COMMENT: Mr. Armstrong, we never met. I was introduced to Socrates at the insistence of a friend at another one of our divisions. There was no 80% Crash on April 29. The whole de-dollarization seems to be another hype, as we have witnessed ourselves. Your system allows you to plot anything in any currency. I just have to comment that you are obviously a highly experienced trader, for it takes someone who has thrown their hat in the ring to actually come up with something useful rather than theory. Plotting the S&P across various currencies confirms the bull market, as you have consistently said. A bull market requires advancement in all currencies.
I understand you will be doing a Next Generation conference to teach the next generation how the world really works. I know our company has used you for many years. I am a recent addition. I just wanted to say that you have opened my eyes and transformed my career into something exciting.
God bless you, Mr. Armstrong, and thank you.
Robert
REPLY: Thank you very much. I know what you mean. When things are always evolving, it keeps you on your toes. Lillian Smith put it this way:
“When you stop learning, stop listening, stop looking and asking questions, always new questions, then it is time to die.”
My father took the family to Europe for the summer back in 1964. That taught me currency, for we traveled all over Europe, and back then, you had to change currencies at every border. That trip taught me more than anything in school, for not only did they never talk about currency because everything was at a fixed rate, but economics was not even a science. It was all really Marxism and Keynes projecting that government was wonderful, our savior, who would eliminate recessions and depressions, creating the path to economic utopia.
It was currency that dragged me around the world and had companies and governments knocking on my door. It has been my clients who have taught me, not academia. I learned early on that a bull market is something that rises in all currencies – not just your local currency. If your currency declines by 50%, your private assets will rise in proportion because everything has an international value.
Not only does classical economics completely fail to keep up with the times, still entrenched in theories from the fixed exchange rate period, where they NEVER considered currency, but everything is based entirely on domestic analysis, void of international capital flows. Here is a chart of the famous 1989 Crash in Japan. Everyone will act out of their own self-interest, and that is measured through the eyes of their domestic currency. Note that the high took place in yen and dollars simultaneously.
I quickly realized that what I was being taught in school was all lies and propaganda. I had to read Galbraith in school and came across Hoover’s Memoirs. It quickly surfaced that Galbraith was just a socialist who portrayed corporations as evil and the government as walking on water. He omitted everything about the Sovereign defaults of Europe, South America, and Asia. The LEFT rewrote history to support Marx. Nothing has changed. Formal education is a detriment. The Shah of Iran paid for the education of Iranians, sent them to the best universities in the US and UK, and they returned with a Marxist agenda mixed with Islam and staged the Revolution in 1979. It was that same LEFTIST hatred I saw in school that has led to the death of hundreds of millions and counting.
A real bull market is something rising in a broad basket of currencies. Then and only then do you see how markets truly respond. This 80% crash is nonsense. To achieve that, which is a repeat of 1929, so many things would have to be different. The US had a balanced budget in 1929. There was a cash shortage because the Fed feared inflation. Over 200 cities issued their own money due to the cash shortage, Milton Friedman pointed out.
The market went down because the dollar rose to record highs and other countries defaulted on their debt. The Fed was terrified that the dollar would be next on the list of currencies to default, and it tried to keep the supply tight, causing deflation.
I had a discussion about the business cycle with Paul Volcker back in 1999. He, too, saw Keynesian Economics fail during the 1970s. He also agreed with my Economic Confidence Model and said he believed that the business cycle was about 8 years.
It was Milton Friedman who came to listen to me speak, I believe it was a COMPUTRAC conference in Chicago. I was speaking about currency and capital flows, and when I was done, Milton came up, shook my hand, said that was the best speech he had ever heard, and that I was doing what he had just dreamed about. To say I was shocked is putting that mildly. I saw myself as just a trader.
What Milton meant was that I was doing what he had just dreamed about, as he had seen in his mind a floating exchange in 1953, almost 20 years before it materialized. In 1953, Milton Friedman published a seminal essay titled “The Case for Flexible Exchange Rates,” where he strongly advocated for a system of floating exchange rates. At the time, the global monetary system was dominated by the Bretton Woods framework of fixed exchange rates. Milton argued that such a “pegged but adjustable” system was inherently unstable. He proposed flexible exchange rates as a superior solution, mainly because they could automatically adjust to economic shocks, helping to maintain both internal (e.g., full employment) and external (e.g., balance of trade) balances for a country.
Milton’s case for flexible rates was so influential that it presaged nearly all the major arguments that later scholars would make in favor of floating exchange rates. It was Milton who encouraged me and said what I was doing was important not just for trading, but for economics and the political world.
I am trying to finish these four books as my final gift. That with the next couple of movies (1), documentary (1), Hollywood film, I can say mission accomplished. I have always believed we are sent here for a purpose, and if we do not stare that destiny square in the eyes, then what is the purpose of being here?
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