Capital Flows – Domestic v International
QUESTION: Martin,
The problem with cap money flows is that they can turn quickly.
For instance, does socrates take in to acct the drought in the west?
If so it must know that the cattlemen are preparing for major water
deliveries. This is happening all the way the the hills of the SF bay area.
Good luck with that.
It is Irish luck John
ANSWER: Actually yes. The Federal Reserve was first set up focused on the domestic capital flows for they caused the Panic of 1907 following the San Francisco 1906 Earthquake. The insurance companies were in the East and the claims in the West. This resulted in a capital shortage in the East and bank failures. That is WHY the Fed was created in 1913 with 12 branches and each branch had independent authority for interest rates to attract and deflect capital. It was not until FED usurped that power and vested it in Washington DC with one interest rates fits all. That to this day has not altered the domestic capital flows. We correlated the regions and have written about the Tex-New York arbitrage. When NY booms Texas is in the hole, and the greatest boom was the oil boom in Texas during the Great Depression in New York.
What you are glossing over is that there are cycles in weather just as there are in war. They too are incorporated into the model and it is always nature first that causes reactions by mankind. Why does war unfold when our model targets 2014? Simple. The economy declines FIRST and this sets in motion rising tensions and discontent.l It is NOT war then the economy, it is the economy and then war. That means weather is also involved for as I have stated – EVERYTHING IS CONNECTED. Personal opinion and interpretations mean nothing at the end of the day. Capitalism only began because of the shortage in labor caused by the Black Death and that spread to Europe because of War in the Crimea. There was the Great Influenza after World War I that killed tens of millions of people.
It took me some time to understand how the computer could even predict the rise and fall of nations. This is NOT ME with some lucky opinion. The computer predicted every conflict with amazing accuracy based upon rapid shifts in capital flows. I came to understand the mechanism only after advising the Universal Bank of Lebanon. They discovered a ledger with the prices of the Lebanese pound recorded since the mid 19th century. They asked if we could construct a model on their currency back in the 1980s. We did. The computer came out and said 8 days until the currency collapsed. I personally thought it was crazy. But the client was paying me to report what the model said – NOT MY PERSONAL OPINION.
I was embarrassed to say 8 days. I had no choice. I did so NOT knowing the fundamentals at work at all. I expected them to say you and your computer are nuts. Instead, they asked what would be the best currency to move into? I told them the Swiss franc.They were calm in asking advice. Only after the fact did I understand why for they were seeing capital flows shift ahead of civil war, which the computer pinpointed to the day. If you know you will start a civil war, what do you do? You move your capital to safe ground. That is HOW the computer picked up events. It does not need to know the fundamental or who is doing what – it tracks the movements and people react in anticipation.
In 1985, under the leadership of Geagea and Hobeika, they split entirely from the Phalangists and other groups to form an independent militia which was the dominant force in most Maronite areas. The Command Council then elected Hobeika to be LF President, and he appointed Geagea to be LF Chief of Staff. In January 1986, Geagea and Hobeika’s relationship broke down over Hobeika’s support for the pro-Syrian Tripartite Accord, and an internal civil war began. The Geagea-Hobeika Conflict resulted in 800 to 1000 casualties before Geagea secured himself as LF leader and Hobeika fled. Hobeika formed the Lebanese Forces – Executive Command which remained allied with Syria until the end of the war.
By 1998, I was an expert. I came to understand capital flows and was able to articulate the events on the horizon in the capital flows regarding Russia that would result in the collapse. That became the collapse of Long-Term Capital Management. This war cycle is doing the same thing. It is possible ONLY because of the collapse in liquidity, the hunting of taxes that is shrinking the world economy, and the excessive socialism that is collapsing government as its pensions and debt become unsupportable.
After 911, the government used this information from our model observations to search to see who moved money in advance and who bought market positions the day before. I had communications on this to expalin how it worked. After all, the CIA wanted our model after it pinpointed the Russian collapse in 1998. They suddenly saw not forecasting markets, but geopolitical events. That was important info to them.
So yes. Capital Flows shift and they are picked up equally rapidly on our models. Sorry – they are just far better indicators than personal opinions. You can think some fundamental operates in total isolation. But farmers would not be in a drought in the first place if it was not cyclical. This is the entire problem. Looking at everything as just personal Irish luck prevents you from opening your mind to entertain that just perhaps we are NOT the masters of our entire economy. We may be just a fly on an elephants ass with no concept that it is even an elephant. As long as you attribute everything to dumb luck, then you should fund me at a casino and see if that luck holds up. Sorry – there is far more order hidden behind the superficial chaos you think is random.
Beware 2025
QUESTION: Hi Martin,
As an avid reader of your blog I have the following question:
I follow the rationale for the coming capital concentration (and bubbles) in US stocks and then gold into 2016/7. Once the bubble for gold bursts where do you see the capital flowing? Is that when you foresee an even greater credit deflation meltdown than what occurred in Autumn 2008?
Best Wishes,
AR
ANSWER: We are most likely going to see a financial crisis that engulf the pensions and the sovereign debt crisis. The preliminary target seems to be really off in 2025. However, 2020 will be the first big crack.
We seem to be headed for the electronic currency as the first fix. But we will see this migrate to the replacement of the reserve currency, which I believe will be a basket of the major currencies administered by some agency, I sure hope will not be the IMF. However, I would bet against my luck on that one.
Gold may not reach its final peak until 2025. This will be a reflection not so much for gold as an investment, but as simply a reflection of the entire financial system.
War & Commodities
QUESTION: Hello,
I am a fan of your research and forward it to my friends when I can. Reading your site has provoked a question..If the war cycle proves true which it very well could, and we see a downturn in Q3 2015, then will commodities such as crude and gold likely spike upward, or will they be pulled down deflationary like in ’08 in your projections?
Thanks for the great work we all appreciate it.
Thank you,
Thanks for the great work we all appreciate it.
Thank you,
AJ
ANSWER: One reason gold and commodities are declining during the upside of the ECM is indicative of the cycle inversion in the wings. During war, base commodities rise in value. During World War I, there was the huge commodity boom. During World War II, governments imposed wage and price controls so prices did not rise as a matter of law. We even saw nickel being replaced by silver in the 5 cent pieces during the war.
Therefore, base commodities would rise like copper and nickel, and normally we should see gold and silver rise as well. This time, since there is no gold standard and silver is not being used for coinage, we stand a chance that there will be no wage and price controls in this respect. Our greatest danger will be the tax man.
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