QUESTION: As an avid reader of your daily BLOG, I’m well aware of the attempt to abolish cash, potential freezing of bank accounts, years of negative or near zero interest rates and “helicopter money” from the government are all likely scenarios in the near to distant future. Without compromising any of your business or proprietary agreements, positions of interest, or ethics, can you suggest or provide some alternatives as to measures to take to avoid this historical “train wreck” we a doomed to experience.
May GOD have mercy on our souls!
BEF

ANSWER: I get a lot of inquiries on this subject. It is much more than I can relate in just a blog post. So I flew to Germany to do another documentary on this subject matter. I believe it will be released in a matter of weeks. I am also putting the finishing touched on a book on inflation and hyperinflation. I am also desperately trying to get this out also before the WEC this November which I hope will put forth a completely new approach to understanding inflation not just for the individual, but to central bankers and politicians as well

We have to come to the reality that from 2019 onward, we are headed into a Pension Crisis that will be serious. Many are starting to yell about the debt crisis. They lump on private debt and yell its a bubble. What they miss entirely is the fact that we face more than a decade of crises that would have been avoidable, had governments been actually managers and central bank had not tried to keep using Keynesian Demand Side Economics that even Paul Volcker warned back in 1978 had failed.

This is by no means prophecies of doom and gloom. Unfortunately, they are prophecies not even of a pessimist, but only facts that are comprehensible simply using a pocket calculator and not even a computer. The Pension Crisis is the end of Socialism. Promises that were made which were never sustainable but were a scheme to win votes. Then the money needed to pay the pension required 8% interest annually. Then the central banks enter the game and mess everything up even more. Instead of DIRECTLY aiding the economy, they lower rates and HOPE that the banks will pass it along. They never did. The banks parked the money at the Excess Reserve Window that the Fed has still not closed.

The cost of pensions is currently stifling Western society beyond belief. Europe itself is ahead of the curve and will crack before the United States. Europe already has between  30% to 40% of the population who have already retired or are about to leave the labor market. They have used the old Roman pension system of the army which was earning an average of 20 years service to qualify for a pension. It was the pensions which contributed to the Decline and Fall of the Roman Empire.

We have to realize that government state pensions are the real crisis. Like California, their solution is always to raise taxes to pay for government pensions. The amount of social insurance contributions and taxes is determined by the cost of providing retirement benefits. The Fed is trying to raise rates, but they fear raising them back to 8% too fast will disrupt the economy. The pressure is building on the ECB in Europe behind the curtain to stop this nonsense of Quantitative Easing that has failed to start with and is now the cause of a massive Pension Crisis for the next 10 years. This condition of a shortfall cannot change immediately and raising taxes to try to solve the problem will only lead to further economic decline.

QUESTION: Hello Martin

I wish all the best for you. The work you make every day to rise up our understanding about the world is amazing and make me feel a huge respect. it is very inspiring. I’m a small customer of your private blog. I don’t know if you answer that kind of request.

I want and I need to understand WHY the dxy was in bull market between march 2000 and feb 2002, from 102 to 113.

you are unbelievable when times come to understand economic history. I can’t find any explanation about this period
M2 supply decreased softly the twin deficit stood around 2% with no hope of getting better and it reversed after 2002 to 8% !!!

Interest rates were declining stock indexes were very bear from the tech turnmoil

Gold was bottoming from 420 to 380 with a reverse pattern during summer 2001. the dxy rise more than 3% after the bottom of gold in 1 year !
how could this DXY get up 10% higher in 2 years ??? what is the secret of history I miss ???? I believe there is something to learn with that period !
kind regards

CD

ANSWER: While the Euro began really in 1999, the physical notes did not come into circulation until 2000. The euro hit its all-time high shortly after its launch at the start of 1999 at that point in history which marked the euphoria of the talking heads on TV and how the Euro would crush the dollar. As always, they talked everyone into buying the high. As we say, buy the rumor and sell the news. That is an INCREDIBLY good market rule.

But The Euro began to slide thereafter, falling to a record low of 82.3 US cents in October 2000. However, both the euro and sterling then recovered at the lows when rumors began that an intervention by the European Central Bank and the Bank of Japan was imminent. In late afternoon trading that day, one euro bought 82.74 and one pound was worth $1.4329. They also spread rumors that Iraq would soon start to price its oil exports in euro and abandon the dollar.

The entire rally has absolutely NOTHING to do with the economic numbers in the United States. The capital inflows to the USA began over FEARS of the Euro. One major central bank was leaking inside info to us to get it out because we were NOT mainstream press and the info was going DIRECTLY to the real institutional money. They were deeply against the Euro because of the faulty design. It was a political creation that nobody in their right mind would have created such a currency under this structure. So the capital fled Europe and this was one of the reasons why the DOT.COM bubble was so big. It was aided by foreign capital fleeing Europe, to begin with.

The economic numbers are nice. But they are NEVER the entire story. Capital can flee one region because of events there and they may be going to a place that is not up to par, but still, it is the best alternative. Capital Flow Analysis which we developed is by far the only way to grasp the full extent of the economy.

QUESTION: Mr. Armstrong; You do not give much credence to the world returning to a gold standard. Didn’t the entire world use the gold standard before?

Thank you for your input

JK

ANSWER: The entire world has NEVER been on the gold standard simultaneously. Asia was on a silver standard while the West was on a gold standard. Above is the first coin struck in Hong Kong in 1866 which was the Hong Kong Dollar. The West struck Trade Dollars during the 19th century to pay for goods from Asia and they were silver – never gold. Here is an example of both the British and American trade dollars used in payments particularly with China.

It is just not practical that we have a monetary system that is based upon a commodity. The true value of money is the productive-capability of its people. China, Germany, Japan, all rose from economic depression WITHOUT gold. They did it with the productive capacity of the people. The produce whatever and sell it to someone else and then get gold or whatever in return. This theory that you have nothing without gold is just stupid. It would mean that no nation could ever rise no matter how good their people are because they lack a natural source of gold.

The collapse of the Turkish lira is a reflection of the collapse in confidence in the government. The same has taken place in Venezuela. China and Japan rose from the ashes, not because of their possession of commodities, but because they could bring their people to bear and produce various items efficiently and cost-effective. It was the people first that produced the economic recovery and then they bought even gold.

HYPERINFLATION has nothing to do with the quantity of money – that unfolds when the CONFIDENCE in the government collapses. You cross that line from normal inflation all nations experience into the realm of a collapse in the faith and trust of government. This is HOW revolutions even unfold. They have nothing to do with the quantity of money.

India’s financial markets are in the throes of this Emerging Market crisis. The Mumbai-based Infrastructure Leasing & Financial Services (IL&FS) is an over 30-year-old infrastructure lending giant that claims to have helped develop and finance projects worth $25 billion in Asia’s fastest-growing economy. The company recently defaulted on debt payments because it ran out of cash. This is illustrating what we have been warning about. As interest rates rise and the dollar, the first casualty will be the Emerging Markets (EM). Because interest rates were driven to absurdly low levels in Europe and the USA, those who need yield ran off to the EM field.

Central Banks cannot manage the economies anymore. We live in a porous global economy. The Fed buying back 30-years bonds to lower real estate loan yields was absurd. The false assumption was that only American owned such debt. But the dollar is the reserve currency. That meant that more than 40% of such debt resided outside the USA. Central Banks can no longer manipulate the economy using the demand side economic models. They drove capital rushing into the EM sector desperate for yield – especially state operated pension funds.

This is why we have a serious debt crisis on our hands. The greenback is STILL going to press higher against the rupee. Just look at the pattern. This is NOT an isolated high. We are looking at a significant rally still on the horizon for the dollar.

QUESTION: Mr. Armstrong; I have tracked the IMF forecasts alongside yours and it clearly appears that they are mimicking you very closely. However, something strange has taken place, for now, their latest warning it seems to be politically motivated. Lagarde warns that the U.K. economy will contract with a hard Brexit. Is this coming from you or is it political?

All the best

PB

ANSWER: Christine Lagard’s forecast or warning is political in nature. Stating that the UK economy would rapidly start to contract in the event of a disruptive exit from the EU next spring with a no-deal Brexit is really just absurd. This is political in nature and this statement itself reveals the political nonsense. Britain is the BIGGEST export market for German cars in Europe. A no deal would by NO MEANS only impact Britain. You would see Germany turn down hard as well.

A BREXIT would allow the UK to cut its own trade deal with the USA and everyone else outside of Europe. As it stands now, whatever Britain wants is subject to vote in Europe and the French have a tendency to veto whatever Britain wants anyhow. All the evidence point to exactly the opposite of Lagarde’s warning. Whatever loss in trade with Europe that takes place will be more than offset with trade around the world. Britain has been in declining economic growth ever since it joined the EU. This entire issue of a hard BREXIT is taking place because Theresa May does not want to leave the EU personally and has sabotaged the entire effort placing the politics of Britain at risk as a whole by dividing the Conservatives, to begin with. Brussels is more interested in PUNISHING Britain as an example to prevent others from leaving because the Euro is their only power and if that goes, there go all the pensions for those in Brussels. This is NOT about what is good for even the German car manufacturers. This is now about protecting EU political jobs, not the people or the economy.

QUESTION: Marty; Your directional changes are amazing. They signal a change but it can be a turn as well as a sudden blast to the upside. You also mention that this is the worst you have ever seen personally in 40 years on the private blog. Could you elaborate?

Thank you for being here. There are a lot of us who are really grateful for what you are contributing. You show know that.

GR

ANSWER: Thank you. We are all in this together. This is not merely trying to pick the next trade. This is about surviving what is really unfolding.

To be a hedge fund manager, you have to look at the entire world compared to a domestic investment manager who operates exclusively in the domestic market and is oblivious to events externally. I get called in all the time into various crisis events around the world. They just need someone who can see the whole rather than has a myopic perspective. There seem to be few of us in such a position. Friends who have worked on desks at the banks internationally have just retired. It is not easy to do this sort of thing. I just have a 40-year track record and in the middle of a crisis, they really do not want someone who may have created the greatest quantitative model in history all in theory but has never actually been in the trenches. You are asking others to stake their entire career on your theory and you are wrong, they lose their job. So it gets hectic to say the least during times like this.

The Directional Change came today and yes it was a blast off. We opened in the Dow ABOVE the previous high which is an extremely bullish technical signal. A Directional Change can be a turn, but it can also be a launch pad. The Panic Cycle can also be a big move in one direction, but they are often outside reversals meaning that they can exceed the previous high and then penetrate the previous low.

Now, as to the comment I wrote today which has sparked a lot of emails. I wrote on the Private Blog ” Anyone who pretends they can forecast this based upon a personal ‘I think’ will be just luck or a fool. I have been an international hedge fund manager and analyst my whole life and this is the worst I have EVER seen in 40 years!!!!!!!!!!!!!!!!!!!!!!!!!!!!!”

There is complete political chaos everywhere you turn. This is not simply supporting or bashing Trump. We are fooling here with the very foundation of CONFIDENCE in the governmental system. Now throw into this cauldron the chaos politically in Europe. Stir in the insanity in Britain, the trade dispute with China, the Russian stupid sanctions, and what we get is complete chaos. Normally, capital flows have been logical. They fled to the USA for World War I and II. They fled the USA during the Civil War. Capital attempts to move away from uncertainty. What I mean as to this is the worst I have personally seen in 40 years is that we have uncertainty absolutely everywhere globally. There is no safe place for capital to hide. This is why we have seen a new record high in the Dow.

Add to this, the chaos our computer is showing in interest rates starting from October onward. On the 10-year yield, we have elected all four Monthly Bullish Reversals and that confirms a long-term change in trend which is really obvious at this point. A Quarterly closing above 3.16% and we are off to the races. We are looking at everything starting to get crazy in sovereign debt issues globally beginning in October. With the Dow Jones Industrials now making a new high for the year, the Fed will be looking more comfortable about raising rates to help the pension fund crisis that is brewing. So pay attention to interest rates in October!!!!!!!!

This is what the Reversal System was designed for. To be objective in the midst of total chaos and uncertainty. November is shaping up as a Panic Cycle in the Euro, not in the share market. In the Pound, we have a Directional Change and a Panic Cycle in October. The political risks around the world are just everywhere. This is also why we scheduled the WEC in November and just after the US elections. Personally, this is a real challenge. I cannot be everywhere around the world at the same time. The best we can do is watch the arrays and the Reversals. Just let the numbers speak for themselves. I warned that we had a Double Bullish Reversal in the Dow at 25800. Once that was elected, it has been off and running to new highs.

The Australian Gold Rush began in following gold discoveries at Coolgardie in 1892 and Kalgoorlie in 1893 located 370 miles (595 km) east-northeast of Perth. Once again, miners discovered two huge boulders with an extremely high gold content. Kalgoorlie is one of Australia’s most famous gold rush events because it was largely credited drawing people from around the world to search for the precious metals. Western Australia’s population grew from a meager 49,782 in 1891 to a booming 184,124 by 1901. In just those 10 years, the region became known as the Goldfields-Esperance region, often called the Golden Mile. It has typically been called in mining the most naturally rich square mile in all the earth.

Now we have boulders worth millions of dollars. The biggest one weighing 95kg and contains over 2,400 ounces of gold. The company has now begun to dig for gold they believe is worth at least $11 million. This is a rare find given this area was the center of attraction for gold miners.

The gold content of these rocks is very high. Some hope that they will lead to an even bigger discovery in the months ahead.