The following correspondence was the reply to our objections in the establishment of the G5 in 1985 to “manage” the global economy through intervention on a coordinated basis. Given the fact that the floating exchange rate system affords governments the freedom to now spend as they like pursuing their domestic policy objectives separate and apart from the international fiscal responsibility behind the value of the currency in global capital flows, it is simply unlikely that the current system will be sustainable long-term. Volatility will rise and will spread among the markets driven by swings in currency values. Eventually, in the course of events that will now follow, the global economy will become increasingly more unstable and reflect much higher degrees of volatility as historically has always taken place under floating exchange rate systems. In the end game, the global economy will be attracted to the next major sovereign debt crisis that should appear going into 26 years from the 1985 birth of the G5 (2011) and perhaps culminate in a new global monetary system by 2016.
– Written by Martin A. Armstrong’s Princeton Economics International in 1986 (welcome to freedom Marty!)
Gold Breakout In Progress
Ok, let’s get right into it. Gold first nudged above $1,400/oz in November of 2010 and has really for all intents and purposes been consolidating in a tight range between $1,350-$1,400 ever since. Today’s breakout to new highs represents the fifth attempt to really get going beyond the high end of the range and this move appears to be the real deal. Everyone likes to talk about the “dollar” and what it is doing but these folks are almost always referring to the DXY Index, which is about as useful an indicator as a Keynesian economist. The reason of course is that the DXY is weighted 57% to the dollar/euro cross and in case your head has been in the sand for the last three years the European Union is a joke. The citizens in the various countries whether on the periphery or Germany itself will increasingly want nothing to do with it and this sentiment will only increase as Brussels acts more and more like a despotic Medieval King when dealing with the broke nations. But clearly the desires of the citizenry no longer matter as we have a self appointed global elite that think they know best and are busy cutting undemocratic deals and treaties behind closed doors (here is control freak Soros’ latest scheme http://www.mrc.org/bmi/commentary/2011/Unreported_Soros_Event_Aims_to_Remake_Entire_Global_Economy.html). The more they do this the more the people will ultimately push back. As I wrote last year, the irony of it all is the harder the incompetent “elite” push for their global government system the more likely we are to descend into even more fractured states and communities. People don’t like to be told how to live generally, but will put up with it if the economic and social conditions are benign. The moment that dynamic changes the people push back hard and revolt. This is what is happening now and it will only escalate exponentially from here.
Anyway, the point is that while most of the world is in a very dangerous position nowhere is the danger greater than in the West (including Japan) where the mountain of sovereign debt is at a tipping point collectively. So to compare one dying currency to another (the dollar/euro) doesn’t tell me much about anything. The cross that I find much more useful is the dollar versus a basket of Asian currencies and this can be followed on Bloomberg via the ADXY. This is because the biggest macro trend in the world is the shift in purchasing power from the West to the East and this will only be sustainably achieved via a revaluation of Western currencies to Eastern currencies. This has NOT yet happened. Last week I noted to several people that we need to watch the ADXY since a breakout there would confirm any gold breakout. Well, take a look at the ADXY chart below. Breakout there and breakout in gold. Game on.
ADXY One Year Chart
Speaking of gold if you read only one thing this weekend please read this http://www.usagold.com/hathawaypyramid.html. It was written by John Hathaway in 1999. He runs the Tocqueville gold fund. It is an amazing piece of work and thoroughly explain the paper gold pyramid scheme. One of my favorite quotes is:
Easy to manufacture paper claims overshadow impossible to manufacture underlying gold by several orders of magnitude. There is plentiful evidence as to the mismatch between paper and physical gold. A bullion fund manager who has made a career of and a business strategy based on the chain of custody of the physical metal told me that he recently attempted to buy physical from a large commercial bank. The bank officer tried to persuade him to buy the bank’s gold certificates instead. It turned out the bank possessed only four bars of gold that were free and clear of various claims and therefore deliverable. The same bank had $452mm of gold certificates outstanding as of 12/31/98. Holders of the certificates do not own gold, even though that may be their impression. What they own is the banks promise to pay. Another bullion trader familiar with the notes said that there was no regulatory requirement for a specific gold backing.
In another instance, a mining CEO mentioned that a small quantity of bullion, a corporate asset, had been deposited with a fiduciary. When the company decided to switch banks, they called for their gold and were told they couldn’t have it within the notice period specified by the agreement. It was only with great difficulty that delivery was made, highlighted by a last minute appearance of a Brink’s truck at the depository institution. The delivery was made with borrowed gold.
This was 12 years ago! Imagine what it would be like now if real money actually tried to take possession of their gold. Guess what…you won’t. Which brings me to the topic of silver. As I hope you all know silver is back up to a new thirty year high today and all the buzz relates to the current Comex March delivery month where there are still 3.7 million ounces standing for delivery with only a week left. This is going to be very interesting and everyone is wondering first of all how can it be so difficult to deliver such a tiny amount? Everyone is also wondering how the criminal bankers are going to weasel their way out of this one. A seeking alpha article provides a window into what these jokers may be resorting to (with the full compliance of our corrupt Banana Republic government and “regulators” of course). Article is here http://seekingalpha.com/article/259549-will-jpmorgan-now-make-and-take-delivery-of-its-own-silver-shorts. Anyone foolish enough to allow JP Morgan to hold their precious metals for them at this stage in the game will get what’s coming.
Welcome to Freedom Martin A. Armstrong
Many Americans are still so brainwashed they do not understand that there are political prisoners in America. Martin A. Armstrong was one of these men. As has been the sad case throughout human history, corrupt and incapable governments will always imprison their best and their brightest. Martin A. Armstrong is in my opinion a genius of the highest order so of course he was thrown in the slammer without a trial. I have been reading this man’s work for years now and I have also used his quotes several times at the tops of these emails, including today’s. Today’s quote was written in 1986 and according to his model he predicted that we would likely be in the midst of a sovereign debt crisis in 2011 (we are) and that a new monetary system will be in place by 2016 (it has to be). The link to this article as well all of his others can be found here http://www.martinarmstrong.org/economic_projections.htm. If you haven’t read anything by him start with the following http://www.martinarmstrong.org/files/Its-Just-Time-Martin-Armstrong.pdf. Sit back, relax and let that red pill go down smoothly.
A Calm Sea Does Not Make a Skilled Sailor
In case you wondered where the title for this piece came from, it was actually the message that popped out my fortune cookie during a meal on Monday night. It just summed up so many things for me. It summarized why our culture is so damaged. At the core of the malignancy killing the nation is the fact that we possess the world’s reserve currency that can be created at will out of thin air and forced upon goods producing nations (whether manufacturing or resource goods). This means we do not need to produce to consume, which hollows out the entire core of the economy over time and has made us the generally lazy and decadent society we are today. I mean take for example the C announcement recently of a reverse 1 for 10 stock split. I haven’t heard such an embarrassing press release since reading about how U.S. taxpayers are going to make money from the bailouts. So for the last year all I heard on propaganda channel CNBC was how once C’s shares got above $5 it would attract a whole new class of investors and the shares would soar. Well the stock wasn’t able to hold above $5 so look what happened. Magic, they are just going to make the stock trade at $45 with this scheme. Bankers can’t lose, didn’t you get the memo? Oh and they are paying a whole penny a share in dividends. You have got to be kidding me guys. Pathetic.
I want to conclude today’s piece on a positive note. The fact that Martin Armstrong was released is an extremely positive development. The man that should be U.S. Treasury Secretary is now at least not rotting in a jail cell. While a small step, it is a step. Meanwhile, more and more people are waking up to the spell that has been cast upon them by the sorcerers of deceit at the Federal Reserve and other large institutions that will remain nameless but their lies will also be exposed in time. Light is indeed overcoming the darkness and the infowar is slowly being won.
Have a great weekend,