If China respects property rights, then capital will migrate to Asia

Country Risk & How it is Critical to Investment Flows

Posted Jul 7, 2017 by Martin Armstrong

QUESTION: Dear Martin:

How does this affect cash flow to and within the USA? (China Bond market)

Rich

ANSWER: It does not alter anything just yet. Most of the capital outflow from China has been its own people trying to get cash out. They were using BitCoin to accomplish that.

This is a first step in the process. It will take time to develop and the next step will be to maintain a stable and important rule of law. In order to attract capital, there must be a stable and honest rule of law. Once the rule of law crumbles into bias and corruption as we see today, this is part of the risk of investment. Edward Gibbon wrote in his classic, Decline and Fall of the Roman Empire:

“…the intolerable weight of taxes, rendered still more oppressive by the intricate or arbitrary modes of collection; the obscurity of numerous and contradictory laws; the tedious and expensive forms of judicial proceedings; the partial administration of justice; and the universal corruption, which increased the influence of the rich, and aggravated the misfortunes of the poor. “

Book III, Chapter 34

Country Risk is a critical part of international investment. In assisting international companies with decisions where to locate plants or open up operations, the first criteria is always “Country Risk” which is all about the stability of the Rule of Law. How can you invest in any country if there is no reliable legal system to secure contracts or property?

Contract Law began in Babylon. Hammurabi’s legal code required all agreements to be written down. This put an end to false claims. When we talk about investing in Europe, we do not even consider“Country Risk” because it is assumed the Rule of Law is stable.

Consequently, China will surpass the United States and the West because our Rule of Law is collapsing. Courts rule in favor of government routinely and once that happens, no property is secure any more. They are just confiscating cash presuming it is criminal in some way be it taxes or otherwise and they do not have to prove anything. This is demonstrating that the West will not be able to survive long-term without a security of property. Hence, you can see it coming. If China respects property rights, then capital will migrate to Asia and leave the West due to the lack of a Rule of Law.

Anyone who thinks dynamically can do what I do or Einstein. It is all in the methodology.

Chances Are you Are A Genius if you Read this Blog – It’s All in the Methodology

Posted Jun 28, 2017 by Martin Armstrong

QUESTION: Mr. Armstrong; I too watched Genius on the life of Einstein. It also left me with the same feeling that it was a parallel to your life right down to the Russian girlfriend you had that the government cancelled her visa. You both seem to have accomplished things others could not see even existed. Your war cycle is amazing. You can feel the rise in tension everywhere from the clash between Hollywood and Johnny Depp boldly saying when was the last time an actor assassinated a president to Hindus and Muslims erupting in India because Muslims were slaughtering cattle. Is there some distinction between this parallel between you and Einstein seeing what other do not?

Thank you so very much

UT

ANSWER: The common denominator between myself and Einstein is the same with Adam Smith all the way back to Socrates. It is NOT some mystic level of intelligence that makes one smarter than everyone else. It is all about vision and the willingness to explore without bias or prejudice. To see the world for the first time like a child and stare at it in wonder. Anyone who thinks dynamically can do what I do or Einstein. It is all in the methodology.

What I try to do with this blog is show you the world and allow you to connect the dots to grasp how the same trends unfold and move around the world. We are all just human and subject to influences by others. Some call this the mob effect. We can choose with free will to just follow the mob, or breakout and think for ourselves.

Formal education imposes tests and you have to study facts as they perceive them. If you differ, you fail. All great minds rebel against traditional education. There have been studies on what people call “genius” and they have revealed that all such people do poorly in school and tend to get in trouble. The school records of the young Winston Churchill revealed the future war leader was a “naughty child” the teachers said would amount to nothing. In the case of Einstein, his Munich schoolmaster wrote in Albert Einstein’s school report, “He will never amount to anything”, back in 1895.

I have been compared to so many people who are regarded as a “genius” yet people have no clue what they are trying to arrive at. It has NOTHING to do with the level of intelligence. It is all about dynamic thinking and methodology. I have written before, if you read this blog, chances are you too fall into the category of being a “genius” for your thinking process. The difference is the majority of the world walk around with blinders on like a horse pulling a carriage in New York City at central park. They only can see direction what is in front of them. This is why A students work for C students, and B students work for government. William Manchest wrote in the Last Lion:

“Studies at the University of Chicago and the University of Minnesota have found that teachers smile on children with high IQs and frown upon those with creative minds. In­telligent but uncreative students accept conformity, never rebel, and complete their assignments with dispatch and to perfection. The creative child, on the other hand, is manipulative, imaginative, and intuitive. He is likely to harass the teacher. He is regarded as wild, naughty, silly, unde­pendable, lacking in seriousness or even promise.“

So if your child is smart, yet not the greatest student, remember that the qualities that make for great success are not taught in school, they are actually suppressed. The creativity comes from those who challenge the establishment, and never conform.

Remember also that we are only as old as we see ourselves in our own mind. You are as young as you see yourself. Once you see yourself as old, age will move much faster.

Albert Einstein had half a dozen girlfriends and told his wife they showered him with “unwanted” affection, according to letters released. Quite a bit has survived concerning his love life and to say he was prolific in that regard is a fair statement.

The last love of Einstein’s life before he died in 1955 was Margarita Konenkova who was a Soviet spy. My Russian girlfriend was not a spy. We met in Tokyo and had to speak Japanese until she picked up English.

True, the government cancelled her visa stranding her in Russia during Christmas to put pressure on me. It did not work. You cannot cut deals with people who are so corrupt and evil, there is no guarantee they would ever honor anything they ever say no less promise. I read the script for the movie. She made the cut. So yes, a curious parallel indeed.

Now, to answer the second part, take the war cycle. Understanding that in comprehending cycles, whatever the subject matter, alter the wavelength or frequency and you arrive at a different effect. This is basic fundamentals from physics and it is illustrated here with the electromagnetic wave variation.

The key is you do not begin with a predetermined expectation you are trying to prove.  You explore like a child in wonder and simply let the results carry you to a new discovery.

Do not ask me WHY there is a cyclical force that results in rising tension and war, albeit domestic (civil unrest) or international conflicts. You cannot reduce it to a single cause and effect any more than you can explain LOVE. It is a complex interaction of many aspects that combine to produce the result. The most dominant factor is always economics. Thus, war never comes when everyone is fat and happy.

Einstein – Relativity – Markets

Posted Jun 26, 2017 by Martin Armstrong

QUESTION: Marty; I watched the National Geographic special called Genius on the life of Einstein. I could not help but see the parallel with you from fighting the establishment, going head to head with the academics, and how the FBI tried to trump up charges against him to send him to prison. He also said the same thing you do, curiosity was your driving force. That’s what you said on stage in Hong Kong when the only question that gave you pause was what to advise the youth. You said always challenge what is being taught.

Did you pick up where Einstein left off? Your reversals are mindboggling and clearly demonstrate that there is a hidden order behind everything. Einstein’s lifelong quest was for the unified theory. Did you discover it?

Is that the key to enlightenment? Curiosity?

Sorry for the deep questions, but they are fascinating.

See you in Orlando also

HW

ANSWER:  I did not see the whole series Genius. I hope to buy it. I caught the end on recommendations of friends. Yes your question is deep, yet interesting. Einstein and myself overlap only where it involves TIME. Einstein’s quest to reach the unified theory is somewhat different, yet related.

The Grand Unified Theory (GUT) is a model in particle physics whereby the Standard Model, which defines the electromagnetic, weak, and strong forces, are merged into one single force. The laws in particle physics do not match the Standard Model. This has been the quest to find the single answer that unified all. However, unifying gravity with the other three interactions would provide what is called the “Theory of Everything” (TOE), rather than a GUT which is an intermediate step towards a TOE.

Consequently, Einstein’s theory of gravity, called general relativity, can explain everything from the movements of planets to the physics of black holes. However, it simply doesn’t seem to apply on the scale of the particles that make up atoms. To predict how particles will behave, we need the theory of quantum mechanics. Quantum mechanics explains the way particles function, but it simply doesn’t apply on any scale larger than an atom. The elusive solution for combining the two theories is the Grand Unified Theory (GUT).

Not to leave everyone behind here, Gravitational Time Dilation is the phenomenon that the further you move away from gravity the faster time passes. This was predicted by Albert Einstein originally in his Theory of Relativity and it has since been confirmed by tests of general relativity. Therefore, TIME is not a constant. This is what Einstein meant by saying “reality is merely an illusion, albeit a very persistent one.”

Interesting that you ask if I have picked up where Einstein ended. Perhaps. But it was a different direction  – just TIME. My curiosity has been in the field of TIME. I have explored how TIME transcends everything so it does not matter what one generation does for they cannot escape the Time Dilation (cycle of time). In other words, the business cycle is continuous regardless of the passing of one generation to the next because it is produce by the synergy of the collective whole while individually we possess the power to join the mob or leave it. TIME expands and contracts and it is all determined by the frequency of each object being observed. I keep my Dali clock to remind me that TIME is not constant, but relative.

The business cycle exists as a pulse for centuries on a consistent foundation being the product of human nature interacting with the universe of influences from nature to man-made. It does not matter the government or type of government. The clock keeps ticking. Waves of innovation and dark ages come and go and each is dependent upon the other. This is the pendulum I speak of. There is night and day, male and female, God and the Devil. There must be two opposites to make the universe function.  The system requires opposites to move; never just one side. Electricity can be transmitted distances ONLY by adding a cycle (Alternating Current) whereby without a cycle, DC (Direct Current) quickly dissipates due to the resistance of the medium through which it is trying to pass. The cycle is the key to using electricity. We need the wave motion between two extremes to perpetuate our existence. It cannot be sunny and bright every single day with no rain and still survive. The Earth turns to an ice age and then reverses with global warming as a natural cycle set in motion by the beat of the Sun.If the Earth every became totally covered in snow and ice, it would fall into the White Earth effect and die reflecting sunlight unable to ever warm back again.

This is what brought me to my question. How does energy move be it natural sun light or the boom and bust of an economy? My conclusion was straight forward: Energy cannot move in a linear fashion. It must move through a medium and in doing so it travels in waves. This is where I overlap with Einstein albeit we are looking at two distinctly different end results.

Einstein’s famous formula establishes the mass–energy equivalence, which states that anything having mass has an equivalent amount of energy and vice versa. Therefore, this formula states that the equivalent energy (E) can be calculated as the mass (m) multiplied by the speed of light (c = about 3×108 m/s) squared. Consequently, anything having energy exhibits a corresponding mass “m”given by its energy “E” divided by the speed of light squared “c²”. Since the speed of light is a very large number in everyday units, the formula implies that even an everyday object at rest has a very large amount of energy intrinsically within it even with a modest amount of mass. Einstein’s famous equation, E = mc², teaches us that matter and energy are interchangeable, merely different forms of the same thing. We have a giant example of that in our sky we call the Sun. The Sun is powered by the conversion of mass to energy.

I have explored the existence of an energy force within society that is behind the business cycle. I can measure the amount of energy within the collective movement of society to ascertain over-bought and over-sold conditions that cause the business cycle to reverse course. I can create models and use math to measure something you cannot see or touch yet we experience the effects. Hence, I can measure something that is invisible indirectly through its effect.

Consequently, I have expanded the question asked by Einstein. He sought the unification as a predictive end result. I have sought not the result, but HOW does energy move and in what manner for I can start from the result and work backwards. Light moves in particles, but also in a wave form. Einstein saw the dual nature of light and that it was both a particle and a wave, which has been proven providing the foundation for understanding electromagnetics and quantum mechanics. Einstein believed light is a particle (photon) and the flow of photons takes the shape of a wave. That is where my curiosity begins and this is where we overlap.

I have concerned my research into how waves move through time-space for this is the core mechanism that unified everything. This is how energy moves at the very essence of it all. Understanding this critical nature is the key to everything TOE. Therefore, the true implication of what Einstein said that “reality is merely an illusion, albeit a very persistent one,” to me opens the door to TOE. It is how energy moves that is the TOE.

A sidewinding snake illustrates how a moving back and forth in a cyclical wave formation moves in a straight linear sense. We have the illusion of moving forward in a linear fashion, yet it moves sideways to achieve movement lacking legs. Light moves in waves yet it is composed of particles (photons) that appears to be moving in a straight line or a beam.

Now, to me, the Theory of Everything (TOE) begins right there. It is HOW energy moves regardless of the medium or TIME since TIME itself is not constant but it too moves in waves.  We are trapped in our reality, which creates the linear illusion of TIME. We cannot see beyond this reality, yet we can measure how TIME moves in waves. This is the ultimate Paradox of Existence.

I began my study of cycles at the beach counting the waves and noticing that each wave was not the same and that there was a rhythm to the waves and when the big wave would appear and start to break further out from the shore. You will see this video I took which illustrates that the energy moving through the water is cyclical in amplitude. Note that some waves break further out from the shore and most break at the shore. This is because the wave which breaks further from shore is caused by a greater amplitude in the energy passing through the medium (water). Hence, not every wave is the same and there is a difference between turning points (waves) and the big wave (volatility/panic). Change the frequency and you achieve a different effect.

It is just an illusion that it is the water which is moving. In fact, the water remains still and it offers the medium through which the energy passes. This can be illustrated by placing a ball on the surface of water and you will see it remains in place even though energy waves pass. This proves that energy moves through the medium and does not cause the medium to move with the energy. Electricity passes through the medium (wire) but it does not cause the copper to move within the wire as the electricity passes.

For you see, in Quantum Mechanics, it is possible to forecast where a particle will appear known as the Wave Function Ψ(x,t) that is effectively cyclical analysis. In essence, this is the proof that everything is cyclical in nature right down to the movement of particles. Consequently, my goal has been to forecast outside of Quantum Mechanics irrespective of gravity.

Hence the first question became, what is the medium through which energy passes around us? It was this understanding that energy required a medium to move at all that led to the theory of Aether (ether) in physics. This was the proposed existence of a medium that filled a space with a substance or field that allowed the transmission of electromagnetic or gravitational forces. The assumption was there had to be a medium even though we could not see it, measure it, feel it or taste it. Since the development of Einstein’s special relativity, theories using a substantial aether fell out of use in modern physics, and were replaced by more abstract models.

Einstein himself said: “We may say that according to the general theory of relativity space is endowed with physical qualities; in this sense, therefore, there exists an aether. According to the general theory of relativity space without aether is unthinkable” Since that time, aether theories have been discredited because there has been no evidence to prove its existence. Instead, quantum mechanics has filled the void.

Dark Matter is nothing at all like the aether. It’s something that behaves exactly like an ordinary particle of matter, but it is “dark” because it lacks an electric charge or strong interaction with known matter particles. Particle physicists have probably more than a billion different candidates for Dark Matter. The idea of Dark Matter was really forced upon everyone only after decades of observations of galaxies and clusters convinced people that regular matter simply wasn’t enough. Once it became clear that indeed something had to exist as a medium, the idea was accepted.

Dark Energy is the second component conceptually closer to the original idea of aether, which was not a particle, but a smooth component that fills space. Unlike the aether, Dark Energy looks the same no matter how you move through it and it is again “dark” because it has nothing to do with electromagnetic radiation. Dark Energy was also forced upon scientists by observations. In 1998, the discovery that the universe is accelerating was a shock to theoretical physicists who knew it was possible in principle, but almost nobody actually believed it.

Perhaps Dark Energy emerges as a synergy resulting from the behavior on scales smaller than atoms in the realm of Quantum Mechanics, that can produce energy and matter that appears out of nothingness, although only for the tiniest fraction of an instant. The constant brief appearance and disappearance of matter could be giving energy to otherwise what we thought was empty space in the Universe.

Consequently, Dark Energy creates a new fundamental force within the Universe where scientific theories allow for the possibility of such forces. The force might even be temporary, and some believe it is causing the universe to accelerate for some billions of years before it weakens and essentially disappears.

There is still much we don’t know about the medium Dark Matter and Dark Energy because science has not yet determined exactly what they are and their detection is still not DIRECT, but INDIRECT by their effects on gravitational fields in the universe. Make no mistake, they are by no means random or arbitrary any more than market behavior. Both Dark Matter and Dark Energy make very specific predictions for what those gravitational effects should be, which astronomers have tested and verified. Hence, despite being unable to measure Dark Matter and Dark Energy directly, their exist can be verified by indirect observation through their impact and effect.

Energy requires a medium through which it can travel. In economics, we are the medium – human emotion and this is why the majority must always be wrong. We have our own cycle of progress so we begin by purchasing the high and selling the low. If we learn from our mistakes, we progress in our personal cycle so we then sell the high to the new-comer and buy the low when he throws in the towel.

Therefore, like Dark Matter and Dark Energy, the business cycle can be confirmed by measuring its effects even though you cannot see it, touch it, or taste it. The business cycle is the wave form but then there is a separate component within the wave composed of a cycle within a cycle of energy in markets we call volatility. There are two primary components to a wave – the particles and the wave so to speak in light terms. Then there is the Schema Frequency interjecting TIME. What constitutes the business cycle is the entire global economy. You cannot look at just one country and forecast the future. Everything is connected. It was World War I and II that shifted the capital flows to the USA. The United States was bankrupt in 1896 when J.P. Morgan lent it $100 million in gold. Without those wars, the United States would still be mostly agrarian.

Now, the proof of the importance of cycles is the blunt reality that everything in the universe has its own inherent frequency. Physics suggests that a sound wave can break glass. Some have said some opera singers with a very strong voice have broken glass. In reality, every piece of glass has a natural resonant frequency—the speed at which it will vibrate if bumped or otherwise disturbed by some stimulus, such as a sound wave—as does every other material on Earth. If you match that frequency, you can shatter the object. Sonic and ultrasonic weapons (USW) exists. Sonic weapons can injure, incapacitate, or even kill an opponent. Some sonic weapons are currently under research and development by the military as the police.

Some sonic waves can repel crowds without killing them. Cycles are extremely powerful if you understand wave motion. There are electromagnetic rail guns using just electricity that will shoot a bullet (projectile) at a speed of Mach 7 (seven times the speed of sound) for 100 miles. The next war will be much different from what anyone imagines. It is not all just nukes.

My criticism of academics is simply this. They promote stagnation and demean both imagination and curiosity. For your see, our knowledge is confined by the limitation of all we now know and understand. All progress takes place ONLY from those who embrace curiosity and imagination thinking out of the box (reality) for here there is no limitation whatsoever since it encompass the entire universe and all there ever could possibly exist. Curiosity may have killed the cat, but what a boring life it would be if there were no risks and no means to learn from our mistakes.

Work force is stagnant and unless they stay current with technology, they will quickly find themselves UNEMPLOYABLE with no useful skills.

The Plight of Junk Science in All Fields

Posted Jun 23, 2017 by Martin Armstrong

Junk Science is the real crisis we face as so many people think that Global Warming is caused by man and Co2. Of course, those who really believe this is the problem that will destroy the world perhaps should just commit suicide and take the dog with them. Since we exhale Co2 that would reduce the problem in their mind and save the world by setting a good example.

Junk Science plagues us in every field of science be it economics to health. For 25 years we were told that eggs are bad. How many people ordered egg whites only. Then the Junk Science was revised, but after 25 years, nobody noticed. When scientists learned that high blood cholesterol was associated with heart disease, they immediate black-listed all foods with high cholesterol content. It took 25 years of study to figure out – oops, we were wrong! You just didn’t really hear the “oops we were wrong” but instead you heard of another great danger – saturated fat! It became evident that cholesterol in food by itself was not the culprit after all — the real great evil was saturated fat, This is what had a much bigger effect on blood cholesterol when it was discovered that full-fat dairy products and fatty meats are loaded with saturated fat and that triggers the body to produce cholesterol.

This is the problem with analysis. The can conclude that everyone who has eaten a carrot eventually dies. That is an absolutely correct statement. They study one component and draw a correlation and thus produce the definitive relationship. They did that with interest rates. Higher rates means the stock market will decline. Oops. The Fed just raised rates and the Dow made a new high. Interesting! See it is the carrot paradox.

In economics, we had the Quantity of Money Theory that has driven central banks into Quantitative Easing expecting inflation and after 10 years of desperately trying to stimulate inflation, they have been beaten to a pulp by deflation. As always, they make a false simple assumption at the outset which then leads to the false result. They also fail to comprehend that there is the contraction within the economy creating deflation from technology advances. The work force is stagnant and unless they stay current with technology, they will quickly find themselves UNEMPLOYABLE with no useful skills.

In the middle of a crash, they ONLY people buying are shorts. No shorts = flash crash and no bid.

EU Wants to Order All Euro Trading Moved from London to Paris

Posted Jun 15, 2017 by Martin Armstrong

The European Union is preparing the legal basis to take over London’s extensive trading business with euro derivatives. This is just another complete failure of bureaucrats to comprehend market function. Perhaps they should also outlaw euro trading in the USA and Asia. That would be real smart. Then they can all sit down and play cards with euro themselves and guarantee it will never be anything to anyone else no less convertible worldwide.

The EU Commission wants to withdraw the multi-billion-dollar derivatives market from London after leaving the UK from the European Union. Transactions with securities settled in euro should then be transferred to the European Union if the relevant clearing house plays a key role in the financial system with its trading volumes. Their draft law is still in draft form. It is the testament to just how stupid bureaucrats can really be. They have already outlawed naked shorting of the government debt to prevent a crisis in sovereign debt. They fail to comprehend that in the middle of a crash, they ONLY people buying are shorts. No shorts = flash crash and no bid.

You just can’t get more brain-dead than this.