 Martin Armstrong is one of the most famous economic forecasters alive, but you wouldn't know it after the whitewashing job he suffered at the hands of the federal government and the mainstream financial press. The man who in the 1980s and 90s had central bankers and politicians calling him for advice is now scrubbed from the memory banks of sites like Bloomberg.com. He's famous or infamous for having predicted the October 1987 Black Monday crash to the very day. He also called the Nikkei stock market collapse in 1989 and the Russian financial collapse in 1998. And he hasn't lost his touch, outfoxing hedge fund managers by predicting last week's Swiss national bank decision to abandon its peg to the euro. Martin is not an Austrian by any stretch relying on complex math and historical models rather than economic theory. But he is strongly anti-state, anti-central bank and quick to criticize Keynesian orthodoxy. Martin spent more than a decade in a government cage after being prosecuted by the SEC, including seven years for the non-crime of contempt of court. His story, both as a forecaster and a stubborn thorn in the side of federal prosecutors, will be told in an upcoming documentary. It's a story you won't want to miss and he has a great interview for us this weekend. Ladies and gentlemen, welcome back once again to Mises Weekends and I'm very happy and pleased to be joined this morning by Martin Armstrong and Martin, I must say it's kind of lucky for us that you were with us today because one of your predictions, one of your prognostications actually came true yesterday. The Swiss national bank announced that it was abandoning its longstanding peg to the euro that it started back in 2011. So I'd love to get your fresh thoughts on this this morning as apparently a lot of corporate interest in Switzerland and a lot of hedge funds around the world are scrambling at the news. Well, actually, I met with a member of the board managing the peg. I think it was in 2012 and I just explained to him, I said no peg has ever lasted. I mean, even Brent Woods was forced to crash yet they always keep trying it. The Asian currency crisis was also a peg that broke. Soros became famous on the British pound peg with the Deutsche Mark. So effectively it's just an attempt to hold on to something for political purposes, but you have to look at this actually and why we were saying it was going to crack is that effectively it becomes, and this is what I explained to them, it becomes a no risk trade. You can buy all the Swiss I want at the peg. Here you go. If the peg holds and I lose, I don't lose anything, I said it's only a win. So I can just keep buying the Swiss and the Swiss until it breaks and once it breaks, then they have the loss. So they have bought the euro all the way at the top and the euro crashes. So you see a 30% move, that's their loss in the euro. In the euro they already hold. Yeah, because they've been buying and buying and buying this stuff and it's all connected. I mean, Greece is most likely going to leave and so you have the ECB saying that they're going to start buying sovereign debt. That will most likely happen next week, which is why the Swiss had to get out of it this week. So that's more or less a code word for them to, for the banks to start selling their Greek debt to the ECB. Because once the Greeks, if the Greeks default, then they have, you talk about stress tests, I mean, sovereign debt is the reserves. So once they just pay something, it's okay and it's not marked to market. So it can be 50% of what they, whatever it was they paid and it doesn't matter. But once they do not pay something, then it goes into default, now they have to admit that those reserves are gone. So the ECB is now coming out and saying they're going to buy sovereign debt. This is why. So it's all connected. It's like you push one domino over and it just keeps on going. And you know, a lot of people have been very bearish to dollar, but they don't understand that this is a situation of a global crisis. There's no place to put money. If you just look in Europe, you know, you look at the rates on 10-year bonds from Germany. I mean, they're at like, you know, 0.4, I mean, 40 basic points, I mean, and here you have Greece at 11%. So it's all the money's been moving in, within Europe, it's been moving to the Germans because they assume the euro is going to break. This is the big smart money. And but they think that if it breaks, they'll end up with Deutsche Marks. And the rest of them are hedging their bet and buying the dollar. But euro is an absolute, it's a basket case. Why do you think so many hedge funds were short, the Swiss franc? And I guess more nefariously, why don't hedge funds have inside knowledge when the Swiss National Bank is about to do what it did yesterday? Honestly, it's interesting. I would meet with various different central banks and there was the finance minister and Nova Scotia, I remember, they were asking me questions. And I asked my friend in Canada, I said, how can you talk to me but not to them? And effectively, they he said two things. One, they cannot talk to one province or a company without talking to all of them. And so I am neither. So I'm kind of like some sort of safe haven or something. I go between the cracks. They still need to talk to somebody. And often, honestly, I mean, now it's enough years have passed. I mean, the Bundesbank used to leak stuff to us so that we would put it out because they couldn't do it directly because they were anti-euro. But, you know, I think a lot of the hedge funds and stuff like this, they follow the fundamental analysis and the problem that they are beginning to encounter is that there is an aspect to analysis that is pretty bad and it's being politically correct. It's not that I'm the only guy that's correct. It's the fact that I have friends that are analysts in banks, etc. And they, you know, I get emails from them all the time. Oh, gee, I wish I could say that, you know, but they can't come out and say, well, you know, Greece is going to leave because then that's attributed to the bank, the bank gets a phone call from the ECB and so they're muzzled. So it may appear as if I'm the only person that's, you know, correct. But I know a lot of people in major institutions, they're just not allowed to speak. And it's being politically correct because the central banks will come down on them and say, hey, you know, knock this off. You can't be embarrassed to Euro. Well, it would be interesting to study what some of these hedge fund managers do with their own personal money behind the scenes. But I digress. Let me ask you this. Can you elaborate? You talked earlier about the Swiss Euro peg being sort of a one sided bet. And in your article that came out today on Armstrong economics.com, you say, I state bluntly, no peg has ever been able to withstand the pressure of reality. So can you just elaborate on that for us? How pegs are in effect, you know, anti-market political creatures? Well, it, I happen to be, you know, I'm the guy that got the call on the Searos thing and John Major's staff called me and the pound was getting attacked and there was, again, a peg. They overvalued the pound to the Deutsche Mark and they were calling me and say, gee, you know, what do you think? I said, listen, if you got about 10 billion pounds a day for about a week at that time, I said, maybe you could withstand it. But it's going to go. I mean, you've overvalued the pound. So I told them, and I'll probably put this in my memoirs, but I told them you have to devalue the pound. And they came back and they said, look, we can't do that. John Major ran for election saying he would never devalue the pound. So I wrote a paragraph and I gave it back and I said, OK, fine. Say it this way, that you're going to allow the pound to float to seek its own level. And they said, brilliant. And within, honestly, within less than 30 minutes, John Major's let the peg go. And he said, we're going to allow the pound to float to seek its own level. I took those words from Richard Nixon. He did that in 1971. He didn't devalue the dollar. He said, we're going to allow it to float. And it's a political way of doing the same thing. You're not officially devaluing and saying, here's a new value. Just let the market do it. But no peg is ever, ever blasted. It cannot. I mean, you've been there on Capitol Hill. I mean, the problem with the gold standard, everybody talks about, OK, fine, but they fixed gold at $35 and never changed it. But you kept increasing the amount of money. I mean, obviously the system cannot function that way. It, you know, at some point, it's got a crack. And the problem is when politics gets involved in this, they are mostly lawyers, they know how to write a law, they don't know how things function. And they just try to put their back against the wall and hold it at all costs. And that's what's going on with the euro. I mean, they designed it incorrectly. And I can tell you they came to me in 1997 and I told them this is going to fail. You have to consolidate the debt. I said, if you're going to leave a debt with each country, it's not going to work because you're trying to compete with the dollar. What makes the dollar the reserve currency? We actually have debt that everybody can park money into pension funds, etc. You can't do that with the euro. So there wasn't a single debt market. They told me right then and there back in 97 that they understood that, but they didn't have the political clout to get that through. So they said they want to do the currency first. Now, you know the way government works. The problem is that crew then leaves. Everybody forgets about phase two. I say, hey, what happened in phase two? They said, what are you talking about? What is that? Phase two was you then consolidate the debt. You can't have it this way. And that's why the euro is just an absolute disaster. It cannot survive and it certainly could never displace the dollar. You know, and you have these people also talking about, you know, oh China and Russia, you know, they're going to try and get rid of the dollar. Trade is such a small fraction of capital flows. It's less than 10%. They can create euro, you know, I mean, petro new currencies, but it doesn't matter where do you park the money? That's the dollar. And until something, we need another market to be able to absorb capital. The dollar is it. I mean, I eventually think that the dollar will be, you know, we're going to go to some sort of a new international reserve currency because there's been a lot of political problems with it. But that's the real mechanism that supports the dollar. It's not trade, not oil, not anything else. We're going to put my money. Well, you've talked quite a bit about this. The dollar is the dominant currency of empire. In other words, as long as this is the case, monetary expansion by the U.S. Fed won't produce price inflation in your view. But you also discuss about how this can't go on forever. That someday, however far removed, the U.S. will face a sovereign debt crisis like Europe. Can you elaborate on that? Absolutely. It's when you have a reserve currency or the empire type thing, what happens is that currency is the currency of confidence. And you can see it. I mean, I published, you know, there's Roman coins that were imitated in India in the Celts and all over the place. Why would they make a coin that looks like Roman? All right. But they're not trying to cheat you on metal or anything else. It's just, and it's not the metal. It was the fact that people understood that Rome was worth something. So just the same as dollars were trading in Russia and China, et cetera. In Ukraine, you paid your rent in dollars. Japan went through the same thing. The government kept issuing coins and devaluing whatever was in circulation, saying, oh, these new coins were 10 times more than the last one. And eventually, after a few emperors doing this, the Japanese just stopped accepting Japanese coins. China's coins circulated in Japan. Japan was unable to issue money themselves for 600 years. So, I mean, this is a common theme. The dollar right now is the king. Yes, eventually, what happens is that our debt system is just kind of crazy in the sense that we're borrowing money, but there's no intention to pay anything back. I mean, why do we borrow? And a subtle thing happened when we went to the floating exchange rate. Before in the 60s, if you went to the bank, you had e-bonds or whatever. And you went to the bank and you said, gee, I want to borrow against my savings here and government e-bonds. They'd say, no, it was illegal. And the banks were not allowed to lend on government debt. And that was correct in the sense that you could say it was less inflationary to borrow than to print. But then in 71, that was removed. So if you want to trade futures, what do you do? You put your money in T-bills and you post them as collateral. So now debt has just simply become a new way of printing money that pays interest, and we don't understand what we've done. So the national debt, I mean, yeah, they can increase it, et cetera. It's really just money that's paying interest. And then if you look at the debt itself, you can pick up an Alman Act that they sell and just calculate the interest payment. And you'll see the interest is about 70% of the total national debt. And so they love to say, oh, it's the rich, the rich and all this other kind of stuff, but this money goes to fund the banks. It doesn't, you know, it's not schools or roads or anything. It's 70% of the national debt is previously interest. I mean, that's alarming. And that's why the system will collapse. Well, let me give you a great quote from yourself. This is from an interview you did with Ron Herra back in 2012. And you say, quote, the entire idea that you can borrow perpetually year after year and never paying anything back, and that somehow that's less inflationary than if you just print money is absolutely insane. In the U.S., if we had just printed the money, the national debt would be only 40% as much as it is today. We're both creating currency and also paying interest on it. So I think that sort of summarizes what you're saying right now. Pretty much. I mean, it's today it's opposite of what it was before. It would be less inflationary if we just printed what we needed for a budget and we didn't go pretending that we're borrowing everything, but because there's no purpose to do that when you don't, there's no intention to pay anything back. Right. And as long as we're Rome, then sort of the actual underlying value of the dollar doesn't matter as much as the perception and the confidence in us as an empire. Right. And what you have to understand is that how do empires collapse? They collapse from deflation, not from inflation. And you can see it in, you know, France is basically kind of going through the same thing that Rome went through. They raised those taxes to 75%. The rich fled. They couldn't sell their houses so you could rent a palace in Paris for like, you know, a couple of thousand bucks a month because they couldn't sell them and nobody wanted to live there. So I went to London and was in a restaurant and I thought I was in Paris, everybody's speaking French, you know, so that's exactly what happened in Rome, the population, the taxes keep going up and going up and you reach a point, look, I just can't afford this anymore and you and you walk away from your house. That's the deflationary side that it's, you know, we keep raising these taxes dramatically and the fact that thing is absolutely destroying the world economy. It's unbelievable. People can't do anything. It's Americans can't open up businesses. People that are, you know, have one parent that was American or getting in Canada, been getting letters from the IRS, say you owe us taxes for the last 20 years. It's unbelievable. And unfortunately, what people don't understand here is that Congress never passed a law making it worldwide taxation. That was a judicial decision and some judge said, well, they didn't say, you know, there was any exemptions so there aren't any and that was simply a judge. Um, us in Japan, that's it. Everybody else taxes are supposed to be, uh, you pay for what you're using and that was the original concept. So if you're British or whatever, you pay if you're there, but if you're not there, well, you're not using any of the, any of the services. So why should you be paying? Yeah, absolutely. And that's, that's a great topic that we're going to address in a future show. This idea of worldwide versus territorial taxation. But Martin, before we go, I just like to talk to you a little bit about the documentary that's being made about you and for people who are perhaps not familiar with your story, who don't know your past, both as an almost unbelievable forecaster of economic trends and cycles, but also your multi-year battle with the SEC and the Justice Department and what is, from my view, an absolute travesty of justice that you were in prison as long as you were for contempt. Um, but there is, I guess you said a European group behind new movie, a documentary called theforecastermovie.com. It's theforecaster-movie.com. I've seen the trailer. Um, can you tell us about the status of the movie? Um, well, they were following me around, um, for conferences and stuff that I've been doing and interviewing clients since 2011. And, um, there, it's going to first hit the theaters in Germany in April. I believe they are going to do some sort of a worldwide, like pay-per-view on a limited basis in February and March. But it was funded by Europe, by the Europeans. I turned down Americans because honestly, the government will just pick up the phone and say, we don't want this out. Um, but it's largely about, uh, the whole banking system. And, um, it goes, they agreed to, they would, you know, let the facts be what they are. And they offered the US government numerous times to come in, um, you know, you want to give your side tonight, deny, deny, nobody would ever appear. The only person from the government that actually appears in it is somebody who was in the prison, who basically, I was kind of surprised that he had very, I mean, he had a lot of guts. Um, he had come to me when they had me there in contempt and he said, he apologized. I had spoken to, uh, um, the attorneys because they said, what am I, what are they supposed to do with me? Cause they didn't know, um, and the longest person was ever held in contempt of court and they told them, look, you know, the guy's probably innocent and, you know, we just don't have any evidence on him. So we're just trying to break them. So he came to me and he says, listen, I'm retiring. If you ever, if they will ever let you get the trial, I will, you know, show up and I'll be a witness for you. So I was surprised. He showed up for this, for this movie and the FBI, he says right on, and on camera. He says they showed up two days before trying to stop him. He said, I got nothing to say with, you know, to you. Thank you very much. Goodbye. So I mean, he had a lot of courage, but he's the only one that showed up from the government. Everybody else has been trying to bring, you know, pretend it didn't even happen. Um, Bloomberg News, which I thought was very interesting, um, they have a little clip in there from, from them and they, they've completely erased me from, from the database completely put my name on Bloomberg. It's like I never adjusted. They've erased everything that they ever written and, um, they were surprised because he had this, they got the people that produced the film found this clip from somebody else had it and then they had to go back to Bloomberg and said, well, you said you didn't have anything, we had this. And so very interesting how they, everybody's just tried to sanitize this whole thing and it just shows you why Snowden had to go to The Guardian. It's an incredible story and a white washing. If you're interested in finding out more about Martin Armstrong and his story, go to armstrongeconomics.com. There's also a trailer for the movie that's currently, I think, on the front page of your site. Martin, I would like to thank you so much for a fascinating interview and for your time today. Ladies and gentlemen, have a great weekend.