Economic Outlook

Martin Armstrong: Hello Deflation!

74% of all Municipals want to raise Taxes. Municipal governments are going broke everywhere. This entire structure of government would never have been designed even by a moron. In Germany. a survey of 300 municipalities shows that 74% are planning to raise taxes. Now 27% plan to increase their cemetery fees, 25% want to demand more money for attending daycare or day schools. 21% plan to increase the property tax assessment rate, and 13% intend to raise the dog tax. (see latest German survery)

We are headed into this Sovereign Debt Crisis and Western Society as we know it cannot POSSIBLY exist. The problem with politicians is they just look at the people as a bottomless-pit of revenue to be taxed at will. They have no grand plan nor have they ever contemplated the long-term viability of such a system with no fiscal restraints whatsoever. They never see themselves as part of any problem – it is always the cheating people who do not hand them everything they demand.

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This is the source of the civil unrest we see coming everywhere. Governments do not respect the people nor do they really care about our future. This is now all about them and they only see raising taxes rather than downsizing or reform.

In the United States, the resistance toward raising taxes to pay for repairs in infrastructure has the Obama Administration pitching the pension funds to join in and invest in an “infrastructure fund”. They are soliciting pension funds because they will benefit from tolls etc and that will be more palatable than watching you toll dollars go to bankers. The idea is this will be salable to the public. California’s pensions Capers is on board and have already announced they will liquidate $4 billion from hedge funds. They have not announced where they will shift that money, but it appears they are getting ready for another Obama star project up there with Obamacare.

Taxation-Deflation

State and local government cannot print money. This is the DEFLATIONARY aspect that first impacts society. Courts begin to rule only in government’s favor and you then see the collapse of investment and society as a whole when the rule of law vanishes. The higher they raise taxes, the lower the disposable income, the lower the economic growth, and the higher we will see unemployment. Government wastes money – they consume capital and are incapable of producing anything worthwhile to contribute the economic growth. This is why government MUST be restricted to defined percentages of GDP to prevent it from growing like corporations until they become so big, they are unable to function.

Detroit-Bankruptcy-Unions

Public unions are already advocating just taking money from other sectors to pay them. This is precisely the same trend that unfolded in Rome setting in motion the decline and fall. When Rome could not fund its pensions to the military, they began numerous revolutions and that justified sacking cities that opposed their wishes.

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Roman-Inflation

As Rome could not pay the troop pensions, they tore the empire apart at the seams. This is what lowered the defenses allowing the Barbarians to finally invade. Rome fell from within for the same faulty structure of fiscal mismanagement. The inflation (debasement) in the currency was NOT the cause of the fall of Rome, it was the symptom that followed the corruption.

populationofrome

So pay attention. It is the DEFLATION that comes FIRST. Inflation NEVER appears first with nothing driving it. It has always been the expansion of government that unfolds FIRSTthat later manifests in inflation only when you cross that point of no return in PUBLIC CONFIDENCE. As taxes were raised on property, people began to vacate the cities. The population of Rome collapsed as property values fell due to rising taxes. Sound familiar? Only with rising taxation did people just start to migrate away from Rome.

Roman Passport

PASSPORT-ROMAN

The Roman Emperor Diocletian (284-305AD) introduced passports. Not to travel from one country to another, but to be able to travel at all AFTER you were verified that you owed no taxes. Today, the US has introduced a law that if you owe the government $50,000 in taxes, they can revoke your passport until you pay. Wonderful how history repeats.

Ed Note: Another great article by Martin about the Stock Market HERE

 

Massive Durable Goods Orders Surge – Record 22.6%….

 
Durable goods orders surged 22.6% in July, associated with a massive increase in aircraft orders. 
The report showed that transportation orders were up 74.2%, but excluding transportation, new orders decreased 0.8%, though this compares to a revised June number that showed orders ex-transport rose 3% compared to a previously reported 0.8%. 
 
Bloomberg Economist Michael McDonough tweeted the following chart, which shows the massive rise in orders. (more below)
 
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Excluding defense, new orders were up 24.9% in July, and non-defense capital goods orders excluding aircraft fell 0.5% in July. 
 
This is the largest increase in the headline reading for durable orders ever, topping the previous record of a 16.6% increase in June of 2000. 
 
Following the report, Ian Shepherdson at Pantheon Macro said, “In one line: Headline is wild, details more encouraging than -0.8% ex-transport number suggests.”
 
Expectations were for orders to increase 8% in July.
 
Paul Dales said the 1.5% increase in non-transport, non-defense capital goods orders suggests, “business investment in equipment is on course to rise rapidly in the third quarter.”
 
There was a massive range of expectations for this report, with some economists expecting this to push the headline increase in durable goods orders as high as 30%.  
 
The June durable goods report was also revised up to a 2.7% increase from a previous reading of 0.7%
 

S&P’s Case-Shiller home price index have declined for the second-straight month.

June prices fell 0.2%, worse than the consensus estimate for no change, and even with the decline seen in May.

Year-over-year, prices climbed 8.1%, about in-line with forecasts but slower than a revised 9.4% gain for May.

The 20-city index hit 172.33, about in-line with forecasts and up from a revised 170.68 in June 2013.

“Home price gains continue to ease as they have since last fall,” David M. Blitzer, Chairman of 
the Index Committee at S&P Dow Jones Indices, said in a release. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators – starts, existing home sales and builders’ sentiment – are positive. Taken together, these point to a more normal housing 
sector.”

Here’s what it’s looked like recently:

WIDESPREAD SLOWDOWN IN US HOME PRICE GAINS

S&P’s Case-Shiller home price index have declined for the second-straight month.

June prices fell 0.2%, worse than the consensus estimate for no change, and even with the decline seen in May.

Year-over-year, prices climbed 8.1%, about in-line with forecasts but slower than a revised 9.4% gain for May.

The 20-city index hit 172.33, about in-line with forecasts and up from a revised 170.68 in June 2013.

“Home price gains continue to ease as they have since last fall,” David M. Blitzer, Chairman of 
the Index Committee at S&P Dow Jones Indices, said in a release. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators – starts, existing home sales and builders’ sentiment – are positive. Taken together, these point to a more normal housing 
sector.”

Here’s what it’s looked like recently:

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