QUESTION: Mr. Armstrong,

QUESTION: There are many people who are now saying we are headed into a recession. Your model shows we are coming to the end. Yet you have been the only analyst who has been correct. There are bankers warning the stock market will collapse by 50% because it always goes down in a recession. I watched the market rally to new high as you forecast back in 2010 going into 2015. Then you warned the market would invert and continue the rally after 2015. The market rallied into nearly your Pi Target in 2018. You said at the last WEC there would be a correction back to retest the monthly bearish reversal.

You have been correct at every turn. Back in 2014, you posted: “What will not go down when the cycles shift, inverts and rises even further.” It seems that this has been a cycle inversion where the market has just been rising through the upside and downside of your model. My question is this. You still forecast that this is just the staging ground and we are about to see a different pattern altogether. Is this all part of the cycle inversion you have been stating is underway?

NM

ANSWER: Yes. I also wrote in that post: “This is why I have been warning a cycle inversion is coming. We may be in that process now starting from November 19th/20th.” With all the craziness on the horizon economically, the government was the one in trouble, not the private sector. That meant we had to undergo a cycle inversion. That is what is underway. A normal cycle would have seen the market peak in October 2015 and then decline. The fact that the market has continued to rally past 2015 proves this is a cycle inversion. We will be addressing this at the Rome WEC. We are about to make a major play that will be critical to understanding for the future.

QUESTION: Hi Mr. Armstrong…Thanks for trying to settle our confusion re: Griffin’s “Creature” You make a distinction between Gov’t mandated debt & Fed helicopter money. But isn’t debt still just debt?
Also, you seem to be saying the Federal Reserve is a necessary evil (maybe not even evil), & that central banks & fractional reserve banking are a fair & honest system. All very confusing.
I believe you could more easily enlighten our Neanderthal economic brains by simply describing your version of a near perfect monetary system, that’s also immune from political interference. Maybe call it “The Armstrong Guide to Perpetual Prosperity”

We’re NOT mocking you. Would love to see this as would 99% of your readers.

Wishing you a long & healthy life. We need you.

HS

ANSWER: I understand this gets confusing because people have taken one tiny stone and assume the entire mountain is the same. The Fed was created to be funded by the banks themselves to effectively be their bailout institution. As I have written before, the Fed “stimulated” for it was authorized to buy ONLY corporate paper when banks could not lend. Because of WWI, the politicians directed the Fed to only buy government debt and never returned it to its purpose. It is nothing like what it was designed to do.

There is no such thing as Fed Helicopter Money. That is another absolute absurd proposition. The Fed can create elastic money, but it is effectively backed by the debt they purchase. The entire Quantitative Easing was by NO MEANS the creation of money out of thin air. They were buying in government debt which is in itself simply money that pays interest. The Helicopter Money these people argue was supposed to create hyperinflation only revealed that the people who call it that actually have no idea what they are talking about. They pretend that the money was just created with no backing. But it was buying in government debt. The REAL MONEY supply is not simply cash, it includes the entire national debt BECAUSE debt is now collateral and can be used in the economy. The economic reality was simply moving money from your left pocket to your right. The supply remained the same. That is why Quantitative Easing failed to work. The real creation of money is the debt and the difference is significant for it is money that pays interest requiring the creation of ever more debt.

The PERFECT monetary system is one in which there is no debt. Rome lasted for 1,000 years BECAUSE it had no debt. It did use MMT insofar as it created money each year to fund itself. The great debasement took place during the 3rd century when Emperor Valerian I was captured by the Persians in 260 AD and forced to be a slave to the Persian King. That broke confidence in the government; people freaked out and began to hoard everything.

The first criteria are TERM LIMITS and the elimination of any power to borrow. No spending bill may be merged with another. Every bill must stand on its own and the people must vote by a computer on each bill. They cannot be passed without more than 50% of the people voting. Therefore, we restore a DIRECT form of Democratic government. There may be no law that is based upon any religious belief or seeks to impose any restriction upon any race, gender, or sexual orientation. Some people will object. But we must understand that we have to protect even people we disagree with in order to protect ourselves. There can be no exception to basic rights. Arnaud Amalric, prior to the massacre at Béziers, was reported to have said: “Novit enim Dominus qui sunt eius,” which is a direct translation of the Latin phrase “Kill them. For the Lord knows those that are His own.” It is not our station to sit in judgment over others pretending to know what God wants. That is his role, not ours. Laws should never be allowed to be written for the purpose of forcing the belief of one group upon another as we have today with the left v right.

Next, we must eliminate all forms of Direct Taxation (income tax), which requires people to report to the government even to confirm you are not rich. All taxation MUST be indirect as the Founding Fathers intended. The people will pay taxes based upon their consumption. Naturally, raw food and rent should be exempt. Then you cap the government expenditure at a max of 5% of GDP, not to exceed the population growth rate.

Money is simply the medium of exchange. It is NEVER a reservoir or store of wealth. It is merely the unit of account that is no different from a language. If someone says something to you in German, you immediately try to translate it to your native tongue to understand what they said. Money serves the same function. We call Trump a billionaire, not because he has cash in the bank, but because people look at his assets and translate them into money to judge his worth. That is the role of money. We must understand and embrace it. Only then can we comprehend a monetary system.

These are just a few of the necessary elements. The crisis is NEVER the quantity of money. It is those who seek to rule us from above. Direct reform at the powers that be and the monetary system will quickly fall into line. There is no possible “perpetual prosperity” because everything is connected and nature also plays a role in the business cycle. Marx to Keynes have all tried to create the perfect system that will produce endless prosperity. That is an impossible fictional dream.

QUESTION: Marty,
Big fat question for you regarding the UK and the SNP.
You seemed to support Scotland breaking away from the UK in 2014, but since then you’ve voiced your concern on the socialist policies of the SNP. I share that concern, as do a growing number of people here, in not so sunny Scotland.

Unfortunately, SNP seems to have introduced a few more taxes into the system in the last year. One of which is that the higher tax band in the rest of the UK has been raised to 50K, whilst in Scotland, it has been kept at 43k. The other latest tax is that if the company you work for have parking spaces and you drive to work and park your car there, you can be hit with around £450 per year.

Looking back on the history of UK general elections, the SNP hit a high point in the October 1974 general election, polling almost a third of all votes in Scotland and returning 11 MPs to Westminster. They then dropped to under 6 seats till the 2015 election, where they went from 6 seats (in 2010) to 56 in 2015. You could argue the rise to 56 seats was due to the fact people either wanted independence or voted for them as they were happy to be led by them in Scotland but not wanting to be independent. They dropped to 35 seats in 2017, primarily due to people being fed up with the independence record being regurgitated over and over.

To summarise then, the large rise in ’74 followed by a big drop in its support at the 1979 General election, followed by a further drop at the 1983 election. Will we see this again? Big rise in 2015, followed by a large drop in 2017 and the same again in the next election?

Personally, I think the tax rises will take a big toll on their support and they will get hammered in the next election.

Many thanks for your thoughts and wisdom.

G

ANSWER: I love Scotland. Every time I flew in to Edinburgh to do an institutional conference for a day, I was introduced as a 7th generation Scotsman – never an American. The separatist movement is separate and distinct from the SNP, which is one step to the right of communism. I was living in London when “Braveheart” came out. I remember going to the movies there, and on the way out everyone was saying how some member of their family was Scottish.

That said, the SNP socialist policies are brain dead and this idea that they must remain part of the EU is beyond stupidity even for someone who is dead mentally. There is absolutely no economic validity to remaining inside the EU. The British have NEVER won anything of significance in the European court. What will it take to make the British realize that they are not really welcome in the EU for resentment remains that it was the Brits who saved Europe from both Napoleon and Hitler.

The Scots voted for independence in a referendum which was clearly rigged by London and the EU. But that was the prelude to BREXIT, which the government is doing its best muck up again over this unwarranted fear over trade. The economy will turn down very hard in Europe in 2019 into 2020 before bottoming. This will alter the politics ahead rather significantly. In Brussels, they will be blaming the Brits, while the Italians will begin to voice their opinion that the Brits got it right after all.

Cyclically, the United Kingdom that was first created back on May 1st, 1707, under Queen Anne (1707.331). On the 309.6 year cycle of the Economic Confidence Model, we arrived at 2016.9315. The BREXIT vote took place on June 23rd, 2016 (2016.476). A referendum on Scottish independence from the United Kingdom took place on Thursday, September 18th, 2014 (2014.715). That meant the Scottish vote was 307.384-years from inception. This was cyclically a confirmation that BREXITwould, in fact, succeed in 2016.

However, the true Scottish Separatist/Nationalism Movement actually began back in 1934 during the economic hard times of the Great Depression. It was in 1934 when the Scottish National Party (SNP) was founded, making its primary goal the future independence of Scotland. The party gradually began gaining ground after World War II, which was propelled by the discovery of rich oil resources in the North Sea during the 1970s. Then in 1974, the SNP won 30% of the Scottish vote and 11 seats in Parliament after campaigning on the slogan “It’s Scotland’s oil!”

Of course, the first major step toward Scottish independence came in 1995. The first and greatest reason for creating a Scottish Parliament in 1999 was that the people of Scotland demanded and deserved the human right to democracy. The UK Government’s white paper on Scottish devolution, Scotland’s Parliament, was published in July 1997. It set out proposals for a new Scottish Parliament and drew heavily on the Scottish Constitutional Convention’s 1995 (see the report: Scotland’s Parliament, Scotland’s Right).

A referendum was held on September 11th, 1997 to ask the Scottish people whether they wanted a Scottish Parliament and whether it should have tax-varying powers. In that 1997 referendum, the Scots voted in favor of devolution of powers, which meant that although Scotland remained part of the United Kingdom, its government gained a broad range of new powers. It would have the power to set its own tax rates as well. Among these new powers was also the right to control education and healthcare. This lead to the creation of a Scottish Parliament for the first time since it was dissolved in 1707. At the peak of the economy in 2007, the SNP won an upset victory in the Scottish parliamentary elections, ending some 50 years of Labour Party dominance. Then the SNP leader Alex Salmond became the first elected minister of Scotland. He won a second term in 2011 and was able to use his party’s historic mandate to secure approval for a referendum on independence for Scotland.

It took just two 8.6-year cycles from 1995 to the beginning of the separatist movement in 2012. In 2012, Salmond and British Prime Minister David Cameron signed an agreement to hold that referendum in 2014. Subsequent negotiations lowered the voting age in the referendum for 16 and determined that it will pose a single question: “Should Scotland be an independent country?”

The problem the SNP faces is they have mixed up independence, socialism, and remaining in the EU rather than the UK. In this regard, they have truly lost their way and do not comprehend either trade of the fact that socialism is collapsing right in front of their face.

Hong Kong’s intervened to support the Hong Kong dollar for the first time since August 2018 after the exchange rate fell to the lower end of its trading band against the greenback. The Hong Kong Monetary Authority bought HK$1.507 billion ($192 million) of their own currency during London and New York trading hours on Saturday.

The Hong Kong dollar peg to the US dollar has come under a lot of pressure. The problem they face is simply that such a peg also imports the inflation or deflation of the currency to which a peg is created. As the Greenback rises in the political-economic sea of international finance, it will become impossible to hold the peg.

In 1863 the Hong Kong Government declared the silver dollar – then a kind of international currency issued by many nations – to be the legal tender for Hong Kong, and in 1866 began issuing a Hong Kong version of the silver dollar. The silver standard became the basis of Hong Kong’s monetary system until 1935, when, during a world silver crisis, the Government announced that the Hong Kong dollar would be taken off the silver standard and linked to the pound sterling at the rate of HK$16 to the pound.

In 1972, the Hong Kong dollar was pegged to the U.S.dollar at a rate of HK$5.65 = US$1. … Between 1974 and 1983, the Hong Kong dollar floated. On 17 October 1983, the currency was pegged at a rate of HK$7.8 = US$1, through the currency board system.

The problem Hong Kong will face is as the financial crisis in Europe erupts, this will push the Greenback higher. If Hong Kong keeps desperately trying to hold the peg, they will import DEFLATIONand turn their economy down very hard all because of international events. The models we showed at the Singapore Conference targeted 2019 for an important turning point.