Renowned forecaster Martin Armstrong joined Cris Sheridan on a recent edition of the Financial Sense Insider podcast. Known for his out of the box and controversial opinions, Martin shared his thoughts on the cornoavirus, where the U.S. and global economy is headed and how he thinks the 2020 U.S. presidential election will play out. Read below for excerpts from his interview on FS Insider. If you’re not already a subscriber, click here.
See We Are Destroying the World Economy, Says Martin Armstrong for audio.
We’re operating on a fear of the unknown. Markets thrive on confidence and suffer in uncertainty. What’s your take on all of this?
To me, the coronavirus seems to be an excuse. Our computers were predicting a crash anyhow, simply because the market was up for 11 years. The market was growing tired, but we still see this thing going up and making new record highs as early as 2022. We're still looking at reaching the 35 to 40,000 level, but we have to understand what's different this time.
Normally you get the flight to quality; money moves from the private sector and rushes into government bonds. Right now, they're selling government bonds, so governments are overburdened with debt. They can't lower interest rates anymore. They’ve killed the Keynesian model idea. So eventually, capital is going to look at this and go I'm better off with shares of IBM than with government debt, and then it flips. It's all a confidence game.
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We're at about double the percentage movement in time from 1929. Coming down this fast, in a shorter time span is good because it means you're getting it over with quicker. But the damage to the world economy is this overreaction that's going on about this virus.
You have everybody shutting down businesses without contemplating the cost of this. I'm not talking about just bailout packages, because the bailouts are not going to reach the average small business on the street. In the U.S. maybe that worker gets unemployment but if they're a part-time worker, they're not going to get it. In many Asian countries they don't have unemployment; they've closed all the bars and everything in Thailand. I mean, you're risking people basically losing more from starvation than you are from anything else. You can't shut the entire world economy down like this.
What happens if we start to see drug shortages?
It's just an overreaction. I mean this is like the influenza, so it spreads faster. But at the same time, I think it’ll peak out like the flu. I think it's already peaked out in China and South Korea and will probably peak in the U.S. in late spring.
What I understand from the reliable sources in the medical field, about 14% of the viruses each year are coronaviruses. So, the question becomes does this turn into a parallel flu-type epidemic for next year's season as well?
It certainly does not warrant the degree of shutting down the entire world economy. The damage can't be fixed by giving out money. Everybody gets $2,000 doesn't cut it. There are a lot of people losing jobs, small businesses shutting down and the banks won't lend the money, so they go bankrupt. My concern is that the bailouts are only for the big companies, and it won't go down to main street.
For more on the impact of drug shortages, see What Happens When We Run Out of Drugs?
Would you agree that we're shaping up for a pretty big fight in Congress over whether or not to bail out the oil companies?
Well, then it cuts off a lot of the fracking and you're back to the basics where it’s profitable. Our computer's been projecting that we're looking at an inflationary trend between 2022 to 2024. Now what creates that? It’s not showing a trend that’s demand led; it's showing one that has a shortage. Prices can go up because there's a shortage of supply or they go up because everybody's out trying to buy toilet paper. This seems to be more of a supply shortage.
You start bringing oil prices down, everything starts shutting down. Same thing in gold. It's ironic, but you know, the gold companies shut down and it brings supply down when you're going into the lows. At the highs everybody's thinking, 'wow, gold is at 2000, I'll be able to make a fortune for the rest of my life,' and they assume it's always going to stay there.
That's pretty much the same way it is in all industries; they expand at the top and they contract at the bottom. It's interesting, but that is probably what you're looking at to fulfill what our model is saying. We're going to be seeing shortages in supply, which forces prices up, not demand.
Trump's tied much of his success to the stock market and we're likely to see a U.S. recession. What are Trump’s chances for reelection?
Still very good. Our computer has been projecting that the Democratic Party will split. You can see that now with all the people who follow Bernie Sanders who are really upset and feel that the system is rigged against them. Every other candidate dropped out to stop Bernie. The real fear of the Democrats is what would happen if Bernie was the candidate.
The talk behind the scenes is that they will draft Hillary Clinton, and that is why she's been appearing on all these talk shows and getting back out there again. The talk is that she’ll be called in to be the savior of the Democratic Party.
I do think this race and election are going to be tighter than what people suspect but unless Hillary comes in, Trump will win. And people don't understand why Trump won to begin with. The press doesn't want to report it and the politicians don't want to admit it. But when Trump won, they all said it was a fluke. Even the Republicans didn’t really like it.
I would say the elections are not altered at this stage in the game. I am very concerned about what comes after Trump because I think we're looking at much more authoritarian type things. Look at what's happened in Denmark. They just put in this proposal that the government can force you to test. And if you refuse to test, you're not allowed to leave your house. It's really dramatic.
I think CDC is trying to use similar power here in the United States to a level that's dictatorial, where they have the right just to shut down all small businesses. I think it's just overkill, and you don't kill the patient to cure the disease. And that's what's happening. You're not going to be able to repair it with bailouts, once the stores are closed, they’re not coming back. We're really destroying the world economy.
Click here to listen to the rest of this interview with legendary forecaster Martin Armstrong to find out what he thinks about the Fed’s recent moves and where he sees the economy going in the weeks and months ahead.
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