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By Martin Armstrong | 24 April 2009
Martin Armstrong says Major Turn at Hand— Batten Down The Hatches, Or…
A turn date in Martin Armstrong's Economic Confidence Model passed on April 19th or 20th, depending on how many days you use to calculate a year. The graphic shows that the model is predicting a top at this turn date before heading down into a long-term low in June 2011. As Martin explains in the essay below, the model does not necessarily mean that a top in the Dow Industrials is at hand.
For instance, the 1989 turn date forecasted a top in the Japanese Nikkei. The Economic Confidence Model was created with inputs from around the world and therefore is not limited in scope to just pinpointing (U.S.) stock market tops and bottoms. Personally, I am looking at the US Dollar, the Treasury market or the Shanghai market for signs of a top. All these markets have experienced strong rallies off of recent bottoms and might be ready to turn lower.
Why (Prospective) Models Are Our Only Hope
Should we create a model to manage our social-economy?
In the real world, experience counts as the primary attribute in any field. The question we face in the middle of this economic crisis is simply this: "Is there anyone at the helm who has any (immediately relevant) experience at all?" Can we disregard gathering the experience of those who have gone before us by constantly re-inventing the wheel for every crisis? Wouldn’t it be nice to have gathered a database so that when an economic panic took place, and we tried a particular stimulus, the result was a particular effect? Yet for every economic crisis, we seem to start over at the beginning retaining no knowledge or experience from the past, assuming in our arrogance that "that was then, this is now".
It is time to start taking advantage of the collective progress/knowledge of man that has developed, particularly during the last Century. We have not merely landed on the Moon, we have developed sophisticated computers to get us there. We have even conquered many forms of disease, also through the process of scientific learning and reasoning.
Science has revealed that our greatest form of knowledge comes not from book learning, but from hands-on experience. We have even begun to unravel how the human mind works. Now we understand that the difference between "book smart" and "street smart" is based upon the fact that when we learn only from study, we do not acquire the deeply seeded and critical knowledge base that our mind constructs when using all of the senses we refer to as 'experience'.
When we actually do something, we use all our senses and construct a knowledge base recording all the little nuances that are not always self-evident as being either important or relevant. I could read every book on brain surgery, but would you like to be my first live patient? Just as a medical student might have perfect book scores, they must still then start at a teaching hospital working under the critical guidance of those who have had actual, 'hands-on' experience.
The Importance Of Experience
What has emerged from the study of the human mind is that it takes practical experience in a field to truly comprehend what to do. There are two broad categories of memory as explained by Eric Jensen in his excellent work, "Teaching With The Brain In Mind."(ASCO— Assoc for Supervision and curriculum Development (2005)). The two primary types of memories are: (1) "explicit" (clearly formed or defined) that is constructed either by learning in a semantic manner (words and pictures) or more episodic (autobiographical or personal experience rather than learning about it second or third hand through books); and (2) "implicit" (implied by indirect means) that includes the reflexive memories and procedural physical or motor type routines like riding a bike, burning your hand, love, and other 'real-life' experiences.
Jensen points out that students that are typically taught by merely 'dumping on' facts, rarely retain such knowledge (ibid/pg 132). Jensen pointed out that studies have shown that students who attended class retained only 8% more than those who skipped class. Consequently, this semantic method of knowledge gathering is highly limited.
We need something more to strongly bond critical knowledge within our minds. We need the emotive forces of actual experience, which can be invoked only through the ancient method of hands-on 'apprenticeship'— which involves all the senses. It is now understood that the 'episodic' memory process "has unlimited capacity" (ibid/pg 134). This puts flesh on the words "book smart" and "street smart" illustrating that it is highly dangerous to trust the operation of anything to someone who has no real world experience of it.
This is why we need to collect the experiences of mankind and record them to a database that allows human interaction to query "why" events take place and "when" an event should take place, as well as "what" should be the correct response, and "how" should that response be implemented. [[In particular, such an experiential database must allow for learning, so that— as in humans— new knowledge is added onto and does not simply replace old knowledge.: normxxx]] History tends to 'repeat' because as a society we do not learn from past written histories. We lack the capacity to acquire real knowledge— of deep understanding— except through actual experience.
If we are afraid to construct such a model— that incorporates the total global experience of mankind to better manage our society and our economy— then we will be doomed to repeat the mistakes of the past, relying on an imperfect understanding of what the past has to tell us. [[Which, of course, begs the question of whether we have the capacity to construct any such model as yet that would not be very seriously limited. The "economic models" of our leading 'econometricians'— notoriously less reliable than that of meteorologists predicting weather— does not allow for such a sanguine assumption!: normxxx]]
History is no "random walk" through time. Everything is event driven, and history 'repeats' largely due to the fact that given similar events, mankind will react within a set parameter of reactions. [[On the other hand, while many historians try to supply one, history does not come complete with a plot— as witness how the same events are variously interpreted by different historians and at different times. I, myself, have a fixed belief that given a particular period of history to do over again, it would all come out differently!: normxxx]] Stick your finger in the flame of a candle and it matters not what culture you are from or the language you speak. You will still pull your finger out of the flame. [[But social forces are infinitely more complex than such a simple stimulus— as are the reactions of different human cultures, in time or place!: normxxx]]
Understanding There Is A Business Cycle
As I have stated many times, there is always a cycle within everything [[easy to say; quite another matter to prove, as many have tried over the millenia: normxxx]], and that includes the boom and bust swings within our economy that have caused so much political unrest, that it has fueled even the birth of Communism & affected the lives of mankind throughout recorded history. Economic swings have led to wars when a king’s finances were running low, and may have inspired the dreams of a utopia that influenced Karl Marx (1818-1883)— whose ideas have cost the lives of many millions of people.
Cycles may come in different patterns and are at times driven by a convergence of many individual events each functioning separately according to its own cyclical nature. This is simply the very essence of how everything functions throughout life and the entire universe. It is the cyclical nature of life from the beating rhythm of your heart, the cyclical events of the seasons, weather, movement of planets, to even how artificial gravity is created by the cyclical spin[!?!] Even the music we listen to must have a cycle or rhythm. Our 'social interaction' that we call our economy, is no different. [[On the other hand, every attempt to seperate out the 'different cycles' of the Dow Jones average, for example by Fourier analysis, have led analysts to the conclusion that the Dow Jones average is merely 'pseudo' cyclical.: normxxx]]
What Eric Jensen points out is critical to our understanding of our very ability to learn and advance as individuals. This method of acquiring knowledge applies to us as a society. Jensen explains there are differences between how our brain processes "verbal or spatial information." When we process written or verbal words in an 8 hour session there was an 80 minutes cycle for cognitive performance while the spatial task of locating points seems to cycle at 96 minutes, on average, (ibid/pg. 49).
While there is a genetic foundation for being smart, this accounts only for about half of our intelligence. In fact, a part of the brain deals with 'discrepancies' and is automatically activated when the outcome differs from our 'expectations'. This is the anterior cingulate and seems to be hard-wired to enable us to learn— acquire knowledge— through 'trial and error'. Jensen makes it clear that we also learn through 'social interaction'— or lack of thereof. 'Social isolation' is devastating to one's mental and physical health as well, (ibid/pg 95).
Even in prisons or POW camps, solitary confinement absent any social contacts is seen as a devastating punishment that can force its subjects to comply with the demands of the jailer. We are also familiar with the problem of 'infectious' group behaviors that can take the form of 'peer pressure' or imitative behavior among members of spontaneous groups ('mobs') or affiliative groups as demanded by Fascism or Communism— turn in your neighbor (or father or mother or sister or brother) if s/he says anything 'derogatory' of the government. These are forms of mental duress imposed by all forms of governments to varying degrees.
To continue reading this long essay go (HERE). It provides a broad overview of how Martin Armstrong built his model and how one should interpret its signals. He also provides thoughts on how government may use the model to better affect policy. While it doesn't contain any specific predictions, it is a fascinating read. Portions have been edited in order to make his ideas a bit clearer.
You can also access most of Martin Armstrong's recent essays at http://www.scribd.com/ (search on Martin Armstrong).
M O R E. . .
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