Category Economic Subjects

Oct 18 2023

Why Was the 1987 Crash Important Even for Today


Armstrong Economics Blog/Training Tools Re-Posted Oct 18, 2023 by Martin Armstrong

COMMENT: I watched a pretend analyst who claimed the 1987 Crash was nothing. It is amazing how these people claim to be analysts yet do not understand the first thing about what took place behind the chart. I was there at your WEC in Princeton the weekend of the crash. I don’t remember if it was videoed. If so, you should post that.

Dan

See you in Orlando.

REPLY: Your statement is a sad epitaph on analysis these days. The “pretend analyst” is a Fed watcher who never looks beyond the shore. There is nothing you can do with these people. If they cannot look beyond a domestic economy, they are not analysts – plain & simple. Because I warned them back in 1985 that they would create a crash within 2 years by manipulating the dollar down 40%, when the Crash Came in 1987, that is when they were forced to call me.

When they began to realize that lowering the dollar by 40% also created a bear market in US assets for foreign investors, including US debt, they held the Louve Accord.  Yet, look closely at the chart. The dollar had already bun its decline. It had nothing to do with the central banks. Those in charge know less than the average investor. They proceed, always assuming they have power – but over what they do not comprehend.

They then announced that the dollar had fallen far enough. When the dollar continued to decline, that is when the market realized that the CENTRAL BANKS COULD NOT CONTROL THE WORLD ECONOMY. Once that took place, that is what unfolded as the 1987 Crash. My biggest accomplishment was to persuade the Brady Commission not to impose restrictions on the market when the formation of the G5 created the crisis. But the government will NEVER blame itself. The most significant accomplishment I was able to do was to get the Brady Commission to at least imply that foreign exchange had something to do with it.

The lesson of 1987 is NOT in the chart. It is behind the chart. Once the public realized that the central banks were not actually in control, that is when the panic took place. Today, when interest rates rise without the Fed’s actions because of the Neocons constantly threatening the world and China over Taiwan, that is when panic will strike. It all goes nuts once people realize that the government is just a ship of fools with ZERO sailing experience. That is when gold will break out. It is that CRACK IN CONFIDENCE that will cause the panic.

That is the Significance of the 1987 Crash

Mar 7 2023

Is the US Following Ancient Athens?


Armstrong Economics Blog/War Re-Posted Mar 7, 2023 by Martin Armstrong

COMMENT: Marty,

Zelinsky has tried to portray himself as a military leader, cloaked in the symbolism of a military strongman. Gaddafi, Hussein, Stalin, and even Hitler come to mind. All were seen as ardent nationalists. Zelinsky did this to attract enormous weapons and capital to this country, ensuring that his face becomes the symbol of the military leader.

In truth, Zelinsky is a figurehead whose survival depends on outside assistance. Ukraine continues to bleed out citizens, while its military gets eviscerated. Even with the weapons provided by the West, Ukraine’s military was never of the caliber of Russia’s. A Heroic figure he is not.

The West probably bet the sanctions and outside pressures would force Putin to withdraw. No one counted on Putin to stand his ground. Putin’s determination to crush Zelinsky means his tenure is linked with his war record and battlefield performance.  Panic is now setting in. Zelinsky is as much a puppet regime as we saw in South Vietnam. It lacks broad support and like the one in Saigon, Kiev will collapse sooner or later from outside pressure.

Once collapse happens, military defeat means political defeat. Therefore, the West is panicked to raise the stakes and step in to bolster a puppet regime. The US entered Vietnam slowly, then suddenly. It now appears NATO is following this same process, first indirectly, now perhaps directly. They have turned Ukraine’s future into some kind of existential life-or-death battle. For NATO, that is certainly the case. Having squandered untold billions, their military readiness is now on the line.

Kennedy tried to block the expansion of the US presence in Vietnam and was assassinated for it. Johnson enthusiastically took over and then realized his generals, Westmoreland to be precise, had no real plan. Johnson lost by blindly following the military. Trump tried to keep the US out of wars and was ousted by a fraudulent election. Biden enthusiastically took over echoing Johnson. As with Vietnam, an unpopular regime with no support, Ukraine is likely even more corrupt and ripe for destruction. Pumping in billions won’t stop the eventual collapse. Zelinsky’s failures on the battlefield are synonymous with Vietnam.

The US congress has disgraced itself. As with Vietnam, there was no declaration of war. It became incremental and it took nearly 15 years to extricate ourselves from this mess. The blank check spending then is now in overdrive in Ukraine. That country will disappear but unlike Vietnam, from which we would eventually retreat, the US now is so deep inside Ukraine. Retreat would mean the collapse of Nato and the withdrawal of the US.

Who today is the Republican version of Nixon who will get us out of this mess? And who is the next Henry Kissinger to negotiate out of this modern disgrace? No, this is not like Vietnam. This is much worse. We have no leadership, just as is now evident with the puppet in Kiev. We, too, have a puppet in Washington. So two puppets trying to pretend they have each other’s backs ensures that what unfolds has no coda ending like Vietnam. Rather, it looks more like some roll of dice all-or-nothing gamble, echoing the epic debacle of Hitler’s Germany. It’s really the end of the US hegemony now in play.

MS

REPLY: We have followed the same exact path as Athens following the Defeat of the Persian Invasion. They became arrogant and compelled other Greek city-states to pay tribute to them for protection against another possible Persian invasion which never came. The various city-states began to rebel and a coalition was formed led by Sparta ushering in the Peloponnesian War. In the end, Athen lost if status as the financial capital of the known world.

The United States has lost every war contrived by the Neocons ever since World War II. There have been no overwhelming victories. Even the Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co, Jamie Dimon, has come out and said that his top concerns include Ukraine and China. Only a fool does not look at the geopolitical events unfolding. The Biden administration is firmly in the hands of the Neocons. God help us!

Dec 13 2022

What investment would have produced 4,414% Gain since 1932?


Armstrong Economics Blog/Traders Re-Posted Dec 13, 2022 by Martin Armstrong

Imagine if you could have bought a loaf of bread in 1932 for 7 cents. That 7 cents would be $3.09 today would be a gain of 4,414%. Of course, you could not even freeze it that long. That is also the problem with many who sell investments. Gold was $20.67 in 1932 so that has been a gain of 8990%. On the other hand, the Dow Jones Industrials bottomed in 1932 at 40.56. That has been a gain of 83,992%.

In 1955, the Dreyfus Fund was established by a New York stockbroker named Jack J. Dreyfus, Jr. (1913–2009)  It was Dreyfus who acquired the open-end Nesbett Fund, which had $2.3 million in assets.  This ambitious stockbroker renamed the fund bestowing his own family name upon it which would become a household word in the decades ahead.  By year end, the assets grew to $5.6 million as 1955 drew to a close.  The best decision Dreyfus made was to buy 400 shares of an unlisted stock.  That “sleeper” stock was Polaroid which he bought for $31 7/8.  Dreyfus would watch this single purchase rise to $6,372 per share – not counting splits – in the years ahead.  This outstanding performance almost single-handedly led to the mutual fund boom in the 1960s.

Sometimes a new technology paves the way for something that changes the game.

Dec 7 2022

Futility of Price Controls


Armstrong Economics Blog/Economics Re-Posted Dec 7, 2022 by Martin Armstrong

COMMENT FROM HUNGARY: Dear Marty,
You were correct again. Price controls do not work in the long run. The Hungarian government introduced a price cap on gasoline and diesel a few months ago, but a few hours ago this evening they had to let it go(they “tried everything in their power to help but the damn bureaucrats in Brussels who voted for the sanctions”.etc etc.).

The holiday season, panic buying, no gas another nail into the trust in our government’s coffin.
Marty these people really have no clue what the hell they’re doing. We have several food products that also have price controls: Wheat, sugar, eggs, etc. And interestingly supermarkets simply stop selling them or they sell brown sugar (no price control) instead of white sugar (price controlled, the maximum amount you can purchase in one go is 3kg i believe). When will they learn (not admit) or at least stop blaming others for their own brain-dead decisions?

I honestly hope that whatever the hell comes after 2032 will be better than this nonsense.
Thanks for all you do Marty. Keep up the fight, and get some well-needed rest during the holidays. I reckon you’re getting more phone calls than usual…
All the best,
RH

ANSWER: You know the most astonishing fact is that this was not even my personal opinion. All one need do is consult history. NEVER has any attempt to freeze prices to prevent inflation EVER worked even once.

The Roman emperor Diocletian (284-305AD) tried to impose wage and price controls in an effort to prevent inflation that was soaring because of a collapse in confidence in the Roman government. The Edit on Maximum Prices was imposed during 201AD. It was an utter failure.

Even if we go back to the 4th century B.C., the Roman government bought corn (grain) and, in times of shortage, it re-sold it at a low fixed price to try to prevent inflation from shortages – as we have today. In 58BC, the Roman Senate went even further and granted every citizen free wheat. The politicians were trying to bribe the people as they are doing once again today. What happened was that the farmers began moving back to the city of Rome because they could live and eat without working – it was free. By the time Julius Caesar (100-44BC) crossed the Rubicon, one in three Romans was receiving government wheat. He was forced to create a census and found there were more people claiming welfare than there were possible people.

Those in government ALWAYS assume that since they possess a pen, they can write whatever law they desire and they will comply or be thrown in prison until they die. I was named FOREX Person of the Year in 2015 because we forecast the Euro/Swiss peg would break. I even met with the Swiss Central Bank and warned that the peg would break. I was told they would be able to hold it. I replied I think the odds are on my side since NOBODY in history has ever been able to do this. There was the British pound peh into the ERM the broking making Soros all his money. In 1997, there was the Asian Currency Crisis where all the pegs broke. then there was even Bretton Woods which was a fixed exchange rate that broke in 1971 and in 1973 I was called in for the first bank failure due to foreign exchange.

I have done my best trying to warn governments that they CANNOT fix currencies and even when they were forming the G5 with the Plaza Accord in 1985, I was called in and warned that lowering the dollar by 40% would lead to a major currency crisis and a crash by 1987. Never have they ever listened.

Perhaps, the ONLY time anyone in Europe or the United States than anyone in government ever listen was perhaps in 1997. They were starting the jawboning of the Yen for trade purposes once again. I wrote to Robert Rubin and he has Timothy Geithner respond who later became the Secretary of the Treasury. China has listened, but other than in 1997, I cannot say any central bank or government has EVER heeded my warnings that history is on my side – pegs NEVER work.

Oct 10 2022

Holiday Expenses Rise in Canada


Armstrong Economics Blog/Canada Re-Posted Oct 10, 2022 by Martin Armstrong

Wishing our friends in the north a happy Thanksgiving.

Canada’s Thanksgiving is not as widely celebrated as America’s November feast. However, outside Quebec, around 90% of Canadians plan to celebrate the holiday. Everything from fuel to food is more expensive this year. Statistics Canada reported a 10.8% rise in food prices this August, marking the fastest pace of food inflation since 1981.

The Agri-food Analytics Lab (AAL) and Angus Reid conducted a survey (sample size 1,244) to see how Canadians plan to celebrate the holiday this year. Turkey prices have risen 16% per kilogram this year. In British Columbia, 29% of respondents said that they would be making changes to the meals they typically prepare due to food prices, while 25% in Alberta and 20% in Manitoba said the same. Around 19% of those celebrating in Ontario will be changing the menu due to costs, followed by 17% in the Atlantic, 10% in Quebec, and 8% in Saskatchewan.

In addition to turkey prices increasing, potatoes have spiked by 22% this year. Bread and dairy prices have gone up 13%, while cranberries have increased by 12%. Prices vary based on location, but they’re up in every province. So many are grateful for the harvest, albeit less bountiful.

Categories: Canada

Oct 10 2022

Dallas Fed: Over Half of Americans Experienced Real Wage Declines This Year


Armstrong Economics Blog/Inflation Re-Posted Oct 10, 2022 by Martin Armstrong

The Dallas Federal Reserve found that the decline in real wages is at a severity not seen in 25 years. Simply put, when adjusted for inflation, American’s paychecks are down despite wages going up. The median decline in real wages surpassed 8.5% this September.

"How severe are the losses for workers experiencing negative real wage growth? For the 53.4 percent of such workers in second quarter 2022, the median decline (that is, half of the declines were larger and half smaller) in real wage growth was 8.6 percent."

After examining real wages over the course of 12 months, the Dallas Fed found that 53.4% of all workers experienced real wage declines. Additional taxes under Biden have added to real wage decline as well. Peter C. Earle of the American Institute for Economic Research estimates that someone earning $70,000 annually now has $4,500 less in buying power in New York. “The bill for the Covid mitigation policies is due,” Earle said. “Record levels of fiscal and monetary policy expansion in the first half of 2020 are wrecking the purchasing power of the dollar. Thus even without a pay cut, wage earners are effectively earning less over time.”

The average median decline over the past 25 years has been 6.5% with real wage declines reaching between 5.7% to 6.8%. Inflation is simply too severe to compensate for any additional wages. The Fed continued to say:

"Despite the stronger wage growth due to the tightness of the labor market, a majority of workers are finding their wages falling even further behind inflation. For workers who experienced a decline in their real wage in second quarter 2022, the median decline was 8.6 percent.

While the past 25 years have witnessed episodes that show either a greater incidence or larger magnitude of real wage declines, the current time period is unparalleled in terms of the challenge employed workers face."
Oct 3 2022

The Federal Reserve is Raising Rates – Get Used to It


Armstrong Economics Blog/Interest Rates Re-Posted Oct 3, 2022 by Martin Armstrong

The title speaks for itself. The Fed is going to continue raising rates until inflation shows notable improvement. Some still question whether the Fed will ease on its hawkish policies, but there is absolutely every indication to believe they will continue at full speed. Core PCE rose 4.9% in August from the year prior and increased 0.6% for the month.

Before the aforementioned data was released, Chicago Federal Reserve President Charles Evans said he was “cautiously optimistic” that the US could avoid a recession. “There are lags in monetary policy and we have moved expeditiously. We have done three 75 basis point increases in a row and there is a talk of more to get to that 4.25% to 4.5% by the end of the year, you’re not leaving much time to sort of look at each monthly release,” Evans, who is set to retire next year, said.

The truth of the matter is that the White House simply changed the definition of a recession. The majority is hurting financially right now, and I don’t think we need the talking heads to tell us that we are already in a recession. The typical analysis looks only at domestic conditions, but internationally, most central banks are in the process of raising rates and backtracking on failed QE policies.

Every month there are reports of the market being “spooked” by rate hikes. People come on TV and act surprised that the Fed has the audacity to raise rates yet again. Why? Powell stated in every possible way that the FOMC will raise rates for “some time.” In Powell language, that means rates will continue to rise for a while. The computer foresees havoc going into 2023. Things must get worse before they become better. Unemployment must rise, rates must go higher, and you must adjust your strategy accordingly.

Sep 25 2022

The Flight to Mexico


Armstrong Economics Blog/Mexico Re-Posted Sep 24, 2022 by Martin Armstrong

QUESTION: Good afternoon Mr. Armstrong.
I have been a basic member for 6 years.
Since then I have been following your USD prediction and it is on spot despite everyone saying the contrary.
However, after seeing the EURO, Pound, Yen, and other currencies waterfall, why has the Mexican peso kept its value? I can’t find the logic.
Could you please explain?
Thanks for ALL you do.
BP

ANSWER: This is the Array from 2020. That was the ideal of the high for the dollar and that coincided with the end of the Trump Administration. The Biden Administration has been at war with fossil fuels from the beginning, despite trying to blame Putin.

This has benefited Mexico from a value perspective, but while claiming to be on board with this Great Reset, they are not as gun-ho as Canada and the USA. Even polls at the start of 2022 in the USA were telling. Rasmussen Reports national telephone and online survey concluded that 45% of American voters believed the highest priority for businesses was to provide individual consumers with high-quality products and services at the lowest prices. Only 9% of voters classified climate change as the top priority for business, and only 1% said that business resources should pursue social justice as a top priority. (To see survey question wording, click here.)

Our capital flow model has been pointing to tremendous inflows to Mexico since they have had the best anti-COVID mandates so there are a lot of Europeans leaving for South and Latin America and Mexico has been a primary target.

This trend appears to be continuing into 2024. As war rises in Europe and the leaders seem intent upon sacrificing their people on the altar of climate change, COVID, and Ukraine, the flight of people and capital will continue. For those who refused to get vaccines, Mexico has been the safe haven for the world.

  • There are no COVID-19 test requirements in Mexico.
  • COVID vaccination passports or certificates are not mandatory to enter Mexico.
  • There are no quarantine requirements in Mexico

Sep 24 2022

TIR Introduction 1988 London


Armstrong Economics Blog/Armstrong in the Media Re-Posted Sep 24, 2022 by Martin Armstrong

Sep 20 2022

Jim Cramer on Bear Stearns (2008)


Armstrong Economics Blog/Economics Re-Posted Sep 20, 2022 by Martin Armstrong

This is a reminder of why I warn against listening to the talking heads. Unlike advanced AI software, these mouthpieces speak from a biased perspective. On March 11, 2008, Jim Cramer told his audience on CNBC’s “Mad Money” that “Bear Stearns was fine!” At the time, the stock was going for $62 before crashing down to $2 only five days later.

When a viewer wrote in to Cramer to ask about Bear Sterns experiencing a liquidity crisis, Cramer shouted: “NO, NO, NO! BEAR STEARNS IS FINE! DO NOT TAKE YOUR MONEY OUT! If there’s one takeaway, Bear Stearns is not in trouble.” He added, “I mean, if anything, they’re more likely to be taken over. Don’t move your money from Bear. That’s just being silly. Don’t be silly.”

Cramer later tried to claim he never said to buy the stock, but was simply discussing the banking sector. He was trying to prevent a panic, he claimed. In reality, this man has repeatedly made poor calls, yet still remains on air. His screaming tirades are interrupted by commercials and his show is nothing more than the QVC of stocks.

Cramer is an entertainer. Even if I were to go on TV and make forecasts solely from my own viewpoint, I would be doing a disservice to my audience. If you’re looking for true analysis, then there is only one tool that is unbiased and capable of tracking every market around the world.