Martin Armstrong: "Lower interest rates does not stimulate the economy" - Video

"Most of what we were taught in school was wrong. It was just propaganda" starts financial analyst and advisor Martin Armstrong in this excerpt of our 1-hour interview with him.

Armstrong takes an example by mentioning (and strongly recommending) the reading of Herbert Hoover's Memoirs. In 1931, when there was a major sovereign debt crisis it began with Austria defaulting and then it moved from one country to the other. Hoover is one of the few to cover this chapter of the economic history. He explains that “capital acted like a loose canon on a deck of a ship in the middle of a storm. They were shooting off in every which directions so fast that they could not figure out what was going next. That is exactly what happens with Greece. As soon as the trader gets what we call "first blood" on Greece, they look around and say "Who's next?", and they start attacking the others. It's exactly what Hoover said in 1931.”

Then he explains that when he was writing one of his books years ago, since he could not rely on any historical book (because “it was all propaganda”), he read the newspaper every day and took notes. One of his conclusions is that "lower interest rate does not stimulate the economy. It is the differential that counts: if you think you can make 20%, you'll pay 5 or 10. If you don't think you're gonna make 1%, you won't pay 0. It's what you think you can make."

Central banks keep lowering interest rates and go negative, but if there is no confidence in the economy or in governments, that does not work. “They keep going in the same direction but they don't understand the economy. Politicians are the worst at that and they do not understand currency.”