An ancient Roman shipwreck has been discovered in the port of ancient Caesarea, located in Israel. The ship was full of bronze statues and coins that were destined to be melted down. The coins are from Constantine (309-337AD) and Licinius (308-324 AD). The typical bronze Follis of this period weighed 6.5 grams on average. By the end of the century, bronze coins were reduced to under 2 grams.
Shipwrecks like this are rare and typically the main source of bronze objects since most would have been melted down. The Vandals sacked Rome, and, to this day, we retain the word “vandalize” because they ripped the copper off the roofs of every temple. Even bronze went through cycles of abundance and periods of scarcity. There is a cycle to everything.

There was an attempt to restore the bronze coinage under Constans in 348 AD, and again under Julian II in 362 AD. As the empire began to spiral down, the coinage became gold and silver. Bronze was hoarded because it had a utilitarian value and could be recast into weapons or tools. The 4th century finds bronze all but vanish and gold becomes the common means of a medium of exchange until the empire collapses altogether in 476AD.
Even after the fall of Rome, we find the coinage is virtually only gold. The Merovingian coinage is gold, and the same is true in the Celtic coinage. This eventually gives way and gold vanished for 600 years. The Dark Age produced some coinage, but they are rarely found more than 20 miles from where they were struck, which confirms the lack of trade. The coinage simply became silver.

We can even see the debasement of gold being replaced with silver in the coinage of the Anglo-Saxons. The silver denarius of Rome was revived and became the silver penny in Britain. Offa (757-796 AD) even issued coins with his wife’s portrait. This is a direct restoration of the Roman monetary system that always issued coins showing the first lady so to speak.

It is this restoration of the Roman denarius which continues to the present time. Indeed, the penny in your pocket is, in fact, the direct link to the Roman coinage that is alive today until we move to electronic money.

QUESTION: Dear Mr. Armstrong,

(a) You say that the world is losing confidence in governments and I do not question that for a minute.

(b) BUT you also say that the dollar will strengthen for various probable sounding reasons, which it is presently doing. (whereas many think it will collapse).

For the collapse theory: it appears the petro dollar is being dumped which bodes ill for the dollar remaining the prime reserve currency. ——– does not think it will and that SDR’s will replace it. Surely as this eminent position of the petro dollar declines, there will be further debasement? (loss of purchasing power) – the opposite of a stronger dollar.

These two factors (a) and (b) seem to be very much at odds with each other. Does not a strong and growing stronger currency boost confidence in government? or at least keep it in power.

We have a debased dollar as per the examples you gave re the silver content of our coins from 1964 till now and we see what happened to the Romans who did the same thing, so it is hard to wrap your head around the fact that our debased dollar is growing stronger. (understood that its strength is relative to other currencies). Is this because no matter whether confidence is lost confidence in government, the money is all people have to hoard in deflationary periods which makes paper money become more valuable for a time (only)?

I also understand that the bad situation in Europe will drive money over to the US which is on the plus side for the dollar.

Whereas a collapsing currency often spells a collapse of government. (watching Venezuela)

Exception: we see in the case of Zimbabwe, that although its currency collapsed, Mugabe still has the money to pay his army which keeps him in power. I expect Mugabe gets US dollars from what is left of the country’s exports and somehow has nationalized the businesses that produce those dollars – in order to get his hands on them. Just guessing.

The US has not yet reached this point, although examples of mismanagement become more evident by the hour.

I believe Milton Friedman when he said”put government in charge of the Sahara and sooner or later there will not be any more sand”

I also keep in mind Greenspan’s quote: “There is no place to hide”.

I hope you are going to tell us in due course where to hide when so many of our assets are just numbers on a screen. Understood is the importance of asset allocation, but that does not take care of investments in brokerage accounts. Perhaps it is not possible to protect these.

So … it is the seeming inconsistency of the (a) and the (b) that I wonder if you could/would shed some light.

Best,

RH

ANSWER: The facts you are putting together are old and out of date. The US dollar has nothing to do with oil. The days of the petro-dollar are long gone. The USA is now exporting energy and electric cars are here. I bought one myself. It is a hybrid that gets 75 miles to a gallon. That is slightly better than my sports cars when I was a kid where 8 miles a gallon was fantastic. Saudi Arabia is in serious trouble. They have all had to pump more just to make ends meet because they are now forced to borrow money to fund budgets that expected $200 oil forever.

Your scenario about confidence and a currency is a bit skewed. As an economy declines, the currency rises because people stop buying assets and seek to go to cash. This is why the dollar rallied during the Great Depression as well and the deep recession from 1980 into 1985 forcing the government to create the G5 (now G20) at the Plaza Accord in New York. The yen rallied dramatically into 1995 falling to 75 to the dollar when the country was also doing terrible. It rallied again into 2011 when all looked rather bleak. In all of these cases, there was no concern that the government would collapse. Demand for the currency rose in each affair. This is not on par with a collapse in confidence in government to the point of hyperinflation. To produce that result, nobody is willing to buy the debt so all they can do then is print. In that instance, it all flips. You spend the money to buy assets. A normal correction you sell assets that crash to go to cash.

Yes we peaked in government 2015.75 and have begun a downward cycle in public confidence. We are witnessing this on a GLOBAL scale at a far greater pace than within the United States. This is a game of musical chairs. Capital is moving from one to the next until there is just one standing. Then the final shoe will drop. Read Herbert Hoover’s memoirs for 1931 and you will see what he described was the same behavior when Greece was in trouble starting in 2010.

The USA will be the last to fall. I have been warning this is simply how things will play out for years because the USA is the core economy like Rome in ancient days. The disease always begins in the limbs and then moves to the chest and finally strikes to heart. So dollar up as the disease is in the limbs. Then the rise in the dollar will force political change on many levels. Not the least will be a new monetary system, but that is the end-game once it hits the chest. We are not there yet. It’s coming.

As for SDRs, I proposed that back in 1985, The White House responded to me with a two-page letter stating that such a system would mean the government will lose domestic policy objectives for international. That is happening right now any way. The Federal Reserve is becoming the central bank for the world because it is chaos everywhere else.

Today, however, I would oppose the IMF SDR system for the IMF is way too corrupt. I have told how I was invited by Edmond Safra to the IMF Washington Dinner he put on for the IMF renting the entire National Gallery. Everybody was there from politicians to Paul Volcker. I was told bluntly to join the bankers “club” back then. I was invited to demonstrate to me that they had the IMF in their pocket. They poured money into Russia and the IMF was to keep the loans going. When they could not, the whole mess collapsed. That produced the Long Term Capital Management crisis and the first Fed bailout.

Because the London Financial Times had reported on the front page that at our London WEC in July 1998, I delivered the forecast that Russia would collapse in a matter of weeks, that began this whole mess alleging I manipulate the world economy because I must have more people on my side than they did on their’s. People judge others by themselves. The “club” tries to manipulate the world paying bribes and controlling mainstream media. When my forecasts become correct despite all their machinations, they scream I am the one manipulating the world because they lost. Nobody can manipulate the world and if these fools do not figure that out, all I can say is they are not even at the dumb and dumber level of stupidity.

To break the world monetary system, that will ONLY take place with a rising dollar. But with a declining outcome thereafter. You are just missing that part that FIRST the dollar must soar to screw up the world to create the change in the monetary system and that illogical proposition is in fact what makes it happen. Forget about petro-dollars. They are history. Measuring confidence is key. The confidence is turning against government now. We can see that with Trump and Bernie. The masses are not so happy. They are rising up everywhere you look.

In Europe we have 2/3rd of Germans against Merkel. In France, the biggest union uprising is forming against Hollende. We have Greece in trouble, Britain voting on whether to stay or go, Catalonia voting to separate from Spain, Austria rigging the election claiming write-in ballots of just 31,00 decided the election, and Brussels is trying desperately to prevent any democratic vote because they know the people are turning against the whole euro idea, which is the federalization of Europe.

Don’t worry. Just go with the flow. It’s happening fast. Just let go off the old-world theories. The reserve status of the dollar cannot be changed by pricing oil in even rubles or yuan. The reserve status is created by the fact BIG MONEY can park in US debt. It cannot park in European debt which remains in chaos outside of Germany. Britain, Canada, Australia are too small, Japan is too restrictive, and China as well as Russia are not quite ready for prime time. The debt has to turn belly-up in the fish bowl to change reserve status. It is not even something the USA, China, or Russia can decree. This is created by the Invisible Hand which is beyond the control of governments. People who have no real world experience in trading or seriously advising in the big leagues have way too much time on their hands to come up with theories that amount to just sophistry. You would not ask someone to operate on your brain because they smile nice or sound good but happen to be a piano player instead of a doctor. There are just some things you cannot understand without experience. That is why school is so bad in the social sciences (economics) beyond reading, writing, and math. It teaches theory – not reality.

COMMENT: Marty, I used your model as you have taught us. I sold the euro at 116 with a stop loss at 11705. I sold gold at 1305 with a stop above last year’s high. I can afford to buy seats at the WEC for my wife and son. Will you scream loud when it is time to buy gold? That should mess all the goldbugs up. They really hate you because they are the ignorant fools.

REPLY: Numerous emails are coming in from those who sold the Euro at 116. It is what it is. This is a shame politicians will never admit a mistake. They just go pedal to the metal and assume more of the same will reverse the trend. A close in the Euro below 11140 should signal that the trend will continue to press lower and the May high was possibly the high for the year. But that is our initial support for now. As for gold, yes, we take out 1206 on a weekly closing basis and new lows become possible. A close on Friday below 1225 and we should press lower. We do see capital inflows to the USA right now and this is probably because of the upcoming BREXIT vote on June 23rd. It is hard to see how the metals can rally against a rising dollar.

We will scream loudly when it is time to buy at the low. That will be for those who subscribed to the metals report exclusively. Everything has its time and place. Unfortunately, the gold promoters have one agenda so that is all they can preach. That is the entire problem in the United States. We have too many agencies competing for authority regulating everything they do not understand. The CDO bombs sold by the banks were approved by SEVEN agencies. Big deal. Not a single one figured out this was a bad idea. They are paid not to do a job. The credit rating agencies showed in 2007 they too are the disposal of the highest bidder.

This is why we have countless funds each with some special expert market. The muni-bond guy will always tell you they are the best. The emerging market guy will tell you its a buy. Every single specialty will preach its own book. The average person needs to become a hedge fund manager to sort out the nonsense from reality since they all preach with such passion and sophistry. So of course, any group I warn that instrument will decline will hate my guts. That is their bread and butter.

I was a global hedge fund manager. That meant people came to me to make those decisions. The world was available for my shopping cart. That is what I am trying to provide here. The unbiased global view. This is about survival. Sorry, I am not selling gold, swamp land in Florida, or condos in Bora Bora. This is about surviving what is coming and hopefully we can spread the word so when it cracks, we have enough influence to push toward freedom. Otherwise, say goodbye to the world we grew up in and your children will never know what freedom use to be.

QUESTION: Dear Martin, First of all, thank you for your daily blogs. First thing I read every morning. I can’t wait to attend Novembers Orlando conference. My question is about the inverse relationship of Gold(precious metals) and the Dollar. Looking at historical charts it would suggest that we may continue to see a price decrease in Precious Metals as the value of the dollar rises, deflation. This will continue until the Government panic sets in around 2021-2023 as your ECM tells us. Then serious lift off of Gold may occur as a new monetary system sets in and people want to get rid of dollars because of the complete loss of confidence in government and the future of the US monetary system.

Would love your input and thoughts.

D

ANSWER: There is no question that we should see deflation overall moving into 2020. But this is a different kind of deflation. This is capital contracting and hoarding so you will probably see asset prices rise, but GDP actually continue to contract. The classic “inflation” people talk about is rather narrow-minded. They tend to see waves of only demand inflation when people are rushing to buy things. This is associated with hyperinflation, but that is really when the collapse in confidence unfolds in a government. That can take place in the peripheral small economies like Zimbabwe or the collapse of a government post-war as in Germany and other Eastern European nations post WWI. It does not unfold in the core economy arbitrarily while others survive. It always comes from the outside in.

Now, let us look at cost-push inflation such as we saw with the OPEC crisis. They just raised the price of oil so the dramatic rise in the cost of production created the recession, but demand contracted. So prices can rise from a ratcheting up of cost which can be both private like OPEC or government with taxes.

QUESTION: Mr. Armstrong; On the one hand you show the debasement of the Roman currency, but then you say there was also massive hoarding and deflation. Can you explain how do you get deflation with debasement?

Thank you for the the mind food

PH

ANSWER: It may seem to be a paradox, but everything unfolds like a bell curve. This is why you do not get the same result by simply moving in a straight line. This is the same thing we are experiencing currently under Quantitative Easing by central banks. We have increased the money supply, but we are also moving toward negative interest rates and this promotes hoarding. People have not been investing. They have been sitting on the sidelines trying to figure out what to do.

Sir Thomas Gresham made the observation that debasing the currency results in bad money drives out good. But what does that really mean? What he is saying is that people then start hoarding the old money. It may be a paradox, but debasement does not cause hyperinflation, it causes deflation because the vast money supply that was circulating is hoarded. Therefore, the government needs to further debase desperately trying to keep a sufficient degree of money in circulation. The more it debases, the more people hoard. As people hoard, they contract from commerce and GDP contracts. This results is a reduction in tax revenue, which then causes government to further debase to make up shortfalls in revenue.

When you then introduce a collapse in confidence within government, then if people no longer “feel” secure, they then hoard even the based currency. This is why we find so many hoards of debased Roman currency during the chaotic 3rd century.

It is a curious paradox. Right now, people are hoarding as are the banks and corporations. It is hard to hoard paper currency for you will not be able to distinguish between old and new. This means that the hoarding will migrate ti tangible assets, shares, gold, silver, and antiquities.

The Dow does not need to break last year’s low. That was accomplished in the NASDAQ and S&P500. Nothing has changed there. The entire interest rate issue has far too many people brainwashed. No doubt, they would initially sell. However, the market will rise with higher interest rates as it has always done historically. Therefore, as shorts build, we can easily create a bear trap and that is the fuel to rally again. This is the churning we are in until it appears at least after September.

This time, we have a far more serious problem with where to put money – big money. Stocks are the modern-day version of what what gold use to be decades again when you could jump on a plane with a suitcase full and sell it wherever you landed. Today, metal detectors prevent that from taking place. Stocks are being used to move money but they must be the high-end shares that are traded globally (see article posted on Egypt).

There is ABSOLUTELY NO INDICATION yet that we are in a bearish trend poised to break last year’s low in the Dow. Another retest of support – YES.  Breaking last year’s low would ONLY be indicated with a monthly closing beneath 16000 and prior to August. That said, we have a more important number for month-end at 17579 followed by 17210. A May closing below 17210 would signal a possible test of the 16000 level in the months ahead.

Nevertheless, it is the first Minor Weekly Bearish Reversal in the Dow lies at 17434 which we have flirted with on Thursday. We need a closing below this today to suggest a correction is unfolding. However, make no mistake about it, the next critical area is 17120, which happens to be a Daily and Weekly Bearish Reversal. That is the level to watch for a serious short-term break.

Keep in mind that people continue to think this market is “rich” in price and the are concerned about earnings. Those ideas are so out of touch with reality. The PE Ratio reach 50:1 in 2000 during the DOT.COM Bubble, but it exceeded 120:1 during the 2007-2009 meltdown because blue chips are the place to secure money. The market is by no means “rich” from a historical perspective.

There have been a some unusual capital flow developments involving Egypt illustrating that there is a shortage of dollars building which has been caused by the decline in oil prices. This decline in oil has resulted in a decline in subsidies for Egypt from other Arab nations. What has been taking place is interesting. Shares of Commercial International Bank Egypt on the Cairo market have been bought using Egyptian pounds and then dumped in London sold for dollars taking a loss between 20% and 30%. There is such a shortage of dollars building, there are developing net capital movement through proxy instruments.

These trades have been creating regulatory problems. Typically, regulatory limits dictate how much of the company’s shares can be be traded offshore in the form of global depository receipts. This flow of shares is impacting regulations all because of  a shortage of dollars.

The first Minor Weekly Bearish Reversal in the Dow lies at 17434. A closing beneath this for the week will confirm what already appears to be in motion technically as well as after electing three Daily Bearish Reversals. The next critical area is really 17120 which happens to be a Daily and Weekly Bearish Reversal. This is the primary support. Breaking this area then opens the door for a more sharp drop ahead to retest 16000.

We have a more important number for month-end and that is 17579 followed by 17210. A May close below this level will confirm a correction into the August/September period, which can extend even into early 2017. This should produce a retest of the broader support at 16000 and a breach of that level on a monthly closing basis would set the stage for a new low under that of 2015.

Keep in mind the Fed realizes that it needs desperately to restore some “normalization” to interest rates. The Fed is departing from Draghi who is destroying the future of Europe as is the Bank of Japan. This is really turning into the Clash of Titans. This is also unfolding is helping to keep the dollar as the only game in town.

Last week, the Dow closed BELOW the technical support I warned had to hold on any retest, which it did not. This was the market warning that between the chaos of the elections, the BREXIT vote in June, and the Fed realizing it has to raise interest rates to try to ward-off the growing demands to seize all pension funds in the nation to bailout public pensions in the various States, the future looks a bit cloudy at best.

We need to watch gold as well. If gold exceeds last year’s high of 1307.80, the likelihood of a sustain breakout beyond 1360 is not very good with a strong dollar. However, such move would also confirm an extension of this entire mess and any reversal where there is a sudden crisis in confidence in government within the main segment of the population would probably come in 2017. This makes sense from the perspective of 2017 being the year from Political Hell. It also would not rule out the ultimate swing for gold to crash to new lows really twisting the minds of everyone with rising rates and the dollar.

June is the first target for a shake in confidence with the BREXIT vote. It still appears they will be desperate to rig the vote. David Cameron has been calling upon everyone to paint such a dark picture if Britain leaves it demonstrates how important this is to the survival of Brussels, not Britain. Everyone from Obama to Christine Lagarde have been in London to warn the Brits to stay in line. I seriously doubt even if the real vote is to leave, as Stalin said, elections are decided by those who count the vote. The election fraud in Scotland should warn that this is probably in the bag for the “establishment” and that does not look very good for Britain.

So hold-on. The markets are still churning. A monthly closing for the Dow beneath the 16000 level will warn of a new low under 2015 going into 2017. Nevertheless, everything will flip when the general public comes to realize that the future looks very chaotic and it boils down to how can you trust. That is when the flip come from Public to Private.

Keep in mind that the Fed is really caught between the worst of two worlds. It needs to raise rates to save pension funds, yet higher rates is going to devastate the bond markets and blow out federal budgets. I have been warning that there will be NO INFLATION as long as rates remained low. Raising the rates is the only way to ignite inflation. Europe and Japan and just brain-dead.

People have been indoctrinated with Marx and Keynes to such an extent, they cannot invest because they are confused and assume rates up stocks down. They just listen to the talking heads on TV and never grasp the real history of this move.

Therefore, a break even to a new low will get everyone offside and assume this is the mother of all crashes. This is when the reversals and timing will help to pinpoint that low. Keep in mind that we need the majority to turn bearish to provide the fuel to the opposite move. This is just the way markets function.

So watch the numbers now. It’s Just Time. Keep in mind we if we hold the 16000 level on a monthly closing basis, then we will just churn back and forth. That is the key area on any decline on a monthly closing basis.