muses of the moment

July 28, 2011

Latest Letter from Martin Armstrong July 27, 2011

Filed under: Economic Crisis, Martin Armstrong, Odds 'n ends — Tags: — totallygroovygirlfriday @ 8:38 am

Click here for Martin Armstrong’s latest letter dated July 27, 2011, entitled Lack of Formal Education Part 2 (10 pages). Apparently his last letter regarding the lack of  education in FOREX and world economics hit a nerve.

Very interesting read. Especially his testimony (last part) before Congress in the 1990’s. Although, he states that not all his solutions for the situation in the 90’s would work now (since we are much further down the debt road), it is very interesting that his warnings have all come true today.

Understanding capital flows is the key to policy. This letter is a clear contradiction to what is being taught in our financial schools and what is being understood by US policy makers.

We are doomed.

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Currency Crisis

Filed under: Dollar Crisis, Fiat Currency, Hyperinflation, Hyperinflationary Depression — totallygroovygirlfriday @ 8:30 am

Casey Research has a great summary on the history of fiat currencies and the USdollar’s similarities to the fallen currencies of the past. The worst part of this situation is that most believe that the dollar can never implode, since it has been “stable” for so long.

Click here.

So, will a similar fate befall the U.S. dollar? The common denominator that led to the downfall of each currency above was the two big Ds: Debts and Deficits.

With that in mind, consider the following:

Morgan Stanley reported in 2009 that there’s “no historical precedent” for an economy that exceeds a 250% debt-to-GDP ratio without experiencing some sort of financial crisis or high inflation. Our total debt now exceeds GDP by roughly 400%.

Investment legend Marc Faber reports that once a country’s payments on debt exceed 30% of tax revenue, the currency is “done for.” On our current path, analyst Michael Murphy projects we’ll hit that figure by October.

Peter Bernholz, the leading expert on hyperinflation, states unequivocally that “hyperinflation is caused by government budget deficits.” This year’s U.S. budget deficit will end up being $1.5 trillion, an amount never before seen in history.

Since the Federal Reserve’s creation in 1913, the dollar has lost 95% of its purchasing power. Our government leaders clearly don’t know how – or don’t wish – to keep the currency strong.

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