COMMENT: Mr. Armstrong, I simply needed to say that your 1985 clip explaining how the greenback rose as a result of they thought the US would default on its eurodollar obligations was fascinating. You’re the solely actual analyst with real expertise and sources. The newest stats present that overseas holdings of US debt have risen, whereas holdings of metals have declined. A lot for the fixed greenback haters, as you name them. They’re at all times improper.
Thanks a lot to your view of the world. Expertise counts.
GP
REPLY: These perpetual greenback haters have been singing the identical tune because the Seventies. It will get irritating for me to see the identical previous claims regurgitated continuously with no reflection or authentic evaluation ever no much less historic investigation. As Julius Caesar as soon as mentioned, folks consider what they wish to consider, nit the info or reality.
Socrates is displaying that March might be a low and we’ve a Directional Change and the volatility rises sharply in June. Now we have Panic Cycles in July even in our Warfare Index. It’s suggesting that capital flows will shift into the USA with escalating battle in Europe and the Center East. These greenback haters are usually the fiat forex crowd who’ve been insisting on a commodity backed forex for many years when they don’t perceive the very first thing in regards to the economic system and the way it capabilities globally.
The Petrodollar was a their determined try to clarify why the greenback didn’t crash after the collapse of the Bretton Woods in 1971. When the greenback didn’t collapse after the top of the gold commonplace, they needed to cover-their-ass as a result of they have been WRONG. So, to save lots of face, they claimed that the greenback was now backed by oil fairly than gold as a result of oil was priced in {dollars}. They bought that BS to the press and it was pure sophistry. To this present day, we nonetheless hear the conspiracy concept in regards to the Petrodollar.
The proportion of world commerce attributed to grease and petroleum merchandise is roughly 8-10% based mostly on the 2022 information. Merchandise Commerce in 2022 globally totaled round $25 trillion (WTO information). Of that, crude oil and refined petroleum product exports worldwide have been estimated to be between $2.2 and a couple of.5 trillion (relying on worth fluctuations and commerce volumes). This contains contributions from OPEC, that are solely 40% of crude exports, and non-OPEC exporters just like the U.S., Russia, and Canada.
The entire Petrodollar concept was absolute nonsense and it diverts folks from understanding the significance of the monetary capital actions. The USA has the biggest consumer-based economic system and everybody has to see their merchandise in {dollars} to American customers. Evaluating Per Capita Spending internationally, the US shopper spends $32,700, European is available in at $18,000 – $22,000 (varies by nation), and Japan is available in at $8,800, even if Japan is the second largest consumer-based economic system.
The backing of ANY forex is the productiveness of the nation – it’s folks. Russia is the biggest nation with $75 trillion in pure sources, however they’re nonetheless within the floor. If a forex is would just some commodity, then Russia must be #1 and if oil backs a forex then why is Venezuela or Saudi Arabia not the reserve forex? A part of what makes a reserve forex can also be navy energy. When Athens defeated the Persian invasion, they rose in stature. The Athenian Owl turned the dominant forex within the historic world to the purpose that Egypt, which by no means issued coinage, struck imitation Athenian Owls for worldwide commerce. The US greenback can also be the reserve forex partially due to the navy energy.
The Roman Empire was the primary society to develop a large, market-driven city shopper tradition on a scale by no means seen earlier than. That is why you see imitation of Roman coinage produced in India for the Roman coinage carried a premium over and above the metallic content material. This instance reveals that the imitation contained extra gold then authentic. Historic Rome (notably the town itself) was a shopper metropolis—a time period historians use to explain cities that consumed way more than they produced domestically. Rome’s inhabitants of about a million folks was sustained by:
- State-distributed grain (annona) paid for by taxes from the provinces
- Elite wealth extracted from conquered territories
- An enormous community of imports (wine, olive oil, metals, pottery) from throughout the Mediterranean
This created an unprecedented focus of demand. In Rome you discovered subtle retail outlets (tabernae), aggressive markets, standardized coinage, and even early types of branding (e.g., wine amphorae stamped with producers’ names). Here’s a coin of Nero saying the development of primarily a meals mall, Macellum Magnum. This coin is an interesting artifact as a result of it serves each as a bit of imperial propaganda and a novel historic document of Roman city life.
I’ve defined that when Emperor Valerian I was captured by the Persians in batte throughout 260AD, that despatched a shockwave all through the empire and inspired the barbarian of the North to invade smelling Rome was weak. Thie turned the disaster of the Third Century; silver denarius collapsed inside simply 8.6 years and provincial coinages started to return to an finish. The extreme debasement destroyed confidence.
Emperor Diocletian (284-305AD) sought to reestablish that confidence reforming the forex. He launched the gold solidus and new silver/bronze coinage in an try to revive the economic system. But, solely the gold remained secure because the silver coinage started to say no and vanish.
Britain was a particular case of complete collapse. In contrast to Gaul or Italy, the place some continuity was maintained, coinage in Britain got here to a whole halt after the Roman departure. By about 435 AD, cash had ceased for use as a medium of change. The island wouldn’t see a brand new, native coinage till the late seventh century. The Romans exited Britain primarily in 410 AD, when Emperor instructed the cities of Britain to “look to their very own defenses,” successfully ending central Roman rule. Nonetheless, this was not a single occasion however a course of over a number of a long time, with key troop withdrawals beginning as early as 383 AD.
The formal break in 410 AD was the end result of a protracted interval of decline and withdrawal. The primary main troop withdrawal got here in 383AD when Common Magnus Maximus took a big portion of Britain’s garrison to Gaul to launch a profitable (however short-term) bid for the Roman throne. He by no means returned the troops, leaving native leaders in command of protection in northern and western Britain.
The usurper Constantine III stripped the remaining cell Roman troopers from Britain in 407AD, crossing to Gaul in one other try to turn out to be emperor. These forces additionally by no means got here again. The Formal Break (409-410 AD) got here with no military for cover, dealing with growing raids, and paying taxes to a distant emperor who may now not assist, the Romano-British elites expelled Roman officers round 409 D. The next yr, Emperor Honorius despatched his well-known rescript telling the British cities to rearrange their very own protection, formally acknowledging the top of Roman authority.
By the late fifth century, it was over for the West. Following the ultimate lack of Roman political management, the assorted barbarian kingdoms (just like the Franks, Visigoths, and Ostrogoths) took over the present Roman mints. They continued to strike cash, typically within the names of the remaining Roman emperors for a time, however this was the start of a brand new, post-Roman financial system.
The concept that the greenback will collapse as a result of it’s fiat and isn’t backed by gold is simply laughable. German and Japan rose to the strongest economies of their respective areas with out gold. They did so by productiveness.
