Mirror Mirror

Copyright Martin Armstrong All Rights Reserved May 13th, 2012

Mirror Mirror On The Wall

We Are Socialist After all

The markets have been ignoring what is developing in Europe unconvinced as yet that this will have any inflationary impact upon gold for example. Europe is standing up and rejecting austerity on the one hand yet embracing Marxism at the core foundation. France has elected its first Socialist President, François Hollande, in 24 years as Athens burns again in protest. We are approaching the brink of a major crossroads in civilization. There is the risk that when the tree falls, it can be sharply to the left. Just look at all the bills being passed by the US government right now. Little by little, the constitution is being eliminated. We have lost so many rights in the last few years, the America that once was, is no more. The trend is clearly toward authoritative government and the reason for this swing back to the la la land of Marx, is because Marxism has failed, yet at the same time, those in the bowels of government are determined to hold on to power at all costs. This is the classic battle between good and evil playing out on the grand stage of life. One of the 10 Commandments is thou shalt not covet thy neighbor’s goods. That is precisely what socialism is – coveting the property of anyone who has more than the average person. This is why it is so inherently evil. It violates every principal of civilization for why should people come together if they will be treated unfairly at the request of another.

The “Great Unwashed” as the population has been called in the inner circles for centuries, is blind, deaf, and dumb. As the Roman politicians once said – given them dames and bread and they will blindly leave us alone. Europe has shown that the ideas of Marx are still alive and well. The Great Unwashed believes the propaganda that if the rich simply paid more, everything would be solved. They know nothing about what we face and this is why we cannot escape.

What the world fails to understand is simply that the jig is up. There is no way to fix this nightmare because to make your dreams come true you at least have to be awake. On that score, neither the politicians nor the press understand the nature of the problem, so why would the Great Unwashedunderstand? Even if we had a balanced budget, all spending would eventually be cut and interest expenditures would ultimately consume everything. Likewise, a gold standard would not work for the same reason it would not force a balanced budget any more than it did between 1944 and 1971. The only thing a gold standard would do is require us to pay the bankers in gold. DA? We have to think outside the box before it closes up completely. This is why the New York bankers hate my guts. I have stood in their way for a long time exposing their corruption and agenda to screw the hell out of everyone else. Can anyone explain how Alan Cohen of Goldman Sachs ends up running Princeton Economics, the very firm that was investigating them with the blessing of the NY Federal court? Despite the entire world outside of New York sees this as a conflict of interest and I am introduced on Capitol Hill as this is the guy with the model “they” are trying to suppress, the NY Court protects Goldman Sachs and refuses to ever investigate anything no matter how corrupt is appears to everyone else.

Now we have François Hollande, the president-elect of France, who has never held national elective office despite being at the center of French politics for more than a decade. Hollande led the Socialist Party for 11 years and was leader when Ségolène Royale ran unsuccessfully for president against Nicolas Sarkozy in 2007. Yet, unlike American standards, Hollande has never been married despite a three-decade relationship and four children with Royale. Hollande and Royale split up a month before that election, and he is now dating journalist Valérie Trierweiler, who appeared with him, as he celebrated his victory Sunday.

Hollande immediately rattled markets taking a shot at Germany and German Chancellor Angela Merkel in his victory speech stating: “Austerity can no longer be something that is inevitable“. Interesting enough, Hollande emerged as his party’s candidate for president following the political assassination of Dominique Strauss-Kahn, who was arrested in May 2011 after a New York hotel maid alleged that he tried to rape her. Curious enough, the charges against the former IMF chief were later dropped in the United States. Strauss-Kahn became the head of the IMF on September 28th, 2007, with the backing of France’s President Nicolas Sarkozy, and served in that role until his resignation on May 18th, 2011 following a sex scandal. This seems to be very strange because Strauss-Kahn was the favorite for winning the election against Sarkozy. Despite the US dropping charges stating that the maid was not credible following a tapes phone call with her and a prisoner boyfriend stating how much money she would get, France warned that Strauss-Kahn could be investigated in France over accusations he participated in a prostitution ring. This whole thing appears very strange since Strauss-Kahn would have beat Sarkozy and there was behind the scene fears he would block New York bankers. Elliot Spritzer was also taken down with a sex scandal paying a prostitute when he too had taken down AIG director Greenberg and saw himself as cleaning up Wall Street. Anyone who stands against NY seems to be taken down.

Hollande is simply a less charismatic personality than Strauss-Kahn. It certainly seems BEHIND THE CURTAIN that Hollande was not expected to be a threat to Sarkozy. The real threat was Strauss-Kahn. Anyone who thinks that the powers-that-be do not play god in this area are sublimely ignorant. What may have just taken place was the unexpected!

Hollande is succeeding the late Mr. Mitterrand as France’s first Socialist President in 24 years, and the quiet man of French politics is now upsetting the expectations for Europe. As the new French president he wants the treaty, seen as crucial to ensuring the survival of the single currency, to focus more on encouraging economic growth. Angela Merkel responded that there was no alternative to spending cuts and painful deficit cutting measures, warning that “growth through debt” would destroy Europe. However, German policy of austerity is failing to work and threatens to unravel the political framework of Europe and destroy Europe as a whole. The German proposal that aims to impose austerity difficult budgetary discipline on the 25 European Union countries will fail and would tear Europe apart at the seams. The treaty is now unlikely to be even submitted for ratification under these terms.

Angela Merkel’s blunt message directed at France and Greece telling them not to abandon debt cutting policies in the wake of elections says it all and it cuts both ways:  “The European sovereign debt crisis will not be beaten overnight, there is no magic bullet.” Merkel further said: “Growth through structural reform is important and necessary. Growth through debt would throw us back to the beginning of the crisis.”

In Greece, they are clinging to hope that a coalition government can form after the leaders of two socialist parties said they would work together in order to keep the country in the euro. However, there is the goal that the heavily indebted country of Greece may wish to stay in the euro and the European Union, but at the same time it is seeking to negotiate a gradual disengagement from the harshest austerity measures demanded by the euro.

Nonetheless, there is still rising resentment in Greece that is turning increasingly violent and anti-austerity protests in Athens are lighting up the skies with fire. Police reported that at least 150 shops were looted in the Greek capital and 48 buildings set ablaze. This included one of the city’s oldest cinemas. Some 100 people – including 68 police – were wounded and 130 detained.

The new French president Francois Hollande stated clearly:

“Europe is watching us. The moment that I was announced president, I am sure in many European countries there was a relief, hope at the idea that at last austerity is no longer inevitable, and my mission is to give to European construction the dream of growth.”

This is the battle between good and evil. The entire world is based upon debt and there has never been any plan to actually borrow and pay something off. We are being brought to the edge of oblivion and unless we recognize what we face, we do not stand a chance of surviving this Sovereign Debt Crisis.

The Markets

GOLD

Gold has closed the week May 7th at 1587.3 below our 1599 Weekly Bearish Reversal. This indicates that we should be moving now to text the 1522 level where we have the next Weekly Bearish Reversal and a weekly closing beneath that should take gold down to 1407. A weekly closing beneath 1407 would point to a retest of last year’s low at 1310.5. As I have been warning, this is the 13th year. The best possible outcome was for a low this year rather than a high. This appears to be in the cards.

It appears that we may form a low as early as next week on a temporary basis. A May low appears it could be followed by a reaction rally into July, with a panic to the downside in Aug/Sept. However, the absence of a Directional Change in this period also warns that we could simply continue lower into July and that would tend to make the Aug/Sept time period pointing up rather than down.

Timing models ONLY highlight the turning points. They DO NOT guarantee a specific high or low. To accomplish that, we need the correlation with the Reversal System and Pattern Recognition. Fundamentals really mean little. The whole fiat reasoning means nothing since gold declined for 19 years from 1980 when it was still fiat. The same is true in stocks when the price can decline on good news and it is explained by saying the market was
expecting results “better” than that. Markets trade technically because they are influenced truly by everything. Each market is interlinked to everything else so it becomes a delicate dance of comparison and capital flows like water to the lowest cost for the greatest gain. Focusing upon just one market exclusively ensures failure. The Directional Changes in Feb/Mar worked perfectly and now we see Aug/Sep as the key target ahead.

Dow Jones Industrials

March remains as the high in the Dow Jones Industrial Index. So far, this suggests that we could see a low in May followed by a rally back into August. We do have a Panic Cycle in July warning there could be an outside reversal and then you will notice the target of September with high volatility due in October. If we are looking at a high in August, then we could be looking at another crash late in the year perhaps as people begin to realize that that the Bush tax cuts will expire at year-end in the Lame Duck Congress sending investment taxes from 15% to 40% killing the economy in 2013. We will have the committee that was supposed to come up with something to cut the deficit expire making the automatic cuts in January. Now we have a political change in the wind in Europe. So there are plenty of fundamentals that can make everything go nuts.

Since the Directional Change last January, the Dow broke out and has rallied reaching 13359.62 during May. We do have to be careful about a pull-back into June/July for a low at that time would then point to a rally into September for a high with big volatility coming in October. This warns that the fundamentals may yet spark a serious retrenchment in capital investment starting in September. Just about everything that could go wrong is going wrong. There are people within the bowels of government who hate my guts and would love to kill me for writing about their gradual repeal of all our rights so they can maintain their power rather than reform the world monetary system to make things better.

Support now lies at 12220 on a monthly closing basis. The highest weekly closing remain that of 03/16. Our Weekly Bearish Reversals at at 12740 and 12422. These are the numbers to now watch carefully for the underlying support.