QUESTION: Once again Martin your information and explanations are top class. Indian demonetisation, supportive stories in Australian press of ending the $100 bill, Swedish Riksbank investigating digital currency…
You called all this months ago and now mainstream media softening up the masses..
Question – why is Bill Gates supporting this do you think ?
Thanks for all the work you do

Regards

V

ANSWER: Keep in mind that Bill Gates lives within his bubble. I have been shaped rather uniquely by my clients. Having clients around the world and fielding questions from every country, forced me to see the world through everyone’s eyes. So what I see, others may not if they lack international exposure. This in part is why our World Economic Conferences are so popular. They are the ONLY such gathering of sophisticated people from around the world. You get to see the very capital flows in the room. We had people from more than 30 countries at the WEC. They have become fantastic networking meetings, but have risen to virtually like a college reunion.

Without that exposure to see the world through everyone’s eyes and listen, you will never see the trend of the whole. It is not that Bill Gates is evil, stupid, or involved in the conspiracy. He lacks the experience to see the world for what it is rather than be shaped by local propaganda. It sounds entirely reasonable that eliminate cash and you eliminate crime. He is not asking, what else is being eliminated?

While people keep criticizing Trump’s tax plan saying the wealthy will get more back by lowering the top bracket from 39.6% to 33%, all they focus on is class warfare. Trump’s tax plan collapses the seven federal income tax brackets into three, reducing the top marginal rate from 39.6% to 33%, and lowers the corporate tax rate from 35% to 15%, among other things. The criticism is always just the socialist view and never address the vast waste and corruption in government. They say the national debt will explode by $5 trillion if Trump cuts taxes as if $1 trillion deficits under Obama was somehow OK. They also ignore the fact that lowering the corporate rate to 15% matches the best rates overseas and will then encourage them to bring their money home and with that JOBS! There is nearly $3 trillion offshore that will not return because the socialists demand high taxes. So it will not return. Saying the deficit will rise by cutting the tax rate assumes nobody will return home. That same position was taken with the Reagan tax cuts and proved to be DEAD WRONG!

Kennedy Revenue Act of 1964 (Pub.L. 88–272), also known as the Tax Reduction Act, was the Kennedy tax cut plan that was signed by President Lyndon Johnson on February 26, 1964. Individual income tax rates were cut across the board by approximately 20%. In addition to individual income tax cuts, the act slightly reduced corporate tax rates and introduced a minimum standard deduction. The economic growth virtually doubled.

The Ronald Reagan tax cuts that the Democrats hated and called “trickle down economics” reduced the top rate from 70% to 28% between 1983 and 1990. The GDP growth soared from -3% to +8%, yet Democrats continue to call this a failure. It was Bush who raised taxes in 1991, but it was the massive tax increase of Bill Clinton jumping the top bracket to 39.6%. The Democrats tried to claim that tax increase “produced the one period of shared prosperity in this past era (since 1980).”

Let’s face the facts. The source of data for the chart above is the Bureau Economic Analysis. So this is the government’s own data. This clearly shows that the Democrats just want to tax people who have more than they do EVEN IF it hurts jobs and lowers the economic growth. This to them is just about punishing people. Their claims that “trickle down” economics did not work is total lies. This is not about letting the rich pay less, this is about EVERYONE enjoying the fruits of their own labor.If you cannot discriminate for race, creed, or gender, then why is it OK to discriminate against anyone because they have more than you or work harder?

With India just cancelling currency, Australia and Sweden probably next, then Europe and Japan, all we have standing in the way is Trump. If he fights against this trend to tax everything in sight and further shrink the world economy, then just maybe we can save the United States from the worst of it. Otherwise, we are going down without a life-jacket to cling to in 2017. At some point, it just pays to quit and not produce anything; Ayn Rand.

This is the boldest move by any government in recent times. Both the old 500 Rs and 1000 Rs notes have been “probabilistically devalued” meaning that anyone holding large number of notes, the value just has been significantly lowered by approximately 10 to 20% overnight. If you now try to deposit the cash, the money is devalued so in other words you were just taxed up to 90%. This is all claimed to attack the underground economy or black money and corruption.

To understand this bold attempt, let us assume that the ECM €100 and €500 notes are demonetized overnight. The government can ensure that this money is deposited or converted in banks and thus it then becomes your obligation to prove you paid your taxes. They will compare the sum with an individual’s income tax obligations.

The other tax India has imposed is highly dangerous and is known as the wealth tax, but that was abolished, and replaced with a new tax on wealthy individuals. Broadly speaking, the wealth tax was determined by your nationality, residential status and location of the asset. If you were an Indian national and resident as per Indian tax laws, you would have to pay wealth tax in India, even on global assets. With the new regulations coming by September 2017 whereby the G20 nations will be sharing information, any assets you have offshore will be reported back to your home country anyway. If you did not report mere ownership of assets, that generates fines, seizure, and taxes, the G20 regulations may fill the gap.

The intent of the law was to wealth tax assets that do not generate an income. What you would have on deposit in a bank would be exempt since that generates interest, which is taxable. However, in case of some assets that do not generate income such as gold, jewelry, watches, a second property that you own, you will have to pay a wealth tax. You could avoid the wealth tax by generating an income from it, meaning by renting it out for at least 300 days in a financial year.

The repercussions of not filing wealth tax return or filing an incorrect return was harsh. The provisions of regular assessment that apply to income tax also applied to wealth tax. Interest at 1% per month is payable for failure to pay wealth tax on due date. There were also provisions to impose a penalty and/or prosecute an individual for not filing wealth tax returns. Therefore, under this approach, any tangible asset became taxable just to possess it on an annual basis.

The wealth tax was replaced by an additional 2% surcharge on income for individuals and a 7% tax on business.

Trump is keeping his word so far. He has admitted that he was part of the problem paying lobbyists to get preferential treatment. As they say, if you want to catch a thief, you hire a thief. In this case, Trump has really been on the other side and admitted he even paid Hillary to attend his wedding. He has cleaned house, throwing out anyone who has been a lobbyist from his cabinet. Nonetheless, he cannot fire Janet Yellen from the Federal Reserve. I also believe that would be a mistake. She inherited a nightmare and is by no means the origin of the problems.

Trump is indeed moving rapidly to “drain the swamp” and will keep his pledge to block lobbying by former government official for 5 years. Trump has also made it clear that trade reform begins DAY ONE. As for healthcare, the absurd Democratic owned press blasts him constantly on repealing Obamacare. They clearly do not bother to notice all the insurance companies exiting nor do they bother to pay attention to many doctors refuse to accept Medicare patients. I personally called on doctor for my mother and immediately they said they would no longer take Medicare patients. When I said she had already been there, they backed off. In many states insurance companies will not write insurance for someone over 65. They can only get Medicare. If the press stops this biased nonsense about Obamacare and just called around, they might discover there is a crisis brewing behind their panacea of Obamacare is so fantastic. If you are over 65, you better pray Trump repeals Obamacare and addresses the real crisis that nobody wants to deal with government insurance plans.

We hardly saw any excitement overnight other than the fact that the BOJ bought some 10yr JGB’s to keep yield around zero. This obviously has a detrimental affect on the currency and in late trading we see JPY trading close to 110. As a consequence of the weaker currency financial stocks traded heavy whilst the exporters found support. The Nikkei closed almost unchanged on the day with other core Asian markets also looking for inspiration. The HSI and Shanghai cash exchanges closed unchanged as they await the FED chair Janet Yellen and her Senate address. It was not until late US trading did we see Asian futures markets trade higher. As we close Nikkei futures are over 1% higher with HS and China300 around 0.3% better.

A quiet morning in Europe was brought to life once we heard from Yellen. It was the Bond Market that took flight when in the prepared remarks were released on the “relatively soon” comment when referring to the next rate increase. There is just no holding the DXY back these days as today we see another 0.5% increase (around the 101 price futures). Euro suffered yet again but it should not be singled-out as it is dollar strength across the board that is relentless. Core Europe closed better with IBEX outperforming the others (+0.9%) with FTSE 0.6% and CAC and DAX both around +0.4% higher.

The broader retail market liked what it heard from the Chair today and performed accordingly. With many major indices close to all time records it was NASDAQ and S+P that produced the returns (+0.7% and +0.5% respectively). On the data front Housing Starts and Jobless Claims were the best since 1982 and 1973. VIX traded lower and was last seen 13.4 with gold also taking a hit last down $14 at $1212.

The US curve steepened in anticipation of higher rates with 10’s last seen at 2.28% (+6bp). 2’s closed 1.03% (+3bp) putting the 2/10 curve at +125bp. 30yrs gained 8bp and was last seen trading 3%. It was not the same in Europe as traders are still under the impression the ECB can QE the globe! 10yr Bunds closed 0.28%; which puts the US/Germany 10yr spread at +200bp. Italy 10’s closed 2.09% (+6bp), Greece 7.18% (-7bp), Turkey 10.74% (-1bp), Portugal 3.71% (+7bp) and UK Gilts 1.41% (+3bp).

The Wall Street Journal wrote: “Securities and Exchange Commission Chairman Mary Jo White plans to step down in January, opening the door to a new Republican-appointed leader who could move to loosen rules on Wall Street and curb the aggressive enforcement approach Ms. White prosecuted.”

To set the record straight, White has protected the big banks all along. Even Elizabeth Warren called for her dismissal because she failed to implement the regulations that Congress directed from Dodd Frank. Mary Jo White is “establishment” all the way. She protected HSBC and Republic Bank, and in my case she gave them deals for returning the money they stole with NO FINES and no JAIL TIME. The WSJ is way off-base on this one. Let’s cheer this resignation.

Understand one thing: revolutions emerge from the youth. With all the rhetoric hurled during the campaign, and Bernie Sanders promising free everything at the expense of anyone who works for a living, the youth have become an increasingly communistic generation. Typically, candidates promise everything and nobody really expects them to deliver. This election has hit a nerve simply because it came at the wrong time. The protesters are growing in number with signs that advocate anarchy, “Not My President.” However, they are now staging sit-ins at Chuck Schumer’s office, asking him to step aside as senate minority leader in favor of Bernie Sanders. They are singing this song: “We are standing for our future, we are hearing what is wrong, we are standing for our future, and together we are strong.”

Many schools are now encouraging civil unrest and allow students to skip class if they go protest Trump. Sources told the New York Post which reported that about 200 kids from Beacon High School in Manhattan joined other students in the city to demonstrate in front of Trump Tower and the schools are encouraging them to skip classes to join the protests. This is taking place around the country. Including in Los Angeles Unified School District estimated that 4,000 have skipped classes. Any public school engaging in such activity should immediately dismiss such teachers who are obviously unqualified to teach by injecting their own personal propaganda into the minds of students. You cannot use taxpayer’s money to inspire a revolution that is anti-democratic and inspired by anarchy – their way or no way.

The teachers at Beacon High School should be arrested for inspiring civil unrest when high school students, even assuming they are legally born Americans and not aliens, are TOO YOUNG to vote anyway. This is dangerous and these teachers should be arrested for inspiring riots. That just so happens to be a crime. They are putting the country, the students, and others at risk of violence.

All of this political rhetoric has actually brainwashed a large number of youth. This is all because the War Cycle turned up in 2014. Our model has been warning that the peak in civil unrest would not arrive until 2021. We should not dismiss this uprising so lightly. We are dealing with something that very well may turn ugly and violent. This is what happens when government protects bankers and refuses to prosecute people for crimes that anyone else would spend a lifetime in prison for committing.

QUESTION: Mr. Armstrong; Your conference was exactly as you have said. A fantastic networking event. It was like a college reunion of like minded people coming together from around the world. At the cocktail party, you said 2015 was simply the 26 year “differential peak” in western governments. I didn’t get a chance to ask you about that. Could you please explain that a bit more.

Thank you so much. I will be there in Hong Kong

FD

ANSWER: Every society has its own cycle. Following Tiananmen Square in June 1989, rapid reforms began in China. On May 4, 1989, a student declaration was read on Tiananmen Square, calling on the government to guarantee constitutional freedoms, free press, and to fight corruption and accelerated economic and political reforms. On May 13, the students announce a hunger strike, using the huge armada of foreign media representatives to gain global attention. The Shenzhen Stock Exchange (SSE) opened on December 1, 1989, while the Shanghai exchange opened November 26, 1990 after a 41-year hiatus. Between 1990 and 2004, China began the process of restructuring and/or closing state-owned enterprises that accelerated in 1992 under Deng Xiaoping’s market reforms to establish a “socialist market economy.” By November 2001, after years of negotiations, China became a member of the World Trade Organization and its rise has been spectacular ever since.

The youth rose up in union and led the movement at Tiananmen Square. Do not underestimate the fact that we are witnessing an uprising of youth in the United States who have been brainwashed by the Democrats and do not understand who is even on their side. Revolutions emerge from the youth.

Simply, 2015.75 was the PEAK IN WESTERN GOVERNMENT. This was the 26-year differential between East and West. Hillary lost due to her manipulation of the Republicans, but in the process, she seriously damaged the foundation of the American economy and social structure. Her defeat in 2016 was precisely on target of 23 years from when Bill was inaugurated. But it was also 112 years (half of a 224-year cycle) from the 1904 elections when socialism first took the White House.

Therefore, 1989 was the Eastern peak, and 26 years later, we have established the peak in the West (2015.75). The phase differential between East and West has been on target. We have begun the decline, and the youth uprising is very, very, very disturbing.

Again, we saw good performance from the Nikkei but with the currency attempting the 110 handle having a neutral ling affect. The index closed up over 1% on the day and was helped by the renewed OPEC rumour of potential output cuts. Other Asian exchanges were equally better bid but could not sustain their performance into the close. The Shanghai opened strong but by the close was back to unchanged a flirting with negative gains. The PBOC lowered again the Yuan level today at 6.8592 whilst the off-shore reached almost 6.900. The Hang Seng did manage to close 0.6% higher on the day but in late US trading has turned and is last seen down -0.8% at 22100.

The rising USD is starting to weigh on many markets now and certainly had a impact on European indices today. Yesterday we saw the DXY (fut’s) break the par level trading up to 100.50 in early US trading so we see assets and the currency trade heavy. As a result there were declines across the board of a little over -0.6% for DAX, CAC, FTSE and IBEX with the CAC the worst performer dropping -0.8% on the day. Given the electoral shocker last week the one area that has started to perform is Dry Shipping Bulk and freight rates. The belief that the US will begin a fresh drive infrastructure spending has lifted many beaten down stocks from their lows.

US stocks indices started lower but managed to drag themselves back to almost unchanged on the day as the currency boosted demand for dollar assets. Todays data was not much to further demand with PPI inflation missing expectations (0.8% against forecasts for 1.2%) and also Capacity Utilization and Industrial Output both missing expectations. Tomorrow we hear directly from Fed Chair Janet Yellen as she appears in front of the joint economic committee before Congress, which many in the market will be waiting for. December rate hike appears to be a done deal so much will be taken from tomorrows appearance.

The US curve continued the recent flattening theme closing 2/10 down 2bp at +121bp. 10’s closed marginally higher (in price) to yield 2.21%. Europe was a mixed-bag with core Bunds closing 0.30% (the spread at +191bp) while the peripherals continue to weaken. Italy 10’s closed 2.03% (+7bp), Greece 7.25% (+4bp), Turkey 10.75% (TRY was also weaker by 1%), Portugal 3.65% (+18bp) and UK Gilts 1.38%.