2016-2020 The Modern Great Depression

Survive and Prosper – buy gold and silver

About the Author

My name is John Yii and I am a retired Engineer. In 1993, I found my true passion in the financial services industry, specifically in investing and trading equities, commodities (gold and silver) and FX. I have accumulated about 20 years of experience in financial market and in 2004; I qualified with a Diploma of Financial Services. I have learned several top courses ( William D Gann’s Master Time Factor, Elliot Waves, Charles Lindsay’s ABCD methodology ) from a few top traders in the world in my earlier years of trading and that led me to discover my own methodology called H3M+++ ( Hidden Money Momentum trading system). I made and lost money during my trading and investing career, and those successes and losses have taught me about the critical importance of combining fundamental, technical and cycle timing analysis to achieve final success in trading and investing.

I currently trade gold and silver for the short term but invest for longer term time frame. I also trade stocks, indices, Foreign exchange (USD-EURO) and ETFs. I offer information, opinions and commentary, but I also provide investment education and coaching to certain groups of people.

Over the years, I’ve successfully used Fundamental, Technical and Cyclical Timing Analysis to predict major market trends especially gold and silver. I correctly predicted the beginning of the gold-silver market bull in 2001 and subsequently correctly predict the peak of gold and silver in 2011 and thereafter correction and consolidation.

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2016-2020 The modern great depression

Survive and Prosper – buy gold and silver

By John Yii

www.johnyii.com

DISCLAIMER

John Yii is not an investment advisor and therefore all his research offerings, opinions and statements or any publications or newsletters should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any kind of investment purposes. This particular book contain unsolicited general educational information only, without regard to any investor's individual objectives, financial situation or needs. It is also not specific advice or a general advice for any particular investor and therefore, whatever information provided

herein or elsewhere by john yii or johnyii.com is not to be construed as an offer to buy

or sell securities of any kind

Before making any decision about the information provided, you must consider the appropriateness of the information in this document, having regard to your objectives,

financial situation and needs and consult your own financial adviser at all times. Investment in financial products involves risk. Past performance of financial products is no assurance of future performance. The information provided has been obtained from sources deemed

reliable but is not guaranteed as to accuracy or completeness.

All Rights Reserved. Copyright © 2013. This book may not be reproduced, in whole or in

part, by any means, whatsoever, without the express, written permission of the author.

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Acknowledgements

This second eBook is also distilled largely from the ‘the streams of voices’

which flow in our cyberspace, from the dawning richness of the countless

authors, editors, analysts, investors, traders, commentators, bloggers who

share so generously. To them I owe my gratitude.

The undertaking of this worthy eBook would never have been possible without

the support of my family and friends.

Primarily my thanks to my wife, Ming whose encouragement, assistance,

patience, supports, and understanding was critical in completing this

meaningful project.

Very special thanks to Katherine Hsiao who have tirelessly help to search and

compile all the data and charts. The eBook would not have come together

without her charting skill and hard work.

Very Specific thanks to John K Wong, Dr Andrew Chu and Dr Miriam Yii who

all sacrifice their personal time and bear the pain to edit my eBook and make

them readable.

I am particularly grateful to some of my close friends especially Dr Leonard

Chu and his lovely wife Catharine, Lee H Lim, Simon Lee, Lee K Ling who all

inspire me to take up life challenge and move forward to complete the eBook.

Let’s not forget my new friend Wilson Tiong who helps to develop and design

my new functional website (greatly exceed my expectation) and beautiful

eBooks cover.

It is a great pleasure to recognize Ps Simon Eng and Ps Jeremiah Yap who

provides a special prayer in time of my needs.

Most of all, I would like to thank our Creator-mighty God who has endowed

upon us with “hope, faith, love”.

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Dedication

To Miriam and Mark

And the Y generation who cares about ‘economic truth’

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2016-2020 The modern great depression

Survive and Prosper – buy gold and silver

Table of Contents

About the Author Pg. i

Title Page Pg. ii

Acknowledgements Pg. iii

Dedication Pg. iv

Table of Contents Pg. v

Foreword A Word About This Book Pg.vi

Chapter 1 INTRODUCTION- THE COMING GREAT DEPRESSION Pg.1

Economic revelation, False hope and sign precipitate

Depression in 2016, Stock market crash in 2016

Chapter2 FINAL PHASE OF HISTORIC ECONOMIC COLLAPSE Pg.9

Economics – it’s all lies! , 6 shocking data or evidences

Chapter 3 SOMEONE WHO REALLY UNDERSTAND GOLD Pg.29

Professor Antal Fekete, Charles De Gaulle, Ron Paul, John Exter

Chapter 4 HISTORY OF FIAT (PAPER) MONEY COLLAPSE AND Pg.40 THE DESTRUCTION OF ECONOMY Rome’s denarius debasement, China, France, U.S.A.,

Weimar Germany, infamous Fiat money failures 1932-2006

A picture is worth a thousand words – worthless paper money

Chapter 5 THE COMING COLLAPSE OF U.S. DOLLAR Pg.72

Quotes –Morgan Stanley, Peter Bernholz, John Williams, President Hoover,

Matrix of money (debt), City of Mainz, Ron Paul’s report - “Default Now, or

Suffer a more expensive crisis later

Chapter 6 GOLD SILVER & DOW OUTLOOK 2013-2020 Pg. 79

Various Cycle Timing : Gann’s master time factor, Bradley Model

Fibonacci numerical cycle, 8.5 year, 13 year, 17 year, 20 year,

40 year cycle, etc, Armstrong’s economic confidence modal

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Foreword

A Word about This Book

This book is the result of 10 years of “serious observation” for the truth about the global economic condition. It leads me to believe the global economy being is built upon all lies. So BE PREPARED TO PROTECT, SURVIVE, PROFIT AND PROSPER IN THE LOOMING GREAT DEBT CRISIS 2016-2020

You must realise that the largest modern economic decline that has begun in the 2008 Global Financial Crisis has not receded and in fact, it will get worse. Most people do not realise that that we are in the beginning of the final phase of a historic collapse where economic dislocations will cause an unprecedented modern era of depression in 2016-2020. And that will bring even greater hardship than in the 1930s where unemployment hit 25%+.

History dictates that the economy of any nation on mounting debt to GDP ratio of anything more than 100% will eventually crumble.

The global economy is heading into a time of great confusion, uncertainty and turmoil because the governments of major nations like U.S., Europe and Japan simply has simply ignored the fact that the current economic foundation that has been built on debt-based monetary system is totally flawed and rotten. All the debts of these nations have escalated to unprecedented disastrous levels- a level that is beyond repair and will eventually sink the whole world into depression in 2016-2020.

So, I am writing this second EBook to further enlighten you so that you know what is happening in the current fragile economic events and take steps to protect and survive in the coming crisis. But it will also be a time of opportunity, profit and prosper if you are well informed and prepared for the looming great debt crisis.

I encourage you to read this second economic book of revelation with serious

attitude because what we are witnessing today is something that almost no

one has witnessed before. We are now living and moving toward perilous time

ahead.

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CHAPTER 1

THE COMING MODERN GREAT DEPRESSION 2016-2020

“It’s time we faced the truth: America is on a fast track to a full-blown depression that could end up much worse than the Great depression of the 1930s. And this depression cannot be stopped! A temporary bull market serves only to delay the crash a bit longer but increases its certainty.”- The Reverend David Wilkerson “Just because a massive and painful shift in the world order hasn’t happened yet doesn’t mean it isn’t going to happen. The vast majority of people never would have predicted the Great Depression, or the fall of the Soviet Union in the years leading up to these events, even though in hindsight, it seems obvious to us.” Billy Kenneth in Business, Government Spending

“As I have said before, possibly the best definition of a depression is a period when most people's standard of living drops significantly. You can also define it as a period when distortions in the economy and misallocations of capital are liquidated. The distortions are almost always the result of government intervention in the economy, through things like taxes, regulation and currency inflation.”- Doug Casey

Images: Great Depression 1930s

Copyright 2013 by www.johnyii.com – All Rights Reserved 1

This small eBook is a book of economic revelation that carries the message of the coming “modern great depression” and why you should prepare to protect yourself and most importantly how you can profit and prosper in the coming crisis. The phrase "Modern Great Depression" was coined as a way of warning that the unfolding economic crisis is looming in the modern era, and it has been completely ignored by those who should be alarmed (politicians who run the country).

I suggest you also read my other book so that you are able to comprehend more when reading this book of economic revelation. Also, in the first book titled “2016-2020-The greatest bull market of gold and silver in history”, you will be able to learn of events and facts you are not aware of and how will they affect your life in the coming dreadful times.

The global economy is heading slowly but surely maturing into a time of great confusion, uncertainty and turmoil because the governments of major nations like U.S., Europe and Japan have simply ignored the fact that the current economic foundation that has been built on debt-based monetary system is totally flawed and rotten. All the debts of these nations have escalated to unprecedented disastrous levels - a level that is beyond repair and will eventually sink the whole world into depression in 2016-2020. History dictates that the economy of any nation with a mounting debt to GDP ratio of anything more than 100% will eventually crumble.

In regards to confusion, uncertainty and turmoil, one should pay attention to what legendary billionaire financier, Frank Giustra said whilst speaking at the World Outlook Financial Conference in Vancouver earlier in February 2013:

“What we are witnessing today is something that almost no one has witnessed before. To analyse what’s going on requires understanding history and the natural evolution of nations, certain patterns of human behaviour especially with respect to politicians. I study a lot and look at the trends, how we’ve seen the evolution of fiscal and monetary policy the last twenty years, how we’ve seen sort of the breakdown and deteriorating issues of the political system in the US. Then I look at how the public is educated to accept certain things through the media and other special interest groups. Through that, I formulate a range of probable predictions. The problem is that there is no absolute outcome to this because there are so many variables.

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Just like in quantum physics you know there are no absolute everything is measured probabilities so I look at the range of probabilities of the things that are going to happen.

They go from anywhere from just modelling through this next few years with anaemic growth (deteriorating middle class for a number of years) all the way to the other extreme which with social unrest, complete mayhem and collapse, and everything in between.”

He further pointed out that “The reality is that the true fix will require pain, but no one is willing to suffer, whether it is the cutting back on services, or increasing taxes. The IMF has suggested that, in order to get out of this fiscal mess, the US has to raise taxes by 35% and cut costs 85% percent across the board. It is like everybody is on the Titanic right now and they can see the iceberg on the horizon. There are only three ways to get out of this mess: either you are going to cut costs dramatically which is a very difficult pill to swallow (especially as we have very slow growth), or you have to write off the debt, or you inflate it away.”

I think his honest view is a wake- up call for everyone because I believe that the outlook really looks grim as there are no serious or any hard economic reforms being carried out by any governments. They all lack the political will to do so. Most of them do not want to fight for or introduce the workable unpopular policy because it will not get them re-elected. Without any fundamental changes in government’s policy, the ultimate end result could be disastrous. You have to understand that the largest economic decline that has begun in the 2008 GFC has not receded and in fact is getting worse and the modern great depression seems inevitable.

FALSE HOPE AND SIGNS THAT PRECIPITATE DEPRESSION IN 2016

But recently, the Mainstream Media (MSM) leads you to believe that a robust recovery is on the way and because of that, most will be unprepared and hit hard when the world head into the greatest depression we have ever seen between 2016 to 2020, probably worse than 1929 great depression, based on the various cycles that I have studied. One of the most prominent cycles that are more familiar to the traders and investors is W.D. Gann’s Master Time cycle. Gann’s cycle projects that another great depression is looming and is going to strike in 2016-2020.

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You need to be aware that the Government’s and MSM’s report is based on the hope (i.e., propaganda) that the global economy stimulus can overcome massive mounting historic levels of debt, an ever-widening deficit and high unemployment. Those hopes, unfortunately, are as unfounded as like a mirage. Note that history teaches us that simply printing more money to stimulate the economy while creating a perpetual and insurmountable debt will never solve the problem. So, beware of the rising false hope and here again, I want to warn that we are in the beginning of the final phase of a historic collapse where economic dislocations will cause unprecedented depression that will bring even greater hardship than in the 1930s.

Image: Tidal wave of money printing creates worthless paper money and is not solving any economic problem.

It is also noteworthy to pay attention to what Bill Fleckenstein; president of Fleckenstein Capital spoke to CNBC recently about how the $16 trillion U.S. government debt burden and the Federal Reserve's money printing actually distort reality: “The United States has cancer, because we refuse to address our problems,” From time to time we go into remission. The Fed has created bubbles now [with its easing].” “We are in a sweet spot of the bubble, where money printing gets people to believe the economy is getting better. But it won’t”. “Economic data aren’t getting better, the stock market has levitated, and people pretend things are getting better. They act as though things are going to get better. Then when things don’t get better, they get hurt.” “The Fed’s easing distorts reality without really accomplishing anything, Fleckenstein maintains.” 4

“We don’t address the problems. They just get worse. It just takes longer to go where we have to get to, where we have to settle up the imbalances we have from a government spending point.” “This focus on the Fed is a gigantic waste of time. We already know what they’re going to do. They’re going to print money. They told you they’re going to print money.” “They don’t understand that they are the problem.” STOCK MARKET CRASH in 2015-2016 WILL PRECIPITATE MODERN GREAT DEPRESSION

Image: 1929 Wall Street Crash

Hope is also on the rise again for the global stock markets to greatly

outperform other assets investments. I reckon this is due to the false belief in

the cyclical economy’s recovery.

In April 2013, US stock markets are at record highs, the volatility index, the VIX,

is at the lowest point and DOW; S&P registered a five year high. Though I

believe it has some legs (based on technical and cyclical timing analysis) to go

on probably for another 2 years into September 2015 but be warned of the

negative sentiment that will build up towards that time. It is just like a saying

which says “it’s brightest before the night”. Think carefully, how is that

possible for the stock market to rise continuously with widespread unrealistic

optimism (since GFC in 2009) despite the low or negative economy growth and

high unemployment that has been reported recently? 5

The stock market escalates to record highs due to the Federal Reserve’s

massive easing campaign which provides artificial push, not the strength of the

U.S. economy. The economy’s recovery as reported by the Main Stream Media

(MSM) is 100% fake. Euro Zone is registering negative GDP growth in the first

quarter of 2013 and U.S. barely passed the line to record 0.1% pathetic growth.

Be warned! The steroid bull will not charge on forever. The stock markets now

are exhibiting strong rally that mimic those just prior to the crash of 1929 and

1937. As pointed out by the legendary trader Jesse Livermore: "All through

time, people have basically acted and reacted the same way in the market as a

result of: greed, fear, ignorance, and hope. That is why the numerical

(technical) formations and patterns recur on a constant basis."

Déjà vu; is it 1937 all over again? Remember the 1920s era in stock market-

1925-28 bull roll on and suddenly the whole market crashed in the following

year in 1929. It hit bottom in 1932 and rose for the next five years before it hit

a 50% market decline again after a big rally. See chart below:

Fig.1.01 Source: Stockchart.com -1920-1939 Dow Jones Industrial Average

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History told us that three of the biggest market crash of the past 300 years

triggered the obvious and sudden onsets of the great economic depressions:

1720-1784, 1835-1842 and 1929-1932. And also remember that the stock

market decline of 1929 to 1932 was first leg followed by the bear market rally

and finally came the second and another severe leg of the decline in 1937.

FEDERAL INDICATOR alerts “RECESSION AHEAD” or even “CRASH”

Fig.1.02 Source: Federal Research of St. Louis- Every time this index reaches 20%... a recession then hit. In the last 46 years, this has occurred six times already

Remember that I am not warning an immediate crash though this year 2013 will bring great panic and volatility. In fact this year will bring an opportunity to buy low between May-August for another two great years of rising before the great crash ahead in 2015-2016.

I concur with the “Ned Davis Research” report that was published in February this year by Mark Hulbert of Marketwatch.com:

“Anything’s possible, of course. But a careful review of the historical data suggests that the bull market would still have a long way to go if and when the Dow reaches a new all-time high.

That careful review was conducted by Ned Davis Research, the quantitative research firm. Though their study focused on the S&P 500 rather than the Dow Jones Industrial Average, I think it’s safe to extrapolate their results to the Dow — even though the S&P 500 itself remains a few percentage points below its high.

The accompanying table reflects what they found upon focusing on the 13 instances since the S&P 500 was inaugurated in the 1950s in which, following a bear market, it reached a new high. 7

Calendar days between

attainment of new high and

eventual market peak

Gain between attainment of new

high and bull market’s end

Best case 2,711 221.6%

Worst case 132 2.3%

Median of all 13 cases since 1954 417 18.4%

Mean of all 13 cases since 1954 644 40.3%

On average following those 13 cases, according to Ned Davis’s firm, the bull market continued for another 644 days — nearly two years — and, in the process, gained an additional 40.3%. To be sure, this mean is skewed upwards by a few outliers; the median may therefore paint a more accurate picture. But even in the median case, the bull market lasted more than a year more and gained more than 18%.

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CHAPTER 2

FINAL PHASE OF HISTORIC COLLAPSE: CRACKING GLOBAL ECONOMY’S FOUNDATION

'This economic crisis is like a cancer...And if you just wait and wait... thinking this will go away... just like a cancer it's going to grow and it's going to too late. "What I'd say to everyone is to get prepared." - Alessio Rastani

"I'm not upset that you lied to me, I'm upset that from now on I can't believe you" - Friedrich Nietzsche

“My journey into economics began in 1956 when I was a sophomore at Harvard. A classmate was arguing with me that the Federal Government did not have to balance the budget. He was sure of this because his professor had told him so. My thinking was different. “If the Harvard Department of economics did not believe that we had to balance the budget, then they must be a bunch of idiots. I have nothing to learn from such people. I will learn my economics when I’m out of here Good bye John Harvard.” –Howard Katz

Image source: Kevin A. Lehmann

Before we delve into the studies of various timing cycle that pin-point the coming bad time- depression era, we should take a hard look on all the economic lies (as reported by governments and MSM) and signs that point out that the global economy is getting worse despite the tidal wave of money printing to revive the economy.

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ECONOMICS – IT’S ALL LIES!

However, because of all the misinformation and nonsense the MSM and government has reported, let's me tell you the truth.

The truth is : Now, Look across the globe: The Euro debt crisis…, high unemployment..., slow or negative GDP growth..., negative real interest rate, the China slowdown… the Fed’s massive dollar printing to inflate its escalating trillion debt, currencies war( devaluation). U.S., Japan, Europe and even China are (doing the same) printing free money out of thin air to keep exports cheaper and competitive. There is no economic recovery, and there are no signs that a recovery is coming. There are massive problems everywhere. It is not going away and the worst is yet to happen. Most of the true economic indicators suggest that we are on a path to the modern era of economic depression that will send the shock wave to all nations and people who are unprepared.

You have to realise that the past and the recent market economic turmoil is due to an unprecedented financial bubble that's been many, many years in the making – billions of dollars worth of bailouts, deficit spending, excessive borrowing (living on debt), printing free money, currency war, and manipulated low interest rates. The trader and investor Alesio Rastani’s video warning: 'This economic crisis is like a cancer’ that went viral on YouTube indeed spoke up the truth. "And if you just wait and wait... thinking this will go away... just like a cancer it's going to grow and it's going to too late." "What I'd say to everyone," continues Mr. Rastani, "is to get prepared."

As I waded through the massive floods of economic data and world events recently, my shocking prediction of coming ‘modern great depression’ are slowly but clearly unfolding. Here's some of the rundown that might shock you though you won't hear even a whisper (from MSM) about how bad they can affect your financial life now and in the future.

1. Despite 4 years of more than 10 trillion dollars of stimulus push –money printing, deficit spending, U.S. is still recording a negative growth rate of 0.1% in the 4th quarter of 2012 and a mere positive growth of 0.1% in the 1st quarter of 2013 after some manipulated adjustments. This is not making sense, isn’t it? Quantitative Easing (money printing) is not the solution but the path to currency destruction and loss of purchasing power. Growth definitely is not picking up as President Obama’s policy of raising taxes is irrational and counter-effective.

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Take note of what The Christian Science Monitor (CSM) wrote, "In a survey released 28th February, the National Retail Federation (NRF) said some 46 percent of consumers plan to spend less as a result of the payroll tax increase. One-third said they will reduce dining out and one-quarter will spend less on "little luxuries," like manicures and trips to coffee shops. According to an estimate by Citigroup, just the expiration of the payroll tax cut will move $110 billion out of consumers' pockets.

Fig.2.01 U.S. GDP GROWTH CHART Source: Washington Post

Look at the following 2 charts, MSM is not telling you how unforgiving is the decline in the purchasing Power of U.S. Dollar. It is just a matter of time, USD dominant position as world reserve currency will be replaced by China’s “Yuan”

Fig2.02 source: Bureau of Labor Statistics 11

Fig.2.03 Source: Classical Numismatic group

The Euro zone is facing the same fate. Look at euro zone economic report that

was released on 14th Feb.2013 via Bloomberg: The euro-area recession

deepened more than economists forecast with the worst performance in

almost four years as the region’s three biggest economies suffered slumping

output. Gross domestic product fell 0.6 percent in the fourth quarter from the

previous three months, the European Union’s statistics office in Luxembourg

said today. That’s the most since the first quarter of 2009 in the aftermath of

the collapse of Lehman Brothers Holdings Inc. and exceeded the 0.4 percent

median forecast of economists in a Bloomberg survey. The data capped a

morning of releases showing that the economies of Germany, France and Italy

all shrank more than forecast in the fourth quarter. European Central Bank

President Mario Draghi said last week that confidence in the 17-nation bloc

has stabilized and the ECB sees a gradual recovery beginning later this year,

though the situation is “fragile.”

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Fig2.04 source: Bloomberg

The above chart shows the reality for Euro zone, the world largest combined economy has a very high chance of falling apart because all the problems particularly sovereign-debt crisis and banking crisis which were dragged into the light of day by GFC in 2008 have simply been swept under the rug by excessive money printing. And that's just the tip of the iceberg.

Image: A pedestrian passes a closed store advertising sales discounts in its empty window displays in Athens. Photographer: Kostas Tsironis/Bloomberg

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2. Manipulated inflation figure

Probably, most people know that Government lies about their core inflation level. Do you believe that inflation is only 2% every year for the last 10 years? You should have an easy answer if you look at the following charts let alone look at the price of things around you.

Fig 2.05 Source: Shadow Government Statistics. 1970-2012 U.S. Inflation Data

Look at the chart above: The red line indicates official inflation data according to Bureau of Labour Statistics. The gold line shows the higher inflation figure based on 1980 method of calculation.

Let’s use the following prices of 20 goods to determine that the official inflation figure issued by the government is a manipulated figure. The following data is sourced from Peter Schiff of Euro Pacific capital, who presents the data on YouTube.

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Image: See how the offcial figure mis-matched with the the price rise in a basket of 20 goods in 2012

Fig2.06 Source:Youtube/Peter Schiff

Using 1980methodology, you can truly see that the offcial figure closely matched with the the price rise in a basket of 20 goods. But using the 2012 methodolgy, the price of goods rise about 40% more than the offcial figure. And if you take other products or services like the following Newspaper/Magazine and Insurance Cost and fuel into calculation, the true figure may easily rise to 6% or more and not only 2% as officially reported

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Fig2.07 Source:Youtube/Peter Schiff

Fig2.08 Source:Youtube/Peter Schiff

3. The Effect of Continuous Unlimited money-printing from the Federal Reserve, European Central Bank, the Bank of Japan.

Image: money printing machine

Latest reports tell us that The Federal Reserve is committing to the purchase of $85 Billion of bond and mortgaged backed securities every month. 16

In Jan 2013, the new Prime Minister, Shinzo Abe, elected only 1 month ago, officially pledged to print unlimited amounts of Yen to stimulate the long crippled economy until inflation reached 2%. He will soon be installing a new Bank of Japan governor who is in favour of his policies. In fact, all countries are racing each other to bring their currencies to the bottom to boost their export competitiveness. All major currencies are on the path to destruction and the loss of purchasing power. Just look at the escalating cost of all the goods that you buy in the following chart.

Fig2.09 Source: Casey Research

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Fig2.10

The effect of unlimited money supply on gold price

The chart below shows The Fed’s expansion of money causes the gold price to soar

Fig2.11 Source: Merrill Lynch

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3. Bankrupt Greece being bailed out, living on life support. Spain, Italy, France soon going down the tubes.

Read how France's employment minister, Michel Sapin's on 29th Jan, 2013 questioned the economic policies of President Francois Hollande, admitting that the European country is “totally bankrupt.”Meanwhile, a recent poll in the French daily Le Figaro showed that 80% of the population agree with Sapin’s viewpoint. “There is a state but it is a totally bankrupt state,” said Sapin, adding, “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”According to figures published by France’s National Statistics Institute (INSEE) in September 2012, France’s national debt has reach 90 % of its gross domestic product (GDP).

Fig2.12 source: Eurostat

Any Debt-GDP Ratio exceeds 60% is considered ‘dangerous’ and may come to a point of no return.

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Mac Slavo (SHTFplan.com) reported in Jan 2013 the following story:

Greeks Fight For Food: "I Never Imagined That I Would End Up Here" Not long ago Greeks were enjoying high paid salaries, early retirements, excess cash, and seemingly never ending economic growth. Today, just a short time after a financial collapse that rocked global financial markets, Europe’s darling has turned into a frightening example of what happens when governments and their people take on more debt than they can ever hope to repay. The end result is a warning to the rest of us. “I never imagined that I would end up here,” said Panagiota Petropoulos, 65, who struggles to get by on her 530-euro monthly pension while paying 300 euro in rent.“I can’t afford anything, not even at the fruit market. Everything is expensive, prices of everything are going up while our income is going down and there are no jobs.” A similar grinding down should be apparent in other Western nations, namely the United States, where we’ve seen employment decline unabated over the last decade and tens of millions of people added to government funded social safety nets like food assistance and disability.

U.S. billionaire investor George Soros compared the euro-zone crisis with

factors that led to the Soviet Union’s collapse in the early 1990s.

“Europe is similar to the Soviet Union in the way that the euro crisis has the

potential of destroying, undermining the European Union,” he said in a

debate on public policy education. “With the profound social, economic and

moral crisis that Europe is in, we can see a similar process of disintegration.”

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4. No Government Has Ever Survived a Debt Crisis when its DEBT to GDP ratio exceeds 100%

The U.S. debt situation is a lot worse than any politician in Washington is willing to admit. The Debt ceiling of $16.2 trillion has been reached and now Washington is seeking a new approval from the Congress to raise the debt ceiling in 18th May to $18 trillion. As of the 6th of March 2013 they have kicked the can down the road again. Remember, when you add up government, corporate, personal, unfunded liabilities and obligations, the debt are amounting to $145 trillion. Based on that, the actual debt-to-GDP ratio rises to something on the order of 400%. That comes to approximately $328,404 for each and every household in the United States.

Astronomical debt kills the nation. Can you imagine how much is one trillion?

“If you spent a million dollars a day going back to the birth of Christ, that wouldn't even come close to just one trillion dollars — $145 trillion is a staggering figure.” Rep. Darrell Issa, R-Calif. Chairman of the House Committee on Oversight and Government Reform

In the video (that went viral) posted on YouTube, Tony Robbins uses a fun illustration to help put in perspective how large a “trillion dollars” really is. If you had a million seconds to do something, would you consider that to be a long time? Well, it turns out that a million seconds is only about 12 days. What about a billion seconds? Is that a long period of time? Well, yes, a billion seconds is close to 32 years. So that is definitely a lot longer than a million seconds. What about a trillion seconds? How long do you think that is? Well, a trillion seconds is about 31,688 years.

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U.S. Debt- Generational theft of an enormous magnitude

Now, listen to criticism made by the founder of The Home Depot (largest American retailer of home improvement and construction products and services). The nation's debt as a percentage of the economy is going to cause a fiscal storm, Home Depot Founder Kenneth Langone told CNBC on Tuesday 19/02/2013. President Barack Obama's roadmap to reduce the deficit and invest in the future is "generational theft of an enormous magnitude," Langone said in a "Squawk Box" interview. "The fundamentals haven't changed ... And we don't know when the storm is going to hit," he predicted. "It has to happen. If you look at our debt to GDP, eventually you reach a point where there's no turning back."He used an analogy to make his point. "If you had one meal left, and you had your grandchild with you, would you eat if or give it to your grandchild?"He said all people would say "give it to my grandchild." But pursuing the president's vision, he argued, "[Is] eating the grandchildren's breakfast, lunch and dinner right now. And the [grandchildren] haven't been born yet."

Fig2.13 U.S. National Debt

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Over the last two years the government has printed $2 trillion, with another

200 billion in the next year (as a minimum), and also saddled with an unstoppable huge deficit which will balloon from $1.3 trillion to at least $2 trillion per year. Now look at what’s already started to happen…It has come to the point of NO RETURN like Japan whose economy is still limping on despite massive stimulus for the last 22 years. Virtually, it is impossible to repay the $16 trillion debt. If history has taught us anything, it’s that governments can’t spend their way out of the astronomical debt which is suffocating the U.S. economy today.

Fig 2.14 Source: Agora Financial

Let take a look at other scary economic data and facts published by The Economic Collapse Blog that tells that the U.S. economic situation is getting worse

Social drama (increasing poverty)

In December 2008, 31.6 million Americans were on food stamps. Today, a new all-time record of 47.7 million Americans are on food stamps. That number has increased by more than 50 percent over the past four years, and yet the mainstream media still has the gall to insist that “things are getting better”.

Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps.

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Right now, approximately 48 percent of all Americans are either considered to be “low income” or are living in poverty.

According to one survey, 77 percent of all Americans are now living pay check to pay check at least part of the time.

Today, the wealthiest 1 percent of all Americans own more wealth than the bottom 95 percent combined.

One recent survey discovered that 40 percent of all Americans have $500 or less in savings.

(UN) employment deteriorating

The percentage of working age Americans with a job has been under 59 percent for 39 months in a row.

If you can believe it, approximately one out of every four American workers makes 10 dollars an hour or less.

Barack Obama has been president for less than four years, and during that time the number of Americans “not in the labour force” has increased by nearly 8.5 million. Something seems really “off” about that number, because during the entire decade of the 1980s the number of Americans “not in the labour force” only rose by about 2.5 million.

Economy deteriorating

The U.S. share of global GDP has fallen from 31.8 percent in 2001 to 21.6 percent in 2011.

The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row. CONMAN CHART

Corporate profits as a percentage of GDP are at an all-time high. Meanwhile, wages as a percentage of GDP are near an all-time low.

There are four major U.S. banks that each has more than 40 trillion dollars of exposure to derivatives.

Inflation

Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

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Image: Slow decay: By comparison, the once-bustling but now derelict Packard Motor Plant in Detroit is a stark example of the decline in U.S. economic power

4. Soaring Unemployment everywhere

Spain's unemployment rate is 26% and is rising; unemployed youth is soaring to over 50%. Civil unrest, riots could escalate and spread...

Fig.2.15 Source: Euro sta

In November 2012, the youth unemployment rate was 23.7% in the EU27 and 24.4% in the euro area, compared with 22.2% and 21.6% respectively in November 2011

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Italian Unemployment reached 38.7%

As reported in February, 2013, Italy’s unemployment rate jumped to 11.7 percent in January to reach its highest level for at least 21 years. Youth unemployment also hit an all-time high of 38.7 percent since the current statistical series was begun in 1992. You may not realise how serious the problem is if you never experience this kind of situation. Perhaps statement made by Martin Armstrong of Armstrong Economics (of Princeton Economics fame) below may shake you out a bit. 26

“If we do not stop this nonsense and SERIOUSLY reform the world monetary system, there will be bloodshed in the streets. You cannot destroy the livelihood of people like this and expect to survive.”

Today, the U.S. government reports that nearly 8% of its citizen is out of work. But that figure has been skewed to hide how dire the situation really is. The true rate of unemployment, when including under-employment, is 17%, according to Bloomberg! In fact, during Obama’s first two years in office, this figure has averaged 16.5% a month! The highest mark ever reached pre-Obama was 15.2% during the recession brought about by the 1970s! The government's most widely publicized unemployment rate measures only those who are out of a job and currently looking for work. It does not count discouraged potential employees ( for 27 weeks and over as shown in the chart below ) who have quit looking, nor those who are underemployed — wanting to work full time but forced to work part-time. Look at the following chart and see yourself how terrible is the figure.

Fig 2.16

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6. Geopolitical risks: The Middle East is in flames. Japan and China and North Korea. Civil wars and bloodshed are escalating all over Egypt, Syria, Libya and Iraq. ISRAEL-IRAN is potentially a very large powder keg: The Israeli-Palestinian conflict is in an explosive situation, never receded and is capable of causing the entire region to break into an all-out war. North Korea is not keeping quiet, threatening to strike South Korea and its counterpart- U.S.A. Japan and China are squabbling over the Senkaku islands in the East China Sea and have escalated their rhetoric about keeping them. We are now heading into a cycle of war that may fall upon us in 2014

Image: “Iran’s nuclear program has put it on a collision course with the United States and Israel as both countries reject Iran’s insistence that the program is for peaceful civilian purposes. The chilling prospect of military confrontation in the Middle East between Israel and Iran looms large. But is war the inevitable outcome or can it be averted?” Source:

Geopolitical monitor 27

CHAPTER 3

SOMEONE WHO REALLY UNDERSTAND GOLD

“A currency system must be based on an indisputable money base that doesn’t bear the mark of one country. There is only one standard that meets those criteria and that must be gold.” Charles De Gaulle

“You can always eat what gold will buy”- Professor Antal Fekete

“For over 6000 years of history gold is always money and paper money fails”-Ron Paul

“The final link between the dollar and gold was broken. The dollar became nothing more than a fiat currency and the Fed [and especially the banks] were then free to continue monetary expansion at will. The result... was a massive explosion of debt.”- John Exter

Fig 3.01 and 3.02 Chart above: Overpriced-not so! 29

Warren Buffet probably is the only billionaire who can’t understand gold because he loves valued stocks with good dividends and he does not need Gold to protect his assets as he has billions of paper money. He thinks Gold is overpriced and has little value. “You can’t eat gold” is a sophomoric statement used by Warren Buffet intended to ignore the value of gold in times of economic and sovereign-debt crisis.

On the positive note, I like to particularly mention three guys here, who really understand gold. One is Professor Antal Fekete who is a leading authority on Gold and is also a renowned mathematician and monetary scientist.

He is a proponent of the gold standard and critic of the current monetary system. He dismisses Buffet’s absurd statement by saying, “You can always eat what gold will buy”.

The second one is 2012 Republican Presidential Nominee Ron Paul.

Image: Ron Paul

Ron Paul recently in his interview with Bloomberg television made the following comment: we are in a currency war and we have been for decades. He noted that governments have always competed against each other’s currencies even under Bretton Woods. It has always been a form of protectionism and will make people want to export more. He said that for over 6000 years of history gold is always money and paper money fails. I strongly suggest you read his book titled “The Case for Gold”

The other one is the Late John Exter who was a central banker during the time of President Nixon’s era. He made a fortune in gold investment from 1970 till the time he died in 2006. 30

The following reports are reprints that are noteworthy to read:

The First Report

There’s still a case for gold- by Ron Paul · November 9, 2012

Thirty years after its first publication in 1982, The Case for Gold remains remarkably timely. The Case for Gold is the minority report of the U.S. Gold Commission and lays out a thorough and comprehensive defence of sound money. Today, The Case for Gold remains a timeless piece of scholarship, offering successive generations both a prescient warning and a path to sound currency and a stable U.S. dollar.

When Lewis Lehrman and I submitted this minority report, it had been 10 years since Richard Nixon, by executive fiat, ended the last vestiges of the gold standard. Those intervening 10 years should have shown us again what all of human history teaches: When a nation adopts paper (which can be printed without limit) as the basis of its monetary system, the results cannot be good for the people. The elites and the government can fare pretty well for a time, but the people suffer in the end. Paper money experiments, usually adopted as temporary expedients, do not end well for anyone.

The 1970s was a decade of economic malaise, resulting from the U.S. government’s decades-long loose monetary policy. Outflows of gold throughout the 1960s led to President Nixon’s decision to close the gold window in 1971, severing the final link between the dollar and gold. The next several years witnessed the emergence of stagflation, as both inflation rates and unemployment rates rose in unison. Inflation rates soared into double digits by the end of the decade, while unemployment rates continued to rise, peaking at nearly 11% in the early 1980s. It was against this economic backdrop that the call came to establish the U.S. Gold Commission.

In 1980, Sen. Jesse Helms introduced an amendment to a Senate bill, and I introduced a similar amendment in the House, calling for the establishment of a commission to examine the use of gold in the monetary system. Although the legislation establishing the commission was signed into law by President Carter, his loss in the 1980 presidential election meant that President Reagan — a public supporter of the gold standard — would be responsible for appointing many members of the commission.

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While President Reagan was sympathetic to the gold standard, he did nothing to restrain the anti-gold members of his administration. As a result, the Gold Commission was packed with establishment supporters of fiat money and the Fed. Thus, the deck was stacked against the pro-gold forces from the outset.

Despite the commission’s ultimate endorsement of the fiat paper money system, the commission’s work resulted in positive developments: the eventual adoption of legislation to authorize the minting of gold coins by the United States Mint and the publication of the commission’s minority report as The Case for Gold. And the intellectual case for gold put forth in the commission’s minority report provided the underpinnings for the continued drive toward a restoration of sound money.

Most of the historical research in The Case for Gold was undertaken by the eminent Austrian School economist Murray Rothbard. Rothbard was the leading scholar in America’s monetary history. His work makes it is only too clear that government intervention into monetary affairs is at the root of all economic crises. The Case for Gold explains the numerous interventions, the disastrous effects of those interventions, and the steps needed to free the markets in order for gold to return to its rightful place as the ultimate commodity money.

We predicted in this report that without substantive change, the nation would experience continued economic hard times, economic cycles, dollar depreciation, government growth, and the continued diminution of human liberty. Despite periodic illusions of rising prosperity that turned out to be false booms, this prediction turned out to be indisputably true.

Since that time, nothing has worked to restrain government growth. We’ve lost a decade of economic gain in the 1990s, average Americans have less disposable income than any time since the 1970s, and the dollar has fallen in value by 82% since 1971. Median income has risen only 12% in real terms in that entire period. The 1982 dollar is now worth 42 cents. A $1 trillion government debt of those days is now a $16 trillion government debt. The banking system is broken. Taxpayers and savers are being looted daily at unprecedented levels to sustain a system of zombie banks, bad debt, high unemployment, low business creation, and bankrupt government. This is why many young people today despair for their future.

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It could have been different. Back in those days, we could have, as a nation, embraced sound money and spared ourselves all this suffering. The means to make a change were right there, but the political will was lacking. Paper money makes life too easy for those who want to extend their rule over society. It lets leviathan out of its cage. It removes all discipline from the federal government that state governments, businesses, and households deal with every day.

How to make a change? In this report from 1982, we suggested many different paths to reform: competitive currencies repeal of legal tender, redefining the dollar as a certain unit of gold, juridical changes that enforce the monetary clauses of the Constitution as they read in plain language, the application of standard free-enterprise competition to the banking industry, and more.

Any one of these reforms would have been an excellent step. Instituting all of them would have restored sound money and spared us the gruelling and continuing economic problems that are slowly killing the American dream today.

Today, in light of technological developments, we can add more paths. The rise of digital networks could enable unprecedented monetary entrepreneurship, with digital currencies and new payment systems, as well as new banking and lending structures that bring together consumers and producers in genuine market relationships. But it turns out that such development is seriously hobbled by regulations and monopolization. Simply put, free enterprise in money and banking is illegal. At a time when digital economics are revolutionizing all sectors, money and banking seem forever stuck in the analog age and the errors of the past.

I did my best during my presidential campaign and with my book End the Fed to make money a public issue, a topic on the table. I sought to break the silence. The political class largely ignored what I was saying. As this economic reality becomes more evident, however, the political tides begin to change as well.

Not since The Case for Gold’s initial publication in the early 1980s has discussion of gold been so widespread among the punditry class and within the financial press. Investment in gold is no longer the domain of long-derided “gold bugs,” but rather an integral inflation hedge for ordinary investors ravaged by the decline in their purchasing power.

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The Republican Party recently embraced a gold commission in its party platform. No less than Forbes magazine has called for serious consideration of a gold standard. And even former Federal Reserve governors are beginning to question the wisdom of the Federal Reserve’s monopoly on currency creation and are calling for a free market in money.

I’m thrilled today that the young generation has become excited about the topic. They now see that the Fed is more than another Washington bureaucracy. They see it as a threat to their future. As a result, it is not unusual for Fed employees to look out their windows and see groups of protesters on the sidewalks. This is all to the good. There is also serious pressure on the Fed to be more public about its operations. Its power no longer goes unquestioned.

The Fed’s paper money system is the major source of economic suffering today. It is the reason that Congress can’t control its spending. It’s why it can fund wars and the police state. The paper money monopoly distorts economic signals and causes booms and busts. It robs the American people with the insidious tax called inflation. We must never forget that the Fed has the massive power it does only because of paper money. If it were restrained by a gold standard or monetary competition, the Fed would be a menace, but not a mortal threat. As it is, the Fed, and, by extension, the government itself, holds our entire economic future hostage.

The most conspicuous policy of today that harms the middle class is the Fed’s “zero interest rate policy.” The idea here is to inspire lending and give the economy a boost. It has done nothing of the sort. Instead, it acts as a method by which the Fed is permitted to pay a rate of return on bank deposits in an environment that is risk-free for the industry.

Banks are now in the unprecedented position of ignoring their customers (both depositors and would-be borrowers) and still enjoying a high rate of return on their balance sheets sustained by Fed-created money and an unlimited guarantee on deposits courtesy of federal deposit insurance. This is several steps beyond the old “too big to fail” doctrine and one or two steps shy of total nationalization.

These are the types of extremes that the Fed has pursued to sustain an unworkable system. This is a predictable trajectory: from paper money to total government control.

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Each new step away from free-market money creates new problems that seem to cry out for more intervention, which creates more problems, and so on until the entire system unravels. And this is precisely what we are seeing.

The risks are very high for the middle class. The incredible bust of 2008 might turn out to be just a warm-up. Another, even worse meltdown threatens because rather than face reality, the Fed papered over problems. As a result, hyperinflation is a real possibility, and it is not possible for the Fed to simply pull a lever to stop it once it starts. Bank runs will continue to threaten. The dollar will continue to lose its purchasing power. Government will continue to grow.

But now with “zero interest rate” policies, we are seeing something else. It is no longer possible to make money through saving money in the normal way that economic structures would provide in a normal market. Saving is no longer rewarded with even a normal rate of return. To be sure, the insiders find ways to make money regardless through risky and far-flung techniques. It is the middle class — the people who live honestly and work hard to provide for themselves — who are being harmed.

How much more evidence do we need? A failed system has proven itself a failure too many times. I will once again issue this challenge: Reform the monetary system or strangle the future of freedom itself. This is the choice we face. It is not too late. And such reform has never been easier. The government should permit free enterprise a role in the management of money. Let the entrepreneurs take over where the Fed failed.

In an ideal world, we would see the dollar made good as gold. This would be the first action of a responsible Congress and president. But even without reforming the dollar, it should be legal for producers and consumers to migrate to other market-based systems of money and banking.

The need for reform has never been more urgent. I’m pleased that a revived Laissez Faire Books, an institution I depended on to provide literature in my early years in Congress, is bringing out a new edition of The Case for Gold to teach money and banking to a new generation and to show the path forward.

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The case for reform is fundamentally the same today as it was when it was first published. The principles never change. Freedom and sound money are inseparable. Money must be returned to the people to manage and be taken away from the government and its planning apparatus at the central bank. Socialism works in no area of life. Freedom works in every area.

The Second Report JOHN EXTER: THE CENTRAL BANKER FOR ALL TIMES John Exter (1910-2006)

John Exter was an American economist, member of the Board of Governors of the United States Federal Reserve, and founder of the Central Bank of Sri Lanka in 1950. He was famously known for creating Exter's Pyramid- an inverted theory of liquidity. His pyramid states that gold is the most liquid asset which forms the small base of most reliable value. In other words, his economic views are very different from well known economists like John Keynes and Milton Friedman. Keynes prefers printing money (or borrowing) to create full employment and. Friedman believed that without gold, free market forces would stabilize currencies and by expanding the money supply a deflationary depression could be prevented.

John Exter was a member of the Council on Foreign Relations. He died in 2006 at 95. He believed that in financial economic crises Gold will rise. He probably was the first person to argue for gold as a deflation and inflation hedge.

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The following is an excerpt : How Exter, an economist, a central banker and

investment banker, was to make a fortune in gold is told by W A Wijewardena,

Deputy Governor of the Central Bank of Ceylon, in “John Exter –Central Banker

For All Times” an article published on the first anniversary of Exter’s death at

95 on February 28, 2006.

With a huge fortune made on the gold market by using his own expertise on

the foresight of irresponsible central banking and its inevitable consequences,

Exter took an early retirement in 1972 and went into private consultancy work.

According to his own admission, the prospect for his fortune on gold dawned on

him after a friendly debate he had in 1962 with his onetime Harvard buddy and

Nobel Laureate Paul Samuelson. In that debate on why the dollar was

becoming weak and USA was losing gold, Exter gave his diagnosis which was

based on his experience with the Federal Reserve System. “Paul, it is very

simple. The Fed is printing too many dollars and they flow out of the country

into foreign central banks who demand gold” Exter is reported to have said.

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But, Paul Samuelson did not accept it and wanted to explain the malady in

terms of productivity differences between USA and other countries, namely,

Europe and Japan. Samuelson’s thesis was that the latter category of countries

had a higher productivity than USA and therefore the dollar was becoming

weaker. Exter says that he countered Samuelson saying that Japan was in more

trouble than USA, because “the Bank of Japan was running its printing press

even faster than the rest of the central banks around the world” Exter had

decided then and there that the irresponsible government expenditure by the

Kennedy administration could not keep the dollar stable in the long run and one

day, gold would become the preferred asset by the world’s nations. Hence, he

says that he converted all his savings into gold based assets and waited

patiently. He was amply compensated in 1971 when the US government was

forced to sever dollar’s link with gold under the gold exchange standard and

allow the gold prices to be determined in the free market overnight, gold prices

doubled from $35 per ounce to $70 per ounce. So did the gold based assets

portfolio held by Exter.

When President Nixon closed the gold window in 1971, Exter made the following comments which come true today: The final link between the dollar and gold was broken. The dollar became nothing more than a fiat currency and the Fed [and especially the banks] were then free to continue monetary expansion at will. The result... was a massive explosion of debt. Gold Wars, Ferdinand Lips, Foundation for the Advancement of Monetary Education, New York (2001)

The following is another one excerpted from an interview with a Money

changer in 1991. Mr. John Exter who was certain that depression was coming

and would be greater than 1929-1939 depression.

“I lived through the great depression. I remember it vividly. I know what it did

to people. I remember the 25% unemployment. So I’m very unhappy when I

have to say this depression is going to be worse.

A time will come when housing prices will weaken so much that many people

who bought houses recently will lose all their equity. Once they lose their

equity, they may say: “Why should I go on paying the bank? Why don’t I just let

them have it?” So I think you’re going to have defaults on mortgage loans and

foreclosures… 38

More foreclosures, of course, put more pressure on home values. Then more

defaults-and when people start to default on their debts, troubles multiply. This

is one reason why I think we cannot avoid a banking collapse.

I think people have rather been seeing—in their heart of hearts—that a

depression is coming, or at least some sort of hard times…When your income

shrinks and you have a debt burden, the debt burden becomes more and more

onerous-and you get desperate to borrow…I expect the government to respond

to the deflation by trying desperately to re-inflate. I expect huge budget

deficits. So I expect the dollar ultimately to become worthless.

The Federal Reserve has already defaulted-gone bust. When I was a young

man, the Fed had to redeem its liabilities in gold at $20.67 per ounce. As a

matter of practice, any of us could go to any bank in the US and write a $100

check and take out five $20 gold pieces. To maintain that obligation, the Fed

had to avoid borrowing short term and lending long term. But it didn’t. As a

result it had its own liquidity squeeze and defaulted on its IOUs-the paper

dollars circulating-are not promises to pay anything. They’re IOU nothings.

Paper is worthless as a store of value. The only thing that can give the US dollar

any value is its promise to pay something that is a good store of value-primarily

gold-to the holder. The government now has welched on that promise, so these

paper IOUs are not really worth anymore than the paper they are printed on.

Sooner or later the public will catch on and the dollar will become

worthless…As the crisis intensifies; as the results of the liquidity squeeze

become apparent and illiquid debtors start to default; as the depression and

deflation set in; gold will once again emerge as the supreme store of value.

…This is hard for me to say, for I am a banker: On the subject of income, I’d

definitely stay away from banks. Bank deposits are paper IOUs. A bank owes

you Federal Reserve notes. Even Federal Reserve notes are not good. A bank is

even worse because you have the added risk that it will default on its promise

to pay such notes. Remember: gold never defaults.

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CHAPTER 4 HISTORY OF FIAT (PAPER) MONEY COLLAPSE AND THE DESTRUCTION OF ECONOMY

"We learn from history that we do not learn from history." - Georg Wilhelm

Friedrich Hegel

"Progress, far from consisting in change, depends on retentiveness. When

change is absolute there remains no being to improve and no direction is set for

possible improvement: and when experience is not retained, as among savages,

infancy is perpetual. Those who cannot remember the past are condemned to

repeat it." - George Santayana

“What experience and history teach is this — that nations and governments

have never learned anything from history, or acted upon any lessons they

might have drawn from it.”- Georg Wilhelm Friedrich Hegel, Lectures on the

Philosophy of History (1832)

Image: U.S. dollar: Fiat Ghost Wikipedia- Sweeping bills in Hungary in 1946

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History tells us that excessive money printing always lead to the destruction of currency and the collapse of the nation’s economy—from ancient Rome in the first century, to 11th century China or In the Ming dynasty, to revolutionary France and America or to Weimar Germany, to Hungary in 1946 and to the present —you'll find that EVERY fiat currency has ended in devaluation and eventual collapse and so does the economy which houses that currency.

If history speaks anything, the US dollar will be devalued soon, probably in 2014 and gold will rise as they are inversely related.

The study pointed out that the average age for all existing “paper currencies”

in circulation is only about 40 years. Based on the study presented through

David Morgan, Silver Specialist and was published in summarised form by Gold

Silver worlds about 600 paper forms of money created over the past 900

years have now ceased to be in circulation. There were a few reasons behind

the failures like declarations of independence, monetary unions, war or

hyperinflation. Let’s take a look at some cases of unbelievable currency

destruction in history.

Rome - The Denarius

Rome was the first example in history in regards to the debasement of a

currency though it was not in paper form. The currency at that time was called

the ‘denarius’ – a silver coin. Why and how was the Denarius debased?

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In the first century, the Roman Empire was the largest in the world. But at one

time during that century, unemployment levels were at all time highs and

rising in the cycle of economic decline. In order to exert its influence as the

powerful nation ( like U.S today ) and despite the economic downturn, the

administration still spent record amounts of money on public works, projects,

and food programmes to feed the population. They even increased money

supply to support the military in order to protect their interests around their

world. Because of massive deficit spending, the government started to

manufacture more money in order to pay the bills. As a result, the hyper-

inflationary destruction of currency set in causing the seeds of the downfall of

the empire. The government continually devalued their currency at the time

which was gold and silver. They clipped coins and mixed them with lesser

metals like copper, thus reducing the amount of silver (hence value) of the

currency and by the time Claudius II took the throne in 268AD, the value of the

silver coin had dropped more than 90% as shown in the following chart.

Source: Wikipedia – Emperor Claudius II

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Rome - The Denarius –Currency debasement

Fig 4.01 Roman Currency devalued

CHINA

China is no exception and was the first country in the world manufacturing paper money during the Tang Dynasty. One of the typical cases is in the 11th century when a bank in the Szechuan province issued paper money in exchange for iron coins. Following the acceptance of this form of money, a lot of paper money was printed to fund an ongoing war with the Mongols and eventually inflation began to take hold. The following is an excellent quote taken from The Daily Bell:

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“China, one of the world's most ancient civilizations, is said to have had no less

than eight separate interregnums of fiat currency – each collapsing and then

being replaced by another. In the 1800s, fiat money was even banned by the

Chinese. Today, however, the Chinese government is once again a user of fiat

money along with the rest of the world. Fiat money has never been as

prevalent perhaps as in the modern age. But that doesn't make it any healthier

or less prone to failure. Those who ignore history are doomed to repeat it”.

Wikipedia: Yuan dynasty banknotes were the earliest fiat money.

FRANCE

During the French Revolution, the National Assembly issued bonds backed by seized church property called Assignats. These evolved into fiat legal tender money, were overprinted and caused hyperinflation. Napoleon replaced them with the franc in 1803, at which time the assignats were basically worthless Despite the fact that the assignat is normally considered to be the currency of this time, it was actually the mandat the experienced the peak month of hyperinflation.

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Start and End Date: May 1795- Nov. 1796

Peak Month and Rate of Inflation: Mid-Aug. 1796, 304%

France – 5 livres, 1793

Source: Wikipedia

UNITED STATES

During the Revolutionary War, when the Continental Congress authorized the printing of paper currency called continental currency, the monthly inflation rate reached a peak of 47 percent in November 1779 (Bernholz 2003: 48). These notes depreciated rapidly, giving rise to the expression "not worth a continental."

A second close encounter occurred during the U.S. Civil War, between January 1861 and April 1865, the Lerner Commodity Price Index of leading cities in the eastern Confederacy states increased from 100 to over 9,000. As the Civil War dragged on, the Confederate dollar had less and less value, until it was almost worthless by the last few months of the war. Similarly, the Union government inflated its greenbacks, with the monthly rate peaking at 40 per cent in March 1864 (Bernholz 2003: 107).

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Image: Continental One Third Dollar Note source: wikipedia

Image: Confederate States of America dollar source: Wikipedia 46

WEIMAR GERMANY - MARK

Right at the start of World War I, Germany removed its gold standard so that they could print more paper money-(Marks) to fund the ongoing war. As a result, money supply increased by 400% which caused the great hyperinflation that occurred afterwards. After World War I ended, the treaty of Versailles was signed to force Germany to make financial reparations for the damage it had done in war. Huge unpayable debts and mounting budget deficits eventually forced the government to print enormous amount of money which subsequently made the German Mark worthless.

Fig 4.02 Deficit spending

As one can see, the debt mounted with each passing year, almost all of it being funded through monetization.

Let’s see some of the shocking data and pictures below:

1. The exchange rate between Marks per one U.S. Dollar:

April 1919: 12 marks

November 1921: 263 marks

January 1923: 17,000 marks

August 1923: 4.621 million marks

October 1923: 25.26 billion marks

December 1923: 4.2 trillion marks.

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2. Rising Whole Price Index

July 1914 2.6

Jan 1919 3.4

July 1919 12.6

Jan 1920

Jan 1921 14.4

July 1921 14.3

Jan 1922 36.7

July 1922 100.6

Jan 1923 2,785.0

July 1923 194,000.0

Nov 1923 726,000,000,000.0

Fig 4.03 Source: The Nightmare German Inflation by Scientific Market Analysis, 1970.

3. Weimar Republic hyperinflation from one to one trillion paper Marks per gold Mark; on a logarithmic scale

Fig 4.04 Source: Wikipedia

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Fig4.05

Source: Wikipedia- A medal commemorating Germany's 1923 hyperinflation. The engraving reads: "On 1st November 1923 1 pound of bread cost 3 billion, 1 pound of meat: 36 billion, 1 glass of beer: 4 billion."

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A 50,000,000 (50 million) mark banknote from 1923

A 1000 Mark banknote, over-stamped in red with "Eine Milliarde Mark", i.e. 1,000,000,000 mark), issued in Germany during the hyperinflation of 1923 Source: Wikipedia

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Lining up at the bakery early before prices went up

Germany, 1923: banknotes had lost so much value that they were used as wallpaper

Source: Wikipedia

INFAMOUS FIAT MONEY FAILURES FROM 1932 to 2006

In 1932, Argentina’s currency collapsed.

In 1992, Finland, Italy, and Norway had a currency crisis.

Between 1987 and 1995 the Iraqi Dinar went from an official value of 0.306 Dinars/USD (or $3.26 USD per dinar, though the black market rate is thought to have been substantially lower) to 3000 Dinars/USD due to government printing of 10s of trillions of dinars starting with a base of only 10s of billions. That equates to approximately 315% inflation per year averaged over that eight-year period.

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In 1994, Mexico the infamous “Tequila Hangover,” caused the peso and the economy collapse. In spite of increased oil prices in the late 1970s (Mexico is a producer and exporter); Mexico defaulted on its external debt in 1982. As a result, the country suffered a severe case of capital flight and several years of hyperinflation and peso devaluation. On 1 January 1993, Mexico created a new currency, the nuevo peso ("new peso", or MXN), which chopped three zeros off the old peso, an inflation rate of 100,000% over the several years of the crisis. (One new peso was equal to 1,000 old MXP pesos).

In 1997, Asian Financial Crisis - the Thai baht crashed and the crisis spread to other countries like Malaysia, Philippines, Indonesia, Hong Kong, and South Korea.

In 1998, The Russian ruble collapsed. Not Long ago, Zimbabwe, one of the wealthiest countries on the African continent experienced rampant inflation and the collapse of the economy severely devalued the currency.

In 2007, The International Monetary Fund stated that inflation was predicted to rise to 100,000% per annum. As reported in SMH newspaper on 31st January, 2013, Zimbabwe's government has just $US217left in the bank after paying its civil servants.

Source: Wikipedia- The 100 trillion Zimbabwean dollar banknote (1014 dollars), equal to 1027 pre-2006 dollars.

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Worst hyperinflations in world history

Highest monthly inflation rates in history[73]

Country Currency

name

Month with

highest inflation

rate

Highest

monthly

inflation rate

Equivalent daily

inflation rate

Time required

for prices to

double

Hungary Hungarian

pengő

July 1946 4.19 × 1016 % 207.19% 15 hours

Zimbabwe Zimbabwe

dollar

November 2008 7.96 × 1010 % 98.01% 24.7 hours

Yugoslavia Yugoslav dinar January 1994 3.13 × 108 % 64.63% 1.4 days

Republika

Srpska

Republika

Srpska dinar

January 1994 2.97 × 108 % 64.3% 1.4 days

Germany German

Papiermark

October 1923 29,500% 20.87% 3.7 days

Greece Greek

drachma

October 1944 13,800% 17.84% 4.3 days

Source: Wikipedia

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A PICTURE IS WORTH A THOUSAND WORDS- WORTHLESS PAPER MONEY

The following posters (featuring busted currencies) are taken from BMG Bullion Bars, Wikipedia and descriptions are sourced from Wikipedia

1) Germany – 1 billion mark, 1923

The hyperinflation in the Weimar Republic was a three-year period of hyperinflation in Germany (the Weimar Republic) between June 1921 and January 1924. During this period, The Mark was no longer tied to gold and the hyperinflation in 1923 was caused by the German Government to print ton of banknotes to pay its war debt.

Germany went through its worst inflation in 1923. In 1922, the highest denomination was 50,000 Mark. By 1923, the highest denomination was 100,000,000,000,000 Mark. In December 1923 the exchange rate was 4,200,000,000,000 Marks to 1 US dollar. In 1923, the rate of inflation hit 3.25 × 106 percent per month (prices double every two days). Beginning on 20 November 1923, 1,000,000,000,000 old Marks were exchanged for 1 Rentenmark so that 4.2 Rentenmark were worth 1 US dollar, exactly the same rate the Mark had in 1914.

(1) Start and End Date: Jan. 1920- Jan. 1920

(1) Peak Month and Rate of Inflation: Jan. 1920, 56.9%

(2) Start and End Date: Aug. 1922- Dec. 1923

(2) Peak Month and Rate of Inflation: Nov. 1923, 29,525%

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2) Greece – 100 Billion Drachmai, 1944

Greece went through its worst inflation in 1944. In 1942, the highest denomination was 50,000 drachmai. By 1944, the highest denomination was 100,000,000,000 drachmai. In the 1944 currency reform, 1 new drachma was exchanged for 50,000,000,000 drachmai. Another currency reform in 1953 replaced the drachma at an exchange rate of 1 new drachma = 1,000 old drachmai. The overall impact of hyperinflation: 1 (1953) drachma = 50,000,000,000,000 pre 1944 drachmai. The Greek monthly inflation rate reached 8.5 billion percent in October 1944.

Start and End Date: May 1941- Dec. 1945

Peak Month and Rate of Inflation: Nov. 1944, 13,800%

3) Hungary – 100 Quintillion Pengo, 1946

The Treaty of Trianon and political instability between 1919 and 1924 led to a major inflation of Hungary’s currency. Unable to tax adequately, the government resorted to

printing money and by 1923 inflation in Hungary had reached 98% per month. 55

Hungary went through the worst inflation ever recorded between the end of 1945 and July 1946. In 1944, the highest denomination was 1,000 pengő. By the end of 1945, it was 10,000,000 pengő. The highest denomination in mid-1946 was 100,000,000,000,000,000,000 pengő. A special currency the adópengő – or tax pengő – was created for tax and postal payments. The value of the adópengő was adjusted each day, by radio announcement. On 1 January 1946 one adópengő equalled one pengő. By late July, one adópengő equalled 2,000,000,000,000,000,000,000 or 2×1021 (2 sextillion) pengő. When the pengő was replaced in August 1946 by the forint, the total value of all Hungarian banknotes in circulation amounted to 1/1,000 of one US dollar. It is the most severe known incident of inflation recorded, peaking at 1.3 × 1016 percent per month (prices double every 15 hours). The overall impact of hyperinflation: On 18 August 1946, 400,000 or 4×1029 (four hundred quadrilliard on the long scale used in Hungary; four hundred octillion on short scale) pengő became 1 forint.

Start and End Date: Aug. 1945- Jul. 1946

Peak Month and Rate of Inflation: Jul. 1946, 41.9 quintillion percent

4) China – 10,000 CGU, 1947

As the first user of fiat currency, China has had an early history of troubles caused by hyperinflation. The Yuan Dynasty printed huge amounts of fiat paper money to fund their wars, and the resulting hyperinflation, coupled with other factors, led to its demise at the hands of a revolution.

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The Republic of China went through the worst inflation 1948–49. In 1947, the highest denomination was 50,000 Yuan. By mid-1948, the highest denomination was 180,000,000 Yuan. The 1948 currency reform replaced the Yuan by the gold Yuan at an exchange rate of 1 gold Yuan = 3,000,000 Yuan. In less than a year, the highest denomination was 10,000,000 gold Yuan. In the final days of the civil war, the Silver Yuan was briefly introduced at the rate of 500,000,000 Gold Yuan. Meanwhile the highest denomination issued by a regional bank was 6,000,000,000 Yuan (issued by Xinjiang Provincial Bank in 1949). After the renminbi was instituted by the new communist government, hyperinflation ceased with a revaluation of 1:10,000 old Renminbi in 1955. The overall impact of inflation was 1 Renminbi = 15,000,000,000,000,000,000 pre-1948 Yuan.

(1) Start and End Date: Jul. 1943- Aug. 1945

(1) Peak Month and Rate of Inflation: Jun. 1945, 302%

(2) Start and End Date: Oct. 1947- Mid. May 1949

(2) Peak Month and Rate of Inflation: Apr. 5070%

5) Chile – 10,000 pesos, 1975

In 1973, Chile had experienced hyperinflation that had hit 700 percent, at a time when the country, under high protectionist barriers, had no foreign reserves, and GDP was falling. Despite very severe government cuts and attempted monetary targeting under the Pinochet dictatorship inflation remained extremely high throughout the 1970s.

Start and End Date: Oct. 1973- Oct. 1973

Peak Month and Rate of Inflation: Oct. 1973, 87.6%

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6) Bolivia – 5 million pesos bolivianos, 1985

Bolivia experienced its worst inflation between 1984 and 1986. Before 1984, the highest denomination was 1,000 Bolivian pesos. By 1985, the highest denomination was 10 million Bolivian pesos. In 1985, a Bolivian note for 1 million pesos was worth 55 cents in US dollars, one-thousandth of its exchange value of $5,000 less than three years previously. In the 1987 currency reform, the Peso Boliviano was replaced by the Boliviano at a rate of 1,000,000: 1.

Start and End Date: Apr. 1984- Sep. 1985

Peak Month and Rate of Inflation: Feb. 1985, 183%

7) Argentina – 10,000 pesos argentinos, 1985

Argentina went through steady inflation from 1975 to 1991. At the beginning of 1975, the highest denomination was 1,000 pesos. In late 1976, the highest denomination was 5,000 pesos. In early 1979, the highest denomination was 10,000 pesos. By the end of 1981, the highest denomination was 1,000,000 pesos. In the 1983 currency reform, 1 peso argentino was exchanged for 10,000 pesos. In the 1985 currency reform, 1 austral was exchanged for 1,000 pesos argentinos. In the 1992 currency reform, 1 new peso was exchanged for 10,000 australes. The overall impact of hyperinflation: 1 (1992) peso = 100,000,000,000 pre-1983

pesos. 58

Start and End Date: May 1989- Mar. 1990

Peak Month and Rate of Inflation: Mar. 1990, 197%

8) Peru – 100,000 intis, 1989

Peru experienced its worst inflation from 1988–1990. In the 1985 currency reform, 1 inti was exchanged for 1,000 soles. In 1986, the highest denomination was 1,000 intis. But in September 1988, monthly inflation went to 114%. In August 1990, monthly inflation was 397%. The highest denomination was 5,000,000 intis by 1991. In the 1991 currency reform, 1 nuevo sol was exchanged for 1,000,000 intis. The overall impact of hyperinflation: 1 nuevo sol = 1,000,000,000 (old) soles.

(1) Start and End Date: Sep. 1988- Sep. 1988

(1) Peak Month and Rate of Inflation: Sep. 1988, 114%

(2) Start and End Date: Jul. 1990- Aug. 1990

(2) Peak Month and Rate of Inflation: Aug. 1990, 397%

9) Nicaragua – 10 million córdobas, 1990

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Nicaragua went through the worst inflation from 1986 to 1990. From 1943 to April 1971, one US dollar equalled 7 córdobas. From April 1971-early 1978, one US dollar was worth 10 córdobas. In early 1986, the highest denomination was 10,000 córdobas. By 1987, it was 1,000,000 córdobas. In the 1988 currency reform, 1 new córdoba was exchanged for 10,000 old córdobas. The highest denomination in 1990 was 100,000,000 new córdobas. In the 1991 currency reform, 1 new córdoba was exchanged for 5,000,000 old córdobas. The overall impact of hyperinflation: 1 (1991) córdoba = 50,000,000,000 pre-1988 córdobas.

Start and End Date: Jun. 1986- Mar. 1991

Peak Month and Rate of Inflation: Mar. 1991, 261%

10) Zaire (now Democratic Republic of the Congo) – 5 Million zaïres, 1992

Zaire (now the Democratic Republic of the Congo)

Zaire went through a period of inflation between 1989 and 1996. In 1988, the highest denomination was 5,000 zaires. By 1992, it was 5,000,000 zaires. In the 1993 currency reform, 1 nouveau zaire was exchanged for 3,000,000 old zaires. The highest denomination in 1996 was 1,000,000 nouveaux zaires. In 1997, Zaire was renamed the Congo Democratic Republic and changed its currency to francs. 1 franc was exchanged for 100,000 nouveaux zaires. One post-1997 franc was equivalent to 3 × 1011 pre 1989 zaires.

(1) Start and End Date: Nov. 1993- Sep. 1994

(1) Peak Month and Rate of Inflation: Nov. 1993, 250%

(2) Start and End Date: Oct. 1991- Sep. 1992

(2) Peak Month and Rate of Inflation: Nov. 1992, 114%

(3) Start and End Date: Aug. 1998- Aug. 1998

(3) Peak Month and Rate of Inflation: 78.5%

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11) Russia – 10,000 rubles, 1992

In 1992, the first year of the post-Soviet economic reform, inflation levels went up to 2,520%. In 1993, the annual rate was 840%, and in 1994, 224%. The ruble devalued from about 40 r/$ in 1991 to about 5,000 r/$ in late 1997. In 1998, a denominated ruble was introduced at the exchange rate of 1 new ruble = 1,000 pre-1998 rubles. In the second half of the same year, ruble fell to about 30 r/$ as a result of financial crisis.

(1) Start and End Date: Jan. 1922- Feb. 1924

(1) Peak Month and Rate of Inflation: Feb. 1924

(2) Start and End Date: Jan. 1992- Jan. 1992, 212%

(2) Peak Month and Rate of Inflation: Jan. 1992, 245%

12) Brazil – 500 cruzeiros reais, 1993

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From 1967–1994, the base currency unit was shifted seven times to adjust for inflation in the final years of the Brazilian military dictatorship era. A 1967 cruzeiro was, in 1994, worth less than one trillionth of a US cent, after adjusting for multiple devaluations and note changes. In that same year, inflation reached a record 2,075.8%. A new currency called real was adopted in 1994, and hyperinflation was eventually brought under control. The real was also the currency in use until 1942; 1 (current) real is the equivalent of 2,750,000,000,000,000,000 of Brazil's first currency (called réis in Portuguese).

Start and End Date: Dec. 1989- Mar. 1990

Peak Month and Rate of Inflation: Mar. 1990, 82.4%

13) Bosnia – 100 million dinar, 1993

Bosnia and Herzegovina went through its worst inflation in 1993. In 1992, the highest denomination was 1,000 dinara. By 1993, the highest denomination was 100,000,000 dinara. In the Republika Srpska, the highest denomination was 10,000 dinara in 1992 and 10,000,000,000 dinara in 1993. 50,000,000,000 dinara notes were also printed in 1993 but never issued.

Start and End Date: Apr. 1992- Jun. 1993 Peak Month and Rate of Inflation: Jun. 1992, 322%

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14) Ukraine - 1 million karbovanets, 1994

Ukraine experienced its worst inflation between 1992 and 1994. In 1992, the Ukrainian karbovanets was introduced, which was exchanged with the defunct Soviet ruble at a rate of 1 UAK = 1 SUR. Before 1993, the highest denomination was 1,000 karbovantsiv. By 1995, it was 1,000,000 karbovantsiv. In 1996, during the transition to the Hryvnya and the subsequent phase out of the karbovanets, the exchange rate was 100,000 UAK = 1 UAH. By some estimates, inflation for the entire calendar year of 1993 was 10,000% or higher, with retail prices reaching over 100 times their pre-1993 level by the end of the year. Until today, Ukraine holds the world record for the highest inflation in one calendar year, which was set in 1993. In 1996, it was taken out of circulation, and was replaced by the Hryvnya at an exchange rate of 100,000 karbovantsi = 1 Hryvnya (approx. USD 0.50 at that time, about USD 0.20 as of 2007).

Start and End Date: Jan. 1992- Nov. 1994

Peak Month and Rate of Inflation: Jan. 1992, 285%

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15) Yugoslavia – 500 Billion Dinar, 1994

Yugoslavia went through a period of hyperinflation and subsequent currency reforms from 1989–1994. The highest denomination in 1988 was 50,000 dinars. By 1989 it was 2,000,000 dinars. In the 1990 currency reform, 1 new dinar was exchanged for 10,000 old dinars. In the 1992 currency reform, 1 new dinar was exchanged for 10 old dinars. The highest denomination in 1992 was 50,000 dinars. By 1993, it was 10,000,000,000 dinars. In the 1993 currency reform, 1 new dinar was exchanged for 1,000,000 old dinars. However, before the year was over, the highest denomination was 500,000,000,000 dinars. In the 1994 currency reform, 1 new dinar was exchanged for 1,000,000,000 old dinars. In another currency reform a month later, 1 novi dinar was exchanged for 13 million dinars (1 novi dinar = 1 German mark at the time of exchange). The overall impact of hyperinflation: 1 novi dinar = 1 × 1027~1.3 × 1027 pre 1990 dinars. Yugoslavia's rate of inflation hit 5 × 1015 percent cumulative inflation over the time period 1 October 1993 and 24 January 1994.

(1) Start and End Date: Sept. 1989- Dec. 1989

(1) Peak Month and Rate of Inflation: Dec 1989, 59.7%

(2) Start and End Date: Apr. 1992- Jan. 1994

(2) Peak Month and Rate of Inflation: Jan. 1994, 313 billion perce

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16) Georgia – 1 million laris, 1994

Georgia went through its worst inflation in 1994. In 1993, the highest denomination was 100,000 coupons [kuponi]. By 1994, the highest denomination was 1,000,000 coupons. In the 1995 currency reform, a new currency, the lari, was introduced with 1 lari exchanged for 1,000,000 coupons.

(1) Start and End Date: Mar. 1992- Apr. 1992

(1) Peak Month and Rate of Inflation: Mar. 1992, 198%

(2) Start and End Date: Sep. 1993- Sep. 1994

(2) Peak Month and Rate of Inflation: Sep. 1994, 211%

17) Angola – 500,000 kwanzas reajustados, 1995

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Angola experienced high inflation from 1991 to 1995. It was a result of exchange restrictions following the introduction of the novo kwanza (AON) to replace the original kwanza (AOK) in 1990. At the first months of 1991, the highest denomination was 50 000 AON. By 1994, the highest denomination was 500 000 kwanzas. In the 1995 currency reform, the readjusted kwanza (AOR) replaced the novo kwanza at the ratio of 1 000 AON to 1 AOR, but hyperinflation continued as further denominations of up to 5 000 000 AOR were issued. In the 1999 currency reform, the kwanza (AOA) was reintroduced at the ratio of 1 million AOR to 1 AOA. Currently, the highest denomination banknote is 2 000 AOA and the overall impact of hyperinflation was 1 AOA = 1 billion AOK.

Start and End Date: Dec. 1994-Jan. 1997

Peak Month and Rate of Inflation: May 1996, 84.1%

18) Belarus – 100,000 rubles, 1996

Belarus experienced steady inflation from 1994 to 2002. In 1993, the highest denomination was 5,000 rublei. By 1999, it was 5,000,000 rublei. In the 2000 currency reform, the ruble was replaced by the new ruble at an exchange rate of 1 new ruble = 1,000 old rublei. The highest denomination in 2008 was 100,000 rublei, equal to 100,000,000 pre-2000 rublei.

(1) Start and End Date: Jan. 1992- Feb. 1992

(1) Peak Month and Rate of Inflation: Jan. 1992, 159%

(2) Start and End Date: Aug. 1994- Aug. 1994

(2) Peak Month and Rate of Inflation: Aug. 1994, 53.4%

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19) Venezuela – 50,000 bolívares, 1998

In 1940, Central Bank of Venezuela started circulating paper money and by 1945, it issued denominations of 10, 20, 50, 100 and 500 bolívares. As inflation hit, higher denominations of banknotes started being issued: 1,000 bolívares in 1991, 2,000 and 5,000 bolívares in 1994, and 10,000, 20,000 and 50,000 bolívares in 1998.

20) Turkey – 20 Million lira, 2001

After periods pegged to the British pound and the French franc, a peg of 2.8 Turkish lira = 1 U.S. dollar was adopted in 1946 and maintained until 1960, when the currency was devalued to 9 Turkish lira = 1 dollar. From 1970, a series of hard, then soft pegs to the dollar operated as the value of the Turkish lira began to fall.

1966 — 1 U.S. dollar = 9 Turkish lira 1980 — 1 U.S. dollar = 90 Turkish lira 1988 — 1 U.S. dollar = 1,300 Turkish lira 1995 — 1 U.S. dollar = 45,000 Turkish lira 2001 — 1 U.S. dollar = 1,650,000 Turkish lira

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2005 — 1 U.S. dollar = 1.29 new Turkish lira (The use of New Turkish lira, which drops 6 zeros from the currency Turkish lira, was implemented in 2005)

2010 — 1 U.S. dollar = 1.55 Turkish lira 19 October 2012 — 1 U.S. dollar = 1.79 Turkish lira

In 2010, the name was changed to Turkish lira, but New Turkish lira was used as currency until 31 December 2009. In the last decade, the Turkish lira stabilized against the U.S. dollar and the euro, although since 2011 it has been losing value steadily. The Guinness Book of Records ranked the Turkish lira as the world's least valuable currency in 1995 and 1996, and again from 1999 to 2004. The Turkish lira had slid in value so far that one original gold lira coin could be sold for 154,400,000 Turkish lira before the 2005 revaluation made all the old Turkey liras up to 20 million denominated banknotes and coins at par value with the new 1:1 by Central Banks of Turkey accounting for Turkey national hyperinflation rate of exchange as up to date monetized legal valid and current world circulating pay money for any businesses abbreviated as TRL/YTL/TRY

21) Romania – 50,000 lei, 2001

In the 1990s, after the downfall of communism, inflation took hold due to reform failures. Romania experienced hyperinflation in the 1990s. The highest denomination in 1990 was 100 lei and in 1998 was 100,000 lei. By 2000 it was 500,000 lei. In early 2005 it was 1,000,000 lei. In July 2005 the lei was replaced by the new leu at 10,000 old lei = 1 new leu. Inflation in 2005 was 9%.In July 2005 the highest denomination became 500 leu (= 5,000,000 old lei).

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22) Zimbabwe – 100 Trillion Dollar, 2006

President Robert Mugabe issued a 100 Trillion dollar bank note in January 2009, which is Zimbabwe’s highest denomination note and the biggest ever produced for legal tender.

Hyperinflation in Zimbabwe was one of the few instances that resulted in the abandonment of the local currency. At independence in 1980, the Zimbabwe dollar (ZWD) was worth about USD 1.25. Afterwards, however, rampant inflation and the collapse of the economy severely devalued the currency. Inflation was steady before Robert Mugabe in 1998 began a program of land reforms that primarily focused on taking land from white farmers and redistributing those properties and assets to black farmers, which disrupted food production and caused revenues from export of food to plummet. The result was that to pay its expenditures Mugabe’s government and Gideon Gono’s Reserve Bank printed more and more notes with higher face values.

Hyperinflation began early in the 21st-century, reaching 624% in 2004. It fell back to low triple digits before surging to a new high of 1,730% in 2006. The Reserve Bank of Zimbabwe revalued on 1 August 2006 at a ratio of 1 000 ZWD to each second dollar (ZWN), but year-to-year inflation rose by June 2007 to 11,000% (versus an earlier estimate of 9,000%). Larger denominations were progressively issued:

1. 5 May: banknotes or "bearer cheques" for the value of ZWN 100 million and ZWN 250 million.

2. 15 May: new bearer cheques with a value of ZWN 500 million (then equivalent to about USD 2.50).

3. 20 May: a new series of notes (“agro cheques”) in denominations of $5 billion, $25 billion and $50 billion.

4. 21 July: “agro cheque” for $100 billion.

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Inflation by 16 July officially surged to 2,200,000% with some analysts estimating figures surpassing 9,000,000 percent. As of 22 July 2008 the value of the ZWN fell to approximately 688 billion per 1 USD, or 688 trillion pre-August 2006 Zimbabwean dollars.

Date of

redenomination

Currency

code Value

1 August 2006 ZWN 1 000 ZWD

1 August 2008 ZWR 1010 ZWN

= 1013 ZWD

2 February 2009 ZWL

1012 ZWR

= 1022 ZWN

= 1025 ZWD

On 1 August 2008, the Zimbabwe dollar was redenominated at the ratio of 1010 ZWN to each third dollar (ZWR). On 19 August 2008, official figures announced for June estimated the inflation over 11,250,000%. Zimbabwe's annual inflation was 231,000,000% in July

(prices doubling every 17.3 days). For periods after July 2008, no official inflation statistics were released. Prof. Steve H. Hanke overcame the problem by estimating inflation rates after July 2008 and publishing the Hanke Hyperinflation Index for Zimbabwe. Prof. Hanke’s HHIZ measure indicated that the inflation peaked at an annual rate of 89.7 sextillion percent (89,700,000,000,000,000,000,000%) in mid-November 2008. The peak monthly rate was 79.6 billion percent, which is equivalent to a 98% daily rate, or around 7× 10108 percent yearly rate. At that rate, prices were doubling every 24.7 hours. Note that many of these figures should be considered mostly theoretic, since the hyperinflation did not proceed at that rate a whole year.

At its November 2008 peak, Zimbabwe's rate of inflation approached, but failed to surpass, Hungary's July 1946 world record. On 2 February 2009, the dollar was redenominated for the fourth time at the ratio of 1012 ZWR to 1 ZWL, only three weeks after the $100 trillion banknote was issued on 16 January, but hyperinflation waned by then as official inflation rates in USD were announced and foreign transactions were legalised, and on 12 April the dollar was abandoned in favour of using only foreign currencies. The overall impact of hyperinflation was 1 ZWL = 1025 ZWD.

Start and End Date: Mar. 2007- Mid-Nov. 2008

Peak Month and Rate of Inflation: Mid-Nov. 2008, 7.96 billion percent

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CHAPTER 5 THE COMING COLLAPSE OF U.S. DOLLAR

“Default will be painful, but it is all but inevitable for a country as heavily indebted as the U.S. Just as pumping money into the system to combat a recession only ensures an unsustainable economic boom and a future recession worse than the first, so too does continuously raising the debt ceiling only forestall the day of reckoning and ensure that, when it comes, it will be cataclysmic. We have a choice: default now and take our medicine, or put it off as long as possible, when the effects will be much worse.’- Ron Paul

American-Dollar Toilet Paper

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As mentioned before, history dictates that no country has ever survived the

mounting debt crisis. Why would the U.S. be different? The U.S. Government

basically is Bankrupt. It cannot cover all the debts and unfunded obligations or

liabilities it owes which currently stand at $150 trillion or even higher.

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. U.S. total debt and GDP ratio (if taking all debts into accounting) is about 400%. Let’s read the expert’s opinion: Peter Bernholz, the leading expert on hyperinflation: “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. 72

John Williams (of Shadow stats) in his interview with USAWATCHDOG.COM,

he predicts: Hyperinflation is virtually assured because the Fed doesn’t have

any options left.” “That’s absolutely nonsense. The Fed is just propping up the

banks.” “You’re likely going to see a dollar sell-off . . . That should evolve into

hyperinflation.”, “Doesn’t see the current system holding together without

hyperinflation beyond 2014.” He contends the real annual deficit is “$5 trillion

per year” and says, “That’s beyond containment.”

President Hoover made a comment in regard to 1931 crisis:

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Is hyperinflation possible in the modern era? Yes it has been happening even

as recently as only a few years ago. The question is if it can happen to an

economy that is so big. This is a critical and controversial question which is

subject to some debate. I personally reckon that it is only possible if the Middle

East tension escalates to World War III. If this happens, the debt bubble will

explode upward and eventually implode. At that time, no government is able

to sell any more bonds. Paper money will become worthless. Gold at that time

will be the King.

MATRIX OF DEBT AND CITY OF MAINZ

Before I conclude this short chapter by looking at Ron Paul’s report about the possible solution to the debt crisis, let’s examine the implications and seriousness of mounting debt by looking at how David Burton describe the “Matrix of money” which is really shocking and the often untold story of City of Mainz in Europe as described by Martin Armstrong

David Burton: “The Matrix of money works like this; the government prints a $100 note for 6 cents, sells it to the bank for say 4%, which is $4.00 on $100. Now 6 cents into a $4 is 6,666% return. Then the banks lend it out to say a credit card at 19% or $19 on $100. This is 31,666% return on 6 cents. It gets worst, as the banks have been lending out around the world, 100, 200, who knows, maybe 500 times the $1 on deposit. If you lend $100 out, say, 100 times it equals $10,000.00, using say 10% interest rates that’s $1000.00 per/year. Now 6 cents into $1000 is a 1,666,666% return. Now if it’s 500 times, rather than 100 times, then it is 8.3 million percent. Of course, they aren’t printing fresh money each year to replace that $100, so say it lasts 10 year? 6 cents into $10,000 (10 years of interest at 10 percent) is 16 million percent return. Now, if its 19% like on credit cards, this means a 31 million percent return over 10 years. For this system to work, the bank relies on you staying in debt and paying interest. When people don’t want to borrow, or pull their money out of the bank - like in the great depression - the system will collapse; or if everyone wanted to pay off their debt at the same time, it would collapse, and this is what is going to happen because the mathematics of money just can’t work - and the next great depression will prove this to be correct. Not everyone can pay off their debts because there is more debt than paper money in circulation - only 2% can”. 74

Martin Armstrong: The city of Mainz is a prime example of what awaits us.

•By 1411, gov’t expenditure was 48% due to annuities it had previously issued.

• By 1437, gov’t expenditure was 75% going to the creditors and interest rates continued to rise.

• By 1448, Mainz was forced into bankruptcy when there were no longer buyers for its new debt to pay off the last issue.

“The city of Mainz defaulted. They had raised taxes so much the rich left as they are doing today. When there was not enough revenue to pay the creditors, they sacked the city and then burned it to the ground. We just never learn from the past. History repeats because the passions of man never change. A politician just can’t keep their hands out of everyone’s pocket. If someone comes into your home at gun-point and demands your wealth, it is called robbery. When government enters, it is called your obligation. Of course they spend and it is your obligation to pay whatever they sign for with their special interests on which you were never consulted. That is not an Athenian Democracy. That is a Roman Republican Oligarchy.”

Debt Crisis: Is there a solution?

I have explored some possibilities (though unlikely) that are covered in first book titled “2016-2020-The greatest bull market of gold and silver in history” but now, let’s just take a serious look at the following reprint of “Default Now, or Suffer a More Expensive Crisis Later: Ron Paul” that was published via Bloomberg in late 2011.”

Debate over the debt ceiling has reached a fever pitch in recent weeks, with each side trying to outdo the other in a game of political chicken. If you believe some of the things that are being written, the world will come to an end if the U.S. defaults on even the tiniest portion of its debt.

In strict terms, the default being discussed will occur if the U.S. fails to meet its debt obligations, through failure to pay either interest or principal due a bondholder. Proponents of raising the debt ceiling claim that a default on Aug. 2 is unprecedented and will result in calamity (never mind that this is simply an arbitrary date, easily changed, marking a congressional recess). My expectations of such a scenario are more sanguine.

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The U.S. government defaulted at least three times on its obligations during the 20th century.

-- In 1934, the government banned ownership of gold and eliminated the right to exchange gold certificates for gold coins. It then immediately revalues gold from $20.67 per troy ounce to $35, thus devaluing the dollar holdings of all Americans by 40 percent.

-- From 1934 to 1968, the federal government continued to issue and redeem silver certificates, notes that circulated as legal tender that could be redeemed for silver coins or silver bars. In 1968, Congress unilaterally reneged on this obligation, too.

-- From 1934 to 1971, foreign governments were permitted by the U.S. government to exchange their dollars for gold through the gold window. In 1971, President Richard Nixon severed this final link between the dollar and gold by closing the gold window, thus in effect defaulting once again on a debt obligation of the U.S. government.

Unlimited Spending

No longer constrained by any sort of commodity backing, the federal government was now free to engage in almost unlimited fiscal profligacy, the only check on its spending being the market’s appetite for Treasury debt. Despite the defaults in 1934, 1968 and 1971, world markets have been only too willing to purchase Treasury debt and thereby fund the government’s deficit spending. If these major defaults didn’t result in decreased investor appetite for U.S. obligations, I see no reason why defaulting on a small amount of debt this August would cause any major changes.

The national debt now stands at just over $14 trillion, while net total liabilities are estimated at over $200 trillion. The government is insolvent, as there is no way that this massive sum of liabilities can ever be paid off. Successive Congresses and administrations have shown absolutely no restraint when it comes to the budget process and the idea that either of the two parties is serious about getting our fiscal house in order is laughable.

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Boom and Bust

The Austrian School’s theory of the business cycle describes how loose central bank monetary policy causes booms and busts: It drives down interest rates below the market rate, lowering the cost of borrowing; encourages mal-investment; and causes economic miscalculation as resources are diverted from the highest value use as reflected in true consumer preferences. Loose monetary policy caused the dot-com bubble and the housing bubble, and now is causing the government debt bubble.

For far too long, the Federal Reserve’s monetary policy and quantitative easing have kept interest rates artificially low, enabling the government to drastically increase its spending by funding its profligacy through new debt whose service costs were lower than they otherwise would have been.

Neither Republicans nor Democrats sought to end this gravy train, with one party prioritizing war spending and the other prioritizing welfare spending, and with both supporting both types of spending. But now, with the end of the second round of quantitative easing, the federal funds rate at the zero bound, and the debt limit maxed out, Congress finds itself in a real quandary.

Hard Decisions

It isn’t too late to return to fiscal sanity. We could start by cancelling out the debt held by the Federal Reserve, which would clear $1.6 trillion under the debt ceiling. Or we could cut trillions of dollars in spending by bringing our troops home from overseas, making gradual reforms to Social Security and Medicare, and bringing the federal government back within the limits envisioned by the Constitution. Yet no one is willing to step up to the plate and make the hard decisions that are necessary. Everyone wants to kick the can down the road and believe that deficit spending can continue unabated.

Unless major changes are made today, the U.S. will default on its debt sooner or later, and it is certainly preferable that it be sooner rather than later.

If the government defaults on its debt now, the consequences undoubtedly will be painful in the short term. The loss of its AAA rating will raise the cost of issuing new debt, but this is not altogether a bad thing.

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Higher borrowing costs will ensure that the government cannot continue the same old spending policies. Budgets will have to be brought into balance (as the cost of servicing debt will be so expensive as to preclude future debt financing of government operations), so hopefully, in the long term, the government will return to sound financial footing.

Raising the Ceiling

The alternative to defaulting now is to keep increasing the debt ceiling, keep spending like a drunken sailor, and hope that the default comes after we die. A future default won’t take the form of a missed payment, but rather will come through hyperinflation. The already incestuous relationship between the Federal Reserve and the Treasury will grow even closer as the Fed begins to purchase debt directly from the Treasury and monetizes debt on a scale that makes QE2 look like a drop in the bucket. Imagine the societal breakdown of Weimar Germany, but in a country five times as large. That is what we face if we do not come to terms with our debt problem immediately.

Default will be painful, but it is all but inevitable for a country as heavily indebted as the U.S. Just as pumping money into the system to combat a recession only ensures an unsustainable economic boom and a future recession worse than the first, so too does continuously raising the debt ceiling only forestall the day of reckoning and ensure that, when it comes, it will be cataclysmic.

We have a choice: default now and take our medicine, or put it off as long as possible, when the effects will be much worse.

(Ron Paul is a Republican representative from Texas and a candidate for the 2012 Republican presidential nomination. The opinions expressed are his own.)

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CHAPTER 6

GOLD SILVER & DOW OUTLOOK 2013-2020

The world will head into the greatest depression we have ever seen between

2016 to 2020, worst than all other depressions added together, based on the

cycles of master forecaster W.D.Gann-David Burton

I started to build up my interest in various Cycle Timing Analysis since 2001. I have learned W.D. Gann’s methodology from 3 different experts Ken Gerber (www.wdgann.com), David Bowden (Safety in the market, Australia) and P.C Wong (Hong Kong) in the past and found that their emphasis is quite different. Recently, I also studied the works of Bradley Cowan, Stan Harley (Fibonacci derivation) and studied other cycle timing models like Donald Bradley’s model and Armstrong’s Economic Confidence Model. The importance of Cycle timing History of Cycles repeats itself because human passion and behaviour never changes. Men always respond to the same instincts of hope, fear and greed. Therefore, Cyclical Timing analysis is able to provide uncanny prediction ability if sufficient data can be collected and analysed. To invest safely and maximise your return, you must apply both Technical analysis and Cyclical Timing analysis at the same time. 79

Cycles are extremely important because they help us to determine the turning points (bottom to peak or vice versa) within the dimension of time. Traders or investors must go with the trend and turning points to survive in the market. It is noted that many average long term investors bought gold near to the peak price between $1800-1920 in 2010 and 2011and now they are losing patience and some already are forced to liquidate at these lower prices (~$1580). Due to the Cycle factor and volatility, it is entirely possible to flush out all the weak holders before the next big rally that may happen in 2016. Various cycle methodologies seem to have their own emphasis. But one interesting aspect that I discovered in my deep studies convinces me that some particular cycles are particularly accurate if I can align all the different concepts in harmony with one another. I would give you the following outlook which is based on my own

interpretation of what I have learned from the works of others. I certainly give

credit to those who have pioneered them; however, my conclusions may differ

from those of other cycle proponents because I don’t use one cycle timing

methodology alone. In other words, this helps my analysis to be more

complete with the ability to produce a consistent, better and unbiased

forecast.

Certainly, high accuracy of any analysis needs constant review and monitoring

to determine the cyclical top or bottom. Be aware that a cycle low is not

always found at the price low for the cycle or vice versa. Cycles can expand and

contract and we always have to watch out for changes in the expected length.

FIBONACCI NUMERICAL CYCLE

One of the methods that I followed and studied for more than a year is of

particular interest is the works of Stan Harley. He reckons that cycles have their

solid fundamentals in Fibonacci numbers. That is what he said: “I have found

that 99.9% of cycles can be derived from Fibonacci numbers. That doesn’t

mean just the straight Fibonacci number itself, but some mathematical

multiple or derivative of that number. I see these same recurring rhythms

outside of the financial markets. I see them in such economic statistical

databases as unemployment, and I see them in commodities. I even see these

cycles in the casino games. Actually, I have made a detailed study of the

games.” 80

Stock Cycle: Interestingly, every turning point (major low) from August, 1982

has followed a Fibonacci numerical sequence in years. 1982 +3 = 1985, 1982 +

5 = 1987, 1982 + 8 = 1990, 1982 +13 = 1995 and 1982 +21 = 2003.

Now, on short term basis, If you start taking 2003 as a turning point from

major low, the next sequence is 2003+3=2006, 2003+5=2008 and followed by

2003+8=2011, 2003+13=2016

Gold Cycle: 2008 is the major turning point, 2008+3=2011, 2008+5=2013,

2008+8=2016.

Fig 6.01

THE 4 YEAR CYCLE

The 4-year cycle turning points has been widely followed and is found to be very accurate for the last 50 years.

Stock 4 year Cycle: The four-year stock cycle’s last bottom is set on 6th March 2009 and the next major turning point will start in March 2013 (likely in May-August) and the next major one in 2017. I expect 4 year cycle to fall in line with the 13 years cycle which would set the turning point sometimes between May-August in 2013. 81

Gold 4 year Cycle: 2001 bottom, 2005, 2009, 2013, and 2017 are major and minor turning point.

ARMSTRONG’S ECONOMIC CONFIDENCE MODEL 8.6 years and 4.3 years Cycle and 2.15

In the 1970s Martin Armstrong discovered that the global business cycle operate on an 8.6 year cycle. He postulated that this cycle consists of 6 waves built into the Long Wave Cycle of 51.6 years. He tested the validity of this cycle back into ancient times. He was astonished to find out that The 8.6 years turned out to equal 3,141 days – the magic number being π (Pi) times 1000 – the perfect cycle. With his trading experience, Armstrong was able to use his computer model called Economic Confidence Model to predict so many events right to the precise day years in advance. His forecast for the 1987 Crash right to the day was uncanny accurate. He also predicted new highs would be hit by 1989 when the majority was expecting a new low after the crash. Armstrong believes that global economy crisis is due to borrowing issues put in place that started since World War II. He comments that, “governments around the world had this idea that they could borrow year after year and never have to pay anything back.” Martin Armstrong states that back in the good old days when the national debt was just $1 trillion instead of $15 trillion, President Ronald Reagan made it clear: “We don't have a trillion-dollar debt because we haven't taxed enough; we have a trillion-dollar debt because we spend too much.” History has proven he was right!

Martin Armstrong ‘Mathematical Economic Confidence Modal’ which can be applied very accurately to stock cycle

Fig 6.02

Note that the next major turn with the Armstrong model is set for August of this year – which could be a significant point of top. Bradley model below is also indicating major turning point, about 2 months earlier. 82

Fig 6.03

8.6 can be broken down to 2 X 4.3 years Cycle or 4x2.15. All this cycle denote minor and major turning points. Gold Cycle: Gold price reached 1920 on September 2011 (2011.75) and now already in almost 18 months correction and consolidation. Based on 2.15 cycles, gold is expected to hit the low point by April and will head lower by August-october 2013. Based on 4.3 cycles, gold is expected to rally big from approximate 2015.75 - 2016.15 13 YEARS (PANIC CYCLE) GOLD CYCLE AND 25 YEAR GOLD CYCLE Gold double bottom in 255.8 on the year 1999 and 258.2 on the year 2001. If we take the middle point ie. The year 2000 as average turning point, gold is likely to hit low in April 2013-August 2013. Then, it may start a new phase of rises till 2020-2026 if one uses the 20 years or 25 years Gold cycle when the low was set on August 1976 at $99 and $255.8 on 1999 $258 on 2001. 10, 20 YEARS GOLD CYCLE AND 20 MONTHS GOLD CYCLE Gold hit peak at 1980 and low at 1999 and 2001 and that is almost 20 years correction. Based on 20 years cycle, gold will hit the peak at 2020. Based on 20 months cycle of correction, gold may have turning point around April-August 2013. 83

40, 50 YEARS GOLD CYCLE AND 60 YEARS GOLD CYCLE 1971 gold window (fixed at 35) removed and 40 years later it hit the peak in 2011. Due to tidal wave of money printing and debt crisis, gold will remain in uptrend for 10 years till it reaches 50 years Jubilee in 2021 or even 2031 for 60 years cycle celebration if mounting debt keep rising. STOCK MARKET 13 YEARS CYCLE AND 17 YEARS CYCLE 2013 being 26 years from the 1987 Crash. 26 years come from 2 sub-cycles of 13 years. If you take 2003 as major low and based on 13 years cycle, then 2016 will be another important panic cycle low in stock market. Based on the cycle top in 2000 and based on 17 years Cycle, 2017 could be another important turning point which I believe will be low instead of high due to debt crisis. However, if you base on cycle low in 2008(GFC) and calculate with half cycle of 17 year, cycle low would hit in mid 2016. I believe widespread debt crisis may start to hit around September 2015 followed by 2016 and 2017 low point. Interestingly, 13 years cycle and 17 years cycle are harmonic nodal points.

Fig 6.04 Source: Pentagonal Time Cycle Theory by Bradley Cowan

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Fig 6.05 Source: Pentagonal Time Cycle Theory by Bradley Cowan

Fig 6.06 Source: Pentagonal Time Cycle Theory by Bradley Cowan

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Fig 6.07 Source: Source: Pentagonal Time Cycle Theory by Bradley Cowan

WD GANN MASTER TIME FACTOR

Based on his 20 years cycle………2013-2015 are good years for stocks and 2016-2023 are very bad years for stocks. W.D. Gann, attained legendary status as a “Guru of Wall Street” between 1900 and 1955.

He demonstrated an uncanny ability to forecast major market turning points. His forecast of the 1929 bull market top in the stock market nine months before the high is a matter of record, having been published in his yearly forecast for 1929. He made about $2 billion in today’s money.

Let’s review some of his methodology “Master Time Factor” taught to all of us. I found they are particularly useful for long term investing but what you need here is ‘patience’ and ‘discipline’ if using his methodology.

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MASTER TIME FACTOR

“By a study of the time cycles you will learn why tops and bottoms are formed at certain times. Everything moves in cycles as a result of the natural law of action and reaction. By a study of the past, I have discovered what cycles repeat in the future. In order to be accurate in forecasting the future, you must know the major cycles. The most money is made when fast moves and extreme fluctuations occur at the end of major cycles. I have experimented and compared past markets in order to locate the major and minor cycles and determine in what years the cycles repeat in the future.” The law of vibration enabled me to accurately determine the exact points to which stocks and commodities should rise and fall. By studying time cycles, you will learn why tops and bottoms are formed at certain times. In order to be accurate we must know the major cycles. Always consider the annual forecast and whether the big time limit has run out before judging a reverse move. Everything moves in cycles as a result of natural law of action and reaction. The cause can be determined years in advance. The future is but a repetition of the past, as the Bible plainly states, “the thing that hath been, it is that which shall be; and that which is done, is that which shall be done, and there is no new thing under the sun.” (Ecclesiastes. 1:9). By a study of the past, I have discovered what cycles repeat in the future. In order to be accurate in forecasting the future, you must know the major cycles. The most money is made when fast moves and extreme fluctuations occur at the end of major cycles. I have experimented and compared past markets in order to locate the major and minor cycles and determine in what years the cycles repeat in the future.

After years of research and practical tests, I have discovered the most reliable cycles to use. The great cycles which mark extreme high and low prices which occur over a long period of time are 90-years, 82-84, 60, 49-50, 30, 20 15, 13 and 10. Minor cycles 9, 5, 3, 2 and 1.

“This is the greatest and most important cycle of all, which repeats every 60 years or at the end of the third 20-year cycle.” 87

Time is the most important factor in determining market movements because the future is a repetition of the past and each market movement is working out time in relation to some previous Time Cycle. TRADING WITH THE TREND. You always make the most profit by following the main trend and playing the long swing, you can never make much money jumping in and out of the market. If you will put in time and study to determine the main trend, and then follow it the length of time that it should run and not get out until you get a definite indication of change in trend, you will make big profits. It is much better to make 3 or 4 trades each year and make large profits, than it is to try to make 100 to 200 trades a year and be wrong half the time, and finally wind up with a net of loss.” “Let your rule be to GO WITH THE MAIN TREND, AND NEVER BUCK IT. If you don’t know what the trend is, don’t get in the market. There are times when it will pay you to stay out of the market and wait for a definite indication and a real opportunity, which is sure to come if you wait.”

PRICE MOVES INTO TERRITORY WHICH HAS NOT BEEN REACHED FOR YEARS “When a stock [or commodity] moves into new territory or to prices which it has not reached for months or years, it shows that the force or driving power is working in that direction. It is the same principle as any other force which has been restrained and breaks out. Water may be held back by a dam, but if it breaks through the dam, you would know that it would continue downward until it reached another dam, or some obstruction or resistance which would stop it. Therefore, it is very important to watch old levels of stocks. The longer the time that elapses between the breaking into new territory, the greater the move you can expect, because the accumulative energy over a long period naturally will produce a larger movement than if it only accumulated during a short period of time.” MULTIPLE CONFIMRATIONS “MATHEMATICAL RULES OR REASON: It is possible to get as many as nine confirmations of reasons why a stock (or commodity) should be bottom or top at a certain time and the greater number of confirmations the surer the chances of making profits. That is why each of my Lessons and Courses teach you more rules to confirm what you learned in the first Course or previous Lessons.” 88

CONCUDING REMARKS ABOUT CYCLE TIMING Based on my in-depth studies, I strongly suggest all traders or investors to start using both Cyclical Timing and Technical analysis to achieve consistent and better results. The year 2013 is going to be a year of volatility especially after April-May but it may present an excellent last opportunity to buy gold and silver at low price before the beginning of the next phase of rally which may start in 2014 followed by parabolic rises in 2016-2020. I also want to point out the truth here -“ NOTHING IS 100% CERTAIN” with any kind of analysis as perfectly figured out by experienced hedge fund trader Todd Harrison (Minyanville) who once said: Nobody knows what the future holds; as I’ve repeatedly shared, anyone who claims to is not to be trusted. All we can do is map a spectrum of future outcomes, assign probabilities for those outcomes, sync risk profiles with time horizons and allow for an ample margin for error. There are no magic pills or blanket solutions for what ails us; we’re in uncharted waters but we cannot let ourselves succumb to the perfect storm”. Therefore, I need to re-emphasise here, high accuracy of any analysis needs constant review and monitoring with some sorts of risks management along the way to determine the cyclical top or bottom for achieving the best or consistent results. 89