Time is far more important than price

TIME & PRICE

Posted on November 12, 2015 by Martin Armstrong

QUESTION: Marty time and price you always say are two separate forecasts. So reaching a price level means nothing unless it also meets the objective in time. So it is time that is more important than price. Correct?
HK

ANSWER: Yes. Only a fool thinks that forecasting is simply price. Time is far more important than price. If we saw the Dow rally to 25,000 in two weeks and gold fall to $800 the next week, neither move would signal the end of the trend. Whatever price you reach must be aligned with the time. That is why there are several price objectives on the Dow. Our first was 12,500, then 18,500, 23,000, and finally 40,000. If you exceed one before the time target then you focus on the next. You step in and out of an investment accordingly.

It is a question of time that is dominant. In gold, we must make a new low, for the low was not aligned with time. You can stop below 1,000, or the extreme would be $680. The benchmarks are the most important. Gold never elected a Yearly Bearish Reversal from 1980 suggesting the eventually new highs would still be made. You have a certain amount of time to accomplish something. That is the limit always. When gold declined for 19 years, they made excuses it was manipulated without any proof of perpetual manipulation just claiming this would create the image of less inflation and a strong dollar as if anyone really uses gold today as such a measure. Why tell people to only buy gold when the same $1000 investment in 1980 returned $19,000 and today gold would be about $1,200? When does someone admit they are wrong? Like politicians it is never.

Only a fool would think that you could forecast only price or the market with fundamentals. How many times has the news on a company been countertrend, yet the market ignores that. Fundamentals are worthless and amount to sophistry. Gold declined for 19 years and was still fiat. They then form groups and ask for donations to fight manipulators, whom they pretend are perpetual, when in fact, the entire commodity sector is in crisis, no less the deflation that is destroying the economy. Metals will turn only when the perception of the whole changes. Then you will not hear about manipulation when gold reverses and rallies. All the excuses that hurt people will be forgotten. That is not analysis, that is called sales propaganda.

The Sixth Wave

 

Posted on November 6, 2015 by Martin Armstrong

Yes, we will be addressing the seriousness of the culmination of the last three waves. 2015.75 was the start of the Big Bang — the midpoint in this wave. It began with the revolution against the monarchy; what comes this time is either real Democracy or authoritarianism. Government is doing everything in its power to achieve the latter.
They KNOW what is coming. Everything they created is crumbling before their eyes. Socialism has been robbing the people to further the corruption in government. It has lowered the living standards and has subsidized education and medicine to the point where they no longer need to be competitive. These are two areas that will need serious reform. Tracking money and people will not prevent the demise of the political-economic system we find ourselves within. What comes after this crisis is the unanswered question.

Mainstream vs. Austrian Economics

Posted on November 6, 2015 by Martin Armstrong

 

QUESTION: Mr. Armstrong, I believe the difference between the Austrian school of economics and mainstream economics is that mainstream economists believe recessions are inherent to capitalism and can be controlled by manipulation where the Austrian school recognizes argues the causation is fiat money with or without central banking. You seem to ascribe to something in between. Can you explain?
JZ

ANSWER: Both schools are wrong for both assume that the business cycle began with the industrial revolution. The mainstream group follows Marx and Keynes and assumes the business cycle is a flaw within the modern industrial economy; the Austrian schools are fixated on assuming this is caused by paper money.

Both are DEAD WRONG. This is the same limited thinking as global warming where nobody looks at the data before 1900. Forest fires and volcanoes put up more CO2 than cars. Here the assumption is that the business cycle was somehow born with the Industrial Revolution and paper money. Sorry, any investigation of history reveals there has ALWAYS been a business cycle and its cause has nothing to do with the Industrial Revolution or fiat money. It is inherent within human nature, and we swing political systems left and right based upon the same inherent emotional tendencies of people. There will be people who flatly disagree with me that only gold is money. No matter what evidence I put forth, they will never change. The same is true of diehard republicans or democrats. Some just hate the other and they cannot even explain why they belong of those groups.

The problem with both camps is that their assumptions begin with the Industrial Age. Neither has done extensive research before this period nor have they ever bothered to look. They are fixed in their ideas and everything begins with that era. There is no testing their theories over thousands of years. It is like looking at the Dow Jones only since 2011 and concluding it always must rise.

The idea that fiat money is responsible for the business cycle is not very practical when paper-like monetary systems existed in ancient times, such as when Egypt issued coins after being conquered by Alexander the Great. Paper money was also in China, and in fact, China never issued precious metal coinage and their currency was always fiat since the emperor was God’s representative who declared what value money would be, which is precisely fiat. Fiat can be tangible coins that are debased. Gold would be fiat if government declared its value is fixed at whatever price. Fiat is the declaring of value irrespective of any commodity value.




Gold has NO real commodity value outside of demand nor does silver. Both were totally dependent upon demand, based upon desirability like art. Cattle and bronze had a tangible value for both served a consumption purpose as food or as plows and swords. Therefore, tangible money must have a “use” other than money.

Gold and silver were prized objects but had no utilitarian “use” value outside of jewellery. Gold was desirable but was not a vital commodity that served a purpose beyond its prized status like art. Therefore, numerous monetary systems have existed that were not gold based since the medium of exchange had to have a “use” value other than as money. That was the core of all barter systems – I give you this for that.

As far as mainstream economists assuming that government can manipulate demand, even Paul Volcker admitted in his “Rediscovery of the Business Cycle” that this idea of “new economics” has failed.




I believe more in Adam Smith and the invisible hand. Money is whatever people say it is. Dictating money shall be gold, seashells, cattle, paper, or slave girls as St. Patrick reported in Ireland, is still fiat – the dictating by government what shall be money. Money is not a store of value; it is a medium of exchange. In that case, it is merely an agreed upon medium to supplant barter. That’s all.

We have two camps arguing with each other and at the core of both is the assumption that government is in control one way or another. I disagree. The people are in control and those in power are there ONLY until they go too far. A revolution always takes place. There are no exceptions throughout history. In the end, the people must consent to be ruled and it must be a rule that is fair and equitable. Whenever politicians, dictators, or kings forget that they require the consent of the people to rule, that is when they fall.

Artificial Intelligence & Neural Nets – Sorting out Truth from Fraud

Posted on October 24, 2015 by Martin Armstrong

QUESTION: Mr. Armstrong, it seems many people are starting to pretend they have artificial intelligence systems and neural nets. It seems that they are using these terms very loosely. Can you explain the real difference? Everyone I have spoken to says you are the father of AI in finance.
Thank you for all you contribute
Cheers
CW
ANSWER: Yes, 99% of what people pretend is Artificial Intelligence is nothing but an Expert System, which amounts to a look-up table. An Expert System is simply a list of, let’s say, diseases with their symptoms. You ask questions and it looks up predefined conclusions and says – wow, you have this disease. There is nothing to it. Real markets are nonlinear and the process by which they move appears to be random on the surface and that causes tremendous problems in modeling for if you cannot see the hidden patterns, you cannot achieve
Real Artificial Intelligence is something that learns and analyzes on its own to create its own conclusion. The countless claims of using AI to forecast markets can be distinguished rather easily from rule-based systems. You can take a chart, calculate the cycles, and then project the potential future pattern. Looks nice, but that is just making a calculation that can be done with a pocket calculator. There is nothing original in this process.
Then we have claims of using neural nets to predict the future. They can predict words and what you are looking for in Google or Apple’s Siri. Yet these are fairly rudimentary and far from the complexity of predicting the world economy. Neural Nets have outperformed subjective analysis like fundamentals. Nevertheless, attempts to forecast the future of markets has a dismal success rate of far less than 50% if not 33%. They have been flat models attempting to forecast a single market.
The problem with forecasting is human bias. This is the number one problem as to why forecasts fail. Take the goldbugs, they will never admit they were wrong even though gold declined for 19 years and this current decline is headed into a 5 year decline. They make excuses that are endless and will never revise their thought process. This is the human error caused by bias.
Then the next greatest failure in forecasting is attempting to predict the outcome of a single market in total isolation. Everything is connected. If you cannot grasp that concept then you are waiting in line to lose your shirt, pants, house, wife, kids, and the dog.
So how do we circumvent these two major problems? Devoted investigations, exploration of knowledge, and how it is attained in relation to the information process boils down to data processing in all systems of all kinds, regardless of whether we are talking about a human, animal, or machine based knowledge acquisition. True AI must acquire knowledge, remember that knowledge, and deploy it in the future without predetermined rules (e.g. if interest rates rise sell stocks) and without human bias. That creates an in-your-face confrontation with people clinging to their biases swearing you are evil and wrong.

The true scope of the subject spans the entire range of interests from classical problems in the philosophy of the mind and psychology into issues in cognitive psychology and sociobiology. This involves the actual mental capabilities of a particular species. Ideas that are related to the Artificial Intelligence field and computer science reveal, not so much the answer of how to create AI, but how to distinguish what is NOT AI.

The primary emphasis is traditionally placed upon theoretical, conceptual, and epistemological aspects of acquiring knowledge. Then we turn to reasoning which many expect will emerge from that data set. This introduces a very fine line, which distinguishes problems that are empirical, experimental, and methodological over time. We need to employ imagination, but it must be tempered and controlled within reality. Otherwise, we can or cannot achieve our aspirations.

There are many aspects to Artificial Intelligence that distinguish both input and output. The output must reach something that, at the very least, matches the human ability to reason without the expert system structure of a predetermined result. Then the input must be broad enough to cope with humans in order to communicate. So there must be an ability to determine what you are feeding into the system as information to acquire knowledge and experience in order to comprehend the result reached. To achieve this, interaction must be comprehensible and that also requires introducing language to be able to communicate but the system must understand what words really mean.

You cannot accomplish these tasks with a simple downloadable program to pretend that you are employing Artificial Intelligence or have a program that makes billions of calculations and call that AI. These are concepts that by no means are easy tasks to create in programming code, no less comprehend. It has taken me my whole life to develop what we have achieved and there is nothing like this. You cannot even create a random number generator for in programming there is the simple fact that it will become too repetitive and thus unable to learn.

To accomplish real Artificial Intelligence,  it was possible ONLY because I have the skill set as a programmer and the knowledge base of a trader. Without such a combination, that list of accomplishments becomes impossible and cannot be brought into focus. Programming is understanding how to read and write in many respects. That does not mean you can write a book on how it feels to give birth if you have never gone through such a process. The programming is the skill, but then whatever field you may be in provides the knowledge and experience that can then be captured in code.

Debt cancellation or forgiveness actually was a tradition that began under Sumerian rule in Mesopotamia

Debt Forgiveness / Cancellations

Posted on October 24, 2015 by Martin Armstrong

QUESTION: Mr. Armstrong; What do you think of the Biblical forgiveness of debt which this time was due with the turn of your model?

ANSWER: Debt cancellation or forgiveness actually was a tradition that began under Sumerian rule in Mesopotamia. The Jewish tradition appears to have been adopted from the Sumerian. Do not forget that Abraham came from the Sumerian city of Ur located in southern Iraq today. Therefore, he would have grown up with that tradition.

Consequently, the debt cancellation practice began in Mesopotamia and can be traced back to 2400 BC extending into 1400 BC. The noted historian on this subject, Michael Hudson, I believe is absolutely correct when he states that general debt cancellation was one of the principal characteristics of Bronze Age societies in Mesopotamia. There were numerous debt cancellations in the Mesopotamian cities which used the words for these debt forgiveness decrees or cancellations such as amargi in Lagash (Sumer), nig-sisa in Ur, andurarum in Ashur, misharum in Babylon, shudutu in Nuzi.
(See:Michael Hudson’s Debt Cancellations)
However, we are way beyond such a solution thanks to SOCIALISM. Countless people now rely entirely upon pensions and social security type systems for their retirement. Many such programs by decree must invest “conservatively” in government debt. To default will set off a blood-bath if not a Mad Max event. During the Bronze Age, debts were private and did not tend to be expectation that you would be taken care of for life. So the debt structure was entirely different. Today, such a debt forgiveness would cause total economic meltdown. This is why we have proposed the Solution we have. There is no option to cancel of default without major civil unrest if not revolution.
The debt cancellations of the Bronze Age can be distinguished as PRIVATE. They were not PUBLIC debts borrowed from the people that they just never paid back. This was a debt forgiveness within the private sector. I might add that during the civil war that ended the Republic of Rome, the people cheered Julius Caesar and assumed he too would cancel all private debts. He adopted a different resolution forgiving all past interest applying that to capital with revaluing property and money to the same purchasing power parity. Clearly, the people were aware of the debt forgiveness ideas in that region. (See Anatomy of a Debt Crisis).

(Note: We have collected economic text from Mesopotamia as part of our research project in reconstructing the historical economic history of civilization. Here I hold one Sumerian cone from our collection. I funded archaeological digs that would further our knowledge of the past in order to reconstruct the history of the world, much of which the academics will not explain for reasons it will contradict prior theories. Then there is their communistic approach to knowledge.
I was asked to fund the dig at the House of the Papyri near Pompey in Herculaneum. Half of this villa has still not been excavated. This was a villa of a book collector and the Greek part of the collection is still buried. Here is all the lost books of Greek historians waiting to be uncovered. The Italian government lacks the money so 20 years after I was asked to fund this project, it still remains undone.
Additionally, the latest issue concerns material that arises on the black market rather than from an archaeological dig. For example, during the first Gulf War in Iraq, the bombing uncovered a city previously unknown. The archives of all the text appeared on the black market. Academics boycott such things rather than trying to save them. They object to private people using private funds for research and treat the subject as if it were a communistic state that only they should have such cache to play with. Something I seriously disagree with for there is never always public funds available for such projects.
In this particular case, thousands of tablets were on the black market. I bid to get the entire collection. There was a Norwegian collector of documents, Martin Schoyen. I do not recall what my bid was but it was many millions of dollars. Martin and I met in Zurich for dinner. Since he was a specialist in documents, we reached an agreement that my interest was economic. Martin even had an original Magna Carta. So the deal we struck was that I could use the economic text in return for bowing out of the bidding.
What made this find so valuable was it contained legal code predating Hammurabi who academics teach was the first legal code. Here we have the Legal Code of (ca. 2100BC) which is the oldest known, written law code that predates Hammurabi’s law code by about 300 years. The translation of this legal code was provided by Martin Schøyen, a Norwegian collector of manuscripts containing over 13,000 documents. His private efforts have contributed greatly to our knowledge base when government funding for translation is lacking and academics lack the funds to save material on the black market. When the Legal Code of Hammurabi (1792-1750BC) was first discovered in 1901, his laws were heralded as the earliest known examples. Subsequent to that discovery, older collections of legal codes have been unearthed. There are even older Babylonian copies of the Legal Code of Ur-Nammu (ca. 1900-1700 BC).

When I say we have THE largest database known to humankind, I am not exaggerating. You cannot create models if you lack the data to input. How can you forecast a debt crisis or list the possible outcomes without understanding how such a crisis has been resolved throughout history or how they appeared in the first place. People can pretend to do what we do, but how is that possible without the data?

All schools should be private, PROPERTY TAXES must also be abolished, ONLY a retail sales tax EXCLUSIVELY for local government

How to Create A Fairer System

Posted on October 21, 2015 by Martin Armstrong

QUESTION: Mr Armstrong,

I am an avid fan of your site and thoroughly enjoy your posts.

As much as I am against tax, would you not agree it’s rather sick that a company the size of Facebook paid out less tax than I did last year?

http://www.bbc.co.uk/news/business-34504474

I know you advocate a tax on sales, but in the UK we already pay VAT on goods.

Any suggestions on a fair system?

Many thanks for all your work.

Regards,

G

ANSWER: This is the problem with taxation. Major public corporations can move their tax domicile offshore to avoid taxes legally. The average person cannot move his labor offshore to lower his taxes, which is a disadvantage we must address with tax reform. With VAT, that is far worse than a sales tax. Every person in the chain must collect and file paperwork. It must require three times the number of people to administer such a system compared to a point of sales tax collection.

But that issue aside, there should be ABSOLUTELY NO income taxes whatsoever. That not only eliminates government having to track everything, but it also eliminates the whole movement of capital solely for tax purposes. This is unfair, for the average person cannot send their labor offshore to avoid taxation without moving. Even then, that would only get an American the first $100,000 tax-free; after that, it would be subjected to U.S. income tax.

The Founding Fathers of the United States revolted over taxation without representation. We are back to that now, for we are being taxed to pay interest to service debts from the last two generations. We had no right to vote on that spending, which took place before we were born. This is not a democratic process.

There should be ONLY a retail sales tax EXCLUSIVELY for local government. Federal government should be prohibited from imposing ANY tax and it should be barred from borrowing money. The local tax will naturally be checked by the free market, for if they keep raising taxes, businesses will move to the next town and there goes the jobs. This will help to restrain government on a more practical level.

Moreover, there should be NO PUBLIC SCHOOLS. All schools should be private for then there will be no mismanagement, crazy pension failures, or tax hikes to line their pockets. Schools should be by voucher and run by private industry just like Catholic schools, which were always known for having better education in the States.

It is the teachers and their unions who have ruined society, as taxes are imposed on property and people cannot afford to retire in their home where they raised a family. They are forced to sell because they cannot afford taxes that never stop and only rise. PROPERTY TAXES must also be abolished.

Our problem is the total mismanagement of government. They promise and award themselves all sorts of perks, which reduces the quality of life for everyone else. We must look at the cause and that is the seriously flawed design of the financial-economic-governmental system.

Posted in Uncategorized

Cases, money was gold and it failed to prevent any crisis.

Gold & Politicians – Getting it Right For Once

Posted on October 20, 2015 by Martin Armstrong

QUESTION: Mr. Armstrong; I heard you on Infowars. I understand how the gold standard would not solve anything for the problem is politicians and not what we call money. Some think that you can create a floating gold standard so gold would be money but not fixed. I really have a hard time seeing where this would solve anything for you still would have loans then in gold and you end back at the same spot with paper gold. This is really getting confusing. That was the question I wanted to ask.

Thank you

P

ANSWER: It really does not matter what we use for money. It is only a medium of exchange. Before 1934, private loans always had a gold clause. So yes, you are correct. You ended up with more gold owed than actually existed, This is fundamental to any credit system.

The problem is people are arguing over what should be money as if this really matters. There were defaults under a gold standard just as there were under paper. This is kind of blaming your wife because she failed to compel you to take the trash out.

The problem is not money and as long as people only focus on money assuming some return to a gold based system will magically convert all politicians into saints, then we doom ourselves to repeat history for this nonsense is arguing at the surface and ignoring the fact that governments and monetary systems have collapsed for countless millennium. The list of empire, nations, and city states that have collapsed are countless since the beginning of recorded history regardless of what money was. The common denominator that existed for EVERY collapse, was abuse of credit and politicians. How about the  Athenian Crisis of 354BC. Just replace the names and you have 2007. Or how about the Roman Financial Debt Crisis of 53BC when interest rates soared because the politicians were borrowing so much to bribe people for votes. Or how about the Roman Debt Crisis of 49BC which ended in revolution. In all cases, money was gold and it failed to prevent any crisis.

If people stop with the gold bias and open their eyes, we will see that the cause is NOT paper (fiat) since China always had fiat as did Egypt until it was conquered by Alexander the Great, but career politicians. Aristophanes (c. 446 – c. 386 BC) said “Under every rock lurks a politician.” Nothing has ever changed.