Manipulations & Monetary Systems

QUESTION: Mr. Armstrong: You frequently discuss how markets cannot be manipulated, has not the Federal Reserve manipulated markets with Zero interest rates.

As a follow-up to our exchange regarding valuations. I believe I understand your explanation the markets will increase for capital appreciation, but are you excluding that there could be price increases with extreme volatility?
Could you expect there could be market runs to the upside, but with price levels the same in ten years that they are today?

Best Regards, RC

ANSWER: No market can be manipulated on any sustained basis. The duration of an attempted manipulation seems to be 26 years max. That is what happened with Bretton Woods. Any attempt to fix an exchange rate is an attempt at manipulation. Progressive taxation is also a manipulation. Keeping interest rates so low to reduce government expenditure is also a manipulation. None of these attempts are ever sustainable indefinitely. They collapse with regularity.

The low-interest rates will collapse because it is threatening the pension funds. The banks charge what they like but pay you nothing based upon the manipulated rate. They charge interest according to market conditions. Hence, it cannot be sustained indefinitely.

Am I “excluding that there could be price increases with extreme volatility?” Absolutely not. That is a Panic Cycle and not a sustainable action indefinitely.

“Could you expect there could be market runs to the upside, but with price levels the same in ten years that they are today?”

That is most likely an impossibility. The volatility will indeed cause prices to rise. However, it is more likely that we will end up with a new currency than continuing to deal with the current monetary system.