COMMENT: Well it looks like the coronavirus is going to cause a major problem because everyone will be deducting their home offices.
HL
ANSWER: You better check with your accountant. It is my understanding that if you are a W2 employee, you cannot take a home office deduction. Currently, you need to have self-employment income to benefit from home office deduction. This is going to cause real problems now that so many people are forced to work remotely. I seriously doubt the Democrats will allow a deduction for working remotely.
Your post today on inflation(when people see it coming) reminds me how things have changed from the 1970s. Then, the inflation we saw came from oil rising(Opec raising prices), unions demanding wage increases, and currencies untethered to the abandoned Bretton Woods agreement. Governments then seemed clueless how to stem this rise, with interest rates rising relentlessly, pressuring bonds and eroding earnings of still largely manufacturing-based economies. Globalization was not an issue as half the world still lived under communism.
Today, it seems central banks have “learned” how to rig interest rates by flooding markets addicted to debt. What is different today is governments now, instead of fearing inflation, actually want it. In fact, desire it to bring about the Great Reset. They appear to want to drive oil prices higher to such levels that this makes Green Energy cheaper and helps to accelerate the conversion over to electric cars. All at the expense of the consumer. On top of this, taxing old tech, principally oil and gas, only helps to fuel shortages, since companies have cut back on oil exploration. When you force people to stay home, the demand for energy shifts from driving to people staying home, more demand for computers, more energy required to supply the grid, more companies delivering products to the home. What has been accomplished? People fleeing high tax states to ones that remain open, those with no state income taxes, those in the south. The burden shifts to northern states, the advantage gained by southern states.
Today, governments are deliberately fueling these shortages…encouraging them, to expedite the transition away from globalization to one centrally controlled. No longer do they need access to debt markets, they can supply guaranteed income without fear of inflation or failed bond auctions. This is truly diabolical. And with Big Tech doing their bidding, people too stupid to grasp what is happening, it appears today’s inflation is by design, intended to destroy a private business, which can’t compete with large companies, jobs destroyed, inflation today used as a weapon against private enterprise. This is pure evil, which stands out against the market-based inflation of the 1970s.
MS
REPLY: You are correct that it was a period of unions demanding more, but it was more than just that aspect. There were two other major developments. First, there were rising prices with lower economic growth. This became known as STAGFLATION. This took place because COSTS were rising from an external price shock that rippled through the economy, which was created at the same time as an economic recession. That never took place before because previous recessions were entirely confined domestically, so prices declined with lower demand.
It was more than simply the collapse of Bretton Woods. It was the in-your-face collapse of Keynesian economics. Still, it was Paul Volcker who followed Keynesianism and raised interest rates into 1981 simply because he had no other theory available. I had a conversation with Volcker at the IMF Dinner in Washington. I did not bash him over his head with his mistake, he was so tall it would have been hard to do so, but we did have a frank discussion of the changes in the global economy.
Today, the central banks are still trapped by the same Keynesian economic theories. Now, they have painted themselves into a corner with artificially low interest rates that they cannot escape without a drastic alteration to the debt markets as a whole. Volcker could at least correct his mistake by lowering interest rates. Today, the central banks cannot raise rates without blowing up their own portfolios. It is a very different type of crisis they face today than what it was during the 1970s.
COMMENT: Dear Mr Armstrong, I wanted to write in to affirm your observation of regular people buying now rather than waiting (The Bull v Bear in the US Markets). I had to buy a new dryer earlier in the year. It took 6 weeks to get the one I had ordered. I wanted to buy a new computer recently. Lenovo showed delivery in 12 weeks for the one I wanted! Another company I looked at was taking pre-orders for delivery beginning the end of May. I paid a little extra and went with a small manufacturer that could deliver within 10 business days. I bought an extra freezer so we can stock up. I actually tried to buy a freezer last year and couldn’t get one at all, so I snapped one up as soon as they were available back in January. My wife just asked me if I wanted to get a new grill for Father’s Day. I said, ‘Let’s buy that right now and put it aside. Who knows what will happen by Father’s Day.’
J
REPLY: I remember the 70s well. Because of OPEC, not just gasoline was rising, but suddenly everything made of plastic was rising. For those who do not know, plastics are made starting with raw materials, such as natural gas, oil, or plants, which are refined into ethane and propane. Ethane and propane are treated with high heat, in a process known as cracking. This is how they’re converted into monomers such as ethylene and propylene. The monomers ethylene and propylene are combined with a catalyst to create a polymer “fluff,” which looks like powdered laundry detergent. Then the polymer is fed into an extruder, where it is melted and fed into a pipe, and the plastic forms a long tube as it cools. So when oil rose in price, so did everything made of plastic. That was much of the inflationary boom between 1976 and 1980.
Everything was rising in price which led to the realization that it was cheap to buy today because it would only cost more tomorrow. I ordered a new refrigerator in December. It finally arrived in March. We are entering a period of shortages so prices will be moving higher as supply is constrained and demand will rise. The other side-effect of lockdowns and the destruction of offices with people working more remotely, everyone is out remodeling or expanding their homes. The construction industry is booming. Just look at the price of lumber.
Welcome to the inflation cycle our computer has been projecting would be built upon shortages
While the general overview of this market by most technicians has been bearish simply based upon how high the market has risen, we are also in an interesting position where the fiction of vaccines is providing some underlying support. Based upon RELIABLE sources, this entire Build Back Better motto and a scheme were developed BEFORE COVID took place. This virus has been one of convenience and I know people were warned to sell stocks and bonds because a virus was coming and that was Jan/Feb 2020. That leaves only two possibilities.
(1) This is really the Fauci virus since this was the precise research he was doing and was told to shut down so he sent it to Wuhan
(2) They knew a natural virus would appear seasonally and they would exploit it as extremely dangerous
While Europe is still trying to push the Great Reset and destroy as much of the economy as possible that is reliant upon fossil fuels, there is no question that this virus has been greatly exploited and exaggerated for political purposes. In the United States, because the power has resided with state governors, it has been more difficult to accomplish the economic contract that we see in Europe especially in Britain where Boris Johnson is in bed with Bill Gates.
Consequently, the US will not see the economic devastation that we are witnessing in Europe because Trump was in charge and made no effort to lockdown the entire country. Additionally, politics is so corrupt they rely on corporate donations and they have been getting a lot of resistance. On the private blog, I warned that the Biden Administration, according to reliable sources, was looking at putting a tax per mile that you drive in addition to the gasoline tax. That would create an army of new government employees and a nightmare of enforcement.
That all said, the real impact of all of this nonsense has been to seriously disrupt the supply chain in everything from food to electrical appliances. These shortages have already led to rising prices and consumers are starting to realize that it may be cheaper to buy today because whatever it is will be more expensive tomorrow. That is the REAL stimulus to inflation – not the increase in money supply which has been exponential since the 2007-2009 Financial Crisis with no inflationary impact. As long as the consumer does not trust the future, then they hoard their cash. Inflation emerges ONLY when they see that it is no longer beneficial to hoard their cash. That is the psychology we are now entering.
While our near-term target in the Dow Jones Industrials remains in the 36,000-37,000 range, we are still in a position to test the 40,000 number on a broader-term. What you must keep in mind are the capital flows. Because we had Trump, that one year of refusing to join this Build-Back-Better agenda was critical in keeping the US economy much stronger compared to Europe, yet neck & neck with China, which will put in a stronger growth pattern number in 2021. The Dow has been making new record highs which the NASDAQ peaked in February on target with our timing models. This disparity is reflecting the international capital flows for foreign money always go for the blue-chips.
To see the future, we must look at the entire world. Analyzing a single market based upon what comment the Fed will make tomorrow is for amateurs. We live in a global economy and it is time we open our eyes to the real world that surrounds us.
It has always been critical to look at everything from a global perspective. Gold declined for 19 years from 1980 into 1999 and the domestic analysis was always wrong. They looked at gold only in dollars. Yet when we looked at gold in a basket of currencies, what looked like a bull market in dollars was really a bear market in world currencies. This is why Socrates looks at everything in all currencies – not just domestic.
Those that keep calling to the collapse of the dollar because of debt have not bothered to look outside the United States. The US sovereign debt is about $28 trillion out of nearly $59 trillion globally. However, add in state and local government with private debt, as we are approaching $300 trillion. This is why US federal debt is still the golden parachute in the world and the fact that US long-term rates are not being manipulated as they are in Europe only offers a greater incentive for capital inflows. We are witnessing US rates rising and this will further attract international capital in the face of the US economy doing far better than Europe.
Re-Posted Mar 16, 2021 from Martin Armstrong Blog/WEF
The entire world of economics has been abandoned without actually admitting it has failed. Even the International Monetary Fund (IMF) is throwing in the towel without actually admitting its policies have totally failed. The IMF was the bastion of Keynesianism, supporting economic Neoliberalism. Of course, the head of the IMF is on the board of the World Economic Forum and is fully onboard with Schwab’s Great Reset. Previously, if you asked if the IMF was a Neoliberal-Keynesian it would have been like asking if the Pope if he was a Catholic.
The complete reversal of the IMF has been at the direction of the World Economic Forum who endorses really a one-world government and economic dictatorship. The old Neoliberalism ideology of free markets, free trade, and small government, are gone. This is part of Schwab’s attempt to control the Fourth Industrial Revolution, yet when we have the ONLY fully functional AI system in the world that writes over 1,000 reports on the state of the financial world, they wanted to shut it down because it also forecasts that they will fail. The current and previous head of the IMF has been a board member of Schwab’s WEF. There is no more independence. The IMF is fully occupied by Schwab.
The IMF has been pushing Schwab’s digital agenda for several years once Christine Legard got a hold of the IMF. What makes this reversal in economic policy so shocking is that the IMF even put out a piece entitled: “Neoliberalism: Oversold?” They are now questioning the entire world of free trade and are advocating more of a fascist state with control by a central authority.
There seems to be a HUGE gap in what people think about cryptocurrency. The European Central Bank (ECB) is working on a scheme to launch “digital euro central bank money” as soon as possible. Many economists praise the project as an “innovation,” as an important and indispensable step in an increasingly digitized world. But economists typically always advocate socialism without ever actually contemplating what is its final destination. The socialist press which has engulfed most of the mainstream is also obvious to what is the final destination.
The ECB has made its intentions known, as has the Federal Reserve, that in declaring a digital currency, both have stated it will be a currency accessible for everyone, robust, secure, efficient, and compliant with the new agenda. What is overlooked is this is to be a central bank currency and they have been quietly suggesting that they will even take direct depositions from non-banks. Nobody seems to really understand what that means. As usual, they simply glass over the statements. In truth, it is circumventing the banking system for they are also not about to bail out the banks in this new world because they are also contemplating the end of government debt. If the government does not borrow, then who needs the bakers?
Mainstream media also refuses to address privacy concerns. To be very clear, the path to digital currency is also one to total surveillance by a state regime that will accelerate considerably in this world where they can pick your face out of a crowd of a thousand.
Anyone who thinks a digital euro is somehow better because it is not fiat money, well it is simply fiat money on steroids. The ECB will not surrender its monopoly of euro production. However, what is being talked about behind the curtain is that a digital euro can either be “account-based” meaning you will keep it in an account held with the ECB directly, or it can be “token-based” where banks receive a “token” that can be transferred from smartphone to smartphone via an app.
The ECB says the digital euro is a “compliment” to cash and bank balances. Clearly, that is like saying the lockdown will be just three weeks when they never had any such intention. Obviously, those who pay in cash find it convenient and want to ensure their anonymity. That will become a thing of the past which is their intention. The objective is to force everyone into paying electronically, i.e., transfer balances through PayPal, Apple Pay, or debit or credit cards.
Back in May/June 1992, we put out a report on the long-term implications of what our computer was projecting. The year 1998 marked the Russian default which sparked the Long-Term Capital Management Crisis and the first time the Federal Reserve had to bail out a hedge fund. Heading into the end of this cycle in 2032, we would see the extinction of 30-year bonds and the demise of the floating exchange rate system. This time what comes after 2032 will be indeed a new world order for what appears on the horizon is the collapse of our present system which is being accelerated by Klaus Schwab and his World Economic Forum. These forecasts, along with 2016 being the first time a non-politicians would win, sounded far-fetched back then. But this is simply how economies and societies unfold. It was not some premanitio9n. It was just history repeating itself.
“Since 1985 we have been warning that the Nineties would be a period of turmoil marked by greater volatility and a major crisis in world debt. We have also stated time and again that our computer models were forecasting the extinction of 30-year bonds along with the collapse of the floating exchange rate system. While these forecasts may appear bleak, this does not necessarily signify the end of civilization. A similar crisis involving these issues along with war were also the hallmark of the final years during the 18th century. The new world order that emerged thereafter brought forth an era in democracy and capitalism not only in Europe, but also in the birth of the United States.
While many will laugh at these forecasts or attempt to simply dismiss them as too far-fetched to be considered seriously, they merely display their own weakness of a closed mind.”
Gamestop has rallied back during the week of March 8th after all the hoopla. Cyclically, it was 13 years down and it was due for a bounce. Even our pattern recognition models picked up the rally starting in August 2020. Quite frankly, this has all the hallmarks of manipulation, but not what you may think. The classic manipulation is to pump up a market touting some player but the pros have already been in the market. This is how the Buffet manipulation of silver was done in 1998 and even the entire Hunt Brothers silver rally back in 1980.
I knew the Hunt Brothers were buying silver from the early 1970s. At the end, their name was attached to silver and the claim was they were taking it to $100. At that time, the exchange pulled the same maneuver and made it a fraction in margin to go short but 10x that to go long. The Hunts were trapped and could not sell anything without everyone jumping in front of them,
Melvin Capital, which was a small hedge fund lost 53% of its capital in January on GameStop. Not sure how that was possible unless the bet was purely a gut-trade rather than quantitative. The four largest asset managers in the world together own 39 percent of GameStop shares, according to regulatory filings. Those stakes, which are mostly held for years in passive index funds, have collectively gained roughly $1 billion in value since the beginning of this year. The hype of a huge short-squeeze seems to be exaggerated. One hedge fund, Senvest Management, recently boasted to clients that it made more than $700 million from a bet on GameStop in September, the Wall Street Journal reported. Certainly, our model was long, not short and I cannot see even a trend-following-model that would have been short. Melvin Capital to lose 53% does not seem to be very professional to lost that much on a single stock. The long-term is not over in this stock.
QUESTION: Hi Martin Thanks for all the work you do, my day always starts with reading your take on things. I was a member until recently as I am out of a Job. I Live in Toronto, where lockdowns have been the worst and longest in North America. Presently looking to relocate out of the city. I am a Contractor and it seems most of the work in the coming years will be outside the city, as everyone is selling and moving to small towns or their cottages and now want them upgraded for year-round living.
Question: Bitcoin and Crypto. It seems to me that they are using Crypto and pushing it mainstream for a reason. Is it may be a way of increasing the fiat. What I mean is every time someone Buys a Bitcoin they are purchasing with Fiat, so the $10,000.00 someone buys in incremental Bitcoin automatically doubles that Fiat, as the person selling now, has the equivalent of $10 k to purchase something using Bitcoin and the Seller now has $10 k to purchase an item with the Fiat. Could this be another way of getting money into the market without having to Create it at the Fed?
What do you Think CB
ANSWER: No I believe they are allowing it to trade for the sole purpose to mislead people into thinking cryptocurrency is somehow better than cash. Governments are planning to swap all physical money for 100% digital to end hoarding of cash and to be able to increase tax enforcement as well as to reduce the underground economy – i.e. drugs to prostitution. They always blame the people for not paying all the taxes they think they are entitled to rather than realize that no matter how much taxes they collect – it will never be enough.
By allowing Bitcoin to rally, they are creating the image that cryptocurrency is better than cash. It is psychological and the average person is easily fooled. The 911 Porsche came out in 1964 and changed little for the rest of the decade. There was less variation in the 911’s early years as well. The high-performance 911S came out in 1967, as did the famous Targa body style with its removable roof panel. I bought one in 1970 for just slightly under $10,000. By 1980, they were starting at $35,000 and over $50,000 by 1985. The Deutschemark rallied 140% during the 1970s and the German manufacturers priced their cars in marks – not dollars. So the value of the German cars kept rising in dollar terms during the 1970s all because primarily due to the currency, which also led to higher prices for commodities caused by OPEC. This created the image that German cars were better than American. I bought foreign sportscars during the 1970s and would drive them around for 2 years and would get my money back so cars never cost me a dime.
I have told the story before that I bought a 328 Ferrari in London for about £30,000 when the pound fell to $1.03 when it was a $50,000-$60,000 car in the USA. The pound had been over $2 when Ferrari priced what they would sell that car for to Brits. Since the pound fell so hard, the Italians raised the price to £45,000 or maybe £60,000. Then the pound rallied back to almost $2. I drove the car in London for about two years and then sold it used about doubling my money.
This example of the sharp rise in the price of a Ferarri created the false assumption that they were a great investment and people began buying and storing them. It was just the currency — not the car. Once you understand how the FX markets create different impressions of domestic markets, you can suddenly see the world through a whole new set of lenses.
Cryptocurrencies are going through the very same phase. They are creating the illusion that they are somehow better than cash. Even the name “cryptocurrency” is misleading for they are not a currency at all – they are merely a trading vehicle. Do not get all stary-eyed and look at them as better than cash for that is looking at a Ferrari as an investment rather than a car to drive.
I understood the rise in the value of the Ferarri was currency so I also knew when to sell. It is critical to look behind the facade to see what is the true nature of what you are dealing with. Bitcoin is no more a store of wealth than any stock because it rises and falls. Anything that fluctuates cannot be a store of wealth – it is simply an investment vehicle.
The assumption in governments has always been that WE ARE THE PROBLEM – not them! They have really believed that if they could tax the underground economy they would have balanced budgets. We all know that in reality, no matter how much money they collect, they will always spend more. This idea that digital currency will wipe out crime is rather absurd. I was talking to a young person who buys their weed, like so many these days. They make a phone call, it is dropped off in their mailbox, and they pay by some cash transfer application. So they never even see the person anymore. So the move toward digital transactions has not eliminated the underground economy, it has actually improved it making it more efficient.
Meanwhile, the criminals have to learn now how to code in order to hack into systems. It seems that this trend is forcing criminals to become much more professional in their endeavors.
COMMENT: Mr. Armstrong, I thought you were wrong on Bitcoin and that it was a store of value. I can see now that it is only a trading vehicle as you have said. But what made me write to you is I just read that Dorsey is opening up an online bank. You got that right too. It is interesting when I read you and compare to others, you are the one who comes out correct in the end.
My humble apology for being a doubting, Thomas.
GP
REPLY: I know for a fact they have allowed Bitcoin and other cryptocurrencies to exist in order to condition people into accepting the end of paper money. I cannot understand people who think I am wrong and somehow cryptocurrencies will overthrow the dollar and governments. Really? Does anyone really believe that governments will just relinquish power willingly?
We are headed into a wave of inflation, but one that is constructed on shortages. One need only look at the systemic problems behind the shortages created by a planned economy during the communist era. A goods shortage was the norm. Those under communism were confronted with chronically empty store shelves. When the shelves were replenished on rare occasions, there were long lines that would form outside the stores for blocks. I had a Russian girl who worked for me as a programmer. She said the number one problem coming to America was having to make decisions in the store. She said they had only one type of toilet paper. There are so many here. She didn’t know how to buy anything for each purchase involved a choice and decision.
Even in China, there were ration coupons that became the norm. Just about everything was rationed. This is what takes place when the government is in control of production be it directly, or through what we are beginning to see, outrageous regulations – lockdowns which are hailed by Schwab’s World Economic Forum.
This is NOT really a question of I TOLD YOU SO. This is not a contest of my opinion v someone else. I really have to wonder if some of those mouthing these absurd forecasts are not being made as deliberate misinformation to move people toward a digital currency on behalf of the powers behind the curtain. They defy all reason and show either sublime stupidity or cunning devious misinformation to manipulate society to pull off this Great Reset.
I warned back on January 21, 2021, that BigTech sees the power to overthrow the banks. These powers have declared that they want everyone in the banking system worldwide to end paper money, which is over 1 billion people (just read the IMF). This is why Dorsey, Facebook, YouTube, and Google along with Microsoft were blocking Trump and funneling money to the Democrats who bribed them with the dream of controlling international banking. If governments take Schwab’s solution and default on all its debt, then they NO LONGER NEED THE BANKERS to sell their bonds. Branch banking will come to an end and these people think they will move to a controlled economy with no private debt. They are out of their minds!
I know what I am talking about. I have shaken the hand of Schwab. Have any of these people claiming Bitcoin will overthrow the dollar ever talked to anyone in authority? I have met with board members of the IMF. There are those who are so desperate to convince people not to listen to me because they are part of the entire scam against We the People. I have been approached many times to join these globalists. They preach the Fourth Industrial Revolution is coming, but post comments on YouTube to try to prevent people from looking at Socrates because it forecasts their demise. Sorry Schwab, but Socrates says you fail!
Schwab and his cohorts think locking us all down and destroying the economy and production is a good thing. I cannot see how ANYONE takes a position against me who is not really working against our freedom and human rights. They are so desperate to stop people looking at Socrates or the media to ever cover what Socrates is doing, all in their quest to conquer the world.
So it is not I TOLD YOU SO, this is not a matter of opinion. This is a serious global effort to redesign the world economy and Socrates stands in their way.
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