The Rise in Agriculture for the Next ECM

The Fall Army Worm (FAW; Spodoptera frugiperda) is a crop-eating pest that was first detected in China back in January 2019. It has now spread across China’s southern border and currently impacts about 8,500 hectares (127,000 mu) of grain production in Yunnan, Guangxi, Guangdong, Guizhou, Hunan, and Hainan provinces. Officially, Chinese authorities have employed an emergency action plan to monitor and respond to the pest. FAW has no natural predators in China and its presence may result in lower production and crop quality of corn, rice, wheat, sorghum, sugarcane, cotton, soybean, and peanuts among other cash crops. Experts warn that there is a high probability that the pest will spread across all of China’s grain production area within the next 12 months.

This is obviously a contributing factor to what the computer is projecting for agriculture. Keep in mind that the patterns the computer identifies come from the price movements. We have wheat prices back to 1259. Clearly, the projections it makes are all inclusive of weather and disease, for everything unfolds in a cycle.

Endless Cycle of Corruption

QUESTION: I read your articles on Capital flows regularly and I appreciate how you interlace different concepts together.
Where is the money?

European rulers essentially drained the Asia/Africa of their resources in the last 400-500 years. With all of it piped into Europe, it should have sustained the population for way more time than what we see.

Did it get utilized or was it financially mismanaged or lost in wars? Was it a population mismanagement or an governance issue? If the Asia/Africa don’t have the resources…Europe doesn’t have it? Where is it?

– PR

ANSWER: It always seems to be mismanagement more than anything. The downside of a “representative” form of government (Republic) is that those who “represent” the people as their full-time career are subject to bribes. A Democracy is more direct insofar as the career people in government are the bureaucrats who are subject to review by the people. As long as they are not career politicians, then they will perform more of a check and balance against the corruption that always takes place in every type of political system. Career politicians accept money from lobbyists BECAUSE they continually need funds to run in the next election. It is an endless cycle of corruption.

Trade Negotiations

QUESTION:

Mr Armstrong

In your opinion of Trump’s trade war policy, you disagree with him because it makes China look weak. What is your solution when the real problem is China stealing intellectual property and they have been called out on it. A person or party always looks weak when they get caught doing something illegal or immoral. Is a little dose of humility and acknowledgment of the error too much to ask?

JM

ANSWER: When dealing with nations, you really cannot humiliate the other side. The best way to deal with that is privately to make it appear there is cooperation and dignity. Both sides must save face. This is not a brawl nor is it a negotiation in a lawsuit. I believe that there is a huge cultural divide and that is a big problem. Many in the private sector in Asia do not negotiate the same way things are done in the West.

The best way is to negotiate behind the curtain and allow the victory to be shared. Head to head confrontation will never win. They cannot afford to yield. This is the same problem with Russia. How can anyone expect Putin to say, “Oh, sorry, you are right. I will yield to your sanctions!” There is less than a zero percent chance of that EVER happening and it would be political suicide for Putin to adopt such a policy in Russia.

I have been in that position of trying to negotiate between two foreign governments. It is not an easy task. One government asked me to see what I could do because I knew the leadership in the other. You must respect the dignity of each player when you are at that level of negotiation.

Market Talk – June 14, 2019

ASIA / AUSTRALIA:

Chinese Industrial output numbers were released today and show a growth rate of 5%. This is the lowest rate of growth in 17 years, showing the strain the U.S. trade tariffs are likely having on the Chinese economy.

A former Chinese central bank governor has warned that the trade war can cause financial chaos, especially if east Asian countries use currency devaluations as a way to gain trade advantages.

India is preparing to impose tariffs on some imported goods from the U.S., mainly dealing with agriculture products, in a retaliatory measure from the recent U.S. tariffs.

The major Asian stock markets had a mixed day today:

Shanghai decreased 28.77 points or -0.99% to 2,881.97; Kospi decreased 7.74 points or -0.37% to 2,095.41; ASX 200 increased 11.60 points or 0.18% to 6,554.00; NIKKEI 225 increased 84.89 points or 0.40% to 21,116.89; Hang Seng decreased 176.36 points or -0.65% to 27,118.35; and SENSEX decreased 289.29 points or -0.73% to 39,452.07.

The major Asian currency markets had a mixed day today. AUDUSD decreased 0.0048 or -0.69% to 0.6865; NZDUSD decreased 0.0078 or -1.19% to 0.6489; USDJPY increased 0.1800 or 0.17% to 108.5500; and USDCNY increased 0.0071 or 0.10% to 6.9353.

Gold decreased 2.3 USD/t oz. or -0.17% to 1,336.96 and silver decreased 0.07 USD/t. oz or -0.47% to 14.8340

Some economic news:

South Korea:

  • Export Price Index (YoY) (May) increased from -0.4% to 0.4%
  • Import Price Index (YoY) (May) decreased from 4.8% to 4.6%

New Zealand:

  • Business NZ PMI (May) decreased from 53.0 to 50.2
  • FPI (MoM) (May) increased from -0.1% to 0.7%

Japan:

  • Capacity Utilization (MoM) (Apr) increased from -0.4% to 1.6%
  • Industrial Production (MoM) (Apr) remain the same at 0.6%

India:

  • WPI Food (YoY) (May) decreased from 7.37% to 6.99%
  • WPI Fuel (YoY) (May) decreased from 3.84% to 0.98%
  • WPI Inflation (YoY) (May) decreased from 3.07% to 2.45%
  • WPI Manufacturing Inflation (YoY) (May) decreased from 1.72% to 1.28%
  • FX Reserves, USD increased from 421.87B to 423.55B
  • Trade Balance increased from 15.33B to 15.36B

China:

  • Fixed Asset Investment (YoY) (May) decreased from 6.1% to 5.6%
  • Industrial Production (YoY) (May) decreased from 5.4% to 5.0%
  • Retail Sales (YoY) (May) increased from 7.2% to 8.6%
  • Chinese Unemployment Rate remain the same at 5.0%

EUROPE / EMEA:

Two “flying objects” have now been identified as culprits behind the attack on Japanese tankers in the Gulf of Oman on Thursday. The U.S. immediately laid blame on Iran. The Iranian foreign secretary was quick to push away the allegations, and is accusing the U.S. of creating a false flag event to sway public opinion against Iran.

The EU is to make a choice whether to follow the U.S. and abandon the Iranian deal or to help normalize trade with Iran.

European MEP’s have created the biggest far-right group in the history of the parliament as tensions rise within Europe with respect to immigration and nationalist agendas.

The major European stock markets had a negative day today. CAC 40 decreased 8.01 points or -0.15% to 5,367.62, FTSE 100 decreased 22.79 points or -0.31% to 7,345.78, and DAX decreased 72.65 points or -0.60% to 12,096.40.

The major European currency markets had a mixed day today. EURUSD decreased 0.0064 or 0.57% to 1.1211, GBPUSD decreased 0.0080 or 0.63% to 1.2592, and USDCHF increased 0.0055 or 0.56% to 0.9991.

Some economic news:

Germany:

  • German WPI (MoM) (May) decreased from 0.6% to 0.3%
  • German WPI (YoY) (May) decreased from 2.1% to 1.6%

France:

  • French CPI (YoY) decreased from 1.3% to 0.9%
  • French CPI (MoM) (May) increased from 0.3% to 0.8%
  • French HICP (MoM) (May) decreased from 0.3% to 0.1%
  • French HICP (YoY) (May) decreased from 1.3% to 0.9%

Italy:

  • Italian Industrial New Orders (MoM) (Apr) decreased from 2.1% to -2.4%
  • Italian Industrial New Orders (YoY) (Apr) increased from -3.8% to -0.2%
  • Italian Industrial Sales (MoM) (Apr) decreased from 0.40% to -1.00%
  • Italian Industrial Sales (YoY) (Apr) decreased from 1.30% to -0.70%
  • Italian CPI (MoM) (May) decreased from 0.1% to 0.0%
  • Italian CPI (YoY) (May) decreased from 0.9% to 0.8%
  • Italian HICP (YoY) (May) remain the same at 0.9%
  • Italian HICP (MoM) (May) remain the same at 0.1%

U.S. / AMERICAS:

Section 232 of the Trade Expansion Act legally allows the president of the United States to impose tariffs if they are deemed necessary under the threat of national security. Lawmakers are now drafting bills to override this legal loophole, and the proposed changes are receiving bipartisan support.

Senator Pat Toomey (R) and Senator Mark Warner (D) have proposed the Bicameral Congressional Trade Act. Under this bill, the Department of Defense, rather than the Commerce Department, would lead investigations into matters of national security. Furthermore, Congress would have the ability to vote on any actions taken under Section 232 over the past four years. Senator Toomey said he is especially concerned about the tariffs placed on aluminum and steel, claiming they were implemented “under the false pretense of national security.” Senator Warner believes that the tariffs imposed under the Trump administration have “strained our relationship with key allies,” and accused the Trump administration of “stretching the concept of ‘national security’ beyond credulity.”

The Trade Security Act, proposed by Senator Rob Portman (R), takes a less aggressive route. This bill would give Congress the ability to disapprove tariffs. However, Portman’s bill is not retroactive and all current tariffs would remain in play. Portman stated that he has a “broader view of trade,” and seemingly wishes to reign in the power granted by Section 232 rather than dismantle it.

Over 600 U.S. companies signed a letter urging Trump to resolve the trade issue with China. Of those included in the list were Walmart and Target, with many believing that the brunt of the trade issue will be taken on by the consumer. “We encourage the administration to negotiate a strong deal with China that addresses longstanding structural issues, improves U.S. global competitiveness, and eliminates tariffs. We believe this goal can be achieved without taxing Americans,” the letter stated.

U.S. indices traded in a choppy pattern this Friday before closing in the red. The Dow slipped 17.16 points or -0.07% to 26,089.61, the S&P 500 fell 4.66 points or -0.16% to 2,886.98, the Nasdaq decreased by 40.47 points or -0.52% to 7,796.66, and the Russell 2000 declined 13.30 points or -0.87% to 1,522.50.

The Canadian indices advanced this Friday. The TSX Composite gained 62.65 points or +0.39% to 16,301.91, and the TSX 60 added 4.27 points or +0.44% to 976.82.

Brazil’s Bovespa fell 733.64 points or -0.74% to 98,040.06.

ENERGY:

Crude fell back from yesterday’s surge. With Chinese industrial production slowing, the global outlook doesn’t look too bright.

The oil markets had a green day today. Crude Oil increased 0.18 USD/BBL or 0.34% to 52.4870, Brent increased 0.61 USD/BBL or 0.99% to 61.9750, Natural gas increased 0.063 USD/MMBtu or 2.71% to 2.3851, Gasoline increased 0.01 USD/GAL or 0.58% to 1.7305, and Heating oil increased 0.0206 USD/GAL or 1.14% to 1.8261.

Top commodity gainers: Lumber (3.75%), Canola (2.89%), Ethanol (3.81%), and Natural Gas (2.62%). Top commodity losers: Cotton (-1.21%), Coffee (-1.28%), Cocoa (-2.89%), and Oat (-1.48%)

The above data were collected around 14:38 EST on Friday.

BONDS:

Japan -0.11%(+1bp), US 2’s 1.84% (+1bps), US 10’s 2.09%(-1bps), US 30’s 2.58%(-2bps), Bunds -0.24% (-1bp), France 0.09% (-2bp), Italy 2.34% (-3bp), Turkey 17.72% (+29bp), Greece 2.74% (-72bp), Portugal 0.62% (-1bp), Spain 0.50% (-4bp) and UK Gilts 0.84% (+1bp).

Iran v USA – Oil Tanker Attacks

There are many people claiming this is Tonkin Gulf 2.0 claiming it is a false flag of the USA attacking the oil tankers in the Gulf of Oman and using it as an excuse for war with Iran. While the theory may seem to have lived in the conspiracy world, there is so much tension and many moving parts, it is unlikely that such a simplistic account has any validity. True, the U.S. blamed Iran for suspected attacks on two oil tankers near the strategic Strait of Hormuz, saying this is a campaign of “escalating tensions” in a region crucial to global energy supplies.

What we must understand is this is not the traditional war of conquest as was the case with Hitler and Napoleon. Nobody is into empire building anymore. This is religious dogma based as laid out in The War  Cycle Report. This falls more into the category of a religious war akin to the Protestant v Catholic conflicts that culminated in the English Civil War. This is a religious conflict where Iran believe the region should run the state and Saudi, UAE, for example, believes in the separation of powers.

There is far more incentive for someone in the Middle East to try to start a war than USA. Trump is not really interested in sending in troops as was Dick Cheney with Iraq. If they could get rid of Trump, there would be a puppet in place to pump up the military sending which many would love.

Do not count on this being just Tonkin Gulf 2.0 just yet. There are a lot of moving parts.

 

What Happens When the Financial Capital of the World Moves?

QUESTION:

Hi Marty,

Knowing that the financial capital will likely move to China after 2032, since that would be the peak of the public wave, where will someone in the US put their capital?

Usually, the move from public to private would result in a move into sovereign debt and cash, but will the move after 2032 be different given the sovereign debt and monetary crisis we will be going through these next few years.

Thanks!

SB

ANSWER: Britain was the Financial Capital of the World until World War I. This chart illustrates what happened to Britain and how it lost that stature of being the Financial Capital of the World — it was debt. The people in Britain did not lose everything. What really happened was that the separatist movement emerged and the British Empire began to break up.

 

Look at the British pound during the American Civil War. It was the rally in the pound that began the breakup of the British Empire, as I have warned will happen to the US dollar. That rise in the pound exported DEFLATION to the British Empire and the economic conditions led to the start of separatist movements. Canada won its independence on July 1, 1867. The second major wave of separatist movements came with the end of World War II. India won its independence on August 15, 1947.

The United States will be at risk of also breaking apart under economic conditions, which will fuel both the religious and political battles between left and right. There will be a high probability that the United States will break into regional groups, probably four major regions in general. It does not mean life will come to an end or that we all have to run and hide in a cave. The British survived as will Americans. If we understand the cycle, we will be better positioned to survive with security.

Forced Loans People Ignore Until it’s TOO LATE

QUESTION: With the private vs public debt and interest rate discussion, nobody is mentioning things like government legislation to forcing people to buy government debt. For example 401’s, IRA’s… must have or be in government debt.

Your thoughts?

ANSWER: Governments have often resorted to forced loans. When Italy was in trouble, they took 90-day paper and converted it to 10-year paper. Most people are clueless about the German hyperinflation. They assume it was due to the government printing money. The spark was December 1922 when the government confiscated 10% of everyone’s property and handed them bonds as a forced loan. Confidence completely collapsed at that moment.

This is all part of the process of the decline in confidence in the government. This is why the system is unsustainable. We will be heading into a great monetary crisis very soon.