Just the other day, Patrick Calvar, head of the General Directorate for Internal Security (DGSI), France’s equivalent of MI5 or the CIA, warned that in the aftermath of last year’s terrorist attacks on Paris, any further Islamic attacks might lead to a new French civil war. The total French population is 63.9 million people of which almost 10% are Muslim — 6.13 million.

The Nice attack that killed about 73 people on Bastille Day (French Independence Day), will undoubtedly further the support for the extreme right wing in European politics. Additionally, it will add support to BREXIT as PM May was sympathetic in regard to closing the borders for this very reason. We will see Pen surge more now in the polls and Hollande, who was at a whopping 11% approval rating, may fall below 10%. This will have further impact upon the diminishing approval rating of Merkel in Germany as well.

Our models have warned that the Schengen free movement agreement, the cornerstone of the EU, would come to an end. Last December, we warned our models were showing that the Schengen Agreement was on the verge of extinction. This is exactly how that will unfold. Everything is connected and as our models rise for civil unrest in Europe, which is the origin of revolution, much will change. Politicians simply have no idea how trends are set in motion. You do not allow these refugees into Europe while the economy is declining and unemployment among the youth is over 60% in parts of the EU. This is just insanity.

Understanding how things unfold is absolutely essential. Human nature is the common denominator. If you press the same buttons, you will get the same response. On the night of November 9, 1938, violence against Jews broke out across Germany. While it appeared to be an unplanned spontaneous event erupting from anger over the assassination of a German official in Paris at the hands of a Jewish teenager, there was something more behind the curtain. Indeed, the German propaganda minister Joseph Goebbels and other Nazis carefully organized the event and the assassination was the match.

In just two days, over 250 synagogues were burned, over 7,000 Jewish businesses were trashed and looted, dozens of Jewish people were killed, and Jewish cemeteries, hospitals, schools, and homes were looted while police and fire brigades stood by. This spontaneously appearing event became known as Kristallnacht, the “Night of Broken Glass,” for the shattered glass from the store windows that littered the streets. Without question, we must respect that with the economy down, as it was in Germany at that time falling back from 1937 as many people feared round-two of the Great Depression was upon them, the economic decline in Europe with these attacks is creating a tinder box ready to explode. This same set of circumstances led to the chaos in Germany. When the economy is down, people want to blame someone. This time it will be Muslims.

The morning after Kristallnacht, 30,000 German Jewish men were arrested for the “crime” of simply being Jewish and were sent to concentration camps. Businesses owned by Jews were not allowed to reopen unless non-Jews managed them. Curfews were placed on Jews, limiting the hours of the day they could leave their homes.

There are 11,000 Muslims who are on the watch list in France for connection to ISIS. This is an impossible number of people to keep track of. This deadly attack in Nice illustrates the crisis in France and the risk that the tensions will rise.

QUESTION: Do you think that Comey is protecting the Democrats by refusing to indict Hillary when he was originally appointed by a Republican? Why the switch?

ANSWER: Let me explain something here. I believe Comey was not about to recommend an indictment on Hillary. But Comey’s role is the head of the FBI, not a prosecutor at the Department of Justice. He took the heat for this but we have to dig a little deeper.

Lynch was caught meeting with Bill Clinton and I believe that had to do with a separate investigation into the Clinton Foundation. Bill had to have known there would never be an indictment. The Democrats let Hillary run and Joe Biden failed to step in. So the deal was cut for Hillary. The elite judge people and they think Hillary can win simply because she is a woman. However, the under-45 women are not impressed with that.

Lynch said she would accept whatever recommendation Comey presented, but at the same time, the DOJ said she held the final decision. Legally, Comey was just the FBI. The FBI has no constitutional power to bring an indictment. Therefore, the fix was in. If Comey is speaking the truth and nobody knew he was making that announcement that day, which happened to time with Obama coming out for Hillary, then we must consider that Comey effectively put Hillary on public trial by explaining everything she actually did. If Comey merely sent a report to Lynch, this info would NEVER have been released. So, if we take Comey at his word that he did not tell Obama or Lynch, then what he did was put Hillary on public trial.

True, Comey manipulated the statutes to clear Hillary. That was so obvious, that one must wonder if he thinks everyone is that stupid. Or, just maybe, Comey did not tell Obama or Lynch and put all the evidence out there knowing this would lead to a Congressional investigation, which would take the case out of Lynch’s rigged hands. This all depends on whether or not Comey was telling the truth that neither Obama nor Lynch knew what he was going to do. It certainly seems that this was more detrimental to Hillary than anything was so far.

Hillary’s lead over Donald Trump collapsed to just 3 points after Comey’s shocking announcement. There will be Congressional investigations and there is so much dirt on Hillary, well, she just may lose after all. Keep in mind we are all getting tired of this election that seems to never end. It is just a little more than half over. So we have seen a lot thus far, but we may not have seen enough just yet.

The three main credit rating agencies have been downgrading government debt at an alarming rate, which confirms our computer models, albeit a tad late. The first half of 2016 has seen more sovereign downgrades since the crash of 2009. The first six months of this year saw Moody’s downgrade 24 governments, Standard & Poor’s 16 governments, and Fitch 14. This has included Saudi Arabia and Brazil.

QUESTION: Marty; You do not reply just on cycles. Your Reversal System is incredible. That seems to be something nobody can match. Then you also use your proprietary technical analysis and your Global Market Watch is purely pattern recognition that is also highly unusual. So I am correct in that no single model produces the end result. This is all a flat model and then you correlate everything in the world through your capital flow analysis. Am I understanding this correctly?

ANSWER: Yes. You cannot accomplish such forecasts without the database. The chart of the monetary system of Rome alone would cost over $100 million to produce today. That was only possible by gathering the largest and most complete collection of coinage ever assembled in the world. Just this single gold coin of Saturninus would bring today probably $5 million+. There are only two: the one in our collection and the other is in the Louve. This coin proved that “Historia Augusta” was genuine and not a fake account of history as academics argued until these two coins were discovered in Egypt.

Now, it would be impossible to forecast the rise and fall of empires, nations, and city-states without a database of the world monetary system to determine just how fast things unfold. Anyone mimicking our forecasts are just charlatans. Ask them how they arrived at such a conclusion. Did God speak to them in the middle of the night?

Putting this all together is what produces the final outcome. Then it is all worked out based upon the fractal nature of the universe, which drills right down to markets that are propelled by human nature. So, exactly how does one accomplish all of this without massive computing power?

Everything, globally, must be back-tested. How could one person on a shoestring possibly do this? It just is an impossible task no matter what fancy name someone gives their program or pretends it is artificial intelligence. They run the risk of discrediting the entire field, and in doing so, they are dooming society along with themselves. They have nothing to offer, yet they make claims and demand more money.

This is entirely a physics based model whereby everything in the universe complies with the same laws. Even the Global Market Watch proves that everything taught in schools was wrong in economics. It proves that the same patterns unfold across all markets. Therefore, it is humanity which is the common denominator, not individual markets. Hence, all the fundamental explanations fall to the floor and crumble into dust because markets move in anticipation of events that may not even occur. People were betting big that Britain would not vote to leave the EU. They were wrong. We had people aware that when Reagan won he was a hawk and would start world war II. They too were wrong just as they are in all the nonsense they are spinning about Trump. Human anticipation moves markets and fundamentals are nonsense. We watch markets all the time and traders have concluded – buy the rumor and sell the news.

Asia gapped open higher on continued strong sentiment brought forward from Abe’s election landslide victory weekend. The Nikkei saw a 1.4% rally at the open but was subject to profit taking as the day wore on. The JPY rejected the 105 handle and is seen in late US trading back towards the 104.30 level having earlier helped exporters, we may see a reversal of that trade overnight. The HSI and Shanghai were also stronger around 0.4% each and so had helped support the favorable Asian move.

In Europe, economic data releases were quite disappointing with poor CPI numbers for France (expected 0.2% but actual was 0.1% m/m) and Eurozone Ind. Prod. expected -0.8% when actual release was -1.2% m/m and with y/y missing even more (1.4% and actual 0.5%). Despite the data the markets closed only small lower as trading seemed quiet ahead of Bank of England announcement due tomorrow and a slightly stronger Euro. In the UK Theresa May took office with many cabinet changes which the inclusion of Boris Johnson and the Philip Hammond as Chancellor following George Osborne’s resignation. GBP saw a turnaround from the rally seen over the past two days and this evening closed 0.8% lower against the USD at 1.3140.

The US, by comparison, had a rather dull day with prices meandering around yesterday’s closing levels and in thin volume. We do see Producer Prices, PPI and being Thursday the usual Jobless Claims tomorrow in the US. All of this ahead of Fridays Retail Sales, CPI, Cap Util., and a host of other economic releases which has the potential to see volatility into the weekend.

History was made today when Germany issued 0% 10yr German Bunds at a negative yield. With an auction average of -0.05%, but well off the lows seen a week ago of -0.20%. 10yr Bund closed this evening at -0.085% as equity markets turned lower into the close. The spread US/Germany closed this evening at +155.5bp. Italy closed 1.20% (-1bp), Greece 7.68% (-1bp), Turkey 8.95%, Portugal 3.07% (-3bp) and UK Gilt 10yr at 0.74%.

The British pound panic is subsiding and now it is time to retest resistance. Our Monthly Bearish Reversal stands overhead at 13660, so expect this to be the formidable resistance going into month-end. The Daily Bullish now stands at 13350 and 13535 with the Major numbers being a Double Daily Bullish at 14725. We can see technically that the pound traded extremely on point to the channel analysis. The two main channels overlapped and picked both the high and low of the panic BREXIT move, demonstrating nothing is random.

Now we have a turning point next week and we can see that Directional Changes are showing up almost every other week warning of a choppy pattern. Serious volatility should not return until late August going into September.

Private Blog Update – Gold for July 13th, 2016

QUESTION: Marty, Given the accumulation of gold by China and other nations with large trade surpluses, along with the statements by Alan Greenspan, and the implementation of the Shanghai Gold Exchange, does this suggest that gold is being positioned to be re-introduced into the international monetary system?

ANSWER: No. The statements of Greenspan seem almost delusional. If there was to be a REAL gold standard, as people would like to think existed, you are talking about far more of a political revolution than even Donald Trump would imply. If money was actually backed, you would end deficit spending, social programs, effectively everything. No government, not even China, would seek such a system. It would be the total loss of everything. There would be far more involved than most people even think about. Talk about blood in the streets. Pensions would end with socialism. You are creating a total collapse and revolution. How can all the unfunded liabilities be paid in gold?

If you are talking about another Bretton Woods, that would be a joke. They tried fixing the price of gold but allowed the money supply to increase and it collapsed. No peg or standard has ever lasted because politicians cannot run government in any efficient manner. Marx tried that and communism failed. Human nature is human nature. It does not matter the century or country. It always ends the same.

The Latin Monetary Union was just an agreement that various currencies were equal to a specific weight of gold. That allowed for efficient trade by eliminating foreign exchange fees for the most part, but it did not seek to “fix” the value of gold and everything floated. It was not a “gold standard” during the 19th century as people loosely assume it means money is a store of value. It still was not. The value of money, even when gold, rose and fell. It was not “fixed” in terms of some value. Everyone agreed simply on specific weight per your currency. The purchasing power still rose and fell.

So those who talk about gold standards typically imply fixed values and money becomes a store of wealth. That is a total fantasy land. It has never existed in such a manner. Even under communism, they had to issue gold coins to settle international trade when wealth was confiscated and the state owned all property. That would not fly internationally. They still needed acceptable money to deal with the world.

What are US multi-nationals doing with the $2 trillion they keep offshore? Looking at the Securities & Exchange Commission (SEC) disclosures shows that Apple, Microsoft, Google, and Cisco Systems hold about 10% of their offshore cash in US government debt, which earns these companies substantial sums in interest. So they are earning interest in dollars while parking money in federal and agency debt.

The world financial crisis that is unfolding post-2015.75 is different from that which followed the 2007.15 peak in the ECM. As stated countless times, each event is a crisis in a different sector. The 2007.15 crisis was the over-leverage in real estate that the bankers created. This time, we are looking at the demise of governments. Under normal conditions, bond prices would be falling with interest rates in the public sector rising. We still see this unfolding in the peripheral markets. The markets where central banks have been buying government bonds to try to stimulate the economy has utterly failed and created a crisis beyond contemplation. We are looking at the collapse of government’s ability to issue debt as we move forward into this cycle. The only buying will be central banks at the end of the day – totally insane.

The Sovereign Debt Crisis of the 1840s was the demise of the states, thanks to Andrew Jackson shutting down the Bank of the United States. This led to a banking crisis with individual states trying to support their banks. Because the states could not create money. The states issued debt to bailout the banks, but the crisis was far too massive, and as a result, the banks took down the state governments, which had no choice but to permanently default on their debt. This time, governments are trying bail-ins and this is causing confidence to collapse. Why should people trust banks at all? Once they hoard cash; that is it. The velocity of money implodes and you end up with an economic depression.

To answer all the questions about whether this will be covered at the World Economic Conference — of course. And to answer why we did not hold one in Berlin, yes, our models were warning about significant civil unrest in Europe as a consequence of the complete fiscal mismanagement of the ECB. It appears that the negative interest rates are totally insane. This is the complete incompetence of those who think they know how to manipulate society from Larry Summers to Mario Draghi.

These people will never admit a fatal mistake. Thus, we have to stand by and what Rome burn.