The Coming Revolution

by Martin A. Armstrong

Since the Oklahoma incident,President Clinton has been lashingout at what he terms as "hate"radio. In a very shallow attempt toplace the blame for the bombingupon the conservative camp withinAmerican politics, Clinton hassought to turn this tragedy into apolitical windfall. By using this inci-dent to say that talk shows shouldstop preaching anti-governmentthemes, Clinton is seeking to si-lence his critics and suppress freespeech - particularly those who feelvery frustrated over the current de-cay in the political process andAmerican society in general. Byblaming talk radio, Clinton illus-trates the very core of the " liberal"agenda that has turned-off somany. This core philosophy is thatindividuals who commit violent actsdo not do so because they are vio-lent, but because society drivesthem to it. There is a complete lackof personal responsibility that isnurtured by this line of thinking,which permeates from violentcrime right down to the woman whospilled coffee in her lap and blamedMcDonald’s for brewing their coffeetoo hot. No single individual is re-sponsible for their own behaviour -society somehow creates it. Un-less of course you are dealing withthe IRS where even if a agent gives

you advice and that advice iswrong, the taxpayer bares full re-sponsibility exclusively!

The hypocrisy in this debate isthat is highlighted by the fact thatClinton himself found it necessaryto travel to Russia in order to pro-test against his government whenhe disagreed with its political direc-tion. Now the President seems tofeel that while he is in office, no oneshould call into a talk radio showand complain about government.Obviously, the President is in favorof free speech ONLY when it is inline with his personal politicalagenda.

Talk radio in New Jersey israther upset over a number of is-sues. But the one issue that sticksin the throat of most residents ishow we as a nation have lost ourway when it comes to democracy.In New Jersey, as it is in many otherstates, a proposed municipal taxincrease is put on the ballot. If thepeople vote against the tax in-crease, the municipality then ap-peals to the state for relief. Thestate ALWAYS and without excep-tion, grants the municipality theright to go ahead and raise thetaxes anyway therefore pushingthe people’s vote aside. It is ironicthat in this nation we have the gutsto criticize Russia, Cuba and count-less other nations for holding mockelections, while our state and localgovernments have made a mock-

ery of our constitutional right to rep-resentation. Perhaps our electionsfor individual politicians may bereal, but when it comes to voting ontaxation issues - the US is equallyas guilty as the nations we criticize.

The principle that the state useswhen it overturns the votes of itsown citizens is one that the stateclaims financial expertise and thatthe citizens are too uninformed(stupid) to realize that the tax in-crea se i s necessary. Oddlyenough, the Russian governmentholds on to its power using thesame theory that they are merelyprotecting its citizens who wouldotherwise not understand whatthey truly need.

The political corruption withinthe United States has become sowidespread that tempers are flaringand frustration is building. Just thispast week in New Jersey, an en-raged motorist, who had been tick-eted several times for minor speed-ing offenses, suddenly snapped.He drove his car directly into a statetrooper who was hiding in the mid-dle of the road looking for unsus-pecting motorists. The trooper waskilled.

A couple of years ago in Texas,a man climbed on top of a buildingdirectly across from the InternalRevenue Service office in Dallas.He began shooting ONLY IRSagents who were leaving work. A

Issue #5 June 1995 Copyright Princeton Economic Institue all rights reserved

swat team was called in and theman was immediately killed.

There is a common theme be-tween these two incidents and therecent attacks at the White House.In all cases, government spokes-man are stating publicly that thesewere unusual incidents that werenot direct attempts to protestagainst the government. In thecase of the motorist, the state issimply saying for "some unknownreason" the driver suddenly driftedoff the highway and crashed intothe state trooper when the evi-dence suggests that the motoristmay have had to deliberately aimfor the trooper. In Dallas, the storyline was that the gunman was crazyand shooting at random. Despitethe fact that no other people on thestreet were shot other than IRSagents suggests that the shooterhad a grudge against the IRS. Andas far as the attempts made againstClinton, well every statement im-mediately released after a WhiteHouse incident gives the party line,"this was not an attempt uponthe life of the President." Onlyafter the press dies down is theman charged with attempted as-sassination.

A serious problem that we haveis that government just doesn’t re-alize how unfair it has been with theAmerican people. Any act of vio-lence that emerges, has been ig-nored and classified as somethingother than what it was. It appearsthat the Oklahoma incident didseem to break that barrier of denialthe government continually por-trays. The question that remains isquite simple. How many more inno-cent lives have to be lost beforegovernment comes to realize that avast number of its citizens are up-set, frustrated and dissatisfied.Within any group, there are alwaysthe extremists. In this case, thereare extremists who will resort toviolence against the governmentout of pure and simple frustration.This is not the result of talk radio,Republicans or anarchists. It is thedirect result of too much govern-ment.

One of the fastest growing finan-cial markets is state paper that isbeing backed by tax liens placedagainst its citizens. This is essen-tially a real estate scheme. Thenotes are being offered aroundWall Street where local govern-ments, like those in New Jersey,are seeking to raise money basedupon the tax liens that they havefiled. The security backing of thenotes is the actual real estateowned by the defaulting taxpayer.The incentive for the note holdersis the potential to make big profitsof 10% or more. If the tax lien is notpaid by the citizen, then the title tothe real estate becomes the prop-erty of the note holder. This sickgovernment scam seriously bringsinto question the whole incentive ofgovernment to file a lien against anindividual whereby the governmentcan immediately sell the lien towaiting investors. A mutual fundhas even emerged whereby taxliens from several states are pur-chased to offer the investor somediversification no less. The danger-ous element to this scheme is thata home of $100,000 could be con-fiscated and sold to satisfy even atax lien of only a few thousanddollars if the original owner is un-able to come up with the necessarycash within the time limit imposedby the state. As such practices be-come more widely known amongthe people, it will be incidents likethis that stir additional political dis-satisfaction and doubt.

Mr. Wheeler, a noted researcherinto the cycles of war, created animportant database stretching backto 6,000 B.C. where all battleswhere indexed according to thegeographical area involved in com-bination with the number of troopscalled into the field. This invaluabledatabase (available through theFoundation for the Study of Cycles,Wayne, Pa) clearly distinguishesbetween international vs civil con-flicts. Feeding this database intoour computer models warned thatthere is a direct correlation be-tween the cycles of war and that ofour Economic Confidence Model.Consequently, our computer isforecasting the worst period justahead in terms of the war for the

history of mankind. What this fore-cast has been warning about issimply this: the period between1998 and 2003 is most likely goingto produce the greatest activity ofwar known to history. This rise inwar activity will be more focused ina civil war nature than in terms of amajor conflict of one group of na-tions against another. This cycle isnot exclusively focused upon theUnited States. This cycle is onebased upon global activity. Any civilconflict within the United Statesmight be mild in comparison towhat we see in Europe and Asia.

Our computer models havebeen warning since 1985 that thistendency of greater civil stress isdirectly linked to the decline in theconfidence in government. The1992 Perot capture of 19% of thepopular vote in the United Stateswas the single greatest vote for anythird party in the history of this na-tion. The huge third party vote wasthe first warning sign that our long-term computer forecasts just mightbe correct. The 1992 forecast thatwe issued in our reports (copyrighton file in Washington), called for asweeping victory in both houses forthe Republicans in 1994. While theAssociated Press carried that fore-cast nationwide in 1994 after it hadbeen proven to be correct, politicalscientists at several universitiesclaimed that nobody could makesuch a forecast because funda-mental events change often andthe success of that forecast waspurely coincidence.

What political scientists fail tounderstand is that just becausethey are surprised by the outcomeof an event does not mean thatsuch events are totally random.The truth of the matter is that suchtrends may be isolated events onthe surface, but in reality they arecompletely consistent with thelong-term trend of the whole. Inother words, the shocking uprisingin Russia could be classified as afluke or coincidence ONLY if therewas no other collateral trend takingplace. What this means is that theuprising would NOT have takenplace as long as the underlyingeconomic trend was stable. The

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long decline in the economic trendwithin Russia resulted in a steadydecay in the standard of livingamong its people. At some point,that decay within its economy risesto the surface and explodes.

In the United States we too havebeen suffering from a steady eco-nomic decline whereby the stand-ard of living among its citizens hassharply declined just since the1960s. The median family in 1964paid 25% in federal taxes com-pared to 36% by 1992. Add to thisfederal trend the explosive trend instate and local taxation in the pasttwo decades where taxation hasmore than doubled, and what weare left with is a very concerningissue. As states are forced to lookfor ways to raise revenue otherthan through direct taxation, weend up with police forces that havebeen transformed into IRS agentson wheels and clever notes beingissued backed by the confiscationof assets of the homeowner.

It is the very greed for greaterand greater levels of revenue onthe part of government that is bring-ing Western society as a whole tothe dangerous brink of civil unrest.The higher the taxation levels, thelower the economic growth and thestandard of living of the people. InEurope, the economic growth hasaveraged below 2.5% for the pasttwo decades. This lethal combina-tion of rising taxation and lowereconomic growth has propelled thenational debts of nations in an up-ward spiral of never ending expan-sion. Belgium, Canada and Italy willbe the first three to fail. As long aseach nation continues to merelyraise taxes in an effort to gain morerevenue, economic growth will de-cline even further causing theirdebt to GDP ratios to rise above150%. Sweden is also in serioustrouble. The national debt of Swe-den stood at only 57% of GDP in1987. This ratio has exploded to81% last year. We expect to seethis debt to GDP ratio exceed 100%by 1996.

Civil unrest is rising in everycountry within the West along withAustralia and Japan. This rising

tide of tension is being caused bythe greed and over expansion ofgovernment regardless of the politi-cal slogan. In Britain, where theconservatives have ruled for morethan 10 years, the standard of livingfor its people has still declined.Conservative or not, the cost ofgovernment in Britain has simplybeen rising too high. Our own prop-erty taxes on our London office is110% of the rent! New business issimply too hard to create in Britainwith local taxation as high as it is.This has caused chronic levels ofunemployment that at their lowestlevels are equal to that of the UnitedStates during the peak of a reces-sion.

According to the OECD, the totalsum of world debt to GDP ratiosstood at 42% in 1980 compared to71% in 1994. Unfortunately, if thistrend is NOT reversed, this globalratio could easily reach 100% asearly as 1998, but no later than2003.

It is also unfortunate that in theUnited States the media and theliberal Democrats fail to see thatthere is any problem at all. No mat-ter what t he program, they argueand characterize those who are try-ing to bring some sanity back to ournation’s finance as evil people bentupon benefiting the rich. The prob-lem concerning this Marxist styleclass warfare is that not even aRepublican seems to understandwhat has been taking place withrespect to the definition of the rich,which had once stood in 1940 at $5million. That definition of the rich,according to the IRS, came down toa mere $51,900 by 1992. EvenPresident Clinton, who raised taxeson the so called rich, did so byadding a nother bracket at$250,000 while leaving all otherbrackets unchanged. So yes, Clin-ton raised taxes on anyone earning$250,000 or more, but he did noth-ing to relieve the tax burden uponthose who earned less.

Society has always rebelledwhen the standard of living has de-clined in the face of escalating un-fair taxation. Stopping talk showhosts around the nation from airing

the unrest could lead to evengreater frustration that merely ex-plodes in an unpleasant manner.With 33% of the civil work force inthe US employed directly or indi-rectly by government combinedwith those dependent upon govern-ment through welfare, we find thatthis group is quickly approachingthe 45-47% level of the total civilwork force. If this situation rises anyfurther, then everyone in the privatesector will find their votes to betotally worthless. Once the majoritydependent upon government is at-tained, they will always outnumberthose in the private sector. In effect,private citizens will find themselvesmere indentured servants of gov-ernment with no reasonable hopeof civil relief.

Government must come to real-ize that we are reaching a danger-ous threshold in the cycle of publicvs private. Our greatest concern isthat Wheeler’s cycle will be correctonce again and we could see adisintegration of the political proc-ess even within the United States.If our politicians continue to lie andmisrepresent this issue as cuttingthe size of government for the solebenefit of giving a tax cut to million-aires and bil lionaires, they willmerely allow the continued declinein economic growth and the stand-ard of living to unfold. Such a con-tinuance of this trend will not merelyjeopardize our long-term economicprosperity, it will force more ex-tremists to take action combinedwith a general rise in political unrestthat will ultimately result in the po-litical disintegration of the Ameri-can system. This is no longer aDemocrat vs Republican debate - itis an economic debate within whichthe future of the entire western so-ciety rests. It is fundamentally andmorally wrong for society to attemptto raise the living standards of thepoor by undermining the livingstandard of the working class. Themoral responsibility is to provideequal opportunity and to insure thatno one starves. America’s poorhave become the rich by third worldstandards and we should not allowsome to gain the same living stand-ard by government aid that the ma-jority must earn through their hard

Copyright June 8, 1995 PEI All Rights Reserved

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labor. Society should not be heldhostage by public service unionsthat demand higher benefits thanthose that are standard within theprivate sector. In fact, governmentjobs should be elastic whereby thebulk of those jobs should be avail-able on a temporary basis for thosewho suddenly find themselves un-employed. We should also not al-low the truly disabled to lose theirbenefits due to the greed of thosewho would prefer to live off of gov-ernment aid rather than work. It istime the truth be told. It is time forhonesty and moral justice to rise tothe surface within the ranks of ourpolitical process. If this is not forth-coming and soon, then our com-puter models are not forecasting avery rosy scenario for the period1998 to 2003. What politicians donot restore willingly, could result insociety’s usurpation by disorientingmeans.

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UNITED STATES:

FACTORY ORDERS: Orders toUS factories fell by 1.9% in April,the biggest drop for 9 months andthe first time in nearly 2 years thatsuch orders have fallen for 3 con-secutive months.

GDP: The US GDP, the govern-ment’s broadest gauge of eco-nomic strength, had risen 2.7% inthe 1st quarter of this year - downsharply from the 5.1% growthgrowth recorded in the last threemonths of 1994.

US TRADE DEFICIT: The UStrade deficit narrowed slightly inMarch as gains from recent effortsto tear down trade barriers aroundthe world helped push up exportsnearly 5% to $65.34 billion. But theglobal trade pacts, such as the onenegotiated under the auspices ofthe GATT, also led to a 4.3%jumpin imports to $74.46 billion from$71.40 billion. Overall, the deficit ingoods and services shrank to aseasonally adjusted $9.12 billionfrom February’s $9.15 billion, ac-cording to the Commerce Depart-ment.

DURABLE GOODS: New or-ders for durable goods fell 4% be-tween March and April, a much big-ger drop than expected, raising theprospects of a cut in short-term in-terest rates. The drop in orders wasthe third consecutive monthly de-cline.

INDUSTRIAL PRODUCTION:The prospect for a "soft-landing" forthe US economy increased with therelease of official figures showingthat industrial production fell in Aprilfor the second month in a row. Thisis the first back-to-back fall in pro-duction since the end of 1991,when the economy was strugglingto emerge from a recession.

INDUST RIAL CAPACITYUTILIZATION: The Fed reported asharp decline of industrial capacityutilization to 84.1% against a peakof 85.5% in January - the third dropin a row - suggesting that inflation-ary pressures may be subsiding.

HOUSING STARTS: The Com-merce Department said housingstarts increased 0.4% in April afterfall ing for the previous threemonths, an indication that housingstarts are stabilizing. Despite therise of 0.4%, housing starts still re-main 16% lower than in April lastyear.

Industrial out put declined 0.4%in April, after a 0.3% decline inMarch and a zero increase in Feb-ruary. More than half of the drop inApril reflected a sharp retrench-ment in the car industry, where out-put fell 4.4%. Excluding cars,manufacturing output fell 0.3%from March.

The figures are likely to be inter-preted by the Federal Reserve asan encouraging sign that its strat-egy to curb growth to prevent up-ward pressure on inflation is suc-ceeding.

UNEMPLOYMENT: The US jobmarket weakened sharply inMarch, providing the strongest sig-nal yet that the economy was slow-ing down after last year’s hecticpace. The workforce shrank in Aprilfor the first time in two years, push-ing the unemployment rate up to5.8% from 5.5% in March. Easinginflationary pressures on the jobmarket and thereby reducing thelikelihood that the Fed would raiseinterest rates later this year, bondprices rose strongly.

The bureau’s survey of busi-nesses showed non-farm payrollfell about 9,000 in April to 115.8million, compared with an averageincrease of 271,000 a month overthe previous six months. Manufac-turing employment fell by 28,000 inApril to 18.25 million, while con-struction employment fell by20,000 to 5.11 million. Retail andother service sectors added work-ers to their payrolls. Using a sepa-rate survey of households, The Bu-reau of Labor Statistics calculatedthe April employment rate at 5.8%,back at the level recorded last Sep-tember.

Ms Katherine Abraham, com-missioner of Labour Statistics cau-

tioned that quirks in the calendarmay have skewed April unemploy-ment results, possibly overestimat-ing the extent of job creation bybetween 70,000 and 234,000 jobs,although she did emphasize thatthe trend in payroll employmentgrowth was clearly down from lastyear’s rapid pace.

Unemployment rates rose sig-nificantly in most regions of thecountry. Michigan and Pennsylva-nia were the only large states torecord lower jobless rates in Aprilthan in March.

Average hourly wages in the pri-vate sector rose slightly to $11.32after remaining flat for two months,and average weekly wages rosesomewhat faster to $394.09 inMarch.

UNITED KINGDOM:

ECONOMIC GROWTH: In itsmonthly monetary report for May,the Treasury said figures for first-quarter GDP show that the econ-omy is growing at a healthy, moresustainable rate than in the first halfof last year.

The British economy expanded0.8% in the first quarter, preliminaryestimates show, unchanged fromgrowth in the previous quarter, andclimbed an annual 3.9%. Analystshad been expecting growth to slowto 0.6% in the three months toMarch.

INDUSTRIAL OUTPUT: T hepace of UK manufacturing produc-tion slowed in March, supportingthe government’s view that eco-nomic growth is falling to a non-in-flationary rate, reducing the needfor interest rate rises. Overall in-dustrial output rose 0.9% in March,higher than expectations of 0.4%and higher than the 0.2% rise inFebruary.

However, production at factoriesrose by a lower-than-expected0.3% in March. In the first quarter,manufacturing production fell 0.1%

Copyright June 8, 1995 PEI All Rights Reserved

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from the previous quarter, with de-clines in all sectors except cokerefining and chemicals.

While the Treasury welcomedthe manufacturing production fig-ures, some analysts said the reportshould viewed with caution. Thereport is in contrast to a recent sur-vey from the Confederation of Brit-ish Industry which suggest outputhas risen strongly in the first quar-ter, although their were signs of aslowdown in the April survey.

PRODUCER PRICES: Accord-ing to the Central Statistical Office,manufacturers are raising theirprices more slowly than at the turnof the year, but the weakness of thepound is still pushing the cost ofraw materials up sharply.

Fuel and raw material costs roseby 0.7% in April, after adjusting forseasonal variations. The CSO re-vised its estimate of March’s in-crease from 0.4% to 0.8%. This leftinput prices 11.5% higher in Aprilthan in the same month a year ear-lier. This is the same increase asthe year to March and one of thehighest for a decade. Weakness inthe pound has pushed up the priceof imported raw materials. Chemi-cals, many of which are paid in D-Marks, rose by 2% between Marchand April. Imported metals andfoods have also risen sharply.Manufacturers put up prices by0.4% in April, taking the annual rateof factory gate inflation to a 16-month high of 4%.

M4 MONEY SUPPLY: Britain’sbroad money supply measure - M4- climbed a final 1.4% in March froma year earlier, amounting to a year-on-year growth rate of 5.5%, ac-cording to the Bank of England.The final estimate for March M4was unchanged from the originalestimate. The annual rate of in-crease was also unchanged.Growth in M4 aggregate, which in-cludes notes and coins and bankand building society deposits, hasheld below the middle of the Treas-ury’s 3% to 9% monitoring rangesince October 1991.

MACHINE TOOL SALES: Anestimate from the Machine ToolTechnologies Association showedthat the US was the leading exportmarket for UK machine tools lastyear, with exports up 13.4% tonearly £80 million.

Machine tool exports rose 6.5%last year to £361 million, while im-ports rose 7.3% to £354 million.This meant that the UK had a tradesurplus in Machine tools of just over£7 million, down from £9.1 millionin 1993. That, however, was theindustry’s first trade surplus for tenyears.

Recession in continental Europecut the EU’s share share of the UKmachine tool exports from about50% in 1991 to 33.7% last year, butUK exporters are now benefitingfrom the weakness in sterling.

UK machine tool production rosefrom £645 million in 1993 to £738million last year, while UK con-sumption of machine tools jumpedfrom £636 million to £731 million.The association expects consump-tion and production to rise to about£900 million this year. The projec-tion is not adjusted for inflation.

NEW CAR IMPORTS: Importpenetration of the market for newcars reached its highest level lastmonth for several years. The fighterwas 61.1% compared with 56.7%in April 1994. Imports for the first 4months of the year also appearedpoised to brake through the 60%threshold, at 59.9% compared with56.6% a year before.

The overall market for new carsin the UK weakened further lastmonth when the business pur-chases that have helped offset fall-ing private demand began to falter.Figures from the Society of MotorMa nufacturers and Tradersshowed some leading UK-basedmanufacturers under pressure andlosing ground to imports, mainlyfrom mainland Europe.

Total registrations of new cars inApril, at 138,770, were 2.3% lowerthan the 142,009 of the samemonth a year ago. Within the total,

however, registrations to privatebuyers were 7.5% lower. In recentmonths, this weakness in privatedemand has usually been offset byrises of up to 10% in demand fromcompanies making long overduereplacement of fleets kept runningthrough the recession.

But last month fleet registrationsby companies operating 25 cars ormore were only 0.8% higher. Reg-istrations by other business usersrose 5%, but this category ac-counts for well under 10% of thetotal market compared with nearlyhalf of the fleet sector.

As a result, total registrations forthe first four months of this year, at664,134, were 1.1% below the671,445 of the same period lastyear. It appears increasingly likelythat the society may have to revisedownwards its forecast of a 1.95million market for this year com-pa re d w ith the 1.91 mi ll io nachieved in 1994.

HOUSING MARKET: The UKhousing market remains de-pressed in spite of a traditionalsprig rise in sales. Halifax BuildingSociety, the country’s biggest mort-gage lender, said prices fell an av-erage 0.3% last month comparedwith March, and were 1.4%lowerthan in April last year. Halifax saidthe fall in prices confirmed thatthere was still no evidence of arecovery in the housing market.

A survey of British Bankers’ As-sociation showed a further declinein Mortgage lending. Net new lend-ing in March fell by 15% to £560million, compared with £674 millionin the same month last year. Grosslending, in spite of rising by 31%compared with February, was still10% lower than a year ago. A sur-vey by the National House-BuildingCouncil showed a sharp fall in ap-plications by builders to starthomes in the first three months ofthis year.

NUCLEAR POWER PLANTSALE: The UK government hasproposed to sell more than half ofits nuclear power plants next yearin a public offering that could raise

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more than £3 billion. Under the planannounced by Michael Hesseltine,president of the Board of Trade, thegovernment will waive a special taxfor nuclear cleanups that could re-duce the electricity prices in Eng-land and Wales by 8%. The sale ofthe nuclear utility will come at aboutthe same time the governmentplans to sell state-owned BritishRail, the National Railroad.

Heseltine didn’t say how muchthe sale would raise. It has been thepolicy of the ruling Conservativegovernment to sell state- ownedindustries to investors because itbelieves private ownership is moreefficient.

AUSTRALIA:

MARCH RETAIL SALES: Aus-tralian retail sales in March fell by0.8% from February, according tothe Bureau of Statistics. That fol-lowed a 1% decrease in February.Retail spending in the year rose2.7%. Forecasts ranged from a2.5% decline to to an increase onthe month of about 1.5%.

The value of sales in January fellto A$9.29 billion from A$9.37 billionin February. Retail sales in thethree months to March 31, adjustedfor inflation, rose 0.3% from theprior quarter which compares withwith a rise of 1.1% in the Septem-ber-December period. Retail salesaccount for about 60% of all con-sumption in Australia. The bureau’strend estimate, which removesvolatility in the seasonally adjustedfigures, rose 0.2% in March. For theyear, the trend was up 6.3%.

ANZ JOB VACANCY INDEX:Australia & New Zealand Bank’smonthly index of job advertise-ments fell 2.6% in April, its thirdconsecutive monthly decline. Theindex was up 13.8% on the yearand about 7% above its averagemonthly level for 1994.

The index is pointing to sloweremployment growth in the secondhalf of 1995, according to Graham

Hodges, chief economist at ANZBank. However, he said job growthshould be sufficient to to insure fur-ther reduction in Australia’s unem-ployment rate the rest of the year.

In March, the index dropped1.4% and in February 2.6%. Aus-tralia’s unemployment rate fell to8.7% in March, its lowest levelsince February 1991 when itreached 8.6%, the Bureau of Sta-tistics reported. It was at 8.9% inFebruary and has held below 10%since April last year. Employmentdeclined by 10,800 to 8.15 millionin March, following a 75,200 jumpin February.

The ANZ job ads series meas-ures the number of job ads ads inMetropolitan daily newspapers. Inthe past it has proven to be a lead-ing indicator of trends in employ-ment and current indicator of eco-nomic activity.

EMPLOYMENT: Australian em-ployment surged to a record in Apriland the jobless rate plunged to a52-month low, fueling concern thatthe economy is still growing fastenough to warrant further rises ininterest rates. The number of jobsrose by 90,400 - the second largestmonthly increase ever recorded - to8.24 million.

Adding to the bullish jobs report,the Bureau of Statistics said thebulk of jobs growth was in full-timeemployment. Full-time jobs, whichare considered the most importantindicator of employment, rose80,600 to 6.22 million. The joblessrate fell 0.4 to 8.3% in April, itslowest level since December 1990when it was at 8%. EmploymentMinister Simon Cream said it wasthe first time in four years that allAustralia’s six states posted job-less rates below 10%.

MARCH BUILDING APPROV-ALS: Australian building approvalsin March fell 4.3% from February,The Bureau of Statistics reported.Approvals in the month were12,830, compared with 13,403 ap-provals in February. They weredown 17.9% from a year earlier,after a 13.7% decline in February.

The bureau valued the monthlyapprovals at A$2.124 bil l ion(US$1.56 bil l ion), down fromA$2.36 billion in February. Approv-als for private-sector homes fell7.3% to 7,978 in March, following8,606 approvals a month earlier.

The bureau’s trend rate, whichsmoothes the seasonal adjustmentfigures, showed a 3.2% decline inthe month. On the year, the trendestimate fell 19.6%.

CURRENT ACCOUNT DEFI-CIT: Australia’s current accountdeficit in March widened 10% to abetter-than-expected A$2.319 bil-lion (US$1.71 billion). That com-pared with a revised A$2.115 billionin February. The December fig-ures, which previously reached arecord, were revised down toA$2.323 billion in the latest report.Analysts had forecast the currentaccount deficit to widen to aboutA$2.6 billion in March.

The Bureau of Statistics re-ported that the nation showed amerchandise trade deficit of A$756million in the latest month, com-pared with a revised deficit ofA$515 million in February. Mer-chandise exports rose 4% toA$5.889 billion. The bureau earlierreported an 8% rise in imports to A$6.645 billion in February.

The net income deficit - theamount that Australia pays to serv-ice its debt - narrowed to A$1.470billion from a revised A$1.509 bil-lion in February. The bureau saidthe unadjusted current accountdeficit widened to A$2.188 billionfrom a revised A$1.489 billion. Thetrend estimate on the current ac-count deficit, which smoothes sea-sonal anomalies, expanded toA$2.277 bill ion in March fromA$2.243 billion in February.

ANNUAL BUDGET: Australiancorporate leaders were not im-pressed with the government’s an-nual budget for the year startingJuly 1, saying that spending wasn’tcut enough and company tax wasraised too much.

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Treasurer Ralph Willis said thegovernment plans to reduce itsspending A$700 million (US$512million) in the year. This was re-garded as insufficient by businessleaders. The government is relyingon higher taxes on business to turnits annual budget to surplus for thefirst time in five years from a deficitof A$12.15 billion in the presentyear.

The government said from July1 the corporate tax rate will be in-creased to 36% from 33% pres-ently. Business groups expected atax hike to 35%. The governmentsaid the increase in the corporatetax rate would raise A$320 millionin the coming year and A$1.57 bil-lion in the year to June 1997. Thebig difference is because compa-nies pay tax on a provisional basis.According to many business lead-ers, the tax on business is going tohave a significant effect on busi-ness confidence, investment andjobs growth.

The budget detail plans to raiseA$5.35 billion from asset sales, in-cluding about A$4 billion from thesale of the government’s remaining50.4% stake in CommonwealthBank of Australia Ltd.

The Australian governmentacted to raise the country’s lowlysavings ratio through an extendedsuperannuating scheme, which willrequire employees to save 3% ofearnings by the year 2000. The su-perannuating scheme will cost thegovernment A$4 billion a yearwhen fully implemented, and willboost further Australia’s fund man-agement industry. While employ-ees will be required to save 3%, thegovernment is to match this on adollar-for-dollar basis for lower paidworkers.

RAW MATERIALS PRICES:The prices of raw materials used inmanufacturing in Australia rose1.2% in March, increasing concernthat the nation’s inflation rate is onan upward path. On the year, inputprices rose 7% as the A-dollarweakened and oil prices rose, ac-cording to the Bureau of Statistics.The bureau said that the rise in

input prices was caused mainly byprice increases for crude petro-leum, reflecting both higher worldoil prices and the continuing de-cline in the value of the A-dollar. Oilprices are denominated globally inUS dollars.

Prices for imported materialsrose 2.5% in March and 9.2% onthe year. Prices of domesticallyproduced materials rose 0.6% onthe month and 5.7% on the year.

WESTPAC CONSUMER CON-FIDENCE INDEX: The widelywatched measure of consumerconfidence fell in May, apparentlyin response to the Australian gov-ernment’s annual budget state-ment. The Westpac- Melbourne In-stitute of consumer sentimentdropped 5.8% in May after rising9.8% to a 5-month high in April andgaining 8.9% in March.

Of the 1,201 people surveyed,28% said they expect their per-sonal finances to improve in thenext 12 months, down from 34% inApril. The percentage predicting adeterioration in their personal cir-cumstances rose to 21% from 18%.About 50% said it was a good timeto invest in major household items,down from 55% in April. About 25%said it was not, against 22%.

Looking back at the past 12months, 24% of people surveyedsaid their situations had improved;37% felt they were worse off. Thesurvey showed 33% of respon-dents expecting economic condi-tions to improve in the coming year,and 39% expecting a deterioration.

GERMANY:

UNION PAY ACCORD: Unionsrepresenting 3.4 million Germanpublic sector workers accepted a3.2% pay rise and extra benefits.Negotiators for the OeTV publicservice and transport worker’s un-ion and the DAG white collar unionsaid the accord included a one-offpayment for April of DM140 ($102).

The deal was well below the av-erage 4% wage increases won byGermany’s engineering and chemi-cal workers and also includedmeasures to make working hoursmore flexible. However, employersaccepted a union demand to im-prove pensions for eastern Ger-man public sector employees from1997. Unions earlier rejected anoffer from public employers to raisepay by 2.5% over 15 months andhad threatened to strike if no ac-cord were reached in this round oftalks.

WEST GERMAN CONSUMERPRICE INDEX: Consumer prices inWest Germany rose 0.2% in themonth to mid-April and were up2.3% from a year earlier, accordingto the Federal Statistics Office. Thefinal report confirmed preliminaryestimates.

Prices rose at a monthly rate of0.1% and an annual rate of 2.3% inMarch. Food prices rose 0.4% inApril and were up 1.6% on the year.The cost of non food consumergoods went up 0.2% on the monthand rose 1% on the year. Servicescost 0.2% more in April and wereup 3.2% from the year earlier. Rent-al costs increased 0.4% in April androse 4% on the year. The cost-of-living index climbed 125.9 in Aprilfrom 125.6 in March (1985=100).

EAST GERMAN PRICE IN-DEX: Consumer prices in EasternGermany rose 0.3% in the month tomid April and were up 2% from ayear earlier, according to the Fed-eral Statistics Office. Prices hadbeen unchanged on a monthly ba-sis in March and rose at a yearlyrate of 1.9%.

Excluding fuels, the April con-sumer price index rose a monthly0.2% and was up an annual 2.0%.Taking out residential rents, the in-dex rose 2% from March and wasup 1.9% from the year below. Foodprices rose 0.8% in April and wereup 1.8% on the year. The cost ofnon-food consumer goods was un-changed on the month and rose0.3% on the year. Services cost0.4% more in April and were up6.0% from a year earlier. Rental

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costs increased 0.5% in April androse 2.5% on the year.

The Eastern German cost-of-liv-ing index climbed 137.8 in Aprilfrom 137.4 in March (2nd half1990/1st half 1991=100).

The government continues topublish a separate price index forthe five eastern states, which ac-count for a quarter of the Germanpopulation but only a tenth of theeconomic output.

GERMAN M3: German M3money supply fell at an annualizedrate of 1.8% in April from the fourthquarter of 1994, compared with acontraction of 2.7% in March, ac-cording to the Bundesbank in a pre-liminary report. The contraction ofthe money supply was less thanexpected. The Bundesbank’s tar-get for M3, set in December, is foraverage growth of 4% to 6% fromthe fourth quarter of 1994 to thefourth quarter of 1995. The Bun-desbank said M3 rose at an annual-ized rate of 3.5% relative to thefourth quarter of 1993, comparedwith 3.6% in March. The Bundes-bank said purchases of longer-termdated bonds kept M3 under controlin April, offsetting a pickup in banklending and the Bundesbank’sprofit payout to the federal govern-ment.

M3 averaged a seasonally ad-justed 1,859.7 billion marks in April,up from 1,857.1 billion marks inMarch, the Bundesbank reported.The bank’s extended M3 measurefell at an annualized rate of 1.1% inthe six months to March. Duringthat period standard M3 contractedat a 2.9% annual rate.

Standard M3, under the Bundes-bank’s definition, consists of cashin circulation, demand deposits,time deposits with maturities of lessthan four years and most savingsdeposits.

The extended measure also in-cludes offshore Euromark depos-its, some short-term bank debt anddomestic and domestic and off-shore investments in Germany’s

newly legalized money marketfunds.

HOUSING INVESTMENT: Ac-cording to the Bundesbank, invest-ment in German housing rosesharply last year to meet the needsof immigration and unification. To-tal spending on new homes, exten-sions and renovations increased by16% to DM252 billion ($174 billion);in real terms the rise was 12%. TheBundesbank said Germany’s totalpopulation rose by some 4 millionbetween 1987 and 1994. Most ofthe increase was is West Germany,caused by immigration from east-ern Europe.

The Bundesbank said the westGerman housing market faces itsbiggest challenge since the 1950’s,with the state providing supportthrough building incentives. Hous-ing completions in west Germanytotaled 505,000 last year, a levelnot seen since the 1970’s; in 1988,they were down to 208,000

JAPAN:

JOBLESS RATE: Japan’s job-less rate rose to a record 3.2% inApril. The rate, the highest sincepostwar records began in 1953,breaches the 3% ceiling seen asacceptable by Japanese industry,unions and government. It alsoputs extra pressure on a dividedcoalition government to take morevigorous action to stimulate theeconomy.

Unemployment touched 3% inMarch, a fraction below the pre-vious record of 3.1% in May 1987.The jobless figures alarmed gov-ernment officials, who warned thatthe Japanese economy could be"gravely hurt if current level’s of theyen’s appreciation continues. TheEconomic Planning Agency esti-mates that Japan’s leading export-ers can break even at Y107 to thedollar compared with the currentY83.

However, the April rise in job-lessness is believed to be a conse-

quence, not of the high yen, but ofthe rise in business failures whichoften increase after the bottom ofthe economic cycle. Most of theYen’s latest rise came after lateFebruary, so damage to exporter’sprofits will not be felt until aboutnow.

The labor market is clearlyweakening. The number of jobsavailable for every 100 applicantsfell from 66 to 65 from March toApril. 210,000 jobs were lost overthe past year, leaving 2.14 millionpeople out of work. The losseswere mainly in the manufacturingindustries, retail ing and restau-rants. Employment has risen, bycontrast, in construction, transportand public utilities, sheltered fromcompetition by government regula-tions.

INDUSTRIAL OUTPUT: Indus-trial output fell by 0.2% in April fromthe previous month, compared witha ministry of trade and industryforecast of a 2% rise. MITI nowexpects output to fall again in Mayand June, the first 3-month run ofshrinkage for two years. The de-cline in output, largely a conse-quence of lower production by carexporters following the yen’s rise inthe past year, forced MITI to with-draw its judgment that the economyis in a "gradual recovery".

ECONOMIC REFORM WARN-ING: In its 1995 paper on trade,The Ministry of International Tradeand Industry warned that Japan’shighly successful economic systemmust be adjusted to incorporatemarket mechanisms more fully ifthe country is to avoid falling behindin global economic development.

The failure of market mecha-nisms in certain sectors of theeconomy has kept many domesticprices much higher than in othercountries and risks underminingJapan’s competitiveness as an in-dustrial base. According to MITI,government regulations and spe-cial business practices are respon-sible for the high cost structure inJapan. Unless measures are takenquickly to correct the situation, it will"cause huge repercussions in ar-

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eas such as Japan’s economy, so-ciety and unemployment. Japandoes not have much time to realizethis reform" says MITI.

Structural factors in the Japa-nese economy have prevented thebenefits of the high yen to reachconsumers:

-In domestic manufacturing, thetrade ministry found that businesspractices were mainly responsiblefor keeping prices high, as the sys-tem made difficult for Japanesemanufacturers to replace expen-si ve do mest ic su pplies wi thcheaper foreign imports.

-At the same time, lack of com-petition in business sectors not ex-posed to foreign competition arealso keeping prices high.

The overall result has been todrive business activity overseas ascompanies seek to maintain com-petitiveness. The high cost struc-ture is leading Japanese compa-nies to move production, and in-creasingly, corporate functionsabroad, while discouraging foreigninvestment in Japan.

Miti suggests promoting deregu-lation, correcting price differentials,and increasing domestic invest-ment opportunities and new busi-ness opportunities to prevent Ja-pan losing its economic vitality.

CONSTRUCTION ORDERS:Construction orders in Japandropped for the fourth consecutiveyear in fiscal 1994, but the trend ofthe decline has apparently bot-tomed out, according to the Japa-nese Federation of ConstructionContractors. Orders received at its57 member companies in the yearending March 31 were down 0.5%on the year before.

The fall was much smaller thanthe 14.6% decline in fiscal 1992and an 18% slide in 1993. In fiscal1994, domestic building orderswere down 1.5% in the year before.Private sector orders rose for thefirst time in four years by 0.7%, butthe public- sector orders declined5% for the second year in a row,

given the relatively inactivity in pub-lic work projects. Overseas buildingorders rose by 22.2%, helped bythe strong demand in Asian mar-kets.

CURRENT ACCOUNT SUR-PLUS: Japan’s current accountsurplus shrank 6.5% in March forthe first time in four years from ayear earlier to $14.825 billion, ac-cording to the Ministry of Finance.March’s surplus was smaller thanexpectations.

For the fiscal year to March 31,Japan’s current account surplusdropped 4.2% from the previousfiscal year to $125.01 billion. Lastfiscal year, the current account sur-plus came to a record $130.491billion. In yen terms, the March cur-rent account surplus reached 1.346trillion, down 19.3% from March1994, according to the Ministry.

The merchandise trade portionof the current account, whichmeasures trade of tangible goods (the largest portion of the account )rose 8.9% to $16.644 billion. Nor-mally, Japan’s trade surplus islarger than its current account be-cause Japan usually runs a deficiton its services account.

Separately, the deficit on tradein services more than doubled,from $5.5 billion to $12 billion.Within that, the travel deficit hit arecord $28.5 billion, up from $24.1billion - a result of the 13.74 millionforeign trips made by the Japaneselast year. Investment income, an-other component of the servicesaccount, fell sharply.

The current account balance isthe nation’s broadest measure ofthe import and export of tangiblegoods, services and monetarytransfer such as donations andeconomic assistance. It is part ofthe larger balance of payments re-port compiled by the Ministry of Fi-nance, which includes capital flowsin and out of Japan.

IMPORTED AUTO SALES:Sales of imported vehicles in Japanrose 10.1% to 26,708 units, accord-ing to the Japan Automobile import-

ers Association. That represents18 consecutive months that saleshave risen.

Vehicle imports from Germanyled all the countries during themonth, with 11,515 units sold, in-cluding trucks, up 16.55 from a yearearlier. Imports from the US in Aprilrose 9.1% from a year earlier to8,560 units.

SPENDING PACKAGE: Ja-pan’s cabinet proposed to spendan additional 2.73 tril lion yen($32.84 billion) on measures toboth help rebuild earthquake shat-tered Kobe and ease the paincaused by the high yen. Thisspending package designed toboost the sluggish economy wasregarded by many analysts as in-adequate to produce much growth.

The bulk of the new spending,about 1.4 trillion yen, is for Kobe.Only 70.3 billion yen would go to-ward helping small and midsize in-dustrial businesses survive the ris-ing yen, and only 2.8 billion yenwould bolster deregulation efforts.

The spending plan follows aneconomic package announced inApril that included promises to pro-mote imports, trim regulations, andboost spending. But the plan wasgreeted as insufficient to resolvethe problems threatening to tip Ja-pan back into a recession.

CANADA:

APRIL HOUSING STARTS:New apa rtme nt constructionhelped to boost Canada’s nationalhousing starts in April, even ashome construction is expected toremain quiet through the end of theyear.

National housing starts rose 5%to 113,000 units in April, from108,200 in March, according toCanada Mortgage and HousingCorp. All figures are seasonally ad-justed at an annual rate. It was thefirst gain since January and only

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the second increase in sevenmonths.

Mul t iple-un it const ruct ionjumped 16% to 46,600 units inApril, from an unusually weak40,100 units the month before.That more than offset a 3% declinein single family starts to 44,800units from 46,000 units.

In April Canada’s major bankslowered their mortgage rates, de-creasing the popular 5-year fixedmortgage rate 50 basis points to9.375% That dropped the monthlycarry ing cost of a C$100,000(US$73,600) mortgage by $36 to$850. Even with the reduction, therate is still 212 basis points higherthan its 30-year low of 7.25 % inJanuary 1995. A 1-year fixed ratenow stands at 9.125%, in contrastto 5.75% 16 months ago.

FRANCE:

CHIRAC VICTORY: Bonds, theCAC-40 and the french franc allrose sharply in the wake of conser-vative Jacque Chirac’s election aspresident. Chirac pledged that hewould reduce interest rates toboost the economy. He is thoughtto favor a less stringent monetarypolicy, which could allow him toreduce rates.

MANUFACTURING OUTPUT:French manufacturing productionin the fourth quarter rose 1.2% fromthe previous quarter, according tothe French national institute of sta-tistics, Insee. Industrial production,which embraces manufacturingoutput and energy production, wasunchanged from the third quarter,when it grew 1.9%. The third quar-ter rise was revised up from aninitial growth estimate of 1.1%. Theincrease in manufacturing output inthe third quarter was also revisedup, to 1.8%, triple the initial 0.6%estimate.

That increase essentially camefrom semi-finished goods, forwhich production grew 3%, and carand other vehicles, for which outputrose 5.2%. In contrast, capital

goods output declined because ofa fall in the production of arms aswell as ships and planes.

APRIL CONSUMER PRICES:French consumer prices rose 0.1%in April from the previous monthand rose 1.6% from a year earlier,according to provisional figurespublished by the National StatisticsInstitute, or Insee. Most analystswere expecting a higher rate. Theministry said that consumer priceinflation has returned to levels atthe end of last year.

In March, consumer prices wereup 0.3% from February, giving anannual increase of 1.8%, ending afirst quarter in which prices rose asa result of what the French Econ-omy Ministry called "transitory fac-tors". Analysts have said that infla-tion is certain to rise, partly as aresult of the election of JacquesChirac as president and partly aswages rise. Committed to reducingbudget deficits, Chirac has alsopledged to create more and im-prove wages. Among the steps thatcould be taken to bridge the financ-ing gap is increasing value addedtax to 20% from its current 18.6%level. Added to this has been aseries of wage rounds in whichworkers have secured above an-nual inflation rate wage increases.

M3 MONEY SUPPLY: FrenchM3 money supply, The Bank ofFrance’s preferred gauge of do-mestic inflation, fell by 0.3% inMarch and rose by 3.1% in thequarter, compared with the sameperiod a year earlier. M3, the broadmeasure of money supply, hasrisen at an annual rate of 4.1% overthe last 6 months, according to thebank. That rate is down from a re-vised comparable rate of 5.2% amonth ago. The bank’s medium-term target is 5% a year, a figurereaffirmed in December when itoutlined its 1995 monetary policy.M3 is composed of cash in circula-tion, demand and most savings de-posits.

The growth in total domesticdebt, another inflation indicator, re-mained firm. It grew an annual3.7% in February after rising 3.9%

inn January and 4.2% in Decem-ber. Bank lending fell an annual0.9% in February, compared with arevised decline of 1.7% in January.

CONSUMER CONFIDENCEINDEX: French consumers’ confi-dence remained unchanged inApril from March, as did their out-look on the country’s future livingstandards, according to Insee. In-see’s monthly survey showed theconsumer confidence index re-mained at - 21. The index had fallenfrom -20 to -21 in March.

The index is based on house-hold assessments of the county’spast and future living standards,their own past and future financialsituation and the opportunity tomake large purchases. Frenchhousehold’s opinions of their cur-rent financial situation, as well astheir opinion of their past livingstandards, fell.

Their outlook for their future liv-ing standards remained stable.Household’s opinion of the evolu-tion of prices remained stable,while their outlook for the labormarket improved again last month,continuing a trend which began atthe end of 1993. The surveyshowed households still judged thesituation unfavorable for makingmajor purchases in April and forboosting savings.

TRADE SURPLUS: France hada record seasonally adjusted tradesurplus of FFr11.84 bil l ion inMarch, partly due to healthy salesof Airbus jets, according to the Cus-toms Office. The March figure bet-tered an FFr11.03 billion surplus inFebruary. Exports to Italy, Britainand Spain continued to be dampedby the depreciation of their curren-cies, but exports remained strongto Germany. The French franc haslost some ground to the D-Mark thisyear. French sales were strong toAfrica, the developing countries ofAsia and in Latin America. Indus-trial capital goods, and especiallythe sale of 20 Airbus aircraft worthFFr8.17 billion, boosted the bal-ance. But even consumer goods,long in chronic deficit, showed asmall surplus of FFr661 million in

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March. The seasonally adjustedsurplus for the first quarter of 1995was FFr31.60, nearly double thefigure reported in the same periodlast year.

UNEMPLOYMENT: The num-ber of people out of work in Francefell sharply in April, declining by justunder 23,000 to 3.26 million, ac-cording to the Labour Industry. De-spite the size of the decline - thebiggest monthly fall since 1991 -the unemployment rate remainedat 12.2% of the workforce, the high-est among the G7 group of indus-trialized countries. The new con-servative government of Mr AlainJuppe, the prime minister, has saidit will give priority to the fight againstunemployment and has set a targetof creating 1 million jobs over thenext 3 years. French unemploy-ment has fallen by just under82,000 since its May 1994 peakand there has been a marked fall -2.1% - in the number of young outof work.

However, the number of long-term unemployed, those out ofwork for more than a year, rose by0.3% to more than 1.2 million. Jobcreation schemes due to be in-cluded in a mini budget sometimein June are expected to include amonthly subsidy of FFr2,000 andreduced payroll taxes for compa-nies to hire the long-term unem-ployed. The cut in payroll taxes isaimed at easing the structural ri-gidities of the French labor market.

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