The Disruption Has Just Begun

I’ve been amused at the statements in the major media that people generally are glad to see the end of 2016. Well, watch what you wish for! 2017 will be much, much worse from an economic perspective.

2017 will be the year that “The Financial Revolution” begins in earnest. Over the next few years, I’m expecting a move towards public central banks (backed by the government) rather than the private central banks (backed by private investors) that we have right now worldwide. There will be a move by the people of individual nations to get control of their money but it will likely not happen quickly or without bloodshed. The start of the process should begin to get underway during the 2017 year.

We’re once again in the classic struggle of the people against the moneylenders. This fight happens over and over again throughout history, but this time is a 515 year cycle top and the bubble that’s been created is the largest in history. There’s no way out of the current situation other than with a complete overhaul of the factional reserve system that’s in place around the world. It’s concentrated wealth in a few hands at the expense of everyone else.

Money rightfully belongs to the people of each country. That’s why it was invented —as a medium of exchange, not as a commodity. In fact, with fiat money, it’s constantly changing in value, so it’s not wise to covet it as a commodity in the longer term.

That aside, it’s usury that’s our biggest problem. Centuries ago, usury was defined as any amount of interest attached to the lending of money. Oh, how that’s changed!

In Canada, we have a law that states that lenders cannot charge more than 60% annually. Why did they waste time even debating that law!? On the other hand, the Islamic religion outlaws interest of any kind and guess what, their banks are doing really, really well and springing up all over the US.

Let’s look at how this ponzi scheme that central bankers have created is going to unfold. The period in the US just after the war of 1812 is a good example of an economic cycle top, but I could have picked the depression of 1837, 1857, 1873, 1893, 1907, or in fact, 1929. If you look under the economic hood, the engine worked in a similar manner.

In 1816, a charter was given to “The Second Bank of the United States,” to become the central bank on a federal level. In granting the charter, Congress demanded (and got) $1.5 million dollars from the investors in fees. In return, the government invested 20% of the required reserve capital, with investors to supply about $7 million in gold and silver—the most that they ever raised, however, came to a total of $2.5 million—and taxpayers, as usual were on the hook again. The largest concentration of investment ended up being from foreign sources: Guess who; the Rothschilds, once again.

With the War of 1812 over, attention in the US turned to the west of the country and the expansion, with the wild speculation in real estate. In 1817, Pennsylvania chartered 37 new banks, followed by Kentucky with a further 40. Banks sprung up all over the place and, of course, with minimal reserves, they all created new money like crazy, based on it being a fractional reserve system.

The money supply expanded by $27.4 million, which inflated the dollar by about 40%. Taxpayers footed the bill once more.

In 1818, “The Second Bank of the United States” got cold feet with all those questionable loans out there and started to pull in loans. Once you do that, of course, the money supply contracts. Over the next year, there were a series of serious economic contractions, ending in a severe nationwide depression.

This was the first major boom/bust scenario in the US, the first of many, as another and another happened with regularity every twenty years or so throughout the 1800s.

The creation of the Federal Reserve, the story of which is covered extremely well in, “The Creature from Jekyll Island,” was supposed to end all that, but within the first twenty years of operation, they helped create the next depression of 1929. This time, they decided to inflate the money supply to help the Bank of England recover from a very weak reserve position. The idea was that if the US lowered interest rates, investment would seek the higher British rates and gold would start to flow in that direction. They were right, of course, but the lower interest rates (almost free money again) increased speculation in the US, raising the prices of assets and fueling the stock market mania, which eventually led to a crash, huge credit contraction, and depression.

Well, here we go again in 2017, two hundred years later.

For all those who keep talking about hyperinflation, you’ll have to wait. The first order of the day is spiralling deflation. It always has been. Every time we inflate and cause a loss of confidence, people stop borrowing, banks restrict credit, businesses falter, and on and on. There will be no stopping it. In fact, to pay down loans at this point contracts the money supply even more (it takes money out of circulation). There is simply no escape.

A major deflationary spiral is the direction the economy is going to take this year and it will become even more obvious early in the year. Cash is king; investments are dead.

All over the world, major indices are rising to their tops in tandem. When they turn, they will all come down together. There will be no escape from yet another central bank ponzi scheme.

Above is the typical man-made cycle that historically runs over about 20 years, based on a fractional-reserve banking system. We’re at the top of the boom just about the head down.

There are other things to watch during this year.

The Great American Eclipse (a total eclipse of the Sun) is coming on August 21, 2016. It will affect America’s chart as well as Donald Trump’s. It will likely be negative in both cases. But it’s even worse for Melania Trump (in her astrological chart). This will be a date to watch.

Finance and Markets

Stock prices will drop more than 30 percent in 2017. There will be much more to come in 2018, or course. I’m expecting the bottom in 2021/2. We should eventually drop 90%.

Real estate values will drop at least 25 percent in 2017. We should see the top of the latest bubble early in the first quarter of the year. I expect real estate to drop to about 20% of its value at the height.

States, provinces, cities, and countries will default on bonds. We’ve already seen the start. There’s much more to come this year.

International bank runs will begin. Italy is on the verge of one, with Monte Paschi in dire straits. France may very well run into a financial road block before the year is out.

At least one major European country will default. Who’s first-Italy? It’s a bit of a horse race. The euro will also come to an end in the next couple of years, with additional European countries reverting back to their own currencies.

The Federal Reserve will be abolished or nationalized. This projection may not come to fruition this year, but the process will begin and eventually it will be dissolved one way or another. In Canada, we have an active law suit one step away from the Supreme Court, that if successful, will force the national government to return to using our own public central bank (The Bank of Canada) to create our money, as we did before 1974.

Deflation will start its spiral. Where I live, in Calgary, Alberta, where we’ve been hit so hard by the drop in oil, we’re already seeing signs of deflation. You don’t have to be very sensitive to this phenomenon to notice the extraordinary mark-downs in products and services in countries all over the world.

Governments will restrict trade. We’re starting to see free trade agreements falter. There will be no new ones signed and, in fact, we’re likely to see the end of NAFTA. Also look for tariffs to be put in place by the Trump administration, the start of an all-out trade war.

Numerous new buildings will remain unfinished in the midst of construction. These cycles tops always see a plethora of buildings being erected. In fact, you can predict a top when you see buildings reach new heights, as we’ve see in places like Dubai. Commercial real estate is going to be hit particularly hard this year (look out Trump International!).

Politics

More populist leaders will come into power. European countries will continue the trend. I expect to see Angel Merkel say good-by to public life this year.

The President’s and Prime Minister’s (Canada) popularity will drop substantially. Both will be heavily side-lined by the devastating drop in the stock markets of both countries.

US will devolve into a civil war (likely not ’til 2018). The Soros camp is hard at work in the aftermath of the election stirring up trouble. Hillary Clinton’s astrological chart shows an inclination for revenge, which won’t be much of a surprise for most of us.

Some US states will develop legislation to secede. Some states will likely divide into smaller states over the coming few years.

The United Nations will start to become defunded (eventually will cease to exist). President-elect Donald Trump is none too happy with the performance of the UN. Neither is Rodrigo Duterte of the Philippines. And then there’s Bibi Netanyahu … Look for more leaders to start to question its existence this year.  Note that they were also the instigators of the Climate Change scam. We may see a major reversal on that front this year, as well.

Some international travel will be restricted. I expect to see a lot more danger areas spring up around the world. This turn down of this major cycle puts an end to international wars, but internal civil wars will continue to crop up, making travel much more difficult. Airlines will also start to default this year and prices for air travel will begin to rise.

More and more corruption will be uncovered. I know that’s difficult to imagine; however, this cycle is more about the uncovering and prosecuting of corruption rather than the instigating of it. We’re going to see some wall-streeters heading for a fight with the government finally.

Social Trends

Homelessness will increase. That goes without saying, but it will become an overwhelming problem over the next couple of years.

The shift to alternative news sources will pick up steam (more newspaper bankruptcies). Fake news is the latest salvo in that regard. Now we have Donald Trump completely side-stepping mainstream media with his tweets. The major news networks in the US now have more minutes of advertising in their half hour nightly new programs than they have news time. Television news has become info-tainment and there is very little, if any, investigative reporting any more. We’ll start to see viewers turn away from these sources and get more of their news from alternative sources online. Look for at least one major news outlet to go bankrupt.

Marijuana will continue to be legalized. Canada should see legalization in 2017. More states in the US will go legal. We’ve known this for years. Governments need the money.

Major violence will increase in the US and murders will rise. Unfortunately, 2016 was the tip of the iceberg.

Horror films will rule the box office. Dark entertainment will start to pop up and make money across multiple genre.

Major sports teams till fold. The incongruity is that major sports facilities continue to be built. We’ll see some of the newer ones remain empty.

The suicide rate will increase. We’ve seen our suicide rate in Calgary increase by 30% over the past year. Twenty percent of the office space in our downtown core is now empty. Most of the affected are younger—people who have never learned to fail. This, to me, is perhaps the most difficult aspect of the coming downturn.

It’s going to be quite a year.

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Projection for a Top

Based on the ending diagonal we’re currently in (which is the pattern playing out in all the major US indices), I’m still projecting a final top to our five hundred year set of Supercycle waves very early in the New Year. It will take a topping of the third wave of the ending diagonal to give a more accurate prediction of the date, as the fourth and fifth waves should take longer than the third wave by at least three quarters. The third wave up has taken 8 weeks so far.

NEXT Federal Reserve Annct:  February 1, 2pm EST

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Mini-Brexit: Here’s the latest daily chart of ES (emini futures):
We’re still heading up. On Friday, December 30, 2016, ES traced out the end of an expanded flat (a 3-3-5 configuration) and then an ending diagonal at the tail end of that. It was a dramatic end to a B wave that should give us a dramatic turn to a new high. We have yet to complete the third wave of the ending diagonal.

Through fibonacci ratios, I’m projecting a possible top for the third wave of the ending diagonal for ES of 2294. By extension, it projects a top for the third wave for the SP500 of about 2296.

Note the extreme drop-off in volume for this wave (it’s the purple indicator line at the bottom of the chart). Volume is almost none existent. It should surge in the fourth wave down and we should get a volume surge during the first part of the fifth wave.

Here are the rules going forward:

• Wave 3 must be shorter than wave 1 and reach a new high.
• Wave 5 must be shorter than wave 3 and reach a new high (usually it does a “throw-over”—extends above the upper trendline defined by the tops of wave 1 and 3, but it is not necessary.
• Wave 4 must be shorter than wave 2 and must drop into the area of wave 1.
• All waves must be in 3’s (zigzags).
• The trendlines of the ending diagonal must converge.

Summary: We’re completing the third wave of the ending diagonal before zigzagging to the top of the largest bubble in history. I expect a sharp drop in wave four of the ending diagonal perhaps later this week. The long awaited bear market is getting closer.
Good trading!

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