Posted Originally on Aug 16, 2026 by Martin Armstrong |
QUESTION: I spoke with my son-in-law who is into the AI revolution and when he heard I followed you, he said oh, the legend. Not only did he know all about you, but he said you were the classic AI developer and that they thought they could beat Socrates, but he said they cannot get AI to understand the world economy. He explained that your classic AI had rules, and the neutral nets have no rules and they have gone rouge and nobody known how to reverse this since these neural nets ignore rules. He said people remain in awe of Socrates to this day.
What is you take on this. Are there two divisions in AI?
Victor
ANSWER: Yes. I experimented with the neutral nets and realized they would never be able to be trained to see the world no less trade a market. They could read a Biblical parable but they would not trulu comprehend the moral message. They could make a good review, but they then are incapable of apply a lesson from that to a different field. They are not capable of curiosity and will never reach the level of a true sentient lifeform.
I have stated that Socrates in NOT a neutral net. I guess they call what I did as “classic AI” like a vintage car. I codes my experience and how to trade and I explained how the complexity of the entire world economy and how it functions. It is completely a different approach. The neural nets are great for research, but they cannot discover something entirely new. That is why IBM spent $4 billion on Watson and it failed to discover the cure for cancer. They sold it for scrap.
Posted Originally on Aug 16, 2026 by Martin Armstrong |
Andy Burnham has not maintained Keir Starmer’s migrant policy in full. Instead, he has broken with his predecessor by canceling a key Starmer policy and is publicly advocating for a different approach. Burham aims for “fundamental changes” and has focused on tougher border controls while increasing support for genuine asylum seekers. The migrants in the UK receive a specific form of government support for basic living costs:, which amounts to £45 per week per person for food, clothing, and toiletries. This is often loaded onto a special debit car
Prime Minister Andy Burnham is not considering spreading the migrats all over “all parts of the country need to play their part.” That means he now expects middle-class families to accept large numbers of asylum seekers so the poorest areas are no longer the only ones carrying the load.
This approach obviously does nothing to stop the root of the problem, the sheer number of migrants washing up in boats. It simply advertises better accommodation to the next wave of illegal arrivals.
In essence, Burnham’s plan is about a government-led, large-scale rehousing program using dedicated sites and public management of housing stock, not a request for middle-class families to act as hosts in their own homes.
Andy Burnham named former Defense Secretary John Healey, 66, served as a junior Treasury minister between 2002 and 2007, to be his Chancellor of the Exchequer in a surprise move by the UK’s new prime minister that fueled speculation about a bigger increase in military spending. Healey is a serious Neocon.
While his appointment to the second most important post in government upended expectations in Westminster. Little is known about his position on economic issues, beyond a general assessment that he represents a safe pair of hands and has advocated for more money to fund defense.
Burnham told NATO Secretary General Mark Rutte that Healey’s appointment was a “signal of his intent” on defense, according to a readout from his office. Healey told reporters that Burnham’s government “will meet our commitments on defense to our international allies.”
There does not appear to be any shift in policy with regard to geopolitics and pressing with war with Russia. Our forecasts for the next two remains remain unchanged and it does not look very good for the UK with Burnham.
Posted Originally on Aug 14, 2026 by Martin Armstrong |
QUESTION: Marty,
I’m seeing online sources-videos, comments and AI say that “Socrates model forecasts a collapse in paper derivative markets, explicitly warning investors that paper spot prices on exchanges will completely disconnect from physical metal reality as physical shortages mount and sovereign debt crises escalate.”
I subscribe to Socrates and watch all your interviews and have never heard you discuss this. Is this accurate?
I’d appreciate if you could set the record straight with a quick reply. Thank you in advance.
Alex
ANSWER: This AI is becoming a problem where people can make posts mimicking my voice and I have even seen videos while other try to prevent people from reading our site. Some people with self-interests try to make false forecasts that we have NOT made to influence people to buy often in the metals.
There will not be a collapse in derivative markets and this rush to spot metals. There is not enough metal in the world to end currency and only after 2032 are we looking at a redenomination of assets. After the hyperinflation and the fall of the Weimar Republic in Germany, they came out with a new currency in 1925 and it was backed by real estate. This is what I am talking about. Tangible assets from metals, real estate, shares in companies, all make that transition from one currency to the next.
There are people who hat my guts because I have not agreed with them. They have been adamant that derivatives hold gold prices down. They have taken the same position concerning gold leasing, which they also insist suppresses gold.
I am tired of all the BS with bankers who lose money blaming me that I have too much influence to some goldbugs who say the same thing as if I was eliminate gold would soar. Markets are far bigger than anyone from central banks to an individual.
Everyone acts in their own self interest. Compare gold in USD and Euro. You will see that in Euro, gold made new lows into August. In USD, the los war July intraday and a close it was June. I have been the only international adviser with offices around the world from China to Dubai. Giving advice to buy with no regard for the currency is not being a responsible analyst. This is why Socrates allows you to take any market and replot it in whatever currency you like. Telling an American in July to buy gold for a bounce would lead to a loss for a European.
That forecast is clearly ABSURD and it is not by me nore Socrates. I recommend that you stay with our site to verify any such claim.
Posted Originally on Aug 14, 2026 by Martin Armstrong |
The Center for Strategic and International Studies conducted an extraordinary survey of 64 leading experts on China, Taiwan, and cross-Strait relations, including 28 former senior U.S. government officials, 23 former government policy and intelligence analysts, and 13 academics and think-tank experts. What their answers reveal is not that China is preparing to invade Taiwan tomorrow, as the neocons would like everyone to believe, but that Beijing remains willing to wait so long as nobody crosses the line of formal Taiwanese independence. Some 84% said Beijing is willing to wait for unification but will not accept the status quo permanently, while only 10% believed China seeks unification at the earliest opportunity. Not one of the 64 experts believed Beijing would ever accept an independent Taiwan.
This is precisely why Taiwan has become so dangerous. The West keeps portraying the conflict as if Xi Jinping wakes up every morning staring at a calendar trying to decide when to launch an amphibious invasion. Yet 83% of these experts said China did not plan to use significant kinetic force against Taiwan by 2027, and 80% said China’s enormous 2022 military exercises did not indicate Beijing had accelerated its timetable. Only 6% of respondents outside the former senior government group saw 2027 as a hard deadline, while not one former senior U.S. official did. The obsession with 2027 has nevertheless become extremely useful for the military establishment because every supposed deadline becomes another justification for weapons, deployments, bases, and spending.
The survey found that 44% believed Beijing has a hard deadline of 2049, the centennial of the People’s Republic, while 42% believed China could wait indefinitely provided unification remains possible. This is an important distinction because China thinks in terms of generations while Western politicians think in terms of the next election. Beijing does not need to invade Taiwan if economic, political, and military pressure can gradually change the situation in its favor. Only 20% of those surveyed believed China even possessed a coherent roadmap for peaceful unification, which tells us this is not some perfectly scripted invasion plan sitting in Xi’s desk drawer.
Where the numbers become alarming is not an unprovoked invasion but what happens when politicians begin crossing China’s red lines. More than three-quarters of the experts, 77%, believed China would invade within six months if Taiwan formally declared independence. Among former senior U.S. officials, that number was 79%. Even some of those who did not expect an immediate invasion believed Beijing would respond with a blockade or enormous military exercises. This is why politicians encouraging Taiwan toward formal independence are playing with the lives of 23 million people. They can deliver all the speeches they want about democracy from Washington, London, or Brussels, but they will not be the civilians sitting underneath the missiles if their political experiment goes wrong.
Not one expert believed an explicit American commitment to defend Taiwan would cause China to invade immediately, but 64% believed Beijing would respond strongly enough to provoke a U.S.-China or China-Taiwan crisis, while another 31% expected a more limited negative response. Only two of the 64 experts believed formally committing America to Taiwan’s defense would actually deter China from using force because Beijing already assumes that the United States will intervene anyway.
A direct invasion is not even the most likely path toward conflict. Only 8% of the experts described an amphibious invasion within ten years as likely, while 63% called it possible and 27% unlikely. Force short of invasion received much higher probabilities, with 52% saying deliberate escalation such as a blockade was likely or very likely. An accidental military incident was considered even more dangerous, with 34% saying a collision or accident around the Taiwan Strait was likely and another 22% calling it very likely. When warships and aircraft from opposing nuclear powers continually operate around the same small body of water, war does not require some grand master plan. It requires one mistake followed by politicians who refuse to back down.
A later CSIS survey of American and Taiwanese experts reinforces that point. Roughly 90% of U.S. experts and 62% of Taiwanese experts believed China already possessed the capability to impose a law-enforcement-led quarantine that substantially reduces trade into Taiwan. Around 80% of American experts and 60% of Taiwanese experts believed Beijing could execute a PLA blockade, while Taiwanese experts were considerably more skeptical that China could successfully carry out an invasion. If Beijing wanted to coerce Taiwan during the following five years, experts considered a quarantine the most likely option. If China decided it wanted immediate unification, however, approximately 80% regarded a highly kinetic joint blockade as likely or very likely.
This is where the economic consequences become enormous because Taiwan does not need to be invaded for the world economy to be thrown into chaos. A quarantine or blockade would immediately threaten shipping, insurance, semiconductor supply chains, electronics, automobiles, communications equipment, and virtually every modern industry dependent upon advanced chips. The later CSIS survey found most American and Taiwanese experts did not believe Taiwan could withstand a Chinese blockade for longer than three months without substantial U.S. intervention. Washington would then face the decision nobody wants to discuss honestly: accept China’s blockade or attempt to break it militarily and risk direct war between two nuclear powers.
Taiwan is also the world’s semiconductor pressure point. The island’s importance to advanced chip manufacturing means a serious blockade would not remain a regional event. Factories thousands of miles away could discover that a conflict they thought had nothing to do with them suddenly prevents them from obtaining critical components. Markets would begin repricing the risk immediately, shipping premiums would explode, companies would scramble for inventory, and governments would discover once again how fragile global supply chains have become. This is why capital will react long before politicians formally declare that a war has begun.
What I find particularly revealing in the later CSIS survey is the difference between American confidence and Taiwanese confidence in Washington. An astonishing 96% of American experts were completely or moderately confident that the United States would intervene militarily if China invaded Taiwan during the following five years. Taiwanese experts were less confident in American intervention and considerably less confident that U.S. allies would join the fight. It is always easier for people thousands of miles away to be certain about somebody else’s war.
This is precisely why Taiwan remains one of the critical geopolitical pressure points as we move toward 2029. The danger is not simply that China arbitrarily decides to invade. The greater danger is escalation, miscalculation, political promises that cannot be withdrawn, and Western policymakers convincing themselves that every additional provocation somehow produces deterrence. China has made its position on formal independence perfectly clear, and even the experts inside the Western foreign-policy establishment overwhelmingly acknowledge that Beijing would react with force if that line were crossed.
If Taiwan declares formal independence, 77% of the experts surveyed believed China would invade within six months. That is not a statistic policymakers should treat as another war-game scenario. It is a warning about what happens when politicians deliberately remove the ambiguity that has helped keep the peace.
Posted Originally on Aug 14, 2026 by Martin Armstrong |
Wholesale prices were unchanged in July, coming in below expectations for a 0.2% increase. The Producer Price Index was flat after a revised 0.1% decline in June, while the annual rate fell sharply to 4.7% from 5.5%. Wholesale prices are still 4.7% higher than a year ago, and beneath that flat headline number there are several very different forces moving in opposite directions.
The primary reason July looked so tame was goods, and particularly energy. Final-demand goods prices declined 0.7%, with energy falling 3.1% and food dropping 0.9%. This follows the enormous energy shock earlier this year when final-demand goods surged 2.8% in May, the largest monthly increase since that series began in 2009. Energy jumped 10.7% that month and gasoline alone surged 23.4%. You cannot look at the subsequent decline and pretend the original price increase never occurred. Energy exploded, retreated from that spike, and therefore dragged July’s monthly PPI downward.
This is precisely why I would be extremely cautious about declaring victory over inflation. July PPI probably did not fully capture the late-July increase in oil prices. Energy works its way through virtually everything because businesses do not simply purchase gasoline. They pay for diesel, electricity, transportation, plastics, fertilizer, chemicals, refrigeration, manufacturing, shipping, and eventually higher insurance costs when geopolitical tensions threaten transportation routes. A temporary decline in petroleum can make an inflation report look beautiful for a month, but if energy reverses, those costs begin working their way through the entire production chain again.
Services tell a very different story from goods. Final-demand services increased 0.2% in July, and portfolio-management fees surged 6.5%. Freight transportation costs declined 1.8%, providing some relief, but the underlying service economy remains under pressure.
Producer prices excluding food and energy increased 0.2% in July and remained 4.2% higher than one year ago. More importantly, the measure excluding food, energy, and trade services increased 0.4% for the month and 4.7% annually. That tells us that once you strip away the volatile decline in energy and some of the distortions from trade margins, underlying producer inflation is hardly sitting at the Federal Reserve’s 2% target.
This is the problem with reducing inflation to a single number. A farmer looks at fertilizer, diesel, machinery, interest rates, seed, labor, and transportation. A restaurant owner looks at food, electricity, rent, wages, insurance, and financing. A manufacturer looks at commodities, energy, components, shipping, tariffs, and borrowing costs. Each business experiences a completely different inflation rate, and eventually those costs either have to be absorbed through lower profit margins or passed along to consumers.
CPI rose only 0.1% in July and 3.4% annually, while core CPI came in at 2.5%. Now PPI has also surprised to the downside, and naturally everyone will begin demanding that the Federal Reserve ease. Reuters reports that the federal funds rate remains at 3.50% to 3.75%, while the latest inflation and labor data strengthen the argument for leaving rates unchanged at the September meeting rather than tightening further. Estimates derived from the latest inflation data put July core PCE at approximately 0.2% for the month and 3.3% annually.
There is also a tremendous difference between producer inflation and consumer inflation because companies do not pass costs through immediately. Businesses initially absorb higher expenses by reducing margins, changing suppliers, shrinking products, eliminating employees, automating operations, or postponing investment. Only when those measures become insufficient do they raise prices aggressively. PPI therefore gives us a look into the pipeline, but it does not tell us exactly when or how much of that pressure ultimately reaches the consumer.
This is particularly important now because American businesses are already dealing with a consumer who is stretched thin. Grocery spending is slowing, small-business bankruptcies are rising, foreclosures are increasing, credit card balances remain enormous, and households are becoming increasingly price-sensitive. Companies may therefore have less ability to pass higher costs onto customers even when their own expenses increase. That does not necessarily eliminate inflation. It can instead destroy margins and eventually businesses, which is an entirely different economic problem.
The July report is certainly better than another 2.8% explosion in goods prices like we saw in May, but it does not demonstrate that inflation has been defeated. Goods fell because energy and food provided substantial relief while services continued higher and the broad core measure excluding food, energy, and trade services rose 0.4%. The annual PPI remains 4.7%, and the late-July oil increase may not yet be fully reflected in these numbers. That is hardly an environment where anyone should assume prices are about to return to what Americans remember before the inflationary surge.
What we are seeing is inflation moving through different layers of the economy at different speeds. Energy can plunge one month and surge the next, commodities respond to war and supply, services remain sticky, businesses absorb costs until their margins break, and consumers finally see whatever remains at the end of that chain. July provided relief at the wholesale level, but the underlying numbers remain far too elevated to declare that this cycle is finished.
Posted Originally on Aug 13, 2026 by Martin Armstrong |
Many requests have been pouring in for an updated forecast for the 2026 Midterm Elections and beyond. We have put this report together with the computer forecast arrays out to 2036. This report dives into the Great Divide politically and this is part of the process as we move into 2032 when we get to redesign government and enjoy perhaps a Direct Democracy and what that will mean. For the first time, we dive into the rigging of the 2020 election. Trump was looking in all the WRONG places. This was an international conspiracy that was even linked to COVID to lock people down leading to a massive surge in mail-in ballots all intentional.
This offers a view beyond 2032 at least for major decisions like war bringing an end to this UNELECTED usurpation of foreign policy all for the vengeance of these Neocons who want perpetual conflict for vengeance or profit. They love to stay safe in their bunkers while sending other people’s children to death. Robert McNamara apologized before he died for the Vietnam War saying Russia was not involved, it was just a civil war. They have lied about every war or were just too biased to see the truth like WMD in Iraq didn’t exit.
Hopefully, 2032 will bring into focus the light at the end of the tunnel. These Neocons have been the problem since Vietnam, which was the subject of the song:
Posted Originally on Aug 14, 2026 by Martin Armstrong |
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Germany has spent more than a decade lecturing everyone about the supposed moral virtue of opening the borders, and now the numbers coming out of its own prisons are becoming impossible to conceal. According to figures obtained from all 16 German state justice ministries, roughly 27,000 of the 60,408 people held in prisons or pretrial detention in March 2026 were foreign nationals. That is 44.8% of the entire prison population, compared with roughly 30% in 2015. Foreign nationals represent less than 17% of Germany’s overall population, yet they account for nearly half of those behind bars.
Think about what that means. The political establishment invited millions of people into Germany under the banner of humanitarianism, dismissed everyone who questioned the consequences, and insisted that diversity would somehow pay for itself. Now Berlin has reached the point where 59% of its inmates are foreign nationals and Hamburg is at approximately 58%. Bavaria, Baden-Württemberg, and Hesse have also crossed the 50% threshold. These statistics do not even count a foreign-born offender who later obtained German citizenship as foreign, so nationality data cannot tell us the full migration background of the prison population.
The government cannot simply dismiss this as right-wing propaganda because the prison system itself is sounding the alarm. René Müller, chairman of the German Association of Prison Officers, said that “language barriers are a major problem” and warned that officers are increasingly struggling to rehabilitate inmates or even communicate effectively with them. He further warned that communication failures contribute to aggression, isolated prison subcultures, and the danger of Islamist radicalization behind bars. Bavaria’s Justice Ministry has likewise acknowledged conflicts arising from language difficulties and what it called “culturally determined behaviors.”
This is what happens when politicians make immigration policy according to ideology rather than economics, culture, security, or the ability of a society to absorb enormous demographic change. Angela Merkel’s government threw open the doors in 2015 and anyone who questioned the wisdom of that policy was immediately attacked. Yet the foreign share of Germany’s prison population has risen from around 30% in 2015 to nearly 45% today. You cannot indefinitely suppress statistics simply because they offend the political narrative.
The taxpayer is then forced to pay at every stage. They finance asylum processing, housing, welfare programs, integration programs, policing, courts, interpreters, incarceration, and eventually rehabilitation. Germany’s prison system was costing taxpayers roughly €4.14 billion annually, with approximately €1.82 billion associated with incarcerating foreign nationals at that time. That is not the fault of every immigrant, nor does being foreign make someone a criminal, but pretending that migration policy has no fiscal or security consequences is equally dishonest.
Europe’s political class refuses to understand that a government has a fundamental obligation to its own citizens. Immigration should benefit the country accepting the immigrant. It is not supposed to become an unlimited social experiment where politicians collect applause in Brussels while working people are forced to absorb every economic and social cost. Germany needed skilled workers because its demographic structure was deteriorating, but importing people without regard to skills, integration, culture, or criminal risk was never a coherent economic policy.
The most infuriating aspect is that ordinary Germans were never permitted an honest debate. Anyone who questioned Merkel’s migration policy was branded xenophobic, extremist, or far-right. The establishment learned that censorship was easier than answering uncomfortable questions. Yet you cannot censor a prison census. You cannot lecture a statistic into changing its opinion. When foreign citizens make up less than one-fifth of the population but nearly half of the people incarcerated, there is a disparity requiring serious examination, not another government-funded campaign explaining why citizens should ignore what they can plainly see.
This is also precisely how governments manufacture political extremism. They create a problem, refuse to discuss it, demonize anyone who raises it, and then act shocked when voters eventually abandon establishment parties. People do not suddenly wake up one morning and become angry at government. Governments spend years earning that anger.
Germany is already suffering economically from some of the worst policy decisions in its postwar history. It destroyed its energy advantage, crippled industry with climate mandates, sanctioned cheap Russian energy while pretending American LNG could seamlessly replace it, and increased military expenditure while the domestic economy struggled. Now the same population that is expected to pay for this economic incompetence is being told that discussing the consequences of mass migration is somehow morally unacceptable. A country cannot remain politically stable when its citizens begin to believe their government values an ideology more than their safety. That is the road Germany is traveling, and the prison statistics are simply one more visible symptom.
The elites will undoubtedly continue calling everyone who discusses these numbers an extremist. They have run out of arguments, so labels are all they have left. But Germany cannot imprison 27,000 foreign nationals and then demand that the public pretend there is nothing worth discussing. This is not compassion. It is government malpractice.
Posted originally on Aug 13, 2026 by Martin Armstrong |
The Consumer Price Index rose just 0.1% for the month after declining 0.4% in June, bringing the annual rate down slightly from 3.5% to 3.4%. Core CPI rose 0.2% and declined on an annual basis from 2.6% to 2.5%. Yet inflation is not one number, and anyone looking only at 3.4% is missing what is taking place underneath the surface.
The first layer is energy, and this is where the headline number becomes extremely misleading. Energy prices declined another 1.5% in July after collapsing 5.7% in June, which restrained the overall CPI considerably. Gasoline fell 2.9% for the month, but gasoline is still 24.6% higher than one year ago. Fuel oil is up an astonishing 39.1% year over year, electricity is up 4.2%, natural gas is up 4.3%, and the entire energy index remains 14.7% above July 2025. So when they tell you inflation is cooling, they are describing the rate of change from June to July while ignoring what people are actually paying compared with last summer.
This is why I have disagreed with New York Fed President John Williams suggesting that inflation has peaked. That assumes the geopolitical situation has peaked, and there is no basis for making that assumption. The United States has been cushioning the energy shock by drawing down petroleum inventories, but those inventories eventually have to be replenished. The war involving Iran has not disappeared, the Middle East remains unstable, and Trump himself said this week that one option is to hit Tehran “really, really hard.”
War is inflationary from almost every direction. It raises oil and transportation costs, increases insurance premiums on shipping, disrupts fertilizer and agricultural markets, diverts industrial production into military production, creates shortages, and forces governments to borrow extraordinary sums to finance weapons and military operations. Europe is simultaneously embarking upon its largest military buildup in generations while already struggling with sovereign debt. Those costs eventually migrate through the world economy.
Food is the second layer, and here again the headline does not tell the story experienced by households. Overall food prices rose 0.1% in July and are 3% higher than one year ago. Grocery prices actually declined 0.1% for the month, helped by a 0.7% decline in meats, poultry, fish, and eggs, a 1.5% drop in pork, and an extraordinary 16.4% decline in lettuce. Fruits and vegetables remain 5.1% more expensive than last year, nonalcoholic beverages are up 4.1%, cereals and bakery products are up 2.7%, and the overall grocery basket remains 2.7% higher.
Restaurant prices increased 0.3% in July and 3.4% over the year. Limited-service restaurants, which include many fast-food establishments that people traditionally used as inexpensive alternatives, raised prices 0.4% in a single month and 3.3% over the year. Full-service restaurants are up 3.4%. This reflects labor, rent, insurance, electricity, transportation, ingredients, and financing costs moving through the entire chain before the customer ever sees the menu.
Housing is the third layer and remains the largest burden for millions of households. Shelter increased only 0.1% in July, but that accounted for roughly two-thirds of the entire monthly increase in CPI because shelter carries such enormous weight in the index. Both actual rent and owners’ equivalent rent increased 0.3% during the month, while shelter remains 3.2% higher than one year ago.
Healthcare provides yet another layer that cannot simply be dismissed as “core inflation.” Medical care increased 0.4% in July. Medical care services rose 0.6%, hospital services increased 0.5%, and physicians’ services advanced another 0.2%. Prescription drugs provided some relief by falling 0.8%, but anyone who actually pays insurance premiums, deductibles, hospital bills, or elder-care expenses knows that healthcare has become one of the largest financial threats facing American families.
Transportation presents an equally distorted picture. Gasoline declined in July, but airline fares jumped 2.2% in a single month and are now 25.5% higher than one year ago. Used cars and trucks increased 0.4% in July, although they remain 1.9% lower annually, while new vehicles edged 0.1% higher. Transportation services rose 0.3% during the month. Motor vehicle insurance finally declined 0.3% after falling 2% in June, but that comes after years in which insurance became one of the fastest-rising expenses in the household budget. A few months of moderation do not return those premiums to where they were before the surge.
Then there is the inflation buried throughout ordinary life that receives almost no attention. Communication costs increased 0.6% in July, education rose 0.5%, recreation increased 0.2%, apparel rose 0.1%, household furnishings increased, and services excluding energy services remain 3% higher than a year ago. Apparel is up 3.9% annually, recreation 2.6%, and household furnishings and operations 2.2%. These increases may appear small individually, but households pay all of them simultaneously.
This is where the entire political discussion about inflation becomes dishonest. Inflation falling from 3.5% to 3.4% does not mean prices fell 0.1%. It means the overall price level is still rising, only at a slightly slower annual rate. Actual deflation would be required to return the price level to where it was before.
There is also a fourth layer that CPI cannot adequately measure, which is asset inflation. A house, farmland, stocks, gold, and other tangible assets can rise because capital is moving away from government debt or because the purchasing power of money itself is declining. Someone who already owns assets can become wealthier during an inflationary period. This is how inflation widens the gap between classes even when the official statistics suggest conditions are improving.
The Federal Reserve will now debate whether 3.4% inflation and 2.5% core inflation justify holding rates steady or eventually easing policy. The Fed’s benchmark rate remains between 3.50% and 3.75%, and before today’s report markets were assigning roughly a 46% probability to a September increase. Yet the Fed is attempting to steer an economy whose largest inflation risks are increasingly geopolitical and fiscal rather than purely monetary. Washington is running massive structural deficits while the world is simultaneously increasing military expenditures and preparing for additional conflict. Interest rates cannot correct fiscal irresponsibility, nor can they negotiate peace in Ukraine or the Middle East.
Posted originally on Aug 13, 2026 by Martin Armstrong |
Taiwan began seriously examining Ukraine’s battlefield experience after Russia invaded in 2022. Taipei has since partnered with Auterion, the American-German drone software company whose systems have been tested under actual combat conditions in Ukraine. Auterion CEO Lorenz Meier stated, “What we offer has been battle-tested in Ukraine to deter aggression and destroy tanks, naval vessels, and other truly expensive equipment.” That is precisely the lesson Taiwan needs. A smaller nation does not defeat an industrial giant buying program. It survives by dispersing thousands of inexpensive weapons that can remain hidden, move quickly, operate after command systems are damaged, and continue killing an invasion force when the conventional military structure begins to break down.
Taiwan is studying Ukraine because Ukraine has become the testing ground for how the next major war will be fought. The battles are no longer determined simply by who owns the most tanks, fighter jets, or aircraft carriers. Cheap drones are destroying equipment worth millions, mobile missiles are forcing fleets away from coastlines, electronic warfare is disabling sophisticated weapons, and factories must replace losses faster than the enemy can destroy them. Taiwan knows it cannot match China ship for ship or missile for missile. It must make the Taiwan Strait so costly, chaotic, and bloody that Beijing hesitates before giving the order to invade.
Taiwan introduced two domestically produced medium-range attack drones during its latest Han Kuang exercises. They were integrated into coastal combat operations alongside fast missile boats, special forces, and Coast Guard vessels. The drones resemble the loitering weapons Ukraine has used to reach behind Russian lines, attack supply routes, destroy equipment, and force Moscow to defend targets hundreds or even thousands of miles from the battlefield. Taiwan wants to apply the same principle to Chinese landing ships, command posts, ammunition vessels, radar systems, fuel depots, and troops attempting to establish a beachhead.
Taipei is considering NT$210 billion, approximately $6.6 billion, for surveillance and attack drones through 2031, while an alternative legislative proposal would authorize NT$240 billion. Broader plans call for purchasing as many as 200,000 aerial drones and 1,000 unmanned surface vessels, with an industrial goal of producing 100,000 drones per month by 2030. Taiwan also intends to expand its anti-ship missile arsenal beyond 1,800 weapons by early 2029. Many will be placed on mobile launchers that can hide in tunnels, under bridges, inside warehouses, and throughout Taiwan’s mountainous terrain before moving immediately after firing.
The timing should not be ignored. The computer’s international War Cycle identified 2026 as a Panic Cycle, with the cycle building into 2027 and a critical Taiwan and China period emerging around 2029. That does not mean China must invade on one predetermined day. Cycles identify the period when pressure, political miscalculation, capital movement, military preparation, and international conflict begin converging. We have already entered the expansion phase. The Ukraine conflict has spread deeper into Russia, the Middle East has erupted, Europe is militarizing, Japan is abandoning its postwar restraints, and Taiwan is transforming itself into a heavily armed island fortress. These are not isolated stories. They are symptoms of the same global turn toward war.
The 2029 target is particularly disturbing because military preparations now being announced are scheduled to mature around that same period. Taiwan wants more than 1,800 anti-ship missiles by early 2029. Drone production is being pushed toward enormous capacity by 2030. China is expanding its navy, missile forces, nuclear arsenal, amphibious capabilities, and converted drone fleet now. Governments do not spend these sums because they expect eternal peace. They see the same horizon even if they refuse to tell the public what they are preparing for.
Taiwan is also attempting to create a “non-red” drone industry that does not depend upon Chinese components. This is essential. A nation cannot claim to possess an independent defense industry when the motors, batteries, circuit boards, magnets, cameras, communications equipment, and navigation systems inside its weapons come from the country it expects to fight. Ukraine discovered that supply chains are weapons. Taiwan understands that Beijing could restrict critical components before firing a single missile, crippling production while Chinese factories continue operating at full capacity.
Taiwanese companies have reportedly sent more than 100,000 drones to Ukraine through intermediaries since 2025. Some Taiwanese systems have been submitted to Ukrainian forces for battlefield testing, where they face electronic jamming, GPS denial, broken communications, extreme weather, and an enemy that adapts within days.
Taiwan has even begun teaching civilians how to fly drones manually without depending on GPS or automated navigation. Civil-defense organizations are training ordinary people in reconnaissance, communications, first aid, emergency response, and drone operation. This is gritty preparation because Taiwan understands that if China attacks, there will be no safe rear area. Ports will be hit, power may disappear, cellular networks could fail, hospitals could be overwhelmed, and civilian infrastructure will become part of the battlefield almost immediately. There will be no time to learn these skills after the bombs begin falling.
The difference between Ukraine and Taiwan remains enormous. NATO can move artillery shells, fuel, vehicles, medical supplies, and replacement weapons into Ukraine across a long land border with Poland and other European states. Taiwan has no Poland. It is an island surrounded by water, sitting barely 100 miles from mainland China. Once Beijing imposes a naval and air blockade, the weapons Taiwan failed to stockpile beforehand may never arrive. Every missile, drone, spare part, generator, medical kit, and barrel of fuel needed to survive must already be on the island, protected and dispersed before the first strike.
This is why all the talk about treating Taiwan like Ukraine is dangerous nonsense. The United States cannot wait until an invasion begins and then debate arms packages for six months. A Chinese blockade could prevent those weapons from ever reaching Taiwanese forces. CSIS concluded that there is no real “Ukraine model” for Taiwan because Taiwan must begin the war with nearly everything it expects to use. If the stockpiles are insufficient on the first day, Congress cannot repair that failure by holding another press conference.
A war with China would be the most dangerous conflict the United States has encountered since World War II, and Washington is not remotely prepared for the scale of destruction. China is not Iraq, Afghanistan, Libya, or Serbia. It is a nuclear power with the world’s largest navy by hull count, a massive missile inventory, extensive cyber and space capabilities, and an industrial base that can manufacture ships, drones, electronics, and munitions on a scale the United States abandoned years ago. America outsourced manufacturing to China, enriched its future adversary, depleted its weapons in peripheral wars, and now talks as though victory in the Pacific would be quick and painless.
CSIS ran 24 simulations of a Chinese invasion. The United States and its allies usually prevented China from occupying Taiwan, but the supposed victory was horrific. The United States lost dozens of ships, hundreds of aircraft, thousands of troops, and normally two aircraft carriers within a few weeks. Taiwan’s navy was destroyed and its economy was devastated. Japan lost ships and aircraft as its bases became targets. China also suffered enormous losses, but that does not make the destruction disappear. A victory that leaves carriers at the bottom of the Pacific, thousands dead, and Taiwan reduced to rubble is not the clean triumph politicians will sell to the public.
Another CSIS assessment found that the United States could exhaust some critical long-range precision-guided munitions within the first week of a Taiwan conflict. One week. Washington has spent years handing weapons to allies while pretending inventories are infinite and production lines can be restarted with the stroke of a pen. Ships take years to build. Missile factories cannot multiply output overnight. Skilled workers, machine tools, microelectronics, propellants, and specialized components cannot be summoned because Congress approves another trillion dollars.
China could also strike American bases in Japan, Guam, and elsewhere across the Pacific. Supply networks, satellites, ports, fuel storage facilities, communications cables, and power systems would all become targets. Americans have not experienced a major-power war in the modern age and have been conditioned to believe conflict is something watched on television from a safe distance. That illusion would disappear the moment ships were sunk, bases destroyed, communications disrupted, and thousands of casualty notifications began reaching American homes.
The War Cycle is not moving toward stability. It is moving toward greater confrontation as we approach 2027 and the critical 2029 period for Taiwan and China. Taiwan is preparing because it sees what happened to Ukraine when diplomacy failed and politicians assumed war could be controlled. Washington continues pretending it can fight Russia indirectly, wage war in the Middle East, defend Europe, confront China, and finance the entire operation with endless debt.
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This is a library of News Events not reported by the Main Stream Media documenting & connecting the dots on How the Obama Marxist Liberal agenda is destroying America
