QUESTION: Mr. Armstrong. Does deflation  accompany hoarding of cash and the velocity you speak of declines? Is this the trait that you write about and part of the reason gold has declined?

ANSWER: People simply save money in times of uncertainty. This is one aspect we have to watch with the turning up of the Cycle of War next year. This can be caused by several different types of events such as civil unrest that materializes into revolution, economic uncertainty during recessions and depressions, and of course times of war. There was such a shortage of money when the Napoleonic War began that England had to simply counterstamp silver coins of Spain with the portrait of George III because there were no coins circulating. The Bank of England began to issue small denomination paper currency notes because of the shortage of coins.

During the American Civil War there was also a shortage of coins and we find small denomination currency backed by postage stamps.

Private companies issues encased postage stamps with advertising on the reverse. This was because of the chronic shortage in coinage.

Silver traditionally becomes cheaper than nickel for it has no practical use as weapons. We saw during the World War II 5 cent nickels replaced with 5 cent silver coins.

As uncertainly prevails, people hoard money and the velocity declines. As a result, unemployment rises for jobs depend upon capital feeling safe and contented. Nobody will start a business when the future is cloudy.

There were two taxes that altered how people lived. There was the Window Tax that inspired row homes in Colonial America. That simply became the standard and long after the tax was gone, row homes became the norm. Row Homes eliminated the need for windows on two sides of the house.

You will also see some colonial houses had just one step and others two or three. You were also taxed on the number of steps you had. Hence, the saying “taking a step up in life” had its root in the fact that you were rich because you had more than one step and were taxed at a higher rate.

Taxes have always altered behavior. The higher the taxes in a city, the more people moved to the suburbs in ancient times as they do today. When Maximinus I had spies seeking people with money in Rome, capital went into hiding. The one way to destroy an economy – keep raising taxes. Unemployment among the youth in Southern Europe is over 60%. Government is destroying their future entirely and altering society by preventing marriage at the same age because there is no job to start a family.

Money today is effectively electronic. Cash forms such a tiny fraction of the money supply it is rapidly on its way out the door. When I park my car in the city, there are only machines to give me a ticket, then to pay and receive an exit ticket, and I see no one. The age of technology is eliminating minor jobs and converting money into simply credit and debt cards. There will be no going back to some gold standard and the younger generation will look at you in amazement as if you are speaking “how for art thou” in some ancient tongue.

We no longer need taxation at the federal level. About 70% of the national debt is simply interest to keep borrowing with no intent of paying anything off anyway. All we need is simply pay for government capping its cost at a maximum of 5% of GDP and prohibit borrowing. State and local government need to tax only because they do not create money. Take this step and we will restore our privacy and freedom. We have once again accomplished “taxation without representation” because we have career politicians who always raise taxes to fund their desires without any regard for society. All we hear about is taxing the rich to help the common man. But the taxes are going to fund the bankers not the poor and the slogans sound nice, but are total bullshit.

I was in Australia when they were proposing the Luxury Tax. They got the people to vote for higher taxes by lying to them. The slogan was they were going to tax the rich with their “Ferraris, Fur Coats, and French Wines.”  Everyone cheered – ya! Get the bastards! When the tax was passed, suddenly the dumb public discovered ALL electrical products were included. You could not buy a clock radio without the Luxury Tax.

People get what they deserve from government – lie, lies, and more lies, and empty pockets to show for it. Like Row Homes, they are altering society reducing our standard of living. Many among the youth no longer have the dream of owning their own home and marriage forever. It is now cheaper to rent and the house may cost more in the long-run. It is hard to find a husband who can even provide for a family at the same age forcing society back to the way it was before Hollywood – the growing age gap between husband and wife and in nearly one-third of marriages the woman earns more than the man.

Hollywood converted lust into love at first sight and created the image of two people meeting in school and marrying for life. Divorce is so high, Mexico is even considering creating temporary marriages that require renewal. The age gap before Hollywood was traditionally 15 years. The man had to go establish himself BEFORE taking on a wife.If you asked for the hand of someone’s daughter and the father asked what did you have, a response like nothing, but I love her would have been a good laugh.

The younger generation has watched their parents divorce and the trust in marriage as some institution has declined. Various studies show that the greater the education (really maturity) the lower the divorce rate. But the data also shows that marriage is now at its lowest point in modern history – so much for socialism. Politicians simply ignore the fact that it now takes TWO incomes to support a family when before Socialism – it required just one because there was also no income or payroll taxes.

Girls in their 20s are discovering men in their 20s are still boys. Women simply mature faster than men and this may be the truth within nature. In the animal world, it is the fittest male that gets the female. Among humans, it is the male who is reliable and a good provider, not the one who can down more shots and throw-up more than anyone else because he thinks that’s cool. This change in behavior among humans thanks to taxes has even been promoting studies that show men live longer when they have younger wives. Taxes are changing everything. It even seems to be divorce declines with the rise in age difference. Perhaps Marxism altered a lot more than we realized. It is time we seriously look at ending the income taxes and stop the borrowing funding government by just increasing the money supply keeping it within 5% of GDP which a central statistical agency calculates for ALL nations eliminating political manipulation.

James Otis (1725-1783)

President Obama is supposed to be a Constitutional Lawyer. It is sad he clearly has no respect for the Constitution whatsoever. John Adams, Second President, listened to the 4 hour speech of the defense lawyer James Otis (1725-1783) who argued against the king’s Writs of Assistance in February 1761 that allowed the government to arbitrarily search whatever they suspected for any reason. History repeats for there are few people in Washington today that even understand what is at stake with the actions of the NSA and how they are so devastating to the economy and free markets as they scare the hell out of capital globally. Even a marriage will not last if either party also distrusts the other. This is what the NSA has done. It has shown that it trusts no one. It is now not just seizing every phone call globally it can get its hands on, it has now been revealed it is storing the locate of every cell phone when used.

The NSA trusts no one. Like a marriage based on mistrust, they are changing the behavior patterns of the entire world. Many countries are taking steps to place all servers for the internet in their own country and cutting off access to information. The NSA even grabs all flows through the Swift system following every piece of money that flows around the world. None of this excessive surveillance has proven to stop any terrorist plot and when you seize so much, it is impossible to sift through that much data on any timely basis. Proof of that was the Boston Bombing where these two kids were using their cell phones.

Here are a few excerpts from that famous speech of James Otis that so moved John Adams and inspired the birth of the American Revolution.

I will to my dying day oppose, with all the powers and faculties God has given me, all such instruments of slavery on the one hand and villainy on the other as this Writ of Assistance is. It appears to me the worst instrument of arbitrary power, the most destructive of English liberty and the fundamental principles of law, that ever was found in an English law-book…  

The writ prayed for in this petition, being general, is illegal. It is a power that places the liberty of every man in the hands of every petty officer. I say I admit that special Writs of Assistance, to search special places, may be granted to certain persons on oath. But I deny that the writ now prayed for can be granted…

In the first place, the writ is universal, being directed “to all and singular justices, sheriffs, constables, and all other officers and subjects”; so that, in short, it is directed to every subject in the King’s dominions. Everyone with this writ may be a tyrant; if this commission be legal, a tyrant in a legal manner, also, may control, imprison, or murder any one within the realm.   In the next place, it is perpetual; there is no return. A man is accountable to no person for his doings. Every man may reign secure in his petty tyranny, and spread terror and desolation around him, until the trump of the Archangel shall excite different emotions in his soul. In the third place, a person with this writ, in the daytime, may enter all houses, shops, etc., at will, and command all to assist him. Fourthly, by this writ not only deputies, etc., but even their menial servants, are allowed to lord it over us…  

One of the most essential branches of English liberty is the freedom of one’s house. A man’s house is his castle; and whilst he is quiet, he is as well guarded as a prince in his castle. This writ, if it should be declared legal, would totally annihilate this privilege. Custom-house officers may enter our houses when they please; we are commanded to permit their entry. Their menial servants may enter, may break locks, bars, and everything in their way; and whether they break through malice or revenge, no man, no court can inquire. Bare suspicion without oath is sufficient. 

The Global Market Watch has been posted for the close of December 6th, 2013.

http://armstrongeconomics.com/market-watch/

John Thornton, ex- Goldman Sachs banker who next year takes over the helm at Barrick Gold, the world’s top gold miner, has suggested that hedging may once again be appropriate. We use to assist mines in hedging. Outsourcing hedging is not really done other than to hand the reins of power to a bank who collects fees.

At Princeton Economic International, we use to take on the outsourcing projects to assist companies in restructuring portfolios globally to create natural hedging strategies and to outright hedge currency and product risk on a PERFORMANCE basis rather than just fees where the house always wins.

The mining companies were sold a bill of goods by the banks that they should always be hedging their product to lock in profits when gold was about $300 and in decline for 19 years. They lost tremendous upside in the 13 year rally. Naturally, like most unprofessional traders, they lifted their hedges to share in the new bull market. Then the high came in place and gold has crashed and burned since 2011.

The majority of the mines will once again hedge going into the low. They will have their short positions in place and end up with losses during the next rally as they did before.

You would be surprised, but the majority of big corporations do not have professional treasury management facilities. Most will defer to the banks for advice, which is how they make a lot of money trading against their clients.

Corporations are the targets of the banks more often than not. Even central banks are now starting to outsource the management of their reserves. Financial risks have always existed wherever trade and international investment have been undertaken. However, the extent to which they have been identified, quantified and controlled has varied tremendously. Some well-publicized losses incurred by both financial and non-financial organizations around the world in recent years. We were call into a major auto manufacturer who had made a hedging decision at board level based upon the headlines in newspapers.

Treasury risk management has become increasingly important.  Companies  need to comprehend the market trends  to  ensure  that  their  own operations will survive. A Japanese airline bought a fleet of 747 planes in dollars years ago, but failed to hedge the currency. They were forced to lay-off almost 25% of their work force. Both currency and product are presenting tremendous risks that boards are incapable of comprehending. Simple and properly  controlled risk is essential to good management.

Investors have to understand that hedging is vital to safeguard a company and its assets. However, also understanding that the hedging is done on a professional manner rather than listening to brokers and banks interested only in fees, should be distinguished from professional management.

Treasury Management has become the greatest un-quantified risk in a business given the implications of currency and product trends. Many  companies should be reconsidering the way they have viewed treasury management in the past and making sure that in future treasury management contributes positively to the overall success of the company in a controlled and structured way. Investors need to pay attention to these trends and how companies are handling those risks.

QUESTION: Mr. Armstrong; Are you also going to update your report on weather, earthquakes, and plagues? I think the last time you did that was for the 1985 Conference. I do not recall the target, but I think it was 2020 on the plagues. Is that correct? I cannot find my materials.

ANSWER: We do have the forecasting booklets from the 1985 Conference in PDF version at $100. We are still looking for someone who has the VIDEO. We have included a brief update on the plagues in the current Cycle of War report. The target is 2019 on plagues, not 2020. We did include a brief discussion of the earthquakes also in the Cycle of War update.

This is a special report Cycles of War covers the global turning point in 2014 and the fascinating 2012 turning point in China that has marked with amazing accuracy the border dispute with Japan over the Shenkaku Islands. It is vital to understand this cycle and what it means for herein lies the fate of gold and the Dow Jones Industrials not to mention the Euro and European markets. This report covers the world including the cycles of war with respect to China and Russia in addition to the US, Japan, and Europe.

$75.00 Allow 3 days for Delivery

The Global Market Watch has been posted for the close of December 5th, 2013.

http://armstrongeconomics.com/market-watch/