COMMENT: 

Good morning, Martin.

Yesterday I bought an old booklet printed for 10 NoK at the Armed Forces Museum: “Laws, resolutions and prescripts due to circumstances of war”, by the Justice Department, printed in Kristiania (now Oslo) in 1917. I thought I there would find the outline of a recipe for what may come here this time around. Here are the highlights (in addition to an ever growing list of goods that are temporarily forbidden to export):

3. August 1914: Telegram from the Finance dept, ordering all major banks to execute the bank-plan restricting withdrawals from accounts, and immediately order all banks to stop any withdrawal not in accordance with the plan.

4. August 1914: Maximum prices to be imposed on certain goods

4. August 1914: Payment of expireing government paper will be postponed one month, ordinary interest rate applies. For paper without interest rates, 5% p.a. will be paid during the posponment period.

5. August 1914: Bank of Norway is temporarily not obliged to exchange its notes with gold.

15. August 1914: Since there was no bank run, the bank-plan is relaxed, but banks shall only allow withdrawals to companies to pay salaries etc. Private persons are allowed to withdraw what the bank think they will need for one week at the time. Under no circumstances must the banking restrictions come in the way of companies/private persons paying taxes to state/munis.

18. August 1914: Gold and silver in any form is for the time being prohibited to export from Norway.

18. September 1914: International private telegrams are to be in Norwegian, Swedish, Danish, German, English, French or Russian, and be written in a clear way that gives meaning to the operators. If not, the telegrams will not be forwarded and no notification given. International phonecalls are to be in Norwegian, Swedish or Danish. Non- compliance leads to termination of the conversation.

20. August 2015: Increased taxes on income generated due to the war business cycle: 5% on first 5000 NoK increased income (based on tax declaration 1914) assumed to be due to the war. 15% on 20 000 NoK and above.

15. April 1916: Bank of Norway is temporarily no longer obliged to exchange into notes gold handed in, nor is the State Mint obliged to mint coins from gold handed in.

Happy New Year Martin, and all fellow readers of this blog.

Nemesis & Justice in Pursuit

QUESTION: Mr. Armstrong, I wanted to thank you for the conference in Berlin. It was my first time attending. I cannot wait for the DVD. You gave so much information, I think I will have to watch the DVD several times. I can see the debt crisis here in Europe and I can see the move to get cash into dollars. Has debt always been the great destroyer of civilization?

ANSWER: The Sovereign Debt Crisis is our Nemesis; the inescapable agent of someone’s or something’s downfall. Before governments borrowed, they debased their currency. This was the same result for the German Hyperinflation that is so seriously misunderstood. Because of the 1918 Communist Revolution in Germany and their default on all outstanding debt of the previous government, the new Revolutionary Government could not borrow. Hence , all they had was the printing press. That is SIGNIFICANTLY different from today. As long as “confidence” prevails and they can sell debt, there can be no hyperinflation for that is not caused by simply printing more money this year than next. That is a simpleton’s view of more complex issue.

We are not anywhere close to hyperinflation. We are trapped within a Sovereign Debt Crisis where the world governments continue to issue debt which is bought by insane people, and then they try to service that debt by raising taxes. This shrinks the private sector as government acts like a black hole sucking in all the energy and light within the economy destroying civilization and risking a Dark Age.

This time there will be no peaceful hand-over of power, so I would not count on the Pax-Nemesis prevailing. After the assassination of Caligula on January 24, 41AD, the Praetorian Guards needed an emperor to retain their jobs and took Claudius to the Praetorian camp and put him under their protection. The depiction of the goddess Pax-Nemesis, representing subdued vengeance or the amnesty in prosecuting those who had participated in the assassination of his nephew.The Senate quickly met and began debating a change of government, yet it quickly devolved into an argument over which of them would be the new Princeps. When the Senate heard of the Praetorians’ claim, they demanded that Claudius be delivered to them for approval. Perhaps King Herod of Israel, a boyhood friend may have counseled Claudius, but whatever the source of the counsel be it Herod or the guards, Claudius rightly refused sensing the danger.

Eventually the Senate was forced to give in and accepted Claudius as the new Emperor and in return he pardoned nearly all the assassins. Thus, this coin was issued depicting “Pax” meaning peace and Nemesis; the inescapable agent of someone’s or something’s downfall.

So unfortunately, the only possible way forward to escape our fate of a Dark Age is to employ the SOLUTION we have set forth to deal with the debt. This is our only hope of achieving Pax-Nemesis.

QUESTION: Dear Mr Armstrong,

Thank you EVER SO MUCH for everything that you do even for ordinary folks like me who are not traders but just want to have a good grasp of where to put their money. I have already learnt a great deal by merely following your blog throughout the last two years, and I’m eagerly anticipating the investor level of Socrates. Merely from looking at how it’s supposed to work on your website is mind-blowing! Thanks for the incredible work that must go into this amazing project.

Concerning the pressure exerted by banks on Romanian politicians I find it really intriguing that these days banks usually (at least, here in Germany) may put stipulations in their mortgage contracts giving them the right, under certain circumstances, to re-evaluate the value of your property, if this has increased in terms of your currency, and to adjust your mortgage accordingly. Interestingly, they weren’t allowed to put in such stipulations before the Euro was introduced. Clearly, the banks want to have it both ways, so I agree with you when you say: “The bankers want no risk and will screw the people every time. This law is fair as the banks sold mortgages without guidance.”

What still confuses me sometimes is that assets may rise even in a deflation, but I suppose that’s due to an asset inflation then which is to do with the political climate calling for a flight to assets, correct?

Yours sincerely,
TN (Germany)

ANSWER: Correct. The banks did not believe in the euro. Even the German Central Bank was against the euro. They could not speak out back then so there were people inside who were feeding us all the inside info to get it out. We published a lot back then and the commission even attended our conference in London in 1997. This was, in part, the primary reason for that hidden clause which never got much press. Trying to cope with pricing cross currency has always been a huge problem for corporations as well as banks. Not every mortgage has such a clause. However, if a country were to exit the euro, the mortgages would most likely be revalued by political dictate rather than a free market.

We can still experience “asset inflation” during a deflationary move for one of two reasons. First are commodities that can rise due to a sudden shortage in supply, such as in an agricultural produce when a crop is destroyed for some reason. Second, asset prices can rise during a deflationary wave because taxes are rising and banks become untrustworthy. Then money seeks merely to park. It is not a speculative boom whereby people are expecting to make money on a rise. This is the typical capital flight to quality where assets replace government bonds.

The typical assumption is that Rome went through hyperinflation during the 3rd century simply because the coinage was debased. Yet, hoards of the debased coinage are common during this period. We rarely see hoards of the debased mixed with the old silver coinage. The hoard we purchased covered the period of 250 AD up to 285 AD. We bought this hoard for study because it was perhaps the widest span of time of any hoard. Most seem to be 270-285 AD period. This demonstrates that they hoarded even the debased coinage. Therefore, it was beyond merely debasement. This was the massive invasions of barbarians at the gates.

If you travel to Rome, you will see its walls are largely intact in many areas. They were constructed by the Emperor Aurelian (270-275 AD). Banks could not be trusted and there was a question of whether government could even defend its people. It was not merely the debasement. The debasement became necessary because of massive hoarding which created deflation. The inflationary wave came AFTER the contraction bottomed. This is when we see the wage and price controls of Diocletian (284-305 AD) issued in 301 AD. This curiously was 51.6 years after Trajan Decius (249-251 AD) came to power. Decius was the first Roman Emperor to be killed in battle by the Goths. This was the start of the decline in CONFIDENCE of Roman society when they realized they were vulnerable for the first time.

The deflation comes as governments try to collect more and more taxes. This shrinks the economy and makes it vulnerable long-term until it collapses. The inflation comes when CONFIDENCE is lost in government. Then money declines in value and assets rise. It is always a confidence game.