Armstrong is saying the economy will bottom in January 2020. Do you think that we will turn things around after that point?
Let’s answer Dave’s question by first looking at Armstrong’s ECM:
Armstrong’s Big Bang of 2015.75 was predicated on growing default pressures for sovereign debt coming to a head on or about that day. Around this time he expected bond yields to escalate until bankruptcy. Higher bond yields would have also resulted in much lower real estate prices and assets priced off the yield curve.
Problem One: 2008, not 2015, was the pivotal year for all sovereign debt. In 2008, for the first time, organic investor demand for sovereign debt was no longer large enough to absorb all the massive new government issuance. In 2008 and 2009, supply began to outstrip demand and the gap has been growing every year.
Problem Two: Quantitative easing was not a failure if viewed from the establishment’s eyes; it was the elites’s response to this growing supply/demand gap. The Fed and their apologists could never admit this and chalked up QE to helping the economy.
It was clear that a debt forgiveness was not in the cards. Had QE not been promulgated, the monetary system would have collapsed. Yields would have spiked starting a decade ago, and that would have been it. The central banks have been absorbing all the extra supply to ensure fading yields.
Problem Three: If the economy has been on an effective IV-drip for a decade and 2015 was not a nominal high (low in longer-dated bond yields) as expected, how can we bottom in early 2020? If sovereign bond yields continue to fade and have yet to spike and real estate prices continue to rise what will be the catalyst for a bottom? There is none.
Problem Four: The central banks seem to have things under control as they are managing the entire yield curve. The monetary authorities, especially in China, have been intervening for 10 years now and I see little reason to conclude that the banks during any time in 2020 will stop the QE process. The central banks are in firm control of the agenda and the global investors know this. If the central banks stop now or any time in the future they will get the blame.
Problem Five: Those who understand the conspiracy for world government and have also concluded that the elites are still in firm control of the economic system will achieve greater predictive accuracy and will be able to stay ahead of the rest of the other prognosticators, Armstrong included. Mr. Armstrong scoffs at the talk of conspiracy. A man at the 2015 WEC asked him about a conspiracy and Armstrong got angry at him.
I see central bank intervention only growing in the coming years. There is no more business cycle; that’s a relic of the past. There is no way that the economy can bottom out any time in the near future when bond yields will continue to sink. We cannot bottom out as long as the global debt balance continues to increase. Turnaround talk is the stuff of folly and wishful thinking, but this does not mean that assets values will fall.
Imagine a scenario where the economy continues to succumb to all the debt while asset prices resume their upward trajectory. I say to throw all that silly cycle talk and discussion of pi out the window. Socialism will not collapse, because this is what the people want. The more debt that is generated for social spending, the lower the inflation rate, the weaker the economy, and the higher asset prices move.
This is the way the world ends, not with a bang, but a whimper.