QUESTION: Mr. Armstrong, I have followed you since your 1985 conference in Princeton. It was your advertisement in the Economist that caught my eye when you bluntly stated that the deflation was over and a major change in trend was at hand. I watched you forecast the takeover boom and I was shocked by your forecast that the Dow Jones would rally from 1000 to 6000 back then. The 1987 Crash was a real eye opener for the very day you pronounced the low was in place and new highs would be seen, the Elliot Wave people said a crash like 1929 was beginning. I watched in amazement your call on Japan, then the currency crisis of South East Asia. Your forecast for the fall of communism and then Russia in 1998 was shocking, however, I must confess, I was not entirely certain how you could do politics and markets. Then the rumors were Goldman Sachs and Buffet wanted you silenced. When it came to markets, I do not think there is anyone who can even come close to your track record. Now I have watched your Cycle of War and after all of these years I think the light has finally gone on. This is what you mean when you say it is all connected. You cannot be right on so many trends for so long unless you were correct about the structure. So do I now get a gold star?

Thanks for everything;

JCH

ANSWER: Yes. It can be platinum if you prefer. You are seeing this is not about my personal opinion. This is about figuring out what makes the world tick – not some preconceived agenda – I follow the methodology of Smith not Marx or Keynes. There is absolutely NOTHING that functions in isolation. Absolutely everything is connected and these indirect connections combine to make the trend. The paradox is fascinating. The world functions in a dynamic nonlinear way, yet we try to reason everything in a linear fashion reducing it all to a single cause and effect that cannot account for the reaction.

There is so much connected in the background where the Cycle of War is set in motion by a convergence of many trends – not just one. It took the computer and clients around the globe to allow me to see the structure how we all act in our own self-interest based in each of our currencies. This is why I define a bull market as requiring an advance in ALL currencies – not just one.

Governments are in trouble both in the West and in Russia. It has been their heavy hand of regulation and oppression that still reflects the Marxist Model of centralized planning when they are clueless about how society and the economy even function. This is why socialism is also collapsing. Money naturally concentrates in the hands of the most productive. Sorry – but this is structural reality.

True, people constantly braid the rich. However, what they FAIL totally to grasp is that the entire system is FRACTAL. So they hate the rich on an individual level, yet fail to see that the same concentration of wealth moves through the entire system and thus distinguishes the USA from Zimbabwe. The concentration of wealth is NEVER simply one flat dimension, but it is behind the rise and fall of nations as well measured collectively as a group and impacts war.

Some kids go to school to become a lawyer or a doctor in the USA because they were earning more than other fields. As wages rose in manufacture, people were attracted to learn skills and leave the farm. So this same concentration of wealth applies to trends in education and has resulted in a glut of lawyers in recent years. Yet this concentration of wealth is part of nature that Marxists do not like and have constantly tried to eliminate what they do not understand.

I explained what if we took this socialism to the classroom and everyone was given the same grade regardless of how much they studied? Soon, the real performers would stop studying for what is the point and the lazy would do even less. Everyone would fail. What if we invaded other countries simply based upon this same economic jealousy because they were making more money than their neighbor since under the Socialist theory that isn’t fair? Who decides what is fair? Is this why the Ten Commandments states plainly that socialism is a sin for it covets their neighbor’s possessions? Look at trade. Someone has to have a trade surplus at the expense of another having a trade deficit. Why in nature are there carnivorous creatures that exist by eating others? This is a divine structure that we may not like, but we did not create this world.

Consequently, the Cycle of War turns up as a convergence of many aspects that merge and force but one reaction. Every single tiny thing is connected and causes a reaction upon something else. Governments try to manipulate the outcome, but become only part of the game. The observer affects the outcome with his meddling. They always see themselves as the solution, when they are typically the instigator. The American people do not want war with Russia any more than the Russian people desire war. War between nations begins between kings and ministers – not the grass-roots people. Only civil war emerges from the grass-roots within the populace. Governments always see themselves as far more powerful than they are even capable of being and they will stir the masses only to further or sustain their own power.

Yet for as much as things appear to change, indeed they remain the same. Enemies seem to be enemies for life and it matters not what even the philosophy might be – opposition will always remain. The USA opposes Russia and the fight use to be about communism that Russia were trying to destroy American freedom exporting Marxist theories. But not even Russia clings to that idea of communism in its absoluteness for there is private ownership today and it does not appear to be reversing that trend.

Nevertheless, we keep fighting shadows of the past. So why do both sides have missiles pointed at each other if communism is no longer a threat? It simply seems that the answer is just because. Neither side desires to occupy the other’s territory. Like man needs to believe in God is watching over him, at the same time we also need an opposing foe. Look at sports. The spectators actually fight physically over some games. There have been soccer matches where people were killed. It is the same source of emotion as war and just as brain-dead.

This trend of opposing forces not limited to international affairs nor even to sports. It exists in everything right down to politics. The Democrats were the pro-business slave owners and opposed the Republican liberals who were following Marx, hated Wall Street, and enacted most of Marx’s ideas from Anti-Trust to taxing the rich. Then, philosophies change, they still opposed each other, but today the each support the others old philosophy. This is political cross-dressing at its best. If you are a Republican today, you would have been a Democrat 125 years ago.

Marriage is also such a disaster today because Hollywood spread propaganda that there was love at first sight and happily ever after without any stress. Divorce has become common place because there is no happily ever after, there too is also some confrontation. This is simply human nature that we must accept and deal with. However, to sell movies they created nonsense. How is it possible to see someone across the room and know that is the person you will spend the rest of your life with without ever speaking to them? Maybe they hate the very things you like. You need some communication – not just visual stimulant.

Russia lost territory and that is the distinction between them and China. Russia is still in the old way of judging itself based upon the size of its empire. China lost no territory. Russia needs to take Ukraine for its own self-image of coming back. This is why they will be far more aggressive than China. The United States did not let the South leave and went to war to keep the union. It is the same driving emotion that compels Russia to invade Ukraine.

So the Cycle of War turns up BECAUSE of a cascade of many things and the least of which is not to be overlooked. Governments are in trouble and that includes Russia where its economy is turning down. Both sides need a war to distract the stupid majority who really think this is over apple pie and capitalism. It is the diversion that becomes necessary for politics to survive. Humanity – well I have never seen a government mourn its fallen soldiers. It is always just a show.