muses of the moment

February 28, 2013

Martin Armstrong’s blog post from February 26, 2013

Filed under: Economic Confidence Model Cycle, Gold and Silver Investing, Martin Armstrong, Precious metals — Tags: — totallygroovygirlfriday @ 1:05 am

Click here for Martin Armstrong’s latest blog post entitled, It’s Always a Question of Time, dated February 26, 2013. This post is about Martin’s thoughts on an eventual two-tier monetary system.

groovygirl says:

Groovgirl agrees with Martin’s thoughts on a two-tier monetary system. She also believes that there are 3 shifts to this move in the US:

  • The collapse of the US dollar and/or US debt, that requires a “revalue” of the dollar.
  • A new national-only “dollar” that will be either inflationary or deflationary in nature.
  • The new “floating” international currency that will be for international trade, particularly petro and energy. This will be the opposite monetary pressure than the national dollar.

Physical gold and silver will help see your changing fiat currency retain its value during this process. The bullet points above explain why gg thinks it is very hard to figure out if we will err on the side of inflation or deflation before and after this “revalue” and new currency. It is very possible that in the next 10 years that the deflationists, stagflationists, and hyperinflationists will all have an opportunity to be correct in their forecast.

What I am saying is that it is highly unlikely that the powers that be will get it right the first time and we will have ups and downs in the value of these new currencies for a while, possibly years. This could be a reason to hold onto some gold and silver even after it reaches its “high” in the cycle. We will have to watch this carefully.

Side note: gg thinks you can all see that an extra currency in international trade will have fees attached to it, a special system to track taxes, maybe even an international tax of some kind, and probably will be digital. The US will then get to feel the same pain that everyone else on the globe has felt with the petro-dollar for the last 40 years.

This new system will have the effect of stopping the decline in US economic activity, only to the extent that it will create stability. But the days of cheap auto gas and energy are gone forever, and it has little to do with Peak Oil. It has to do with a debt collapse, the destruction of the petro-dollar, and the fall of the American Empire.

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10 Comments »

  1. gg-

    Could you expand on the 3 bullets in your comments? I am especially interested in the first one. How does the debt get defaulted on and what happens theoretically to the value of money in a bank account? Let’s say in a money market. This is a key question that no one seems to be able to explain – the actual mechanics of it. Do we wake up one day and find that instead of $100,000.00 in an account we have $50,000.00, or $10,000.00? How does that work? Also, are you alluding to a free gold concept in the future? I will probably go to Armstrongs’ seminar in March if tickets are still available. Maybe he has some answers.Thanks.

    Comment by Anonymous — February 28, 2013 @ 10:56 am

  2. Anon,

    You will still have $100,000 in your money market, but it will only purchase $65,000 worth of “stuff”. It is like the decline in the dollar since 2000, but it will happen overnight, not over a period of several years.

    Martin’s seminar sounds interesting. If you go, let us know what you think.

    gg

    Comment by totallygroovygirlfriday — February 28, 2013 @ 1:08 pm

  3. Anon,

    Or….it could be worth $120,000, but the international currency makes gas/oil 10 to 50 times what is was, so expenses have still increased, exceeding your $120,000 value. And maybe other things are cheaper than before, like US housing?

    That’s the beauty of fiat currencies, you can fool the people longer as they focus on the numbers not the converted value. And they certainly don’t teach purchasing power formulas or inflation-adjusted formulas in school.

    Right now to determine the change in purchasing power, you divide the dollar by some tangible asset like gold or oil. But when there are two currencies, you will have to use two formulas to really see the true change (and your loss of purchasing power). This will fool the people for a time.

    This is also why people think their houses went up in value from 2000-2007. They really didn’t.

    It is always about what you can buy with your ever-changing fiat currency, not the face value of the paper.

    gg

    Comment by totallygroovygirlfriday — February 28, 2013 @ 4:43 pm

  4. Thanks gg. It’s a hard concept to grasp. I guess inflation will kick in overnight and make things more expensive too.

    Comment by Anonymous — February 28, 2013 @ 8:22 pm

  5. One other note: groovygirl is leaning toward a revalue downward of a national dollar or the new issue of another national currency rather than a revalue upward. It would solve a lot of issues regarding the entitlement programs (social security, federal pensions, and things like food stamps) that are political dynamite. It would also allow states, cities, and large companies (who can not “print” money) solve some of their entitlement, debt, and pension problems. It would also help the national pension program that keeps getting more and more bankrupt companies’ pension liabilities.

    gg

    Comment by totallygroovygirlfriday — March 1, 2013 @ 3:31 pm

  6. Yeah. My company terminated my pension in 2006 and turned it over to the PBGC, so I’m reeeaal interested in where this is all going. Can you direct me to a site explaining your last comments? I’ve been looking for some type of theory for how this might look. Clearly, the gov. wants to give us every penny they can so that they can just turn around, tax it, and get it back. Thanks.

    Comment by Anonymous — March 1, 2013 @ 6:16 pm

  7. Anon,

    There is no real website that supports or contradicts my comment. It’s just one of the many reasons that I agree with Martin Armstrong’s assessment that we may have a two-tier monetary system in the future. There has been a concentrated effort to lower the dollar in a controlled way since 2001. Most people don’t remember that the DOW and the economy were in crash mode before 9-11, the dollar was at a high of 120, now battling 80 (formal low around 70). That’s a 33% decline in purchasing power in a decade. I hope everyone’s net wages have increased 30%? We all know social security payments have not increased that much. That’s how they get to pay out “less” without looking like it because the dollar amount is the “same”, but purchases around 30% less.

    Imagine if they could knock off another 30-40 % over night? Might help social security without having to “reduce” or cancel payments.

    gg

    Comment by totallygroovygirlfriday — March 1, 2013 @ 6:42 pm

  8. OK. I’m getting there, and certainly understand inflation and things costing more ( dollar debasement ), but what is the mechanism for how that would work ‘ overnight ‘ ? A default? Sorry, still trying to grasp it. Not saying you’re wrong, just trying to understand. I personally don’t subscribe to the gov. cutting off all welfare and unemployment benefits overnight, followed by mass riots in the streets, so this type of debasement makes more sense, but there will come a time when the gov. can’t print any more money and then what?

    Comment by Anonymous — March 1, 2013 @ 9:04 pm

  9. Anon,

    It is just like all the other times that fiat currencies have been created and adjusted. One day in 1934 gold priced in the US dollar was one price, the next day it was $35 per the government. After WWII, all currencies were tied to the dollar per all governments. In 1971, one day the dollar was not tied to gold anymore. In all these situations, were reactions to severe global debt problems/crisis. And in all these situations, certain words were used: create confidence, create stabilization, stabilize global economy, peace, prevent global collapse/crisis, and temporary measure. Look out for these words in the future when people are talking about modifying currency systems.

    gg would also note that people survived these changes, but they all created other problems and reactions.

    gg

    Comment by totallygroovygirlfriday — March 2, 2013 @ 10:44 am

  10. Great point. I need to go back and look at Bretton Woods. They did it then and they will do it again. Hope you caught the excellent interview with Jim Sinclair on KWN today, BTW.

    Comment by Anonymous — March 2, 2013 @ 7:07 pm


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