Coming Commodity Boom

7/29/2019 Coming Commodity Boom

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Copyright Martin Armstrong All Rights Reserved May 29th, 2012

Are Commodities Preparing

for a Major Rally?

One of the biggest problems with the Kondratieff Wave is how people use it and what they claim it is

supposed to be doing. If Kondratieff were alive today and decided to investigate the business cycle, he

would have come up with a whole different model. Why? The 19 th century was simply a commodity

world. The Industrial Revolution was just beginning with any practical force.

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The three primary Kondratieff waves were based upon a predominantly commodity dominated

economy where agriculture accounted for 70% of the civil work force in 1950 and 40% by 1900

compared to 3% in 1980. This is why unemployment rose to

25% during the Great Depression you could not pass a law

to end the Dust Bowl. Consequently, those who have

abducted Kondratieffs work to preach doom and gloom fail

to understand that the economy is itself constantly evolving.

The economy is indeed what Heraclitus of Ephesus realized

that everything in the universe was subject to change: "You

cannot step twice into the same stream." It is not that

Kondratieffs wave is wrong or incorrect, it is merely a wave

frozen in time lined up with the commodity sector that is

directly impacted by war. Therefore, the peak in commodities in 1980 implied a low should have been

due at least 12 years later around 1992 at best if we look at the high in 1920 and the low in 1932. Using

the two previous waves, we had a decline of about 31 years. This would suggest the low would be 2010-2012.

When we look at the currency perspective,

we can also see how the next turning point

on the Economic Confidence Model of

2015.75 is critical for this is the target that is

31 years from the Plaza Accord and the

entire birth of the G5 that is now G20.

I have been warning that contrary to the

doom and gloom forecasts out there that

call for the collapse of the dollar and the

rise of gold right now, this is not a scenario

that is quite reading for prime time.

The United States is in the very BEST shape

compared to both Europe and Japan. What most people do not realize is that Japan from an economic

perspective is actually far worst that Greece. It is always just a matter of perception that really counts.

This is why fundamental analysis fails. It is NOT what is true that matters. It is what people BELIEVE that

matters!!!!!! Why? Because people buy or sell on anticipation of events to come, not of events

themselves! Do you listen to a forecast that a stock will double and then buy when it has doubled?

Capital moves in anticipation of events. This is why the old maxim exists buy the rumor, but sell the

news. By the time the fundamental has taken place, the move is over. The key to forecasting is NOT the

fundamental nonsense; it is understanding what people are looking at and what they believe will

happen regardless of the facts. This is why there are bank runs. People withdraw their cash in

anticipation that the bank might fail. They cannot wait until the bank fails.

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So what we are looking at is a sequence of events

that unfolds with one cascading into the next. It is

never a simultaneous collapse of everything all at

once. It is like that bankrun. It is one event moving inanticipation that sets in motion the next

consequence. So the Sovereign Debt Crisis will

appear when government find it difficult to see their

bonds. Only then will the failure take place. So

forget the doom and gloom guys that always call for

the end of the world each and every time the stock market pauses. Others call for the hyperinflation of

the dollar. They utterly fail to understand that hyperinflation takes place ONLY in a peripheral economy

and cannot take place within the core economy. Everything would collapse long before hyperinflation

would unfold. Historically, hyperinflation just has never taken place in the major economy. The closest

we have ever seen such a collapse was that of Rome and there money fell by debasement and its valuecollapse to about 1/50th of its former purchasing power.

Rome survived for about another 224 years. There were many reforms. The first came precisely on the

Pi cycle 31.4 years from the start of the massive debasement of the coinage by Gallienus in 260AD

after his father Valerian I (253-260AD) was captured by the Parthians. The reforms of 292AD restored

the silver coinage to that of where it had stood at the time of Nero. Now we face 31.4 years from the

Plaza Accord in the 2015-2016 time frame. That is when we will see the Sovereign Debt Crisis start to

unravel.

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The global money supply many argue is only around US$5 trillion while assets values of bonds (debt),

share values, and real estate are purported to be around US$120 trillion. Then they add the credit

derivatives, hybrid securities, options, futures, forwards, swaps, and OTC derivatives, and they come up

with the number of over US$1,000 trillion. They then argue that today gold is really paper gold, and the

market have multiplied that many times. They argue that the real gold is only about 5 billion ounces.

They then argue that the paper gold depresses the price of gold and this is why it is not where it should

be right now. All this sound nice, however, you can make the same argument about anything traded

today from wheat to stocks and bonds given the derivative markets.

Some see conspiracy behind everything. They purpose that structurally, the new Euro monetary system

had been designed to withstand the complete demonetization of physical gold. They argue that it was

the Euro that was the first currency to actually sever its link to gold, as well as any link to the individual

nation-state. They point to the fact that the euro is neither backed by any metal or by the authority of

the independent state. In Europe, they argue that gold is no longer important from a monetary point.

Money has evolved and as the medium of exchange it is simply a virtual concept. It is no longer even

printed for that is a tiny fraction of the money supply. Government no longer even creates money since

it is electronic. So the whole idea of money being backed etc. is simply antiquated and no longer

necessary. When Winston Churchill stood up in Parliament in 1925 and announced that Britain would

return to the gold standard, many cheered. He proclaimed: No responsible authority has advocated

any other policy. It has always been a matter of that we should return to it. This resulted in

overvaluing the pound, cut off trade, and set in motion the demise of the British monetary system to the

point it was forced into default by 1931.

Money has become purely a virtual concept as it was in Asia from the beginning. Money cannot be fixed

in value for nothing is really fixed. If you fix money then everything has to be fixed including wages.

Money must float for that is the foundation of everything within the business cycle. This is separate and

distinct from whether or not gold is an asset of value, which of course it is. However, its rise and fall

need not be orchestrated by conspiracies.

All commodities are prone to dramatic

advances and declines. They do not rise in

proportion to everything else nor do they

rise in a steady linear fashion. Gold has

not risen sharply yet simply because the

world is not ready to grasp the idea that

government debts are not stable. Once

they realize that fact, gold will rise

dramatically just as it did from 1976 at

$100 into 1980 reaching $875. Such an

advance today from $1500 gold would be

$1,312,500 gold.

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There are those who claim that there is some grand scheme among what they call the dollar faction

to make the dollar supreme and the emergence of the completely demonetized gold. While this all

sounds dramatic, in reality, this gives far too much credit to those in power and quite frankly the vastmajority of Americans see money as the dollar. Government need not create some giant conspiracy

against gold to make the dollar supreme. Roosevelt did that when he nationalized gold in 1934 and the

subsequent generations have no concept of precious metals being coins. Roosevelt altered the mindset

of Americans. Those that still see gold as lawful money are the non-conformist crowd, which are

admirable for they do not accept government at its word. Nevertheless, the government won. They

need no longer convince the majority about what is money. They want direct deposit and eliminate even

paper dollars so they are sure to get every penny of taxes they demand. It is not gold they seek to

eliminate, but even paper dollars! They want ALL money to be electronic and that will in their mind

result in 100% tax collection.

The role of gold in the future is by no means a monetary form. This offers nothing from a strategic

perspective for government power. We face a Sovereign Debt Crisis and that they know. They could

care less about gold and its worth. It is the DEBT stupid! That they see as the real problem. Every

sumptuary law being introduced is designed to eliminate the Constitution and civil rights. They want the

kill switch on the internet to prevent the youth from organizing any resistance. Why do you think they

want to indefinitely detain American citizens without lawyers or any right to a court hearing?

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The American specialty is to create as many laws as

possible so they can ensure the power to arrest you

whenever they want. Professor Harvey Silvergate

wrote a book Three Felonies A Day that became a

national best seller (available from Amazon). Just as

the government broke up the first march on

Washington led by Coxley in 1894 under the pretense

he walked on the grass, which of course had

absolutely nothing to do with preventing him from

exercising his First Amendment Right to freely

assemble and speak, they did the same for the

Occupy Wall Street crown. There is always some law

you will break that enables them to obstruct your

constitutional rights and that means you have none.

The way government operates is that no judge will ever rule that the Constitutional Right trumps the

bullshit law they will use to obstruct it. You need a permit to protest. Exercise your First Amendment

Right and you will end up in jail because you did not get the permit to exercise it. They have ways to

defeat absolutely every right you think you have there are none! If they want your ass it is theirs!

Gold is a dead issue. It is all about money. There is no concern about gold or making money tangible.

Why would they ever want to do that? Talk about a game changer politicians could not promise the

moon, bribe people for their vote, borrow whatever it takes to placate the masses, and worry about

who will pay the bill later if ever. Everything would have to change to make money some form of

tangible wealth. How do you pay the interest on the debt alone in gold? The bankers would love that

one. Whatever gold there is in Fort Knox would be gone inside a year putting aside all the stories that

there is none or the bars are really gold plated tungsten.

We do not need all this drama. This is NOT about

gold exclusively. We are in the throes of a major

economy collapse and it has nothing to do with what

is money. We cannot service the debt in perpetuity.

NOT even a BALANCE BUGET will stop what is

coming. The proportion of interest expenditures will

continue to rise while you are forced to cut spendingin social and defense. You cannot cut interest

expenditures without defaulting on the debt. So

forget the nonsense about a gold standard. A

balance budget will not even work. We are now past

the point of no return.

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All commodities will rise. This is inevitable. The idea that somehow Freegold will emerge as a solution is

just absurd. Governments will NEVER give up power until they are forced to do so. Gold will be reduced

to the barter system and its value will rise largely as an alternative to ELECTRONIC money. If you had $1

billion, and you wanted to withdraw it from a bank, the best that could happen is there will be a

cashiers check. Even that is highly unlikely. The only way to withdraw that much money is by electronic

transfer. So lets get real. There is no role for gold to play in the future and the whole idea of a fixed

exchange rate has been attempted many times and it has always failed. You cannot fix the value of

money without fixing everything else from wages to stock values. That is why all fixed exchange rates

systems have collapsed after brief periods of time.

What we do face is a rise in prices due to the Sovereign Debt Crisis. Nothing will take place until we

begin to see pressure put on the debt markets. That has not quite appears outside of Greece andSouthern Europe. The politics is already starting to shift toward inflation rather than austerity. The only

check against this trend is capital. It is not FREEGOLD we should be concerned about, but free capital in

general. Once capital begins to shift as it did in 1925 away from debt and toward the free markets, then

we will see interest rates start to rise. As that takes place, the debt structure of government will

explode.

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Indeed, when we look at wheat we have the spike high in 2008. This followed the low in 1999.Thecomputer forecast was spot on for the last 12 years. What certainly appears to be on the horizon is a

rather significant breakout to the upside. Here is a chart of wheat showing the Breakout Line from the

1932 low. We exceeded that briefly during the 1974 rally. We exceeded that line for the first time

closing above it at the end of 2006. That led to the spike rally into 2007. We exceeded that BreakoutLine briefly in 2011 and then the market turned down. This was still quite critical for it indicates that this

market is preparing for a blast to the upside.

Looking at wheat indicates that what we are facing is by NO means something related ONLY to gold.

When we look at the entire landscape of markets, we can see the true scope of the Sovereign Debt

Crisis that we face. For the distinction between a wholesale decline in a currency value and a capital

concentration that creates a bubble economy, is rather simple. The former is witnessed in all markets

whereas the latter is concentrated within a single market such as the Mortgage Pools in 2007, the

Internet Bubble in 2000, Russia in 1998, Japan in 1989, the dollar in 1985, gold 1980, and the

agricultural markets in 1974.

Consequently, what we are looking at is a wholesale advance in the commodity sector and this implies a

very broad based decline in the

currency purchasing power rather

than a single isolated capital

concentration. Thus, this is not

about just gold, it is about a

systemic decline in the way Western

government has functioned since

World War II. The 1989 turning

point was the death Nell for

Communism. This is now our turn

with unfunded socialism. So indeed

repent for the time is near. Just not

for the reason a lot of people have

been saying.

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Coming Commodity Boom