QUESTION: Mr. Armstrong; I have been trapped by these gold promoters and they indeed are like used car salesmen, worse since they are not regulated. I listened how they were wrong because the bankers were suppressing gold. If the bankers were eliminated, gold would soar to anything like $25,000 to $100,000. Well, the bankers have all been skewered. Here in Canada, Bank of Nova Scotia is one of the five banks accused in manipulating metals. One would think if the bankers were really preventing the metals from rallying, then why are they collapsing? I suspect you are the only person telling the truth here. Can you explain the real story?

Thank you

PH

ANSWER: Bankers have always fun-run their clients. It is way too tempting to do so when you make the market and you can see the client positions. The big traders are starting to wise up. They are a bit slow. You have to excuse them. Perhaps they were in the special-ed classes growing up. They trusted the big names and are starting to experience being screwed big time. The total gold bullion trade has averaged 4,000 tons annually for the past 10 years. One metric ton equals 32,150.7466 troy ounces. So we are talking about 128,600,000 ounces per year. The US Mint sells about 425,000 one ounce coins. This tend to put the bullion coins in perspective.

About two-thirds is new mine production and one-third is recycled gold according to the World Gold Council. Jewelry accounts for about 50% of gold sales. About 9% of gold production is used in technology. Central Bank demand has fluctuated from 2% to 14% annually of total production. Including ETFs, investment demand accounts for about 33% of world production. This means you have a fresh supply every year of 128,600,000 ounces coming to the market. This is not all “investment”. If the retail trade in the economy slows, jewelry sales decline. That is the bulk of gold but the promoters want to make you think gold is suppressed solely by the bankers for nefarious reasons. There are other factors taking place. This is not all “investment” consumption.
This type of “manipulation” pushing the fix one way or the other to elect stops has been like growing money on trees. This BY NO MEANS suppresses gold or any currency, no less any other commodity that they have played games with. All the big manipulations have ALWAYS been to the UPSIDE, not to the downside. It is absurd to pretend that gold is suppressed perpetually so they can make money in some strange way. Both of the Buffet entries into silver were to push it up. Even GATA knew that was the game in silver back then. Did they tell everyone it was PhiBro & Buffet? Why not?

The bankers get it going from $3 to $7 and and then the promoters talk it up and the retail come in to buy the high every time and they turn around and sell it to them. That is how they make real money. Suppressing gold to keep in down with no volume means no profit. Even the manipulation of Platinum was the the UPSIDE.

Now that the bankers are being forced out of the game, gold was actually being supported by them. They were keeping the hope of a rally alive. Without the bankers, the support will be less and we can see gold fall out of bed. It has fallen to $1201 by 5PM on May 30th. The next support does not come into play until 1170.

Every market has its time and place. The promoters hate my guts because they always want to make a profit getting people to buy. They could care less about the advice they are giving. The market is always right. People are wrong. We can define the levels and the time. Just let the market do its thing.

COMMENT: it is just chaos by politicians destroying the future. cashless society …how did u see this just amazing.I never thought it is coming to india as indians believed in hard MONEY sir.
thank you for your knowledge i think in future u should create an AI to help the people show the path. Coz there is no other way to see this except CYCLES.

We end up making same mistake over and over again.

REPLY: All governments talk. Indian Prime Minister Narendra Modi is now saying that a cashless society will end black money. He is on par with the rest of the political world. The prospect of a cashless society was discussed at the last G20 meeting. They want to eliminate cash worldwide and shut down tax havens. When you have actually worked behind the curtain, you come to realize how things really work. Those who make up conspiracy theories are usually biased. For decades, I have been told in meetings with many governments around the world that IF PEOPLE PAID THEIR TAXES THEY WOULD HAVE NO PROBLEM RUNNING SOCIETY. This has been told to be so many times; it is the prayer they say at the foot of their bed before they go to sleep every night.

There really is nothing new from what they are doing now and the fall of the Roman Empire. The human emotions are the same. This is the ONLY reason I am doing what I am doing. If I acted only for myself, I would run to an island and trade from the beach. But I realize that government is like water in a bathtub. There will be no place to hide. History teaches us that. So the question becomes, how fast will this be over? I follow our models. Once the plug is pulled, everything will go down the drain very rapidly. We spend tens of millions of dollars recreating the world monetary system to answer the question: how fast do governments die?

Look at this chart of the fall of the Roman monetary system. The Persians captured Valerian I in 260 AD. His son Gallienus took over and the economy went into a massive wave of deflation after the people came to the realization that they were vulnerable and began to hoard money. As people hoard, as they are doing right now on a personal, corporate, and bank level (see Fed excess reserves), the economy turns down and that results in less tax revenue. Before, they debased the money for that was the means to increase the money supply to meet expenses. The bottom in the debasement unfolded in 268 AD. So while Rome lasted over 1,000 years, its monetary system collapsed in just 8.6 years. That was without internet, radio, or TV for communication.

Those in power really do see us as the great unwashed who are clueless and hopeless without them. They fight against the invisible hand all the time, and they want to rule the world. I have met with many heads of state over the years. They all know about our computer. They always seem to want to know what it is saying. It is not that they follow it, but rather they call to keep an ear to the ground to see who is winning this eternal contest between the rulers and the great unwashed.

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.