Posted originally on Dec 18, 2024 by Martin Armstrong
A lot of people are fixed on what money is and presume somehow that a return to precious metals will solve the problem. Precious metals are for personal use. They have never prevented any society from systemic economic collapse. Do not confuse hoarding gold to preserve wealth with a gold standard. We had one with Bretton Woods. Governments printed and never adjusted the conversion ratio because they had to admit what they had done. The problem is not WHAT is money, the problem is regardless what money might be, politicians always spend more than what they have. The only practical solution is to eliminate the ability to borrow.
Debt has destroyed every empire, state, and city since the dawn of time. Hammurabi’s Legal Code created legal limits on interest, so borrowing was a problem from the dawn of civilization. The only solution to be realistic must address the outstanding debt while eliminating the capacity to borrow. Changing to a gold standard means the outstanding debt would be due then in gold. The bankers will love that. If we default, all pension funds will go to waste, and we will be looking at massive civil unrest.
We have to be practical. If we are going to follow dogma, you better dig a hole and don’t come out until the mushroom cloud subsides. This is real shit we are talking about! This is not an idealized theory. Every act will have an equal and opposite reaction.
I have stated many times that unemployment hit 25% during the Great Depression because of the Dust Bowl, and 40% of the civil workforce was employed in agriculture. We are at a similar risk today, but the 40% is in government, producing nothing toward national wealth, and are public servants because we pay them to produce nothing.
It is the implosion of state and local government, their inability to print into oblivion, that is the check against hyperinflation as they raise taxes and try desperately to hold on to their chiefdoms. Gold is for personal survival. Switching to gold does not address the debt, growing employment in government, the pensions, and our long-term survival.
So gold may help you survive personally as the economy switches to underground, but it will not address the decades of abuse suffered under Marxism. The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn (just being a little pregnant with Marxism).
Posted originally on Dec 18, 2024 by Martin Armstrong
QUESTION: Mr. Armstrong, Like so many others, I cannot express my gratitude for creating Socrates. You provide forecasting for the entire world. In Brazil, Socrates has been a light in the middle of darkness. Our central bank has had to intervene four times, desperately trying to prevent the collapse of our currency, as we see nothing but soaring budget deficits. We are witnessing the wholesale spread across assets. Our government dollar bonds are declining despite being denominated in the US dollar. Our hopeless president, who the West cheered, Luiz Inacio Lula da Silva, proposed new income tax breaks alongside a plan to cut over $11 billion in spending last month. Lula has no idea about the economy.
Could you please comment on Brazil as we go, so does South America?
Enzo
ANSWER: It is so important to look at the entire world. We are all connected. However, looking at the array for South America it does not suggest that everyone will follow Brazil. Nevertheless, the US dollar should continue its advance into 2025. I would be concerned about the May/June time period next year. We are looking at the collapse of socialism. The election of Lula da Silva was an act of economic suicide for Brazil. Silva was elected in 2022 to be the president of Brazil. That was a stunning comeback following a very tight run-off race that was not without controversy. His victory heralded a political about-face for Latin America’s largest country. You can see the economic consequences ever since the US dollar reversed direction and was projecting going into 2025 for a major high. Bolsonaro is ahead of da Silva in the polls for the next 2026 election. It certainly appears that the US dollar will rally into 2025, impacting your 2026 election.
A year-end closing above 5.98, which the market is trading above currently, should confirm a new high for the dollar into 2025. Looking into next year, the overhead resistance will stand at 6.31, 6.79, and 7.27. Brazil is a founding member of the BRICS. The collapse of their currency files in the face of propaganda about how the BRICS will kill the dollar. They lack the economy and certainly the financial capability. As you mentioned, they had to issue debt in dollars to raise money. As the dollar rallies, those emerging markets that issued dollar-denominated debt are being pushed closer and closer to default in 2025.
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