Angela Merkel and her party remain clueless about the economic history of Germany which has been made apparent through her insistence upon austerity that tearing the EU apart at the seams. This is like blaming Trump for Hillary’s loss. Merkel’s belief that the quantity of money is the cause of inflation has been proven dead wrong after the central bank’s quantitative easing since 2008 has had no impact on inflation for the past 8 years. At what point does one admit error? Never?
German Vice Chancellor Sigmar Gabriel told Der Spiegel magazine that the breakup of the EU is no longer unthinkable because of Merkel’s desperate clinging to austerity. He asked Merkel ,”[W]hat would be more costly for Germany: for France to be allowed to have half a percentage point more deficit, or for Marine Le Pen to become president?” He is still waiting for Merkel to answer that question.
Her economic policies of austerity have sent Europe into an economic depression, and opening arms to refugees has sent Europe into a terrorist crisis. One has to ask, just how long can Europe endure this person who is dictating policy to the rest of Europe?
QUESTION: Mr. Armstrong; What Modi has done here in India is far worse than what the press reports. I read your piece that this is part of a larger plan discussed at the G20 meetings. Is there any historical precedent for such actions that would provide some guidance for the future?
R
ANSWER: Since ancient times, many times those in power have cancelled their money supply to make a profit or collect taxes by force. It is rather absurd to think gold or silver coins could somehow exempt one from these types of actions by tyrants for they pulled off such maneuvers even in ancient times. Governments have recalled all coinage and demonetized silver and gold coins, declaring them not acceptable in payment for anything. Despite their metal content, the coins were still declared worthless. This is one of the simple truths that demonstrate not even a gold standard will save the day.
The first debasement or reduction in weight too place in Lydia, which was the first city-state to invent coinage stamped by the King. Kroisos fought against the Persians and as expenses mounted, he reduced the weight of the gold stater from 10.75 grams to 8.08 grams – a reduction of nearly 25%. Cyrus the Great won the battle and then retained the invention of coins minting the same designs. Eventually, Darius I of Persia place himself of the coinage and they then became known as a Daric denomination.
There is no evidence that Kroisos recalled the older coinage ti reduce the weight and make a profit. However, others to follow did adopt that tactic which is effectively what Modi has done replacing the currency with electronic deposits. Over the centuries, governments have routinely replaced worn coins or worn paper currency with new issues. However, not all coin recalls were about reminting old and worn coins or paper notes with new ones. Three literary passages from antiquity identify the reminting of coinage in ancient Greece that had nothing to do with recycling of worn coinage. The government did what India did, but instead of moving to electronic money, they devalued outstanding coins and recalled them for restriking regardless of their condition, specifically as a means of raising revenue for the state.
The 6th century BC Athenian tyrant Hippias recorded, “[H]e also made the coinage existing among the Athenians legally invalid (adokimon), and, having fixed a price, ordered them to bring it to him; and after they had come together for the purpose of striking another type (character), he gave back the same silver money (argurion).” (Aristotelian Oeconomica 1347a8–11)
It is unlikely that Hippias the Tyrant (528-510 BC) simply returned the coins unchanged. He would not have carried out such a monumental task without making some profit by demonetizing and devaluing all of the coinage in the state, thereby requiring it be exchanged for the legally acceptable (dokimon) coinage that he issued at a higher value. This is similar to the actions of Modi in India.
We also find similar passages that are notable for their overvaluations of the new replacement coinage. During the 4th century BC, Dionysios I of Syracuse (405–367 BC) and Leukon I (389-348 BC) of the Cimmerian Bosphoros pulled off similar mass recalls of coinage. Dionysios, we are told ([Arist.] Oec. 1349b27–33), and Leukon (Polyaenus, Strat.6.9.1), recalled in the existing coinage and restruck (or countermarked) it with a new type (character), thereby doubling its original value. This was an effort to cover the expenses of the state by increasing the money supply. Dionysios recalled the coinage and imposed the penalty of death for noncompliance. Leukon followed Hippias and simply demonetized all existing coinage.
Various Japanese emperors engaged in similar tactics but did not recall the existing coinage. Each new emperor just devalued all outstanding coinage to 10% of its value and issued their own coinage for profit. This practice led the population to use Chinese coins and rice. Eventually, nobody would accept a Japanese coin because of this practice. Thus, the end result was that Japan lost the ability to issue coins at all for 600 years after 958 AD.
This is why, as we move forward, it will be best to hold assets out of banks and out of currency. They can even declare gold a criminal act to possess, which is why I suggest genuine old coins rather than bullion. Just another layer of protection. Whether that would be the case, as it was under Dionysios I of Syracuse, is not unthinkable. The safest asset may simply be blue chip stocks for they would never make it illegal to own corporations unless you had a full-fledged leftist revolution that seized all private assets as in a communist revolution. That risk would naturally alter everything once again.
France’s Marine Le Pen spoke to her supporters and detractors alike when she announced recently if she succeeds in the French election her first foreign visit would be to Brussels to dismantl…
Source: Marine Le Pen: I Do Not Run to Praise Brussels, But Rather To Bury It…
Actually the answer is very simple as we have 1,400 years of history to analyze, the current conflicts are nothing more that the extension of those from the past but using modern tools. If you want to stop what is happening then you must fellow the principles of Sun Tzu “The Art of War.” Although it is true that there is a series of internal struggles with in Islam (and that is good and bad) for what we have are a pack of lions fighting over who gets to eat the prey that is surrounded by them and has no chance of not being eaten. If we get ride of the PC we find clear answers such as that for all particle purposes all the conflict is related to Islam so Islam is the enemy. If you can not understand that then you or your posterity will at some point be Muslims whether you want to be or not. Back in the day when the mob ruled New York there were all of Italian decent and the FBI when after them and eventually broke then up but if they could not have targeted Italians they would never have been able to defeat them. Today with PC the FBI would never be able to get rid of the mob as they used profiling with is no longer allowed. So my point is identify the enemy which is not hard to do but since it is impossible to say there is no way to defeat them we would just have to life with what we have now. Personally I think trump has an understanding of the true situation so there may be hope to safe the republic.
The Dow made a new high on Friday, but we failed to closed above the 2016 high. We still see the next major resistance level in the 21000-23000 area. A Phase Transition is only likely exceeding that level.
Gold has bounced but the resistance stands at 1197 level with support at 1130 zone. The lowest closing remains 2015 on an annual basis. We need a weekly closing back above 1222 to suggest any short-term sustainability.
Most markets, including the dollar, are really holding waiting to see what the Trump Administration looks like. The tax reform will clearly bring cash moving back to the States despite the leftist economist desperately saying it will not. Any company who does not take advantage of a 10% one-time tax compared to 40% would be one giant short illustrating that their management must be brain-dead. Nevertheless, we are on a wait and see alert for tax reform.
January is still a risk of a turning point in many markets. So you want to be careful with rallies in currencies or commodities at this particular time. The big turning point seems to be shaping up for April/May.
QUESTION: Mr. Armstrong; I read your work on the euro from the nineties and how it would fail. Everything you laid out unfolded over the the subsequent 20 years. I assume you have discovered historical attempts to create a euro type system before aside from Napoleon. Can you point to any other references?
HF
ANSWER: History repeats because the human emotions and passions of humanity NEVER change. Without going into all the numerous attempts of trying to create standards, which in fact was the root idea behind the euro to combine the European currencies to compete with the dollar, let us turn to Greece, which was the first state to crack in the Eurozone.
The Athenian coinage decree standardized currency among all the city-states that were allied with Athens. Between the years of 450 and 447 BC, the use of Athenian silver currency and Athenian weights and measures was made MANDATORY in all allied states of the Athenian Empire. This established the Athens Owl as the currency at the time making it the ancient equivalent of the US dollar on the one hand and imposed a single currency such as the euro. Section XII of the decree reads:
“And if anyone proposes or puts to vote concerning [these matters that it is possible] to utilize foreign coinage or put out a loan, let him immediately be haled before the Eleven. The Eleven should punish him with death, but if he disputes his guilt, let them bring him before a dicasteric court.”
The Athenian Owl became the world currency that was imitated even in India. It was not that these imitations were counterfeit insofar as reducing the metal content. To the contrary, imitations were simply created because the Athenian Owls carried a premium over the silver content similar to the US dollar in peripheral economies today as many peg their currency to the US dollar such as Hong Kong or Saudi Arabia.
The resentment of this Athenian decree that made the Athens Owls the “reserve currency” of the ancient world, contributed to the Peloponnesian War (431–404 BC) fought by Athens and its Empire positioned against the Peloponnesian League led by Sparta. Athens had the naval supremacy, but in the end, it fell to Sparta. Today, we have resentment against the dollar being the reserve currency coming from China and Russia. But what backed the Athenian Owls to the point that they carried a premium over their metal content was the fact that Athens was the financial capital of the world due to its dominance in trade. Even shipping insurance emerged in Athens along with banking.
The Athenian Empire emerged following its defeat of the Persians much as governments now share information and hunt people for one another under the claims of terrorism. The Delian League was founded in 477 BC as an association of Greek city-states under the leadership of Athens for the purpose of continuing the defense against the Persian Empire after the end of the Second Persian invasion of Greece. The name is derived from its original meeting place, which was the island of Delos where the ancient central bank stood. Pericles moved it to Athens in 454 BC. This was similar to the design of the European Union.
Athens used the League’s navy to further its trade much as Germany has done to eliminate currency risk for its exporters. This conflict of interest often led to disputes between Athens and the less powerful members of the League creating tension over the single currency created by the Athenian Coinage Decree. By 431 BC, Athens’ authoritarian control led to the outbreak of the Peloponnesian War, which ended the League in 404 BC under the direction of Lysander, the Spartan commander upon the defeat of Athens.
The authoritarian attempt to rule Europe by the EU is leading to the same disruption in commerce. The unelected Troika are also like the tyrants of Athens who were overthrown and replaced with democracy. Southern Europe has not benefited from the single currency any more that the various city-states among the Delian League. The single currency benefited the northern manufacturers within Europe at the expense of the less industrial Southern European member states. The failure to consolidate the debts of all members in the EU burdened their economies causing their past debts to be converted to euro which then doubled in real value. Nobody understand this very basic problem in political circles. Talk about being brain-dead!
QUESTION: Marty; Did you see Larry Summer’s comments on Trump. Is this guy completely insane? He says Trump is proposing things off the planet. Wasn’t it Summers who came up with the negative interest rates and supported repealing Glass Steagal?
ANSWER: Larry Summers is a classic example of how a PHD means absolutely nothing compared to real life experience. He had the audacity to say, “The vast majority of the companies who have large overseas cash also have substantial amounts of domestic cash.” Obviously, Summers has never advised a real company. If Trump makes it a 10% tax, any company who does not bring their cash home would be a short. EBay had two companies it wanted to buy domestically. It backed out of the deal because it would have to bring in cash from overseas and pay too much tax to make it worthwhile. That’s how much Larry Summers knows about the world.
Summers went further, “The reality is that cash that is brought home will be used to pay dividends, to buy back shares, to engage in mergers and acquisitions, to rearrange the financial chessboard, not to invest in large amounts of new capital. It is a chimera to suppose that there will be large increases in capital investment as a consequence of that repatriation.”
First of all, paying dividends and buying back shares will put money DIRECTLY into the hands of investors who will redistribute the funds. Summers tries to “stimulate” by handing banks billions with no strings attached in hopes that they will lend the money to people who want to borrow. Then he wants to impose negative interest rates to punish people for not spending or investing.
Larry Summers has publicly admitted he is incapable of forecasting the economy, so where does he get off saying this nonsense? Quite frankly, those who are watching their pension funds go bankrupt should sue this guy for his non-conventional idea of negative interest rates to “stimulate” the economy. He gave us the 2007-2009 crisis by repealing Glass-Steagall and supporting the bankers, and he set the pension crisis in motion with negative interest rates. Thank God Hillary lost because this clown would be in charge of screwing up the economy even more.
QUESTION: Hi Martin!
I have been enjoying readings in your rich (in knowledge) website and writings in my vacations here in Southern South America. Between one coffee and another I printing articles and writings in order to “connect de dots” as you use to say. That is being a pleasure.
My question is on your article from 9th November in 2013. That’s outstanding, by the way, I really liked that. It makes me happy once you make connections throughout history of human civilization. I do appreciate that.
The name of the article is “Deflation – The Great Equalizer – Now Greece? Was There a Different TESTED Response in History? YES!”
Was astonishing to me the initiatives form the Emperor Tiberius (14-37 AD) and the fact that it worked as you said!
Therefore, I am wondering on the following points:
a) Where can I find (book references) more about these initiatives to fix the economy made from Emperor Tiberius? Which book you would recommend on Roman Empire focusing in this economics view?
b) Where can I find some source with regard “call money rate” of the countries around the world or at least from some of them?
Thank you very much for your attention and hard work!!
All the best!
Warm regards,
RS
ANSWER: There is no single source from which I can draw everything. “The Decline and Fall of the Roman Empire” by Edward Gibbons is probably the best single source, but this does not focus upon the economics. I put together the Panic of 33 AD from various sources using Tacitus as well as the coins themselves. You will find some of the the digital versions on this site under “books.” I prefer contemporary historians to modern ones who interject their interpretations. I also recommend “Historia Augusta.” You can also see how I have brought together all the key sources from ancient times by recording the economic crisis of the first Roman Civil War.
Plutarch (c. 46–120), recorded the personal lives of important Greeks and Romans
Gaius Cornelius Tacitus (c. 56 –c. 120), early Roman Empire
Suetonius (75–160), Roman emperors up to Flavian dynasty
Appian (c. 95–c. 165), Roman history
Arrian (c. 92–175), Greek history
Lucius Ampelius (3rd century AD?), Roman history
Dio Cassius (c. 160–after 229), Roman history
Herodian (c. 170–c. 240), Roman history
QUESTION: Hi Martin, You have mentioned on numerous occasions, that the Socrates has inputs from around the world to come to very accurate conclusions. I assume, it has plenty data from within the USA as well. Can it also predict the NFP? ADP?. (few days BEFORE.)
Don
ANSWER: We have put in such information from the NFP (Non Farm Payrolls) and ADP Private Sector Jobs data and the interesting result demonstrates that human emotion rules — not numbers. Yes, any data series develops patterns including lottery numbers. Forecasting the direction of such numbers is not really that difficult. The stunning realization, as I have said plenty of times regarding fundamental analysis, is that the reaction of the market is driven by the trend. Therefore, you can obtain a good number but the market will respond in the opposite direction and the news will say it was not good enough. The overall trend being bullish or bearish will color the response to the numbers. Forecasting the number does little good from a reality perspective.
I have created this site to help people have fun in the kitchen. I write about enjoying life both in and out of my kitchen. Life is short! Make the most of it and enjoy!
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