The talk is a flurry in Washington and the plan seems to be centered around a brokered convention in the Republican camp. Ted Cruz is disliked and they hate Trump to the core. According to the talk in circulation, it is between Mitt Romney or Paul Ryan being drafted as the Republican nominee. The elite see no problem with this and point to their rules that the people really do not vote for the candidate; the party does. They have convinced themselves that the Great Unwashed will return to soap operas and sports and after they bitch and moan it will be business as usual.

It is looking more and more like a brokered convention. If Trump goes to the Libertarian Party, then we may see this decided in Congress. In that case, expect a Republican victory.

Two members of France’s far-right leader Marine Le Pen’s entourage are being used to try to stop Le Pen from overturning Hollande. This is similar to what they are trying to do to Putin. According to the Panama Papers, two members of Le Pen’s entourage allegedly moved hundreds of thousands of euros by way of offshore companies in recent years. These two individuals are a businessman and an accountant with close links to Le Pen’s National Front Party. They designed a “sophisticated offshore system” to transfer up to €275,000 out of France between 2013 and 2014, according to France’s daily “Le Monde.”

This clearly demonstrates that there is a political agenda here, which may be to defeat any resistance or democratic change to the establishment who is pushing for electronic money and worldwide taxation. This is more than just looking for the rich; there is a dark shadow lurking behind this incident. Targeting certain people based upon friends is really stretching things and reveals the hidden political agenda. You can bet they are looking through a magnifying glass to find any remote connection to Trump.

The Independent has reported that the police in Cologne, Germany, who were investigating the New Year’s Eve Muslim refugee attack were told to remove the word “rape” from all reports. The initial reported stated that incidents of “rape, sexual harassment, thefts, committed by a large group of foreign people” occurred on the night of the attack. However, responding officers were told to either retract their report or remove the word “rape” as it was “the wish of the state interior ministry.” One really has to wonder who the government is trying to protect — themselves or the people?

The Federal Reserve has called an expedited closed meeting of the board of governors on Monday, April 11, 2016, at 11:30 AM.

The main topic again last night was the magnitude of the advancing Yen. Despite a convincing break below the 109 (and 108 in European trading) the Nikkei only managed to hold ground to show a modest (0.22%) gain on the day. The Shanghai fell over 1.3% overnight and only just managed to hold the psychological 3k level. Yuan was fixed 6.4716 which is marginally stronger against the USD. In late US trading the Nikkei has lost a further 2% whilst the JPY traded down 1.5% on the day to within a whisker of the 107.61 (Major Weekly Reversal). China 300 and HSI both down an additional 1% from the cash close.

European equities started ok but that sadly was to be short lived! Concerns around the Italian banking system hit shares again (BMPS -8.09%), banks exposure to energy remains a concern for many dealers and discussions around the Minutes of the ECB meeting and Mario Draghi’s comment, “Negative rates ‘broadly’ not hurting banks” remains open to interpretation. DAX, CACA and IBEX were all off around 1% whilst FTSE lost 0.4%.

US had already opened lower, following Europe but it was not until mid-afternoon session did we see the days lows. Yen remains a hot topic into the US session with many blaming unwinds of the carry trade. S+P goes negative on the year after todays losses, as does oil. Banks are one of the worst performing sectors and so we see a flight into both Gold and Treasuries. Interesting that we are starting to see a divergence between S+P and Banks indices.

The US Treasury market see the curve flattening with 2’s losing 4bp (last seen 0.69%) whilst 10’s were 6bp lower at 1.69%, closing the 2/10 curve at 100bp. Interesting the European reaction to the flight to quality. We saw the core perform while the peripherals lagged. 10yr Bund closed 0.09%, closing TY/RX at +160bp. Italy gained +10bp closing 1.39%. Greece 8.82% (+2bp), Turkey 9.73% (+5bp) and Gilt 10yr closed 1.33% (-5bp). Portugal 10yr closed 3.39% (+23bp).

Although we did see some large currency moves today the DXY managed only a small 0.2% improvement for the Index. The JPY as we have already mentioned closed +1.5% firmer whilst the EURO and GBP lost around 0.5%. The A$ suffered one of its largest loses in a while down 1.25% on the day.

Some people were surprised that I wrote that the USA paid off its debt under Andrew Jackson. What you have to understand is that the debt was effectively a deal between Jefferson and Hamilton. Jefferson forced an agreement that debt had to be paid off and the capitol would be put next to Virginia which became Washington, DC.

The federal government did not issue paper money until 1864, so there was no funding of debt as we know it today. This was the bailout for the States under the Hamiltonian model that was used to create the United States under a Federal government. Hamilton absorbed the war debts of the States (See report on Hamiltonian Model). They paid off the debt briefly and then it returned after Jackson left office.

Greek TV

The fact that this movie is appearing on national television in Europe and even in Canada, but not the United States, demonstrates how there really is no free media.

Even Jeff Deist of Mises Institute wrote:  “Martin Armstrong is one of the most famous economic forecasters alive, but you wouldn’t know it after the whitewashing job he’s suffered at the hands of the federal government and the mainstream financial press.”

It is truly amazing just how far the government and media are linked and willing to block anything that exposes the banker’s deep links to both.

A video of the riot in Naples was posted to Facebook.

In Naples, Italy, riots against Prime Minister Matteo Renzi resulted in clashes between police and demonstrators. 

Italy’s government had to address the plight of Italian banks which now seems to be significant as both houses of parliament voted to create a state fund for bad loans. On Tuesday, the government announced that they planned to fund the money houses to buy the bad loans. The decree also provides for the formation of a holding company to merge the 371 small credit unions. Therefore, it is placing the bad loans outside the banking system.

The Senate rushed together late on Wednesday afternoon. In the House of Lords, the vote was 171 for the plans, 105 against. Resistance to Renzi’s idea was very limited. Nonetheless, the House of Representatives had already passed the decree while Prime Minister Matteo Renzi had only a very thin majority in the Senate. The crisis appears to have forced the measure through, demonstrating how bad the banks in Italy really are.

The EU rules for bail-ins are breaking down. Each country is beginning to ignore Brussels by proceeding in their own manner and the ECB is really losing control. The new plan envisages that banks can bundle their bad loans into new financial products and then sell them. But who will buy them?

In reality, Italy’s government has survived a vote of confidence in this decree involving a bank rescue. This is now all about state guarantees for banks that could collapse under the weight of bad loans. That day is coming rapidly as all the QE efforts of the ECB will do nothing to reverse the crisis in banking or the economy.

Meanwhile, ECB Chief Economist Peter Praet spoke at a conference in Frankfurt on Thursday. Effectively, the message was that the ECB is ready and willing to do “whatever is needed” to return inflation to target. Instead of looking at the current negative interest rate policy, they continue to see the solution to be more of the same. Obviously, the ECB is incapable of reversing the trend as banks continue to implode in Europe and smart capital flees to the USA. The cycle will play out and things will look very bleak for Europe into 2018.

Based on the cash, we can see that the Greenback has rallied sharply against the A$ but has not elected a yearly bullish as of yet. It did exceed that level intraday, but the fact that it failed to retain those gains warns that we are not looking at new historic highs for the dollar against Australia.

Looking at the A$ in futures (opposite of cash), here is a chart of the A$ rather than the Greenback. Our Daily Bearish to watch is 7415. A closing beneath this will warn of a drop back under 72. The Weekly Bullish stands at 7819 while we have reached 7698. The Weekly Bearish lies at 7390. This is what we need to elect on a closing basis to reverse the A$ back down.

Keep in mind that the low took place the week of January 11, so April will present the extent of any reaction. March closed at 7650 and our Monthly Bearish resides at 7606. However, if we make a new high in April and retest the reversals in the 7800 zone, then this will possibly change and move lower based upon our What-If models. The Monthly Bullish stands at 7820 and the Downtrend Line stands at 8132, technically showing that we have not reversed the decline as of yet.

We still see the key weeks ahead as 04/18 and 05/02. It appears we should start to see rising volatility come May. We have not elected any Quarterly Bullish Reversals which begin at 8795. It does appear that we may exceed the March high during April. A daily closing back above 7627 will warn of a retest of the March high of 7698, and a break above that should produce a brief rally up to test the 7800 area.

Keep in mind that we did elect a Yearly Bearish in the Futures. To date, we are 4 years down from the highest annual closing in 2012 and 5 years down from the intraday high in 2011. It does not appear that the A$ will make a new historic low, but it will remain under pressure a while longer. It appears we are looking at a revival of the uptrend from 2017/2018. This may be fueled by the realization that the Superannuation Fund is funded when most other countries are broke.

Keep in mind that in order for the January low to hold, we need to make new highs after April and close above 7820 on a monthly closing basis. Otherwise, we are still looking at a 3-month counter-trend reaction.