Tag Archives: Hyperinflation

May 21 2018

Understanding the Fractal Nature of TIME


Armstrong Economics Blog/Training Tools

Re-Posted May 21, 2018 by Martin Armstrong

COMMENT: I attended your 2015 WEC where you laid out the future for the euro. I was skeptical, to say the least. All these people constantly focus on the dollar. Then your model gave buy signals on the euro and you said it would then rally into 2018 and that could form the slingshot down. It came close to your target and now here in France, the government has warned of a euro crisis blaming Italy. I attended your euro conference in Frankfurt and again you explained why the euro would decline.

I have come to understand that your model is really split into timing levels. I think you need to explain that better because the rest of us are used to what you would call I guess a flat forecast that is not relevant to the time. Just a suggestion. But a lot of people do not catch on that you can forecast the long-term yet also provide the forecast for the short term counter-trend moves.

I can’t make Singapore but will be there in Orlando.

merci et bonne chance

PV

REPLY: Thank you for the perspective. You are probably correct. The very reason why we are one of the largest institutional advisers in the world is because we can forecast not just time, but distinguish the short-term from the long-term. I suppose it can get confusing when the long-term warns the euro is crashing and yet you have a 13-month rally which is also necessary to create the energy for the resumption of the decline. This is how the energy in a market is created for the opposite direction.

It is always the false counter-trend move that creates the energy to swing back the other way. We did elect a Quarterly Bearish Reversal at the end of the 1st quarter 2018. That confirmed the counter-trend rally was over. On the weekly level, it was 57 weeks up to the February high.  There we were electing Weekly Bullish.

Take gold. Here too the line the model drew was 1362 on a monthly level and 1341 on a quarterly. Gold would crash at the end of every quarter to avoid a buy signal. Likewise, it just could not get through the 1362 number. This also confirmed the position with the dollar that was reflected in the Euro.

You are correct that 99.9% of forecasts are flat one-dimensional. Our model enables big players to sort out the small counter-trend moves from the point where you have to flip a major portfolio in the billions. How you trade personally and for huge size is totally different. OPINION will not cut it. It has to be black and white. We must reduce it to a specific number and then the targets in time.

I suppose you are correct. I do not explain this difference between our forecast and everyone else in sufficient detail over the course of events.

May 20 2018

What Fields Will Survive Going Forward?


Armstrong Economics Blog/Economics

Re-Posted May 20, 2018 by Martin Armstrong

QUESTION: Hi Martin,

You are a clever man and all the best to you.  I am a 43 yr old man that is still looking for his way in life.  In short, knowing what you know, what business would you strive to get into?

I am purely looking for some sound advice as everyone is busy doing what they are doing.  Basically, any knowledge you would part with would be excellent, as I have no father figure to turn to.

Confused, is the word.

I know you are not a counselor, however, what advice would you give to your kids etc?

All the best,

Charlie

ANSWER: First of all, you have to pick a field that interests you. If you enjoy what you do, you will be good at it. If you are asking what business to start, you have to pick a field that is new or has little competition. You obviously would not try to start a smartphone company when you have giants who dominate the field. If you have a revolutionary idea, then you can start that and look to be taken over by one of the big boys.

It is all about what you enjoy. The economy is turning toward technology. Learning skills in programming will be the leading industry for the decades ahead. Fields that a labor-intensive will survive. such a construction. However, services, in general, can suffer where computers can replace that sort of employment. Keep in mind that as governments raise taxes, they put the lower levels out of employment. This trend has also tended to hit the very high end as well.

As technology advances, it will always displace sectors of employment. The combustion engine led to tractors and farm equipment so employment fell from 41% of the civil work force in 1900 to just 3% by 1980. Service jobs are being replaced by the internet every day.

May 20 2018

As long as Cryptocurrencies remain Assets – Then they will Survive a Monetary Crisis.


Armstrong Economics Blog/Cryptocurrency

Re-Posted May 20, 2018 by Martin Armstrong

 

QUESTION: You originally said back at the 2015 WEC the first window for the monetary crisis and the collapse of the Euro could arrive by 2018 and then the cycle was extended into 2021 when the Euro finally elected a weekly bullish. So it appears correct that 2018 is the start as the Euro never reached your target but came close and the EU seems to be coming apart at the seams. Gold could never get through your 1362 number either so that too seems to have confirmed a false move extending your cycle into 2021. I understand that cryptocurrencies are really an asset class and not really a currency. Nevertheless, do you think that cryptocurrencies can survive a monetary crisis?

WN

ANSWER: The year 2018 was the start of the Monetary Crisis. We had a shot that this could all come undone in 2018. However, you are correct. All we achieved was a false rally with the Euro stopping just shy of our number and gold struggled admirably but could not get through 1362. There were many other markets also confirming that we are dealing with only the beginning of the crisis here in 2018 rather than the conclusion including the consolidation in the stock market without election any monthly bearish reversals. The monetary reset can arrive during the next window in time come 2021 if we get the dollar at new highs. Then the monetary system will crack. However, this could drag out to the third window which is of course 2032. That appears to be more the shift of the Financial Capital of the World to China at that time.

These are the turning points. The Reversals are the key which confirms or denies the trend. My opinion as to the future is still an opinion. I will say this. As long as cryptocurrencies are an asset class, then they will survive a monetary crisis along with all other assets. Assets are the ONLY thing that survives the collapse of a currency. So be careful of what you wish for.

The new currency issued after the German Hyperinflation, Rentenmark, was backed by real estate. Tangible assets are on the opposite side of whatever the currency is in use. When the stock market rises, the purchasing power of the currency declines. When the stock market crashes, then the purchasing power of the currency rises. They are on OPPOSITE sides. Do you really want a cryptocurrency to be a currency or asset? Most people pitching them are really explaining an alternative asset – not a currency.

Cryptocurrencies are a new asset class. Just look at them from that perspective. You are asking a lot if we are talking about replacing the monetary system with private money. That is just not likely in the cards. Nonetheless, we will probably end up with a new RESERVE currency used among nations. That is still unlikely going to be a world currency used by the people in every country. What we use for currency can be cryptocurrencies of some sort ONLY if we see the political powers crumble and fall.

None of the big IT companies are doing anything with Blockchain. That may change in the future and it may even be replaced by something even better. I draw the line between an asset class and a replacement currency for the dollar with a very thick marker. You would have to completely destroy the system as is for that to even come into play. Is that what people are praying for? All pensions gone, banks destroyed and you think this cryptocurrency will be the only thing to survive? You go that far the ONLY money becomes FOOD! We are still in mid-game and we are not yet close to the end-zone.

For now, cryptocurrencies are not a currency at all, they are a new asset class. Just because they are called “currency” does not make them an actual currency. If they are not widely accepted in payment as legal tender, then they are not yet ready for prime time. When you go online to buy anything, they display the standard payment methods – not BitCoin.

You buy insurance for healthcare, fire, accident, but when it comes to death insurance, they flipped the name to life insurance. They could not sell “Death Insurance” for people would respond that they were not ready to die and it was seen as bad luck to buy death insurance because you may invite such an event.  To sell “Death Insurance” they called it “Life Insurance” and then everyone would buy it and brag how much they had. Calling BitCoin a “currency” does not make it one. It is still an asset class and for it to be a currency, it would have to respond OPPOSITE of assets, not trade with them.

Cryptocurrencies are an ASSET CLASS for trading. Do not marry the trade. Treat them as any stock and you will be fine.

May 20 2018

How Linear Thinking that has blinded most People


Armstrong Economics Blog/Basic Concepts

Re-Posted May 20, 2018 by Martin Armstrong

COMMENT: I think I now see the light. It has been my linear thinking that has blinded me. Gold rallied and failed as was the case with the euro, British pound and so on. Putting them all together is why who said that the euro would rally because they all were indicating a pause in the trend of the dollar. If they all crash together, I can see the dollar rally easier for they are all lined up the same way on your model looking at the reversals. I hope you elaborate on this in Singapore.

SHV

REPLY: Yes you are starting to see the light. You cannot have just one market rallying beyond the reversals without the others. Everything is linked. You have to begin to look at the world as a hedge fund manager to see what others cannot. You did not elect a key Monthly Bullish in any of these markets. That is the key. The same model allows us to see the critical point across the financial spectrum and in that instant we can listen to the markets telling us the future.

Opinion means nothing, including mine. ONLY the model allows us to see everything in a black & white manner without prejudice. This is how we avoid Marrying the Trade!

Yes, at the Singapore WEC I will cover this interlinking process so the future is revealed by the markets, not my opinion.

May 19 2018

Can Cryptocurrencies Survive?


Armstrong Economics Blog/Cryptocurrency

Re-Posted May 19, 2018 by Martin Armstrong

QUESTION: Do you think Bitcoin can survive? Or has it been a passing fad?

MT

ANSWER: Bitcoin rose because 70% of the miners were in China. It was NOT simply because energy was cheap. Bitcoin became the LEADING means of money laundering and movement of cash out of China, circumventing their rule of law and currency controls. So do not think for one minute that Bitcoin rose because it was really a wonderful idea. It was a means to get money out of China when you could not wire money out. In Australia, they have adopted the slogan that “CASH IS FOR CRIMINALS.” They will do the same to cryptocurrencies. All they need to do is declare a law that it is illegal for a business to accept cryptocurrency under the excuse that it is money laundering. You just killed the entire industry. The government has the army, tanks, and the guns. Until the army is willing to turn against the hand that feeds them, you cannot stand with cryptocurrency and claim some magical right to suppress government. You need the power grid!

Video streaming today is because of the online porn industry (I won’t post a picture of that).  They needed to sell their product and they invented video streaming. It has since expanded to everything. Blockchain can be used in many other contexts just a video streaming was not restricted to just por

May 18 2018

Emerging Market Debt Defaults on the Horizon?


Armstrong Economics Blog/Sovereign Debt Crisis

Re-Posted May 18, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; You said that the emerging markets are a huge problem that will lead to a Sovereign Debt Default. Can you elaborate on that statement?

Thank you for your insight

VU

ANSWER: The emerging markets are in far worse shape today than they were even back in 2008. They have issued heaps of dollar-denominated debt to sell particularly to US pension funds seeking higher yield. Some of the buyers have been state-run pension funds. The outstanding Emerging Market debt has exploded by 50%. The majority of the increase in emerging market indebtedness has been in local currency, which was more than $48.5 trillion as of the end of 2016 from around $43 trillion in 2015 and is pressing $50 trillion for 2017.

We passed $200 trillion in global sovereign debt back in 2016. All of these dollar bears that yell about the USA at $20 trillion, ignore where the world stands at and the fact the USA is still the only economy holding everything up. Both the Emerging Market and EU countries have used the cheap interest rates to just pile on more debt – not reform. This is why central banks have lost all capability of manipulating interest rates to direct the economy. All of those theories are entirely dependent upon DEMAND management. They may, in theory, be able to manage the “demand” of the consumer, but they have zero influence over government spending. They lower rates to stimulate private demand and simply underwrite government debt.

The world comes unglued ONLY with a dollar rally – not a decline. A drop in the dollar would be cheered by governments who would then issue even more debt. A dollar rally will cause the Sovereign Debt Crisis – not a dollar decline. Emerging Market defaults are once again on the timeline. They are economically in far worse shape today than they were in 2008. As interest rates rise, they will blow their budget out and they do NOT have the economies to support the debt repayments (excluding China).

May 18 2018

Draghi Calls for Consolidation of Debts?


Armstrong Economics Blog/European Union

Re-Posted May 18, 2018 by Martin Armstrong

COMMENT: You were here in Brussels a few weeks ago. Suddenly, the ECB is talking about the need to merge the debts to prevent a crisis. So your lobbying here seems to work.

RGV, Brussels

REPLY: I do not lobby. It is rather common knowledge I have made those proposals since the EU commission attended our World Economic Conference held back in 1998 in London. I focused on the reason the Euro would fail if the debts were not consolidated. So it is not a fair statement to say I meet in Brussels to lobby for anything. I meet with people who call me in because of a crisis brewing.

So everyone else understands what this is about, the ECB President Mario Draghi has come out and proposed interlocking the euro countries to create a “stronger” and “new vehicle” as a “crisis instrument” to save Europe. He is arguing that this should prevent countries from drifting apart in the event of severe economic shocks. Draghi has said it provides “an extra layer of stabilization” which is a code phrase for the coming bond crash. He has conceded that the legal structure is difficult because what he is really talking about is the consolidation of national debts into a single Eurobond market. There is no bond market that is viable in Europe after the end of Quantitative Easing. There will be NO BID.

There is no viable bond market left in Europe. The worst debt is below US rates only because the ECB is the buyer. Stop the buying and the ceiling comes crashing down. This is why what he is saying is just using a different label. He is not calling it debt consolidation, just an extra layer of stabilization to bind the members closer together.

It will be a hard sell and it may take the crisis before anyone looks at this. You have “bail-in” policies because of the same problem. If the banks in Italy need a bailout from Brussels, then other members will look at it as a subsidization for Italy which is unfair. There is no real EU unity behind the curtain which is when the debt was NEVER consolidated from day one. They wanted a single currency, but not a single responsibility for the debt.

May 18 2018

Euro Demise – The Crash of the Euro is Inevitable


Armstrong Economics Blog/Euro €

Re-Posted May 17, 2018 by Martin Armstrong

Naturally, the majority had to be wrong that the dollar was in this inevitable bear market. These prognostications were typically those who kept cheering gold higher and ignore everything else on the silver plate of politics. The implications of the Italian elections have been ignored by so many. They were a major blow against the European Union and no country has suffered more from the refugee crisis than Italy. The ballooning cost of the refugees was denied by Brussels to be an exception to the budget rules. Italy then threatened to give them all EU passports and send them north. This is the entire problem with the structure of the European Union. They want one federal government, one single currency, but none of the responsibility of a national debt.

The Benchmark Italian government bond yields have continued to push higher after a 16 basis point jump on Wednesday, There were reports that were subsequently denied that said the prospective Five Star/League coalition government had drafted an economic plan that would seek 250 billion euros of debt forgiveness from the European Central Bank. Despite the denials, there is a major issue beneath the surface that the entire refugee crisis was created by Merkel without member state consent. Then the member states have been ordered to pay their share. Consequently, publicly, the announcement is that such a debt forgiveness is not a realistic proposal or one that would remain in the coalition’s agenda. However, this is not entirely true. There have been rumblings behind the curtain concerning the debt and the reason for that debt escalating has been the refugee crisis.

The tone of the new Italian government’s position toward the Eurozone rules was seen as confrontational to say the very least. The economics behind the Eurozone is a complete disaster. The markets are reflecting that economic reality behind the curtain that nobody wants to pretend is even going on for fear what that will do to Europe. Two-year Italian government yields are now back in positive territory for the first time in almost a year despite Draghi’s ECB policy of keep buying until you cannot see anymore. Now we have for the first time Italy and Greece currently yielding above ZERO on their respective two-year Eurozone government bonds. Interest rates are going to EXPLODE when we look down the line!!!!!!!

The Euro has tremendous headline risk which will also include the elections coming up in Turkey where Erdogan’s post-election plans are appearing more like a dictatorship.