Submitted by Taps Coogan on the 22nd of May 2018 to The Sounding Line.
Legendary investor and forecaster Martin Armstrong recently gave an wide ranging interview to USA Watchdog’s Greg Hunter and warned about continued strengthening of the US Dollar and the possibility for dramatic increases in interest rates, particularly in Europe.
Martin Armstrong on the structural problems in the Eurozone:
“What happened was they (the Eurozone founders) felt that they could not get everybody to agree to a Federalized Europe, so they sold the idea of a single currency first and that’s why they never consolidated the debts… When they formed the United States… Alexander Hamilton said: ‘Look everybody contributed to the cost of the revolution.’ So they took all the debts from the members states and that became the national debt. After that, every state was on its own… So Louisiana, Florida, New Jersey… Everybody issues their own debt. Now, the difference between the United States and Europe, that debt (state debt) is not reserve currency status. A bank that is going to have reserves at the Fed, its only federal debt. That’s it. They don’t have that in Europe. That’s why the banking system is an absolute disaster, because to be politically correct every bank had to have a piece of everybody. So then Greece gets in trouble. Alright we’re going to give them a haircut to help out. Well, your cutting the bank reserves.”
On the US dollar’s reserve currency status:
“You have major institutions: pension funds, sovereign wealth funds, etc… The dollar is the reserve currency because it’s the only place to park money. They pick up the phone and say ‘buy me a billion.’ Where are you going to do it? It’s the US. That’s it. You don’t have a single bond market (in Europe)… There is nothing on the opposite side to compete against the dollar… China is not fully free yet. Japan is a joke, they’ve been buying 97% of their own auctions… There is no competition to the dollar and I’ve been in meetings in Washington and they understand this… The dollar is not a petro-currency. That is an absolute falsehood. If you take energy and look at it compared to global GDP… you are talking about 7%. I don’t care if you want to price it in Turkish Lira. It’s not going to change the dollar.”
On the Fed becoming the world’s central bank:
“The whole thing is going to break. The Federal Reserve has become the central bank of the world by default… Now behind the scenes… the Fed wanted to start raising rates in 2014. They waited until the last quarter of ’15. Why? Because emerging markets were saying please don’t do this, the IMF was lobbying them, the ECB said ‘if you raise rates it’s going to be difficult (on our banks)…’ Janet Yellen kept coming out and saying ‘you have to normalize interest rates’ because at the same time you have all the pension funds, that need effectively 8%, going bust. So you’ve got a pension crisis coming that the central banks have created. The Fed understands this and keeps trying to push interest rates up and everybody is screaming. So the Fed has lost the power to actually control the domestic economy. It’s lost domestic power to international.”
On the possibility for massive interest rate increases in the EU:
“You have to understand that both Japan and Europe, they have completely destroyed their bond markets, completely utterly destroyed them. They (central banks) are they buyers. That’s it. There is no pension fund that can buy 10-year paper at 1.3% when they need 8% to break even. They’re locking in a ten year loss. They can’t do it… Once you start seeing the cracks in Europe, you are going to see interest rates rise faster than you have every contemplated in your life because there is no-one in their right mind that can buy an Italian 10-year bond at 1.3%. It’s just not going to happen. Once the ECB is forced to stop, those rates are going to jump to 10%… instantaneously. So just be practical here, who’s going to buy it (Italian bonds)? Nobody has been buying it. The bond markets have been utterly destroyed… What will finally make everybody realize it is cracking is simply when you start seeing rates going up dramatically and the ECB is at a point where it just can’t buy anymore.”
There is much more, so enjoy the interview above.
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