It did not matter what form of government we lived under, JUSTICE is always defined as the self-interest of government

Iran on Schedule for the War Cycle

Posted Jun 21, 2019 by Martin Armstrong

COMMENT: Mr. Armstrong; I am a Muslim and I have just read you War Cycle report from 2015where you provide your forecast for this crisis we are cascading into. You historical analysis is fair and honest. Most people have no idea of the history of the region no less the divisions in Islam. Your forecast is coming into play. It looks like a countdown for the next year.

I wanted to take the time to express my respect for your world view and how you remain the voice of reason.

ABS

REPLY: I have been a student of history my whole life. But memorizing battles and dates and handing out titles like “The Great” (Magnus) for winning a war to me is the noise. The key to history is understand the patterns and once you see the patterns, it no longer justifies one position against another. I have come to understand Thrasymachus who observed that it did not matter what form of government we lived under, JUSTICE is always defined as the self-interest of government. Once I looked at his observation, it became crystal clear that it also did not apply to merely government, but all aspects of any group that seized power under a variety of labels including religion.

The English Civil War was also supposed to be about religion – Puritans v Catholics. Oliver Cromwell overthrew King Charles I and even beheaded him. He then issued coins calling himself the Lord Protector, but they carried his portrait with an olive wreath as if he too were then king. The Puritans outlawed all sports because that led to cursing, plays for they were lies, Christmas for you should be praying not celebrating, and it became a felony subject to death for kissing you wife in public. Indeed, Thrasymachus hit the nail on the head about 2,000 year before Cromwell – justice is simply the self-interest of those in power.

History repeats BECAUSE the patterns repeat and they are patterns of human reactions. I tried to do a good job in that report on the Middle East. The target date is rapidly approaching. Indeed, we have nearly a year to understand what is taking place.

Make no mistake about it. The majority of the youth in Iran do NOT support the current government in Iran. This also raises the stakes for the current religious regime in Ira will gradually lose power as attitudes change among the younger generations. To this inevitability, Iran becomes a greater risk for starting a war of they face the loss of power and a potential internal revolution. There was the 1979 revolution in Iran which put in place the religious government. The previous revolution took place between 1905 to 1911. It is unlikely that the religious government in Iran will be as strong after 2021 and the country is likely to end up with a completely non-religious government by 2051

The Rise in Agriculture for the Next ECM

Posted Jun 17, 2019 by Martin Armstrong

The Fall Army Worm (FAW; Spodoptera frugiperda) is a crop-eating pest that was first detected in China back in January 2019. It has now spread across China’s southern border and currently impacts about 8,500 hectares (127,000 mu) of grain production in Yunnan, Guangxi, Guangdong, Guizhou, Hunan, and Hainan provinces. Officially, Chinese authorities have employed an emergency action plan to monitor and respond to the pest. FAW has no natural predators in China and its presence may result in lower production and crop quality of corn, rice, wheat, sorghum, sugarcane, cotton, soybean, and peanuts among other cash crops. Experts warn that there is a high probability that the pest will spread across all of China’s grain production area within the next 12 months.

This is obviously a contributing factor to what the computer is projecting for agriculture. Keep in mind that the patterns the computer identifies come from the price movements. We have wheat prices back to 1259. Clearly, the projections it makes are all inclusive of weather and disease, for everything unfolds in a cycle

Interest Rate & Currency Pegs

Posted Jun 13, 2019 by Martin Armstrong

QUESTION: Martin,

I went over three blogs this morning (both public and private); they are The FED Between a Rock & a Hard Place, Manipulating interest rates & Public vs Private Interest Rates. A common theme of the FED possibly pegging interest rates and inflation. My question is: If the FED is induced to peg rates at artificially low levels and the traditional method of combating inflation is raising rates, something must give, so are metals and commodities getting ready for “prime time?”

CF

ANSWER: Behind the curtain the system of pegging rates, as I have stated, is viewed substantially differently than QE. The rates on the U.S. debt will be pegged, but not the Fed funds rates. They will be able to raise rates to the marketplace, but the bonds will be “pegged” like the Swiss attempted to “peg” the franc/euro.

This is a hybrid interest rate system that would eventually collapse as all pegs do. But it will allow, initially, for a bifurcation of rates.

They REALLY REALLY REALLY REALLY REALLY do not want me to talk about this publicly.

This is feeding into what we see coming for the next wave. They realize QE has failed. They cannot allow rates to rise as it would blow out the budgets.

This is not a long-term solution. The interest rate peg collapsed in 1951 due to Korean War inflation.

Governments have often resorted to forced loans .

Forced Loans People Ignore Until it’s TOO LATE

Posted Jun 14, 2019 by Martin Armstrong

QUESTION: With the private vs public debt and interest rate discussion, nobody is mentioning things like government legislation to forcing people to buy government debt. For example 401’s, IRA’s… must have or be in government debt.

Your thoughts?

ANSWER: Governments have often resorted to forced loans. When Italy was in trouble, they took 90-day paper and converted it to 10-year paper. Most people are clueless about the German hyperinflation. They assume it was due to the government printing money. The spark was December 1922 when the government confiscated 10% of everyone’s property and handed them bonds as a forced loan. Confidence completely collapsed at that moment.

This is all part of the process of the decline in confidence in the government. This is why the system is unsustainable. We will be heading into a great monetary crisis very soon.

2 tier currency

The International Unit of Account

Posted Jun 6, 2019 by Martin Armstrong

QUESTION: I only recently learned of your material and am still digesting it. I appreciate that you encourage critical thinking. I hope you find my questions of the same spirit.

In your recent article “Are Two-Tier Monetary Systems a Possible Tool?”, you illustrated how South Africa’s experience could provide an example for nations wanting to untangle their domestic currency from global obligations (i.e., US dollar, presumably others too).
Would you mind elaborating on this concept in relation to the following questions?

My questions:
1) For this 2-tier approach to work, must every nation have a 2-tier money system, or would it suffice to have only the major players do so (i.e., USA, EU, etc)?
2) If every nation had a 2-tier money system, then how would that compare and contrast to a “global SDR” or some other global, non-national currency acting the reserve currency?

I suppose what I am really asking is: Imagine a collection of nations and each nation has a 2-tier system. The nations agree to use each other’s “external” tier when dealing with each other and keep the “internal” tier for solely domestic purposes. Instead, now imagine that same collection of nations decided they would each use a global, non-national currency (SDR or otherwise) as the global reserve currency.

What similarities and differences would these 2 different approaches yield? Are there certain conditions where 1 approach would be desirable over the other approach?

I find this subject both intriguing and very relevant, so I would like to hear your insight.

Thank you for the new (to me) material.

C

ANSWER: During the 19th century, it was common to issue a “trade dollar” with China who used the silver standard initially by using the Spanish 8 reals known also as pillar dollars. The US issued trade silver dollars and domestic silver dollars of different weight. All of these nations were issuing a two-tier currency to facilitate trade with China.

During the 14th century, there was also a two-tier monetary system. Florence used the gold florin for trade, but domestically, wages and commerce took place in silver. Companies were required to keep two sets of books by regulation.

A two-tier system can be used to isolate foreign capital inflows. Switzerland was suffering and that eventually broke the peg. The foreign capital was not looking to buy assets in Switzerland, they were just converting euro to Swiss and parking the money. Therefore, a two-tier system would have allowed the flow of capital to concentrate in what we would call the Financial Swiss Franc (FSF). This peg would have not been necessary and they could have even imposed negative interest rates or zero rates to deposits in the FSF. Any trade for produces could have then been delegated to the Swiss franc and the peg would not have been necessary.

We would not need a system where everyone had a two-tier currency and traded against each other. The new International Unit of Account (IUA) would be a basket of currencies and your local currency would then trade against that. You would need to allow contracts and debts to be contracted in this IUA freely, as takes place today in US dollars. This would by no means eliminate FOREX risk.

Insofar as a global SDR, the problem would be the calculation and then the IMF has been notorious for corruption. Would some nations put pressure to alter the formula because of a financial crisis?

I would say that the formula must be fixed and based on the total percentage of international trade a given nation wields. It should be subject to revision only once every 5 or 10 years at fixed terms.

The primary reason I would design the system in this manner is that the Federal Reserve has already become the central bank of the world. The Fed has lost the ability to manage its own economy because the IMF and others lobby it not to raise rates because that would adversely impact their currencies. There should be an IUA so that a central bank can manage its own economy without impacting others because they will be prohibited from issuing debt (public or private) in a foreign currency — only in an IUA. There would be no sovereign debt issued by the agency controlling the formula. The reserves of central banks would then be only in IUA terms.

Already, capital flows globally when it sees opportunity, and in this manner, it acts as an arbitrage tool. If real estate looks cheap in one country, the capital will flow in. Australia, New Zealand, and particularly Vancouver are fighting this trend. There will be a natural cycle to it and there is no need for changing laws to try to stop it. The Japanese were big buyers during the 1980s, even buying Rockefeller Plaza in New York. As their economy turned down, they resold it and exited.