muses of the moment

May 18, 2011

Latest Letter from Martin Armstrong dated May 18, 2011

Filed under: Economic Confidence Model Cycle, Martin Armstrong, US Government Debt — Tags: — totallygroovygirlfriday @ 7:19 pm

Click here for Martin Armstrong’s latest letter dated May 18, 2011 entitled What Destroyed Rome (7 pages).

Answer: unfunded liabilities….

Harry Dent

An excellent post about an interview with Harry S. Dent via zerohedge. Click here.

Groovygirl follows Harry Dent. She thinks he has some excellent thoughts on the coming collapse in debt. One thing that groovygirl is not completely certain about: will the US experience a severe deflationary depression before or after the hyperinflation depression or at all?

One reason she thinks a depressive deflation phase is a possibility in this winter cycle is because of Harry Dent. He has been and is expecting a deflation in stock prices and all markets. In this interview, he puts a date and price on that prediction DOW at $3000 by 2014. He also calls gold at $250.

There is no doubt in groovygirl’s mind that the severe economic crisis will occur between 2014-2016. Probably a crisis and a not-so-helpful reaction from the government. But groovygirl doesn’t think that gold will go back to its long-term low of $250. The bull market is not done yet and the Fed and every other country is printing fiat money. But a severe correction across all markets? It is still a possibility.

Side musing: groovygirl can see housing prices fall during a hyperinflationary depression because the driver of the US housing market is mortgages which are not available to unemployed people. Until people can get and keep a reasonable paying job, so they can get a mortgage or save for a large down payment or both, housing prices will fall in the US.

If we look at Alf Field’s prediction for the gold price (and we will presume that silver will do something similar), the major four wave down could be a depression in all markets before the final wave five high. Or there could be a depressive action in all markets after the high:

Major ONE up from $256 to $1,015 (actually 4 times the $255 low);
Major TWO down from $1015 to $699, say $700 (a decline of 31%);
Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $700 low); this is the one we are in right now;
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)

It is this uncertainty that makes this winter cycle extremely hard to invest in. And this indecision and unpredictability is one reason why groovygirl is in physical gold and silver very early in the bull market. Physical gold and silver hold their value in a depressive or hyperinflationary depression.

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