QUESTION: Hi, Martin
You have referenced the three different types of inflation in previous posts. Please speak to what we can expect to see manifest from this record money printing/stimulus from the Fed.
ANSWER: This cycle will be on the back of shortages in commodities. This is what the computer has been forecasting all along. We have been witnessing shortages in food. But this coronavirus has also disrupted the supply chain in many areas. Then we have the Monetary Crisis Cycle coming for 2021 into 2022. With Europe planning to cancel its paper currency to try to force everyone into banks, you have the punters looking at this as bullish short-term for a trade.
The European and Japanese governments will have little choice moving forward, for they have destroyed their bond markets and are UNABLE to issue bonds that institutions will buy at these crazy rates. It is more than a simplistic printing of money. We are looking at the bond market is collapsing. This is the DESTRUCTION of Capital Formation so in the end, capital must flee anything connected with governments and seek shelter in primarily the stock markets.
So far, we are into a 3-month reactionary bounce with the NASDAQ taking the lead and the Dow lagging. This is very disquieting for it warns we are going to see much higher volatility into the next two years, perhaps more so than anyone has ever witnessed in their life or for the past 300 years.
The Reserve Bank of Australia has cut the official cash rate for the second month in a row to 1%. As we head into the turning point of the Economic Confidence Model come January 2020, the unemployment rate increased to 5.2% in April. GDP growth remains very low at 0.4%, wage growth is sluggish, inflation is well below target, and retail sales are struggling. None of this will change until after the ECM turns as people begin to see that central banks are incapable of managing the economy.
Have read the two blogs on the Emerging Markets. Hit like a cold bucket of ice water. Knew something was coming from all your writings and the EMC, but Wow. Right in front of us.
Here is an observation, a thought:
Emerging Markets could turn out to be the Sub-Prime of this new era.
On the periphery. A Liquidity crises. Unplanned for, because Unexpected.
REPLY: This is going to be an extremely interesting WEC. Whatever could go wrong is going wrong in the world. It is becoming the perfect financial storm as we head into the bottom of the Economic Confidence Model. We have politicians only looking at saving their own power who are blind to the implications of their actions on a global scale. There are even rumors now that Recep Tayyip Erdoğan will claim some manipulation of the election by another country in a vast conspiracy. If he loses, he will likely refuse to leave office.
QUESTION: Mr. Armstrong; I have studied you Economic Confidence Model and found it to be extremely accurate in forecasting the business cycle. When I showed it to my professor here at ——— he responded that itis impossible to forecast the business cycle. He would not even engage in a conversation about it. Why are they so intimidated by your work?
ANSWER: What you have to understand is that IF it is possible to forecast the business cycle, then that means politics have to change. The entire system is based upon the proposition of vote for me and I will reduce unemployment and bring world peace unless I do not like the people. If you listen to Larry Summers, he states that if you could forecast the business cycle, that would be bad because it would become a self-fulfilling prophecy. He also states that the economy is far too complex, like weather, with way too many moving components that make it impossible to forecast. That means the door is open to manipulate the economy, as he suggested with negative interest rates. When that failed, he then discovered there was the zero interest boundary where people would withdraw their cash from banks and defeat his negative interest tool. He has thus advocated eliminating physical paper money to allow his negative interest rate idea to then work — so he maintains. He ignores, of course, the entire pension fund system.
…click on the above link to read the rest of the article…