Tag Archives: The Forecaster

Apr 11 2018

The Fate of Italy & the Italian Lira


Armstrong Economics Blog/Italy

Re-Posted Apr 11, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; A friend of mine world for the central bank back in the nineties and he gave me a copy of this chart you provided to Italy on your recommendation not to enter the euro on the present terms back then. He said you were the only one with a database and nobody ever saw what the lira looked likely before World War II. Do you have that report you gave to the Italian Central Bank?

JDH

ANSWER: Sorry. I do not have a copy of that report. It was a private issue. The general advice was put out back then in a series of reports we published for our general client base (see Euro). Here is a chart from 1792 to 1999. We can see that the intraday high for the US dollar against the Italian Lira was 1985.

Here is a chart on a closing basis. We can easily see that the US dollar is breaking out and will be making historical new highs against Italy going forward in time.

 

Now when we ask the computer to extrapolate the Lira from the past and project where the turning points would be in time looking ahead as if it were a single currency, 2018 comes up as a directional change and 2019 in a Panic Cycle. Here are the turning points and we will see this provide the critical points for cracking the euro

Apr 10 2018

Meaningless Words – Chairman Xi Jinping Uses Panda Speech To Con China Trade Critics…


Re-Posted from The Conservative Tree House on April 10, 2018 by

While necessarily needing to continue the gamesmanship, and publicly exhibit positive reception therein, I doubt seriously President Trump is fooled by this familiar Chinese ploy. Actions speak louder than words:

BOAO/BEIJING, China (Reuters) – Chinese President Xi Jinping promised on Tuesday to open the country’s economy further and lower import tariffs on products like cars, in a speech seen as an attempt to defuse an escalating trade dispute with the United States.

While much of his pledges were reiterations of previously announced reforms that foreign businesses say are long overdue, Xi’s comments sent stock markets and the U.S. dollar higher on hopes of a compromise that could avert a trade war.

Xi said China will widen market access for foreign investors, addressing a chief complaint of its trading partners and a point of contention for U.S. President Donald Trump’s administration, which has threatened billions of dollars in tariffs on Chinese goods. (more)

Historic Chinese geopolitical policy, vis-a-vis their totalitarian control over political engagement (action) and diplomacy through silence, is evident in the strategic use of the space between carefully chosen words, not just the words themselves.

Each time China takes aggressive action (red dragon) China projects a panda face through silence and non-response to opinion of that action.…. meanwhile, the action continues. The red dragon has a tendency to say one necessary thing publicly, while manipulating another necessary thing privately.  The Art of War.

President Trump is the first U.S. President to understand how the red dragon hides behind the panda mask.

It is specifically because he understands that Panda is a mask that President Trump messages warmth toward the Chinese people, and pours vociferous praise upon Xi Jinping, while simultaneously confronting the geopolitical doctrine of the Xi regime.

In essence Trump is mirroring the behavior of China while confronting their economic duplicity.

Peace or war. Win or lose. Yin and Yang. Culturally there is no middle position in dealings with China; they are not constitutionally capable of understanding or valuing the western philosophy of mutual benefit where concession of terms gains a larger outcome.

If it does not benefit China, it is not done. Why would any nation agree to any action that is adverse to their specific interests?  From the Chinese position any nation taking such action is weak.  In politics or economics the same perspective is true.  It is a zero-sum outlook.

Therefore the only way you win a strategic confrontation with China is to control the outcomes of victory.  China must win inside the outcome as presented.  All successful negotiation with China is based on the principle that China must view the presented end-deal as a victory.

If the negotiation is presented as China needing to concede a current position, they will never agree and a deal will never happen.  China must gain within the outcome.

Avoiding loss is not victory from the Chinese perspective.

Apr 10 2018

Hungary Election Also Shows EU’s Days are Numbered


Armstrong Economics Blog/European Union

Re-Posted Apr 10, 2018 by Martin Armstrong

Viktor Orban has clearly won the parliamentary elections in Hungary winning 74.6% of the votes on Sunday in Budapest. His party could take 134 seats in the 199-seat parliament giving it a constitutional two-thirds majority. This is an amazing landslide victory for Orban that no American president has ever reached such a majority. The record is 61.05% of the popular vote and that was a sympathy vote for Lydon Johnson after the Kenney Assassination. Even Franklin Roosevelt in 1932 only won 57.41% and Ronald Reagan even beat Roosevelt scoring 58.77%. This puts Orban’s victory at a truly historical level and it is decidedly anti-EU based upon the Refugee Crisis.

After all, it was 1683 when the Turks invaded the Holy Roman Empire and sought to conquer Europe with the Battle of Vienna. That is a historical event that lives on in memory throughout that region. The Muslim invasion crossed from Istanbul through Bulgaria, Serbia, Hungary, to Austria. That event still lives on in the memories of the people in that region that Western Europe does not respect.

Little by little, the European Project is being torn apart all because of the Refugee Crisis that was begun by Markel without ever putting anything to a vote for all of Europe who must suffer simply because Merkel tried to divert her critics from Greece. This has demonstrated that the European Project has been a complete failure. It allowed Merkel to affect all of Europe without any democratic process. The European Project has failed for it has tried to federalize Europe covertly, yet has undermined the political-economic structure necessary to accomplish that goal. The European Project should have remained a trade agreement rather than a political agenda. By trying to force their centralized agenda upon everyone, they are acting no different than any other conqueror.

Apr 10 2018

Russia & the Panic


Armstrong Economics Blog/Russia

Re-Posted Apr 10, 2018 by Martin Armstrong

 

QUESTION: Mr. Armstrong; I greatly appreciate the mere fact that you cover the Russian markets when nobody does. It is really incredible that your computer can write so much and there is no fear of bias or policial slant. Socrates just wrote, “At this moment, this market is in a downward trend on all our indicators looking at the weekly level.” There has been a panic taking place here with stocks crashing on the news of asset confiscation. You mentioned that your model will predict war correlating all the markets. Is this what is beginning with the crash?

EV

 

ANSWER: Yes. Here is a chart of the British share market as World War I began. There, the market began to display inherent weakness. It could not get through the top of the channel and as soon as the previous year’s low broke, the market crashed. They then closed the market completely so many people lost all liquidity. We must fear that Europe will do the same. The EU does not like free markets. They have outlawed short government bonds. They are trying to seize the market in the Euro from London because they want to manipulate the currency and will try to prevent a currency crash with the stroke of a pen. Europe remains deeply in danger of a liquidity crisis. If you have money all parked in Europe, you may find it of little use in a crisis.

The immediate crash in Russia was caused by investors in Moscow dumping Russian shares and the ruble following the announcement that the West wanted to confiscate Russian assets abroad. The ruble depreciated by nearly 3% against the dollar. The United States imposed sanctions on Russia for interference in the 2016 US presidential campaign, which is something they do to everyone else from Canada all the way to Russia. Hillary has turned Russia bashing into a national sport. This is clearly leading to a confrontation for the West desperately needs a war to divert attention from the failure of social program promises.

The Russian government will retaliate against the tightened US sanctions. Clearly, the actions of the Congress are unjustified and intended to provoke a confrontation. We are on the path to war and every opportunity to further that goal is clearly being taken by the USA, UK, and the EU.

Apr 10 2018

The Coming Pi Target – Will it Bring World War III?


Armstrong Economics Blog/War

Re-Posted Apr 10, 2018 by Martin Armstrong

 

QUESTION: Mr. Armstrong, Putin invaded Syria precisely on the day of your model back in 2015.75. You have stated at the WEC that the upcoming Pi turning point on November 21, 2018, is most often political in nature. You scheduled this year’s WEC for the week before. Trump just called Assad an animal. Even 911 took place of Pi target to the day and Greece applied to the IMF for a bailout again precisely on that Pi Target. Do you think that this turning point will be a war starting in Syria?

I am sure this year’s WEC will be a thrilling moment in history.

WG

 

Syria_Russia_9-30-2015

 

ANSWER: Unfortunately, the nagging fact that Putin invaded Syria precisely on the day of the ECM 2015.75 leaves one with a feeling of a stone in the stomach. All of this investigation that Russia interfered with the US elections set in motion by Hillary has convinced so many of her followers that Russia is the Arch Enemy as if in some comic book. This has created the proposition in the mind of the mindless that Russia is some sort of great evil that should be eradicated from the face of the earth. That mindset, no matter how wrong and distorted, is the basic requirement to support a war. Hillary has been one vindictive and evil person and her running around the world to blame Russia for her failed election has done so much to undermine world peace I do not know where to even begin. She has created the image that Russia is evil and that is all the military needs to justify playing with their weapons to attack Russia.

This entire confrontation with Russia has been orchestrated by the military aided by Hillary. I have warned that the mere fact that Russia invaded Syria precisely on the day of the ECM was a warning call to all of us to wake up and smell the roses before the lid of the coffin is closed. The entire Refugee Crisis began just weeks into this ECM wave when Merkel stood up with open arms to divert her negative press for refusing to forgive any debt with Greece. Then, the Washington Times wrote on September 10th, 2015, “Angela Merkel welcomes refugees to Germany despite rising anti-immigrant movement.” The entire refugee crisis was created by Merkel as a diversion because Germany was being viewed as the harsh enforcer of loans to Greece.

The ECM Turning Point 2015.75 has been a major profound event. This means that the likelihood of the coming Pi target on November 21st, 2018 has a higher potential to be linked (1) to the Middle East, and (2) to Russia.

The answer, unfortunately, is yes. We will be looking at the world markets to extract what they are setting up for at the Orlando WEC. This event will be important for (1) the consolidation should end, (2) we have the Monetary Crisis Cycle in play, (3) the Pension Crisis is beginning cascading into a Sovereign Debt Crisis, (4) interest rates will rise even faster with war, and (5) the prospects of the Pi target, which is normally geopolitical rather than economic, also comes into play.

This will NOT be an easy time to deal with all this. We will need the computer and review all the markets for only then collectively can we possibly comprehend what is about to unfold from that turning point into 2020/2021. This is essential not just to make sure we have a great trading/investment opportunity, but being on the right side of this will be everything.

To be on the wrong side of the market may mean you simply lose everything going forward. This is the time to let the markets speak loud and clear. It is our job to listen. History repeats, but like lightning – it never strikes precisely at the same spot every time. The only way to see what is coming is to look at the world as a whole. The markets collectively speak to us for they show the true trend rather than personal opinion. There is no human alive or dead who has ever been able to predict such events from a personal gut perspective consistently time and again.

Apr 9 2018

World Trade – We Are Lost But Don’t Even Know It


Armstrong Economics Blog/World Trade

Re-Posted Apr 9, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; You seem to be the only rational person who understands world trade. Trump said we already lost the Trade War. Does he have any clue as to what is really going on in world trade?

HF

ANSWER: Sorry, but he and just about everyone else is just brainwashed. We are experiencing the same problem when the Japanese trade surplus was number one. Rubin was starting the same nonsense under Clinton back in 1997. I wrote to Rubin in May 1997. Once again, I warned of coming crazy volatility and that hit the next month with the 1997 Asian Currency Crisis. Rubin was again trying to talk the dollar down for trade but with Japan.

These people are just amazingly stupid or just too lazy to do the real research. Back then, Japan was the largest holding of US debt. They had bought the debt to try to ease trade friction.  When they buy US debt, that runs through the Capital Account – not the Current Account. However, the interest they earn goes back out through the Current Account. Hence, the more debt they buy to ease the trade deficit actually makes it worse.

When it comes to world trade, we are simply lost in our own short-sightedness. Nobody seems to even bother to look at this issue. If we add world trade and attribute it to the flag flown by the parent company, the USA dominates the world. There is a trade surplus.

I had recommended to the Japanese to buy gold in New York and ship it to London and resell it there. That was a transaction which went through the current account and provided the impression that the trade deficit was declining.

The situation is just hopeless. Nobody will listen and they just like yelling about things that make absolutely no logical sense.

Tim Geithner responded:

Categories: World Trade
Apr 9 2018

Currency Based v Credit Based Monetary System


Armstrong Economics Blog/Economics

Re-Posted Apr 9, 2018 by Martin Armstrong

Economic Theory

QUESTION: Hi Mr. Armstrong. Impressive work you do. I have followed you closely since I watch your documentary and your predictions have mostly been spot on.

I was wondering if you perhaps could share some thoughts on the increasing US budget deficit while employment etc is at multi-year low. This is rare and would someday crash and burn I guess.

EL

ANSWER: I fully understand that the prevailing belief concerning economic theory is that an increase in money supply will cause inflation. There is absolutely NO EMPIRICAL evidence to support that theory. Much of this concept has been distorted by the ideas of Sir Thomas Gresham (1518-1579) who is famous for his Gresham’s Law that bad money drives out good. He was more than just an early observer of finance. Gresham was England’s agent in the Low Countries where he negotiated loans with the bankers on behalf of England. The repayment of their sovereign loans and interest owed by England caused exchange fluctuations and markets began to trade showing the swings in confidence in the various sovereign debts.

Gresham attempted to smooth out the market fluctuations without success. He advocated using the power of government to affect these fluctuations suggesting to create an exchange-equalization account to control the value of the currency. This is not dissimilar to the 1985 attempt to manipulate currency by the formation of the Group of Five nations (G-5) that was the brainchild of James Baker advisor to President Ronald Reagan. Just as the free markets caused the 1987 Crash due to the manipulation of currency by the G-5, here also we find that the free markets forced reform of the currency in England and Spain, and this would be a bitter lesson that would result in strikingly distinct monetary policies in Britain compared to Continental Europe.

Exchange rates among nations were entirely based upon the metal content of the coinage. Both Spain and England experimented with debasing the coinage in an effort to increase their money supply. Therefore, Gresham’s observations were based entirely upon foreign exchange predicated upon the metal content of the coinage rather than full faith and credit in a government. As a result, the theory of inflation that dominates modern thinking remains tied to the old world monetary system BEFORE based upon CURRENCY BASED compared to the modern system which is a CREDIT BASED system dependent upon the full faith and trust of a political government rather than a monetary bases system.

This is why our modern ideas of Quantitative Easing have FAILED to produce inflation for the monetary system today is CREDIT BASED rather than CURRENCY BASED. Exchange rates are no longer dependent upon metal content, but instead, they are based upon the perception of the government. This is why the dollar will fluctuate based upon trade news etc. When you look at the actual amount of money impacted even by a trade war, it is negligible. The entire price action is based upon anticipation (confidence) rather than an actual monetary system outcome.

Apr 9 2018

Great Alignment – Metals – Shares – Tangible Assets


Armstrong Economics Blog/Basic Concepts

Re-Posted Apr 9, 2018 by Martin Armstrong

QUESTION: Hi Mr. Armstrong, I notice that the gold market and the Dow Jones they both had a high in January and since then they have been treading water, are this markets getting in sync or is just a coincidence. Also when it come to the markets you have explain that we will always see the “if then” situation, my question is a what point do we know that this is the right time to pull trigger on buying or selling?

Thank you

NMP

ANSWER: We are not there just yet. However, we are starting the Great Alignment and this is what needs to take place as we move into the future. The 99% of analysis out there on gold is just so wrong it is laughable. They typically call the dollar to collapse and gold will soar. They look at historical charts without understanding the economics behind them. Yes, you see gold rally between 1930 and 1932 so they forecast gold will rally with the collapse of the dollar and the stock market. However, 1931 was the Sovereign Debt Crisis where most of the world permanently defaulted on their National Debts. The USA did not. So because we were on a gold standard, if the price of gold rose, so did the dollar. OMG! That must be heresy!

When you are on a gold standard, then tangible assets drop in terms of currency so yes gold rises. But when you are NOT on a gold standard, then gold is just a tangible asset that declines against the currency along with everything else. Most of these people are clueless about understanding the monetary system

During the rally for gold into 1980 when the dollar was declining in the floating exchange rate system, the stock market did not crash – it consolidated. These people spin out total sophistry that sounds great, cause so many people to lose their savings, and they never repent or try to understand why they have been wrong every since 1980

The Great Alignment will be when all tangible assets rise against a declining purchasing power of the currencies which today are NOT linked to gold.

We are getting closer. Do not rush in where only fools are found.

Apr 8 2018

Sunday Talks: Gordon Chang Discusses China Trade Confrontation…


Re-Posted from The Conservative Tree House on April 8, 2018 by

Gordon Chang discusses the ongoing trade initiatives by President Trump to reset the trade imbalance with China.  The dynamic of confronting a bilateral trade relationship with a government controlled economic state (China) is the dynamic behind the discussion.

Mr. Chang does a good job of outlining the ‘big picture’ issue from the perspective of the Trump administration trade policy toward China.