How 10% of the People Can Make a Difference & Real Estate’s Role

QUESTION: Dear Marty,
First I would like to thank you for all the help you provide especially for us little guys.
I’m from Barcelona, and happily attended the release of “The forecaster” when you were there a few years ago.
I’m under 30 and working my butt off trying to save what I can while paying rent with my partner on a smallish 50m flat (which has become prohibitevely expensive for young local people as rents are at all time highs).

Following your recomendations I’ve put my small savings into movable assets (US and European equities).
With regards to the chart you posted on Spanish Real Estate I was surprised to see the price still so near the bottom of the Housing Crisis. I live in Barcelona and prices are in most cases near or at all time highs for most of the city neighborhoods (of course in € nominal prices wich have dropped quite a bit in $ terms) but as you move away from the city the recovery has been more modest to say the least.

In Barcelona price increses are mostly due to foregneirs moving in and maybe also because people here don’t ussually invest in the stock market but instead put savings into RE (despite the housing bubble people have a big chunk of retirement savings into real estate).
RE is not cheap to say the least but I’m wondering wether I should contract a 30y fixed mortgage and buy a house. My biggest fears are two:
– If long term mortgages dry up I may find out in mkt to mkt loss positions on the house as prices might collapse.
– If the economy declines I have the risk of maybe being fired but still chained to a mortgage.
I fear the later specially since my father has been recently notified that he is going to get fired. The company he works for has decided to fire all employees who are up to 13y!!! close to retirement age (and will probably replace 1/4 of the workforce with cheaper labor).
Given the above do you think it’s still a good time to buy in the big Spanish cities like Barcelona using a fixed mortgage or that you might be better off renting and waiting for the collapse.
Thank you

ANSWER: Barcelona is one of the most beautiful cities in Europe. It is even one of the best places to live. In terms of local earning power, yes, rent in Barcelona is high. In terms of international value, they are cheap, which is why you have so many foreign investors who have poured into your city. Even economically, Barcelona is extremely productive and this was in part behind the reason for the separatist movement. It also had its own history of separatist movements from the Roman Empire (see Maximus 409 AD).

You have noticed the foreign buyers. As the euro drops, the value of property will look cheaper to a foreign investor than domestic. If you stay in the city proper region, this will have an international bid based on currency. In real terms, of course, the property will decline in value. However, this is more of a short-term trend. We all need a place to live. If you can buy with a FIXED rate mortgage, then you will be better off and certainly do not do floating rates. The risk with banks remains that they will stop lending on property as loans turn bad and political turmoil unfolds. Soon it will be an issue of whether Spain will stay in the euro, or whether the euro even exists. The property in the rural area will always be cheaper. So it depends upon what your personal goals might be. Rural property where you have a bit of land and can grow some food is not a bad hedge. But it has been getting cold even in Spain, a country that normally supplies Europe with food during the winter.

We will be heading into a currency crisis. Tangible assets are the way to survive. The biggest problem with real estate is that you cannot take it with you. So keep that in mind. We need a place to live so that is the bottom line. You do not want all your wealth in one asset. You are young enough to survive the major government reset. That will happen. I remain hopeful that if enough people understand the causes behind this crash, then we can make a difference and push back against tyranny.

Make no mistake about it. Government will ALWAYS act in its own self-interest to survive. There has NEVER been a single government that has EVER admitted it is wrong. They must always suppress the people to survive. Remember one thing: even in the USA, there were only three presidents who ever won slightly more than 60% of the popular vote. So, about 10% of the people really decide the fate of nations. We do not have to convince 100% or even 50%. We just need that 10% to make a difference.

Australia: One Foot in Asia v the West

QUESTION: Hello Martin Armstrong,
Australia seems to have one foot in the West and one in the East. With the fall of the Western economies and then the rise of Asian economies, how does that affect the Australian economy? Does the real estate bubble collapse the Aussie economies and then the rise of China creates the opportunity to rebuild the economy after 2032?
Thanks for all the work you do.

ANSWER: The computer is projecting that Australia will first have to collapse with Western culture because it has become exceptionally left-wing. This is the collapse of socialism in general. We are collapsing just as communism did. It will be one Pi Cycle (31.4 years) from 1989, which brings us into this target of 2020/2021. We should expect serious political change on the horizon that will result in civil unrest.

Longer-term, however, with one foot in Asia, Australia will turn from the USA and Europe. As I have said, China is MUCH WISER than what we see in the West. While Europe is fighting over old economic models and clinging to theories that no longer work, China is investigating HOW the USA displaced Europe. It did so with LOW TAXES and regulation that built the American consumer market that the entire world has been dependent upon.

Germany’s economic model is still the old Mercantilist theory that national wealth is obtained by selling more stuff than you buy from others. The USA model has been internal rather than the Mercantilist external model. This is what China has realized and it is turning inward. Western society has not figured this out yet. Just look at BREXIT. The entire argument against it in Britain is that they will not be able to sell to Europe. That is really stupid and absurd.

Therefore, when the socialist model collapses in Australia, there will be a natural risk of a separatist movement. Western Australia will certainly find that, economically, they are more aligned with Asia than the East coast.

Thailand and the Future

COMMENT: Hi Marty,

As with so many others, I am very appreciative of your writing and am seeing your predictions come true as chaos piles up. Most recently, here in Thailand! The sister of the king, Princess Ubolrat (sp?) announced she would contest the upcoming election as prime minister. This is not only unprecedented in Thailand but perhaps anywhere in the world. In Thailand, the monarchy is treated with reverence and there are very strict laws about criticizing the monarchy, using their names or images for commercial or political purposes. And up until now, the monarchy has been strictly non-political. But there is a new regime now…indeed the king’s coronation is due to take place less than two months after the election on March 24 (coronation May 4).

The sister claims she is no longer a royal as she was stripped of her titles by her father, the former king (who died two years ago) when she married an American, but after 20+ years she divorced her husband and came back from America where she had been living to Thailand where she resumed royal duties. Thai people are so respectful/afraid of the monarchy that the election result is now considered to be a done deal as no one will dare to contest in any meaningful way. The small party she will lead is backed by the former billionaire prime minister Thaksin Shinawatra who has been living in exile for many years after being dumped from power in a coup. He is the darling of the impoverished rural masses while the incumbent Prime Minister General Prayut, who deposed Thaksin’s sister Yinglak as prime minister in a second coup, has the support of the business elite. Thailand up to now has been a very traditional society resting on three solid foundations…the nation, religion, and monarchy. This, despite frequent coups and regular rewriting of constitutions, has given it stability. I wonder if one of these legs is about to be kicked away…with a member of the monarchy descending down to the political fray. Now we await the battle between the general and the princess….most bets, of course, are on the princess!

The king has now criticized the actions of his sister “inappropriate”. Since the king must approve the prime minister, it seems that her name can’t go forward. So the traditions still hold after all in Thailand.

Thank you



REPLY: I love Thailand. It is one of the real gems in the world. Despite all the political turmoil, the structure keeps going. To a large extent,  this demonstrates that the economy is self-sustaining and really does not require government in any country. People will interact with or without the presence of governments. Nevertheless, the beginning of the Chakri dynasty under King Rama I took place in 1782 in Thailand, which rules to this day. The country was then known as Siam and the new capital of Bangkok was found. It was during the reign of King Mongkut (Rama IV) (1804-1868), who embraced Western innovations and initiated Thailand’s modernization.

When we look at the broader picture, the 224-year cycle of political change came into play in Thailand as well and was due in 2006. Indeed, it was during April-May 2006, when a snap election was called by the PM amid mass rallies against him that were boycotted by the opposition and subsequently annulled. This resulted in a political vacuum. The PM took a seven-week break from politics. Then in August 2006, the Prime Minister Thaksin Shinawatra accused several army officers of plotting to kill him after police found a car containing bomb-making materials near his house. Then on September 19, 2006, military leaders staged a bloodless coup while Prime Minister Thaksin Shinawatra was at the UN General Assembly. Retired General Surayud Chulanont was appointed as interim prime minister during October 2006. Finally, in January 2007 martial law was lifted in more than half of the country. Therefore, 2006 was a major turning point in Thailand.

Ever since 2006, we have witnessed rising political change. Opposition protesters occupied Bangkok’s main government complex in 2008, and began a mass anti-government protest calling for the resignation of Prime Minister Samak Sundaravej. Eventually, Sundaravej was forced out of office by December that year. In March-May 2010, tens of thousands of Thaksin supporters emerged in their trademark red shirts. The major political change seems to be on schedule for 2032 into 2048.