The World through Everyone’s Eyes


COMMENT: Sir,

I appreciate that I may not always agree with what you write but I listen and examine and respect your viewpoint. You, in turn, have answered my many questions and discussed my comments with respect in return.

This makes me worry that the ability to discuss problems in a straightforward and thoughtful way may not be possible in the future.

Keep up the good work

F

REPLY: In order to be an international adviser, the very first lessons I learned was (1) listen to everyone, and (2) view the world through their eyes.

I was giving a lecture in Geneva to a small group of institutions back in 1982 but some had flown in from other countries. One was from Canada and the exchange was quite interesting. I had provided the forecasts on the individual currencies and then I moved to the commodities. The Canadian asked so he should be a buyer of gold and I said yes. The on Swiss institution said yes but your forecast on the Swiss franc would mean I would lose money.

When I looked at it in terms of each perspective it was clear. The rally in gold would be impressive only in US$ and CD$ so it was a buy for the Canadian and a sell for the Swiss. Indeed, the rally into 1983 was a strong rally for gold in US$ and CD$, but not in Swiss.

We all have a view and money to each of us is still a mental calculation based upon our home currency. To even do my job, I have to be able to see the world from all perspectives. We are all human and we will all act in our own self-interest.

My clients have trained me. Having to deal with many crises around the world forced me to see the world through global eyes. This is why MY DEFINITION of what constitutes a bull market is something which rises in ALL CURRENCIES!!!!! 

We will all never agree for we will always see things through our own pair of glasses. Never forget, others will respond in the same way.

My philosophy is very simple. There should be no law which compels others to act in a way I believe if correct provided their actions do not harm anyone else. I leave you alone and you leave me alone and we can all get along. I object to politics that seeks to exploit class warfare for historically that has ALWAYS, and without exception, led to civil wa

The Surrender of Liberty in the Name of Security


QUESTION: It seems that as we get closer to a change-over of economic systems that as a society we are more willing to give up our rights to the State. Is that part of a pattern during these types of events? Was it seen as Britain, Rome, and other countries lost power after their peaks?
DS

ANSWER: Unfortunately, the trend first materializes when people need the government to protect them usually from an external force. The British used this tactic against both the French and the American colonists. That prompted Ben Franklin to comment on this trend.

After the 3rd Century Monetary Crisis bottomed in the Roman Empire in 268 AD, there was a surge to build a wall around Rome by Emperor Aurelian following the same pattern. Aurelian saw the corruption that led to the debasement of the currency because those minting the coins were robbing the treasury. Aurelian moved to DRAIN THE SWAMP in Rome. When Aurelian returned to Rome in 271 AD after fighting off barbarians, he had to pacify a terrified city. He immediately halted the rioting and restored order to the capital. The controller of the mint in Rome began a rebellion over the monetary reforms laid out by Aurelian. He ordered that all the debased currency be purchased back and replaced with a new currency of higher content in silver. The rebellion was led by Felicissimus.

It appears that those who had been running the mint were embezzling the intended silver and issuing the debased coinage at least in part on their own authority. Obviously, any reform to the monetary system that called for an increase in silver content would have been unprofitable for those running the mint for personal gain. In the rebellion, as many as 7,000 soldiers died when Aurelian was forced to trap and execute them and their allies, some of the senatorial rank, in a terrible battle on the Caelian Hills.

Aurelian then constructed a wall around Rome — the first of its kind. Clearly, there was both a DRAINING OF THE SWAMP and a sense of security that people surrendered in the name of safety. The final phase comes when the suppression of liberty continues to become oppressive and therefore the people eventually wake up and see that the government is using this as a tactic to sustain or grab more power usually in self-defense.

Why Japan Lost So Big Post-1989


QUESTION: Hi Marty, I come from a golfing family and remember very well the shock when a Japanese investment group bought the Pebble Beach Golf Links, in 1990, for $850 million. The previous October Japanese investors bought the Rockefeller Center, triggering a flurry of Japanese purchases of signature U.S. properties such as Pebble Beach.

Was all this investment caused by The Plaza Accord in 1985, which devalued the USD by 40 percent? Which, as you’ve pointed out, also devalued American assets held by Japanese, igniting a sell-off of American investments and the 1987 crash. With cash repatriated back to Japan, the capital inflows into Japan ran the Nikkei up to its peak, in 1989. Within this late-80s early-90s timeframe, this is when the Japanese made their global malinvestments such as Pebble Beach, which they sold just two years later, in 1992, for $500 million, taking a 42 percent loss. Do I have the correlations and causations correct?

Thanks,

TGM

ANSWER: Yes. The Japanese bought US assets at the peak of their markets in 1989. As you can see, the dollar against the yen kept falling into April 1995. Not only did the Japanese lose money on US assets, but they also lost, even more, when they sold them and converted it back to yen on the decline in the dollar.

Currency is EVERYTHING. It dramatically alters the capital flows and can destroy economies because people remain clueless about how foreign exchange markets even function. That should be no surprise since they still teach all the economic theories of the Bretton Woods fixed exchange rate era including Keynesianism.

That is why everyone in the field is self-taught. You cannot get a degree in hedge fund management. Christine Lagarde of the IMF and soon to be head of the European Central Bank is a lawyer with no experience in funds management. People run for president spouting economic promises without the slightest background even in economics. What they teach in school has become ever more irrelevant in the real world. Other than a doctor or lawyer, it is hard to find someone who is working in the field in which they obtained a degree

Gold in Currencies


QUESTION: Hello Marty,
I have a question about Gold & Silver in other currencies – namely GBP.
Accepting your rational, with evidence I must say, that precious metals are a reflection of the confidence people have in their countries currency, you can see from the price of gold & silver in GBP and EURO that leading up to the Brexit referendum until now confirms this. When you look at the ECM for this period – 2015.75 up to 2020.05 – you can see that there are three main waves to it. One wave down from 2015.75 to 2016.825, then three shorter wave from 2016.825 to 2018.89 – single consolidation wave?, then a third wave down from 2018.89 to 2020.05. Gold & Silver rallied, consolidated, then rallied again within this ECM period. Does Gold & Silver have their own internal cycle? Will your upcoming report include content on Gold & Silver in other currencies? The trade in Gold:GBP since the ECM turning point of 2015.75 has been very lucrative

– thanks for your service and opening up Socrates for us.
Regards,
AJ
England.

ANSWER: When you plot gold in dollars and pounds, you can see the steepness in the pound. This has been the strength in gold in dollars. It has been the hedge, not against fears of inflation in the USA, but it has risen in the face of the fear of a recession OPPOSITE of its previous relationships. This is all because we are approaching a Monetary Crisis Cycle.

Forecasting gold in dollars is pointless for that will be irrelevant to those in different countries. So yes, our report will be in terms of all the major currencies so people can make the appropriate decision in their own currency.

Why Did United States Enjoy Dramatic Improvements in Living During the Last Century?


Published on Aug 26, 2019

Recorded on April 18, 2019 Peter Robinson opens the session by discussing the major improvements that happened over the last one hundred years in the United States, between 1919 and 2019. For example, the GDP per person rose by 760 percent, life expectancy improved from 55 to 79 years, and various other automotive, technological, medical, and quality-of-life advances were achieved. Robinson then starts the discussion with former secretary of state George Shultz, who encourages a broader vision as we look for the reasons for prosperity. Shultz discusses some of the major events that occurred during the 20th century, e.g., the Great Depression, currency manipulation, World War II, and the Holocaust, whose negative impacts framed the mindset of Americans to question the institutions underlying society. Robinson then asks John Cogan about these institutions—private property, the rule of law, free markets—and the importance of these for prosperity. Cogan explains those institutions are necessary for sustained prosperity, which demands conditions that are stable in order to fuel economic growth. Robinson asks Terry Anderson about the importance of property rights. Terry says that property rights are the key to providing people with incentives to care for and maintain the property they own. Anderson notes that nobody washes rental cars, because they don’t own them. Robinson asks Lee Ohanian about the role of immigration in prosperity. Ohanian says that the United States has been fortunate in attracting the best talents from all over the world, which has played a major role in sustaining prosperity. Ohanian notes that having an inflow of immigrants like Sergey Brin from Soviet Union, Elon Musk from South Africa, and others has helped the United States stay on the cutting edge of innovation with new and fresh ideas. For further information: https://www.hoover.org/publications/u…

Socialism Does NOT Work | Daniel Hannan | Oxford Union


Published on Dec 18, 2013
Daniel Hannan gives his argument that Socialism does not work. SUBSCRIBE for more speakers ► http://is.gd/OxfordUnion Daniel Hannan opens with a quote from a from a previous socialist known as Adolf Hitler. The socialist voters elevated cohersion over freedom. The human nature of dog eat dog and ambition to do well was harnessed by capitalism to a socially useful end. He highlights that there are no socialist countries in the wolrd today (e.g. Cuba, Zimbabwe etc) that have persormed better than capitalist one. He concludes his rousing speech with by saying socialism does not work and the house must vote for freedom.

Mortgages & Banks when times are bad!


QUESTION: Hi Martin.. thanks so much for all your world/economic content and perspective. I was reading a comment you made recently concerning real estate mortgages. In the comments, you suggested carrying a low fixed-rate mortgage rather than paying off the property.

My question is what happens when a financial institution goes bust. You’ve taken out a mortgage on your house and deposited the excess money from the mortgage in your bank account. Doesn’t this expose you to bankruptcy risk? If the bank collapses you could potentially lose what’s not covered by FDIC insurance. In one case the house is paid off and the money is out of the banking system. In the second case, the money is held in the banking system and is at risk. Or am I missing something?
Cheers,
Bob

ANSWER: If you have cash at a bank, then you have the risk of the bank failing. However, if you are the borrower and the bank holds the mortgage, then as long as you are current on your payments it cannot foreclose. It will typically sell its assets to raise cash so your mortgage could be resold to another bank or an investment pool.

The problem you will have in a crisis is that real estate is illiquid. When I was growing up, a friend of my father owned virtually the entire main street in town. I recall talking to him and he said that he bought the entire main street in town back in 1937 because he had cash and bought it for 10% of its 1929 value.

If you borrowed and have the cash on the side, you will be in a far better position to sell liquid assets and buy the house at a discount if the bank is in trouble.