Perhaps it is just cyclical, but the Cleveland Republican Convention will be the first time that Cleveland has held a political convention since the fateful 1936 election, just prior to the 1937 peak in the recovery from the Great Depression. This has the potential to be very bad for the city insofar as it will expose the downside of how unions destroy their own jobs by becoming out of touch with the real boss – the consumer. The unions always see this as them against a corporation and fail to understand that if they price themselves out of a job, it is because the consumer is not buying it.

Once upon a time, New York City was the main port. The union demands were abusive and eventually the port of New York came to an end. There can be no monopoly, be it a corporation or labor, for the ultimate decision maker is always the consumer.

The prospect of the Republican nomination going nuts remains rather high. We may yet see riots if Trump is denied the nomination; evoking the memories of Chicago’s violent 1968 Democratic Convention when backroom deals by kingmakers determined the nominee and led to fistfights on the floors that stained the city’s image for a decade as the events were broadcast worldwide.

The 1968 Democratic Chicago Convention saw massive protests about Vietnam. We are in an upward cycle now for civil unrest. We may begin to see a lot more chaos around the upcoming presidential election from those trying to stop Trump and the silent majority who are supporting Trump against the corrupt insiders.

There was a major change in trend in 1937. It appears we are headed for that same change in trend come 2017.

We have 40% of Trump supporters saying they will abandon the Republican Party, and 30% of Sanders’ supporters saying they would never vote for Hillary. This illustrates that a tremendous amount of the political base on both sides is just dissatisfied with politics as we know it today. By the time we come to 2018, this will grow to a nightmare for Washington insiders.

Obama came to office yelling about “fat cat bankers” and “corporate jet owners.” He then rescinded all the Dodd-Frank restraints against the bankers, and Goldman Sachs was the largest donor behind the University of California. Whatever these politicians say they stand for during an election, you can bet is pure bullshit. Whatever they say they will never do and what they never talk about is what they actually enact. So much for the “democracy” they pretend we have.

QUESTION:

Dear Marty,

Whether in a Phase-transition or a Slingshot Move in the Dow, you made it very clear that such moves will be driven by capital inflows to the USA due to the alternative flight to quality to the private sector, both internationally and domestically. It is now just so obvious, it is unfolding in front of our eyes.

The question, however, will be whether capital will remain parked there for long time, or else leave abruptly to go elsewhere? For as high as it can go, that market sooner or later will eventually run out of steam, just like any other system. We are now focusing on the flows towards it, but can you please shed a light on what will come next? Will there be a trade to the downside too? Where will all that capital go at that point, simply repatriate, go to Asia? Your knowledge and wisdom on this would be highly appreciated.

Thanks in advance.
SB

ANSWER: What goes up must also come down. A Phase Transition is the culmination of a collapse in public confidence which is now rising before our eyes.. The question really becomes rather blunt. Will we simply readjust? Or will we crash and burn? This appears to be the end result of socialism. Therefore, we are more likely to see at this time a collapse of the world monetary system. A rise in the dollar will break the back of the US economy and that is what is needed to create the next step toward monetary reform.

We are most likely going to see a new monetary system where the dollar will no longer be the reserve currency. That will probably become some form of a basket. This is the collapse of the West just as Communism collapsed and altered the course of China and Russia. Therefore, we are looking at the shift of the financial capitol of the world from the West to the East dominated in India/China. As we can see, the financial Capitol of the World always migrates.  After Rome and the fall of Byzantium, the capital moved to India. It then moved to China. When Christopher Columbus set sail, he was trying to get to India because that was where all the money was. You do not set sail to be to a slum in a third world country. Europe was rising, but it was Europe which had been reduced to a third world status.

The other side of a Phase Transition will be the fall of the West. That is just how things evolve. We are plagued with politicians who are incapable of making any changes to save the country because they are too busy grabbing the free soap in the hotel room. Republican National Committee chairman Reince Priebus responded to Donald Trump’s recent complaints that the nominating process is “rigged” against him by saying: “Give us all a break.” Priebus demonstrated by his response that the game is rigged. He said: “Nomination process known for a year + beyond. It’s the responsibility of the campaigns to understand it. Complaints now? Give us all a break.”  Priebus is an American attorney and politician so he is a trained and knows how to lie when necessary. Note what he says: “Give me a Break”. He does not deny anything nor does he say Trump is wrong. Priebus simply admits they rigged the voting system more than one year ago so why complain now?

This is a typical response designed to fool the majority as if Trump is wrong. All Priebus is saying that Trump knew this was the game so it is not fair to complain now after a year has passed. Priebus did not deny anything Trump had to say. He only said Trump did not complain soon enough. This is like someone who robs you and they justify keeping your goods claiming you should have complained before. Yes, Priebus, give us a break from this clever double-talk. Unfortunately, this is the classic example of how dishonest politicians have become. There is no honor nor is there any accountability. They will distort and twist things around right before your eyes and do not care because the media will never analyze what they just said. This is why we just have to crash and burn. We cannot reform with people like this trying to maintain an unfair system.

It really should be no surprise to people that we saw some retracement after a 3.3% rally in a day. That is exactly what we saw today in the Nikkei after yesterdays euphoria. Most dealers were hoping China’s GDP release was going to provide the end of week support for the markets but that failed to materialize. Mixed data and some profit taking resulted in a fairly quiet day eventually closing with little change. PBOC set the Yuan at 6.4908 with dealers taking it a little further to 6.4835 at one stage.

Mixed data, the end of the week and concerns surrounding the oil talks in Doha this weekend all made today’s trading a little erratic in thin’ish volume. It is interesting that many core Indices are up against some Monthly reversals so we would not be surprised if we do see a little pull-back next week. On the day we have seen core indices down around 0.3% but given that oil lost ahead of the weekends meeting it was not a bad performance.

The US markets saw the stocks small lower in, what felt like, uncertain trade. We saw mixed data from weak Ind Prod and Cap U but bucked by a strong Empire Manufacturing. Indices drifted into the close having backed up from session lows. The weekend oil meeting is expected to set the trend for Monday so many clearing the books ready.

Fixed-Income saw some buying activity upon the weaker than expected data concerns. The bull curve flattening returned but only mildly. 2/10 flattened 1bp to close +101.5bp. US 10’s closed 1.75% while in Europe the key 10yr Bund closed 0.125% closing the spread at +162.5bp. Italy 10yr closed 2bp lower at 1.33%. Greece again working on the back of the bailout (they added GGB’s to the QE list) tightening 29bp to close 10yrs at 8.71%. Turkey 10yr closed 9.17% (-9bp), Portugal 3.15% (-8bp) and UK Gilt 10yr closed 1.41% (-4bp).

QUESTION: Mr. Armstrong; A lot of people claim to have contacts in high places, but they seem to delude themselves and others. I have been in Washington and saw you at lunch meetings with chiefs or staff of several politicians in ————- one of the most exclusive spots only for members of Congress. I have been in Brussels and seen you there running around to meetings. Friends in Beijing say the same that you are not blocked and held in very high regard. You have more “influence” than you admit. Do you think you can help prevent the coming crisis?

—

ANSWER: Yes, I do not deny that I know a lot of people in many governments. It is true I suppose that you could say I have some “influence” but that is among the minority. There are people in government who see this mess coming. However, they are powerless to prevent the collapse. I do not possess enough “influence” as you put it to prevent anything. The majority will grind the system into collapse. Nobody can stop that. All I hope to accomplish is when that moment comes, perhaps I can shine a light on the path to freedom rather than suppression. We will see. I get to leave this earth. My life is almost over from a rational perspective on a proportional basis. I am glad I am not 18 today and have a lifetime of servitude to the state to look forward to. If I can leave something behind to my posterity, then it is worth the effort. But neither I nor anyone else possesses enough “influence” to prevent the crash and burn. The best I can do is to hope that they can stand there with their arms wide open facing the sun and see the alternative being freedom.

Next week, China will begin its competition with London & New York and attempt to create the equivalent of the London gold fix but in Chinese yuan on April 19th. Of course the gold bugs are misrepresenting this as some dollar killer. Top Chinese banks, alongside Standard Chartered and ANZ, will be among 18 members to join a new yuan-denominated gold benchmark that signals China’s biggest step towards making the yuan convertible.  Of course, in London the banks have been fined for manipulating the closings to elect stops playing against their own clients. By creating a yuan based gold fix, this is a back-door to floating the yuan itself. It will allow for arbitrage in currency so you can go long or short gold in dollars and the opposite in yuan and you have then created a yuan futures contract.

For years, these people spinning stories that “paper gold” was evil, failed completely to comprehend how the market even functions. OPEC nations who could not earn interest religiously, bought gold and then sold it forward. They were not interested in gold; it was the means to earn interest without calling it interest. This is what gave gold the liquidity that other commodities did not have. The gold market was an interest play for decades enabling the OPEC state to circumvent their religious restrictions. Creating a yuan based gold fix is once again not about gold but about a test for floating the yuan. Sophisticated players will use this for the currency and China will monitor the trading as a test case for floating the currency. This is the small step forward. China has to float its currency or it will NEVER make it to the big leagues. Capital has to freely be able to move in and out without applying for permission to enter and leave.

So now these people spinning this story show their ignorance. They say “no dollars allowed”, as if this is some war that will destroy the dollar. China dollar reserves are over $3 trillion. Why would they try to make those reserves worthless? If they wanted to hurt the dollar, then convert the $3 trillion into something else. But what? Rubles? Gold is not easily transportable for international settlements among nations. Gold is such a tiny fraction of world capital flows (less than 1%), that converting all their reserves to gold would isolate China’s economy preventing it from trading with the rest of the world. These claims only reveal the lack of comprehension of how the economy even functions when these gold promoters yell this at the top of their lungs.

Those who are screaming gold will now go to $64,000 an ounce because this will some strange way make the yuan a gold backed currency, only demonstrate how ignorant they are when it comes to international finance. It was during the 19th century when the Silver Democrats tried to fix the silver at 16:1 relative to gold seriously over pricing it relative to where it traded in Europe. That resulted in silver being attracted to the USA and gold fleeing the country. This is why the USA entered a 26 year depression and ended up virtually bankrupt when J.P. Morgan had to arrange for a gold loan in 1896 to save the country. Here is the English magazine Puck showing America drowning in silver by their stupid attempt to overvalue silver relative to gold because the miners paid off the Democrats just as the bankers do today.

If China even dared to attempt to make gold some absurd price well above the world price, they would be bankrupted in a matter of weeks. Everyone would sell their gold to China and return with dollars and nobody would accept gold at some crazy price in payment for anything. All you would need to do is just wait for the collapse and buy back the gold at the world price. Any attempt by any government to FIX THE PRICE of gold far above the world price is precisely converting gold to FIAT defined as dictating the price disconnected from reality of the free market.

So anyone claiming gold will rise to some absurd number, just ask them; Will you buy it now at 10% or 5% of that number and how much do they want? I could easily deliver any quantity at 10% or 5% of such a price of $30,000, $50,000, $64,000, or $100,000. I will be glad to sell them an option at those prices. As the TV show use to be say: Let’s Make a Deal. The question really is; Do they honestly believe this BS? Or are they paid by people to try to sell dreams like swamp land in Florida and the miners did to convince the Democrats to buy silver at overvalued prices during the 19th century?

One of the reforms we have presented in our Solution is why income taxes have become obsolete and should be eliminated. The only people who pay income taxes are citizens and green card holders. Illegal aliens need not apply. Elizabeth Warren has introduced an idea that would allow U.S. taxpayers to have the government do their taxes for them—for free. Since the government tracks everything, they already get reports from employers and banks and match everything up to check what people claim on their returns. Warren proposes that people should not have to file a return and let the government simply calculate your income tax. The interesting aspect is you really do not have to pay your taxes. They cannot imprison you for that. The prison is the FAILURE TO FILE. You can say look I owe you $2 million but I cannot pay. They will hunt down all accounts, freeze what they can, but they cannot imprison you for an inability to pay. So if she eliminates the need to file, she decriminalizes the income tax.

Yet this difference between a citizen/green card holder and an illegal alien is important. Aliens do not have to pay taxes. Those looking to establish themselves in the USA use real Social Security numbers often of dead people. The IRS has admitted it even encourages illegal aliens to use stolen SS numbers. Forbes has reported on this issue and it is shocking. The IRS wants illegal immigrants to illegally use Social Security numbers and admitted that before Congress. IRS Commissioner John Koskinen shocked everyone responding to a question from Sen. Dan Coats (R-Indiana) at a Senate Finance Committee meeting. The question asked was effectively if the IRS was collaborating with taxpayers who file tax returns using fraudulent information? The IRS admitted that it processes tax returns even with false W-2 information and issue refunds as if they were routine tax returns. The IRS actually ignores any notification from the Social Security Administration that a name does not match a Social Security number. The IRS justifies its policy saying that as long as the information is being used only to fraudulently obtain jobs, the IRS was perfectly fine with that. The Commissioner even went further stating that the IRS actually had an interest in helping the illegal immigrants to pay taxes. So much for terrorism. Just show me the money should be their slogan.

QUESTION: Hey Martin.
I’ve been a reader of your for years now. Thank you for everything you are doing. I live in Europe in Finland and I can feel this continent collapsing. Do I understand you correctly. You suggest that we Europeans open a bank account somewhere else, hold our savings in dollars and when gold bottoms we buy gold with our dollars. Is that correct?
Please answer Martin because I’m afraid to hold my savings in Euros in my bank.

ANSWER: Yes. So far, the USA is actually a tax haven for non-Americans. You can open a bank account in the USA which Americans cannot do the same overseas. You would want to do that before it is too late. If Britain does vote to exit, it will set off a contagion that will cripple the EU.

Gold should NOT be your only investment. You should consider US equities – blue chips. The dollar will rise and with it this will break the monetary system. It is unlikely that would unfold before 2018. Nevertheless, this could come in 2020. We get major monetary reform ONLY when the dollar rises. A declining dollar will will see US corporate profits rise. Only a rising dollar will break the system. US banks are far safer than European. Those preaching the dollar will be destroyed so buy gold now do not even understand finance nor do they comprehend history. It was the rise in the dollar in 1933 because of the Sovereign Debt Crisis in 1931 that sent the dollar to record highs resulting in its devaluation and confiscation of gold. In 1985, the dollar rose to all time highs sending the British pound to $1.03, which then resulted in the creation of the G5 (now G20) at the plaza accord. It is the high dollar which export deflation, with result in defaults of emerging market debt, and break the remaining pegs to the dollar by various countries. No such chaos will take place if the dollar declines.

Failing to understand the dollar and its role within this decline of the Western economies will cost you a fortune. Our forecast has always been a retest of support in the dollar for 2016 and then off and running. The dollar is still well within its long-term uptrend channel. Gold will rise but it is not yet ready for prime time. Be patient. The 2016 Gold Report will cover the timing when to buy. These people who constant cheer every rally as the launch of gold and the demise of the dollar live in a dream world. Nothing takes place in isolation. Everything is connected.

Proof that Ted Cruz is very much disliked among Republicans was demonstrated over the Planned Parenthood issue. Cruz is being ignored in Congress. On Monday night, Republicans ignored Cruz’s attempt to disrupt Senate Majority Leader Mitch McConnell’s efforts to fund the government without attacking Planned Parenthood. This incident demonstrates that Cruz would not have the support of his party if president. It was highly unusual, but the Republicans denied him a “sufficient second” that would have allowed him a roll call vote. Then, Cruz’s Republican colleagues loudly responded “no” when Cruz sought a voice vote. Twice, the Republicans showed how little support Cruz actually has and his religious agenda would only alienate the Party. Talk on the Hill, actually began to swing toward Trump. Some are now saying that if Trump has the “majority” of delegates say 1100 but shy of the requirement, he should be nominated. This is a real turn of events to put it mildly.