Topic: Martin Armstrong Discussion - page 350. (Read 647188 times)

Maybe he lives in California and wants to know when to buy or sell a house.

To answer the question, those prices in California are already extremely high compared to 2000. But they should go higher if Chinese are trying to get out of China.

Is california the world? Why would you ask something like that?

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Athough it is not what you (ion.cash / TPTB) wanted, I PM-ed you!

(Email to M.A. re low interest rates and what that means, just in case any of you know ion/TPTB better than I do).

I emailed him in reaction to what TPTB posted recently (5000 years of interest rates), if I hear back from Armstrong, I will advise everyone (duh!).

TPTB_needswar has the best grasp on this, without doubt. I often feel things are so interconnected that saying X happens because Y is too simplistic and there is something critical I am missing

From what I understand (and similarly I write this to try and formulate my take), there are a few factors:

- Capital flocks back to safety initially as EM currencies & economies deteriorate (USD is last man standing)
- A rise in US interest rates / further decline in EM currencies will see the carry trade unwind as the spread narrows so money flocks back to the USD (especially in case of rise cycle)
- It would 'normally' be into gov bonds (safety) which holds down rates but MA says this is a crisis of confidence in government
- Governmental balance sheets (esp EU) took on much of the financial institution debt in 08 and now have the extra debt loads from the free money era and underfunded welfare/pension liabilities), so while EM / EU govts will be first to sink the US will follow eventually)
- As the QE tide and EM economies go into QT (to support their currencies), they sell UST instead of buying, which used to hold down rates, but now will serve to increase them

Generally I think yes, but I assume it is more complicated than that. Oil, fracking, commodity demand, search for yield, threat on rising US rates. Interesting to see Brazil, a commodity economy and ironically the first to call out the new currency war in 2010, has been downgraded to junk

http://www.zerohedge.com/news/2015-09-09/brazil-cut-junk-sp-etf-falls-5-post-mkt


Yes, as currencies collapse v USD, debt loads become unpayable given that they were predicated on low interest and strong EM currencies. I guess watching junk bonds and corporate debt in the EM's will give best advance warning. EM economies collapse with corporations going bankrupt etc, currencies collapsing, confidence declining.


MA writes that raising rates will be horrendous for EM's but a neccessity for the failing pension funds who are already underfunded and need a monumental increase in yield to cover pension obligations (see Chicago and a few others).

So its rock v hard place; batter the stock market, EM's etc by raising rates or try to 'normalise' rates to stave off municipal bankruptcies at home


And retail investors will be onboard the US stock market train after being beaten to death in 00 and 08 - they finally will get back on board as it flies.

Seems that way, and this was part of the upthread discussion regarding the ECM turning points and 26 yr decline in Real Estate.

What do these models mean for real estate prices in California? Will they continue to go up until 2017.9?

Let me see if I can summarize this for my own understanding. Please correct me if I'm wrong.

According to Martin Armstrong, it doesn't really matter how much money America prints or how many UST the Chinese offload. The dollar will remain king because there's no other "safe" alternative for people to put their money. The YEN/EUR are big enough, but they both have fundamental flaws. EUR will probably disintegrate and the Japanese government is hellbent on debasing the currency.

Step 1 (happening now): The China bubble pops taking commodities-based emerging markets with it (as China is the world's largest source of demand for these commodities). Commodities get hammered.

Step 2: Emerging markets issued 19 trillion dollars in US-denominated debt.
That US-denominated debt doesn't get paid back and the money is essentially destroyed decreasing the supply of dollars. The world economy enters depression starting from the periphery and collapsing inwards to the core. The most fragile, most unsound economies collapse first (with perhaps an initial crash in US assets as well) and capital rushes to the US sending US assets way up. US will be the last man standing.

Step 3: Fed will be pressured to increase interest rates because US bond holders will be saying "What ever happened to raising the interest rates like you said you would?" and Politicians will be saying that the Fed is causing bubbles and making housing too expensive, etc. The Fed will raise interest rates by a tiny increment because of the pressure, but UST holders will realize that all the talk about raising rates was bullshit. The Fed won't be able to increase the rate even 1% without making it completely impossible for the US to service its debt. Capital starts exiting bonds and going into the stock market, making stock prices bubble more.

Step 4: By late 2017, things are very volatile. Some parts of the world will be experiencing social unrest. Hard to say what happens next. The rising stock market will be the only thing keeping the dollars value because people will have already lost faith in the government's promise to raise interest rates and pay interest without debasing the currency. Hence, the UST market will be collapsing. But eventually the stock market pops as well. Possibly US corporate earnings reports come in and overseas sales are complete shit because people in other countries are buying much less from the US. Now there's no safe place to put your money. And governments will be hunting for it because they'll be broke and hungry.

Step 5: Now people start hoarding hard assets and hopefully crypto so we can be rich.

So let's discuss/elaborate this scenario. 
 
How might the globe *realistically* lose faith in the dollar?  What would need to happen in order to set about this chain of events? 
 
Step zero: Massive dollar printing since 2008. 
Step one: China having a market and financial crisis begins to offload their US Treasuries. 
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Step :

Spending tons of money is easy. The government can just hire my ex-wife. She will design The Second New Deal. Announce universal healthcare and double social security. All paid for by your neighborhood dollar hoarder. They can literally get into a helicopter and throw money down on people.

I think the real problem is when everyone (all at once) loses faith in the USD in addition to abandoned UST and abandoned US stocks. That's when the government will truly be at a loss. There's only so long that the government will be able to pay its thugs and tax collectors when they have totally lost control of money.

Interesting remarks, jehst.

Re No. 1, my guess is that most/all .govs will go ahead and try to seize what they can that is EASY for them.  True, it would be very hard to seize foreign dollars.  Raise taxes, yes.  But many taxes can be avoided by not making (much) income, not owning too much real estate, etc.  Seizing gold, naah.  They might try to TAX gold sales and purchases though.

Re No. 2, another guess is that with monetary velocity near zero now that printing money may not stop DEFLATION.  They would have to print a WHOLE LOTTA MONEY (QE^QE...  I do not see political (nor bankster) will to do that in the short-term.  Longer-term, printing money becomes more likely.

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EXCELLENT clarification & analysis TPTB.  You explained some of Armstrong's points better than he himself has.  Bravo.

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I am not an economist (maybe a bozo though), but I agree that for a little while, barring Black Swans, that we are in a King Dollar environment.  After 2015 is done (we have some large one-time expenses this year), we are SLAMMING SPENDING DOWN.  That includes buying more gold, I am "there" (have enough).

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Re emerging markets, I noted a ZH article that showed declining fundamentals for Peru.  No surprise, Peru exports a lot of commodities (especially copper to China).

Our business there is now prepared to buy much less inventory on short notice.  So far, sales are OK, but at some point China's problems will yield problems in Peru as well.

My friend selling large US industrial capital equipment in S America just told me that Peru has stopped purchases, after many years of being a great market.  Venezuela and Brazil (duh...) have been BAD for him for years now.  Even mighty Chile has seized up for his equipment sales.

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TPTB

I would be curious to learn your analysis for The Philippines, a country in many ways very different than others I have followed.

Let's say I'm government. You put cash under your mattress because you don't believe in government bonds nor do you believe in stocks anymore. I raise UST rates to 20% but you simply don't believe in government anymore and I can't keep the rate at 20% for very long without instantly being unable to service my debt. So I can't raise money anymore through UST. That leaves me with two options:

1) I hunt down your cash, raise real estate taxes, confiscate gold, etc.
2) I print money.

Isn't the problem with Option 1 that there's USD all over the world? Am I going to hunt down cash in the Caribbean, Switzerland, Saudi Arabia, and all over the world? Option 1 seems a lot harder to pull off than Option 2. With Option 2, I just borrow money at 0%, use it for government spending (create governments jobs, finance huge government projects, service the debt) and stealthily (and heavily) tax everyone who is hoarding dollars through inflation. Only when that stops working am I forced to do Option 1.

Your confusion fundamentally derives from your assumption that cost push inflation and deflation are the primary determinants of economic outcomes and health. Rather debt load and international capital flows are much more powerful factors. This generative essence point is what makes Armstrong's analysis so much more reliable than the other bozos who claim to be economists.

That is a good point to raise and attempt to clarify. The USA will be experiencing deflation of imported goods cost (USA being a significant net importer) simultaneously experiencing a net inflation in asset prices (especially the stock market) because of a net gain in the capital account (ingress of international capital as the carry trade tide of QE comes back in). Simultaneously exports will be experiencing deflation both due to increase in cost of exports for importers and the collapse of the international markets which are short the dollar ($9 trillion international dollar loans from carry trade due to ZIRP from QE). So from 2015.75 to 2017.9, mainstreet USA will be experiencing deflation in both costs of imports and income as export industry collapses. Wallstreet USA will be experiencing asset inflation and increases in net worth. Again the rich class is victorious both on the egress of QE and again on the ingress reverberation effect.

Other significantly net importing countries which are not pegged to the dollar (e.g. not Hong Kong) such as the PIIGS, UK, France, and India will be experiencing basic goods cost increases thus mainstreet experiencing inflation at the same time their economies are collapsing due to debt defaults as the QE carry trade reverses and a liquidity crisis envelopes, i.e. stagflation or deinflation. The net exporting countries have a slightly better buffer zone but will eventually get caught in the contagion of deflation and stagflation/deinflation.

In short, a contagion of pain of deflation of income and jobs every where, and even some basic goods cost inflation in Europe and India. China is also allowing some goods cost inflation to kick in by allowing some subsidies to default (which they absolutely must do or it will be forced on them Minky Moment style or already is).

The only upside are the rich who ride the last bond bubble to October, then ride the dollar and US stocks stampede to 2017, then after that the USA falls completely into deflation too and the world goes FUBAR.

From 2018 to 2020, it is going to be waterfall collapse every where, and the only assets rising will probably be the shit the government can't grab, perhaps crypto-coin and gold, but the government will likely attack all the gold dealers thus I think crypto is our best bet. Technology and nerds have an inherent advantage over the government. We can outsmart them. They are too slow. We innovate too fast. They have no clue what we did until years after we did it. Then it takes them another 5 - 10 years to get all the other governments organized and unified. Gold is an old relic they know how to attack. A Treasury official said some years ago, "we will burn the fingertips of the goldbugs up to their armpits". (that might have been Larry Summers or Time Geithner or more likely Robert Rubin)


Not likely again before 2032. The political climate in the USA will have changed so much by 2017.9, it will be impossible for them to get away with another QE. The problem is confidence. Once the people have decided to exit stocks and put their cash under their mattress, then the Fed is powerless. What the government will have to do instead is stop people from getting cash to put under their mattress. This is why the coming attack on cash, capital controls, bail-ins, nationalization of pension plans, etc..

The shit coming is going to make you wish for QE. But your prayers will not be answered.

I have been trying to take the bull by the horns and work on the crypto-coin attributes we will need coming 2017ish.

When does QE infinity resume? 2017.9?

I don't understand how a rising currency prevent deflation? When the currency appreciates products are cheaper so all else being constant this is deflationnist.

Conversely, if the currency of other countries depreciates the goods and services will be more expensive, I don't see how this is deflationnist.

And as I have stated too many times already, US stocks and the US dollar will receive stampede capital inflow after 2015.75 until the next turn in 2017.9 because these will be perceived as the most liquid private assets for the time being (this will cause the DJIA to double or triple and the rising dollar will reverse the $9 trillion carry trade in dollar loans originally spawned by the ZIRP of QE, wrecking massive deflation in all countries except the USA). The US will eventually top out because of these stampede in of international capital flows, and the USA will probably end up attacking that capital, thus eventually it will shift towards the harder core private assets such as crypto and gold more. Bitcoin and crypto aren't scheduled to bottom until Spring 2016. Thus 2017.9 to 2020.05 looks to be a descent into totalitarian hell. And they will attack all the places you store and trade your gold. That period is where everything will get very dicey and perhaps anonymous crypto is going to be the big winner but many details remain to be sorted out on that one. I'd hedge my bets if I were you via diversification. Which is what you can see I am doing now by attempting to develop a crypto-coin which is not purely focused on anonymity but rather on fixing Bitcoin's major faults especially around scaling and real-time use.

I am also hedging my bets by thinking about diversification of opportunities in the fledging Knowledge Age, which is counter trend to this global deflation.

I am still wishing many of you would raise this point with Armstrong. I am tired of emailing him.

Again to reiterate the emphatic point I made upthread, the elephant in the room that Martin Armstrong is apparently missing is that the 5000 year low interest rates and deflation is because we are shifting into a Knowledge Age wherein most of the old world capital is dying because knowledge creation can't be financed with usury. The bubble in government debt is because most people in the world haven't moved forward to the Knowledge Age and the boomers are still living in the 1950s:

http://www.armstrongeconomics.com/archives/36934



And again his myopic misunderstanding is that why banking institutions can be destroyed, individuals within the elite run off like bandits with the loot. The elite don't own less of the industrial world since prior such failures that Armstrong raves wipe out the banksters.

I was a Perot volunteer (Ventura County, CA) going house-to-house doing sit in talks with people after knocking on their door. I attended the big rally convention in San Diego. I was extremely dejected after he quit and swore to never waste my time in politics again. At the time, I was also suspicious that there was some fraud hiding and that his big businesses had been threatened. Well now I read maybe he was corrupt or just duped into helping Bill Clinton defeat the Republicans.

http://www.armstrongeconomics.com/archives/36990

So bonds vs gold or Bitcoin then? Govt vs private

The real estate cycle clearly shows it is crashing from 2015.75 to 2033. The bounce from 2012 to 2015 (precisely 2011.45 to 2015.75) was primarily in the high-end of real estate as international capital is looking to park in upscale locales for 2nd homes, vacation homes, etc.. But now even that upscale market is turning down, as evidenced recently by UK initiating a new tax on that real estate demographic.



It is incorrect to conceptualize the ECM as positive or negative, rather as a cycling between private and public. The context will determine if that shifting is positive or negative (i.e. increasing private confidence is positive in some respects and has different impacts depending on which stage in other cycles we are in such as the 309.6 year cycle, real estate cycle, etc). The ECM shifts direction every half of an 8.6 year (= Pi x 1000 days) business cycle, i.e. 4.3 years. The ECM is a cycle of shifting between public and private confidence, i.e. confidence in the government and in private assets respectively. Also every 6 cycles or 51.6 years, the theme of the overall cycle shifts been public and private confidence. Since 1981 when public confidence peaked (since the last time private confidence peaked in 1929), we've been gradually losing confidence in government and the confidence in private assets will peak in 2032, then we will begin a gradual transition to a new 51.6 public wave with gradually increasing confidence in government and declining confidence in private assets, yet for a long time from 2032 private assets will still be more trusted than government (just think about 1929 to 1944 before the golden 1950s age started and then you understand why boomers love government so much... think drive in ice cream and cars with gull wings). So don't look at 2020 as a turn up in the ECM, but rather it will be a period where the mad stampede into private assets from 2015 has abated somewhat as Asia will bottom in 2020 so some investment will start to trust Asian bonds and governments some then. But then in 2024, another stampede back into private assets again, which will probably be the West totally collapsing from the mad stampede into Asia. And then 2028 to 2032 will be Asia really rising up. You can see this counter effect from 1977 to 1981 where private asset of gold went bonkers.



Rather conceptualize the ECM turn dates as time when international capital shifts and these cause major inflection points in markets.

Great resource OROBTC, thanks.

Here's a 2009 paper on the Real Estate cycle that is a good read.

http://www.scribd.com/doc/22733555/A-Forecast-For-Real-Estate