COMMENT: A suggestion.
I really think the annual Lobby Day in Virginia, scheduled for January 20, should be considered when discussing the turning point in the ECM. The potential for confrontational violence between the state of Virginia and the federal government on one side, and the Second Amendment supporters on the other, is high. This could be bigger than Charlottesville.

JV

REPLY: A lot of people have written in about Virginia and West Virginia has invited the regions in Virginia to separate and join West Virginia. This clash over gun rights as well as the rising separatist movement to join West Virginia is also taking place on the ECM. There appears to be a tremendous issue involving political change coming due all aligned with this ECM turning point, not the least is the Trump Impeachment. Then we have the Russian constitutional crisis. On top of that, we have bubble tops forming in many different markets.

We are experiencing as we move closer to the peak of this 51.6-year wave in 2032, the number of events that are taking place on these turning points will increase. The 1968 turning point marked the second crash in the stock market from the 1000 level in the Dow and the break in the Bretton Woods where they moved to a two-tier gold market – official v free market as gold began trading in London.

The 1972.75 turning point, which was the equivalent to the peak of the next 8.6-year wave in 2024 marked the political turning point in the career of Richard Nixon. The Watergate break-in took place on June 17, 1972, and Woodward first spoke to his contact who became known as Deep Throat the following day – FBI Associate Director Mark Felt.

Felt had been providing leaks from the FBI to Woodward concerning the assassination event of George Wallace running for President in May 1972. The turning point also marked the infamous re-election of Richard Nixon on November 7, 1972. Of course, halfway into that cycle came the impeachment proceedings against Nixon followed by his resignation.

January 1977 marked the inauguration of Jimmy Carter which set the stage for the political reaction that led to the entire rise of “Conservatism” in politics that resulted in Ronald Reagan’s landslide victory in 1980. But 1977 also marked the low in the stock market in terms of book value from the previous wave which had peaked in 1929. It was because of this 1977 change in trend that our computer began to project that Dow would rise to 6,000 in just a few years which became the Takeover Boom.

It was also on that turning point in January 1977 when there was the coldest weather which dipped so far south it remains the only recorded snowfall in Miami Florida. That resulted also in the presumption that there was significant climate change unfolding. But the experts warned we were headed into an Ice Age, not global warming.

The peak of that wave was 1981.35 which market the high in interest rates. Thereafter, rates declined into 1985 but the capital inflows to the dollar sent it to record highs driving even the British pound down to $1.03. That led to the Plaza Accord to try to manipulate the dollar down after it had been driven up by interest rates.

The Economic Confidence Model has marked specific highs and lows in markets to the very day at times depending upon the shifts in capital flows. Why has the business cycle been masked in complexity that has prevented many from comprehending how it functions? I believe this is the result of the average person always attempts to reduce everything to a single cause and effect. What they fail to grasp is the level of complexity involved which incorporates weather, war, innovation, population changes, the migration of people and economies over the face of the earth.

Many people who are against cycles fail to even comprehend that the rise and fall of civilizations have followed the business cycle itself for thousands of years. We are not all-powerful and cannot by our sheer will create a utopia and a perfect future.

The financial capital of the world has migrated which is why all empires, nations, and city-states are buried in a common grave. We all may believe that we are the exception to history, but human nature ensures that corruption will always rise and defeat the best-laid plans of any group.

Even the 911 famous attack on the World Trade Center took place on the specific turning point in 2001.695 to the very day. Not all wars begin precisely on this model, it may reflect when the combination of trends forms to create the decision to go to war which may predate the event by months or years. It is difficult to determine that instant of a decision, but clearly war unfolds as the result of some trend set in motion previously.

The very day that Greece applied to the IMF beginning the European debt crisis took place on a precise day in the ECM. This was the very same position one which the 911 attack took place which resulted in not only the invasion of Iraq, but it altered our way of life forever having to be X-rayed to get on a plane.

The turning point in 1934.05 marked the confiscation of gold whereas the 1985 turning point marked the birth of the G5 and the organized attempt to manipulate the dollar lower. We have the last three waves of that 51.6-year sequences mark the new adoption of socialism following Karl Marx in the USA. This was the beginning of the “progressive” movement which led to the birth of the income tax by 1913.

For example, the Economic Confidence Model also marked the very day of the high on July 20th, 1998 in the US share market from which the Long-Term Capital Management crash began in September. The 1987 turning point picked the very day of the crash and confirmed the low and the capital flow shift which resulted in selling US assets repatriating cash to Japan creating the Bubble on the peak of that wave in 1989.95.

However, sometimes these turning points have been the opposite whereas the geopolitical or economic event comes first and the markets respond secondly to those events in the aftermath.

There have been many events both economically and geopolitically which have aligned with the Economic Confidence Model. There are people who just hate it and try desperately to dismiss this model out of hand because it confirms that any attempt to manipulate the economy by socialists will always fail.

Anyone who attempts to argue against the existence of any business cycle is typically someone who supports the government against the people in true Marxist fashion. Even Paul Volcker’s rare book from 1977 entitled The Rediscovery of the Business Cycle bluntly confirmed that Keynesian economics failed because it was supposed to eliminate recessions and depressions.

While the peak of the wave 2015.75 marked the peak in government and the start of Big Bang, that was certainly reflected by the peak in bond markets and the start of negative interest rates. It marked the very day of Russia troops arriving in Syria which began the refugee crisis into Europe. Merkel’s unilateral decision to allow in the refugees set in motion the rising separatist movements in Europe. The Washington Times wrote on September 10, 2015, “Angela Merkel welcomes refugees to Germany despite rising anti-immigrant movement.” Her decision illustrated that a single leader could alter the course of Europe denying everyone else the right to even vote on her policy.

Then the following year 2016 brought BREXIT and the election of Donald Trump which most people still fail to understand why he was elected. Trump beat all career politicians fulfilling what our model projected back in 1985 that the 2016 election would be the first time a potential third party would take the White House.

We have witnessed the sovereign debt crisis infect states and set in motion the great migration from the highest taxed states to the states with no income taxes like Texas and Florida.

The pension crisis has undermined Illinois and this has spread everywhere. Even in Europe, about 50% of municipalities are in need of bailouts from the federal government. Pensions for government employees have generally been just grants which never required them to contribute anything.

We have witnessed the healthcare costs rise astronomically with Obamacare and Clinton’s handing student to the bankers excluding them from the bankruptcy laws that have devastated the long-term economic prospects as this debt-burdened generation are living with parents into their 30s and are unable to qualify to even buy a home.

Now we head into the bottom of this ECM wave and incredible we see the Trump Impeachment trial begin on the turning point and a constitutional crisis in Russia that will allow Putin to stay in office indefinitely.

We have watched the US stock market rise as the Euro has declined since its 2008 high and capital flows had turned to the dollar.

The questions we must now address are has the stock market reached a temporary high? Will we face the abolishment of money in favor of electronic to prevent bank runs? Will governments seize cryptocurrencies and force the money to be transferred to their own cryptocurrency?

Will climate now turn bittering cold as the next solar cycle which also begins here in 2020 results in food shortages and a rise in commodities?

Welcome to ECM Wave #935. We should expect a very important turning point in 2022 which will market a serious Monetary Crisis. From here on out, the confrontation in government between left and right will intensify and the violence will rise with the rhetoric. Any hope of a responsible government is now extinguished.

The Democrats are facing the collapse of their party. They know they really cannot beat Trump in a fair election, so they have adopted the policy that if you cannot beat him, impeach him. Yet there may be another conspiracy they are up to behind the curtain, and that is to prolong the Impeachment Trial to force the competition against Biden to remain in the Senate for months. There may be an even darker plot at work involving Hillary.

QUESTION: Hello Marty,
I am fascinated by Socrates as it has opened my mind to patterns in my own nature and the flow in life.
In fact, your economic models have open my awareness of the cycles in my life. As I have experienced support, resistance, reversals, phase transition and slingshots out of expanded consciousness. It really is amazing to see this in myself, others, societies and cultures.

Which leads to my question, have you ever been asked to apply and integrate your research with the research of Clare W Grave, specifically his Spiral Dynamics models of human and societal consciousness?

Your economic models are far superiority anything I have ever seen. Same goes for Spiral Dynamics for understanding why and how humans behavior manifests and emerges.
Like you I’m interested in advancing the world to a more sustainable future less driven by self interest and more driven by system’s thinking grounded in unbiased research that lets the data tell the story, rather than setting out to to confirm own perspectives and bias.

I believe your work will be recognized on a much more grand scale by future generations. You definitely are someone who exhibits the characteristics of Stage Yellow & Stage Turquoise thinker. You are rare and are ahead of your time.

Thank you for your work.
MLK

ANSWER: Clare W. Grave’s work in psychology concluded that the mature human being transitions from a current level of cultural existence based on current life conditions to a more complex level in response to (or to cope with) changes in existential reality. Graves’s model demonstrates the dual nature of human social emergence with state changes between communal/collective value systems (sacrifice self) and individualistic (express self) value systems.

I have not sought to integrate my work into his. You must understand that there are a few of us who have learned how humans behave through trading markets. I never considered that what I was writing or doing had any validity or significance in psychology or economics for that matter. It was during the early 1980s when many people began to take notice of what I was doing because I emerged as the leading analyst in foreign exchange in a new world of floating exchange rates.

I was contacted by the Military University known as the Citadel. I was asked for permission to teach the Economic Confidence Model as the key to understanding the economy and war. They told me I was the modern Hegel, which was perhaps the first time I was being compared to any philosopher. Hegelianism is the main philosophy of G. W. F. Hegel (1770–1831) who was also a major influence of Karl Marx and revolutionary movements during the 19th century. Hegel’s philosophy has been summed up by the dictum that “the rational alone is real,” which means that all reality is capable of being expressed in rational categories. His goal was to reduce reality to a more synthetic unity within the system of absolute idealism.

I was then rather shocked when a rather famous central banker called and wanted to meet with me back in the early 1980s. John Exter (1910–2006) was an American economist, member of the Board of Governors of the United States Federal Reserve System, and founder of the Central Bank of Sri Lanka. I still have the tape from our meeting which we recorded. He was the first central banker who actually came to my office (Part I of three).

Audio Player

Then I was giving a lecture in Chicago at COMPUTRAC or Market Technicians. Milton Friedman came there to listen to me. When I was finished, he came up and introduced himself and said I was doing what he had only dreamed about when he first wrote about creating a floating exchange rate system in 1953. We became friends after that meeting.

When it came time to create the G5 in 1985, I was asked for my opinion. I was opposed to the manipulation of the dollar by announcing it would be lowered by 40% under the pretense that would reduce the trade deficit and create jobs. I expressed my objection to President Reagan and the White House was compelled to respond.

By the 1987 Crash, then the Presidential Task Force, known as the Brady Commission, was compelled to call me in because we ended up with a few clients on the Commission who insisted I be brought in because we had not only forecast the event due to foreign exchange, but that the day of the low we also said that was the low and new highs would be seen by 1989. When the 1989 Japanese Crash took place, I had two central banks on the phone simultaneously asking if they needed to intervene into the foreign exchange markets to stem it from spreading into a global contagion. I advised it was contained to Japan and they did not need to intervene.

Because I became a forecaster of foreign exchange and helped companies do takeovers and reorganized them as to what countries to set up in, former Prime Minister Margaret Thatcher wanted to meet the guy who was restructuring companies and placing so much foreign business into Britain. We too became friends and she even spoke at our World Economic Conference.

When the British pound was being attacked by Soros, the administration of John Major called and asked how long was the attack of the pound going to last? I advised that they had to devalue the pound. I was told they could not because Prime Minister John Major said he would not devalue the pound and the goal was to join the euro. This became the ERM Crisis. My advice was to exit the ERM and allow the pound to seek its own level.

In 1997, I warned Treasurer Robert Rubin against trying to talk down the dollar for trade as they attempted back in 1987. Again, while I managed to to get them to stop that nonsense, the capital flows had nonetheless shifted from Asia back to Europe to get on board for the coming euro. This resulted in me being called in by the central bank of China as a result of the 1997 Asian Currency Crisis.

I have never sought to correlate my work with any others. I have been a trader, not an academic. I have been called the modern Hegel and compared to many others in philosophy as well as psychology. Because the floating exchange rate system was born out of necessity in 1971 as the Bretton Woods system was collapsing, I was often the only voice to be heard who actually had hands-on experience worldwide. When I was asked to testify before Congress in 1996, I was the largest adviser in the world with just over $3 trillion under contract which at that time was about 50% of the entire US national debt. No one had ever had such a role in world foreign exchange markets. I was fortunate to have a front row seat during the entire evolution of the floating exchange rate system. That was never a subject that could be taught in university since the last such floating exchange rate period predated the first course in economics which began at Cambridge University in 1902.

I have been trained, not by some university which could never teach anything to do with the Floating Exchange Rate System, but by the markets and my clients. The person who came up with the very concept of supply and demand was also a trader who had been in the trading room of Amsterdam — the first trading center post Dark Age. His name was John Law (1671-1729), who was also plagiarized by just about everyone else.

Some things can only be discovered by actually observing them from the trading floor. They do not appear out of thin air from a dream. What I learned about the world economy involving foreign exchange and observing capital flows between nations and currencies could only be accomplished by life experience. Likewise, John Law observed the basic human reactions and formed his idea of supply and demand with its impact upon price.

A trader does not have the luxury of clinging to old theories. If you are wrong, you must respond quickly. Knowledge is gained ONLY from making mistakes and surviving our own decisions.