By Greg Hunter’s USAWatchdog.com (Early Sunday Release)
Renowned analyst, Martin Armstrong contends the financial markets run in cycles, and “confidence will always outweigh reality.” Armstrong clarifies, “It’s basically what you believe. There have been all sorts of studies on fundamentals that say if interest rates go up, stocks go down. It is simply not true. The stock market has never peaked with interest rates twice in history. If you think you are going to make 25% in the market, you’ll pay 10% interest; but if you really think the market is only going to go up 10%, you won’t pay 10%. So, it’s always the difference between what you believe and reality.”
Armstrong, who invented forecasting called the Economic Confidence Model, says, “Knowing how empires die is fundamental to forecasting the world economy.” Armstrong explains, “You have a lot of people talking about hyperinflation, and that’s not how empires actually die. That’s more or less the peripheral type economies like Germany was after WWI. The empires that have actually collapsed, such as Rome or Britain, you don’t see hyperinflation. What you do see is massive debt that just keeps going and going–exactly in the process we are at now. They are trying to sustain power. So then, what do they do? They get very aggressive with taxation and come after you.”
What is Armstrong’s take on the current U.S. economy? Surprisingly, he says, “The major economy that we have is still strong underneath. It is still supporting the world economy. Europe is going down. You have all the emerging markets declining, such as Russia and China, etc. We are declining, but it is not as robust as it was before, and it should turn down by the end of next year. The primary thing holding up the U.S. right now is internal capital flows that are coming from everywhere. Part of that is geopolitical. A lot of it is real estate. The high end real estate is still booming. Why? You have a tremendous amount of capital from Europe and even China just trying to get off the grid. They are talking about seizing money in bank accounts. One of the number one questions I get all the time is where do I put my money? If the banks can just take whatever they want now, there will be bail-ins rather than bail-outs. People are afraid. What do you do with the cash? So, people are buying things like real estate and stocks, just trying to get money out of the banking system.”
On the subject of so-called bail-ins coming to America, Armstrong says, “Everybody knows I advise some of the big institutions around, and I can tell you that they have told me directly that the Fed went to them and told them they will not be bailed out for proprietary trading. It will be only on deposits. That’s it. The Fed has been going around telling them, ‘hey, you better change your models.’ They don’t think it will be a flight to quality as it was before. You buy the long term (Treasuries) and that saves you. They don’t think that’s going to happen. It’s quite interesting. . . . It looks like the long term (Treasury bonds) is going to end up starting to rise. Eventually, people don’t trust government, and what happens then is they move from the public sector into the private sector. In some of your extreme cases, like Germany’s hyperinflation, everything went up–real estate, art, metals, whatever was tangible. What you are seeing today is the same kind of attitude, but not necessarily hyperinflation, but everything is going up dramatically.”
On the subject of the U.S. collapsing, Armstrong says, “The core economy never collapses first. It’s the last thing to go. If the United States would collapse first, then all the other economies would have to collapse. It doesn’t work that way. It comes from the outside in. If the United States were to collapse first, the entire world would have to collapse.”
On gold, Armstrong says, “Gold is still in a bear market. I think it will have to make one more new low. I think it will start to turn up around 2016. I don’t see it going down drastically lower. It is more a matter of timing. When are people going to really start questioning government? That’s when gold goes up. You’ll notice that gold went up aggressively up until 2011. People were worried about the economy going down and worried about government. Gold goes up when our Economic Confidence Model goes down, and it should be the period between 2016 and 2020 when it begins to rise.”
On market manipulation in all the markets, Armstrong says, “Any manipulation cannot change the direction of the trend. You can go with the trend, increasing the volatility of it, but you can’t turn a bear market into a bull market. Governments try, but if everybody wants to sell, it’s just going to be gone. The confidence has to be there.”
Global war and civil unrest is also in Armstrong’s forecast. His model shows a 300 year cycle is upon us. Armstrong predicts, “It turned up in 2014. The 300 year model is civil unrest. Going into it was the Occupy Wall Street, but that was peaceful. Next time the Occupy starts, you are going to see much more violence, as you are seeing Europe, but that will probably take place in the U.S. after 2016. In Europe, you are seeing unrest everywhere. . . . Europe seems to be absolutely crumbling. . . . It’s an absolute disaster zone everywhere you look.”
Join Greg Hunter as he goes One-on-One with Martin Armstrong of ArmstrongEconomics.com.
(There is much, much more in the video interview.)
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