Armstrong Economics: How All Systems Can Collapse Overnight

26 Pages·2009·5.44 MB·English

Armstrong Economics
How a ll systems can
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collapse ovjernight.
The 3rd Century Monetary Collapse
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Are there lessons from the past
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__ACK H O W L ED G^E H E N T 5
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T would like to thank thE many people who have
been writing from around the world. It: i encouraging
s
to know that there are so many people who are interested
in uncovering tha truth, i have also special thanks for
stj many providing valuable insight into trends around
the world from China, Soviet Republics, South Africa,
Brazil, Australian, and India, 1 believe wa can survive
tha folly of governments even if they refuse to listen.
The key is understanding the nature o f i events, and that
allows us to correctly make the decision to be on the
opposite side. •
T would like to also thank a ll my old friend and
Corner clients for their support and to know that they
have continued to gather information that serves us a ll
in times of crisis, , .
He are standing on the precipice of a new era in
global-social-econornics. How we enter this new age is
of critical importance. Government is incapable to doing
anything for any reform of its own abuse of power is not
up for negotiation. We must weather the stern, and to do
so we need to understand its nature. Just as tha 1930s
Great Depression set in motion profound changes that were
even manifest in geopolitical confrontations, we have now
reached such a crossroads. A debt crisis has its tentacles
deeply embedded into every sector right into government.
This is the distinction from 3 nets stock market crash that
never alters the economy long-term, Weiare seriously s t i ll
over-leveraged and some banks are s t i ll trying to be hedge
funds and have to speculate to make, a profit. That is a key
warning sign that the worse is yet to coma.
Comments, Snqq&stions & Questions
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Please mail to:
Martin A, Armstrong
FCI Fort Dix Camp, #12518-050
PO Box 2000 I
Fort Dix, NJ 08640
ELE&SE REGISTER YTJUR EMZLIL AECSESS
ME KITUBE NEtfS QifCICaL TO COR SDEVXVEL
Gzcyrightf Martin A, ALUfaUuiig, a ll rights r=3er?~--t3
This Report may be forwarded as you like without ctarge to individuals or gDugcr/ntnt£ around the
world. It is prouidad as 3 Public Service at. this tiire udthout cost ngcaus? of tha critical facts
that lira i-ioiu faced economically, The enntenta and designs of tha systems are in fact copyrighted.
At a futura date, a ns<s\ edition cf tha 19B5 Tha Greatest Bull market In Hiatnry mill be releaaed
and a nsiu book' mill saan ba published an tha model itself: - The Getmetry of Time, It is vital that
me do not forge- this ia a world economy and the arrogance that any nation can dictate to the world
is jet ir-sanity. Euery nation effects all otnata nc rfiff^tait than if one ret ion ven to pour all
its to*ic waste into the oclan. Everything Is intarlinkedj and sciLr-inns ara nsver isolated events.
How a ll systems can
collapse overnight
The 3rd Century Monetary Collapse!
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Are there lessors from the past •
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that equal
•
•
solutions for the Future?
by: Martin A- Armstrong
Former Chairman of Princeton Economics International, Ltd.
and Foundation of the Study of j Cycles
C
ollapse of the global economy as we once knew it can ;take place with such
spaed, it will leave the vast majority frozen like a deer in headlights.
There was one recent movie built upon this realisation of what T refer to
as a Primary One Phas^Transition. That Imovie was "The Day after Tomorrow,11
This was based upon the scientific reality that things lite the sudden and
shocking advance of an ice age, happen; jalroost instantaneously, not the
slow gradual movement. For example, we a ll know that the north pole moves
gradually on an annual basis- Geologists can show ius where the north pole use to be
because whenever a volcano^ erupts, the cooling magna becomes magnetized to where the
north pole ia at that moment- So we can track where it has been, but it has been the
speed (timing) that we have not understood-
There are basic laws that everything inherent within the structure or the kLiy
in the universe is guided by and control systefns. For example, the "gold standard"
led. Our social economy is no different collapsed in 1971 because of its defect in
for at the foundation lies mother nature the Bretton Woods Accord back in 1944. The
herself, if sheihas a bad day, we all have dollar was fixed at $35 to one ounce of
a very bad day. So the rise and the fall gold, j Yes the United States had 76% of the
of many civilizations has been in part entires world gold reserves. Hence, the
also do to the dramatic changes in our dollar became the reserve currency. But
weather; the internal fault within the structure
was they lacked any limitation upon the
Our social-economic system has and creatjion of new dollars, Like a fool who
will again, just collapse overnight in just Von the lottery and spends wildly,
many cases. It is like 1969 and we woke we cah thank our politicians for the same
to a student standing down a column of human|stupidity. Human nature is one key
tanks in china* A few months later, the constant we can always count on.
Berlin Wall fell and Communism came to
an end.
What we may be facing is a Primary
Two Pnase Transition directly within our
The social-economic fabric simply social-economic-political structure that
implodes due to the internal weakness has taken place previously throughout our
recorded history. One of tha best such
California is tha 8th largest economy in
documented cases was the economic meltdown the woirld, and it is dead broke. As this
of the 3rd Century. One might ask how can begins| to spread to more states, we will
this be similar to today? The answer is see the center core come apart. Everything
simple. For as much as things seem to have we havfe today is dependent upon on© factor,
changed, they remain very much the same. Publicj CorificencG. The dollar remains a
medium j of exchange because there is no
The political structure was not so other.jOnce the confidence of the people
different from the United States today. is undermined in this respect, everything
They too voted for local Senators who had implodes as we see took place during the
abdicated their constitutional power to 3rd Century where the value of currency
the executive branch, and the once vital
fell si dramatically, it purchased 1/50th
role of a Tribune who defended the pe ople
of what it once did, and even taxes began
against the corrupt politicians, was then
to be Collected ia kind, for the government
usurped by the: Emperor, The irage was that
would not accept even Its own currency in
the Emperor defended a free constitution payment,'
that was preserved with dignity, honor,
and reverence, and thus the Roman people
appeared to possess the sovereign powers
and authority exercised both through the
senate that they elected, and the Tribune
of the people in the office of the emperor.
Today, we have the Inspector General who
will i ssue reports against the various
departments, but while his function is very Perhaps our greatest problem in making
loosely that of the Roman Tribune insofar as advanceJiient in our social-political-economic
he is to monitor government, he has no power development, has been the arrogance that we
to indict, and is often ignored- Today, the can control such variables, and that leads
new Obama Administration has created 31 new to political intervention into things they
shadow posts called Czars (tsar) meaning a have no idea of what they are doing. It is
"caesar" with semi-dictatorial powers. This the very nature of a Phase Transition that
mirrors the Roman office of "Dictator" for politicians have no concept what it even is
they are not elected, nor are they subject no less about how to manage such a truly
to any oversight committee in the Senate. So astonishing nature of how all systems do in
you see, we too are not exactly what you fact function.
call a true government where the people do
honestly control the state.
If you boil a pot of water, pay very
close attention to how the water boils. It
is by nb means a steady linear progression.
The Roman Empire was structurally also What really happens is that as the water
divided into numerous provinces that were, not begins [to cotne close to the boiling point,
so different from the states, minus the the wax!er will jump into a sudden burst of
election of a governor locally* Hence, the conduct! that we call a Phase Transition.
idea that the favor of the sovereign nay The warier is being transformed from a liquid
confer power was the rule of law, but that into a [gas. When this takes place, there is
exists only based upon the Public Confid a departure from the linear function of a
ence of the people. All governmental power Steady [rise in temperatue, to a sudden burst
exists only so far as it does not offend or explosion into a new state. This change
the estoren of the people for that alone in stages from liquid to gas is what can be
T
confers alj^pgfoer upon a sUibe - even in called ia Phase Transition.
dictatorshjps. The reason for this. Is that
the ultimate check and balance becomes what
iJoriically, this is how human nature
Thomas Jefferson believed - the right of
also responds. Everyone knows our politicians
the people to break those political bonds.
are corrupt as they knew in China and Russia.
People tolerate being ruled and politicians
Everything we have today in our core mistake this as a sign or confirmation of
political structure, remain* unchanged from their power. But that power exists solely
the time of the 3rd Century. What we are
at the [pleasure of the people. Once a line
seeing in the second-phase of this debt
is crossed, that is where revolution explodes
crisis is the spread of unsound finance is
appearilag; to rise from nortiere, that is the
undoing the economic system of the states.
Phase Transition,
!
Mo doubt there are skeptics. That is part of the
the very structural nature. There must always be two
sides to every argument. There are some people who no
matter what you say, they will refuse to ever listen.
They are part of the cycle and help to create natural
swings in politics, law, and markets.
A Phase Transitiori exists and can be measured in
an empiracl manner just like a pot of water. Gold had
bottomed at 3700 in 1976. By December 1979, it had been
a steady progression where it finally reached $400. yet
between December and January 21st, gold erupted into a
Phase Transition and it peaked at $375. It more than
doubled in the last few weeks what had taken 3 years
to accomplish. Wow look at the NASDAQ monthly chart for'
the bubble Dot.Com peak. This too was a Phase TransitirJi
and we can see that between 1998 the NASDAQ rose from
1,000 to 2,200 by the last quarter of 1999. We then see
an explosition with a rise to 4,882 reaching its high
on March 24th, 2000- Like gold, that exploded about 2.1
times in the last period, the JfeSDftg similarly ^exploded
about the same percentage gain.
We can find a Phase Transition for example in the
Nikkei 225 for 19S9, but we do not see that in the Dow
in 2007. It is the debt markets. These moves are
dramatic, profound, and significant. We did see this
today in the debt markets concentrated within the
Financial sector. How markets unfold is very critical.
Desert o£
SttemfKtftAl Cyfc/es
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t is time to peal back: the next Layer of this onion of Structural Design*
Wow that we understand that there are normal rallies that do not end with
the explosive move, there are the bubble topsj that are Phase Transitions
that are the hallmarks of significant changes' as we saw in Japan in 1989,
then there is the Waterfall Effect where therk is no rally per se, it is
the rolling over of the economy in a more sudden death. 1 perhaps shocked
many with showing that the 'TJricertainty Principle" of Werner Heisenberg (1901-1976)
also explains how the social-politicial-economlc structure we call civilisation in
fact works. We can statistically predict that a certain} number of individuals will
be bullish or bearish at a given time. Itowever, we cannot predict which specific
individual will be bullish or bearish. This is how cycles exists, yet they are also
not a redetermined manner of fate that prevents or dictates on an individual level.
It is the group behavior that is statistically predictable - not the individual.
It is true that Albert Einstein said What we are dealing with here is a full
"I cannot believe that God plays dice with blown Structural Design of hew everything
the universe." Nevertheless, Heisenbarg's works in the world we are in and is around
theory has not been disproven. Perhaps, w& us both physical and a derivative of our key
are facing such complexity that it Is not interactions. What makes the economic crash
truly a crap-shoot just yet, but beyond is a conplex set of interactions. It will
our ability to measure and calculate the focus primarily upon one sector. Yet this is
events that cause a. particular action be a symptom, not the cause, Tha raising of the
it an atom or why the Dow closes where it interest rates into 1981 to fight inflation
will tamofow. Perhaps like the TV series is the solution for that cycle that creates
Star Trek that inspired so many people to the problem for the next cycle. This is what
create things from MRls to flip-cell phone I call thej Paradox of Solution. It relets
designs, Heisenberg's day will yet come. the complexity of the system we live in.
A Phase Transition in markets and in the If, you hold your arm straight up in the
economy, are points when the status quo that air above your head, it's no problem, ftaep it
traditionally exists between the two camps of there. Suddenly it becomes so heavy, it is no
beliefs that in politics might be democrat & longer sustainable. The same is true with
republican and in markets bulls 5 bears, just sleep. Vou cannot maintain the energy output
shift to where there Is suddenly a dramatic and you| will collapse if you try to stay up
imbalance. all the! time. The economy can simply just
collapse when there becomes a major.imr*Qahce_
At a conference I held in Tokyo, a rich
individual bribed his way in when this was a The concept of entropy is not always
session for institutions only. He wanted to the easiest to explain outside of physics
ask me a pressing question. He had purchased class J Tt is formally a measure of the un
the Nikkei 225 on the very day of the high in available energy in a closed system in
December 1989. The market was down 30% and he f±errrodynamics so related to the state of
informed me he had never purchased stock in the system that a change in the measure
his life. This was his first investment and varies: with change In the ratio of the
he vffls over 65. I was curious. I had just met increment of heat taken in to the absolute
the man that did buy the high. I asked him temperature at which it is absorbed. How
what convinced htm to buy? He said brokers they can't say I did not give an explanation.
called him every year trying to get him to
invest and pointed out thattthe Nikkei had
it is this transfer of energy that is
risen 5-7% every January for the past several
known as entropy that is seme times commonly
years. Each time he said no, and watched the
also termed - from disorder emerges order.
brokers being correct. He finally bought the
Yes itj can be visualised in many ways even
high looking to make that 5-7% in 3D days.
outside of ttermcdynamics. It can be also
He invested $50 million. That is what I am
the measure of the amount of information in
talking about. When you have sucked in every
a message that is based on the logarithm of
last person, you reach a critical point in
the nuiViber of possible equivalent messages.
entropy and the system will now collapse.
It can! also be the degradation of the matter
and energy in the universe to an ultimate
state of inert uniformity. However, it can
Government has launched countless and
also be more down to earth and be used to
major investigations trying to find that
describe the steady degradation of disorgan
group that sold the high and forced the
ization of a political system or society as
collapse. They never found anyone. The very
a whole.
reason why is not merely is it impossible for
an individual to overpower the free markets, I
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but when everyone is now long looking for Think of it this way. When you are born,
the profit, a ll you need do is scare the herd everything ccmes together creating, let us say
and they will panic like wild animals. Since , from a biased perspective, "order" being a
the vast majority are long, you now have the living organism. Now let us realize that the
vast majority trying to sell. There are no joined matter constituting our body is also
buyers, and thus it collapses, not because moving toward a point of maximum growth where
of short players, but because' the longs are we peak in performance, health, height, etc.
going through a Phase Transition transforming From this maximum point of "order™ the matter
like water to gas into bears with no logic. then constitutes our parson, is seeking to go
Panic unfolds and when you outlaw shorts, it back bb disorder, meaning death. This ifc how
gets far worse. The only person who will buy capital concentrates into a single sector and
in such a panic is a jihort who is taking his create^ the DOT.COM bubble top, but that en
profit. Outlaw shorts, and you have no such ergy will now turn and seek self-preservation
buying in the middle of panics and thus the and thus will move back to "disorder" that is
decline becomes far worse as it did in 1929. the cxish.
When the Senate was hauling in everyone to i
find out who was short, short selling just
dried up. This is one of the primary reasons When people lose money, they turn to the
why the stock market decline in the United politician and demand laws to prevent markets
States during the 1930s was nearly 90%. They from declining. This is not "disorder" but a
made short selling unpatriotic. restoration of "order" rebooting the system
and creating the stage for the next cycle.
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In thermodynamics, if you take a hot Tie "o^tagicsvn is a major effect that
stone and place it on top of a cold stone demonstrates that there are external forces
of the same material, the heat will flow and that one cannot manage the economy for
to the colder object until they both will it is tot a closed system. It is far more
reach the same temperature. These ideas complex and this is why government interven
may seem strange for economics, but it in tion usually creates more damage than it has
ever avoided, nothing Roosevelt did changed
fact governs our world as well.
the course of the economy. It was what came
afterwards -WAR- that pressed the real
Notice that I emphasized "closed"
red button marked "REBOOT" that got things
system. This is very Important. If the
going again. The "New Deal" did nothing at
system is closed, then we need not deal
all to! reverse the economic trend. The only
with any other influences coming from
program that had a benefit was the HPA, not
other sources. This is how politicians
to restart the economy, but bo help train
try to run our economy - in the sheer and
farmers to hectare skilled labor. The Qbama
dark world, of oblivion. They try to feed
stimuli^ for infrastructure will have no
us a single explanation for any event and
effect other than push us dangerously close
you can bet it never involves any action
to the inevitable Waterfall Effect.
on their part. Thus, they perpetuate the
nonsense of a "closed economy11 ignoring
all other external forces including those
what I want to show you is that indeed
of the primary agent - themselves. The
for much things appear to progress and change,
result - economic drivel!
they indeed remain very much the same. What
we arel facing is a classic Waterfall Effect
The very existence of a "contagion" that unfolds as a Primary-Two Phase Transi
disputes everything the politicians even tion. Although we are about to look at the
pretend they have power over. They are real history of the 3rd Century AD, you can
no more capable of running the economy just replace the names with familiar ones of
than I am trying to be a brain surgeon. the present and see little difference.
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any people attempt to be
analysts or economists,
yet they speak without
having real experience
and they- fail to see that
they are really nothing
more than a fly on the ass of a big
elephant. They do not realize they
are even sitting on an elephant and
worse still, they do not understand
what is an elephant. They will just
never know unless they step back or
take flight so they can gain vital
perspective and at last see what the
elephant even looks like. This is
what we are facing. The elephant is
the world economy that we cannot see
if we are too close. I discovered the
•0:n>TlLl-^ta:T Waterfall Effect only by observing
thousands of years of data.
The 3rd Century
Monetary Collapse of the Reran Empire
10BC - 290AD
C O L L A P SE OF T HE ' R O H AN
M O N E T A RY S Y ST EM W g;A S O R ED BY
S I L V ER C O N T E NT
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I do not mean to be arrogant. Vet at the big picture of the Waterfall
the problem is not dissimilar from the Effect. If we focus closely upon any
clash between the established belief of section, we will see the patterns and
the rise and fall and minor Phase Trans
the old world that the earth was both
itions that create the bubble tops along
flat and that the sun revolved around us
the way- Yet stepping back, we begin to
because heaven and hell were clearly
realize that this is the "noise" and
fixed places'above and below.
is within the realm of Heisenrjerg1 s
Uncertainty Principle.
There is no question that empirical
evidence of the cannon observation was
that the earth was flat, aside from the The shocking thing that emerges
rolling hills and mountains. This view from the long-term data, is that drastic
was certainly logical because like the movements" that topple civilization along
fly on the elephant, we were too close the way, take place in the shortest
to observe that It was a gldbe. amount of tine. This in the short-term
world can even be explained as what we
are seeing right now - the "contagion."
By focusing upon only the Jjntiedrate
The detailed chart I have provided of
short-term data, we can come up with an
the 3rd Century Meltdown took place on
array of methods to analyze what we are
a massive scale within just 13 years!
looking at. However, that is not at any
That is stunning insofar as we are not
way reflective of reality. We can come up
looking at just short-term, but a 1,000
with things like Elliot Wave, but the big
year historyl This dispels the slow and
question that jumps out is are we. only
steady linear progression, and reflects
observing the minor fluctuations within
the true nature of how major events do
the bigger whole?
take place just as in the movie "The
Day After Tomorrow." This is important
.From observing the very extremely to understand, because it effects our
long-term data, this is where we arrive perspective of possibilities.
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rroganoe.has of ten been our worst enemy. It prevents us from rising to the
next level of understanrling. We assume that we are so wise, that we know
evei^iJring, so why bother looking at the paat? After all, they were just a
bunch of sword fighting spear chuckers. What we miss, is that while we may
have technology and can now shoot each other, the human character has not
changed. What does it matter if you die by a sword Or you are shot in the
head. You are still dead. Human nature never changes, for that is still the
unifying constant throughout all tine. As I showed in previous writings, government
does not believe in God and certainly nor do politicians, for by their actions, they
display perpetual cupidity and cling to all power with intense avarice.
During the Imperial Age of Rome 27BC see it in the currency of Athens when it
to 476AD, the first Roman Emperor who came under seize by Sparta, Thus, economic
began the process of debasing the money stress from war has been a primary factor
by reducing the silver content, was Nero that can be demonstrated empirically by the
(54-6JAD). It is remarkable, that during monetary history of man.
the Republican period between 240BC up
to Hero, the quality of the Roman Silver The decline of the Soman Empire was
Denarius was largely unchanged. We see
a rathsr steady progression of emperors, who
debasement of currency as early as in
like our politicians today, care nothing of
Lydia during the invasion of Cyrus The
the long-term, and focus only upon the very
Great during the 6th Century DC, as in
inmedia'te term of reference. Politicians
other city states. However, we also
will not risk their election until the crisis
happens.
This chart of the Monetary System of I have explained in previous writings,
Pome cost us probably more than $20 million that the major Cycle of Political Change
to create, back when a million was worth appears to be the duration of 224 years In
something. I have been asked, did' enough which there are 25 periods of 8.615 years.
icoins survive? The answer is yesl You can If we look at the start of this cycle from
the assassination of Julius Caesar in 44BC,
buy some Roman coins for as little as $10
112 years for the half cycle brings us to
because they are still plentiful- Why have
the end of the Julio-Claudian Era with the
they survived? EN^rything from shipwrecks
death of Hero in 66 AD and the start of a
to the fact that hoards are often dug up
new civil war. This erupts with generals
that ccme from (1) individuals actually
trying to seize power, Galba, Otho, Vitellius
burying their money lacking banks, and (2)
and the victor, Vespasian (69-79AD).
the treasurer would bury the payroll going
into battle so the other-side would not get
it if they lost. They have even found mints The Jews saw this as an opportunity to
in the Ealkins With as much as 20-30 million revolt and perhaps break away. This is why
coins surviving. Vespasian had no choice and crushed them
leading1 to Wasada, Had he not responded, it
would have been possible that a "contagion"
The Roman coinage enabled us to put
would have developed and the provinces would
together the entire monetary system of the
revolt ending the Bnpixe right there and
period with such accuracy, one would be
then. This is the political significance for
amazed if you were unfamiliar with the key
advertising on the coinage not that Judaea
material. The coins are effectively dated
was conquered, but it was "vanquished" for
on an annual basis depending on the titles
this symbolizes punishment.
that increment annually. In addition, the .
Romans used coins like newspapers. They used
the reverse side of the coin to announce The second half of the cycle from 6B
everything from victories, to grand opening brings us to the death of Marcus Aureli.ug
events such as the Coliseum pictured on a (161-180AD), where everyone has drawn the
coin of Titus (79-81AD). line with the beginning of the decline and
fall of the Roman Empire. He is succeeded
by his son, OJimodus (177^192PJ>} - It is his
death that begins to show the collapse in
VESPASIAN the rule of law altogether.
(69-75 AD,).
The office of the
The above illustration is the reverse Emperor was auctioned
of a denarius issued by Vespasian {G9-79AD) off to the highest bid
announcing he vanquished Judaea in 7QAD. We der. Didius Julianus paid
find coins of Philip I issued in 24BAD to 25,000 sestertii per man
DID!US JULIANUS,
celebrate the 1,000 year anniversary of the to the praetorian guards.
founding of Rome. Although he survived only (m A.D.).
3 months, he minted a lot
of coinage to pay his debt also showing his
wife and daughter in portrait coinage. Three
other contenders also minted coinage, but did
not survive - Pertinax, Pesccrmius Niger,
Clodius Albinos.
Here we have a denarius struck under
Septimus Severus (193-211AD) showing a The victor was
Roman galley With a sail and gangway to aaptiMffl Severus (193-211
the .ground with annimals arriving for SEPTI Mills AD) who restored order
SEVERUS,
a great show at the Coliseum. There are
;T 93-2II A.b.). and rebuilt defenses. He
quadrigae (chariots) shewing there will
was succeeded by his son
be great races as well. The second coin
Caracalla (198-217flDj
shows a cap and two daggers. It was issued
who killed his brother,
by Brutus announcing he killed Julius
raided the tomb of Alex
Caesar on the Ides of March {15th). Coins
ander the Great, and was
were the newspapers of ancient times. Thus,
CAHACALLA, one of the real tyrants
history is verified and recorded by the
reverse side of the coinage. of Pome.
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