Monthly Archives: July 2018

Jul 19 2018

Complexity & Quantum Computing


Armstrong Economics Blog/AI Computers

RE-Posted Jul 19, 2018 by Martin Armstrong

QUESTION: Do you think that quantum computing will really change the world and is it feasible in our lifetime?

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REPLY: Quantum Computing is the first real change in computer science. Traditional computers encode information in bits which are essentially magnets that store a charge and that created the binary code of 1 and 0. Therefore, 8 magnets form a bit and thus the letter A would be 01000001. You can store the entire alphabet in these bits.

Quantum computers, on the other hand, work entirely different. They are based on qubits, which operate according to two key principles of quantum physics: superposition and entanglement. The superposition means that each qubit can represent both a 1 and a 0 at the same time. Entanglement means that qubits in a superposition can be correlated with each other, which means that whether the state of one is actually a 1 or a 0 can depends entirely upon the state of another. Using these two principles, qubits can act in a more complex yet sophisticated manner. This enables quantum computers to function in ways that allow them to solve difficult problems that are inflexible or difficult utilizing today’s computers.

Whether it is actually possible to solve is one of the greatest mysteries of life and not fully recognizable just yet. There are experiments being conducted to see if they can solve problems that would be impossible with standard coding. Will they change the world? It is possible, but not yet. Socrates was designed with standard computer binary structures. However, in order to work out some of the most difficult complex structures, it required creating a derivative of this principle of superposition and entanglement but artificially creating this quantum structure.

For example, this is a photo of a giant honey mushroom, located in Oregon, which is 2400 years old. It is actually all connected by a root system that stretches 3 miles.  This is the LARGEST living organism on the planet. On the surface, you would assume they are all separate and individual. However, they are all connected and form part of the same organism. It is this same complex structure that connects all of us. Although we are independent on one level, we react and respond also collectively — the panic herd syndrome. Any attempt to forecast a single economy fails because it excludes the trends in all others.

Complexity is fascinating. It is all about how we approach it

Jul 19 2018

Our Journey Through Life


Armstrong Economics Blog/ECM

RE-Posted Jul 19, 2018 by Martin Armstrong


QUESTION:  Hello Martin. Over the years I have read so much of your adventurers (if you could call them that =) and some of the great masters you
quote from time to time.

I know you have done a massive amount of research on your own. I was wondering about some of the unknown people in your early days. Like when you first started programming on wall street. People who shared things with you that gave incite… or steered you in the right directions knowledge wise. People who keyed you in on trading, markets and so forth.

It would be interesting to hear if you could share.

Alright, Nice evening to you sir.

N

ANSWER:  Life is a math equation. Life = Sum(x + y + z). Everything we do accumulates and the sum forges our character-defining who we are. Experience = knowledge. Nobody is ever born knowing everything. We learn ONLY from our mistakes so cherish them well for they are what make us who we are. When there is nothing left to learn about this world, then it is time to leave. Never be afraid to question for unless we have questions, we will never arrive at answers.

People often ask me why I am not bitter for the injustices I have fought against in New York. They have been absorbed and contribute to my understanding of life. In our natural habitat, we tend to judge others by ourselves. We need to be confronted by the opposite to understand its very nature. I have seen the corruption of the Judicial system from the inside out and am so glad I did not become a lawyer as my father wanted. You learn that there are truly evil people who know what they do is wrong, so they try to oppress and even kill those who would expose them. They deny all wrong-doing and pretend to be so upright, but someone who really is upright never pretends to be because they do not have to. The fact that they must act in this manner demonstrates that they themselves know they are evil or they would stand in the light of day. Just mind-blowing how people can act so corruptly and then sleep at night. There was one kid they were charging with conspiracy for murder because someone asked him where a person was he pointed to him and they killed him. The wanted the death penalty. The prosecutor refused because the kid had no priors and was 23. He quit and the next prosecutor had no problem trying to kill this kid for a conspiracy all because they wanted to win the first death penalty case in New York City regardless of who it was they would kill. Some of the evilest people in the world go to the Justice Department.

My father pushed me into computers because I was probably a natural trader which he disapproved of and I decided I did not want to become a lawyer. I was also not motivated by the education system. I suppose I began to see that those teaching did not have actual experience in what they taught. The ancient Romans had the best school system. You have the basic reading, writing, math, as well as history. However, you would decide what you wanted to do in life and left what would be called grade school to seek an apprenticeship. My father was going to take us to Europe for the summer, I believe, in 1964. I wanted to earn some money for myself and got a job in a coin/bullion store. Yes, you could buy gold before 1975 in coin form. There were countries who produced restrikes to be able to sell gold. Hungary issued coins data 1908 and Mexico kept the date 1947 on 50 pesos. Gold coins were legal for “collectors” as long as they were dated 1947 or earlier.

That was my apprenticeship for I began to see markets and observed the daily fluctuations. Silver was rising in price and President Kenney signed in 1963 the Executive Order 11110 on June 4th, 1963 to remove silver from the coins starting in 1965 before he was assassinated. Just about every country soon followed by 1965-1966. They two years later is when Bretton Woods began to crack in 1968 and a two-tier market in gold began – private and official. Gold begab to trade in London. It didn’t trade in the USA until 1975.

Going to Europe, we traveled the entire summer driving from Sweden down to Naples to visit Pompeii. I became the navigator but it also was a quick introduction to foreign exchange. We would have to exchange money at each border. I have a few 1964 Kennedy half-dollars. Whenever I would pull one out, whatever the bill was if $10 to $25, they just wanted that coin instead. It taught me early lessons about arbitrage. I remember telling my father we should have come to Europe with a bag of them and we would have paid for everything.

Every door we open in life leads to another. I have never been one to be afraid of trying something new. Failure is how we learn and success is our reward. Had I not gotten a job in that coin store where I bought my first Roman coin for $10, I would not be here today writing this. That is what I mean that we are the sum of our experiences. I was in history class and the high school professor brought in an old film The Toast of New York. It was a film about the Panic of 1869 and the attempt of Jim Fisk to corner the gold market. In this clip, you will see what sparked my imagination and sense of curiosity given my exposure to reality by working. Jim Fisk is at the ticker-tape, and he then turns to his girlfriend and quotes gold at $162. Now I knew from working that gold was $35. Suddenly, I was confronted with an anomaly. I was being taught that everything was linear. So how was it possible that gold could be $162 in 1869 and $35 today in the 1960s?

At first, I assumed it was just a movie. But it bothered me. There was a QUESTION in the back of my mind that would not be answered. I went to the library and looked up the price of gold in the microfilm copies of The New York Times. There it was, the quote, $162. It was real. It profoundly shook my belief system to the very foundation.

Countless questions were running around my mind like a pack of wild animals being chased. I began to ask questions in economics class. The answer was even more disturbing. Well, there was this thing that they once called the business cycle, but the government has eradicated that I was told.  It was a real bull market in everything going into 1966. Rare coins peaked. I remember an 1877 Indian Head Penny was sold for $700. It crashed by 50% in months and never saw that price again for at least a decade. Pennies were the hot thing back then. I was buying and selling and it taught me how to trade. I made so much money my father convinced me to invest in mutual funds. I did, and then the stock market collapsed and the mutual fund dropped from $54 to about $5. I asked my father if this was the way conservative people made money? My speculating in commodities was much more profitable than stocks I knew nothing about at that time.

I began to notice that there were certain things that were hot and others that were cold. The pennies were soaring but not ancient coins or many other denominations of American coins. Collectibles market crashed with the 1966 stock market crash as did mutual funds. The Crash of 1966 was followed by another in 1968 when the two-tier market in gold began with the crack in Britton Woods. The real estate crashed in 1970 as well. But even more confounding, gold actually fell BELOW $35 in 1970 – the old Bretton Woods fixed rate that everyone assume would hold.

There was no mentor back then. You had to learn from observation. Bretton Woods was collapsing and nobody knew what would even happen no less forecast what would come by 1971. I was finished with high school, but the nagging questions only multiplied. Clearly, there was some sort of a cycle. It did not matter if it was stocks, bonds, coins, collectibles, foreign exchange, or real estate. It was obvious that everything went through the same boom and bust cycle.

I was doing my own research now in the Firestone Library at Princeton University. I was searching old newspapers, looking for previous prices of booms and busts that I had been confronted with in gold. That’s when I stumbled upon an article that listed previous panics between 1683 and 1907. This was an old article published even before the 1929 Great Depression. That is why the list stopped with 1907. It was even pre-World War I.

 

That’s when I also stumbled upon this illustration of a business cycle published on February 2nd, 1932 in The Wall Street Journal. I took the list I found that covered a span of 224 years and I divided it by the 26 events which yielded the 8.6-year average. I began to test through history which I knew well. The rest is history itself as they say (see wave structure). So no, there was nobody to talk to back then. You had to learn everything on your own. It was not until the Crash of 1974 that Paul Volcker was inspired to call it “The Rediscovery of the Business Cycle” because they did not even teach the existence of such a cycle. It was supposed to have been conquered by the government with Keynesianism. It was an age of rediscovery indeed. There was no place to go. Gold futures began in 1975, bonds 1977 and S&P 500 futures in 1985. There were no trading clubs. I was on my own.

Jul 18 2018

Violence from the Left is Starting – It will be Their Way or No Way


Armstrong Economics Blog/Civil Unrest

RE-Posted Jul 18, 2018 by Martin Armstrong

There are groups of Democratic Socialists that are stalking Trump’s staff and Republicans. White House Press Secretary Sarah Huckabee Sanders was refused service in the Red Hen Restaurant which is really no different than discriminating against someone because of their race. If it were over race, that action would be criminally prosecuted. Other angry protesters are chasing Republicans demanding only their vision should be applied in society. They pursued Senate Majority Leader Mitch McConnell (R-Ky.) through a restaurant parking lot yelling at him with a mixture of immigration rhetoric and personal insults according to the MSN. They even threaten to camp out at his home.

This is by no means legal. What they are engaging in is harassment. If someone you knew was doing this to you, a judge would issue a restraining order and if they violated it, they would spend some time in jail. Just because someone is a politician or works in government does not give someone permission to act in this manner that would land them in jail in any other context. This is NOT projected by the First Amendment. They have the right to vote or start a blog. They do not have the right to chase people or camp-out at their house until they vote the way you like. That is not how a Democracy or Republic is supposed to function.

Jul 18 2018

China Venture Capital Raising now Exceed the USA


Armstrong Economics Blog/China

Re-Posted Jul 18, 2018 by Martin Armstrong

Believe it or not, Chinese start-ups have for the first time collected more venture capital than newly established US companies in the past quarter. This is reported by the South China Morning Post . Almost half (47%) of the venture capital used worldwide was spent on start-ups from the Middle Kingdom. The American start-ups were only just over a third (35%). This is part of the entire real reason why China will be surpassing the United States and take the title Financial Capital of the World. 

We will be releasing a printed report on this subject covering all the topics from politics to economic

Jul 18 2018

Why CONFIDENCE is the Backbone of the New Monetary System


Armstrong Economics Blog/Monetary Reform

Re-Posted Jul 18, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; I found your recent article on inflation and contagions fascinating. Am I correct in summing it up that today because currencies are not commodity based, they rise and fall on anticipation of political events whereas under precious metals contagions took place by one country debasing compared to another?

Thank you for your reply;

EG

ANSWER: Correct. The monetary system has been altered far more than people understand. The question of money supply and inflation was philosophically established with Gresham’s Law. Gresham worked in Amsterdam and witnessed the response to the debasement of Henry VIII in England. His proposition that bad money drove out good money from circulation was one important observation. As countries would debase, people would hoard the old coinage, and actually, the money supply would shrink. It then requires a greater production of debased coinage to maintain an adequate money supply. This results in more debasement and unfolds in what people call hyperinflation. Yet, it is much more than simply just producing debased coinage or in modern time printing more money.

In addition to this observation, what is overlooked is frankly the driving forces behind the foreign exchange markets during the precious metal based monetary system and the modern paper monetary system (soon to be electronic based monetary system). Under a precious metal system, the coinage of one nation is compared and exchanged with others based entirely on its monetary value based on metal content. If England was at war with France, this had zero impact upon the value of their coinage as long as there was no debasement. Once debasement began, then the exchange rate between one currency and another changed.

Consequently, this influence of anticipating future value based upon possible political decisions was not readily dominant and the coins of one nation were compared entirely on their metal content rather than political events. When money began to appear as paper currency, this altered the monetary system for then the value of that currency was dependent upon the “confidence” of the people in that currency. Bank runs would emerge when people lost confidence in that establishment surviving.

The Latin Monetary Union was an attempt to create a gold standard whereby member nations issued a standard coin of equal weight and metal content as to allow them to be interchangeable. Therefore, 20 French francs was equal to 20 Italian lire, 20 Belgian francs or 20 Swiss francs. The problem with commodity based monetary systems has always been that domestic economic trends in one country are exported as contagion to others. For example, the Spanish discovery of South American led to a massive influx of gold and silver coins which then created a contagion of inflation (lowering the purchasing value of coinage) throughout Europe.

The waves of gold discoveries during the 19th century also created huge instabilities in the business cycle resulting also in waves of inflation. This is what Kondratieff studied to come up with his long wave theory. War has always resulted in waves of inflation as governments have had to increase the money supply to pay for these expenses. The US national debt exploded by $1 trillion for the Iraq war. We find from the very beginning of coinage in Lydia, its war against Cyrus the Great of Persia also resulted in a debasement of the very first coinage.

There are clearly established driving forces behind the monetary systems rise and fall. What we must come to understand is that a commodity based monetary system NEVER produced a perfect world where money was tangible and worth something. There were always waves of inflation based upon the discovery of new metal deposits. If we had a money supply that could NEVER change, then you would create deflation as the population grew. If there were only 10 gold coins and a population of 5 people, then everyone could have two coins, but one will inevitably have 4 because they invented something others wanted. Increase the population to 10, then the value of the 10 coins will rise in value meaning asset values will decline creating deflation.

 

Therefore, a tangible monetary system has never eliminated the business cycle and it will never bring “stability” as people preach. What has taken place is that by moving to a paper monetary system and a unit of account, which is increasingly more electronic (since paper money is less than 5% of commerce), the “confidence” factor that was once predicated upon the metal content has migrated to political events and thus we anticipate the future possibilities in the current value of any currency.

 

 

Here is a chart of Bitcoin. Once again, we do not see an instrument which is immune to the business cycle. It does not matter if we are dealing with coins, paper money, or electronic entries. Everything will still be subject to the business cycle. There will NEVER be any such exception. Moving forward, the only way to isolate contagions to some degree will be to create a basket of currencies as the international unit of account. It will still rise and fall in value. It cannot be permanently fixed.

 

Therefore, while our computer forecasts that China will emerge as the Financial Capital of the World after 2032, those who hate the dollar and keep calling for its demise fail to understand that the more critical element that will make the China yuan a major global currency is when the “confidence” level rises among big capital and they feel “comfortable” parking their money in Chinese bonds, assets, etc. China is moving in that direction slowly. They will eventually allow their currency to be freely traded and currency controls will vanish. As that dawns, then we will see the yuan rise in global respect. They are moving to achieve that position. It just takes time.

We MUST comprehend that contagions have existed in ancient times to modern times regardless of the monetary system be it precious metals, paper, or electronic. We are all connected and the sooner we come to grips with that understanding, the sooner we can move forward in our evolution of money. Even the creation of money by banks through lending is driven by the business cycle

Jul 18 2018

Tucker Carlson Interviews President Trump…


RE-Posted from The Conservative Tree House on July 17, 2018 by

Fox News host Tucker Carlson sat down for an interview with President Donald Trump following a meeting in Helsinki, Finland, with Russian President Vladimir Putin.  The interview aired in two parts:

Part 1 – President Trump discusses ‘very bad people‘ former CIA director John Brennan, FBI lovebirds Peter Strzok and Lisa Page being ‘exposed,’ the bipartisan call for conflict with Russia in Washington, NATO, Democrats and open borders.

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Part 2 (below) – President Trump discusses the new Mueller indictment, former President Obama ignoring DNC hacking, political bias in FBI, DOJ, German Chancellor Angela Merkel’s political troubles, European migration and Democrat obstruction.

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Jul 17 2018

Boston University Graduate Alexandria Ocasio-Cortez Explains “Economics”…


Re-Posted from The Conservative Tree House on July 17, 2018 by

According to DNC Chairman Tom Perez, Ms. Alexandria Ocasio-Cortez is “the future of the Democrat party.”  Ms. Ocasio-Cortez has a bachelors degree in “economics” and “international relations” from Boston University.

Born in 1989, Ms. Ocasio-Cortez is a millennial and a self-described democrat socialist.  In this interview segment she discusses a millennials’ view of economics:

On the dynamic current economy, 3.8% unemployment and capitalism providing expanded economic opportunity:

“unemployment is low because everyone has two jobs.”  “Unemployment is low because everyone is working 60, 70, 80, hours a week and can barely feed their kids”… “capitalism has not always existed in this world, and it will not always exist in this world.”

…Some people… and such, have jobs… it’s hyper-capitalism, that’s unemployment. Because it’s all like, you know, so unfair and stuff!

This is a millennial with a four-year degree in economics and international relations from Boston University; who won a primary race for congress and could very likely be heading to Washington DC as a political representative of New York.

Let that sink in.

Jul 17 2018

Louie Gohmert Discussing Lisa Page Testimony: “The guilty dogs are barking pretty loud”…


Re-Posted from The Conservative Tree House on July 17, 2018 by

Representative Louie Gohmert appeared on Fox News to discuss the second day of closed-door testimony delivered by former DOJ/FBI Lawyer Lisa Page.  Mrs. Page was the special counsel assigned to former FBI Deputy Director Andrew McCabe.  Lisa Page resigned from the DOJ on May 4th of this year.

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One of the more interesting aspects of Lisa Page congressional appearances is the current FBI sending lawyers to control her testimony. Mrs. Page is not an employee of the DOJ or FBI, yet current officials consider her remarks a risk.  We know from the insufferable press conference given by current FBI Director Christopher Wray (following the IG Report on the Clinton investigation), that current FBI officials are working to protect the former FBI leadership.  As a consequence the institution of the FBI is corrupt, not just the officials.

Jul 17 2018

*UPDATE* President Trump Meets With Congressional Delegation To Discuss Helsinki Meeting – 2:00pm Livestream…


Re-Posted from The Conservative Tree House on July 17, 2018 by

President Trump is scheduled to meet with members of congress to discuss his Helsinki, Finland meeting with Russian President Vladimir Putin.  The president is scheduled to deliver public remarks sometime around 2:00pm in relation to this meeting.

Update: The remarks by President Trump were not carried live as initially anticipated. Instead a pool report and video was provided after the remarks.  Here’s the video:

RSBN Livestream Link – NBC Livestream Link – Alternate Livestream Link