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Europe Wirtschafts Woche – May 30, 1996

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May 30, 1996

Sins of Today

by Michael Baumann

Clinton will Win in November, but the Future will be Dominated by a New Party

“Clinton will win again” is the forecast of Martin Armstrong for the US election in November. However, this is not the exciting part of the forecast from the Chairman of Princeton Economics International, a conservative research institute in the state of New Jersey. Bold in his long-term forecast, Bill Clinton will become the last democratic President of the United States. Democrats will simply disappear, however, Republicans will not benefit either. At least in 2004, the President of the United States of America will be a member of a new third party.

The basis for this revolutionary forecast is Armstrong’s analysis of history. He has put all the historical election data since 1824 combined with the relevant economic data into his computers. The result was indeed clear. Armstrong: “If the economy is in extremes, the ruling party will change.” The Princeton economist is even warning his favorite party, the Republicans: “Only the state of the economy will be the deciding factor in the upcoming election, not abortion, flag burning, marriages of homosexuals or the death penalty.”

Armstrong gets a good deal of confidence out of history. “The result of the 1980 election was easily forecast by our computers” he states. Interest rates were on the verge of almost 20%. The change to Reagan was inevitable. He also has an explanation for Ross Perot’s success in 1992: “It’s easier to blame Ross Perot instead of admitting that 20% of the voters are fed up with the spending policies in Washington.” Neither the Republicans nor the Democrats tackled the problems four years ago. Armstrong speculates: “Ross Perot was at the right place at the right time.” The election in November will take place during a stable economy, leading to the forecast in Clinton’s favor. However, this will change soon according to Armstrong’s computers. The future is not bright at all: Between 1998 and 2003 there is a period of a deep, dark valley due to today’s sins.

“Clinton was only able to reduce the budget deficit by more than 500 billion dollars because he shifted the debt. 70% of the debt is already financed 5 years or less. In 1992 this had been only 40%. Armstrong’s thesis: Those who are financing short-term will run a high short-term interest rate risk if interest rates move up. The deficit reduction a la Clinton threatens to lead to an inverted yield to curve. “Interest rates will go crazy” believes Armstrong. Long-term budget plans as the obligation for a balanced budget will be worthless.

In this dangerous situation, an independent could become president, according to Armstrong, because Democrats and Republicans argue about morality and ignore the problems within the economy.

“The Democrats are the party for gay rights. The Republicans are the party for the religious conservatives and for morality. This gives room for a third party which would go for conservative financial politics and which would relieve the middle class from their burden” summarizes Armstrong. Not too much hope for Bob Dole. “He is a consensus politician who wants to be both social conservative and fiscal conservative. But that doesn’t work.”