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Riptide in the World Economy

COMMENT: Marty, I think the storms are creating dangerous rip currents that just suck swimmers out to sea here in Jersey. Never hear about that in Florida. I guess that and taxes are what made you leave. LOL

DK

REPLY: Actually, I was caught in one when I was a teenager. My uncle was perhaps 15 feet from me and the harder I swarm I was just standing still. Suddenly, the current shifted and I could move forward. It was not a great feeling and it was inv visible. There was a sand bar I was trying to walk to and was caught in a riptide between shore and that sand bar.

It was a valuable lesson in life. Sometimes we walk straight into the invisible which becomes life-threatening. Kind of like current events. I have been in the middle of this crowd, but I never expect that they would actually get this going in their personal direction so swiftly. It is one thing to forecast what the model says like the commodity boom post-2020 and the move toward authoritarianism. But to live through it is another thing altogether. It is fascinating to me to see it all laid out years in advance and then it unfolds according to plan. It is like that hidden riptide but in the world economy.

History Warns – All Governments are the Same!

A man pawns himself off as a baby Kangaroo’s mother. Politicians have LEARNED that they too can pretend that they are your parent and are solely interested in taking care of you when their objective is really raw power.

Government presents itself as if it truly cares about “We the People” when behind closed doors it has nothing but contempt for the people, who they view as easily manipulated and too stupid to know what is best for them.

Everything they do is couched as pretending to protect society when they have no respect for the people or our liberty.

Fauci even said he does not concern himself with the loss of our liberty. Yet, these same people will send us off to war pretending it is to preserve our way of life.

Not only has Snowden exposed that they have collected a dossier on every single person just in case they need to look at your life, but they spy on everything we do, say, or even think. Our government is following the very same path as the most notorious Communist Secret Police in Germany — the Stazi. They are collecting data on everyone. As Amnesty International reported, the Stasi’s massive archive held files on millions.

Once more, we have the government telling us to report family members to the government.

History Repeats Because the Passions of Man Never Change – All governments act the same.

K-Wave – Real or Not?

QUESTION: What is your opinion on Kondratieff Waves?

EH

ANSWER: All those investigating cycles within the economy made a simple mistake. Kondratieff followed agriculture/commodity prices when agriculture accounted for 70% of the GDP pre-19th century. That only began to decline from 1850 forward, dropping to 40% by 1900 as the Industrial Revolution emerged with the invention of the steam engine. Moreover, aside from climate impacting the food supply, there were also wars. So the Kondratieff Wave failed to take into account all of the external forces.

If we extend the K-Wave 54 years from the commodity high in 1919, that brings us to 1973 which was close to the end of Bretton Woods in 1971, and the OPEC Oil crisis. Another 54 years from there will bring us to 2027. Therefore, this may be based entirely on commodities, but they were impacted by weather and war. Note 2027 is the ideal target on our model for war derived from entirely different sources.

There is a cycle of industrialization as well. Rome began as an agrarian society and moved toward trade, which brought them into conflict with Carthage. Rome itself became more like New York and grain was imported from Egypt. As agriculture became more of an import, Rome blossomed like New York into the arts and culture. The shift toward industrialization also resulted in a decline in birth rates for children. Large families were needed in an agrarian society but not so much in a developed society – hence the family laws of Augustus.

The first known Clean Air Act occurred in 535 AD by Emperor Justinian in Constantinople. He proclaimed the importance of clean air as a birthright. “By the law of nature these things are common to mankind—the air, running water, the sea.” Even Cicero wrote about pollution in the ancient city of Rome. This went hand and hand with developed societies and urbanization.

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Cycles, Systems and Seats in the Coliseum

Cycles, Systems and Seats in the Coliseum

The idea that debt, leverage, speculation, greed, exploitation and parasitic elites can expand exponentially forever is magical thinking.

Contrary to first impressions, I am not a doom-and-gloomer; I’m a systems-cycles-er, meaning I’m interested in where systems and cycles are heading.

Cycles work because we’re still running Wetware 1.0 which entered beta testing around 200,000 years ago and was released, bugs and all, around 50,000 years ago. Since the processes and inputs haven’t changed, neither do the outputs.

Nature is a mix of dynamic, semi-chaotic systems (fractals, etc.) and cyclical patterns which tend to operate within predictable parameters. Why should human nature and human constructs (societies, economies and political realms) be any different?

So longterm success breeds complacency, hubris, economic and intellectual sclerosis, draining political infighting and the overproduction of parasitic elites, to use Peter Turchin’s apt description. Consumption of resources expands to soak up every last bit of what’s available and then the supply of goodies plummets for a multitude of completely natural and predictable reasons (sunspot/solar activity, El Nino, etc.) and a host of unpredictable but equally natural semi-chaotic extremes (100-year droughts, floods, etc.).

Wetware 1.0’s go-to solutions to all such difficulties are rather limited:

1. Ramp up magical thinking. If a couple of human sacrifices ensured good harvests in the good old days, let’s slaughter a couple hundred now–and if that doesn’t work, then…

2. Do more of what’s failed spectacularly and slaughter a couple thousand fellow humans, because darn it, maybe everything will turn around if we just kill another couple dozen.

This requires ignoring the novelty of the current challenges and clinging to what worked so well in the past even as whatever worked in the past can’t possibly work now because circumstances are fundamentally different.

3. Seek scapegoats. It’s those darn witches. Burn a bunch of them and our troubles will magically disappear.

…click on the above link to read the rest of the article…

Has Our Luck Finally Run Out?

Has Our Luck Finally Run Out?

We are woefully unprepared for a long run of bad luck.

Long-term cycles escape our notice because they play out over many years or even decades; few noticed the decreasing rainfall in the Mediterranean region in 150 A.D. but this gradual decline in rainfall slowly but surely reduced the grain harvests of the Roman Empire, which coupled with rising populations resulted in a reduced caloric intake for many people.

This weakened their immune systems in subtle ways, leaving them more vulnerable to the Antonine Plague of 165 AD.

The decline of temperatures in Northern Europe in the early 1300s led to “years without summer” and failed grain harvests which reduced the caloric intake of most people, leaving them weakened and more vulnerable to the Black Plague which swept Europe in 1347.

I’ve mentioned the book The Fate of Rome: Climate, Disease, and the End of an Empire a number of times as a source for understanding the impact of natural cycles on human civilization.

It’s important to note that the natural cycles and pandemics of 200 AD didn’t just cripple the Roman Empire; this same era saw the collapse of the mighty Parthian Empire of Persia, the kingdoms of India and the Han Dynasty in China.

In addition to natural cycles, there are human socio-economic cycles of debt and decay of civic values and the social contract: a proliferation of parasitic elites, a weakening of state finances and a decline in the purchasing power of wages/labor.

The rising dependence on debt and its eventual collapse is a cycle noted by Kondratieff and others, and Peter Turchin listed these three dynamics as the key drivers of decisive discord of the kind that brings down empires and nations.

…click on the above link to read the rest of the article…

The Next Major Shift in Society

The Next Major Shift in Society 

QUESTION: Do you see this new age of the internet destroying jobs that result in a Great Depression as you have illustrated with the advancement of the combustion engine in altering the agricultural economy as we move into the future? What is the future for our children?

Thank you

KL

ANSWER: Society historically moves through these great advancements. As an empire rises, civilization expands where coming together means the sum is greater than the individual or small bands of tribes. The oldest known city, discovered in Turkey, shows advanced houses with wall paintings and modern advancements. Coming together created more jobs where someone artistic could then create paintings in houses rather than tilling the soil. Civilization becomes the key to advancement.

What then happens is the government becomes corrupt and greedy. Once you reach that stage, people begin to leave the main centers. In the case of Rome, it peaked around 180 AD with a population of about 1 million and it collapsed to just 15,000. As people fled the cities due to corruption, society then moved back to fragmentation and into the feudal age. People then worked as serfs, tilling the soil for the landowner, and received free lodging along with 20% of the crop.

Then the Black Death came and wiped out 50% of the population during the 14th century. Suddenly, there was a shortage of labor so landlords began to pay wages on top of the free lodging and food deals. Government smelled the money and began to tax. This led to the first tax rebellions during the 1300s. The first peasant tax uprising over taxation was in France during 1358. This was followed by a similar uprising against taxation in England led by Wat Tyler in 1381 that was a bloody affair.

 …click on the above link to read the rest of the article…

Why Has Everything Turned Sour? Is it the Press? Or is the Press Part of the Cycle?

Why Has Everything Turned Sour? Is it the Press? Or is the Press Part of the Cycle? 

QUESTION: Hello Mr. Armstrong,
I´d like your opinion on this,
During 7 Decades in which our lives got better, longer, richer, safer, healthier, better educated, more peaceful and more stimulating. Even World poverty has decreased in a rate never seen before, still, news coverage got increasingly negative

What explanation could there be for this? Is it excessive competition for attention as media sources multiply or an excessive any deeper reasons? I compare it to Markets, seems to be similar like trading on news, which is impossible because when the news is the worst, usually its the low and when everything and everyone is optimistic its the high.
regards

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ANSWER: Coming out of World War II, society really advanced in many ways from technology to medicine. This is the part of the societal cycle that is best to live in. Then what happens is corruption. The news becomes corrupt in sync with politics. I believe this becomes the case because news becomes institutionalized as it is owned by big firms who then direct the news to slant to their personal benefit. This is a funny skit on British News. It is so true here in the States as well. The Democrats love CNN and the Republicans love Fox. The news gravitates to a political slant and is no longer about news – it is always about selling more ads and pushing their propaganda like some religion handing out flowers in airports.

Yellow journalism was created by the battle between Pulitzer and Hearst. They created the Spanish American War to sell papers. Pulitzer’s name was worthless. To rehabilitate it he donated money to create the Pulitzer Prize for good journalism, which he never practiced.

 …click on the above link to read the rest of the article…

You Can’t Stop the Cycle

You Can’t Stop the Cycle

2018’s valuation records are astounding in that they show the S&P 500 to be more fundamentally over-valued than it was at the prior two historic stock market valuation peaks in 1929 and 2000, bona fide speculative manias.

– From Crescat Capital’s recent investor letter

Cycles are perhaps the most natural and common occurrence in the universe. The planets orbit the sun, seasons change, day turns to night and night back to day, humans are born, grow old and die.

Some of these cycles are more pleasant to think about than others, but their consistent occurrence remains factually unassailable. Indeed, it could be said that a human life itself consists of an endless series of encounters with various cycles. Cycles of the natural world and cycles created by humans themselves. Human created cycles are the focal point of today’s piece.

I’ve been writing a lot about cycles over the past few months since it’s become increasingly clear that the artificial economic cycle we’ve been living in for about a decade is on its last leg. In order to understand how significant this is, it’s important to recap what the last ten years actually represented.

It didn’t represent a healthy economic growth cycle, but rather an insanely irresponsible, and arguably criminal, manufactured bubble boom where central banks printed enormous amounts of money to inflate asset prices like stocks, bonds and real estate. In this deranged mission they succeeded, but at a great cost to social stability.

4/ This is key because super rich boomers who get more money thanks to the Fed’s plutocratic polices don’t go out and purchase 5x more avocados or gasoline. No, they do what they’ve habitually done their whole lives. They buy financial assets (stocks and bonds) and real estate.

5/ To narrow it down even further, it wasn’t just very rich boomers, it was very rich boomer financial types. They love stocks, bonds and real estate even more than the average boomer. So they went nuts.

 …click on the above link to read the rest of the article…

Hedge Fund CIO: “Some See Parallels Between Today And The Late-1930s, Which Led To World War II”

The future is unknowable. Yet never has capital been so concentrated in strategies that depend on the future closely resembling the past. The most dominant of these strategies requires bonds to rally when stocks fall. For decades, both rose inexorably. And a new array of increasingly complex and illiquid strategies depends on a jump in volatility to be followed by a rapid decline of equal magnitude. They appear uncorrelated until they are not.

Virtually every investment portfolio measures risk by utilizing some combination of volatility and correlation, both of which are backward-looking and low. But the present is knowable. The past too. And the multi-decade trends that carried us to today produced levels of inequality rarely seen.

Low levels of inflation, growth, productivity, and volatility are features of this cycle’s increasingly unequal distribution. But cycle extremes produce pressures that reverse their direction.

On cue, an anti-establishment political wave washed away the globalists, with promises to turn the tide. Such change is nothing new, just another loop around the sun.

Now signs of a cycle swing abound; shifting trade agreements, global supply chains, military dynamics, immigration, wage pressures, polarization, nationalism, tribalism.

To an observer, it’s neither right nor wrong, it simply is. Some see parallels between today and the late-1930s, which led to World War II. We also see parallels with the mid-1960s, which led to The Great Inflation.

What comes next is sure to look different still. But investment strategies that prospered from the past decade’s low inflation, growth, productivity and volatility will face headwinds as this cycle turns.

…click on the above link to read the rest of the article…

Napoleon – War – Sunspots & Human Excitability

COMMENT: I love when you educate us about the weather, especially the cycles. the NAPOLEON story killed me !!! I’m a french and believe me, nobody talked in school about the weather cycles when he tried to fight Russia and lost everything. I read 3 times your chart which plots the temperatures and the cycle initiated by the volcano a few years ago. you are enough smart to guess that French teachers NEVER talk this story under this angle of cooling temperatures…

REPLY: When you correlate everything you see the patterns. Sure, at Waterloo, the French used CANNONS while the British used CANISTERS. On the day of the battle, it rained a lot. The ground was very muddy, soft and wet mud. In that weather and ground conditions, cannons were not as effective.  It was more than just the weapons. In those weather conditions, Napoleon delayed and that cost him the battle. But had the weather been dry, things may have been different. The cold clearly beat Napoleon on his attempted invasion of Russia.

There is also the Human Excitability Study where war was correlated to sunspot activity. The sunspot cycle is roughly every eleven years. However, this time it’s different. The sun is headed for a very rare, super-cooling period that threatens to topple civilization itself as it has throughout history roughly following a 300-year cycle.

For most of its history, science believed the sun’s output was constant. They finally realized that a thermal dynamic cycle beats like your heart so the sun could not exist if it was a steady outflow of energy. One degree less and it would blow itself out. Hence, it is cyclical rising and falling in intensity.

…click on the above link to read the rest of the article…

The View of American Politics from Afar

COMMENT: This business with Trump and the media is quite amazing when seen from a distance. I read posts from people who can not see past what they are believing. It’s as if the hate for Trump has become a Religion. A religious person will refuse to look at things from another perspective and this is what is happening in your country.

K (UK)

REPLY: Oh yes. It has been whipped up into a religious frenzy. What the media and the Democrats have overlooked is they have gone WAY TOO FAR and this is indeed becoming a religious quest and therein lies the danger for HUGE civil unrest. After the November elections, there is NO POSSIBLE WAY that either side will accept the results. This means historically the only solution becomes violence. The Media is so hateful of Trump because he has called them the fake news. But he has only stated what the majority believe and those in the media refuse to acknowledge. Most Americans cannot even name a nonbiased neutral news source! Gallup Poll now shows that 45% see a great deal of political bias in news coverage, up from 25% in 1989.

We are cascading into the War Cycle and believe me, this is NOT a forecast I even like to repeat. It is not something where I am warning people to reverse course or else, because there is no reversing this trend. We are a fly on the rear-end of an elephant with no shot of steering him in the right direction. We simply have to ride it out until the bloody end.

…click on the above link to read the rest of the article…

Ray Dalio Warns ‘History Repeats’ – Understanding Big Debt Crises, Part 1

Ten years ago this month, the world’s financial system nearly ground to a halt. It was a dramatic and pivotal time, which has had lasting effects on many people’s lives. But, as the founder of the world’s largest hedge fund, Bridgewater’s Ray Dalio, notes, it was also something that has happened many times in history and will happen many times in the future.

Authored by Ray Dalio via LinkedIn.com,

As you know, I believe that everything happens over and over again and that by looking at those things happening many times, one can see the patterns and understand the cause-effect relationships to develop principles for dealing with them. Prior to 2008, I had studied these relationships for debt crises with my colleagues at Bridgewater, and because we understood these relationships, we were able to navigate the crisis well when many others struggled.

Today I am sharing our understanding of how debt crises work and how to navigate them well in a new book called “A Template for Understanding Big Debt Crises.”

I am making it available for free because I am now at a stage of life where what’s most important to me is to pass along the principles that have helped me. My hope is that sharing this template will reduce the chances of big debt crises happening and help them be better managed in the future.

The template comes in three parts.

The first explains the template for understanding how debt cycles work and provides principles for dealing with them well.

In the second, I look at how three big debt crises worked in depth – the 2008 financial crisis, the US Great Depression of the 1930s, and Germany’s inflationary depression of the 1920s.

…click on the above link to read the rest of the article…

Climate Change is Real – Do Droughts Last 8.6 Years?

 

It is time to begin to really investigate Climate Change for what our computer is forecasting is like a dramatic rise in volatility or a Panic Cycle to be more accurate. What does that mean? We are going to experience extremes on both sides. You will see record temperature in the summer of 100+ F and in the winter, bitterly cold freezing. The admixture of these types of trends plays hell with crops. We are looking at severe droughts brewing around the world. In Australia, we are looking at drought conditions that match the ‘Federation drought‘ which took place during the late 1880s and early 1890s. This also contributed to the rise in socialism for agriculture was the bulk of employment and droughts also terminated jobs.

The Federation drought was a major drought in the outback areas of New South Wales, Queensland, Victoria and South Australia killed many animals. There was a major loss of vegetative cover that led to erosion and a dust bowl. Many native edible plant species vanished with devastating consequences. Between 1895 and 1903 there was a major drought that impacted most of the country. They came to name it the ‘Federation drought‘ which lasted interestingly 8.6 years. This event of nature is what forced many to seek employment in the Industrial Revolution and abandon farming.

The American Dust Bowl also became known as “the Dirty Thirties” which began in 1930. This too had devasting consequences for agriculture and sparked protectionism which was centered on agriculture – not manufacture. Regular rainfall did not return to the region until the end of 1939, which finally brought the Dust Bowl years to a close. The severe drought hit the Midwest and Southern Great Plains during 1930. This resulted in major dust storms that began the following year in 1931 coinciding with the Sovereign Debt Crisis. By 1934, an estimated 35 million acres of formerly cultivated land had been rendered completely useless for farming.  Another 125 million acres was rapidly losing its topsoil. Once again, we have a period of 8.6 years.

…click on the above link to read the rest of the article…

2032 – How Hard Do We Fall?

2032 – How Hard Do We Fall?

 

QUESTION: Hi Martin,

First, I’d like to offer my condolences on your mother’s passing. It feels to me that you must take great satisfaction in the fact that she must have been very proud of your accomplishments, and what you are trying to do for the average person. To me, that is the ultimate goal of a child; in thanking their parents for everything they have done.

Concerning the blog entry of “Crash & Burn & The Sixth Wave”, you write that it all depends upon if we begin the process in 2021. My interpretation – having followed you for years now – is that the people must rise up and push back against higher taxation, and demand reform and/or it could hinge on the Euro breaking apart, which provides the path to follow for the rest of us.

I believe you meant that if the people just acquiesce and do nothing – like in 2008, then those in power continue to run the economy for their benefit, causing the social fabric to continue to be torn apart between 2021-2032, (which means continued record low birth rates, low productivity, record low levels of capex, record suicide rates, etc) until it finally crumbles by 2032, leading to civil unrest. Have I got this right?

Thanks again for everything that you do.

Danny

ANSWER: We have to understand that this will be the third such sequence of the Sixth Wave. At the end of the first sequence, we have civilization going into a Dark Age. That also coincided with the energy output of the sun declining and the massive volcanic eruption of Thera (Santorini), which ended the Minoan culture. That is when Mycenae invaded as well as the conquest of Troy.

…click on the above link to read the rest of the article…

The 8.6-Year Frequency is Within Nature

QUESTION: You have noticed that the 8.6-year frequency even allowed you to see that volcanic eruptions would begin in 2018. Are there other examples from history where you have found this to also be true or was Hawaii just unique?

PK

ANSWER: Oh, there are plenty of examples. Let’s take one of the most famous volcanic eruptions in history – Vesusius. Everybody has heard of Pompeii which was destroyed by the eruption of August 24th, 79AD. That eruption was so violent, it hurled stone and ash 20,000 meters (65,000+ feet) into the sky which then came down and buried Pompeii and Herculaneum. There is even a current song out on the destruction of Pompeii by Bastille.

However, there was a major earthquake 17.2 years before (2 x 8.6) that took place in 62AD which was devastating and also produced a tsunami. On February 5th, 62 AD a powerful earthquake that was probably a 7.5+ in magnitude occurred, with the epicenter at Pompeii the prelude to the eruption. The Latin adviser to Emperor Nero (54-68AD) Seneca the Younger wrote a description of the event. Sheep died from falling rocks and statues were toppled. He even said some people lost their minds and wandered around in their madness.

This earthquake was as significant and 1906 San Francisco earthquake which destroyed much of the city. Like the 1906 San Francisco Earthquake led to the Financial Panic of 1907, which inspired the creation of the Federal Reserve by 1913 almost 8 years following that disaster, we see similar reforms in Rome which also included a monetary system reform.

Pompeii at the time had a population of at least 20,000 and was a tightly packed city which was not particularly favorable for surviving earthquakes. Much of the city was constructed from bricks which tend to crumble easily. Seneca reported that while Pompeii was severely damaged, Herculaneum had far less damage while Naples was barely touched. He described the earthquake in vivid terms:

…click on the above link to read the rest of the article…

 

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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