Armstrong Economics Blog/ECM Re-Posted Jul 22, 2021 by Martin Armstrong
Did you ever think when you studied history, created Socrates, then observed what would unfold in the future would lead you to what we see happening today, in social collapse and the march toward authoritarianism? Truly, wasn’t this like discovering the Rosetta Stone and other mysteries best left untouched? When did it dawn on you the shocking truth, that we were walking down the path others have taken that led to chaos and the great unravelling?
ANSWER: The path to where this all led was actually two. When I was perhaps 8 to 10-years-old, I saw a coin in a shop for sale which was a Roman antoninianus of Aurelian (270-275 AD). I bought it for $10. Perhaps that combined with all the movies during the ’60s about Rome captured my interest in history. That coin made it come alive.
When the movie “Cleopatra” came out in 1963, I was 13 and you had to be 16 to get in to see the film. We had to sneak in to see it back then. It was a big covert operation but two friends and I got in. I use to drive my daughter and her friends to the movies when they were in their teens. When she was older, she said they would get a ticket for one show and sneak into another. I said, if you didn’t, there was something wrong with you.
My father always was interested in history and he wanted to return to Europe. He was there with General Patton from North Africa to Berlin. My mother was afraid to fly and said she would only go when he could afford to take the whole family. That day came in 1965 and we flew to Europe for the summer, traveling around from Sweden to Italy and back around through France. So all of that captured my interest in history. I could see the patterns that empires, nations, and city-states all rose and fell. I would ask WHY in class, and they really had no explanation.
I loved Europe and would return as often as I could. That trip to Europe and having to change currencies every time we crossed a border introduced me to foreign exchange. I began to see the prices would fluctuate and this too captured my attention. I also bought my first gold coin at a German bank which I still have to this day — just a quarter ounce.
I simply had a nose for trading. But traveling internationally I also developed friends. Back in the late ’70s, COMEX had only opened in 1975. I was making markets for other dealers to buy what scrap gold they bought each day and Englehard was about 1 hour from me. I was in the perfect location to make markets in gold and have it refined. Back then, to refine gold you had to have a minimum of one lot which was 100 ounces. At $800, that was $80,000 and then it would take 6 weeks to get paid. Most stores could not afford that. They would sell whatever they bought that day to me and I would collect it nationally and do all the refining. Because I was probably the biggest in the country out of the three of us, I represented a lot of business to Englehard. To get my business, they would pay me 90% upon delivery and the balance upon refining. This is a photo of a bar I would get back.
I knew a friend in Hong Kong who explained the gold market there. The problem was that my competitors would make markets ONLY when COMEX was open. I asked if I could sell in Hong Kong after hours. He said absolutely, but delivery had to be made in London. Fortunately, I had a friend in London as well. I asked if I sold in Hong Kong, could he make delivery for me in London the next day, and then I would swap him with a COMEX position. That was the birth of the overnight market in precious metals. I was not getting much sleep and at the high in January 1980. I was sleeping on the floor in my office next to my teletype machine. It was gold that gave birth to the 24-hour market. I eventually became a partner in Rudolf Wolf, which was a firm in London that was a founder of the London Metals Exchange. This was the start of exchange for the physical market overnight.
In 1972, the CME created a division within itself called the International Monetary Market, or IMM. This market offered contracts in foreign currencies, including the British pound, Canadian dollar, German Mark, Japanese yen, Mexican peso, and Swiss franc. The US bond began trading in 1977, and it was 1985 when the S&P 500 futures began. This was the evolution of the 24-hour markets.
Because I was one of the top three market makers in gold back in 1980, the IRS selected me as their test case. They walked in and declared me to be a bank by claiming that gold was still money for it was never demonetized. They came in and wanted to audit our records as to who had sold $10,000 or more. My lawyers said it was hopeless. The courts would always rule in favor of the government. When I walked by the desk where their auditor set up, I saw he was pulling out names of even $5,000 transactions. I asked, “I thought this was $10,000 or more?” He turned and looked at me and said, “If you don’t want any trouble, keep your mouth shut!” The next day, they came with a truck and removed all my records. I made up my mind to retire. I had discovered the Economic Confidence Model about 10 years before. I could see that gold would enter a bear market and decided to move on and just trade for myself.
Because I had been providing research to my clients, they said they still wanted the research. They said they would pay $2,000 an hour just to talk to me about the markets. I gave it a shot, and the next thing I knew the demand just for research skyrocketed so much so the Wall Street Journal heard about me back in 1983. But what was driving our global expansion was foreign exchange. There was really nobody out there advising on FOREX. I went to lunch with one of the heads of the top three Swiss banks in Geneva. He asked me to name a FOREX analyst in Europe. I couldn’t. I was embarrassed. He said there was none. If he was British, he was biased for the pound, the French were via la franc, and the German always the DM. He said, being American I did not care if the dollar rose or fell, and that is when everyone was using our firm.
By 1985, I was even summoned when they were creating G5 because I was the largest adviser in Foreign Exchange by that time. So two separate paths ended up merging. (1) my interest in history and trying to answer the question nobody could answer in school as to why empires, nations, and city-states rose and fell. (2) My interest in trading allowed me to see the “trades” in history and how the markets will rise and fall, with the common denominator being human nature.
I have studied the economic theories of Schumpeter and others who have seen a glimpse of the cause behind the cycles. Not only are we all linked together, but so is everything in nature. Climate change has resulted in migrations both from Africa north and from the north back to Africa (Sea Peoples). The paths I took merged. My interests in physics, computer science, history, and trading all came together. That painted a future that was perhaps the Rosetta Stone. You ask, “When did it dawn on you the shocking truth that we were walking down the path others have taken that led to chaos and the great unraveling?” I saw that long ago. But what I saw was still in the abstract in my mind. Living through this is fascinating, for it is confirming the research I did over decades.
You also ask if such “mysteries [are] best left untouched?” I am actually optimistic. Yes, we must crash and burn. That is simply how new opportunities emerge only from the ashes of the former. That does not mean we all die. Britain was the previous Financial Capital of the World before World War I. Europe committed economic suicide. It is today behind not just the US as an economy but also China. So the model saying that the Financial Capital of the World will move back to Asia is simply a statement of fact. It does not mean the END OF THE WORLD. Life will change, of course, but it will continue.
I do not believe we should turn off all radar and not know when a storm is approaching. You simply close your windows, buy some extra food, and hunker down. I see my discoveries as the same. Nobody will listen to me today. Perhaps after 2032, others will look back, understand, and create a new world that lives in harmony with the cycles of nature instead of butting their heads against them.
As for Gates and Soros, who may be trying to reduce the population and profit from this virus, controlling all forecasting tests and politicians, I believe they are our generation’s version of Hitler. They see themselves as above everyone else, and Gates has made himself the ruler over our health on a global scale. He is NOT interested in helping humanity but reducing it to what he thinks is the proper size. Something happens to many people when they reach a point where they have too much money. Some seem to elevate themselves, and just like Hitler, they never see themselves as evil. Our greatest positive is that Buffett and Soros will certainly not make it to 2032. Bill Gates was born on October 28, 1955. He will only be 77 in 2032. It is Gates who I believe is the greatest threat to humanity. But humanity will survive this latest demigod’s plot.
My hope is that society will one day look at the Economic Confidence Model and the forecasts of Socrates and learn from them. If that day comes, the next 6 waves will be the alternative to this last group.