QUESTION: I remember your forecast that the pound would fall to par back in 1983. I thought you were mad, whilst something inside me captured my attention. When our beloved pound fell to par, I attended every one of your London seminars after 1985. You have my attention. When you say the dollar can go “above” the 1985 high, just how far “above” is above for us here in the UK?

ANSWER: Yes I remember doing a TV interview on FNN back in the early 1980s before it became CNBC. I remember the pound had peaked in 1980 at $2.45. When I said it would fall to par by 1985 the journalist almost choked. I did that interview side-by-side with Walter Bressert. The journalist turned to Walter and asked what do you think of that forecast? Walter said he would not bet against our computer.

We took the back page for 3 weeks of the Economist in 1985 to announce the trend was changing again and that the deflation was over. I hate to say this again because I really loved living in London. It was my favorite city in the world. Perhaps the markets will force the political change and Nigel Farage will rise to drag Britain out of the Marxist Era. But as you know, we had a team of staff in London working daily at the Royal British Newspaper Library collecting data on everything that moved. So forgive me, but the pound could fall to the 65 to 70 US cent area at the worse case scenario by 2015. I know that sounds off-the-wall and it is about a 50% fall. But drastic movements are necessary to force drastic political change. That is the technical projection using the database we gathered against the dollar from inception 1791 to date.

The short position in the dollar and the obstinate European Parliament is so bad, it will take a blinding shock wave to force political change. This is what the pound-dollar view looks like. The spike high is the US Civil War.

When we look at the timing array you can see the 2015/2016 turning point. Now look at the volatility coming after that target. It is going nuts on top of the Panic Cycles in 2016 and 2021. Look at the Directional Changes starting in 2014. This is warning of unbelievable confusion and tremendous oscillations that will break the backs of men and put on trial the philosophies of decades.

We are working on this special currency report. We have a huge waiting list for this one. I doubt there will be a serious institution that does not order this one. This is most likely going to be the trade of the century – currencies. We will advise when it is ready and it will be posted on the Swiss site where you will be able to pay and pull it down at the same time.

The Dow this week reached 15408.00 with our projected technical resistance standing at 15438.92 followed by 15693.27. Next wee we see 15477.63 and 15731.98 as technical resistance. The Weekly Bearish are in the 14300 zone and a crack of that area would signal a drop to the 13500-13600 area.

The Weekly turning points are shaping up as 05/20, 06/17-24 and 07/29-08/06 which is the ECM target. This week is a Directional Change and next wee 05/20 starts the increase in volatility. It looks like Monday should be the turning point followed by a Direction Change on Tuesday and the next target being 05/23. So you may want to take profit on Monday and reenter on a dip or if the high of the week of 05/20 is exceeded.A daily closing below 14590 will signal a correction is in play. Immediate closing daily support lies at 15005.

This is just about ready. We are setting up the delivery service this summer in Switzerland. This should be ready shortly. We are also finishing the reports generated by the computer on individual markets.

Global Market Watch Test

Part I has been Revised with the Spot numbers. That will go out Monday. Part III with Platinum, Palladium & Copper will be out by Wed. next week

Well that post has brought tons of emails from those in the engineering world. Glad the light has gone off. We need to turn it on in government. One comment wrote:

• When you discuss containing velocity of the markets and changing the velocity do you refer to increasing the speed of the implosion and or explosion of inflation and deflation resulting in stagflation? Is  the change in velocity similar to thermodynamics where you can change the thermo velocity in order to contain and control the convaluting wave of inflation and deflation and its extreme thermal effects?
• …
• What you have achieved is testament to us all your continual pursuit of answers and truth whilst harnessing that internal fire regardless. Truly your knowledge, understanding and interpretation which has developed cycle theory and resulted in the creation of the ECM is monumental and will inevitably reverberate in time incandescently. It would be a great honour to partake in your new operation in Switzerland in any capacity, whilst being able to stimulate my mental yearning and learn as much as possible.

The hallmark of a Dark Age is the collapse in the velocity of money. It is more than reserve banking which increases the velocity of money. The greater the confidence that the future is bright the less you save and the faster you spend. That increases the velocity. As confidence declines, concern about the future increases, so you save more decreasing velocity. Everything complies with the laws of nature (physics). Only a fool (government) thinks they can alter the course of society to reshape it to conform to what they think would be better. Marxism was all about eliminating the velocity of money by taking money away from the people. This is why the greater the tax burden, the lower the economic growth because it too reduces the velocity of money.

Markets decline not because of external factors, conspiracies, or manipulations. Those types of external factors can NEVER change trend, but merely increase the VELOCITY of that market leading to VOLATILITY be creating confusion. Changes in TREND takes place ONLY from internal conditions – never external. This is why changing the systemic structure of the economy (taxation i.e.) is so dangerous because it changes the internal mechanism that propels the economy.

Hold you arm straight up in the air. Not a hard thing to do for most people. Now keep it there. Suddenly your arm will grow heavy and you will run out of energy to sustain that simple exercise. There is no external force that will compel you to lower your arm other than gravity. Nobody else has to push your arm down. It does not take a strong wind. Yes those things could happen, but you would still have the energy to fight back. Yet, without those external factors, your arm will grow heavy in and of itself and you will collapse lacking the strength to sustain the simple act of keeping your arm in the air. Gravity will win.

Just as there cannot be a perpetual motion without end, no system is sustainable regardless if we are talking about the sun eventually running out of fuel and dying, holding your arm straight up in the air, or keeping a market perpetually rising. The market must collapse, regroup, and in the process rejuvenate itself for the next rally. Japan created a 23 year Long Depression by trying to prevent the decline. Gravity won. This is not the result of manipulation or conspiracy. The sooner we learn these basic principles, we can progress to the next journey of knowledge as a society. Unless we learn to live with the cycles, compensate for them, and move on, we will be like a broken record stuck in the same grove repeating the same thing over and over again eternally. It is like Joseph in the Bible warning there will be 7 years or plenty and 7 years of drought. Eliminate the cycle and you kill the very essence of life like the White Earth Effect.

It took man centuries to admit the world was not flat against rational explanations that if it were a ball, how could you possibly stand upside down? Surely you would fall off! Well understanding that ALL energy moves in a cyclical manner is the same thing. Stop the Salem witch hunts. If we could just grasp this understanding, guess what? We end this stupid government attempts to manipulate society that only aggravates the system and destroys our future, and then they go lock up the people and blame them for what they themselves are causing. The definition of insanity is doing the same thing repeatedly and expecting a different result. Hello! Anyone reading history lately?

Three regional Federal Reserve officials have called on the central bank to stop buying mortgage-backed bonds, citing the recent improvement in the U.S. housing market. Indeed, the US economy has improved and the rise in the stock market has the talking head talking to themselves in disbelief. The 800 pound monkey remains the German elections and this is not going well. Whatever the politicians in Europe can do to screw up the world they are going perfectly. We are at the edge in the middle of nowhere. Old Marxist ideas dominate the political circles and they cannot see that just as Communism collapsed, it is their turn now. The younger generation are out of work and not buying this nonsense of taxing the rich that does nothing but line the pockets of politicians. This is going to take a lot more pain before we see political reform.

The dollar MUST rise sharply OVERALL between now and 2015.75. This is what we need to reverse the economic fortunes of the US so the entire global economy then turns down 2015.75-2020.

The Fed Stimulus will end. As the Dow rises and they see the problems of Europe after the German elections, the efficacy of continued (bond) purchases will cause a reversal of fortune. Ultra low interest rates and hundreds of billions of dollars of Fed stimulus money led to the gold promoters calling for higher prices for gold and other commodities  on a perpetual basis. This has been purely a domestic view ignoring the global consequences of Europe and the failure of the Euro that has led to the underlying support for the dollar and introduces the risk of it even making new highs above 1985 by 2015.75. As you can see from the above chart on our Dollar Index 1900=Par, the underlying strength in the dollar is formidable.

Despite better U.S. economic data since the start of this year, Fed Chairman Ben Bernanke has been reluctant to take his foot off the pedal because he see there is a problem with the economy insofar as true economic expansion. The recovery has been rather fragile.

The critical problem in Europe remains the faulty capital base of the banks. This is substantially different from the US where that is not an issue. The European banks have sovereign debt among the member states that created a structural flaw, which is why the ECB is touting to take depositor’s money because this is a political crisis that they intend to blame the banks for. This is similar to the S&L Crisis where Congress directed the S&Ls to lend on real estate and then the Democrats raised taxes reducing the amortization schedules creating a one-way sellers market. Then they locked up S&L owners for fraud when they created the mess. Europe has done the same thing and is trying to blame its banks for buying their debt that they cannot pay. The European banks will have to suck up the losses and recapitalize as Tim Geithner did in the US back in 2009 by threatening the banks that that had 6 months to do it or the government would take them over. Geithner was probably bluffing but the Fed then opened the window and the politicians looked the other way as banks cut what they would pay people but failed to lower what they were charging. They increased the spread between bid and ask to historical levels and recapitalized themselves.

The US economy is in far better shape than the EU and the US banking system is now cashed up. So ironically, the risk of US bank deposits being seized is minimal before 2015.75 when things start to get questionable again. The US lending base is rising while lending in the EU continues to shrink. That does not appear to be changing anytime soon. The austerity pressure from Germany will keep the economic deflation in place for Europe as a whole. This the German politicians cannot see that they are shrinking the EU economy and that will reduce their exports and result in a German negative growth rate as well.

The US is the only game in town and it will continue to attract capital both from Japan and Europe. The rising dollar with a rising stock market is creating the international boom much like Japan saw going into 1989. This is a serious risk of creating a US Bubble and the talking head are still babbling that it is not real.

In the US, no one questions the solvency of the banks as is the case in Europe. This is negative for gold as fears have subsided. We are seeing to some degree a moderate

• re-industrialization in the USA and the expansion in energy is creating a new dynamic. Even natural gas is starting to replace gold as the place to be. The fracking technology in the US is creating a cheaper energy future for the US compared to Japan and Europe.

It is true that the gold promoters have focuses on the Fed’s monetization of the debt as they have purchased more than 60% of new debt. But compared to even Britain, that has been over 90%. With 2013 being 31.4 years from the 1981.35 high in interest rates, we should start to see rates rise and the Fed will shift its focus to the stock market knowing that the banks are no longer in trouble.

The Swiss peg to the Euro will not hold for they will suffer tremendous losses buying Euros. ECB’s Outright Monetary Transactions (OMT) by buying bonds is comparable to what the Swiss National Bank does with the FX peg to the EURO.

Chancellor Merkel mentioned the word “Durchgriffsrecht” (right to get hold of assets for non-performing countries) and cannot see that this is the undoing for Europe as a whole. Major political reform is coming, but most likely not until after 2015.75.

QUESTION: What is a cycle inversion? This reaction period of 2 to 3 years how do you know it will extend or not?

ANSWER: Cycles are turning points in time. You cannot always ascertain what the event will be a high or a low near-term. However, it is a turning point producing an event. Normally, you can predict it will be a high or low based upon the  price action going into the event. Looking ahead even decades is sometimes easier.

Reactions have nothing to do with the magnitude of the change in trend. You peaked in September 1929 and bottomed July 1932 fulfilling the 34.4 (4 * 8.6) month cycle, which also produced a 3 year reaction. Look at gold for example. Where in 1980 it appeared that at the very least there would be a bear market for 5 years, the probability of a 19 year decline was quite high given how everything was set up in the broad spectrum of markets. Still, notice that the bulk of the drop was 1980-1982, which was the 2-year reaction, but the 3rd year was a high 1983. That was the kiss of death warning that an inability to rally beyond 1984 pointed to a 5 year bear market which it did on point for 1985. Gold then rallied with the decline in the dollar, but it was not making new highs in yen or dmarks. That signaled lower lows ahead and everything pointed to 1999.

Everything is linked and performs on a long-term basis much more orderly than the short-term. The most important date in gold is actually 1968 not 1971 when Nixon closed the gold window. Why? Because that is when gold began to trade in London. It was the start of the free markets and the first crack in Bretton Woods. Add 31.4 years to 1968 and we arrive at 1999 right on target. Add the long-term gold cycle of 64 years to 1968 and we arrive at 2032, the end of this Private Wave. Since 1999 produced the low, 2032 should produce the high. Add 31.4 years to 1934 and the confiscation of gold and we arrive at 1965 – the first year of coinage in the USA after the withdrawal of silver. Add 64 to 1934 and we arrive at 1998/1999. Add 64 to Nixon’s closing of the gold window and we arrive at the Pi Target after 2032 3.14 years later – 2035.

There is far more hidden order in everything around us than most people are willing to explore. A major Australian company lost a lot of money because its CFO had hedged the A$ based upon the fundamentals expecting it to decline as the trade deficit widened. The board ordered him to meet with me. You can imagine his goal was to try desperately to prove me wrong. Anything I said he replied that could be coincidence. It was frustrating. So I asked him what was his background. He became embarrassed. He replied nuclear physics assuming I would then attack him for lacking a business/finance degree. I said great! Let’s look at the markets from the perspective of the laws of thermodynamics. His eyes sparked. His mouth dropped. He looked at me and said – OMG, there has to be a cycle! I said that’s right. Cycles and understanding this was how  all energy moves is the key to grasping the conception of the world around us in every aspect. Perpetual motion in any system is not possible – hence Marxism and Keynesianism must fail for you cannot remove the cycle from the economy. You cannot create perpetual economic growth without recessions any more than either the Democrats or Republicans can perpetually control Congress.

http://en.wikipedia.org/wiki/Laws_of_thermodynamics