Transcription
The chart you see was drawn up 150 years ago, but its accuracy is astounding. If you look at the smaller chart, it shows that 2026 is a peak and that we descend into 2030 in almost a deflationary mode. But, I want to focus on the 100-year cycle that began in the depths of the '29 recession in 2032. Because what's going to emerge is a series of short cycles, both recessionary, inflationary, booms, and finally the end of a 100-year cycle, a bust.
Let's start with the geopolitical situation because it's the geopolitical that is going to define fiscal and monetary policy. President Trump announced that a deal has almost been completed with Iran. This is the 39th time that he's made such a statement. Iran has denied that there is any such deal. What is interesting to [clears throat] to see that following the various trips by President Putin, the Iranian foreign minister, and the prime minister of Pakistan to Beijing, what is emerging is a new structure, not only for the Middle East, but for the but for the world. It is the start of multipolarity to take over unipolarity. This is only the early stage and it's going to take us the remaining 6 years of this 100-year cycle for it to be fully played out.
So, let me state a few things that I think are going to happen. The first is that on the June the 9th, Iran announced the creation of a new security belt managed by the axis of resistance spanning from the Strait of Hormuz to the Bab-el-Mandeb Strait and the Red Sea. Effectively, what they are saying is that we are going to manage the oil flows out of the Middle East. Now, that has huge implications for global economies and interest rates.
So, let me summarize how I see things developing over this 6-year period. First of all, we are in the first phase of a 6 to 8% correction using the S&P as the guide to other markets. This will probably continue through, not in a straight line, into September. Then, we will start seeing at the end of this year the emergence of a recession in the United States and in most of the rest of the world. What we will also see evolving will be a big relief rally in the S&P and other markets that will take the S&P up to around 8,500. But, at the same time, we will be seeing not just supply disruption from higher oil prices and their product shortages, but it will work its way through the economic system globally to cause demand destruction, which means recession. So, we see recession going through nearly all of 2027.
One interesting aspect, which is a non-consensus view, is that the new chair of the Fed, Kevin Warsh, is probably not going to follow what most people assume he will do, which will be to cut interest rates and inflate the economy. I think what we'll see emerging will be allowing the pips to squeak so that interest rates drop and allow the Treasury to refinance at much lower rates, probably around 2.7 to 3% on the 10-year Treasuries sometime next year. But, what will then emerge because the focus will be on the 2028 elections, less on the midterm elections in November this year, because the Republicans believe that they have the election resolved by remodeling the electoral boundaries. So, what we expect to see is that late in I'll say the fourth quarter of next year, the Fed begins to stimulate and leads us then into the last lap of this 100-year cycle, which will be very inflationary prone, not just because of fiscal and monetary policies, but because of rising food prices due to shortages of fertilizers and the consequences of two weather patterns, the super El Nino, which will particularly affect Asian rice and other food products for the rest of this year and into early next year and that will be followed by the 99 year Eliasberg cycle which last caused the US mid-term dust bowl.
So, what we will see between 2028 and 2032 is how the battle between the unipolar world and the multipolar world will evolve. If as we expect that the forces behind the unipolar world led by Russia, China, and Iran because Iran will be moving out of relative obscurity into a prominent position in the global economic and political equation because of its control over Middle Eastern oil. So, we are going to see a huge inflation resurge reminiscent of what we saw between 1978 and 1982 replaying itself between 2028 and 2032.
Finally, my advice to everybody is that on every dip in the gold price that gold should be bought not just as an inflationary hedge but as a security for institutions and households. And what will the price be? Well, we have the DXY falling by 50% in that period, 2028 to 2032. So, just on simple maths, the gold price should be at least $10,000 by 2032.