Armstrong Economics is an economic forecasting organization based on the cyclical models developed by Martin Armstrong. Our mission is to remove opinion from forecasting through the use of our advanced technical models while educating the public on the underlying trends within the economy.
QUESTION: Today most analysts think higher interest rates are on the way. If the majority is always wrong how does that play into the expectations for higher interest rates?
ANSWER: With the Federal Reserve stating they must “normalize” interest rates since 2014, of course, the majority will view that will be the trend. We are at a 5,000 low in rates historically. Naturally, the only direction is now UP, UP, and AWAY! There are two ways that they will be wrong and that has to do with their interpretation.
First, they will not comprehend just HOW fast rates will rise of WHY!
Second, they will interpret higher rates as BEARISH for equities, as they traditionally do.
Therefore, the way the MAJORITY will be wrong is not in the mere fact that rates will rise, they read the statement of the central banks. It is the interpretation of what will follow from the simple trend.
QUESTION: Enjoyed your article on The Persian Gulf and climate change. In a related topic we did a field trip once to the South of Spain and saw whole cliff faces of gypsum at Sorbas near Almaria. This very thick layer of gypsum is evidence that the Mediterranean Sea had once totally dried up. One explanation is that the Salinity Crisis in the Messinian was caused by tectonic plates shifting the Straits of Gibraltar closed, turning the Sea into an evaporite basin, leaving behind thick deposits of salt. Of course, this allowed migration of animals from Africa to Europe.
It is postulated that this could happen again in the future with the Mediterranean drying up in less than 1000 years. Any comment on this? Thanks a lot!
ANSWER: Yes, that is something we have tried to work out a cyclical model. Most people are unfamiliar with the Messinian Event, and in its latest stage as the Lago Mare event. These were geological events during which the Mediterranean Sea went into a cycle of partly or nearly complete desiccation throughout the latter part of the Messinian age. This appears to have taken place between 5 and 6 million years ago which ended with a breach of that point at the Strait of Gibraltar resulted in a major flood where suddenly the Atlantic reclaimed the Mediterranean basin.
The Mediterranean is much saltier than the North Atlantic because it is virtually isolated by the Strait of Gibraltar. It has a very high rate of evaporation. When the Strait of Gibraltar closes again at some point in the future, the Mediterranean would mostly evaporate in about a thousand years or less. This would theoretically result in the rise of the Atlantic and Pacific oceans. Keep in mind that there is the ongoing northward movement of the African continent which could eventually drastically reduce the size of any future Mediterranean to just a lake.
The Mediterranean maintains its level depth simply because of the current inflow of Atlantic water. When that was shut off sometime between around 6 million years ago, this most likely allowed for the migration of people and animals from Africa northward into Europe.
We were investigating this event cyclically to see if it tied into the flipping of the poles, and that research was published in the Mayan Report. There was clearly a cyclically connection but it is impossible to say which causes which.
QUESTION: Hey Marty,
Thanks for the incredible information you are sharing. I subscribe to your service and read your blog every day.
Do preppers have any justification in planning for a complete collapse, be it economic, political or otherwise? I keep a 30 day supply of freeze dried food but I have friends that are much more serious in their stockpile.
ANSWER: The end of the world scenarios that the doomsday people forecast are over the top. If things unfolded as they proclaim, there would be no point in preparing for there would be nothing left. Movies like the Planet of the Apes were based upon this theory. The likelihood that there will be an economic and political upheaval is 100% on point. I have recommended keeping a stash of food, but not for the reasons they put out there by the doom & gloom people. The winters are going to keep getting colder. As they do, this will also disrupt the food supply. I have warned that historically, it is Global Cooling that kills off people – not Global Warming. Additionally, as political unrest rises, there will also be a disruption in the food supply. The majority of people are incapable of growing food for themselves, so society as a whole has this great vulnerability as was the case in in the eternal city of Rome. Historically, as taxes kept rising, and public safety became a growing concern in the urban life, more and more people began to migrate. There is simply a cycle where we all come together to form great societies, the ruling class becomes greedy, and then the cycle turns we migrate back to suburbia.
The political change we face is the collapse of socialism. That DOES NOT mean they go down without a fight. The French Revolution is where Communism began. They hunted the wealth of the rich, beheaded them, and they even seized all the property of the Catholic Church. Socialists always claim they are doing this to right all wrongs created by the rich, but in truth, they live in hate of anyone who possesses more than they do. I find it curious that this is listed in the Ten Commandments as something not to do, yet it is the cornerstone of the left. So even if someone does not believe in God and looks at the Ten Commandments simply as an ancient list of wisdom, this trait is still listed. Any way we slice it, religion aside, coveting their neighbor’s goods is the creed of a thief.
There have been uprisings against the rich and the bankers throughout history. When Florence was the financial capital of Europe, the banking family was the Bardi of Florence. They preceded the Medici and Rothschilds, yet remain unknown to most people. They were the famous bankers of the day. Because there was a dramatic shift in the silver to gold ratio, there was a major uprising when silver rose in value against gold because wages were paid in silver. An economic collapse unfolded and the people blamed the bankers when the source of the problem was the French king. They stormed the palaces of the bankers and set them on fire.
So history is littered with a cycle between all is well and then there is an economic collapse and civil unrest. This is the greate4st danger with the collapse of socialism, which the center portion is the collapse of the pension system. Rome also collapsed when it could not afford the promised pensions for the army. This led to generals rebelling and the troops followed sacking Roman cities that opposed them because they were ENTITLED to their promised pension.
History repeats because it is the same pattern over an over again. Those in power always promise everything assuming that the people are sheep to extract revenue whenever they need it. They fail to understand that EVERYTHING has its limit. Once they cross that line, the system collapses back in on itself. This is simply what we face. It is not a Planet of the Apes scenario and it does NOT even require World War III. It is already in motion and war will only be a result, not the initial cause.
At the start of what is expected to be a busy week, Asian markets closed mixed but with concerns over the weekends that President Trump had decided to remove the national security advisor expected to wobble markets. Consequently, the Nikkei took much of the brunt of the action after the Yen saw a fresh flight to quality, taking it to mid 105’s. The -0.9% decline for the Nikkei was a disappointment as we had seen early gains for the index. Exporters and tech led much of the move but the whole markets remains vulnerable as concerns over Abenomics and the scandal persist. Most other core held in reasonably well give or take the odd 0.25% point. SENSEX was again hit after a brief opening hour in the sunshine. As the currency drifted so did stock enthusiasm and continued last weeks weakness. Worries over the potential trade wars with the US weighs on prices and given the DOW’s decline today, Tuesday is expected to be another heavy session. All this news is also weighing on the A$ with it losing nearly 5% in a month. With the FED expected to move this week you can probably expect the Aussie to remain weak.
BREXIT was top conversation piece for much of todays European market hours. The UK and EU agree on a 21 month transition period and cable rallied 0.75% on the back of the news. However, it may be a little early to celebrate as we still have an anticipated rate hike from the FED, UK Retail Sales and the Bank of England announcing later tin the week. In UK domestic news, reputedly the UK government is restructuring Northamptonshire County Council’s financial affairs due to “terrible” management. That didn’t help the FTSE, which joined other European indices trading lower and closed down 1.7%. Energy and resources led much of the decline as DAX and CAC both also lost 1.25%. Markets closed on their lows influenced heavily by the lower US markets.
Week of March 19th is upon us and we have opened the week in negative territory. Concerns of an unsettled Trump administration, Trade War fears wobble Asia, sinking energy prices, G20 kicks off, FED and the BOE are imminent and the DOW is unchanged on the year. In todays sell-off the VIX has bounced 30% and was last seen trading 20.35, whilst treasuries play almost unchanged
with a 1bp parallel shift across the curve. Facebook lost 6% which was a major drag on the index. Encouraging to see the DOW bounce 150 points in the final few minutes of trading and an additional 100 once futures were triggered.
Japan 0.04%, US 2;s closed 2.30% (+1bp), 10’s 2.85% (+1bp), 30’s 3.09% (+1bp), Bunds 0.57% (u/c), France 0.81% (-1bp), Italy 1.96% (-1bp), Greece 4.15% (u/c), Turkey 12.52% (+13bp), Portugal 1.72% (-1bp), Spain 1.32% (-3bp), and Gilts 1.44% (+1bp). 3M/OIS spread broke above 50 today, which many believe is a prediction the internationals are short dollars.
QUESTION: You defend central banks yet the Rothschilds when clearly Mayer Amschel Bauer Rothschild said: “Give me control of a nation’s money and I care not who makes it’s laws.” Any comment?
ANSWER: No problem. He never said any such thing it was completely made up. It was attributed to him in 1838 when he was already dead for 26 years. Besides that, what is very clear is that this is based on the assumption that money is fiat. The USA began to issue paper money in 1861. During the period that Mayer lived, the money supply was primarily coined. The only plausible reference would be implied that he debased them. He was a banker and never produced the coinage.
It would be nice just for once that you bothered to actually understand the role of central banks as originally set forth. What they do today with Quantitative Easing has proven that the entire theory of an increase in money supply will be inflationary is outright BOGUS.
In every case of HYPERINFLATION, not even once did inflation ever begin by increasing the money supply. Inflation begins when PEOPLE lose CONFIDENCE in the government and they spend the currency as fast as they can or outright refuse to accept it. I have explained that the Japanese Emperor used a different approach. He DEVALUED all outstanding money to 10% of his new coinage. That led to the collapse in CONFIDENCE to the point that the people never trusted the government and as a result, the Japanese lost the ability to produce money for 600 years.
The definition of what creates inflation is entirely wrong. Even Gresham’s Law needs to be placed in context. Gresham worked in the foreign exchange markets in Amsterdam. Henry VIII debased the English coinage. But coinage traded on foreign exchange markets according to its metal content. The inflation Gresham referred to was experienced in the foreign exchange markets so what he truly observed was the decline in the British coinage value on international markets. Don’t forget, this predates the central Bank of England which was established in 1694.
The entire observation of inflation began with Gresham. However, it was extended by David Hume (1711-1776) who made observations BEFORE paper money began. This observation is not respected even today. David Hume showed why net exporting in exchange for gold currency, which then increased the domestic money supply and was hoarded by Britain, could not actually enhance wealth. Hume’s argument was essentially the monetarist quantity theory of money which would influence others over time. Prices in a country would change directly with changes in the money supply. Hume explained that as net exports increased and more gold flowed into a country to pay for them, the prices of goods in that country would rise with the economic boom. The USA saw this through the course of World War I and World War II ending up with 76% of the world’s official gold reserves. Consequently, an increased flow of gold into England would not necessarily increase England’s wealth substantially was Hume’s argument because the increase in domestic prices due to the gold inflow would discourage exports and encourage imports. Hence, this trend then counter-reacts with trade and automatically this will start limiting the amount by which exports would exceed imports. The more money that flowed into a country, like the USA, the higher the prices and this would then reduce exports. Adam Smith’s attack on mercantilism and argument for free trade, strangely ignored Hume’s argument. Hume’s view of capital flows can be verified throughout history and is really the underlying foundation of the balance-of-payments issues that Trump fails to understand. Hume also advanced the idea of “creeping inflation” that takes placed with a gradual increase in the money supply that would lead to economic growth. This is largely correct, but money supply growth must also keep place with population growth or you will produce deflation – more people and less money to go around.
With the introduction of paper money during the mid to late 18th century, the relationship between the over-supply of banknotes and a resulting depreciation in their value was noted by earlier classical economists such as David Ricardo (1772-1823). However, the issue of paper money during the American Colonial period must also take into consideration two factors: (1) England starved America and extracted money assuming they were using Spanish coinage, and (2) the American Revolution which was funded by creating paper money. There was again a lack of CONFIDENCE to the extent that when the American Revolution ended, the Constitution prohibited States from issuing money again and federally no paper money was issued again until the American Civil War in 1861.
Therefore, most HYPERINFLATION periods are associated with war like the American and French experiences. However, in Lydia, the very first government to issue coins, we see the debasement unfold as a direct result of war. Therefore, there is no evidence of hyperinflation unfolding absent a collapse in the CONFIDENCE of the people in that government.
In the case of Venezuela, obviously there has been a collapse in CONFIDENCE. The same was true in Zimbabwe after it seized all the property of white farmers. Foreign investors refused to ever participate again.
The German HYPERINFLATION came with the Communist Revolution in 1918. That sent capital into hiding and fled overseas, primarily to the United States.
The European Central Bank (ECB) has postponed its new guidelines for banks because if it did not, the Italian banking system would simply collapse. The ECB has given Eurozone area banks more time to adapt to new guidelines on how to deal with bad loans. The deadline has been postponed from 2018 off into 2021. The new rules require banks to increase their capital for all loans, which are now classified as risk-taking. Bad loans are systemic in Europe as they increased after the 2007-2009 financial crisis.
After almost 10 years of Quantitative Easing to help banks, nothing has been achieved. Because of the Quantitative Easing, Europe has become very aggressive in collecting taxes. That is deflationary and Southern Europe still suffers from joining the Euro as a whole. The Quantitative Easing has simply kept governments on life-support while failing to stimulate the economy. Mario Draghi moved to negative interest rates in an effort for force people to spend. Instead, the bought safes and withdrew cash from the banks.
This latest move is once again trying desperately to keep the Eurozone afloat until Draghi ends his term next year. Then Draghi could care less what happens, for he will not be blamed if he can just get out the door before it all comes crashing down.
QUESTION: Can you define cycle inversion and answer the below?
1. What are the specific requirements to confirm a cycle inversion? I have found three elements discussed in the writings, but I am somewhat unclear whether all must be present to confirm a cyclical inversion.
i. The period following the turning point must close higher than the prior period.
ii. The period following the turning point must exceed the high of the prior period.
iii. The period following the turning point must not breach the low of the prior period.
2. Can a cyclical inversion be confirmed beyond the month immediately following the turning point? Notably, the turning points referenced above have been evenly spaced, each separated by a single month. What if each of the turning points were separated by 5 or 6 months?
Could a high on Month 3 (which is not itself a turning point, but rather mid-way between two turning points) indicate a cycle inversion? Wouldn’t a high on Month 3 (which is not a turning point) suggest an error in the array?
ANSWER: In the immediate instance, simply exceeding the January high would imply the next turning point would invert into a high. Corrections are confined to a maximum of 3 timing intervals, which means April. A failure to make new highs and a penetration of the February low after April would imply a correction moving into probably July. Just exceeding the January high intraday MAY BE good enough to qualify as a cycle inversion, but typically you need to CLOSEABOVE it or it could be just a double top formation. The same is true in reverse with lows.
You can normally assume a cycle inversion once that event is exceeded or broken on a closing basis. We previously warned that exceeding the November high is December would lead to a January high. That confirmed the Cycle Inversion. The same will be true with respect to the January high.
The only time an Array would appear to be wrong where the TOP line fails to produce a definitive turning point tends to be when there is a Directional Change say the month before. A Directional Change can influence and become dominant. However, this is usually when a given market is being influenced by another. A major panic in one important economy can become a SUPERPOSITION influence distorting a local market by a more dominant global trend. This is still rare. The Array typically picks this up in advance. The Array can change shifting the turning point from one month to the next because of such a Superposition Principle.
This will really have to be answered in a more detailed report on cycles.
I have written many times about the deep corruption among the political class. The way they have always taken bribes is through their families. I have written how Hillary’s brother magically got the gold mining contract from Hati when he wasn’t a gold miner. The Clinton Foundation which was supposed to be a real charity shut down after she lost the elections as all the foreign government withdrew because they were simply bribing Hillary to get influence. Obama back in 2013 was forced to sign the Stop Trading on Congressional Knowledge Act into law at a celebratory ceremony attended by a bipartisan cast of lawmakers. That was exposed in 2011 on CBS 60 Minutes News Program. Then CNN ran a story on this loophole in 2012, and suddenly there was an Act in 2013.
Now the author of Clinton Cash has come out with a new book exposing all the shenanigans going on in Washington. I previously wrote: The collapse in the rule of law is so vital for sustaining the economy that it is often overlooked. This latest book covers BOTH Republicans and Democrats. In the Secret Empires, Peter Schweizer exposes Joe Biden and John Kerry have the cornerstone of Democrats in the Washington establishment for more than 30 years. The sons of Ketty and Biden formed an investment fund dealing with countries overseas with whom the US was negotiating contracts. This is where Hillary was doing the same thing – selling influence via the Clinton Foundation.
Simply put – career politicians have to come to an end. When I was managing money, I was not allowed to have a personal account and NEITHER were my children or my mother. I could never be charged with insider trading because there simply was no possible way anyone in my family could benefit indirectly. The same standards just DO NOT apply to politicians. I have stated plenty of times, the Democrats preach hating the rich while they load the trunks of their family’s car with all the loot. Then they carve out loopholes for the rich when they pay into their reelection coffers. The corruption is way beyond anything you might imagine.
QUESTION: Is there a way to teach cycles that will enable others to see them more easily?
ANSWER: Oh yes. Students who developed visual mental models of cyclical principles flourish, while students who tried to learn cycles by rote invariably struggled. The mental picture is critical. It is a roadmap to the future. Just visualize the Economic Confidence Model and it will help to comprehend the business cycle and where you are at any given moment.
For example, in 2007 when everyone is buying houses, you can keep this in mind and take a pause, encouraging yourself to wait until next year. The same is true for expanding your business. The first time I really used this model in that decision process was 1976. I signed a lease for space and I got them to give me a 10-year lease. I negotiated the elimination of a CPI clause. Everyone was talking about a depression. My accountant thought I was nuts. I told him this model was never wrong and I was going with it. The space I took at $10 a square foot was $45 by 1980.
This model can provide tremendous guidance if you keep it visualized in your mind.
Several women have written in and disagree with what I wrote about prostitution. They argue that 75% of prostitutes come from broken homes, which today is over 50% of marriages. They also state that these girls were abused as children in every way possible and many are runaways. Some also argue that these girls turn to prostitution because they are addicted to drugs and became pregnant at very young ages in their teens and have to support a child on their own.
All of that said, I agree that there are girls that fall into each of those categories. However, There are strikingly different cultures and different solutions around the world that warrant looking at both in Asia and Europe. In Thailand, they have a different culture and sex is not looked down upon as it is in the West. The girls are not drugged out or abducted. They are there to make money typically to support their families, which include their parents. Many also do dream of meeting the right guy in the process. In fact. studies show that 15% of the women in the Thailand sex trade marry their customers when they are foreign men (see a study published by Khon Kaen University).
Amsterdam is also strikingly different. The girls are not drugged out and they fall more into the professional category and some may cling to that dream of meeting Mr. right while others have probably given up on the dream of love at first sight and the knight in shining armor will come to carry them away. Both Thailand and Amsterdam show that even prostitutes do find love, which was the story-line of Pretty Woman.
Similarly, in Japan, there are a few private clubs where the girls are virgins and if you wish to select one, and she agrees, you paid $250,000+ and she was yours. You then had to provide her an apartment in Tokyo and support her as a concubine. She would be there for you whenever you were in Tokyo. They did this to be taken care of and a portion of the money always went back to her family. There are different cultures around the world and different morals.
I know in East Europe, men were going there and pretending to want to marry. They entered into the arranged marriage and took the girl and then promptly sold her into sex slavery. That was common when the Wall Fell in 1989, and parents are wise to that scam these days. There is just a stark difference between what we see in Thailand and Amsterdam compared to where prostitution is illegal. My point is that if there is a legal industry then the girls are protected and this would tend to reduce the abductions.
I have written before when I was in New York standing on the corner in front of the Plaza hotel during the day, this girl came up to me dressed in genes. She asked if there was anything she could do for me. That is using the words spoken by a hooker, but she looked like 13 to me. I was confused and said no, and she asked again. I was not sure and was giving her the benefit of the doubt because she looked so young. I thought perhaps she wanted money for food or something. Then the doorman came over and told her to get out and she turned and cursed him. I then asked was she a hooker? He said yes she bothered the guests routinely. She was probably a runaway working for someone I suppose.
I knew a girl who worked for me once who was raped by her step-father between 7 and 10. She ran away to an aunt in another State. She was strong enough to tell me the story when she was 25. She did not become a prostitute. I respected her strength and she put her life together.
You can pass all the laws you want. It will not stop the abuse. Amsterdam, Japan, and Thailand are a different issue and there are girls who do hope to meet that special someone.
Outlaw booze and you created the Mafia.
Outlaw prostitution and you create abduction.
There has to be a better way. Girls are abducted and sold into sex slavery only because it is profitable. Remove the profit with legal competition, and you just may end the abductions. Promote safe-houses for runaways and you may save a life.
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