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Jun 12 2023

The True Story of Hyperinflation


Amstrong Economics Blog/Cryptocurrency Re-Posted Jun 12, 2023 by Martin Armstrong

QUESTION: Dear Mr. Armstrong,
could you please explain what happens in technical terms from a capital flow perspective, when confidence is lost and hyperinflation starts to begin?
For example Turkey. When Erdogan was elected i think you wrote that ever since the lira started dropping. So confidence in politics is key. Do you think one day we will see hyperinflation in Turkey?
And another example, is Yugoslavia: what caused the hyperinflation (in technical terms/capital flow perspective)? Are foreign investors getting rid of the dinars? Too many dinars than suddenly rushed back into Yugoslavia causing hyperinflation?
Regards,
Magdalena Š.

ANSWER: The misnomer about hyperinflation is that it is caused by printing money. It is a RESPONSE to the collapse in the confidence of the government.  If we look at the 3rd century, this is where we find the greatest number of hoards of ancient coins. What began this was the capture of Valerian I by the Persians in 260AD.

Valerian was the first Roman Emperor to be captured and Rome was unable to recuse him. That shook the confidence of the Roman people, but it also was a signal to the barbarian tribes in the North that if the Persians could do it, they could as well. Within 10 years, Emperor Aurelian constructed the great wall around Rome. Never before did Romans have such a defensive wall. That had a powerful army.

There was a trend toward debasing the silver coinage which began with Nero to try to fund the rebuilding of Rome after the Great Fire. But that did not undermine the confidence in the Roman Monetary System any more than our perpetual deficit spending since World War II.

However, a spark is ignited and suddenly that trend turns into what I have called a Waterfall event in the purchasing power of the currency. Such an event has taken various forms. However, the end result is the collapse in the confidence of the government and as a result, that is when you get that waterfall event.

In the case of Germany, Yugoslavia, Hungary, etc, there was a 1918 Revolution where communists seized power and the emperor of Germany lost power. In that case, they actually asked Russia to take Germany after their revolution in 1917. This was the beginning of the Weimar Republic.

Germany was saddled with reparation payments demanded by France. First, you had a communist revolution and people with capital began to flee to other places in Europe or certainly move their money out of German banks. It was this drain of wealth that forced the Weimar Republic to print money to try to make their reparation payments. Then in December 1922, they seized 10% of everyone’s assets and handed them a bond.

Here you can see that after that December 1922 confiscation, hyperinflation simply took over. It was NOT the printing of money that caused the hyperinflation it was the collapse of confidence FIRST which then compels the government to expand the money supply lacking taxation revenues etc.

I suspect the spark this time may be the Digital Currency and the proposed cancellation of paper currency. This is why people are moving to anything tangible from real estate, gold, silver, ancient coins, and even equities. With DIGITAL CURRENCY they will have capital controls and prevent you from even moving money outside of your country.

The precise day of the ECM was the announcement of the IMF Digital Currency which they intend to replace the US dollar as the reserve currency. This may be timed with the turning point in 2024. It is unlikely that they would cancel paper currencies before the 2024 election. This is all being

May 19 2023

Ukrainian Ancient Coin brings more than $5 million at Auction Today


Armstrong Economics Blog/Ancient History Re-Posted May 18, 2023 by Martin Armstrong

The Balkck Sea Trade – Tauric Chersonesus, Panticapaeum.

This is probably the finest known Gold Stater (circa 350-300AD) of Panticapaeum, which was the most powerful city in the Tauric Chersonesus with deep involvement in the lucrative Black Sea grain trade for even back then, Ukraine was a major bread-basket in the ancient world as well. This coin is featuring the facing and bearded head of Pan, with the reverse of a Griffin standing left. The griffin type probably alludes to the mythical composite creatures who were believed to guard the gold found in the mountains of Scythia. The Greeks were wonderful storytellers with vivid imaginations.  Herodotus describes the griffins as neighbors to the Arimaspi, a northern people each possessing a single eye in the center of their foreheads, who made constant attempts to steal the gold (4.13.1). Pliny the Elder, who accepted the story at face value, expanded it to note that the griffins made their nests in burrows in the ground which contained gold nuggets and it was these that the Arimaspi tried to take while the griffins were merely defending their eggs and young (HN 7.2, 10.70).

The providence of this coin dates back to Ex F. Schlessinger XI, 1934, and it was sold as the Russian Hermitage duplicates part II, lot 102. It was then sold in the New York XXVII, sale of 2012, where it was featured on the cover. Previously privately purchased from Bank Leu in 1991 in Switzerland. This coin is extremely rare with only a handful known at best. It’s artistic design is considered to be unsurpassed. This is probably the finest known. It sold at auction back in 2012 for $325.000 + 20%

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This coin just sold today in Zurich, Switzerland for 4,400,000 CHF + 20% Commission fee. In US dollars, that is $4,862,787 +20% = $5,834,400. This was about 1500% rise in just about 10 years. In all honesty, I have collected ancient coins since I was probably 12 years old. The field of ancient coins has expanded worldwide with major collectors from China to Russia. This coin was estimated at $1,250,000. The sale continues tomorrow with the Roman. I am truly shellshocked by the prices everything is selling for these days. As I have said, ancient coins are a worldwide market unlike particular national coins which fetch the highest prices in their home country.

Apr 3 2023

What Survives the Collapse of a Government’s Currency?


Armstrong Economics Blog/Gold Re-Posted Apr 2, 2023 by Martin Armstrong

I know a lot of goldbugs hate my guts because I do not constantly only say BUY and I point out that NOT only gold and silver survive the collapse of a currency.

I once had a German client who was a multimillionaire back in the 1970s. When the German government collapsed, he was buying all the old coins that were base metals for scrap. They were nickel and copper and some aluminum.  It was presumed that they were all then worthless.

The new government could issue the paper money, but they lacked the metal to strike a whole new coinage. They then announced that the old coinage would retain a value as fractions of the new currency. He became a multimillionaire overnight. I use to enjoy his stories of the transition since he lived through it there in Germany.

His stories of living through such monetary reforms helped me understand the mechanism behind such events. As I have explained, even in times of geopolitical stress, that is the period when we find the greatest number of hoards of even ancient coins.

Just like the stock market, gold has risen and fallen in value. The propaganda about Bitcoin was the same nonsense – the hedge against central banks and a “store of value” when it is simply no different from anything else that trades – it moves up and down. There is NO STORE OF VALUE in human history. Everything rises and falls. That was what Karl Marx was trying to stop – the Business Cycle of booms and busts.

Sorry, I am not a Marxist. There is a cycle to everything and that means that there is a TIME to BUY and a TIME to SELL. The stock brokers in the Great Depression told people to hold. The market always comes back. Others told them to average in. It took 25 years for the stock market to reach the old 1929 high (it exceed the 1929 high in 1954 on the Dow).

I buy gold but in coin form. The one consistent form of value historically has is generally been food if you go that far down the rabbit hole. However, a loaf of bread from 1930 will not do you much good today despite the fact it was just 12 cents back then. Now that was an investment if it would survive 100 years.

Precious Metals will do well, but I would prefer them in coin form. You may know what they are, but it is the other person who has to know before it has any value. That average person must be able to identify that it is real. That will be your problem. You won’t get change for a cup of coffee with a kilo bar of gold.

I have suggested the pre-1965 silver coins for small transactions. But real estate, art, ancient coins, antique cars, rare coins, and the stock market will all have some value being redenominated into whatever new currency emerges and that will depend on the government. The German stock market rose with hyperinflation and was re-denominated in the new currency in 1925. Like most other markets, it rallied and peaked going into 1929. So I’m sorry if the truth hurts. But the stock market will NOT go to ZERO and only gold will rise if the dollar crashes. There is no such period in history that hints at such nonsense. This is propaganda made up by those trying to sell gold and will say anything just like a used car salesman.

No matter what the tangible object might be,

it will rise and fall with the business cycle. It always has, and it always will.