Martin Armstrong on Government

[ Update - November 15th 2012. To anyone reading the link from TFMetalsReport, you're being led around by a troll. Yep. Analyze closely what was said by user JY896 and you'll find that this link, the graphs, and the assertions were expressed entirely out of context. Whoever it is, is trying to misrepresent the argument. Latest freegold discussion here: LINK  Cheers, Warren]

[ Update - November 30th 2013. So JY896 has a long memory and saw my counter here at the top of a relatively unimportant article and rolled it out here to discredit me (link) .. cool. His main contention is that I didn't give the original source of his original comment here (link to TFM). I stand by my assessment - the original comment was Freegold Trollism, was certainly out of context and did not fairly address anything I said here. His comment
(on TFM) had the misfortune to appear at the height of our Freegold Troll infestation on Screwtape Files last year and at the time I (wearily) figured I would nip it in the bud because I'm sick and tired of FOFOA's stuff being taken out of context as well as social media manipulation (or just simple F.U.D. spreading). It's not my fight but I am still interested in the timing and matters discussed in my article here, I think the fact we're viewing things in 'Internet Time' just makes it seem a whole lot slower. Cheers, Warren ]

Having given up waiting for Martin Armstrong's rebuttal of Freegold, occasionally I raise an eyebrow when his writing contains some of the same titles as some FOFOA articles (like the classic 'It's the Debt Stupid'). Most of Armstrong's ideas appear solid, but like my friend at the Christmas party he believes the Euro system is doomed, so I take what he writes with a healthy amount of salt and wonder what percentage of his views are incomplete. That there is no unified consensus between the heavyweights should be a cause for concern - the diversity of opinion means it is mathematically impossible for 100% of a single person's views to be proven 100% correct, 100% of the time.

But I do like Martin's latest: "Financial Border Controls" [link] (a solid read), in which he points out the primary cause of today's economic ills as being an out-of-control government, which lacks the ability to contract and must gobble up capital and productivity in order to increase it's bloated girth. This is easily documented in the home - where the simple task of renewing car registration includes the following charges: 'stamp duty, goods and services tax (11%), statutory insurance scheme levy, nominal defendant levy, hospital & emergency services levy, administration fee, Traffic Improvement fee', or where the Tax Office suddenly harasses my elderly mother regarding a property sold more than 5 years ago, citing a clause that a property over 2 acres in size has a different capital gains tax rate. Even the accountant had never heard of that one and had to look it up. No doubt they need the extra funds to cover up the various mis-allocation of capital in the public sector, like the Queensland Health Payroll disaster where a $219 million overhaul of the payment system resulted in workers not being paid AS WELL AS overpaying other staff by at least $60 million. It will take at least another $20 million to clean up. So you can see why the Tax Office is doing data mining and going after my mother for extra revenue. This whole process is exactly what Armstrong writes about. I don't see the monetary system failing - I see that it is working very well indeed for the people who run this gig. In fact, and they will continue to keep it running this way at your expense, as long as they are able to coerce you into surrendering your savings and productive effort.

I wanted to mention Armstrong's piece, not just because he does some great commentary on Roman History, but because he includes (again) the chart from 'Decline & Fall of the Roman Denarius Based on Silver Content':

... or the old semi-legible version:

... which is this chart which FOFOA uses as the basis for his inverted waterfall / orbital launch pattern, simply by turning it upside-down:

... which projects the movement of GOLD during its Freegold transition [link].

Just wanted to point out that the collapse itself took place over decades - something as big as the Roman Empire doesn't just disappear overnight (despite the problems), and in my view neither will the modern constructs of the US Dollar. In a Giants time-frame, the movement over decades would be appropriate. It's what we've just seen in the last 11 years with the gold price. But applying a slightly-longer-than-expected timeframe yields all kinds of goodies - this doesn't require the 'physical' and 'contract' price of the metals to decouple. It still allows the investment banks to slice and dice newbie investors and scalp value like they have done for years, without affecting the core trend. It also allows for FOFOA to be right, and parts of the 'currency is doomed' crowd (but probably not in the apocalyptic way they anticipate, since a longer play has the same effect from A to B, but society can cope better with the disruption).

So I figure in 100 years time, they'll see that Freegold movement on the 100-year charts and they'll say "oh my goodness, look at that period where the value got sucked out of fiat currency due to credit expansion and where gold took over the store of value function". And chapters will be dedicated to FOFOA's writings, but they'll nod their heads sagely with the knowledge that during that same period, the contract markets, though manipulated and volatile, still formed part of the fabric that forms the metals markets. Perhaps too, Turd Ferguson will get a mention in that history book, but they will still look up from that page and  toast a portrait painting of the great GM Jenkins who in the early part of the century provided the legacy of their wealth through successful negotiation of the precious metal charts.

The one-ounce Christmas Dinner bet about the 'end of the euro' is a good example of how some folk will in the short term become 'richer' at the expense of another, based on an interpretation of the market and world events. At the minute, the best 'safe-haven' for your capital seems to be 'wherever the government can't get it's dirty mitts on it'. This includes silver, gold, and hard assets, but requires vigilance to protect yourself from whatever random liabilities will be thrust upon your balance sheet. That includes a consideration about the time-frame for conversion of your metals to fiat, where required.


Robert LeRoy Parker said...

Nice post

GM Jenkins said...

The story of the taxman trying to steal from your mother is infuriating, it's a really strong example of the shift that's occurred all around the world where governments now exist almost entirely for themselves, when of course their original raison d'etre was service to the common good. Unfortunately, an entity that exists for itself won't change on its own volition, ther emust be some real exogenous shock.

On the theme of anarcho-tyranny, last summer I bought some food and was taking a shortcut through a back alley behind stores to my car and two assholes in a car pull up with some story about needing money for gas. I didn't give them anything and kept on my way, but there was definitely tension where they didnt give me much passing room and pretty much could've shot me and no-one would've known. Anyway, I get to my car and on my short drive home i get a speeding ticket. A cop was sitting there hiding in wait like a spider waiting for someone going 45 on an empty 30 mph street.

Re: my painting in history books, if that happens it would surely be in the spirit of demotivational posters e.g. "Mistakes: It could be that the purpose of your life is only to serve as a warning to others." and "Hundreds of years from now, it will not matter what my bank account was, the sort of house I lived in, or the kind of car I drove... But the world may be different because I did something so bafflingly crazy that my ruins become a tourist attraction."

Warren James said...

GM, I'll ensure your painted portrait is in my house if you help me negotiate these markets... my new theories give me a weird feeling of confidence. If the direction of gold is set to move strongly upward over many years and there is no prospect of physical-contract decoupling, then navigating the peaks and troughs is all that's required to (mix metaphors) shoot fish in the barrel.

The 100-year theme is sobering. What is certain is that these words will live on in the Google machine (but swamped by an ever-growing digital tide). Makes you consider what legacy you will leave and whether that will be one of adding value to society or destroying it. The local government corruption and waste in this state goes pretty deep, and the middle class foot the bill for most of it.

[Looks like Australia is similar to America in many ways. 'Need money for the train' is (I think) identical to 'Need money for gas' which works until you spot the same person needing more train money a week later in a different location (real story - I don't help people any more). We too have cops who sit behind their speed cameras at the base of a hill and catch the cars which naturally gain a little speed on the way down. At least Australian's are not allowed to carry guns .. your account sounds scary].

Michael H said...


I like your 100 year timeline for the freegold transition. In particular, I have two hangups with a flash revaluation: 1. the resulting mining and panning boom, and 2. the response of people with wedding bands, etc.

On a longer timeline, these issues will sort themselves out naturally.


"governments now exist almost entirely for themselves, when of course their original raison d'etre was service to the common good."

Why is it "of course" that governments originally existed for the common good?

I think governments exist to protect the powerful few from the powerless many. In previous time, power meant violence so this relationship was pretty obvious. Nowadays power means money so the relationship is more cleverly concealed.

What is true and what we are told are two different things. All governments like to tell their citizens that they work for the common good, so that they submit meekly to being ruled.

What is changing is not the government, but the recognition of what the government was always about.

Pamplona said...

GM, do you have any opinions on Gold Oil Ratio vs VIX? The two seem to show strong correlation. The reason I ask is, in my mind, this would seem to indicate that gold is still much more of a fear trade than a greed-fueled bubble, even at the highs earlier in the year.
Thanks in advance

GM Jenkins said...

Michael H - you're right - I was talking about purported raison d'etre, not actual history. (I think of Nietzsche's put down of those who presumed social contracts were behind society; the conquering tribes who enslaved other cultures: "what had they to do with contracts!") On the other hand, even with the most cynical view of government, there's a continuum of what you may call justice, wherein the US was originally pretty good. But Ben Franklin's quote is apropos: "A republic, if you can keep it."

GM Jenkins said...

Thanks Pamplona - I'll look at that and get back to you.

Warren James said...

[Anyone evaluating my 'decades of freegold' theory should also reference FOFOA's Happy New Year, in which he reminds his readers that a Ponzi unwind is often a sudden event, and puts forward a good case for why a controlled collapse rarely notifies folk in advance. For the first time ever, I find myself in disagreement (only about the timing) and am sticking with my long-timeframe revaluation theory.] :p

FOFOA said...

"For the first time ever, I find myself in disagreement..."

Say WAT? Have you lost your mind, Warren??

Happy New Year!! ;)

Brian O'Flanagan said...

Indeed Warren, even if you believe in the long timeframe revaluation theory, why take the risk by not positioning yourself for it now?

Warren James said...

Hi FOFOA, thanks for dropping by ;P

Hi Brian, you're quite right and I should disclose that our household has been preparing for (and is prepared for) a Freegold event whether it occurs tomorrow or over the next couple of decades. FOFOA sent me a few good counterpoints to my above theory, which I'll paraphrase quickly:

1. The current demise of the dollar appears to be accelerating exponentially and Freegold will actually make fiat stable and sustainable (so it's appearance should be on the immediate horizon rather than the longer term).

2. The Martin Armstrong graph describes the longer process of coin re-issuing, which does take time - i.e. actual gathering, melting and minting - the Roman's had to do it all by hand, they did not have an electronic printing press like we do today.

He also states: 'The contract market cannot possibly go along for the ride. It makes sense only as long as gold is still at least partly treated as just another commodity.'

I'm wondering if the large gold ETF's are going to play a role in that, as long as they are around it means that gold is still subject to all the distortions which leverage brings, and when I observe the market I see the ETF's growing in size, not diminishing in structure.

Anyway, I'll be keeping an eye on this over 2012 and trying to refine my theories - supported by data of course, from my database which I am constantly working on. But I'm confident and happy that 2012 will not bring societal collapse nor destruction of the Euro - it won't have a comex default either (a $60 price tag on silver would be nice though, I'm bullish).

GM Jenkins said...

Pamplona, if you're still reading this thread, I checked out the gold:oil ratio vs. the VIX. The correlation has indeed become steadily strong (I like to look at 50 or 100 day correlations on stockcharts; otherwise there's too much noise). I guess the one objection i'd have to your interpretation is that, glancing at the 5-10 year history, I wouldn't say in general that times when the correlation btwn gold:oil and the VIX was low/negative were necessarily times of greed buying vs fear (although that certainly seems to be the case for 2011). Am i missing something? Also, I'd be interested to know why you chose gold:oil and not e.g. gold:copper (which has an even better fit, even historically).