless, China’s effort to establish a major new institution to compete with the Bretton Woods structure of the IMF and World Bank has succeeded because of its economic clout. The failure of the US to persuade dozens of its traditional allies, starting with Britain, to stay out of China’s new venture has utterly failed. This is showing what our model has been projecting – China will pass the USA in time.
So as the world moves to a new era in which the global economy will grow less than in previous decades, the economic powers will shift and churn. The wealthy economies had lost during the financial crisis some of their ability to grow, which seems gone forever. The West is in a deflationary mode as taxes keep rising suffocating economic expansion. We are in the Dark Age of Socialism and there is no reversal without serious change.
Bad Bank
QUESTION:
Dear Mr. Armstrong,
Your identification and differentiation of relationship vs transactional banking in understanding the corruption of the banking system is spot on imo.
Did not the evolution of this change depend on the increasing government involvement, e.g., the recent RE bubble where banks made inflated/fraudulent loans and collected fees only to sell the mortgages to the GSEs and offload the risk on them, or the student loan bubble, now managed by the Feds. Are not the rating agencies complicit, rating MBS and CDS as AAA which them blow up. It seems to me all these groups of players are intertwined and mutually dependent on each other and none wants to reform b/c they all benefit.
For instance, Big Banks promise to buy gov debt and gov promises to bail our bankers. The repeal/stay of the “Volcker Rule” passed over Christmas is a just so obvious indication that the politicians are owned by the big banks. What’s one to do? I voted for Ron Paul in 2008 and wrote in his name in 2012, but suppose the timing was not ripe for a 3rd party.
Thank you for all you do and sharing your fantastic insights with us common folk.
Best,
Greg
Your identification and differentiation of relationship vs transactional banking in understanding the corruption of the banking system is spot on imo.
Did not the evolution of this change depend on the increasing government involvement, e.g., the recent RE bubble where banks made inflated/fraudulent loans and collected fees only to sell the mortgages to the GSEs and offload the risk on them, or the student loan bubble, now managed by the Feds. Are not the rating agencies complicit, rating MBS and CDS as AAA which them blow up. It seems to me all these groups of players are intertwined and mutually dependent on each other and none wants to reform b/c they all benefit.
For instance, Big Banks promise to buy gov debt and gov promises to bail our bankers. The repeal/stay of the “Volcker Rule” passed over Christmas is a just so obvious indication that the politicians are owned by the big banks. What’s one to do? I voted for Ron Paul in 2008 and wrote in his name in 2012, but suppose the timing was not ripe for a 3rd party.
Thank you for all you do and sharing your fantastic insights with us common folk.
Best,
Greg
ANSWER: Correct. But this has been a process of evolution. Fractional banking has existed since ancient times. That is not the problem. Even if you sell your home and retain the mortgage, it shows up on your assets, while the home owner claims all appreciation. You cannot get to a zero sum game without a Dark Age with respect to money supply
The evolution of this stage of corrupt banking has many layers. The bulk of your local regional banks are not the problem. They will sell your mortgage and that feeds the corruption elsewhere, but they are not the source of the corruption. The rating agencies were bought and paid for and in on the entire scam.
The real estate bubble was also driven by socialist-politicians. The Clintons were a direct cause as well for they thought the poor should become home owners. Politicians encouraged the banks to lend recklessly. This is a complex mess of too many self-interest not having a clue that there is a business cycle. Some curiously seemed to time things with our model. Goldman Sacks sold the very day of the ECM in 2007. Great timing.
Doreen’s Battle with IRS and Contempt of Court
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Abuse of Contempt of Court – Far more Common than People Realize
One of the most abusive aspects of our legal system is the contempt of court. This is where judges claim the power to be a medieval king and just send you to prison without lawyers, trials, or even committing a crime. In the case of Doreen Hendrickson, she refuses to plead to something she says is written by the government and is not true.
Judges claim this power of contempt citing precedent, but that is precedent which predates the Revolution. So to a judge, the American Revolution never took place. It may have created all sorts of rights in fictional settings, but to a judge, they do not exist. I have heard judges issuing arrest warrants for contempt even in divorce cases. The cop then will hunt you down and if you dare resist, they will just shoot you for all they know is they have an arrest warrant that could be anything from terrorism to a traffic violation.
Scripted pleas are actually totally unconstitutional. You are supposed to plead in your own words and the judge is legally bound to accept your plea ONLY if he believes it and it is voluntary. That is just fiction for the justice system has become so corrupt, all they care about now is form, never substance. Here is Judge Kennan stating in my case that I must read from a script written by the government and not allowed to explain anything in my own words. They NEVER want the truth, for that will disrupt their nice little pretend judicial system with its 98.5% conviction rate – some have to die in the process after all.
What I agreed to read was that the bankers took money for their “own benefit” for I refused to all along to plead to taking my own money for we were never managing Japanese money, we bought the portfolios. I fail to see where the words I read even constituted anything close to a crime since the accounts were ours to begin with when all we did was buy their distressed portfolios and liquidated them agreeing to pay their original cost making up the 50% loss in 10 years since interest rates was 8.5%.
This is how the courts work. There is no difference between some terrorist organization handing a script to some captive to read on TV condemning his country and agreeing with his captors and the way the US legal system operates. The king’s lawyers (prosecutors) write the words to pretend to match the law and it is all a dog and pony show. This is the ultimate face of corruption.
A reader saw the film and wrote:
My Morgan Stanley colleague and I went last night to watch your movie … The movie moved us both in a surprising way – mostly pertaining to the motivating factor behind what seems to be … aiming to get their hands on your model. That they were able to hold you in contempt the way they did and for as long as they did was abhorrent and downright illegal. I shared some of the details about the story with my wife (a lawyer) and she said; “there is something wrong with that story – that’s not possible”. Corruption plain and simple I suggested…Oh what a deadly web they weave as they practice to deceive. …