Trade Tensions

Donald Trump to Get a Little German Tutoring

By David Böcking and Christian Reiermann

 Containers in the port of Hamburg
U.S. President Donald Trump has said it is "very unfair" that Germany sells more products in the United States than vice versa. Now German Finance Minister Wolfgang Schäuble is traveling to the U.S. with a paper obtained by DER SPIEGEL. The message: Trade surpluses aren't really a problem.

Donald Trump is not a fan of extensive debate. "I like bullets or I like as little as possible," the U.S. president said shortly before his inauguration. "I don't need, you know, 200-page reports on something that can be handled on a page. That I can tell you."

A new paper from the German Finance Ministry and Economics Ministry, obtained by DER SPIEGEL, accommodates the president's preferences. It's just seven pages long and lists out 29 points on an issue that could fill entire books: Germany's trade surplus.

The fact that Germany exports far more goods and capital than it imports from abroad has long been a source of international criticism. But Berlin has only really become alarmed by the disapproval since Trump joined the ranks of those critics. Before moving into the White House, he said, for example, that it was "very unfair" that Germans buy few Chevrolets while New York is filled with Mercedes automobiles. He also threatened German carmakers with massive punitive tariffs.

The Finance Ministry is expecting to hear the accusations again this week at the spring meetings of the International Monetary Fund and the World Bank in Washington. German Finance Minister Wolfgang Schäuble will have the new paper in his luggage when he flies to the U.S. capital Wednesday evening. The document is designed to help Finance Ministry and Economy Ministry staff assuage the Trump administration's concerns. Significant portions of the document read like an introduction to the fundamentals of economic policy.

Free Market Demand

Germany, the authors instruct the Americans, does not see the current accounts balance as a so-called key control parameter because it can only be controlled by political policy in extremely limited areas. "The German trade surplus is primarily the result of market-based supply and demand decisions made by companies and private consumers in the global marketplace."

Around half of the surplus, the paper notes, can be traced to structural factors that policy cannot change in the short term. One of those factors elucidated is "the high competitiveness of German vendors on the global markets," but also the high quality and complexity of Germany's industrial products. In other words, Germany produces and exports goods that are in demand elsewhere in the world and which no other country offers.

The paper also emphasizes that Germany's account balance surplus has already reached its zenith. In 2015, it was 8.6 percent of gross national product (GDP) while in 2016, it sank to 8.3 percent. "Current forecasts assume a further surplus drop to 7.5 percent in this year and to 7 percent next year," the paper notes.

The document likewise claims that Germany's high foreign asset holdings are an inalterable contributor to the high surpluses. It resulted from elevated levels of capital exports, with German companies and private citizens investing much more money abroad than domestically to take advantage of new markets and to generate higher returns. These foreign assets produced profits that increased the country's current accounts surplus. Indeed, according to the paper's authors, this effect accounts for a quarter of the surplus.

The paper further argues that the U.S. is one of the primary beneficiaries of German capital exports. "German investors are among the largest foreign employers in the U.S.," the document reads. They hold a stake in more than 3,000 American companies which employ around 672,000 people and account for a total turnover of 466 billion euros, according to the paper. In 2016 alone, $63 billion in German capital flowed into the U.S., the document claims.

In the years up to 2015, German companies invested around $319 billion in the U.S., making the country the third largest direct foreign investor in the U.S.

"America's extreme attractiveness to foreign portfolio investments is a product of its economic and political importance to the global economy in addition to the role of the U.S. dollar as the leading international currency," the paper's authors stress. In other words, for as long as the U.S. plays the role of global power, it will attract foreign capital, which likewise means that it will import more goods than it will export.

'Comparative Advantages'

Trade imbalances of the kind the new U.S. administration is constantly lamenting, the German government experts reassure, aren't a bad thing. Rather, they are "normal in an open economy." Indeed, "they are the expression of diverse comparative advantages held by different national economies and their associated specialties." Each country does what it can do best.

Another cause for the comparatively high volume of savings that Germans hold abroad, the paper claims, is retirement provisions. "Various estimates assume that between one and three percentage points of the current account balance is caused by demographic factors," the paper reads. That means that the more Germans reach retirement age, the more they will begin to tap into their savings and the German current account surplus will fall as a result.

The authors of the paper do not dispute that the extreme imbalance could "justify economic policy intervention." But Schäuble and Zypries believe that Germany has already taken significant steps to reduce the surplus. One example listed in the paper is the minimum wage that was introduced in 2015 and was increased at the start of 2017. During the same period, tax cuts worth 11 billion euros have been introduced. "These measures increase domestic demand."

Plus, the government has increased public investment by 45 percent and introduced measures to increase private investment. "The current rate of investment is likely to increase slightly this year from 20 to 20.2 percent in relation to gross domestic product."

The paper also vehemently rejects accusations from the U.S. that Germany is using unfair measures to create an advantage. "Germany has no influence on the exchange rate and applies no protectionist measures," the paper notes. EU member states and the European Commission, the document instructs, have no influence on the monetary policy pursued by the European Central Bank.

'A Degree of Certainty'

Such sentences make it clear that Germany is worried that the U.S. could accuse it of currency manipulation. Trump has already indicated that he would do so in the case of China, before surprisingly pulling a step back last week. The most recent currency report by the U.S. Treasury Department likewise makes no accusations of manipulation, which the German Finance Ministry has noted with relief. The formulation used in the Treasury report, according to a senior German official, is very similar to that used before Trump's presidency, which speaks to "a certain degree of continuity."

From a global perspective, the German paper sums up, the country's current account surplus is not particularly meaningful. In the global comparison, the eurozone's trade balance with the rest of the world is decisive. "California's trade balance with China is just as insignificant in the debate as Germany's with the U.S. should be."

Whether such comparisons will truly convince Trump's people is unclear. The comparison with California is one that Wolfgang Schäuble already jokingly made in mid-March in his initial meeting with U.S. Treasury Secretary Steven Mnuchin. The American, however, did not look amused.

Why Those Bigger Paychecks Don’t Feel as Good as You Thought They Would

Weekly earnings were rising at the fastest rate since the recession ended, but inflation-adjusted gains remain lackluster

By Eric Morath

Americans’ paychecks are rising at the fastest rate since the recession ended, but that’s done little to spark stronger spending at stores and restaurants.

One explanation is that rising prices mean consumers don’t feel much richer than they did a year ago.

Median usual weekly earnings for full-time workers rose 3.9% in the first quarter from a year earlier, the Labor Department said Tuesday. That was the best gain since late 2008. (Historical earnings data is adjusted for seasonality.)

Nearly eight years after the recession ended, weekly pay is nearing the 4% annual growth pace that was reached in the prior two economic expansions. It’s a sign the economy has returned to full health, and theoretically should give consumers confidence to go out and spend.

Wage gains had slowed sharply in the early days of the economic expansion, which began in mid-2009, because a high number of unemployed Americans allowed companies to fill positions without offering higher wages.

But when adjusting for inflation, paychecks are growing more slowly than they were a year ago. When factoring in price changes, weekly earnings rose just 1.2% from a year earlier. That matches the fourth quarter of 2016 as the smallest advance since late 2014.

Consumer inflation had slumped to near zero during much of 2015 because energy costs decreased sharply. That made the spending power of historically modest pay increases feel pretty good.

But now costs are rising again, especially for essentials such as gasoline, rent and medical care.

That gives Americans less leeway to spend more at retailers. Even when not adjusting for inflation, sales at stores, restaurants and online retailers declined in February and March. And lackluster consumer spending is a primary reason many economists project the economic expansion to have slowed sharply to start the year.

The government’s first reading on economic output is due out April 28.

Erdoğan’s Pyrrhic Victory?

Soli Özel
. Recep Tayyip Erdogan speech referendum

ISTANBUL – Turkish voters had a clear-cut choice when they cast ballots on Easter Sunday in a referendum on 18 constitutional amendments already approved by the National Assembly. A “Yes” vote would change their country’s political system and usher in a new era in Turkish history. More than a century of parliamentarianism would be replaced by an alla turca presidential system that is tailor-made for the current incumbent, Recep Tayyip Erdoğan.
Given Turkey’s considerable experience in writing constitutions, most legal experts deem the amendments, which voters endorsed by a razor-thin margin, regressive at best. Those who drafted them seem to have ignored 150 years of Turkish history, not to mention the most fundamental lessons of liberal democracy.
The political system that will be operational in 2019, after parliamentary and presidential elections that year, will abolish the post of prime minister and concentrate executive power in the hands of a president who also leads a political party. The National Assembly – the Turkish Republic’s founding institution – will lose many of its powers, and its capacity to serve as a check on the president will be severely curtailed, because the president can dissolve it at any time.
Moreover, changes in how judges are appointed will give the president decisive power over the judiciary, too. The judiciary’s already-fragile independence will be further weakened, and the separation of powers will become meaningless.
Despite the referendum’s high stakes – the abandonment of the Turkish Republic’s longstanding political framework – there was no serious or extended debate prior to the vote, which was held under the state of emergency imposed by Erdoğan in the wake of last July’s coup attempt. And at the same time that Turkey undergoes far-reaching political change, Erdoğan will seek to advance a project of social transformation aimed at erasing a Westernizing legacy that dates back to the late-Ottoman era.
The amendments were approved after a relentless campaign of obfuscation, misrepresentation, and vilification. Opponents were accused of associating with terrorists, and Western officials, particularly European Union leaders, were openly attacked. But Erdoğan, who led the campaign, avoided any real discussion of what the constitutional-reform package would entail, instead merely promising that it would enhance Turkey’s greatness.
Erdoğan had almost the entire state apparatus – including provincial governors and much of the national and local bureaucracy – at his service during the campaign. The government lavished all segments of Turkish society with economic incentives and state largesse, and the pro-government media was thoroughly mobilized to support the “Yes” campaign with absurdly sensational, one-sided coverage. Most other media outlets chose, or were forced, to provide toothless coverage.
In addition to this state-led campaign, “No” campaigners were subjected to at least 200 documented attacks, some of them violent. Members of the Kurdish-based Peoples’ Democratic Party (HDP) – including its two co-chairs, other party officials, and various local administrators – have been in jail since November.
On the day of the vote, a controversial decision by Turkey’s Supreme Electoral Council concerning the acceptability of ballots that lacked the official stamps on the back heightened worries about voting irregularities and cast a shadow on the legitimacy of the result – which is now being strongly, albeit futilely, contested. All told, the campaign and vote fell far short of established international standards, as election monitors from the Organization for Security and Cooperation in Europe have pointed out.
Still, Erdoğan’s narrow win could turn out to be a Pyrrhic victory, given how bitterly divided the country has become. The no vote was concentrated in Turkey’s economic hubs, such as its western and southern coastal region, and the predominantly Kurdish southeast, as well as in its two largest cities, Istanbul and the capital, Ankara. Of Turkey’s 20 most economically important cities, voters in 13, accounting for 62% of total national income, voted predominantly against the constitutional reforms. And, because these cities represent the bulk of Turkey’s economic and cultural output, they are host to the country’s most educated segments.
By contrast, the yes camp comprised all but a few of Turkey’s least educated, economically insignificant, rural, insular, and conservative provinces. This is not in keeping with the forward-looking agenda that has always brought Erdoğan political success in the past. It is telling – symbolically and politically – that the amendments’ opponents carried Istanbul, where Erdoğan came to the national stage as mayor-elect in 1994.
Erdoğan was visibly shaken by the narrowness of the result – and the breakdown of support that underpinned it. But, as the master of the political game in Ankara, he will try to shape the agenda, and remain on his current course, by relying on domestic polarization and, perhaps, daring foreign adventures. He has given no indication that he will try to ameliorate the country’s tensions. On the contrary, he has suggested that he will reintroduce the death penalty – a move that would bar Turkey from joining the EU.
The referendum’s outcome is almost certain to aggravate Turkey’s domestic and international challenges, which have been mounting since the July coup attempt. The good news is that the strong showing by the amendments’ opponents, and their ability to mobilize through alternative media and micro-organizations, even while under duress, has shown that Turkish civil society remains vibrant.
But this is just the beginning. Those who want to prevent Turkey from falling into the trap of electoral authoritarianism must now form a new political space and furnish leadership alternatives. If they do not, Erdoğan will win the 2019 presidential election – and move quickly to use his newly expanded power in ways that will be far more difficult to combat.

Viene la Tormenta - There's A Storm Coming

By: Frank De Baere

From Tulips to South Seas, from Dot Coms to Houses, all manias have something in common.

Assets rise gently, largely unnoticed by the great unwashed, as the easy money is made and price rises above historical norms they become more popular by mainstream, then they become overvalued as their price rises way above "intrinsic value" and when the mania finally matures overvalued grows to extremely overvalued. And then at some point in time at some price level on the chart the market exhausts itself and collapses back to and often below it's starting point.

These collapses tend to be sudden, out of the blue and violent and usually happen without any obvious cause or reason. What was made during the boom gets lost in the bust. Only the smart money has greater odds of surviving ending manias but only if it does not get outsmarted.

Ancient painting
What we as Danielcode members are interested in is markets turns. As we said above manias end at some point in time and at some price. Think about that for a minute. A mania pushes up price to a certain level and at one specific point on the chart it all collapses under its own weight for no obvious reason. Whatever reason is pinpointed to the start of the crash by financial journalists is merely linking an event or piece of news that happened after the top was made. The real question on our mind is "Why is a specific price THE top and why did that top happen in that specific week or even on that specific day?" And God help us, what if we could foresee these points on the chart and have a good idea where and when they should happen. Is that even possible? The truth is that God does help us, the sad truth is that no one listens and even less are interested.

The Danielcode is a mathematical matrix of numbers straight from the book of Daniel discovered by our mentor John Needham. How these numbers are calculated is beyond my time schedule to write here but you can discover all of that in the "Live at the Springs" audio under the articles tabs at the Danielcode website. The Danielcode ratios are 29.7 , 37.5 , 44.5 , 50 , 62.5 , 59.3 , 74.2 and the powerful 89 number. And these numbers are important folks. Very important. They rule all markets in both time and price, they even rule all life and death in the universe. Or do you think it is a coincidence that the synodial month, the average length of a month, is 29.7 days or that the orbit of Saturn (referred to by the ancients as Cronus or Kronos the Roman Deity of Time) is 29.7 earth years or that the orbital velocity of Mercury is 29.7 miles per second?

Maybe. But our mentor has shown us so many charts where price has recognized so many Danielcode numbers always with precision down to a few ticks that I have completely sworn off Random Walk theory a long time ago. Nothing is random in a chart my friends. Markets are not random, they are perfectly mathematically organized, and sometimes even perfectly predictable. Let me show you what I mean.

US Dollar Index 24-Day Chart

This is a 24 day chart of the US Dollar Index DX. Non-daily Danielcode charts are always composed of bars that contain 6 trading days or multiples of that (12, 24 and 48 trading days).

The reason for that is beyond the scope of this article but it all comes straight from the Bible.

You can read about it in the two "Master Class" articles on the Danielcode website under the articles tab. (Master Class I and II). Notice how the strong rally in DX since 2014 found it's perfect top at 100.51 just 3 ticks shy of the 59.3% retracement from the 2008 low to the 2001 high. And how this happened on a 59 time cycle. Yes, that's right, these numbers can also be projected on the time axis of the chart where they become time cycles instead of price levels.

If you think this is complex, let me tell you that I had never seen a trading chart before I met the Needham family in Taupo, New Zealand for a Danielcode Tutorial a few years ago. That was the first time that Mr Needham had taught The 4th Seal, and since then I have loved, lived and worked with it every day. It is indeed a marvel.

Now take a look at the next long term DX chart and how this market reacts to known Danielcode numbers in the form of price extensions. Does this seem random?

US Dollar Index 24-Day Chart
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I don't think so. The precision with which the price levels from the Danielcode sequence are recognized is stunning. Markets recognize these numbers all the time and if you draw the right DC sequence that a market is following on your chart you will see that markets lock on to these sequences for months sometimes even years in a row before switching to another DC sequence.

It's truly amazing how precisely all markets vibrate on the Danielcode sequence. And it happens all the time right before your eyes and totally unnoticed by even the biggest and smartest traders on the planet.

The current state of the market

A question many financial experts are asking themselves is: "What's next?". In fact it is the most important question on every mind that cares about the market. The truth is, we don't know. Nobody does. Only our Creator has foreknowledge. But there are clues and chance favors the prepared mind. Allow me to help prepare your mind.

Here at the Danielcode we try to become experts at timing market turns and we approach this from a totally different angle. We use the numbers from the Danielcode straight from the Book of Daniel in the Bible. Sounds scary right? It's not. In fact it's quite a miracle.

Below is a 24 day chart of the NASDAQ NDX. It has a DC regression channel drawn on it that is constructed on the important 59.3 DC ratio.

This chart shows The Death Cycle on NASDAQ. The last Death Cycle we saw was on the S&P in October 2007 and you know how that turned out!!

NASDAQ Death Cycle Chart
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Notice how this market is at the 3rd standard deviation of the DC regression channel. This means that this market is 3 standard deviations away from the median of its uptrend. This in and of itself is a sign of extreme speculation and tells us NDX is on a unsustainable path.

Markets rarely go beyond the 3rd standard deviation. But there is more. Both the 24 day chart and the 6 day chart have a 59 death cycle expiring early April. Death cycles are 59 topping cycles expiring from the first hub. When they bite they kill the market and turn its trend around to clear whatever excess was build up during the boom.

On the 6 day chart of NDX we already broke the low of the previous bar which means this 59 death cycle is alive and kicking. Once the 24 day chart does the same odds are that this market has a serious meeting with mother nature's laws of gravity and that my friends should get you on high alert for the potential end of this bull market and the start of a financial storm. When the Danielcode 59 death cycle bites there is no interest rate or central bank liquidity injection that can save the market.

Markets turn on Danielcode ratios of time and price and when they do, nothing or nobody can change that. Markets do not turn because they are overbought or because some event happens. They turn on a specific time and price because it's in their DNA to turn there and that DNA is ruled by the Danielcode numbers hidden in the old testament. Amazed? You should be.

The 3rd Day

Remember I just showed you how NDX was at the 3rd standard deviation of the mean? 3 is a fractal of 6 and 6 days is a DC week ("6 days you shall work and on the 7th day you shall rest"). The number 3 is important all across the Bible and since it's Easter today let me remind you what is written in Luke 24:7

Luke 24: 7 "The Son of Man must be delivered over to the hands of sinners, be crucified and on the third day be raised again."

Well folks, take a look at the next long term 24 day chart of NDX. The 59 time cycle comes from the 59.3 Danielcode number and that number comes from 1335/45 which is 29.666 half of 59.333. If you multiply that number by 3 you get exactly 178. Well in early April we were 178 bars away from the 2000 peak in NDX.

NDX Chart
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And that my friends should get you exited. The Danielcode is the biggest discovery in financial markets ever made. I know that is a big statement but I also know it's true. I do not wish to impress you nor do I care whether you believe me or not. But I know that you cannot deny the charts I just showed you and I hope that is enough information to get your investigative mind stimulated so you can do some digging around on the Danielcode website yourself. There is a ton of information there just waiting to be discovered and I promise you that the believer's mind will be blown away. And remember, markets are ruled by the Danielcode. They always have been, they always will be. Even Isaac Newton knew that there was major knowledge hidden in the book of Daniel.

Usaac Newton Quote
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