With the exception of Australia, last night saw a fairly dull session ahead of the FED and also the BOJ decision expected tonight. All core indices were negative but within a normal range given events scheduled later. In Australia however, consumer prices dropped well below market forecast and shook both the ASX (Aussie Stock market) but also the AUD (currency). Expectations of +0.3% were quickly reversed when the release showed -0.2%! Immediately, ASX fell (and the AUD dropped almost 2%. In late US trading, the currency remains under pressure currently trading around 75.75 (-2.24% on the day).

Europe just felt as though it was treading water all day waiting for the Fed decision late this evening. Greece was in the news again today after PM Alexis Tsipras requested a euro-area leaders summit. The ASE dropped over 2.5% and also saw the bond yield jump over 20bp. Talking to dealers there was no sign of concerns spreading to other peripherals but they say they will be watching events extremely closely!
A Fed “No Change” release was as expected but the scare came as they removed much of the reference to global concerns! This, the market took as a flagged June move and subsequently saw the initial move down for the DOW. This move was short-lived and we saw a strong rally into the close given all the cash still sitting on the sidelines.

The US market liked what it heard from the Fed, even though we may be talking a June hike! Confidence feels as though it is gaining, despite some big cap earning misses! As we approached the close the VIX continues to edge lower (broken 14 again), the 18k psychological level continues to haunt dealers especially ahead of tonight BOJ decision. After hours earnings from FB were extremely positive with the stock trading up over 8% as a result.

We did see a short-term sell-off in oil after the higher than expected inventories release but that was brief and by the close was up over 2%. Encouraging signs from a market that has been suffering pressure for a while now.

The bond market saw the curve flatten with 2/10 closing 103bp. 10’s like the fact that the Fed seemed to have changed its focus towards domestic concerns and away from global risks. The US 10yr rallied just after the announcement to close 1.86% (-6bp on the day). In Europe, only the Bund was open to respond and that closed 0.285% a spread of +157.5bp. (European closes) Italy 10yr 1.51% (-2bp), Greece 8.63% (+23.5bp), Turkey 9.04% (+4bp), Portugal 3.16% (-3bp) and UK 10yr Gilt closed 1.62% (-3bp).

“The Forecaster” will be shown this year at the Hack Miami 2016 Conference, which I will be speaking at. The long arm of government seeks to grab technology and what they are willing to do is becoming highly dangerous to society and threatens our very freedom. The demand that I turn over the source code to our computer program named Socrates was probably the first such endeavor. The demands to control technology have not subsided with their very high profile demands made against Apple to break their own encryption so that the government has access to everything. Of course, whatever the government demands is not in the best interest of society for cracking encryption will mean that the security of payment transactions and banking will crumble to the ground.

This will be a special presentation of “The Forecaster” for the programming industry. It is an honor to be invited to speak this year after coding for my entire adult life.

QUESTION: Mr. Armstrong, I have listened to the gold propaganda and believed in it initially but with time they always say the same thing and nothing happens. One would think that this helicopter money should have produced inflation. This effort has failed as Japan and Europe keep moving negative punishing people for not spending. Now it seems that Americans are also starting to save more and spend less. Do we need reinflation and can government even tackle such a task?

Thoroughly confused

Thank you for your efforts

SJ

ANSWER: Governments have been pretending they can control the economy ever since Roosevelt adopted Marxism. The root of our problems lies directly in this idea that government can steer the economy as it desires. The rise of Trump and Sanders proves that something is wrong beneath the headlines.

There is a growing awareness today that the financial markets are beyond the control of national policymakers. We are even beginning to hear people in the business saying that publicly. While a few economies do have the scale to shape interconnected global markets with trade barriers, etc., they face serious constraints in doing so, not to mention political and economic consequences. As a result, the global economy is stuck in a declining financial cycle with few options for escape.

This idea of helicopter money is poorly constructed and assumes that the quantity of money is the explanation for inflation. There is no historical evidence of that proving to be true. The Roman Empire funded its budget on a general mix of 80% taxes and 20% through the creating new money. This did not result in 20% annual inflation.

Look closely at the chart above. The sharp collapse takes place because Maximinus I (235-238AD) declared war on the rich. He simply declared that all their wealth was his and paid informants to report on anyone they thought had unreported money. This set off a deflationary wave as we have today with people hoarding money and not spending, which is causing investment to collapse. Once this was set in motion, the finances of the state could not be met because there was a declining trend in tax revenues. Every study shows that the more you raise taxes, the lower the GDP. Yet to this day, politicians cannot keep their hands out of other people’s pockets, which typically results in rapid debasement to try to meet expenses. Maximinus’ army was allowed to sack any Roman city that did not support their choice for emperor. This is like unions demanding to tax other people to pay for their pensions.

The final straw came when the Roman Emperor Valerian I (253-260AD) was captured by the Persians and turned into a royal slave to diminish the importance of the Roman Empire. The coinage still appeared to be silver until Valerian I was captured in 260 AD. From there in just 8 years the coinage collapsed to bronze silver plated.

The capture of the emperor sent shock waves through the population and revealed that the Roman Empire was vulnerable after all. Once that took place, people hoarded wealth and spent very little. Taxes collapsed. This is  caused the government to debase the coinage to meet expenses rapidly under his son Gallienus (253-268AD) in the subsequent 8 years (8.6 frequency).

It is NEVER the other way around where debasement takes place first and then inflation appears. This is simple propaganda that the promoters keep touting. The cause of such a monetary system collapse is not helicopter money at all, it is the collapse in public confidence. We see such a trend in the decline of public confidence that is rising with Trump and Sanders, as well as people starting to talk about the central banks losing control. The helicopter money is the RESULT of the collapse in public confidence, not the CAUSE of such events. So claiming a central bank is increasing the money supply and that will result in inflation is not ready for prime time. Such a scheme is the same as AIDS, where a person’s immune system collapses and causes them to get sick and die from typically non-fatal ailments like the flu. Was it the flu that killed the person of was it AIDS?

Paul Volcker in his “Rediscovery of the Business Cycle” amazingly spoke the truth back in 1979. He stated that behind the curtain they have always known they lack the power to control the economy. Even Larry Summers admitted that they cannot forecast the economy. This is a CONFIDENCE game – nothing more. How can you manipulate something you do not understand? Volcker made is very clear back then:

“Not much more than a decade ago, in what now seems a more innocent age, the ‘New Economics’had become orthodoxy. Its basic tenet, repeated in similar words in speech after speech, in article after article, was described by one of its leaders as ‘the conviction that business cycles were not inevitable, that government policy could and should keep the economy close to a path of steady real growth at a constant target rate of unemployment. … By the early 1970s, the persistence of inflationary pressures, even in the face of mild recession, began to flash some danger signals; the responses of the economy to the twisting of the dials of monetary and fiscal policy no longer seemed quite so predictable. But it was not until the events of 1974 and 1975, when a recession sprung on an unsuspecting world with an intensity unmatched in the post-World War II period, that the lessons of the ‘New Economics’ were seriously challenged.”

One can only laugh at these promoters and how they say I am wrong, yet they have never been behind the curtain and make up wild conspiracy theories to explain why they have been wrong. It is always someone else’s fault – never their thinking process. Undermine public confidence and everything collapses. Helicopter money will not collapse the economy and the hyperinflation of Germany and Zimbabwe were indicative of a collapse in public confidence to such an extent that nobody would lend those governments anything. The German republic was a communist revolution. The rich withdrew their money from the banks in Germany and sent it elsewhere. We are not in such a situation and the hyperinflation will never appear in the core economy – only peripherals. This is like saying everyone is starving in a third world country so the USA will have to do the same. They fail to consider a host of variables. These people base all this nonsense on this wrong interpretation that the supply of money dictates inflation. There is a lot more to this than that superficial one-dimensional perspective. If that was even remotely correct, then QE should have worked instantly. It has failed along with their theories.

So do we “need reinflation? Yes, absolutely. But this implies a restoration of public confidence which cannot be compelled by punitive measures such as negative interest rates. To reinflate requires restoration of public confidence, and you do not achieve that by blaming the rich and hunting money by expanding the abuse of civil asset forfeiture. People will hoard money when they do not see the future as stable. You cannot force people to do what is unreasonable. So deflation is here for the moment; 2015.75 was the peak in the economy and we are in a full-blown recession. It takes economists almost a year to concede that there is a recession because they cannot forecast the business cycle. When the general public (not investors) realize it is hopeless to expect government to save the day, then public confidence will completely collapse and we will be off to the races.

This is what the Economic Confidence Model is all about – forecasting the economy. You will see a USA recession. It takes 7 to 8 months from such a turn as 2015.75 to confirm a downturn by traditional methods. They define a recession by two consecutive quarterly declines. Ironically, economists do not want to forecast a recession is coming for they too know this is a confidence game.

Hillary is the prime example of total bullshit and using a standard playbook that never works. She is promising to raise taxes, fight Wall Street (her biggest donors), and increase spending. Just how is this ever going to work? There is nothing different from what Hillary says and what central bankers are doing. Sorry, the business cycle wins. Simple as that. Nobody can stop the rediscovery of the business cycle. If those in government understood the business cycle instead of fighting against the wind, then the best we could do would be to reduce its amplitude so the landings are not so hard and steep. We cannot make it sunny when there is nothing but rain. Increasing the money supply will NEVER produce inflation if people save (hoard) and do not spend. Pictured here is an Arab dinar hoard proving that not even culture alters human nature. If you do not have confidence in the future, you will not spend. Therein lies the understanding and creating piles of money that are absorbed and hoarded does not result in inflation. A collapse in public confidence, causes everything falls apart.

QUESTION: Mr. Armstrong; Is this the warmest uptrend cycle in climate? The theory is that man has caused the melting of ice and the warming of the seas greater than on previous cycles. Is this correct or false?

Thank you

JH

ANSWER: No. There are numerous studies that suggest that this particular uptrend in global warming from the low made during 1700s, has been a reaction high and not a new high. I have discussed this with others after running the data through our models, which suggests that we are heading into a lower low than during the 1700s. This may be the worse downturn. If this is correct, we will see larger bouts of famine and migration patterns.

Here is a chart produced from the sediment cores taken from the Norwegian coastal region. We have been in a progressively lower trend moving colder with each wave.

We can see that sunspot activity is part of the uptrend during warming periods. Everything is tied together and attempting to reduce the cause of the entire trend to a single factor is very primitive, to say the least.

Government lies about everything. So why do people believe that they would not lie about climate change when they are using it as a justification to raise taxes? Just follow the money. They are powerless to alter this climate of the earth. We are heading back to historical lows and are most likely going to make new lows. Thank God I will not be here for that. I like global warming. By the time we end up at the low, that should be around 2300. So no worries. Anyone reading this will not be here either.

BTW: It is snowing in Britain.

At the end of the day, does it really matter who becomes President? Typically, Democrats raise taxes and start wars and Republicans lower taxes and end wars (with the exception of shadow President Dick Cheney who sees if their is money to be made, what’s tens of thousands of lives matter?). Perhaps we need to start a collection here to help these celebs actually do what they threaten. For the most part, the same crew threatened to leave the country if George W. Bush was elected president. I suppose after paying their accountants to make sure they paid the lowest possible taxes, there was nothing left to pay for the air ticket out of the U.S. since they never left. Or perhaps they were so drunk on their status they could not find the exit door. Maybe we need to make sure they have enough money to leave just for once, and, of course, they would have to give up their celeb status since they would no longer be allowed to work in the USA.

At the end of the day, one person cannot change the entire ship. The bureaucrats will not stand for that. If they get in the way, there is always assassination.

A German magazine reported that Alec Baldwin said he would leave as well, but Baldwin denied ever saying that. Other celebrities who have made similar threats are still living in the USA. So why are they trying to influence us to vote for their candidate by making such dramatic claims? Perhaps they just need attention.

Eddie Vedder – “I’m moving to a different country if little Damien II gets elected.”

Barbara Streisand – “I don’t think you’ll see me around here for at least four years.”

Robert Altman – “If George Bush is elected president, I’m leaving for France.”

Pierre Salinger – “If Bush wins, I’m going to leave the country and spend the rest of my life in France.”

Oh well. They are actors after all. That’s what they do best and leave politics to someone who has a clue of what is really going on down there on Capitol Hill.

Donald Trump absolutely crushed Cruz after taking all five states including Pennsylvania and Maryland. Hillary Clinton won Pennsylvania, Maryland, and Delaware, but Bernie may walk away with two states. The fact that Trump and Bernie are there shows that the public is really fed up with politics as it stands. It is looking more and more like Hillary v Trump. But as they say, it’s not over ’til the fat lady sings.

Who we elect for president rarely makes a difference. Obama did everything Bush did after promising he would bring “change you could believe in.” After he was awarded the Noble Peace Prize, he tried to invade Syria. Who takes the helm rarely makes a difference because it is the bureaucracy who runs everything anyway, which began with Bush, Jr. People get so fired up as if electing one career politician will really change their lives, no less the direction of the economy. The only result is government gaining more power in the end.

Who will win in November is still a coin toss for it depends on the Republican elite. If they try to deny Trump the nomination it will split the party if not destroy it. Under normal conditions excluding a third party run, the odds favor a Republican victory. However, we are a lifetime away from November and how this shakes out has not been decided. We will have only a two party run or a strong third party. Two of our models project a landslide with Republicans exceeding 60% – very rare. One shows a dead heat and the other 55% v 51% for the Republicans. So despite the fact that Hillary is the media favorite, something else may be waiting in the wings.

Our computer models project a sharp rise of anti-establishment for the 2016 election. That forecast given back in 1985 appears to be on point. We have warned that it is typically the Republican Party that always splits. Some people wrongly believe that the Republican Party can do as it likes with its rules. The primaries are electing delegates rather than a person. Yet, the Constitution created the right for the people to vote, and they cannot ignore that vote and do as they like for that would violate 18 U.S.C. § 241. The idea that government can do as it likes AFTER providing the people with the right to vote for delegates is rather absurd. It would clearly violate the § 241.

So where we go from here will be interesting. It would be far better if Hillary won for then the establishment could not blame what we face on a non-establishment candidate elected to office. On the other hand, the government forecasts that everything goes bust next year. A career politician would just sign us away, followed by much higher taxes to kill the economy. If Trump became president, would he conform to act presidential and surrender to Capitol Hill? Time will tell. It really does not matter who is elected as it all turns down anyhow.

Unfortunately, it was just the Nikkei that prevented a positive “clean-sweep” for core Asian indices today. The Nikkei remains nervous ahead of the BOJ despite the JPY showing no signs of reversing its recent weakness, as YTD it remains down 7.5%. China and Hang Seng both saw late rallies take them back into positive territory closing +0.5% higher on the day. A weaker JPY has boosted the Nikkei this evening and so in late US trading the Nikkei joins the rally (currently up 1%).

All core European Indices were close to unchanged on the day with only the IBEX making a decisive break and closing up 1.6%, with the energy sector providing the boost. FTSE needed some help just to close with only small gain and was provided by Standard Charter (rallied 10% and BP (+4% on profits released $895Mio). Stan Chart reported profit of $589 the analysts focused on better than expected impairment declines.

It took most of the day before the US market decided to make a move away from unchanged and even then it was small and mixed. We saw the DOW and S+P make a marginal move better whilst the NASDAQ provided a small -0.15% decline. Some weaker than expected data Durable Goods and Consumer Confidence failed to unbuckle a tight unchanged stock market but it did help energy prices (+2.4%) but at the cost of the US Dollar (DXY 94.56 -0.25%).

Another parallel shift in the yield curve today in the US with all maturities 2bp weaker across the plain. 2’s losing the bid closed 0.865% with both 10’s and Bonds also 2bp at 1.93% and 2.76% respectively. 2/10 closes 106.5bp. In Germany, the curve continues to steepen with 2’s closing -0.49% and 10’s 0.30% (+3.5bp). This prices the 10yr/10yr US/Germany at 163bp. Italy 10yr closes 1.53%, Greece 8.40% (+12bp), Turkey 9% (-7bp), Portugal 3.20% (-8bp) and UK 10yr at 1.66% (+5bp).

The technology that has emerged to create political propaganda convincing enough to launch wars has crossed the threshold of becoming highly dangerous. The people who created this technology may not have had such an intent. Nevertheless, allowing such technology to get in the hands of government is extremely dangerous.

Technology in the hands of government, who also controls mainstream media, is perhaps the most dangerous combination ever dreamed of. We are doomed without an independent media outlet that actually investigates the abuse of government. Government can start a war and the media will just recite whatever they tell them to report. This is becoming a toxic combination.

 

Ted Cruz and John Kasich have actually conspired to commit a federal crime by denying the American people the right to vote. They announced that they will each step aside in one or more states to try to block Trump from achieving the nomination. Kasich is trying to defeat the democratic process because the establishment hates Cruz intensely and Trump to a lesser degree. Cruz and Kasich are now conspiring to steal delegates after a first ballot; nullifying the entire right to vote in the primaries, which is a federal crime. They are effectively saying that the Democratic process is unfair because the people are electing someone who the establishment does not approve of, or in other words — not them. Neither one of these politicians has a legitimate delegate base to seek the nomination. Their solution is to nullify the people’s choice and cheat them at the convention, committing voter fraud.

Let’s make this clear. They will justify themselves by writing a rule and claiming their actions are legal. There is a small problem they do not address — the Supremacy Clause in the Constitution. The Supremacy Clause of the United States Constitution (Article VI, Clause 2) establishes that under the Constitution, federal laws made pursuant to it, and treaties made under its authority, constitute the supreme law of the land. No rule passed by the delegates for the convention can supersede the constitution. Relying on any rule to circumvent the right to vote is a federal crime. They can write a rule and behead the loser as in some Mayan sports game, but that does not make it constitutional.

The Supreme Court has long ago recognized that the “right to vote” for federal offices is among the rights secured by Article I, Sections 2 and 4, of the Constitution, which is protected by Title 18 Section 241. United States v. Classic, 313 U.S. 299 (1941); Ex parte Yarborough, 110 U.S. 651 (1884). This statute was enacted following the Civil War and was intended to address efforts to deprive the newly emancipated slaves of the basic rights of citizenship, such as the right to vote. Therefore, we cannot find any other law whose purpose is to further criminalize exactly what Cruz and Kasich plan to do.

The civil rights statute, 18 U.S.C. § 241, has been interpreted to include any effort to derogate any right that flows from the Constitution or from federal law. Section 241 has been an important statutory tool in election crime prosecutions. It was used to break up the South’s intent to deprive blacks of their civil rights. Initially, this statute only applied to schemes intended to corrupt elections for federal office, which is exactly on point with the statements of Cruz and Kasich.

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If two or more persons conspire to injure, oppress, threaten, or intimidate any person in any State, Territory, Commonwealth, Possession, or District in the free exercise or enjoyment of any right or privilege secured to him by the Constitution or laws of the United States, or because of his having so exercised the same; or

If two or more persons go in disguise on the highway, or on the premises of another, with intent to prevent or hinder his free exercise or enjoyment of any right or privilege so secured –

They shall be fined under this title or imprisoned not more than ten years, or both; and if death results from the acts committed in violation of this section or if such acts include kidnapping or an attempt to kidnap, aggravated sexual abuse or an attempt to commit aggravated sexual abuse, or an attempt to kill, they shall be fined under this title or imprisoned for any term of years or for life, or both, or may be sentenced to death. 

18 U.S.C. § 241

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This statue 18 U.S.C. § 241 has recently been applied successfully to non-federal elections as well when that state action was a necessary feature of the fraud. This state action requirement can be met not only by the participation of poll officials and notaries public, but by activities of persons who clothe themselves with the appearance of state authority, e.g., with uniforms, credentials, and badges. Williams v. United States, 341 U.S. 97 (1951).

Cruz and Kasich have openly stated that they are conspiring together to rig the election and defraud the majority of the people out of their right to vote for Trump. The Republicans can make rules that the delegates are not bound after the first ballot, but that has never been reviewed by the Supreme Court. Once you create a “right to vote” in the primary, to nullify that “right to vote” would logically violate 18 U.S.C. § 241.

On one side, we have Hillary who clearly should be criminally prosecuted, but won’t because the Democrats control the prosecution process. On the other side, we have the two remaining Republican candidates, who stand no chance whatsoever of winning, conspiring together to deprive the people of the “right to vote”, which is also a felony. You have to admit, this is the craziest election since Andrew Jackson.

This week all eyes will be focused on Central Banks, namely the BOJ, RZB and time again for the Federal Reserve. Stocks have started the week on a nervous note with all core markets falling as talks of further easing weighs on sentiment. The Nikkei and HSI both attempted early recoveries but to no avail closing down -0.8%. The Shanghai managed a small recovery from early lows but still closed -0.4% down. In late US futures trading the Asian indices hit an additional 0.6% lower inline with US markets but a recovery into the close was extremely welcomed.

Oil was a given reason for early losses in Asia but that had all been forgotten by the time Europe opened. Having seen a positive start to the week prices started to drift and only managed a small bounce only to be hit again into the close. With many central banks all expressing concerns around growth it should be no surprise that miners and energy (EDF in the CAC) led the way lower. German IFO released a little weaker than forecasted, 106.6 was the print, whilst the expectation was looking for 106.7. Early DOW action did not help Europe and we closed down around 0.8% across all core indices.

US futures were already trading 0.4% lower when the cash market opened and so we saw a pretty rapid decline resulting in the days lows. Energy and Financials were the leaders on the way down whilst Consumer Staples and Telecoms led the rally back up. Volumes are quite light but is really to be expected ahead of central bank announcements on both sides of the globe later in the week.

A lot of the action was in the European Bond Markets today as Bunds and the peripherals started to be tester. The spread between US and Germany tightened again to close this evening at +162.5bp. US 10’s held-in really well only losing 1.5bp on the day (closing 1.895%). 2/10 tightened 1bp to close +106bp. German Bund 10yr lost 3.5bp, closing at 0.27%. Italy 10yr closed 1.53% (+6bp), Greece 8.28% (+7bp), Turkey 9.07% (+10bp), Portugal 3.28% (+2.5bp) and UK Gilt closed 1.61% (+1bp).