Say’s Law
QUESTION: Mr. Armstrong could you comment on Say’s Law and the existence of money? Some claim that the General Theory proved that Says’s Law is incorrect. Yet how can one satisfy his desire (desire is a want, demand is a satisfaction of that want) if he does not produce in surplus?
ANSWER: Say’s Law effectively stated that the supply creates its own demand. This concept was heavily criticized by Keynes..There were clear conflicts with some of the positions of Say in particular that regarding hoarding of cash. You must keep in mind that Say took the position that under a normal economic condition people would NOT hoard cash and would invest that cash BECAUSEgovernments routinely debased their currency, However, under extreme economic declines, they will hoard even debased currency as Roman hoards have demonstrated.
Hoarding unfolds during an economic decline as people seek shelter from uncertainty. Say’s law had to be modified to incorporate the idea of a “boom and bust” cycle, which was beginning to be seen as natural and inevitable. The idea that people would hoard coins simply because they were made of precious metals is not supported by the documented hoards, which increase during economic declines that are accompanied by uncertainty. Otherwise, Say is correct to state that cash is spent and not hoarded during economic booms that are accompanied by natural inflation that tracks the velocity of money. That spending is reflected in asset appreciation from real estate and stocks to commodity and business.
Dogs Sniffing Cash at Borders
COMMENT: Dear Martin, the information in your blog concerning the hunt for cash in Europe and changes to Swiss banking laws were reported in the mainstream press today. See NY Times article featuring cash sniffing dogs at transportation centers in Europe.
Keep up the great work! John
From The New York Times:
European Borders Tested as Money Is Moved to Shield Wealth
Customs agents at borders of European countries in economic crisis say they are increasingly seizing undeclared cash exceeding the €10,000 that each traveler is allowed to carry.
China – Gold – Financial Capital of the World
QUESTION: Martin…in your previous work, I had noticed that China was due to become the world’s new hegemon by 2015.75. Several sources that I follow, one included below, indicates China’s voracious appetite for metal, something the west seems willing to accommodate at this point. It seems the lower the price goes, the more China is willing to buy. To assume the mantle of world hegemon, it makes sense that they are able to fulfill the “he who has the gold makes the rules” axiom, and at some point, they would become the gold market, much like London has been the hub for years. With reference to your recent position on the gold market and where it is likely to go, as your work suggests, it would seem foolish for the Chinese to do what they are doing. Can you comment on this please?…many thanks…b
ANSWER: Capital is shifting and China will become the financial capital of the world. But that is not likely until after 2032. The West must meltdown first. Below is a chart of Britain’s debt. This illustrates that Britain peaked with World War I and the title shifted to the USA.
But people are confusing the gold buying in Asia and playing games with people to support buying gold now. This is total misrepresentation of the facts. The people buying gold in India and China are private individuals – not the governments per se. Yes, China has increased its gold reserves. But that is irrelevant. This has NOTHING to do with supporting price or anything else. The people have been unable to buy gold in the past and began buying it after 2008. That does not negate the people in the US and Europe selling their old jewelry or the expansion in mining and of course the decline in investment among funds who have been net sellers for the last year.
People will return to gold ONLY when there is a crisis. The ECM turned down in 2007. Gold did not exceed the 1980 high in nominal terms until 2008. The rally was with the economic decline. You will NOT see another such rally in gold until the current wave of the ECM turns in 2015.75. We are preparing a special report dealing with this nonsense about inflation with charts showing this is just selling propaganda.
In 2011 our model TURNED UP and we called for a rise in the stock market that was correctly reported by Barrons. You cannot have the economy rising and stocks off to new highs and gold moving to new highs under the same scenarios. Everything is linked. We would NOT have been correct on the new highs in the stocks market unless we were ALSO correct about gold. You either want to make money or you like to donate to the banks and promoters. You have to understand what it is you are doing.
There are many who comment illustrating they are desperate and WANT to believe I am wrong and gold will soar to new highs any day now. Those arguments I heard for 19 years as well between 1980 and 1999. You cannot fight the trend. The markets are NEVER wrong – people are. If a market is doing something you did not expect – trust me – you are wrong not the market.
Feinstein is Legalizing Mass Surveillance for the NSA
You can never trust Diane Feinstein. Her bill that pretends to restrict the NSA is actually legalizing mass surveillance. She is an affront to everything the United States once stood for. We have to question if she is even mentally capable of doing the job given her age. She may simply be suffering from dementia. Many people have reviewed her bill in the industry and it is a joke if it were not so damaging.
Feinstein’s bill first appears to reform the NSA stating that it bans mass data collection “except under specific procedures and restrictions set forth in the bill” but the loophole is she legalizes it stating that the FISA Court must approve it where no such authority existed previously. If some judge then is approving the bulk data collection from the entire world in a totally un-Democratic manner, the NSA is within the “exception.”
Feinstein’s bill is like saying it is illegal to kill your wife “except under specific procedures and restrictions set forth in the bill” which then says its OK if someone else agrees with you. This is very clever legal framework that lawyers craft to get around things and pretend it is legal.