The International Monetary Fund (IMF) has warned at the G20 summit in Hangzhou, China, that in the face of crises, the refusal to reform how things are functioning will lead to economic weakness in the global economy. “The latest data show subdued activity, less growth in trade and a very low inflation, suggesting an even weaker global economic growth this year,” the IMF told G20 leaders.

Indeed, we are looking at 2016 coming in as the fifth consecutive year in which global growth will be below the average of 3.7% which prevailed between 1990 and 2007. The IMF said: “Without strong political countermeasures the world could suffer a disappointing growth” for several years to come. Christine Lagarde told world leaders: “Even in the longer term the outlook remains disappointing.”

A number of people are asking if we are advising the IMF both in front of the curtain or behind. I have met with former IMF board members as well as people pulling triggers in some central banks. But we have no arrangement to advise the IMF. If their forecasts are starting to reflect ours, it is curious, I admit. They may be looking at things using our lenses. But I have never met Lagarde and I do not advise the IMF. True, they may be looking at the Economic Confidence Model. Many countries do. There is no formal arrangement whatsoever.

As demands rise concerning social inequalities in many countries, this tends historically to only lead toward more regulation and protectionism. In the end, this is the expected knee-jerk reaction from politicians only created a negative downward spiral to the detriment of free trade. The hunt for taxes and the sharing of all information to begin among G20 members January 1st, 2017, will also lead to less investment. The EU decision to retroactively change the tax code of Ireland and the Apple deal, is a death-blow to the global economy. If that policy was employed in the USA, you cannot imagine the total chaos that would be unleashed. States normally compete against each other in the USA. The European Commission is trying to create a total dictatorship.

Structural reforms are vital at this point to prevent a real economic depression on a global scale. In countries with still weak demand, the IMF is advocating monetary and fiscal policy should intervene more to promote growth. But bureaucrats are far too disconnected from the economy to ever manage things correctly. To them, they never see a “free market” economy, only one to be manipulated to perform as they think its should be – never reality. The bureaucrats historically attempt to force their will upon the markets and that has always resulted in complete disaster.

In regions where the monetary policy has been exhausted with negative interest rates having only a negative impact economically, only changes to the fiscal policy are even remotely possible to soften the hard-landing we are headed into. The formula of simply creating temporary jobs with additional public investment building roads and bridges, are never sustainable and have never reversed the economic decline. On April 8th, 1935, Congress voted to approve the Works Progress Administration (WPA), a central part of President Franklin D. Roosevelt’s “New Deal.” The US share market rallied, but this was due to the dollar devaluation in 1934 following the bank holiday in 1933. The WPA kept hiring people reaching its peak in 1938 of over 3 million and failed to prevent the economic decline in 1937 that scared everyone assuming the Great Depression would resume.

The WPA primary restriction was to hire only one person per family. Despite the claims of success, the WPA was a failure for there was no evidence whatsoever that it ended the Great Depression. It did provide relief and helped families make the transition from agriculture to skilled labor. So from the standpoint of retraining people, it did provide a foundation to build upon. However, such programs that fail to help people make such a transition within the work force are worthless in reversing an economic downtrend. In fact, if taxation is raised as a result, then it merely robs the right pocket to put some one in the left. That never provides economic growth no less stimulus.

The economic warning signs of a major slowdown in growth are appearing now on a global perspective from China and Japan to North American and Europe. The sharp decline in trade was reflected in the world’s seventh largest container shipping company Hanjin which declared bankruptcy in South Korea. Hanjin is the first prominent victim of the downturn in international maritime trade. There is little doubt that this is the canary in the coal mine providing a clear visible sign of a new economic Depression is looming on the horizon.

The sun is settling. It may appear to be rather beautiful. It is always the prettiest before nightfall.

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What is fascinating has been the images portrayed about Clinton and Trump. Hillary is viewed as the most dishonest and Trump is looked up as the hot head. It is Hillary who has the reputation for having a violent temper and she is now posturing herself as a hawk in war. Most people did not notice, but a few months ago, Obama had established the legal basis signing a decree that equates hacker attacks with military attacks. So an act of war can be the hacker attack on the Democratic Party since this is very vague.

Now in a speech in Cincinnati, Hillary said that she would “politically, economically and militarily” proceed as US President against anyone who committed the hacker attacks against US facilities. Hillary has called explicitly Russia and China as nations that constantly perform hacker attacks. She told the audience: “You have seen the reports that Russia and China have hacked a lot of things. Russia has even hacked the National Committee of Democrats, maybe even some electoral systems of States. We need to increase and ensure that we can defend ourselves well, to fight against those who fight against us price. I’ll do it as president realized that the US will deal with cyber attacks as well as all other attacks. We are willing to seriously halt politically, economically and militarily respond. We will invest to protect our government units and our national infrastructure. “

She then said she would increased the military budget and make it exempt from the general budget cuts. Nobody has done that one yet and it seems that she is already making concessions to the Republican neoconservatives. The rumblings behind the curtail are all talking about this position.

Keep in mind that historically, wars have been started by Democrats and ended by Republicans. The exception was the Iraq War, which was orchestrated by Dick Cheney it appears to enrich his former company Halliburton.

CHANCELOR ANGELA MERKEL has suffer a major defeat with her party coming in third place in her homes state of  Mecklenburg-Vorpommern on Sunday. The signs of a major anti-immigration movement in Germany assures Merkel’s days are clearly numbered. The growing discontent with the Chancellor is all we hear from our direct sources in Germany. Only one year after she announced her open borders policy, Merkel’s CDU party was beaten so badly coming in only in 3rd place behind Germany’s Alternative for Deutschland party (AfD) who secured 21% of the vote in her home state no less.

Merkel’s Christian Democrat Union (CDU) is going down for a resounding defeat and all the polls rigging and press rigging will not matter, Mainstream press has been supporting Merkel in Germany and they have lost respect of the German population. We are watching the demise of both career politicians and mainstream media.

The handwriting is on the wall. Merkel’s open borders has been a total disaster for all of Europe. This entire mess was only to boost her personal polls when they were collapsing because of her hard-line tactics with Greece. This is a sign of the times. The end of politics as we have known it since World War II. As we have warned, 2015.75 was the peak in government. The further we move from that point in time, the more clear that turning point will come into focus.

Thailand is looking to issue SIM cards to all tourists to protect national security. They say they will be able to respond to tourists in trouble, but they are really looking to track everyone because of the rising threat of Islamic extremism. Domestically, you are already being tracked. Google wants to “verify” who you are by using your phone. The police can and do track people they intend to arrest by using their cell phone. So while many people are shocked by this proposal, the difference would be to only force tourists to use their sim or they could simply take your phone number and track you by using your current sim card. Welcome to the new age of global tracking.

People are still unaware that the tracking system that reads license plates is nationwide. Many places just take your license plate and bill you for tolls. But pull in a parking garage at an airport and you will see cameras taking a picture of your license plate. Lose your ticket and they can tell you the time you arrived and where your car is parked. They are doing this in Europe as well as the USA. We are already being tracked in every way possible.

This is why I say we MUST eliminate income taxes and return to indirect taxation. Income tax requires the tracking of everything we do, where you work, etc. Elizabeth Warren proposed that lower income people should not have to file income taxes because the government already knows everything and can easily just send you your refund check at the end of the year.

It is illegal to send large sums of money by mail for they will deem it money laundering. So far, small sums of cash are still legal, such as a gift in a birthday card. However, the maximum insurance for cash is $15. That does not mean the government employee at the post office even understands the laws and regulations.

When we tried to send Roman coins through the mail to our customers, they refused to allow us to mail them by marking them as money. Trying to explain that this was ancient money was like trying to explain physics to a two-year-old. We gave up and relabeled it as antiquities. The clash in regulations assumed our coins were “money” worth over $15, which was illegal in their minds. So yes, you cannot send even a few hundred dollars in “money” through the mail for they will call it money laundering. It is getting impossible to get off the grid as they say.

President Erdogan turning to Russia and shaking hands with President Putin in St. Petersburg should send a red light to NATO that all nukes must be withdrawn from Turkey ASAP. This reset of Russia-Turkey relations is strategic on Erdogan’s part. The joint statement indicated the two leaders’ willingness to cooperate in several fields and highlights both Moscow and Ankara’s domestic and international policy objectives. He has also sold off about 50% of US Treasuries more than any other government. You do not do that to support a currency. This is political.

President Erdogan plans to achieve his main goal of repairing the economy by entering a partnership with Moscow that will help to revive its touristic sector and develop energy projects. Yet, the more important issue is Erdogan also wants to use cooperation with Russia to turn against Europe and the USA by demanding money and the extradition of Fethullah Gülen who he wants dead as he sees him as a potential threat to his rule.

Putin naturally sees the renewed relationship with Turkey as an additional positive development in Russia’s international strategy and clearly weakens the idea that Moscow is isolated by the sanctions. It makes further sense with Putin for to get allegiance with Turkey against NATO’s southern flank is an absolute victory. It may be true that the Syrian crisis remains a dividing point between the two countries, but it may be far less than people suspect. Erdogan does not act like an elected official. This is a personal quest for power.

If the NATO nukes are not removed from Turkey, they will deeply regret what is coming down the road in the years ahead.

If you look at the calendar, the months that have 31 days are January, March, May, July, August, October, and December. The only two months with 31 days back-to-back are July and August. Why? July was named for Julius Caesar. Augustus, meaning “father of the nation,” died on August 19, 14 AD, and was probably poisoned by his wife. So they named August after him before his death. But of course, August had 30 days and that would be slighting Augustus relative to Julius who had 31 days. So the solution was obvious. They took the extra day from February which was only named for a feast day known as the Februarius or Februa, the feast of purification, and renamed the month with 31 days equal to July.

January was named for the god Janus and March was named for Mars. You certainly didn’t want to make them angry. May was named Maius taken from the Greek Maia, or the goddess of spring. June could not be touched since that was named after the goddess Juno, the queen of the gods. July’s original name was quintilis or the fifth month in the early Roman calendar, so renaming that for Julius Caesar did not offend anyone. August was originally named sextilis or the sixth month in the early Roman calendar. September was the seventh month in the early Roman calendar and October was the eighth. November was named the ninth month and December (decimal) the tenth month.

Therefore, February was an easy month to take days from since it was named after a feast and nobody had to offend the gods.

QUESTION: Sir,

My son is studying US History this year in 8th grade. You have a lot on your plate and appreciate what you have been doing for us. What is the best book on the monetary history of the US?

Keep up the hood work and see you in November.

DK

ANSWER: Although I was friends with Milton Friedman and have respect for many others, they still come up shy of getting on point. The reason I say that is we tend to find domestic trends always analyzed in terms of domestic culprits. Politics is dominated by this view that if you vote for someone, they will do X, Y, and Z to make your life fantastic. The problem is that we are all in this together. You cannot reverse the trend of a single nation against the global trend of events. For example, World War I and World War II are solely responsible for the American miracle.

In 1896, J.P. Morgan arranged a gold loan to bail out the United States from bankruptcy. No matter how bad the trend, those responsible will never admit they are the cause. The champion of the Silver Democrats was William Jennings Bryan. You can listen to his speech against the gold standard in our history of Panics – 1896.

We plan on publishing a book on this subject that covers the rise of America from bankruptcy until the formation of Bretton Woods and the dollar becoming the reserve currency of the world. I have directly quoted the contemporary newspapers and sources so you can read what I read. They say history is written by the victor. To a large extent, this is very true. I am keenly aware of that problem and this book is written painstakingly from the viewpoint of a citizen of the world. This is the most comprehensive account of the world monetary history in motion. I will announce when it is ready. For now, it is in the final stages since I am finishing writing it.

The Nikkei and Hang Seng closed virtually unchanged in anticipation of the US lunchtime numbers. The Hang Seng was the best performing Asian index closing up 0.45%. It was always going to be about the US Payrolls even as Europe opened marginally better bid. Overnight we had seen the USD take a bit of a breather and saw oil (++2.5%) and gold (+0.75%) both recovering from the past few days weakness.

Expectations for the NFP’s were for a +180k print and an unchanged 4.8% rate. However, what we saw was a +151k and a 4.9% release. This will probably surprise the FED a little but remember that the Aug jobs number is the most revised of all months so will be eagerly watched come the October numbers. The market had priced in almost a 30% chance the FED would move this month but that has reduced to around 23% in late US trading. Interesting how the markets took the news! Had we seen this several years ago the equity market would be lower and Treasuries bid across the curve. This evening at the close of the day stocks close higher, bonds have lost ground and core European indices have closed close to 2% a piece. DXY initially saw selling upon the release but managed a higher close at 95.87 (+0.22%). A key currency component (JPY) again playing, in late US trading, with the 104 handle which, in turn, has produced a strong futures rally in the Nikkei last seen +1.25%.

Bonds went bid on the numbers but suffered the balance of the day with long liquidations the talk around many trading floors. Bonds lost ground on both sides of the pond but also saw JGB’s coming under pressure late in the day. The US curve steepened as 2’s lost 1bp (closing 0.79%) and 10’s off 3.5bp to close 1.60%. In Europe too Bunds suffered after the knee-jerk response then saw selling. 10yr Bund closed -0.05% (-3bp) to close the US/Bund spread at +165bp. Italy closed 1.17%, Greece 7.93%, Turkey 9.53%, Portugal 3.01% and Gilts 0.72%.

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