QUESTION: Mr. Armstrong, there appears to be a dispute between what is money and what is a currency. Can you define each easily?

Thank you

LW

ANSWER: “Currency” is an official monetary instrument used in commerce. Currency must be “legal tender,” which means the government will accept it in payment for taxes. “Money” is a much more questionable element for it is different things to different people. The goldbugs would kill you if you dared to say gold and silver were not money. But go to Starbucks and try to explain that a silver dollar should buy you two coffees. Good luck! They will look at you as a con artist.

Money has traditionally been some commodity, be it gold, silver, bronze, seashells, cattle or sheepskins. You certainly cannot historically declare anything to be money for its changes with cultures and time.

As the legend goes, the Gauls attempted to invade the city of Rome quietly but had frightened the sacred flock of geese who made a lot of noise at the Temple of Juno. This alerted the Romans to the surprise attack giving us the word “monere,“ meaning “to warn” in Latin. The Temple of Juno then became popularly known as the Temple of Juno Moneta. Since this is where the coins were minted, we now arrive at the word “money” that springs from the origin of this legend and place that was an ancient mint. Our terms, such as capital flow, arrives from the Latin word “currere” meaning “to run” or “to flow.” This is where the money flowed from, and gives us the word “currency” meaning the “flow of money.” This is why Juno Moneta is pictured on Roman coins as holding the balance scales in one hand and a cornucopia in the other symbolizing endless bounty or wealth. This is the birth of the terms “money” and “currency.”

You can argue with Internal Revenue Service that gold and silver are “money” all you want, but they do not have to accept it in payment of your taxes. The paper dollar is the currency and duly states “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE.” The Supreme Court nullified all gold clauses in private contracts (PERRY v. UNITED STATES, 294 U.S. 330 (1935)), so legally only paper dollars are “currency” for they are accepted by law publicly or privately.

 

Japan’s GDP showing today finally provided signs of life when the expected number of 0.1% was put to shame with a 0.4% print. However, it was only enough to rescue the Nikkei from the selling but did help to provide the days highs. By close of business the index had drifted back only to close the day almost unchanged. Neither the Hang Seng nor the Shanghai benefited from Japans positive sentiment and both closed a little over 1% lower. The JPY lost ground upon the announcement and has continued its weakness into late US trading, currently with a 110 handle. The Nikkei futures has bounced slightly on the back of the currency sell-off but is only just 0.25% higher than the cash close. Both China and HSI remain weak and have extended their losses an additional 0.35%.

Europe saw a reasonably quiet session not just ahead of the FED minutes but even in late futures trading. The majority of European hours trading was in the negative territory but managed a rally within the last ninety minutes. This closing sentiment failed to follow through and futures prices have given back all of todays cash gains.

The US equity markets could nor decide which way to run either before or after the FED minutes! The DOW and S+P traded heavy most of the day with only brief spikes toward unchanged but it was only the NASDAQ that actually closed positive. The recent sideways movement has taken time to accept the possible change in FED stance but at least we are now back to data watching rather than being concerned how the rest of the world will quibble and moan if the FED were to act independently. Given this uptick in possible confidence we saw Gold take a hit closing down 1.7% around $1255. Oil tended to drift into the US close also which had a mild effect on late core equity markets.

As you can imagine it was not a great day for fixed-income markets. The weakness in US Treasuries was across the curve but we did see a 2bp steepening 2/10 taking the curve back to +97bp as 10’s closed at 1.86%. The sell-off was not as fierce in Germany with 10yr Bund closing +4bp at 0.17%; closing the spread at +169bp. Italy 10yr closed 1.49% (+4bp), Greece 7.27% (+7bp), Turkey 10.02% (+12bp), Portugal 3.06% (+2bp) and UK Gilts (after the Bank of England spoke of a possible rate hike given employment data slightly better than forecast) 1.44% (+6bp).

We saw a large rally in GBP today after a BREXIT poll showed a large shift towards the IN campaign. The rumor this evening is that the “remain” camp has an 18pct point lead. Finally, given the FED minutes the DXY made ground this evening closing at 95.21 (0.75%) increase on the day.

Of course, the markets have been causing losses among the bulls as well as the bears. This is what they do and MUST do before they can actually make a decisive move of the nature we are looking at ahead. It becomes rather amusing to watch the so-called professionals, who are constantly wrong, brood and proclaim this feels like 2000 or 2007 before the crash. Are they right? Or are they just angry because they lack the skills to forecast?

Nevertheless, our proprietary Golden Rule of the 3 Attempts (TM) is a very important tool to comprehend. (Details will be provided at the Technical Training Course).

Well, let’s look at 2000 from the Dow perspective. The 2000 high was a Phase Transition in the NASDAQ, DOT.COM bubble. When we look at the Dow, we still see a high, but it is more of a declining sideways pattern. There were three failed attempts to make new highs, but each was lower than the previous in compliance with our Golden Rule of the 3 Attempts (TM). This by no means appears similar to the current pattern.

When we compare this to the current pattern pictured here, we see that the third thrust broke through the channel and made a higher high. This is not showing long-term weakness. We have a different trading pattern going on here, one designed to create confusion to get the MAJORITY on the wrong side to enable a Phase Transition. To revisit key support, the Dow must now close back below 17120, and then we will get a correction.

Here is the 2007 high. Again, we can see our Golden Rule of the 3 Attempts (TM) rally, but each one was significantly lower with new lows each time. This patterns warned a crash & waterfall event was in motion. This reflects a clear bearish pattern with lower highs and lower lows.

Now, look at how a market knocks on the door three times before it breaks out. This is just one of our technical rules we call the Golden Rule of the 3 Attempts (TM). No doubt, other analysts will quickly plagiarize this and call it their own, and you will then see who is a real analyst and who is fake. Still, even the 1966 rally, which was the mutual fund bubble, and the 1968 rally when Bretton Woods started to crack, were the initial attempts to break 1,000. Then we had the 3 attempts which did exceed 1,000 before the breakout began with the beginning of this private wave. Note also that while gold rallied from $34 in 1970 to almost $200 by 1974, the Dow rallied and broke through the 1,000 level for the first time. They did not move in opposite directions.

So to those who keep yelling that the market will crash to 10 cents on the dollar, all I can say is that I suppose that means people will buy bonds at -10% interest rates just to park money. If what they are yelling is even possible, then interest rates must move lower and big money is willing to lose it all just to park money. I am sorry. I just do not understand such logic. This is normally the type of nonsense you get from people who want to pretend to be analysts but have no experience in the field so they lack any comprehension of the moving parts. To create a stock market crash, we need confidence to rise in government. Excuse me. Anyone hear of Donald Trump? Confidence in government is declining rapidly.

As for the dire prognostications that the stock market will crash because the Fed will raise rates, this once again demonstrates such people are not analysts at all for they have nothing original to add to the debate. I traded that rate hike under Paul Volcker into 1981. With each rate hike, the market declined and rebounded. The final hike in 1981 was a real lesson for the market rallied. It did not even decline. When that took place, I knew the ECM was correct and we peaked in rates right then and there.

So sure, we should expect the market to drop when the Fed raises rates. Fools will be easily separated from their money. This is why there are fools in the world. Every species serves a purpose as energy in the food chain for the next one up in the food chain. Trading markets amounts to the same process. We always need the person on the opposite side.

Rising US rates will be inevitable. This will drive the dollar higher, fuel the debt meltdown, and when the capital inflows push US assets higher, the Fed will be compelled to raise rates further to stop the speculation since that is pure Keynesianism that does not work — but hey, what else do they have to do?

 

The Executive Branch was handed dictatorial powers last month in a Washington DC Court of Appeals decision, United States v. Fokker Services B.V., where a Dutch aerospace firm was accused of making more than 1,000 illegal shipments of parts and components to Iran and other sanctioned countries from 2005 to 2010. It held that Federal judges have no authority to “second guess” the discretion of federal prosecutors to cut deals with companies under criminal investigation. This was a unanimous ruling that is handing unimaginable power to the Justice Department, who claims discretion to obey the law. This is why Hillary can escape prosecution because the government can deny equal protection of the law to its citizens. They prosecute some people and not others for the very same offense.

The U.S. Court of Appeals for the DC held that the Justice Department may engage in the often-controversial deals it uses to punish large companies without leaving the scar of a criminal conviction that might threaten their existence when it comes to things like a banking license. These deals are “Deferred Prosecution Agreements” which allow companies to avoid criminal prosecution by paying a fine and submitting to certain conditions for a period of probation, after accepting responsibility for wrongdoing. Who becomes the probation officer? Former US attorneys, such as Ashcroft who gets tens of millions of dollars in return for no criminal prosecution. When NJ governor Chris Christie was a federal prosecutor, he did a deal where the company had to pay  $52 million to John Ashcroft, former US Attorney General, to monitor a firm in New Jersey. These types of deals are rotten to the core, and the US Court of Appeals ruling that judges have no power to object is handing prosecutors the ultimate blackmail card of all time.

The “discretion” in legal terms has been transformed into exactly what it was not supposed to be. The Supreme Court explained back in 1824 in the landmark case:

Osborn v. Bank of the United States
22 U.S. 738 (1824)

“When they are said to exercise a discretion, it is a mere legal discretion, a discretion to be exercised in discerning the course prescribed by law; and, when that is discerned, it is the duty of the court to follow it. Judicial power is never exercised for the purpose of giving effect to the will of the judge, always for the purpose of giving effect to the will of the legislature; or, in other words, to the will of the law.”

id/22 US 866

When the President of the United States takes office, he takes his oath of office which has just become word they babble any more.

“Before he enter on the Execution of his Office, he shall take the following Oath or Affirmation: — “I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.”

ARTICLE II, SECTION 1, CLAUSE 8

Nowhere within this oath does it give the “discretion” to execute what laws based on what someone likes or dislikes. This decision effectively nullifies that oath entirely and declares to the entire world that there is no rule of law. The president and everything within the executive branch has the discretion to enforce the laws created by Congress. That bluntly means that the people have absolutely no say whatsoever in government for they pretend to elect “representatives” who can legislate but the president need not listen. Congressional powers as defined in the Constitution are “To make all Laws which shall be necessary.” None of this means anything if the president has the “discretion” to enforce what laws he agrees with. That is a dictatorship and tyranny.

---

 

Section. 8.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow Money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;—And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

 

The European Film Festival selected another film of Marcus Vetter entitled the “Promise.” Marcus’ work — “The Forecaster” & “The Promise” are two films exposing to the world the cold fact that the justice system in the United States is anything but honest or fair. This is all about prosecutors moving up the ladder to get those big paying jobs or running for political office.

Marcus’ latest film entitled “The Promise” shows his ability to make documentaries that have the quality of a movie — a rare talent indeed. I highly recommend catching his latest film “The Promise.”

 

 

Things all looked good in Asia with the Nikkei closing up a little over 1%, Hang Seng following its lead gaining 1.2% and so it was only Shanghai that returned a small negative on the day. All was good following the strong US session and so we were lead mostly by energy and miners (BHP on the ASX closed +3.7%). The RBA showed rates were cut only at the last minutes as most were initially in favor of holding still. As a result of these minutes the AUD jumped from 72.80 to 73.50 and as we stand this evening in late US trading at 73.30 as equities give back some of the earlier gains.

Europe really was a game of two-halves! The morning found confidence having seen the strong close in US trading and also the fact that most core Asian markets had accepted the trend. Strong energy prices tended to lead stocks firmer with many talking of $50 oil the hot topic. This was the game plan until lunchtime when the US cash markets opened. Lunchtime data were encouraging with CPI seen as the fastest in 3 years, Industrial Output printed +0.7% against an expected +0.3%. The problem this afternoon was that many dealers are concerned the FED will act sooner especially after today’s data and the US Treasury market reflected those concerns. Given the recent rally and the old adage, “Sell in May buy again St. Ledgers Day” (September), many are reluctant to support falling prices or indeed invest!

DOW cash market was heavy from the open and selling seemed relentless all day. Obviously, the data was good and many are concerned about possible FED action but having seen today’s selling erode much of this years gains it just takes the market back to January 1st. This is typical while some are claiming this fells like 2000, there is not spike high to justify that. It feels more like churning back and forth before 1985 when the Dow test 1,000 3 times before it finally broke out.

Meanwhile, Gold regained most of yesterdays late decline closing this evening at $1280 (+0.5%). Here too, it appears more like wasting time churning back and forth before any serious decision is made in this market which appear to be scheduled for the week beginning May 30th. With the chaos of BREXIT June 23rd and the US Presidential elections, it is hard to see where this market can make any sustained move without a conviction of the future.

The US Treasury market saw a volatile day with selling in the morning only to recover and make additional ground in the afternoon. Well, that was correct for the longer end but after the data fears are more along the lines of a two part curve. The front end was heavy with two rate hikes being priced into 2016 again. 2yr notes lost 4bp to close 0.825% while 10’s gained only 1bp closing at 1.76%. This has brought the 2/10 curve into +93.5bp. In Europe the bid remains for all areas of the curve and with peripherals still bid (thanks to the ECB). German 10yr Bund closed 0.13%, closing the US/Bund spread at +163bp. Italy closed 1.45% (-2bp), Greece 7.19% (-1bp), Turkey 9.90% (-5bp), Portugal 3.04% (-7bp) and Gilt 10yr at 1.37% (-2bp).

At last year’s WEC, we warned that the collapse of the euro was underway. We achieved the Yearly Bearish Reversal on the close of 2015, but we did so far below the number. We had been waiting for the rally to retest the 11600 level, which we finally achieved. The ECB monetary policy has been typical banker nonsense and has brought Europe closer to a major financial crash. Draghi has applied the unsupported quantity of money theory and assumes he will simply buy in the debt and the cash will miraculously be spent wildly by consumers. Trading volumes and the velocity of money have been falling in general since 1996-1998. The low to negative interest rate policy of the ECB has endangered pensions and ailing banks, and this is just now beginning to push pensions and banks over the edge. Draghai will not admit he is wrong, so he will blame everyone other than himself.

We are looking at a complete global financial meltdown of the world financial system, which we will focus on at this year’s WEC. The construct of the common European currency is no longer sustainable. A completely new monetary system will be introduced as early as 2018. The fiscal mismanagement of government perpetually borrowing money they have no intention to pay back threatens a complete collapse of the world financial system.

The survivability of the euro has now crossed the point of no return. A daily closing in the cash euro back below 11215 will warn that the high of May could stand as the end of the reaction from the March 2015 low. A monthly closing back below 10520 level would signal that the collapse is underway.

At this year’s WEC, we will be focusing on the pension crisis, sovereign debt crisis, rising pressures for separatist movements, civil wars, and financial chaos. When will it end? We will explain how to recognize it from the signs of the past.

The lastest polls show that 2/3 of the German population have had enough of Merkel. I have warned that 2017 is the political year from hell. We have the BREXIT this June, the USA presidential election (Trump v Hillary), Holland in France, and Merkel in Germany. These are the four big elections we have to pay attention to. The German polls clearly show that the German people are rejecting Merkel as their leader. Currently, the majority cannot see how Merkel will remain Chancellor after the election in 2017. The age group that is really fed up with Merkel are in the 45 to 54 age bracket. The polls are showing that the lower the income and the lower the level of education, the higher the rejection of Merkel as Chancellor. This is exactly on time. We are facing a global political crisis on the 86 anniversary of 1933, the year FDR and Hitler came to power.

A new book confirms what I have been reporting on behind the curtain. This is a devastating inside look at the dark side of Congress that shows why career politicians need to come to an end. This is written by one of its own, anonymously entitled “The Confession of Congressman X.” His admissions are dark and stunning, yet you can bet the mainstream media will ignore it for they are part of the game. This is what he has to say:

• “Most of my colleagues are dishonest career politicians who revel in the power and special-interest money that’s lavished upon them.”
• “My main job is to keep my job, to get reelected. It takes precedence over everything.”
• “Fundraising is so time consuming I seldom read any bills I vote on. Like many of my colleagues, I don’t know how the legislation will be implemented, or what it’ll cost.”

As for the voters, he also explains:

• “The average man on the street actually thinks he influences how I vote. Unless it’s a hot-button issue, his thoughts are generally meaningless. I’ll politely listen, but I follow the money.”
• “Voters are incredibly ignorant and know little about our form of government and how it works.”
• “It’s far easier than you think to manipulate a nation of naive, self-absorbed sheep who crave instant gratification.”

Welcome to the decline and fall of Western civilization. The end of our Republican form of government lurks between the words. As Margaret Thatcher said to me, “It’s just time.”

 

Jamala is a Ukrainian singer, composer and actress whose ethnic background is a Tatar. In this year’s Eurovision Song Contest, Jamala performed her own composition, 1944. This has caused a bit of a stir for the song is about the oppression of the Tatars in Crimea by Stalin. There have been hundreds of comments on Facebook and Twitter that call it the politicization of the ESC by the public broadcasters. The criticism came from virtually every country in Europe such as Sweden, Italy, France, Poland, Great Britain, and Germany. It was noted that the winning song was so political, that a serious suspicion was not overcome.

As summarized by Wikipedia:

The Tatars are a Turkic ethnic group that formed in the Crimean Peninsula during the 13th-17th centuries, primarily from the Turkic tribes that moved to the land that is now known as Crimea in Eastern Europe. Her song is about the forcible deportation of the Crimean Tatars from Crimea ordered by Joseph Stalin as a form of collective punishment for alleged collaboration with the Nazi occupation regime in Taurida Subdistrict during 1942–1943 which was considered to be a case of ethnic cleansing. On November 12, 2015 parliament of Ukraine adopted a resolution recognizing the event as a genocide and declared May 18th as a Day of Remembrance for the victims of Crimean Tatar genocide. Stalin ordered the deportation known as the Sürgünlik in Crimean Tatar. A total of more than 230,000 people were deported, mostly to the Uzbek Soviet Socialist Republic. This included the entire ethnic Crimean Tatar population, at the time about a fifth of the total population of the Crimean Peninsula. A large number of deportees (more than 100,000 according to a 1960s survey by Crimean Tatar activists) died from starvation or disease as a direct result of deportation. They were allowed to return finally during the perestroika times. (“Deportation of the Crimean Tatars,” Wikipedia, accessed May 15, 2016.)

The Eurovision song contest has resulted in some concern that this is a political decision to further the isolation of Russia, despite the fact that the Russian government rejected his harsh treatment of the Tatars after Stalin.