Global Market Watch Feb 27th, 2014
The Gold Question – Luck v Fate
QUESTION: Mr. Armstrong, I’m a long time reader and great admirer of your efforts. I recently read an analysts opinion on inflation that I want to share with you.
This analyst maintains that the Fed’s actions to stimulate the economy has done nothing more than fill the pockets of the very bankers that caused the economic troubles in the form of excess reserves sitting at the Fed collecting 0.25%.
Once the economy gathers enough steam to make lending more profitable for the bankers, he thinks the release of those reserves, in excess of 3.5 trillion to date, will create unbridled bidding for goods and services driving prices higher, thus he wants to buy gold!
I don’t, but he does and I’m sure others will follow. What I want to know is how you see those trillions of dollars effecting the economy as it comes online?
Sincerely,
-M
ANSWER: Sorry, just nonsense. The dollar is really the de facto currency of the world aside from the fact that it is also the reserve currency. As political unrest continues to rise, capital will flee to the US pushing the dollar even higher. This nonsense about hyperinflation and inflation is getting really old. The lowest rate of hyperinflation among the top 10 incidents is about 400% per month and the worse was Hungary in 1946 that reached over 13 quadrillion % per month.
These people who keep touting well this time inflation will soar so buy gold, have zero historical perspective and if you want to cite the hyperinflations in history, ALL tangible assets rose from art to real estate. In fact, the currency that replaced the inflated mark in Germany was backed by real estate in 1925.
So quite frankly, if you are talking about inflation and gold’s pretend special hedge against inflation, I honestly do not know what drugs these people are taking. There is ABSOLUTELY NO incident in history where gold has EVER provided such a hedge in any sole capacity – NONE WHATSOEVER!!! When a currency goes into hyperinflation, there is no coming out of it. Thus, ALL tangible assets become the hedge – not just gold.
I have stated countless times that gold is the HEDGE AGAINST GOVERNMENT, not the hedge against inflation. It has risen during such periods ONLY when there is uncertainty as to what currency will survive.
Claiming that the $3.5 trillion will rush out and cause ONLY gold to rise is absurd. The vast majority of such money will flock to shares and real estate as it always has. YES they traded stocks in Rome as well and the idea of a corporation comes from Rome.
In the US, $3.5 trillion is just about 20% of the outstanding federal bonds. Add in all the other debt, shares, and real estate, and we are less than 2%. Add in the world, and forget it. It would be like putting a drop of oil in the ocean.
Gold is going to rise WHEN capital realizes that we have a geopolitical problem and there is uncertainly on the horizon as to what monetary system emerges afterwards. This is the real issue – not inflation. Plain and simple, gold reach $875 in 1980 and the Dow 1,000. The Dow has reached almost 17,000 and gold at its peak below $2,000. From a plain numbers game, the Dow was a far better hedge against “inflation” than gold since 1980. Why these people keep saying the same thing over an over again and somehow expecting a different result (this time I will be right) is a mystery. This is about surviving – not promoting some scheme or sick distortion of history. Why keep preaching the same thing costing people their future with no remorse is irresponsible. That is not an analyst – it is a promoter.
It is equally important to understand WHY you lost money as it is when you make it. If you do not understand how things truly function, then your wins will be sheer luck and the losses will become fate.
Assassination – tool of Revolution – The Contagion of the 19th Century – Are We in for a New Contagion?
A number of people have asked what was this Marxist Anarchist movement inspired by Karl Marx (1818-1883) and are we seeing this rise again? The very idea of assassinating leaders such as President Lincoln and President McKinley were part of an international trend in the 19th century that was based upon the theory that some dramatic deed was necessary to spark a revolution. It was called the “Propaganda of or by the deed”, and it advocated physical violence in a dramatic provocative public act perpetrated against political enemies with the goal of inspiring others to act in a popular mass rebellion or revolution. This was a political philosophy that was part of the radical thought process that was emerging that surrounded Marxism, but it was not exactly advocated by Marx, who was generally a revolutionary.
Perhaps the first to be associated with this new radical political-philosophy was born the same year as Marx. He was the Italian revolutionary Carlo Pisacane (1818–1857), who wrote in his“Political Testament” (1857) that “ideas spring from deeds and not the other way around.”
Another anarchist of the period who was perhaps the most influential figure of the anarchism movement and one of the principal founders of the “social anarchist” tradition, was Mikhail Bakunin (1814–1876). Bakunin gathered tremendous prestige during the period as an activist that made him one of the most famous ideologues throughout Europe. Bakunin gained substantial influence among radicals throughout Russia and Europe and in one of his surviving letters from 1870 to a Frenchman concerning what he labelled the “Present Crisis”, Bakunin clearly stated that “we must spread our principles, not with words but with deeds, for this is the most popular, the most potent, and the most irresistible form of propaganda”.
Bakunin’s words were popularized by the French socialist-anarchist Paul Brousse (1844–1912), who in 1877 cited as examples the 1871 Paris Commune and a workers’ demonstration in Berne provocatively using the socialist red flag. By the 1880s, the slogan had begun to be used to refer to bombings and tyrannicides. Reflecting this new understanding of the term, the Italian anarchist Errico Malatesta (1853–1932) years later in 1895 described“propaganda by the deed” as violent communal insurrections designed to ignite an imminent revolution.
The anarchist movement that began in Russia in 1878 was known as Narodnaya Volya (Народная Воля in Russian; People’s Will in English). This was a revolutionary anarchist group inspired by Sergei Nechayev (1847–1882) and “propaganda by the deed”theorist Pisacane. The Russian group evolved with ideas that targeted killing of the “leaders of oppression” as indeed the correct path for all political movements where small non-state groups should employ violence. They advocated using modern technologies such as the invention of dynamite. This was the first anarchist group to employ such dynamite on a widespread basis. This was the origin of the Russian Revolution in 1917 and the blood-bath that followed. They assassinated on March 13th, 1881, Russia’s Tsar Alexander II (1818-1881) with a bomb that also killed the Tsar’s attacker. Alexander II was also born the same year of Marx – 1818. This assassination failed to inspire a revolution, but it was taking a step in that direction that eventually led to the Russian Revolution curiously 37 years later (8.6 x 4.3).
Individual Europeans also engaged in politically motivated violence during the 19th century. For example, in 1893, Auguste Vaillant (1861-1894), who was a French anarchist, bombed the French Chamber of Deputies on December 9th that year. The anarchist movement was expanding through a contagion process spreading from nation to nation even across seas. Between 1894 and 1896 during the economic decline, the President of France Marie Francois Carnot, Prime Minister of Spain Antonio Cánovas del Castillo, and Austria-Hungary Empress Elisabeth of Bavaria were killed by anarchists. This was the backdrop to the assassination of President William McKinley in 1901 and why his wife fear for his life.
Clearly, we have a trend in motion that is against government corruption that first poked its head above the surface with theOccupy Wall Street movement. Now that we are in the Cycle of War uptrend staring in 2014, this movement will turn increasingly more violent. More and more people in many countries will rise up against corruption as we saw in Ukraine and this will be a trend that will eventually impact the USA after 2015.75. The worst of the anarchist movement ALWAYS came with the decline in the Economic Confidence Model. So beware 2015-2020.