Legendary forecaster, author, and creator of the Economic Confidence Model, Martin Armstrong, recently sat down with GoldSeek Radio to talk about a range of subjects including two issues frequently discussed here at The Sounding line: the stability of the European financial system and the excess reserves being held by Federal Reserve member banks.
In a fascinating interview, Mr. Armstrong notes:
“They created the Euro but they basically never consolidated all of the debts, and so they left everything still independent and that’s a problem because big institutional money still then has to look at Europe they same way they would look at the States in the US. You know you look at the credit ratings in California versus New York or Illinois etc… So it’s not just a single credit rating so you have the 10 year Bunds going up against the Italian 10’s and the Spanish etc… So they never really created a single market beyond just the image of the currency. And then you have the central bank and what has happened with this quantitative easing, Europe just went completely nuts… This idea of quantitative easing, if I give you a hundred dollars and I say you give me 90 back (in taxes), what did I give you? A hundred or ten? …In Europe the ECB bought government bonds but they have been doing it for nearly ten years with no effect what-so-ever. So at this point in time what’s going on? The ECB owns 40% of all the national debt of all the EU countries… Now what’s going to happen when they stop? Who’s going to buy it? There is no bid… Interest rates are going to have to rise substantially before somebody is going to be willing to buy this stuff…”
The interview continues and Mr. Armstrong goes on to forecast a possible doubling of the DOW, so enjoy it below: