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January 5
th
, 2012
1500 JFK Blvd, Suite 200, Philadelphia, Pa 19102 215-408-4008
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ArmstrongEconomics.COM
Copyright Martin A. Armstrong All Rights Reserved
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at this time without cost because of the critical facts that we now faced economically. The contents and· designs of the systems are in fact copyrighted.
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ets. Don’t trade with money you can’t afford to lose and
NEVER trade anything blindly. You must strive to understand the markets and to act upon your conviction when well researched. This is neither a solicitation nor an offer to Buy/Sell futures, options, or currencies. No representation is being made that any account will or is likely to achieve profits or losses. Indeed, events can materialize rapidly and thus past performance of any trading system or methodology is not necessarily indicative of future results particularly when you understand we are going through an economic evolution process and that includes the rise and fall of various governments globally on an economic basis. CFTC Rule 4.41
–
Any simulated or hypothetical performance results have certain inherent limitations. While prices may appear within a given trading range, there is no guarantee that there will be enough liquidity (volume) to ensure that such trades could be actually executed. Hypothetical results thus can differ greatly from actual performance records, and do not represent actual trading since such trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight and back testing. Such representations in theory could be altered by Acts of God or Sovereign Debt Defaults. It should not be assumed that the methods, techniques, or indicators presented in this publication will be profitable or that they will not result in losses since this cannot be a full representation of all considerations and the evolution of economic and market development.. Past results of any individual or trading strategy published are not indicative of future returns since all things cannot be considered for
discussion purposes. In addition, the indicators, strategies, columns, articles and discussions (collectively, the “Information”) are
provided for informational and educational purposes only and should not be construed as investment advice or a solicitation for money to manage since money management is not conducted. Therefore, by no means is this publication to be construed as a solicitation of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any such investment. Copyright 2011 Martin A. Armstrong All Rights Reserved. Protected by copyright laws of the United States and international treaties. This report may be forwarded to their parties free of charge and to politicians but any citation must provide reference to its websites at ArmstrongEconomics.COM and MartinArmstrong.ORG.
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January 5
th
, 2012
HERE are always two sides to a coin as well as issues.
When it
comes to this argument that only gold should be money and all “fiat” is really
worthless, the premise is about as sound as saying markets only decline because of short players. Paper currency began in the West as receipts for coin that was placed
into storage at a money dealer/merchant. The problem with “tangible” precious
metals is the same today as it was in the 1500s. The problem is simply its authenticity. Coins were routinely clipped (shaved down) and thus they did not fairly reflect the intended or original quantity of precious metals. Each coin had to be inspected for each and every transaction. This was the same problem from the very beginning of monetary history and this played a major role in the Panic of 1789 that took place solely in the United States focused in New York City and Philadelphia.
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From ancient times the problem has always been to verify the quality and authenticity of the precious metals in a transaction.
Pictured above are the first “coins” produced in Lydia, the city of
Sardes located in modern Turkey. At first it was a standardize weight with punch marks on one side to facilitate trade. These were replaced with a design of a lion on one side. Look closely at the coin to the right. You will notice additional punch marks on the edge. There are nine in total showing that each time the coin changed hands, the moneychanger (ancient FX dealer) placed his mark on the coin verifying he tested it before. We have all heard of
“
fool's gold”,
which is simply a
pyrite
, or
iron pyrite
, that has a metallic luster of a brass-yellow hue which has earned it this nickname since it resembles gold. This has been used to dupe many a person over the 6,000 years of history. Aside from that substitute, all sorts of tricks have been played to plating coins as well as debasing the metal fineness. Here is a gold plated English half-penny of Queen Victoria (1838-1901). It feels light, looks great, but it can easily slip-by in a large transaction unless you check each and every coin. It is just a gold plated copper coin.
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The trick of debasing coins has been around in ABSOLUTELY every society in every corner of the globe. Above is a visual example or the debasement of the gold coinage of the Byzantine Empire going into the Great Monetary Collapse of 1092. Silver was being mixed with gold so going into 1092, what was once gold had been debased to such a point it was reduced to just a silver coin. This prompted a major economic reform and in 1092, gold coinage had to be restored. However, this did not last long and gold disappeared once again. We see debasement everywhere. In China, bronze coins were debased using iron. We can see once again the visual debasement of bronze coinage in Japan and the steady reduction in weight. There is simply NO exception in history where debasement has not occurred. This is why I have stressed that it is NOT the fact that money is fiat, but the fact that government can never resist spending more than it has.
Adam Smith in his Wealth of Nations wrote in Chapter III, Of the Accumulation of Capital, or of Productive and Unproductive Labour:
That kings
\"are always, and without any-exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of the subject never will.\"
So the problem has never been “fiat” or even what is money. The problem has always been that
government simply cannot live within its means. It is always this tendency to debase the money supply
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to create more spending power, and/or to borrow as much as they can with no intention of ever paying anything back. In Chapter III, of Public Debts, Smith also wrote about the fiscal mismanagement of government and their constant abuse of credit.
\"Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents, and of paying interest for the use of its own money.\"
Sir Thomas Gresham (1518-1579), u
nder Queen Elizabeth (reigned 1558 - 1603), was the financial agent of the crown. In effect, Gresham was in Antwerp acting as agent borrowing money for the Crown in the money market there. What became obvious was that one could borrow in precious metal based coin, agree to repay, and then debase the coinage to cheat
the lender. Gresham’s Law is thus stated that
bad money drives out good money, meaning that people will hoard the old coinage and spend the new debased coinage and thus debasement had the tendency to also reduce the money supply. The gold coinage under Elizabeth was slightly debased from .994 (1559-1578) to .979 (1583-
1600) for the “Fine Sovereign” and
the lessor denomination less than 30 shillings were .916 fine. Her father, Henry VIII (1509-1547) debased the silver by about 50% from 1544 to 1546 and the gold he debased from 23 carat to eventually 20 carat. Obviously, making gold money will accomplish nothing. It is always the debt.
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HE
United States dollar was actually based upon the Spanish silver 8 Reales coins that had become the mainstay of the European monetary system since the treasure ships from the Americas began pouring gold and silver onto the streets of Europe. Such coins were first
minted by the Spanish in America during 1530. These early pieces are known as “cob”
coinage and tended to vary in weight in addition to being struck rather irregularly. The designs were never fully struck and as such the coinage appeared very crude. Introduction of machine
“milled” did not take place until 1732 and thus it is from that period on
ward that we find the term
“milled” dollars distinguishing the standardized products from that of this early “cob” coinage. The gold
coinage was often referred to as a doubloon. There had been a great
scarcity of coins in the New World, especially in the more remote areas. The early colonists sometimes used other mediums of exchange, such as bullets, tobacco, animal skins, and even adopted the Indian monetary system using mussel shells strung-together into what would appear to be a necklace called wampum composed of polished beads made from seashells. Wampum was made from hard-shelled clams, usually the Northern Quahog (purple) and Atlantic Whelk (white), which were broken up into small beads, polished, drilled through lengthwise, and then strung together. Native Americans were the first makers of wampum where in Asia similar value was attached to pearls. It took a considerable amount of labor to produce these strings, and it was their natural beauty and scarcity that gave wampum its intrinsic value. In this sense, wampum emerged as a medium of exchange because of its attractiveness which was the same reason gold became desirable or pearls in Asia. Throughout much of the 17th and 18th centuries, the exchange rate for white wampum was 360 beads = 5 shillings and 6 beads = 1 penny. The Purple wampum, less abundant in nature, was worth at least twice as much as the white. Wampum was even legal tender for paying taxes due to the Commonwealth of Massachusetts. Even tuition at Harvard University was payable in wampum as was transportation costs such as the passage on the Brooklyn Ferry. Wampum became less important for barter; however it was not until around 1890 that the last wampum mill shut down.
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We will be holding three World Economic Conferences this year. These will be substantially different from the Philadelphia Conference. That was a combination of an Analytical Training
Seminar and a World Economic Conference. Normally, each type of session is a two day event.
Consequently, these two events had to be crammed into two days. Unfortunately, we could not accommodate everyone. We had to turn down 365 people. Traditionally, these events are limited to 100 attendees. Because of the overwhelming response, the room was full to capacity at 300+. That prohibited Mr. Armstrong from mingling with the crowd at the cocktail party and he was unable to see each and every person. These three upcoming conferences will be smaller, just forecasting, and will be two day events instead of the single day WEC which was provided in Philadelphia. Seating will be $1500 per seat. Those who are interested in attending please send your email to reserve a seat to:
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A lot of people have written asking how they can buy Roman Coins. I have contacted some old friends and have managed to get a deal for those who just want a piece of history rather than go collecting expensive rarities. Here are three Roman Emperors of the mid to late 3
rd
Century that are common enough to satisfy that desire to own a piece of history. Aurelian (270-275AD), Probus (276-282AD), and Carinus (283-285AD) are relatively common enough emperors to provide a nice piece of history you can actually touch. These coins are usually sold for $100 or more on Ebay. The Aurelian and Probus are available at $50 and $65 respectively. The third is Carinus which has most of the silver plating intact, which is quite rare to find. These are available at $150 each. Since there is no desire to get into this business, but this is purely an accommodation for so many people that have written, the supply is limited and it is on a first come first serve basis.
Lucius Domitius Aurelianus was born of humble parents at Sirmium sometime between 207 and 215 AD most likely on September 9th, 214 AD. Aurelian adopted a military career, and by his skill, courage and bodily strength he ultimately became one of the Empire's greatest generals of the 3rd century. Aurelian's reputation as a commander of cavalry was perhaps his greatest strength. During the siege of Mediolanum (Milan), Aurelian became embroiled with Marcus Claudius (Claudius Gothicus) in an imperial intrigue. Gallienus was murdered, and Claudius Gothicus became Emperor, with Aurelian serving as Master of the Horse. A series of campaigns against the Goths followed, but in January 270 AD, Claudius died of the plague in Sirmium. His brother Quintillus aspired to the throne, but Aurelian gained support of the army and was elevated to the throne over Quintillus, who later killed himself. The state of the Roman Empire was deplorable at the time when Aurelian came to power. The barbarians hoards were threatening the frontiers across much of the north. The usurpers had virtually divided the Roman world with Tetricus on the Rhine at the head of a Gaulish Empire begun under Postumous and Zenobia, the Queen of Palmyra, stood in the East with various generals and pretenders in her camp. Aurelian, faced with enormous political and economic difficulties, took the only offensive course of action that was open to him. The Empire, he concluded, had to be strengthened and reunified. It would be his determination alone that would postpone the collapse of the Roman Empire and win for him in the process, the title Restitutor Orbis, the \"Restorer of the World.\" Aurelian began his restoration of the Empire by marching first against the Germanic Juthungi, who had invaded the province of Baetia and thus threatened Italy. Aurelian forced the barbarians into a retreat and routed them on the Danube. The Juthungi sued for peace, and Aurelian allowed them to return home. Aurelian then headed for Rome, where he received the imperial powers from a rather reluctant Senate.
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Shortly thereafter, Aurelian received an urgent request from the province of Pannonia, where the Vandals were on the attack. Aurelian responded quickly by crushing them in 270-271 AD. Once again, the German Juthungi threatened Rome but this time they allied themselves with the Alamanni and the Marcomanni. The tribes ambushed Aurelian near Placentia, defeating him and forcing a retreat into northern Italy. However, the Germans were too disorganized to follow up on their victory, and Aurelian used the time to rebuild his defenses on the north. He marched against the Germans a second time and this time virtually exterminated them all. Aurelian returned to Rome in 271 AD, where 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 senatorial rank, in a terrible battle on the Caelian Hills. The barbarian invasions had made a profound impact upon Rome. It was the first time they saw their city as being vulnerable. Aurelian thus commissioned new defense walls (the Aurelian Walls) to encircle Rome itself, although they were not fully completed until the reign of Probus. Nonetheless, these are the great walls of Rome that still remain largely intact today. Aurelian then turned his attention to Thrace, which had been invaded by the Goths. Aurelian invaded with his usual determination and reconquered the region while chasing the Goths back over the Danube. Aurelian realized that the imperial frontiers were proving impossible to defend, and as a result, the province of Dacia, the conquest of Trajan, was entirely abandoned. With the northern frontiers reestablished, Aurelian then turned his attention to the Palmyrene Queen, Zenobia. A battle near the Orontes River ended the revolt of Palmyra. Then, in 274 AD, Aurelian turned his attention this time toward the usurper state - the Gallo-Roman Empire of Postumous. Aurelian marched into Gaul to attack the usurper Tetricus and his Gallic supporters. At the battle near Chalons, Tetricus abandoned his troops and surrendered. The Empire had been pacified, and Aurelian could at last look forward to a splendid triumph in Rome. Both Queen Zenobia of Palmyra and Tetricus, former Emperor of the Gallo-Roman usurper state, appeared as captives in the magnificent triumph which the Emperor celebrated in Rome where at last senatorial resistance to his position finally disappeared. With the Roman Empire restored and military conquests complete, Aurelian turned his attention to the domestic reform issues of the state. The currency of the Empire had been severely reduced in value, plagued by countless debasements one on top of the other. The once silver denarius had been replaced by the double denarius of Caracalla (Antoninianus) and that had been reduced to a mere bronze shell of its former glory. The continued debasements had caused massive inflation, and the Empire would not survive without also restoring the monetary system. Aurelian's reforms did not end with the monetary system. He also attempted to end the social and moral decay that had festered amid such poor economic conditions. Aurelian sought to somehow unify society as a way to accomplish this so he also tried to reform religion. From the East, Aurelian tried to encourage religious devotion to the sun god, Sol Invictus. His goal was to develop a universal deity that would unite the pagan world. In the process he began the persecution of the Christians once again in an effort to create social unity. Aurelian had one last goal in mind so with his domestic reforms accomplished, or underway, he returned to the East during the summer of 275 AD with a glorious ambition for the conquest of Mesopotamia. Always the disciplinarian, Aurelian caught his secretary, Eros, in a lie during the campaign and promised dire punishment. Eros, fearing the worst, went to the Praetorian Guards and told them that Aurelian was planning to kill them as well. In
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an effort to save his own skin, Eros began a plot which proved to be successful. Aurelian, at the age of 68, was assassinated at Caenophruriun in Thrace and Rome lost not merely one of its greatest generals, but a man truly worthy to have occupied the throne of the Roman Empire. (M. Aurelius Probus). Born at Sirmium in 232 AD, Probus adopted the profession of arms and gained rapid promotion until, by the reign of Aurelian, he had become one of the leading generals of the Empire. Soon after the death of Tacitus he was proclaimed emperor by his troops and, following the murder of Florianus, he became undisputed master of the Roman world. His reign was notable not only for his considerable military successes, but also for his attempt to restore the economic life of the Empire. To this end he introduced viticulture into several of the western provinces, and had he been able to carry out all his plans the Roman State might have recovered much of its ancient power and prestige. However, in the autumn of 282 AD he was murdered at Sirmium by a band of mutinous soldiers who were enraged at having been employed on public works instead of military duties. (M. Aurelius Carinus). The elder son of Cams, Carinus was born about 249 AD and was given the rank of Caesar soon after his father's accession. When his father and his younger brother set out for the Eastern frontier early in 283 AD, Carinus was left in Rome to look after the government of the Western provinces, and in July or August of the same year he was raised to the rank of Augustus. Early in 285 AD he left Rome to meet the challenge of M. Aurelius Julianus who, after having been proclaimed emperor in Pannonia, was marching against Italy. Carinus defeated him near Verona, but then had to advance against Diocletian who had been proclaimed emperor by the Eastern army following the death of Numerian. In the battle which followed, Carinus was victorious, but soon afterwards he was murdered by one of his own officers, and the Empire fell into the hands of Diocletian (spring, 285 AD).
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We will be starting up the subscription and per access service to the regular forecasting. This will not alter the current public service reports on explaining the events that surround us. The subscription services will be the computer generated reports that will cover the entire world. These reports will provide the specific forecasts for time and price. Those who are not trading will still have free access to the reports provided currently. Nothing there will change. As far as services are concerned, there will be the general written reports on a monthly basis per market. You can obtain access on this level that will be reasonably priced for the average individual. For the institutions and individuals, there will be the daily reports available per access so you can gear the level of service and the number of markets to you particular needs. We will also restore the alert service where you can input which markets to watch and the computer will send you an alert when it is time to add a position or to change direction. This will provide the full world economy for those with major portfolios. Those interested may get on the list by sending an email to:
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