I t s Jus t Time

The Decline & F a l l of the United States?

The Global Financial System?
Or Capitalism?

2007,1 S
Or i s i t the
(Feb. 27, 2007)

Monetary System?

(Mar 19, 2009)

What Now?

;Mar 23, 2008)

(June 13, 2011)
1AB
by Marti n A. Armstrong
former Chairman of
Princeto n Economics International , Ltd,
Copyright Right October 10th,
2008
 Dedicated to :

Nikola i Dmyitriyevic h Kondratief f

(1892 - 2938)
Who was imprisoned & executed f o r h i s
daring t o explore Economic-Politica l Cyc
l

and

my parents Marti n & Ida

vho inspire d me wit h h i s t o r y
and" the f o r t i t u d e t o explor
e
 Table of Contents
Introductio n
1
Confidence Remains the Key
2
The Keynesian Theory
3
F a l l a c y of I n f l a t i o n
4
F a l l a c y of Money Supply
4
F a l l a c y of Interes t Rates
5
F a l l a c y of Taxation
5
• The Kondratief f Wave
Economic R e a l i t y 6

K a r l Marx was the Most I n f l u e n t i a l Economist 7

tha t perhaps ever l i v e d 7

The Lessons of Time 8

Understanding the Nature of Time 8
Dimensional Time 10
The Multi-Dimensiona l Wave H
Economic Confidence Model 13
The 224 Year Cycl e of P o l i t i c a l Change . . . I 4

The Shape of the Wave * 14

The Phase-Transitio n
. . . 17
The 224 Year Cycle Wave & The United States
18
The Great Convergence of C r i t i c a l C y c l i c a l
20
Waves The Cycl e of Alternatin g P o l i t i c a l Philosophy
22
The 37.33 Year Monetary C r i s i s Cycle .•
24
The 8.6 Year Economic Confidence Model
25
The 8.6 Month Interna l Cycle (37.33 Weeks)
27
The 37.33 Month Cycle Frequency
28
The Self-Organizin g Intensit y Cycle
29
The God P a r t i c l e / Cycle?
30
Truth = the Rule of 9
30
Revelatio n of Fibonacc i
31
The Mystery of the Maya
The Concept of Self-Refera l 33
Unravelin g the Mystery of Time & Space
33
Creatin g Replicatin g Pattern s i n t o the Future
- The Schema Frequency - 33
Comprehending Time 36
 Russi a & The .224 Year Cycle of
P o l i t i c a l Change 37

China & The 224 Year Cycle of P o l i t i c a l Change 38

The Concept of Leverage 39
What About the Derivative s 40
Understanding the Floatin g Exchange Rate 41
System The Nature of a Debt C r i s i s
42

Wh&t &©w? 43
The Paradox of Solutio n 44
Comprehending the Problem
46
The Differenc e Between Monetizatio n & Borrowing ....
Because Government Borrowing Competes wit h the 46
Privat e Secto r - There i s an Equal & Opposite
46
Force of Suppressing Economic Growth i n
Proportio n t o Stimulatio n 47

I t i s Time t o Re-Examine What We Are Doing .... 48

The Paradox of Value
49
Capita l Concentration
The Hyper-Inflatio n Outcome 50
Unraveling the Financia l Contractio n
51
Attackin g the Shorts
Abuse of Investigation s 52

The Abandonment of the Rule of Law 53

Leads t o the Destructio n of Nationa l Wealth
54
The Desir e t o Publicl y Punish
May Irreparabl y Damage Our Own Economy 56

Crimina l Laws i n Anglo-Americam Histor y are P o l i t i c a l Tool 57

s White Colla r Crimes Are the Most
58
Abused Prosecution s i n Federa l Courts
59
The Absence of Disinteres t I n Prosecution s
60
Lends i t s e l f to Corruption
The Manipulatio n of Markets 66
The D i r t y L i t t l e (Big) Secre t '
So What Happened t o the Model? 6 7

£h§ §§ululi©a
 The objec t of thi s t r e a t i s e i s t o demonstrate that ther e i s substance behind
the ol d adage that "histor y repeats. " Everythin g i n nature has i n recen t times been
discovered to functio n mathematically conforming to what f r a c t a l geometry, created
by Bernoi t Mandelbrot, can reveal . During the 1970s, I discovered tha t ther e was a
very strange hidden r e g u l a r i t y i n pric e movements from day tradin g back i n cash
market days. Prom my Translux (paper-ticker-tape ) I could plo t each and every trad e
t i c k - b y - t i c k , and even r e l a t e tha t to volume (an a b i l i t y l o s t wit h computer screens)
. I began to notic e tha t the o v e r a l l patter n tha t unfolded intraday , would r e p l i c a t e
i t s e l f onto the dail y level, - eventuall y appearing i n the weekly l e v e l and then a t
a higher l e v e l of monthly a c t i v i t y . These pattern s were extreme movements tha t had
appeared leadin g up t o major changes i n trends . I explained, to c l i e n t s eventuall y
tha t fo r any patter n based upon c y c l i c a l events t o be v a l i d , i t had t o be r e f l e c t e d
throughout tame on a l l level s of a c t i v i t y . In other words, i f there was a cycl e of
a uni t of 8.6 interval s intrady , i t must als o exis t on the d a i l y , weekly, monthly,
yearly , decade, and century level s of time.
When I l a t e r became f a m i l i a r wit h Mandelbrot *s work, I r e a l i z e d tha t what he had
observed withi n nature, I was lookin g a t withi n human behavior. I*-began t o see tha t
ther e was s t i l l more to t h i s fascinatin g f r a c t a l geometry a r i s i n g from what t r u l y
amounted to geophysics. There were two d i s t i n c t aspects to the causes behind what
became manifest i n why "histor y repeats. " F i r s t , there was the c l e a r observatio n tha t
there were patterns of human behavior that repeated. Thi s patter n based a c t i v i t y le d
t o the f i e l d s of technica l analysi s and patter n recognitio n such as the work of Fros t
and Prechter known as E l l i o t t Wave analysis . Both sought to observe pattern s and then
projec t the futur e from the past assuming tha t there was a r e p e t i t i o n of patterns .
Secondly, there was a c y c l i c a l wave of events irrespectiv e of whether'i t create d a
low o r a high, boom or bust. Where,fracta l geometry could mathematically explai n how
something would unfold , there was a separate and d i s t i n c t element t o t h i s hidden
order than can be best describe d as the Geometry, of Time tha t i s the mathematical
r e a l i z a t i o n of C y c l i c a l Analysis .
I n t h i s t r e a t i s e , I am concerned wit h t h i s Geometry of Time and how through
C y c l i c a l Analysi s i t manifests withi n "when" events are l i k e l y to unfol d leavin g
f o r another day the f r a c t a l geometry of patter n recognitio n that t r a v e l s withi n
the same wave structur e l i k e DKA providin g a hidden code as to the pattern s tha t
should develop. The genius of Mandelbrot always arise s from out of the mainstream
because l i k e Socrates who t r i e d to prove the Oracle of Delph i wrong i n i t s . • prognos-
t i c a t i o n that he was the smartest of a l l Greeks, j u s t sometimes i t takes the one
lookin g int o the forum from the outsid e to see what a concensus cannot.
What I hope to accomplish i s to open the eyes to the tru e hidden order tha t
governs a l l l i f e , includin g ourselves . We must become aware of both time and the form
of structure . We must break-away from l i n e a r thought and t o 'see the world tha t i s
waitin g to be discovered that surrounds everything . My mother always sai d t o me tha t
ther e was a "time and plac e f o r everything, " Her explanatio n of the world t o me was
so very true . We must rejec t the idea than man needs to be controlled . Freedom i s
a devine g i f t that no man has the righ t to rob from another t o impose hi s persona l
views be they p o l i t i c a l or r e l i g i o u s . I f we understand human nature and tha t ther e
w i l l always be the booms and busts fo r they are the engine of progress forcin g new
advances that w i l l not appear, but fo r necessity , then we can surviv e and ex"pand our
comprehension of time and space. We must not destroy ourselve s i n the t h i r s t t o
punish that what we do not understand. C i v i l i z a t i o n i s on the l i n e . So i s the r i s k •'
of war. " I t i s j u s t time!" We must open our mind to see what our eyes cannot but what
our i n s t i n c t s t e l l s us e x i s t s .
f
 I t ' s Jus t Time
The Decline & F a l l of the United States?
The Global Financial System?
Or Capitalism? V Wovelengfh
8.6 5Tear Cycle Wave
/ I \ B
instil •
/
/ \ •/ c
1
« yea r I n t e n s i t y W a v e / \

Or i s i t the
Monetary System? w h a t N o w ?
by Marti n A. Armstrong
former Chairman o f Princeto n Economics International , Ltd .
Copyright Righ t October 10th, 2008
The l a t e s t Financia l C r i s i s of 2007/2008 i s but a manifestatio n of events'
se t i n motion years ago tha t are now unfoldin g precisel y accordin g t o time . The
question of how t o deal wit h i t , i s a seriou s issue . Whether t h i s i s a n a t u r a l
consequence of the Business Cycle , i s another important questio n t o be resolved .
For the one unifyin g core element .of a f i n a n c i a l c r i s i s i s tha t nothin g ever
changes, only the player s and the instruments.-
The c u l p r i t i s not merely the mortgage market. Neithe r i s i t e x c l u s i v e l y Wal
l Stree t and the Banks. I t i s a combination of blame tha t squarel y r e s t s both
upon the Publi c and Privat e sectors . Are we to be so shortsighte d tha t we w i l l
now j u s t destroy our entir e p o l i t i c a l economy i n quest of a quick f i x ? Are we t o
y i e l d to the ranting s of X a r l Marx and hi s hatred of the " r i c h " t o blame the
hig h s a l a r i e s on Wall Stree t when that has nothing to do wit h curren t events
anymore than huge salarie s to sport s figures ? I f we do not honestly examine the
causes, we w i l l i n fac t destroy the Blessing s of Libert y fo r our posterit y
deprivin g them of freedom merely to use curren t events as an excuse to punish the
r i c h as Marx espoused. We face major problems. The Dow Jones could f a l l to 3,500
i f Confidence swings t o the government, or i t could go through a Phase-Transitio n
and reach 35,000 i f the swing i s back to the privat e sector . Gold-i s l i k e l y to go
to $2,500 or jump beyond even $5,000. We are starin g int o a futur e where the
political-econom y and c a p i t a l i s m ar e a t r i s k i n a merky cloud of uncertaint y a r t i c
u l a t e d only by George Orwel l and.Ayn Rand. There are those who r e j e c t histor y as
offerin g any knowledge.. Perhaps these are the same people whose parent tol d them
not t o s t i c k t h e i r f i n g e r i n t o the flame of a candle because i t would burn, yet
they did i t anyway r e j e c t i n g the lesson s of history . I t i s times l i k e the present,
where economic pai n produces people l i k e H i t l e r and Lenin . Capitalism i s
subject to booms and busts , simpl y because tha t i s the nature of mankind.
1
 Confidence Remains the Key
Confidence has always been the determining factor . I f the people t r u s t th e s t a t e
, the f l i g h t t o qualit y w i l l run to bonds f l e e i n g the privat e sector . But i f tha t l e
vel of confidenc e should swing the other^way for_fear__of__an___abundant^supply of bonds,
the swing coul d be violen t i n the opposite directio n toward hyper-inflatioh . I t i s
th e yield-curv e tha t provides clue s to the swing between Publi c & Privat e
confidence . Par too often , the majorit y think s only i n a 10 yield cur™
l i n e a r fashion , rathe r than d3 namic. I f there i s a
r
9 short v Long-Term
f i n a n c i a l c r i s i s , c a p i t a l decides where t o hide.
I f people are not concerned about the stat e going
int o default , they w i l l s e l l the tangibl e asset s and
buy the short-ter m debt of the state . Thi s becomes
self-eviden t by the yield-curv e (shor t vs long-term
i n t e r e s t r a t e s ) . As c a p i t a l f l e e s t o quality , they
w i l l buy the shortes t government debt drivin g the
yield-curv e int o a sharp steep angle. Short-term 6m o lyr 2yr 5yr^ 1Djrr 3Q y r

rate s move toward zero, but the long-term rate s may

remain the same or even r i s e . What i s not commonly understood, i s tha t i f the pendulum
can swing back toward the privat e Confidence that causes the opposite e f f e c t s — sharp
r i s e i n assetvalue s i n direc t proportio n t o the declin e i n the purchasin g power of
the currency . Tha German Hyper-Inflatio n of 1922-23 was the collaps e of the Weimar.
Republic , which was a,sympathic revolutio n of workers who declared a .Republic November
9th, 1918 i n the aftermath of the Russian Revolutio n of 1917. The German h y p e r - I n f l a-
t i o n was the extreme case, and not r e a l l y i n the cards. Nevertheless, th e yield—curv e
steepens fo r now wit h short-term rate s dropping below 1%. However, l a s t year, $400
b i l l i o n i n new debt came to the market. Thi s year, i t may be more than $1 t r i l l i o n .
People may thin k the Government, i s i n control . That i s f a r from the t r u t h . The
Keyneslan model suggested that d e f l a t i o n can be moderated by government d e f i c i t spend-
ing . But Ke3 nes was l i v i n g i n a gol d standard
r
era . Today, the d e f i c i t spending i s
cronic , and par t of the problem. Increasin g the spending t o offse t the declin e works
i n theory i f money i s created. But what we are doing i s borrowing, takin g money put
of the system and merely r e d i s t r i b u t i n g . We have a l l heard that China has been a bi g
buyer of US debt. Some argue they need t o support the US economy to keep t h e i r export s
flowing . However, i f the economic declin e i s spreading l i k e a contagion, around the
world, we may not be able to count on foreig n buyers t o stimulat e the domestic economy.
Economic turmoi l i s l i k e war, and act s l i k e a contagion spreading g l o b a l l y . What
happens i f the Chinese Government face s r e b e l l i o n due to economics? Suddenly, th e
notio n of the bailou t does not work. We end up wit h massive drainin g of cash from
the domestic economy, or a collaps e i n Publi c Confidence tha t swings toward P r i v a t e .
There are solution s tha t are viabl e t o mitigat e the disaster . But the longe r we
ignore the " r e a l " world solution s and trends , the greate r the disaste r w i l l become.
I t i s indeed, the B i b l i c a l stor y of Joseph who warns of 7 years of drought. L i s t e n ,
and we can survive . Ignore the lesson s of the past, and i t w i l l be disaster . I f the
confidence swings back to the Privat e Secto r and foreig n investor s dry-up, the y i e l d-
curve steepens exponentially . Suddenly, the market sees $1 t r i l l i o n i n bonds and the
yield-curv e r i s e s sharply . I f Publi c Confidence collapses , even short-term rates
w i l l explode upward. I f you believe d the Fed could s t i l l stimulat e the economy by
lowerin g i n t e r e s t rates , thin k again. Excessiv e borrowing defeats tha t premise and
runs the r i s k of exposing the lac k of economic control . The Keynesian theory has
been so abused, i t i s l i k e becoming immune to a n t i - b i o t i c s tha t they no longe r work.
I t i s time fo r a seriou s overhaul of the system. I f we continue down t h i s road , we
are f l i r t i n g wit h complete disaste r starin g straigh t .at tens of t r i l l i o n s coming
due i n entitlements . We cannot bailou t the banks. We must buy the debt, put I t i n t o
a~publlc~"funa, and^elT~share s " "allSwlag""dehts"^o^B^eorga^zed-;" I t - i s - t h e m a t i o n we-
need t o save — not the banks! We need r e a l " d i s i n t e r e s t " to govern as the Founders
intended. Where i s our modern-day Cincinnatus ?
2
 The Keynesian Theory
John Maynard Keynes (1883-1946) was a B r i t i s h economist. He worked i n th e
B r i t i s h Treasury between 1915 and 1919. Hi s f i r s t work won worl d attentio n i n
1919 - The Economic Consequences of the Peace. Keynes objected t o the reparation s
imposed by the A l l i e s upon the defeated Centra l Powers (namely Germany) a f t e r
World War I , tha t ended i n 1918. Indeed, the reparation s I s what se t the stag e
f o r the German Hyper-Inflatio n 1922-1923. and the l a t e r r i s e of Adol f H i t l e r , by
the severe economic suppression create d by the payments. Keynes followe d t h i s
f i r s t work wit h a serie s of books and essays includin g A Trac t on Monetary Reform
. i n 1923, The End of Laisse z Falr e i n 1926, and A Treatis e on Money i n 1930. He
became a government advise r and a directo r of the Bank of England i n 1941.
Nevertheless, what Keynes i s t r u l y remembered fo r i s h i s Genera l Theory o f
Employment, Interes t and Money publishe d i n 1936. No doubt, t h i s work has e f f e c t e d
most people's l i v e s today, although i t should be noted, not even Keynes espoused
the result s we now face . Keynes establishe d Macroeconomics wit h t h i s work tha t was
the b i r t h of lookin g at the economy as a whole tha t include d the t o t a l production ,
o v e r a l l employment l e v e l s (concept of- unemployment as % of whole), and the genera l
pric e level s trackin g i n f l a t i o n / d e f l a t i o n .
We must keep i n mind that Keynes wrote t h i s work i n the age of a gold standard
. He di d not, and could not, conceive o f the wholesale f l o a t i n g exchange rat e
system tha t we have today. The concept was too abstrac t a t tha t time. We must-also
not forge t tha t Keynes worked i n Government, and thus would have had a natura l
bia s toward such service . Hi s theory so deeply embraced by world governments
today, was tha t governments should use " f i s c a l p o l i c y " establishe d by taxes and
spending pro- grams, t o contro l and s t a b i l i z e the economy. He argued tha t the o v e
r a l l l e v e l of economic a c t i v i t y depends upon the " e f f e c t i v e demand" he defined
as t o t a l spending by government, businesses, and i n d i v i d u a l s , (GNP Gross Nationa l
Product) . Keynes viewed the cause of the Great Depression i n a rathe
r l i n e a r manner. He believe d that the Great Depression took place as a r e s u l t of a
drop i n e f f e c t i v e demand. He then postulate d tha t durin g such period s of
economic depression , i t was the duty of the government to increas e i t s spending
whil e cuttin g taxes , or t o do them i n d i v i d u a l l y , i n order t o stimulat e the
economy. He. acknowledged tha t t h i s would create a budget " d e f i c i t " and was
contrar y t o Laisse z Fair e (leav e the market force s t o sor t i t out) . He advocated
"that d e f i c i t spending at such a time would stimulat e the economy producing-
higher l e v e l s of economic a c t i v i t y tha t include d investment and nongovernmental
spending to achiev e f u l l employment. Thi s theor y was eaggerly adopted by both
side s of Government, conservativ e and s o c i a l i s t , f o r i t increased the executiv e
powers and cas t the p o l i t i c a l stat e as a new savio r o f the people and give j u s t
cause fo r publi c e l e c t i o n . The problem wit h
the Keynesian Model, i s the same wit h Marx - i t assumes some rol e as a benevolent
dictato r exempt from th e s e l f - i n t e r e s t s tha t drive s the e n t i r e economy as explaine d
by Adam Smith (1723-1790) i n hi s Wealth o f Nations . Once the theory created a
rol e fo r the government to j u s t i f y d e f i c i t spending, i t became l i k e the adicte d t o
drugs. I once had a seriou s meeting wit h Dick Army on C a p i t a l H i l l about the F l a t
Tax. I explaine d that the r e a l problem was the Income ta x and tha t we needed to
retur n t o a consumption tax model f i r s t establishe d by the Founders. He rightly
pointed out, tha t to support a r e t a i l sale s tax would not happen because the
fea r would be the income tax would not be abolishe d and then both taxes would be
i n place . He i s correct . Once the d e f i c i t spending took place , i t was .used every
year fo r p o l i t i c a l agenda, not economic stimulation . The Cronic d e f i c i t s became th e
core problem. Thi s i s the Paradox of Solutio n - .today's quick f i ^ : becomes the.
problem fo r the next cycle . No doubt, we are about t o make the same mistake again !
3
 FALLACY of I n f l a t i o n
Before we can even begin, there are fou r great
f a l l a c i e s that must be understood because we cannot / \ /INFLATION^
dea l wit h r e a l i t y u n t i l these f a l s e b e l i e f s are
disposed of. The f i r s t f a l l a c y i s the misconception
of " i n f l a t i o n . " Most economists defin e t h i s as the
r i s e i n the pric e of goods and services . This i s / DEFLATION.,
dead wrong!

I f you are worried about crashin g your car , you buy acciden t insurance . I f
you are worried about your house burning down, you buy f i r e insurance . I f you ar e
worrie d about someone takin g your valuables , you buy thef t insurance . But i f you
are worried about dying, you buy " l i f e " insurance? The reason they do not s e l l
"death" insurance i s because most people are not comfortable buying "death" i n s u r-
ance and t e l l the salesman they are not ready to die . To increas e s a l e s , they
changed the l a b e l to i t s opposite , creatin g the same deception.
I n f l a t i o n i s not the r i s e i n the goods and service s i n terms o f d o l l a r s when
i t i s throughout the entir e economy. An i s o l a t e d incidenc e because a l l the oranges
were destroyed i n a storm, i s " i n f l a t i o n " t i e d t o the supply and demand and can be
trace d t o that event. However, tha t narrow d e f i n i t i o n I s extended t o s h i f t the
blame from the government t o the privat e sector . When everythin g i s r i s i n g i n
price,, i t i s r e a l l y the declin e i n the value of the currency from-a purchasin g
power p e r- spective . By changing the l a b e l , they s h i f t the blame. So alread y we ar
e hearin g tha t the blame i s the "greed of Wal l Street " tha t immediately
exonerates the government i t s e l f . I f they are not the cause, what good
would be serve d by lookin g at government? None, of course! A systemic r i s e i n
price s i s caused by a declin e i n the purchasing power of the currency - not the
r i s e i n the pric e of goods and services . This c r i s i s i s e f f e c t i n g the underlyin
g systemic i n f l a t i o n a r y pressure s rathe r than the r i s e of price s and service s due
t o externa l reasons. Deflatio n and I n f l a t i o n are s i t t i n g on opposit e side s of the
scale . To deflat e the valu e of the currency causes a r i s e i n the cost s of goods
and services . To increas e the valu e of a currency causes a deflationar y effec t
i n the price s of goods and services . Thi s i s the r e a l i t y of and f i n a n c i a l
system. THE
FALLACY of Money Supply The ide a tha t the
Government control s the money supply i s absurd. The onl y thin g that the
Government can contro l i s the physica l money supply. Beyond that , money i s
created by the privat e secto r (1) through leverage, and (2) by th e very nature
of the f l o a t i n g exchange rat e system. I t i s not d i f f i c u l t t o r e a l i z e tha t if
you deposit $1,000 i n a bank and the bank lends i t t o another party , both w i l l
show the $1,000. I f you now leverag e tha t through derivatives , you can creat e a
multitud e of $1,000 assets .
The fa r more complex r e a l i t y of the money supply i s the electroni c money supply
that i s created by c a p i t a l flow s and banks. I f you have a buildin g and s e l l i t f o r
$1 m i l l i o n to another c i t i z e n , the money supply I s not effected . However, i f you
s e l l that same buildin g to a European, something changes. The'European w i l l brin g
euros, they w i l l be converted withou t r e s t r i c t i o n by a bank i n t o d o l l a r s , and now
that.$ l m i l l i o n i s given t o you f o r the building . You now have $1 m i l l i o n t o spend
domesticall y tha t di d not previousl y e x i s t . Under a f l o a t i n g exchange r a t e , money
i s created by the privat e secto r and no centra l bank can prevent i t . I f the y put
exchange rat e system. Consequently, money supply cannot be controlle d by th e c e n t r a l
bank i n any absolut e manner under a f l o a t i n g exchange rat e system.
4
 FALLACY of Interes t "Rates
We are t o l d that the Government can contro l the economy by r a i s i n g or lowerin g
i n t e r e s t rates . This presumes the ol d world of economics of f i x e d exchange rate s
where the kin g (government) control s absolutel y the money supply . That simply i s
not the case i n a f l o a t i n g exchange rat e system. Secondly, a c l o s e r loo k w i l l now
revea l tha t i n t e r e s t rate s can do nothing t o cure t i e turmoil . We are dealin g wit h
the essence o f the Economic Confidence Model wit h the emphasis on "confidence. " The
y i e l d curve i n t h i s instance w i l l steepen sharpl y irrespectiv e of pla n of nations .
During economic panics, c a p i t a l w i l l i n i t i a l l y seek cover, which means i t w i l l ru n
as f a r away from uncertaint y as possible , i r r e s p e c t i v e of income. Thus, the short-
term rate s w i l l collaps e to as clos e to zero as possibl e fo r c a p i t a l w i l l net t r u s t
banks nor stocks . I t was pure and simple preservation . The y i e l d curve i n normal
f i n a n c i a l panics , steepens when c a p i t a l fear s the Privat e sector . Unique t o t h i s
s i t u a t i o n , we w i l l see a sharp increas e from the d e f i c i t of the l a s t f i s c a l year tha
t j u s t ended September 30th, 2008 wit h about $400 b i l l i o n i n new debt o f f e r i n g s . I f
the Government had to actuall y issu e j u s t $250 b i l l i o n relate d t o the c r i s i s , t h i s
means the new supply of debt w i l l jump to $650 b i l l i o n at a minimum. We coul d see
the expansion of the debt to wel l over 51 t r i l l i o n f o r the tax revenue w i l l decline ,
both f e d e r a l l y and at the stat e l e v e l s , prompting yet another c r i s i s . I t i s l i k e l y
ther e w i l l requir e federa l bailout s of stat e economies as wel l i n 2009.
These curren t events aside , h i s t o r i c a l l y speaking, j u s t f o r once examine 'the ;.
evidence. During the Great Depression, i n t e r e s t rate s collapse d from the 6% t o the '
below 1% l e v e l . -There was a huge f l i g h t to q u a l i t y on a globa l scale . I wrote of
the r e a l events i n the Greatest B u l l Market i n Histor y showing tha t v i r t u a l l y a l l
o f Europe defaulte d or suspended i t s debt. Thi s le d t o a massive f l i g h t to q u a l i t y
tha t caused the buying of d o l l a r s . Thi s drove the d o l l a r to new high s and was not
understood back then, leadin g t o the passage the Smoot-'Hawley T a r i f f Act o f 1930.
The economic contractio n was so bad tha t B r i t a i n even cut Canada los e allowin g i t
t o be recognized as an independent natio n by the Statut e o f Westminster i n 193-1.
By'1932, Congress enacted the Norris-L a Guardia Act , which was the f i r s t law t o
support organized labo r a c t i v i t y . I t was the globa l f l i g h t to the d o l l a r tha t had
s e r i o u s l y confused p o l i t i c i a n s and sparked the protectionism . Thi s f l i g h t t o the
-dolla r als o collapse d interes t rate s a t a f a s t e r pace i r r e s p e c t i v e of the desig n of
the Government. By the abandoning of debt i n Europe, they e s s e n t i a l l y abandoned th e
Fixe d Exchange "Sates under the Gold Standard creatin g a form of f l o a t i n g exchange
rat e system constructivel y tha t force d the d o l l a r t o record highs . Thi s was one o f
the reason Roosevelt confiscate d gold and devalued the d o l l a r r e l a t i v e to gol d i n
1934 r a i s i n g gold from $20 t o $35 per ounce. I f anyone t e l l s you the Government I s
i n absolut e contro l -of interes t rates , they do not know what they are t a l k i n g about.
Look at the fact s behind every major f i n a n c i a l panic , 1837, 1873, 1893, 1907, and
1929, and you w i l l walk away wit h a new perspective.. As long as ther e i s a f l i g h t to .
q u a l i t y , i n t e r e s t rate s w i l l declin e short-term , but w i l l ' r i s e long-term due to the
massive suuply on the horizon . I f the new bonds are .sold only domestically , t h i s w i l l
be s t i l l defaltionar y drying up privat e cash needed a t times l i k e t h i s . I n t e r n a t i o n a l
purchases w i l l brin g new cash i n and stimulat e the o v e r a l l net structure .
The FALLACY o f Taxatio n
We have ofte n heard that Republicans raise d taxes during the Great Depression .
Le t us se t the record straight . The onl y people who pai d taxes were the " r i c h " f o r
the p a y r o l l tax di d not come int o pla y u n t i l a f t e r World War 117 Raisin g taxe s on
those who create d jobs made no sense. The fear s o f maintainin g sound money were
dominant, and tha t i s what led' to Keynsian theory l a t e r on. You cannot punish the
productiv e force s when you need them the most.
5
 The Kondratief f Wave
N i k o l a i Dmyitriyevic h Kondratief f (1892-1938)
i s i n ray opinio n the fathe r of modern economic
• c y c l i c a l theory. Followin g the 1917 Russian Revo- ^i l l f e

::; s5i-j v •
l u t i o n , Kondratief f was an economic professo r who s ;

r^ffi%'"Sji^-ife"i!
1

:
'c., ^m^'iSf^i-' split*
was c a l l e d upon to creat e the f i r s t Sovie t Five-
Year-Plan. To do the job , Kondratief f explored the
globa l economy as i t stood i n hi s day t o come up
wit h a program to stimulat e economic growth. I n
1926, he published hi s conclusion s and finding s
i n a repor t he e n t i t l e d "Long Waves i n Economic
Life . "

Kondratieff' s work showed waves of economic

a c t i v i t y that would span 50-60 years i n duration .
He began wit h the time peiod of 1789 to 1926. He
saw e s s e n t i a l l y three great waves wit h highs about
1820, 1864, and 1920. Because the economy during
the 1800s was largel y 70% a g r i c u l t u r a l based and
even by 1929 i t was s t i l l 40% a g r i c u l t u r a l wit h Nikolai Dmyitrxyerich Kondratieff
respec t t o employment, the base assumption of h i s (IB9S-I83S)
work lends i t s e l f t o c r i t i c i s m , but only from the
standpoin t tha t the economy matured evolvin g int o an i n d u s t r i a l based economy. Thi s
has had an effec t upon hi s prediction s long-term. For. example, even i f we loo k at
the l a s t hig h i n commodity price s of 1919 caused by World War I , we can see tha t
the great explosion'i n commodity price s between 1974 and 1980 would have been quit e
correct . However, whil e ther e was a recessio n followin g 1980, i t di d not produce
the economic depression. The only reason t h i s di d not happen, was because the base
of Kondratieff s work was calculate d by commodity pric e movements. Once commodities
!

were no longer the centra l dominant economic component, t h e i r r i s e and f a l l would

have the opposite e f f e c t . A declin e i n commodities fuel d i n d u s t r i a l p r o f i t s and
the economic evolutio n reduce a g r i c u l t u r a l employment to 3% by 1980.
Kondratief f was the fathe r of applyin g c y c l i c a l a c t i v i t y to economics i n modern
times. Hi s work inspire d myself, as wel l as others , includin g Joseph A l o i s Schumpeter
(1883-1950) who wrote The Theory of Economic Development (1911) where he argued i t
was the innovatio n of a new product or inventio n tha t created waves of economic
prosperit y le d by entrepreneurs. He then wrote Busines s Cycles (1939) where he wrote
tha t new developments generall y came i r r e g u l a r l y and i n bunches creatin g cycle s of
boom and bust. Schumpter perhaps f e l l out of favo r when he wrote Capitalism , Socialism
, and Democracy (1942) where .he disputed Marxian notion s that I f government sought t o
reduce unequal d i s t r i b u t i o n of income and to eliminat e business cycles , t h i s would
destroy the very condition s i n which entrepreneurs coul d f l o u r i s h . Bi g business , he
concluded, would eliminat e the entrepreneurs from decision-making position s withi n
industry . Thi s would r e s u l t i n the destructio n of capitalis m fo r i t would then los e
i t s a b i l i t y t o grow and develop, that would undermine the economy and lea d t o s o c i a l-
ism. Schumpeter taught at Harvard Universit y i n the 1920's, but di d not j o i n the
regula r f a c u l t y u n t i l 1932.
Kondratieff' s work was seen as a c r i t i c i s m of S t a l i n . He was arreste d i n Jul y
1930, accused of being a member of non-existent "Peasants' Labour Party " and as
earl y as August 1930, S t a l i n wrote a l e t t e r c a l l i n g f o r h i s execution . He was first
sentenced to 8 years i n priflon . He wrote 5 new text s whil e i n priso n tha t were never
pub lished . During S t a l i n s "Great Purge," he was give n a second t r i a l on September
T

17th, 1938 and sentenced t o 10 years, and then taken outsid e and shot at the age or -

46. He die d fo r hi s researc h as others before him.

6
 ECONOMIC REALITY"
UR L MARX WAS THE MOST INFLUENTIAL ECONOMIST
THAT PERHAPS EVER LIVED
Kar l Marx (1818-1883) i s arguably the most i n f l u e n t i a l
economist that ever l i v e d i n modern times. Some would point
.to John Maynard Keynes or even Milto n Friedman. But the col d
hard fac t of l i f e i s tha t honor belongs t o Marx. I t goes without sayin g tha t h i s
Communist Manifesto effecte d probably h a l f the world. But what i s overlooke d i s the
fac t that while Marx was i n e x i l e i n London, he di d happen to have a stead y job . That
was writin g fo r the New York Tribune. Make no mistake about i t . Marx's idea s touched
tha t personal cord of jealous y withi n human nature, and that create d Socialism.tha t
dominates the other hal f of the world-
Marx's writing s were over more than 40 years . His i n t e r e s t s s h i f t e d durin g tha t
time frame and he ofte n changed hi s mind. But hi s p o l i t i c a l philosoph y remained ver y
consistent , despit e the f a c t tha t hi s idea s were not presented i n a c l e a r documented
manner, suggesting that i f : people want t o believe , they jus t do, even i n the' fac e o f
an absence of a systematic coherent-scheme. Marx was welcomed wit h open arms by the
American p o l i t i c i a n s and was l a r g e l y behind the progressiv e movement led . by, yes,
the Republicans. Marx's ide a was that employers would be so cheap tha t the y would e x p
loit labo r t o the poin t that they would no longer be consumers and tha t would
collaps e th e core of capitalism . Of course, Marx f a i l e d to r e a l i z e that at some poin
t alon g th e way, the employer would eithe r go broke himsel f by being unable t o s e
l l h i s product , or he would have to y i e l d t o the fre e markets cuttin g price s o r
payin g highe r wages. Marx i s responsibl e fo r almost a l l white c o l l a r crimes.
The p o l i t i c i a n responded f i r s t wit h the Interstat e Commerce Ac t regulatin g commerce,
to preven t what Marx s a i d would happen that was not r e a l i s t i c . Next came the Sherman
Anti-Trus t Ac t tha t als o sought t o prevent the consolidatio n of business reducin g
the number o f employers. Thi s came to be followe d by the Income Tax i n 1909, tha t was
p o l i t i c a l l y j u s t i f i e d by Marxism targetin g the e v i l " r i c h " who threatened
capitalism . A l l of t h i s l e g i s l a t i o n was enacted and. the huge cost s to the taxpayer
tha t i s now the average man, was a l l - create d based upon Marxism. Sometimes, we j u s
t forget . Economic idea s do move nations . Sad economic philosophie s have cos t m i l l i o n
s of l i v e s , destroyed f a m i l i e s , and suffere d generations t o be deprived of l i b e r t i e s .
As you l i s t e n t o both Republican s and t o the Democrats, you w i l l notice , they a l l
have prejudged Wall Stree t blaming them and once agai n resortin g to .Marxism based
philosophy . They are anointin g a l l thos e who work i n the f i n a n c i a l industr y as
the " e v i l doers" tha t have caused the c o l l a p s e .
The Lessons o f Time
Franci s Bacon (1561-1626) sai d tha t " I f man w i l l begin wit h c e r t a i n t i e s , he .
s h a l l end i n doubts; but i f he w i l l be content t o begin wit h doubts, he s h a l l end
i n c e r t a i n t i e s . " The Advancement o f Learning . The ide a of cycle s has been around fo r
a very long time. Even the highl y respected Roman Emperor, Marcus A u r e l i u s (121-180AD),
noted that " A l l thing s from e t e r n i t y are of l i k e forms and come round i n a c i r c l e . "
When we look at a chart of gold , stocks , the economy, or any commodity, we are lookin g
at not some d i s t i n c t object , but a t human i n t e r a c t i o n wit h tha t instrument . Gold does
not r i s e and f a l l by i t s e l f . The char t i s showing human demand and how the y w i l l run
toward as wel l as away from tha t instrument. When a young man die d i n b a t t l e , h i s
mother crie d whether that i s today or back i n Roman times. The u n i f y i n g theor y i n a l l
forms of f i n a n c i a l analysi s i s tha t the unchanging element i s human emotion tha t i s
the same today as i t was hundreds of years ago.
7
 Understanding the Nature o f Time
Time i s but a dimension tha t we divid e up to mark i t s passing . Western thought
unfortunatel y i s l i n e a r , not dynamic. Thi s has been the curse o f western
understand- in g and knowledge. Time i s but a cycl e - a c i r c l e . Asians are raise d wit
h the ide a of cycle s leadin g to a more dynamic thinkin g process. Some, see and f
e e l c y c l e s , and some see i t as "necessary" and i n s t i n c t i v e l y understand them. Lady
Margaret Thatcher once commented to me that the Conservatives would los e the
election s i n Great B r i t a i n when John Major was running, she sai d - " I t ' s j u s t
time." Richar d E. Nesbett wrote a good book e n t i t l e d
"The Geography of Thought, How Asians and Westerners Think D i f f e r e n t l y ... and
why." He attribute d hi s work t o a a Chinese student who said : "You know, the
differenc e between you and me i s tha t I thin k the world i s a c i r c l e , and you thin
k i t ' s a l i n e . " He goes on to quote him: "The Chinese believ e i n
constant change, but wit h thing s always moving back t o
some p r i o r state . They pay attentio n t o wide range of
events; they search fo r relationship s between things ; and
they thin k you can't understand the par t without
understanding the whole. Westerners l i v e i n a simpler , more
deterministi c world; they focu s on s a l i e n t object s or people
instea d of the large r picture ; and they thin k they can contro l
events because they know the rule s tha t govern the behavior
of objects. "
Nisbet t was correct . I have lecture d i n Asi a sinc e the mid 1980s. I notice d
tha t I di d not have to explai n cycle s t o Asians, they i n s t i n c t i v e l y understood what
I was t a l k i n g about. Western thinkin g i s generall y l i n e a r , and has greate r problems
t r y i n g to comprehend multipl e relationship s takin g place on a dynamic l e v e l . The way
I pictur e the world i n my mind i s aki n t o gears i n a machine, where everythin g i s
connected. I f I tur n one gear, a l l other s change
i n s t a n t l y . C y c l i c a l a c t i v i t y i s s i m i l a r . Some f i n d
i t f a r too complex. But keep i n mind tha t we are
a l l connected. Jus t as there was a f l i g h t t o the
d o l l a r because of events i n Europe durin g the Great
Depression, events i n other nation s cause effect s
around the world. I t i s t h i s dynamic structur e
tha t makes i t appear to the casua l observer as
pure chaos. But there i s no such thin g as "chaos,
fo r i t w i l l i n fac t be' clea r order below the sur-
face , i f you understand the nature of time.
Dimensional Time
Time i s a dimension withi n the nonlinea r concept of multipl e dimensions. I t i s
l i k e an onion to i t s e l f . Pea l i t back 'and there i s another layer . We can s l i c e and
dic e time t o creat e countless layer s of observation , and i t i s here we must r e a l i z e
tha t c y c l i c a l a c t i v i t y can be observed, but to avoid f a l s e readings , the t r u t h of
time i s tha t the i n t e r v a l of a c t i v i t y must exis t on a l l layer s t o be v a l i d . We can
see waves i n the ocean. Most do not r e a l i z e tha t what the wave i s by i t s nature , a
flo w of energy tha t come i n cycles . I f you go t o the beach and move beyond th e poin t
where the waves are breaking, the wave passes through the water. You w i l l r i s e wit h
the water "but the wave w i l l pass by you travelin g to shore. The water i s j u s t the
"medium" through which the energy wave moves i n a transvers e r e l a t i o n s h i p . I n other
words, i f we took a rope and t i e d i t on
Transverse wave , . ,- , . ,, ., _ -,
. - one-end-snd-then Jwhip--the-otner__up and .
down, the wave moves through th e rope,
the point s on the rope do not move wit
h the wave.
 A cycl e wave i s measured t r a d i t i o n a l l
y from cres t t o cres t and I s define d as th
The shape of a wave,
Wove Length e "Wave Length" wit h the v e r t i c a l heigh t
from the trough t o the cres t known as th e
degree of "amplitude." This i s th e basi c
formatio n of a proportiona l cycl e wave
regardles s of the medium be i t water, the
eart h as i n an earthquake, o f people
refecte d i n a market or economy.

In addition , we can loo k a t e l e c t r i c i t y to understand why cycle s perhaps e x i s t

. We a l l know tha t ther e i s "direc t currenct " tha t i s what you have i n a batter y
you put i n a radio , and then we have "alternatin g current " tha t t r a v e l s t o the o u t l
e t i n the wall . "Direct Current ("DC") cannot trave l distanc e fo r i f you need a s p e c
ific power output, the resistanc e i n the wire s alone w i l l reduce the curren t so
tha t by the time i t reachs the intended destination , i t w i l l not function . We add
cycles to e l e c t r i c i t y t o creat e an Alternatin g Current ("AC") tha t allows the targe
t uni t t o functio n i n a range of power l e v e l s . The sun i t s e l f i s a form of AC
Insofa r as i t fluctuate s about 15% i n amplitude wit h a 300 year wave length .
Indeed, i f the che sun functione d only at one temperature and i t dropped below
tha t l e v e l , th e sun would simply "blow i t s e l f out l i k e DC. Cycle s extend l i f e . They
are the way a l l l i f e i s enabled. I t i s the c y c l i c a l beat t o your heart. I f i s
why you slee p at night .

tha t We Understand tha t Cycles Longitudinal wave

exis t i n a l l aspects of l i f e i t s e l f , we —>jJflM([[M^

must als o understand tha t sometimes the ^
f Direction of Motion
can be Transverse whereas i t purel y gCCC(ICCC^^
energy wave that constitutes"th e cycl e
passes through the medium e f f e c t i n g only »
amplitude, whil e there i s als o much more ^ccacarcc^ ^
-
destructiv e Longitudina l Wave tha t causes
a temporary change In the medium. I f we
use a c o l l e d sprin g and creat e a c y c l i c a l energy wave t o pass through i t , the wave
w i l l cause the loops or c o i l s of the sprin g to contrac t close r as the wave passes
int o tha t region . The c o i l s w i l l return't o normal once the wave passes. Thi s can
take place where there are convergences of variou s c y c l i c a l force s tha t a l s o may
create panic cycle s or increas e amplitude exponentially . In water, s a i l o r s have told
s t o r i e s of "giant " or "rogue" waves tha t appear out of nowhere: What thes e are can
be simply explaine d as a " c y c l i c a l convergence" whereby numerous c y c l i c a l waves join
together and produce an abnormally "giant " or "rogue" wave tha t causes th e amplitude
Of the i n d i v i d u a l waves t o blend together producing the hugh abnormal event . Thi s
wave interferenc e i s ofte n known as the "phase." I f two waves of th e same frequency
as measured cres t t o cres t j o i n together , the amplitude w i l l increase . I f the two
wave are out of "phase" tha t i s measured I n the degrees of a c i r c l e (360°), l e t us
say by 180°, the waves w i l l i n t e r f e r e wit h each other and can cance l each othe r out.
Wave theory applie s even to l i g h t , sound and to the i n t e r n a l part s of atoms. It has
been notice d that electrons , neutrons; and protons, w i l l als o a t times behave in
waves. Complex wave structur e can be als o
! I l l u s t r a t e d by radi o waves. Here, i t has —
been discovered tha t we can combine two
waves to creat e the radio . We need f i r s t ,
the sound wave, and t o transmi t tha t
sound we need a " c a r r i e r " wave. The two
are combined to creat e the radi o wave
showing tha t we can als o obtai n complex
wave structures .
9
 Pill
The complex structur e of cvcl e waves can
als o be i l l u s t r a t e d by the differenc e between
AM and FM r a ^ i o . I f we a l t e r the amDlitu^e o f
a cycl e wave, we w i l l effec t the i n t e n s i t y . I n
radio , t h i s i s what we c a l l (Amplitude Modulatio n
"AM"). We know tha t AM radi o i s not as c l e a r and
iii cannot t r a v e l as d i s t i n c t as sharp as FM radio., tha
t i s achieved by a l t e r i n g the wave length , known
il as (Frequency Modulation "FM"). So we can see
tha t differen t effect s can be achieved by a l t e r i n g
eithe r the amplitude or the wave lengt h frequency .

Edward Dewey who starte d the Foundation fo r the Study of C3'des, was the
economic adviso r under Herbert Hoover. He came away from the Great Depression
wit h the d i s t i n c t f e e l i n g tha t i t was l i k e what they commonly c a l l , "Murphy's
Law" - whatever can go wrong w i l l go wrong. The Great Depression was not j u s t
a economic disaster , i t was als o a natura l perio d of disaste r - the Dust Bowl.
There was poor management of the s o i l , destroyin g the natura l grasslands and
convertin g i t to wheat that di d not protec t the s o i l . Thi s became a disaste r
s i m i l a r to the B i b l i c a l lengt h of drought - 7 years . The drought began i n 1931
and the destructio n of the a g r i c u l t u r a l industr y that accounted fo r about 40% of
a l l employment, drove the unemployment rat e to nearl y 25%. The drought create d the -
"dust bowl" forcin g American labo r to become s k i l l e d . The Dust Bowl was the most,
severe between 19.35 and 1938, wit h 1935 scorin g 40 storms whil e one of the worst,
took plac e i n May 1934 blowing 318 m i l l i o n tons of s o i l t o the East Coast on the
wind. I t was t h i s combination of cycl e events combining weather wit h other
economic force s tha t caused Dewey to walk away from the event believin g i n some
complex c y c l i c a l a c t i v i t y he f e l t needed to be investigated .
The Multi-Dimensiona l Wave

Electromagnetic nature of light

Now we are ready to look at multi-dimensiona l waves. This can be i l l u s t r a t e d by

l i g h t i t s e l f , which travel s I n a electro-magneti c wave wit h two components. The wave
t r a v e l s wit h the e l e c t r i c and the magnetic f i e l d s together, but positione d separatel
y at 90° angles. Einstei n posite d the theory that l i g h t i s made up of p a r t i c l e s of
photons, which may appear to be contradictin g wave theory. But test s have shown tha t
at times l i g h t behaves l i k e a wave and at other times l i k e a p a r t i c l e . We need not
go down t h i s road sinc e i t i s not the subject-matte r at hand. I t i s s u f f i c i e n t t o
stat e tha t wave theory s t i l l applie s to l i g h t . I am bringin g t h i s up p r i m a r i l y to
i l l u s t r a t e that a l t e r i n g the wave length create s d i f f e r e n t effect s and t h i s i s the
centra l theory behind the Economic Confidence Model.
V i s i b l e - l i g h t i s known as the " v i s i b l e spectrum" tha t i s define d by measuring
the wave length . Tf we shorten the wave length , we cannot see the e f f e c t known as
ultraviolet-•rays--causing~sunbum--Shorten i t . m o r e ^ ^ e ^ e t X-Rays to pierc e the body
and shorten i t even furthe r we get Gamma-Rays tha t emerge with nuclea r reactions .
10
 I f we now increas e the wave lengt h measured from peak t o peak, we move f a r
beyond the v i s i b l e spectrum and beyond the i n f r a r e d rays . Now we ar e i n t o the world
of Microwaves so many people cook wit h from the insid e out and then Radio waves and
Televisio n waves. We can embed cripte d waves withi n the t e l e v i s i o n and radi o waves
t o provide even more information . But as you can see, c y c l i c a l waves can be very
complex and the measurement of the wave lengt h can vary producing a host of d i f f e r e n
t e f f e c t s . Using the sun alone, we can move from seeing thing s the eyes cannot
captur e whil e increasin g the wave length s allow s us t o even cook food or view t e l e v i
sion . The Economic Confidence Model

Economic Confidence WotM

&J0?p'ffl£y Martin A. Armstrong

I have explained many times i n the past, I discovere d the Business Cycl e back
i n the 1970s quit e unintentional . I have explaine d tha t as a youth, I was fortunat e
t o have t r a v e l l e d to Europe i n the mid-1960s spending the summer ther e wit h my
parents . Travelin g around from country to country introduce d me t o foreig n currenc y
exchange. I had obtained a jo b i n a l o c a l b u l l i o n / c o i n stor e t o earn money f o r th e
journe y and.became famila r wit h the precious metals markets as w e l l . So year s l a t e r
, I was s i t t i n g i n histor y clas s when the teacher turned on a black & white f i l m -
"Toast o f the Town." This was a f i l m about the Pani c of 1869 where the term "blac k
f r i d a y " was f i r s t coined, because of a gold panic , people were dragging the bankers
out t o the street s and hanging them. To suppress the Wal l Stree t r i o t , they had t o
a c t u a l l y send i n the troops. One scene showed Cary Grant as a youth givin g James F i s k
(manipulator) the quotes on gold . He read "$162." Having worked wit h gold , I knew
i t was onl y $35. Suddenly, my l i n e a r world collapsed . I went t o the l i b r a r y and even
v e r i f i e d that quote was correct . I could not understand how something was much highe
r i n pric e i n 1869 than today - tha t was not l i n e a r !
11
 At f i r s t , I explored my own analysis , not expectin g to f i n d a cycle , but i n
fac t I was tryin g to disprove cycles . I n the course of events, what I discovere d
changed my entir e l i f e , and I have been paying the pric e ever since . I had begun
by lookin g a t f i n a n c i a l panics . How many were there? Why did they happen? I had
gathered everything I could f i n d . I found 26 such panics between 1683 and 1907 -
a span of 224 years. I then di d a simple calculatio n to determine the average. I t
produced the number t o be precisel y 8.6153846615.
I began t o explore the time serie s t o tr y t o comprehend what caused them. I
could see throughout histor y tha t nation s and .empires always rose and f e l l . There
had t o be some explanatio n as to why such state s j u s t expire . I began t o n o t i c e that
even p o l i t i c s flowed i n a c y c l i c a l nature; Sudden shocks economically seemed t o even
spread l i k e a contaigon around the globe. I notice d tha t war were s i m i l a r . If-on e
takes the American Revolution , you see the trend feeds France. The r e v o l u t i o n i n
England i n 1689 spreads to a revolutio n i n Eussia . The examples are endless . Even
going back to ancient times, the Komans overthrew t h e i r Tarquin king s i n 509BC s e t t i n
g up a Republi c while i n Athens i n 508BC Democracy was born.
My studie s le d me t o see great waves of structure d trends tha t b u i l t i n t o
groups of 6 waves of i n t e n s i t y ( v o l a t i l i t y ) forming major waves of 51.6 year s (6x
8.6). I furthe r began to see tha t how the economyc reacte d differen t on an a l t e r-
natin g basi s between Publi c and Privat e Confidence. When the people truste d th e
state , v o l a t i l i t y was lower almost feuda l inasmuch tha t when an invade r appeared,
one coul d run behind the wall s of the castle . Privat e waves produced f a r greate r
innovatio n where s e l f - i n t e r e s t s fuele d progress creatin g exponentia l economic
advancement. For example, the l a s t 3 high s of the 51.6 year cycl e were 1878.15,
1929.75, and 1981.35. The f i r s t was a Publi c wave f i l l e d wit h c i v i l war and great
expansion of government. The next wave saw the boom from the r a i l r o a d s and th e
innovatio n of the car . The l a s t was a Publi c wave peaking i n 1981.35 marking the
peak i n the New Deal wit h escalatin g i n f l a t i o n and perpetua l d e f i c i t spending. Now
we are again i n a Privat e wave marked again by the great p r o l i f e r a t i o n of desktop
computers, globalizatio n of the economy, and the b i r t h of the Interne t equalle d only
i n importance to .how..the r a i l r o a d s expanded the economy from coast t o coast .
During the earl y 1970s I was i n f a l l i b l e . I foresaw gold r i s i n g from 1970 int o
1974 based upon the gold-bug fundamentals, and gold r a l l i e d from $35 t o almost $200.
; But then gold f e l l back t o about $103 going int o 1976. The fundamentals had not
changed, but the model was correc t c a l l i n g fo r a low i n 1977.05 wit h a exponentia l
r a l l y i n t o 1981.35. I r e a l i z e d tha t my i n f a l l i b i l i t y was dumb luc k j u s t l i k e a broken
cloc k i s s t i l l correc t twice a day. I sol d at the peak i n 1974 only because i t f e l t
r i g h t . I t r u l y f i r s t followe d the model a t the low and saw the exponentia l r a l l y
before my very eyes.
Shortl y afte r publishin g t h i s model i n the l a t e 1970s, I receive d a request
from a wel l known U.S. m i l i t a r y schoo l - the C i t i d e l askin g permissio n to teach
t h i s model i n school . I was. compared t o G.W.F. Hegel (1770-1831) who was a noted
German philosophe r who posite d tha t human nature could not be understood withou t
retracin g the footstep s of mankind throughout history . I t was Hegel who promoted
a wide spread investigatio n of histor y int o variou s f i e l d s besides the study of
philosophy, a r t , r e l i g i o n , science , and p o l i t i c s . Hegel's " d i a l e c t i c " was h i s theory
of histor y tha t formed thre e basi c c h a r a c t e r i s t i c s ; .(1) the course of h i s t o r y follow s
that which i s necessary f o r i t cannot unfol d d i f f e r e n t l y , (2) tha t h i s t o r i c a l change
develops as does progress, and (3) tha t one phase of h i s t o r i c a l development tends
to be confronted and replace d by i t s opposite , and t h i s i s intur n replace d by a phase
that is " somehow a resolutio n of~~the two"~pfevi6us opposed phas"es~'If ~is~T;~hese t l i r e e ~
phases tha t he viewed formed a t y p i c a l d i a l e c t i c a l development tha t has been c a l l e d
thesis , a n t i t h e s i s , and synthesis , but Hegel did not use those terms. While I do
1?
 not agree wit h Hegel i n a l l aspects, u n t i l I was confronted wit h h i s work, I had
not made the connection between my observation s of s h i f t i n g confidenc e between the
Government and the Privat e Se'ctor, and the " d i a l e c t i c " process of Hegel . I agree
wit h Hegel .that there are great swings throughout h i s t o r y that driv e the destin y of
men. But I see t h i s als o as the struggl e of cooperation that forms the foundatio n
•of c i v i l i z a t i o n . As the Roman Senators discovered , giv e the mob holidays , fre e
bread, and plent y of sport games, and they w i l l be so occupied wit h t h e i r pleasure s
that they w i l l leave the Senators alone t o rob and corrup t every corne r o f s o c i e t y
u n t i l the mob can no longer be fed and revolutio n takes hold . K a r l Marx saw t h i s
struggl e only between the employers and the working class , rathe r than between the
stat e and the people. '
The 8.6 year cycl e I have writte n before contain s 3,141 days tha t forms th e
cycl e or c i r c l e so t o speak equal i n numer t o P i x 1000. I als o explaine d tha t
I di d not discove r t h i s from P i , but l a t e r discovered P i i n t r y i n g t o f i g u r e out
i t s accuracy. I explaine d tha t the cycl e was discovered from a study of the number
of f i n a n c i a l panics between 1683 and 1907 tha t was a t o t a l time perio d of 224 years
. There were 26 panics withi n tha t 224 year perio d tha t produced 8.615384615. I t
was l a t e r discovere d tha t these i n d i v i d u a l waves built-u p int o groups of 6
producin g a major wave of 51.692 years tha t was very clos e to the observation s of
Kondratieff . I als o teste d thi s back i n time forming a group of 6 waves again tha
t produced th e major wave of 309.6 years. At t h i s l e v e l , I began to notic e the r i s
e and f a l l o f c i v i l i z a t i o n s . At a conference of the Foundation fo r the Study of
Cycles,, a guest speaker S a l l y Balbinu s showed her discover y of a 300 year cycl e
i n the energy output of the Sun. I t was an .average tha t shocked me fo r i t matched
very c l o s e l y t o the 309.6 year cycl e i n the rise ' and f a l l o f c i v i l i z a t i o n s
. Lik e the characte r Neo i n the Matri x who r e a l i z e s he
i s the "One" because he can now see the code, the hidden order of cycle s
indeed i s everywhere from the beat of your heart , weather, the planets , and
l i f e i t s e l f . We must f i r s t grasp the dynamic nature of cycles . Above, i s the 8.6
year cycl e on a m u l t i p l e time l e v e l . We can see how i t moves up through time i n
phases of 6 groups. For a cycl e t o become v a l i d , i t must e x i s t on a l l level s of
time. In the Second A r t i c l e "The
Business Cycle and the Future (Par t I I ) " dated October 10th, 1999 (the one
the Government prevented from being publishe d but escaped v i a former
employees), I explaine d tha t there were 8,6 month and 8.6 week cycle s withi
n the 8.6 year wave formation. Jus t as the c y c l i c a l wave b u i l d s upward i n scal e
through time, i t als o must exis t moving down i n time r i g h t i n t o minutes. But
notic e that the wave build s int o large r waves i n groups of 6. Thi s i n fac t
build s int o another great wave instea d of being 51.6 years , the grouping build s
separately , yet simultaneousl y int o great waves of 72 years . The organizin g
frequency of 72 years becomes a conerstone of s e l f - r e f e r r a l - i n t e n s i t y ( v o l a t i l i t y ) .
The 224 Year Cycle of P o l i t i c a l Change
The 224 Year Cycle Frequency
In the October 10th, 1999 a r t i c l e , I reveale d what the Government was trying
very hard t o suppress - the 224 year cycl e of P o l i t i c a l Change. I gave a revie w
of numerous governments throughout time showing the r e l a t i o n s h i p o f t h i s frequency
to p o l i t i c a l changes. Some governments di d not l a s t beyond that time frame, whil e
others reformed and survived , a l b e i t i n a different^manner. There i s s t i l l th e
effec t of a p a r a l l e l wave of grouping tha t tends to creat e the s e l f - r e f e r a l natur e
that fuele d both i n t e n s i t y ( v o l a t i l i t y ) as wel l as r e p e t i t i v e cycl e o f which Hegel
spoke, tha t the opposite system emerges. Sometimes there may be a synthesi s o f
the two p r i o r systems, but t h i s gives r i s e to the maxim tha t h i s t o r y repeats .

13
 The Shape o f the Wave
One of the great misconceptions in
cycl e theory i s that cycle s unfol d l i k e
a B e l l Curve. Thi s i s simply not true , as
we w i l l explore . When we conside r the
major 224 Tear Cycle of P o l i t i c a l Change,
we are confronted wit h precisel y how the
wave i s formed.
Another f a l l a c y has been tha t there
i s some mysterious "equilibrium " that forms
a magic balancin g act . This notio n of a
magica l stat e of "equilibrium " aris e from economics where those who construc t the
theorie s lac k personal experience. The. idea of "supply and demand" inherentl y create
s images of balance from.which "equilibrium " seems t o have emerged. I n the r e a l
world, one r e a l i z e d that the economy i s more l i k e one of those e q u i l i b r i s t s who t r y
to balance themselves on a chai r on the edge of a sky—scramper. The ide a of
"equilibrium " i s j u s t impractica l fo r i t i s l i k e the search fo r the fountai n of
youth. I f the stat e of the economy were t r u l y balanced, we would be i n the dark ages.
Adam Smith who wrote the celebrate d Wealth of Nation s i n 1776, states : "Nothing,
however can be more absurd than t h i s whole doctrin e of the balance of trade. "
(Book IV, chp I I I , par t I I ) . I f trade were perfectl y balanced, there would be no
progress, fo r the advantage of one natio n create s prosperty i n that natio n tha t
can come only at the expense of .. another. That does not mean protectionis m i s
the answer, fo r tha t create s th e dark age wit h no prosperity .
For t h i s very reason/tha t the "shape" of the wave cannot also, be uniform wit h
a nic e balanced structure . The shape.of the wave i l l u s t r a t e d here i s a long perio d
of o s c i l l a t i o n s tha t buil d int o a major high , and then l i k e the e q u i l i b r i s t who i s
l e f t i n an unnatura l state , suddenly faces the hazardous collapse . The shape of the
wave i l l u s t r a s t e s the catastropi c melt-down, that appears to come from nowhere l i k e
a "great " or "rogue" wave of combined force i n the ocean. I t i s not a B e l l Curve.
The Phase-Transitio n
The reason the model was indeed
correc t i n forecastin g the p o l i t i c a l
change i n China & Russi a and the bi g
collaps e i n 1998 i n Russia , i s due t o
understanding the wave structure . A
system can cras h from exhaustion, or
i t can go through a Phase-Transitio n
tha t creates the exponentia l r a l l y
such as the .Com Bubble. Nikke i 1989,
or gold jumping from $400 to $875 i n
about 4 weeks fo r the hig h i n 1980.
The Phase-Transitio n i s t y p i c a l l y described as takin g water and b o i l i n g i t . A
pot of water progresses i n temperature,. but toward the end, i t jumps int o a chaoti c
stat e that erupt s at the b o i l i n g point creatin g a Phase-Transitio n as water convert s
to steam. Science has studied t h i s process tha t has reveale d the natur e of a l l things .
The process does not follo w the B e l l Curve but becomes an exponentia l move at the
end, which we c a l l the Phase-Transition . Some have c a l l e d these "Power Laws" that
are e s s e n t i a l l y f r a c t a l s discovere d by Mandelbrot experiments. Some have referre d t o
t h i s as the scienc e of "chaos" ye t i t I s fa r from "chaos" i n tha t i t i s a natura l
and require d functio n withi n nature .
14
 I t i s c r i t i c a l to understand the shape of the wave i t s e l f . We are dealin g
wit h the Phase-Transitio n shape, not the b e l l curve models. The shape o f th e
wave becomes paramount t o comprehending what i s possibl e and what i s not . Fo r
example, s c i e n t i s t s argued over two possibl e outcomes f o r the movement of th e
magnetic poles of the earth . I t was not disputed tha t the pole s move. We know
where they have been fo r when a volcano erupts, the coolin g magna tha t forms new
stone i s magnetized i n the d i r e c t i o n facin g the curren t north pol e a t tha t s p l i t
moment i n time. Studies have shown from ancient rocks tha t the magnetic pole s
have even traded places many times. During some periods , the nort h magnetic pol e
became locate d at the south magnetic pole , and the south magnetic pol e became
locate d at the north . S c i e n t i s t s have ofte n disagreed how the movement take s
place and even why. They have found animals froze n wit h food s t i l l i n t h e i r mouth.
Thi s has revealed that the movement of the poles i s not always a gradua l process .
The pole s suddenly jump followin g more of the chaoti c models along the l i n e s o f
a Phase-Transition .
No matter what we are lookin g at , change comes not i n a l i n e a r fashion , but
appears to be chaoti c - l i k e a "giant " or "rogue" wave tha t simply appears withou t
warning-. I n 1999, I publishe d the char t below of the Roman Monetary System. Thi s
was constructed by takin g a l l the coinage of Rome, measuring i t s weight, and th e
metal content from a purit y perspective . What emerged was fa r from l i n e a r , but
showed 'the c l a s s i c model of a Phase-Transition.. The collaps e of the Roman economy
was s w i f t , and certainl y would have appeared t o have emereged out of nowhere.

o o \D rsi o L n r - m ' - i O L n ^ o «—i

\ OCN r- rn f- C M -O <n Cr* <t CT\ -<r 00 -d- O
c N f M . - f . - H i — i r H C N t N m c O - ^ L n
I I I I I !.

Copyright Marti n A. Armstrong

Above we can see' the monetary system of Rome between 280BC and 518AD. Thi s c l e a r l
y reveal s the sudden collaps e tha t appears out of nowhere takin g shape i n the form of
a Phase-Transition . The Roman Empire peaked wit h Marcus Aureliu s i n 180AD, p r e c i s e l y
224 years afte r the murder of J u l i u s Caesar i n 44BC from which the Imperia l Age began.
Note tha t 72 years afte r 180AD, we a r r i v e at 252AD. Thi s i s where the Phase-Transitio n
takes place . The monetary system collapse s during the reig n of Gallienu s (253-260AD).
I discovered t h i s phenomenon whil e creatin g a model on the Lebanese pound f o r the
Universa l Bank of Lebanon i n the 1980s. The model was completed 8 days before a Phase-
" Transition . I came to r e a l i z e the model predicte d the war because thos e who knew i t
was coming, moved c a p i t a l i n advance causing the model t o see the event .
15
 The turning-poin t of 252AD was r i g h t on targe t fo r in 253AD, where the majorit y
of the collaps e takes place , going int o 268AD marked the reig n of Valeria n (253-260AD)
and hi s son Gallienu s (253-268AD). Valeria n was captured by the Persian s i n b a t t l e ,
and by th e end of Gallienus ' reign , the s i l v e r content of the coinage reached v i r t u a l l
y zero and even the bronze content was severel y reduced. This collaps e was perhaps
very s i m i l a r t o the hyper-inflatio n of Germany, although not t o tha t extreme. The
economic declin e promoted p o l i t i c a l unrest as rebel s appeared i n B r i t a i n , Gaul and
Spai n tha t causing them to secede from the Empire. Once again, notic e the r e p e t i t i v
e patter n of c y c l i c a l behavior. Again, 72 years from the peak on the 224 year P o l i
t i c a l Change Cycle i n 180AD, we come t o the monetary collaps e tha t begins i n
252AD. The s l i g h t recovery displaye d i n the chart i s the Reign of Diocletio n who
resorte d by major i n t e r- vention economically , not merely introducin g a new coinage e n
t i r e l y , but he tackle d the Iryper-inflatio n imposing wage and pric e controls . So we
see, fo r as much as thing s appear t o change through the eyes of progress, they
remain fundamentally unchanged insofa r as how human response unfolds t o s p e c i f i c g
e o p o l i t i c a l and economic events. Even turnin g back i n time before the death
of J u l i u s Caesar i n 44BC, we a r r i v e at 268BC. Note tha t t h i s targe t was during-a
perio d of Roman r i s e t o power. I t was the declin e of Etruscan power. By 275BC,
Rome controlle d a l l of I t a l y . From the times tha t existe d before 268BC, we were
dealin g wit h the economic collaps e of much of I t a l y . The F i r s t Punic War took
place 264-241BC, so the 268 targe t was a perio d of great p o l i t i c a l change. Rome
acquired i t s f i r s t provinces , S i c i l y , Sardini a and even Corsica . Adding 72 years to
t h i s turin g poin t on the 224 year Cycl e o f P o l i t i c a l Change bring s us t o 196BC,
again jus t a f t e r the Second Punic War 218-201BC, where Hannibal was defeated i n
202BC, Look at the i l l u s t r a t i o n of the Monetary System of Rome. Note tha t the
formalizatio n of a Roman monetary system r e a l l y began i n 280BC, wit h a s i g n i f i c a n t
reform i n 240BC and again afte r the Second Punic War. Look even
furthe r back i n time, the 224 Year Cycle of P o l i t i c a l Change targe t was 492BC.
Keep i n mind tha t t h i s i s where the ide a of a republi c and democratic forms of
government swept the world i n a p o l i t i c a l t i d a l wave, not uncommon from th e sweeping
change tha t took place i n China immediately followe d by the f a l l of the B e r l i n Wall .
Romans overthrew t h e i r monarchy I n 509BC whil e democracy took hol d i n Athens in
508BC. Thi s was a sweeping year of p o l i t i c a l change tha t was i n l i n e wit h the
492BC turnin g poin t withi n two 8.6 year cycles .
I f we go back to 180AD tha t i s considere d the pennacle of th e Roman Empire under
Marcus Aurelius , moving forward we come to the next 224 year targe t i n 404AD. This
was the reig n of Honorius (395-423AD). Rome was even invaded and sacked by the people
known as the Visigoth s lootin g the treasur y and the c i t y i t s e l f . Thi s was the perio d
of the Hun invasion . A t t i l a di d not become kin g of the Huns u n t i l 434AD. But the
Invasion of the Roman Empire by the Huns preceeded A t t i l a takin g the thrown. What i s
very i n t e r e s t i n g , i s tha t adding 72 years t o the 404 targe t bring s us t o the very l a s t
Emperor Romulus Augustus (475-476 AD). During t h i s entir e 72 year declin e from the
404 target , the Roman Empire was imploding, but followin g the 8.6 year cycl e and th e
v o l a t i l i t y dimensions very closely . I n f a c t , during the reig n of Valentinia n I I I (425-
455AD), A t t i l a the Hun had become so powerful and arrogant, he demanded i n 450AD tha t
the Emperor giv e him h i s s i s t e r Honoria i n marraige. I n the East , A t t l i a demanded and
obtained annual payments from Constantinople t o avoid being invaded.
Looking t o the East, that portio n of the Roman Empire began when Constantine
decided t o move the c a p i t a l to the ancien t c i t y of Byzantium. Constantin e o f f i c a l l y
declared h i s new c a p i t a l i n 330 AD. Constructio n was a t l e a s t i n t i a l l y completed by
333AD, ye t some major landmarks l i k e the "Blue Mosque" was o r i g i n a l l y St . Sophia
b u i l t by J u s t i n i a n I i n the 530 s known then as "Hagia Sophia." Nevertheless , the
T

turnin g point s on the 224 Year Cycle of P o l i t i c a l Change were 333, 557, 781, 1005,
1229, and 1453. The Byzantine Empire thus laste d from the constructio n of Constantinopl e
16
 5 Cycle Waves. I t was precisel y on targe t i n 1453 tha t the c i t y f e l l t o th e Turk s
and became the new Ottoman Empire. Thi s precis e peak fo r 1453 was so s i g n i f i c a n t ,
we forge t tha t the r i p p l e effec t of the f a l l of Byzantium was the entir e c a t a l y s t
tha t gave b i r t h to our modern society .
We have ofte n forgotte n tha t i t was the collaps e of Constantinople tha t l e d
t o the f l i g h t of scholar s takin g wit h them a l l the books of knowledge back t o th e
Roman and Greek times that created school s i n Rome and sparked the entir e
Renaissance. Even i n Russia , i t was the f a l l of Constantinople tha t le d to the f l i g h t
o f scholar s and roya l famil y members.that create d much of the cultur e of Russia . The
sheer scope . of the Byzantin e Empire i n i t s longevit y was astonishing . There were
many economic c r i s i s tha t unfolded, wars, plagues, and p o l i t i c a l coups. But i t
reinvente d i t s e l f time and again . In fact,, whil e Constantine renamed the c i t y
Constantinopl e i n 330AD, the f i r s t peak on the 224 Year Cycle came i n 557 AD.
Indeed, the p o l i t i c a l tension s . developed i n t o a two part y system tha t clashed int o
stree t brawls. The antigovernment r i o t s di d reach a chaoti c stat e i n 532AD where
much of the c i t y was l e f t i n r u i n . I t was from t h i s r i o t , that the Hagia Sophia
was b u i l t much l i k e the Empire Stat e Buildin g became the symbol of r e b i r t h and
hope durin g the Great Depression. The Crusades
F i r s t Crusade 1096 - 1099
Second Crusade .... 1147 - 1149
Thir d Crusade 1189 - 1192
Fourt h Crusade 1202 - 1204
Even lookin g at the crusades, we see one 51.6.year wave between the F i r s t and
Second Crusades. The Third , Fourth, and the Children' s Crusade of 1212 where thousands
of childre n from France and Germany believe d God would par t the Mediterranean Sea
and allo w them t o walk d i r e c t l y t o Jerusalem, died enroute to the sea , when t h e i r
expected miracl e di d not happen, many survivor s returne d i n shame, whil e other s t r i e d
t o get there by ship , were merely captured by the Muslims, and sol d Int o salver y i f
they di d not peris h at sea. The so c a l l e d F i f t h Crusade (1217-1221) onl y amounted
to the capture of Damietta i n Egypt and the Sixt h Crusade was le d by Emperor Frederic k
I I of the Holy Roman Empire, (1228-1229), which f i n a l l y compelled the Muslims t o
t o turnover Jerusalem, but they seize d i t again i n 1244 takin g i t away from the
Christains . Thi s was followe d by the Seventh Crusade le d by Loui s IX of France, who
became known as St Loui s (1248-1254), who was captured by the Muslims and ransomed.
Loui s le d the Eight h Crusade i n 1270 tha t captured Tunis , but he die d s h o r t l y there-
a f t e r . While the Thir d Crusade was a f a i l u r e and a prelud e to the Fourth , i t was
the Fourth tha t began about 51.6 years afte r the Second tha t f i n a l l y ended i n the
whole crusade e f f o r t about 72 years l a t e r from'the year 1200.
The examples are numerous, but what we fin d i s a complex dance o f c y c l i c a l
a c t i v i t y forming differen t wave length s and creatin g d i f f e r e n t e f f e c t s . But note
the strange appearance of the 72 year cycl e that i s not a harmonic o f the 8.6 year
cycl e or the 224 year, yet i t follow s the 224 year cycl e wit h r e g u l a r i t y . Thi s I s
exposing a multi-dimensiona l c y c l i c a l wave formatio n tha t i s f a r from f l a t . There
i s yet a t h i r d dimension, tha t i s even more complex, tha t i s hard t o see withou t
the col d power of computers - The Schema Carrie r Frequency.
The 224 Year Cycl e Wave & The Unite d State s
The Unite d States has als o h i t i t s targe t i n 1999 on the 224 yea r cycl e from
1775. Thi s was tha t poin t where one must say, " I t ' s j u s t time." I n Hegelia n terms,
we reached the poin t i n time that p o l i t i c a l change and upheaval was j u s t p l a i n and
simply state d as "necessary." Of course, a l o t has happened. There was even the 911
17
 attac k and of course there was the controversia l Bush-Gore E l e c t i o n . There would
be hardl y anyone who can deny tha t the natio n has begun a s p i r a l downward and where
i t w i l l lea d i s a c l i f f of uncertainty .
I t does not appear tha t the 1999 targe t on the 224 Year Circle i s the end o f
American C i v i l i z a t i o n . But i t may very w e l l be tha t poin t i n time tha t h i s t o r i a n s
i n the futur e w i l l look back upon and draw the l i n e i n 1999 as di d Edward Gibbon
regarding 180AD and the peak of the Roman Empire wit h the reig n of Marcus A u r e l i u s .
The United State s w i l l survive , a l b e i t , not necessaril y as we once knew i t . There
are great convergences of c y c i c a l waves coming together fo r t h i s downturn tha t does
not look very good fo r the immediate years ahead.
As I have shown, the major changes i n the p o l i t i c a l economy of mankind have
followe d the wave length of 2.24 years. The r i s e and f a l l of variou s governments and
systems have unfolded wit h the 224 year i n t e r v a l s , includin g Democracy i n ancien t
times. We cannot forget , tha t economic stres s causes i t s e l f a degree of s i g n i f i c a n t
v o l a t i l i t y tha t forms the foundatio n o f change. As I wrote i n the Greates t "Hull
Market I n "History, during the Great Depression, members of the Senate stoo d and even
made the shocking comment that a dictatorshi p was preferrabl e to what they were
under- going at the time. Take away tha t securit y blanket , and you w i l l see t o t a
l chaos erupt among the masses. Below i s i l l u s t r a t e d the convergence tha t we
now face .

THE. "GREAT"
1999 CONVERGENCE
OF

The "Great Covergence" tha t we now fac e i s one of those moments i n time tha t
Hegel viewed as "necessary" and Thomas Jefferso n perhaps viewed as a natural ; event
where the blood of patriot s i s needed t o fee d the Tree of Liberty . While the c l e a r
high i n the p o l i t i c a l stat e of the United State s took place i n 1999, the economic
hig h came precisel y to the day on February 27th, 2007. We have witnessed a stead y
economic declin e much fo r the same reasons as the declin e of the Roman Empire —
excessive leverage, corruptio n o f the r u l e o f law, and the collaps e of confidenc e
i n investing . We have now reached the threshol d wit h the 37.33 year F i n a n c i a l C r i s i
s Cycle tha t has come int o pla y fo r 2008. The c l i f f on the othersid e appears stee p
going int o what should be at l e a s t the f i r s t low i n 2011 on the 8.6 year target .
I t i s now the 37.33 year F i n a n c i a l C r i s i s Cycl e tha t w i l l capture the a t t e n t i o n
of the entir e world economy.

18
 I f we begin wit h the 224 year Cycle of P o l i t i c a l Change, we know tha t d i v i d i n g
t h i s by 26 produces the 8.615 year cycl e - the base core of the Economic Condldence
Model. However, as I explained , there are 37.33 weeks withi n an 8.6 month cycle.
I f we now take the v o l a t i l i t y dimension wit h i t s base uni t of 6 and divid e tha t als o
int o the 224 year cycle , again we end up wit h 37.33. Thi s produces the followin g
years.
1775 - 1812 - 1849 - 1887 - 1924 - 1961 - 1999
Of course, 1775 marked the beginning of the Revolutionar y War tha t has been
attribute d to A p r i l 19, 1775 when the B r i t i s h t r i e d t o seiz e the m i l i t a r y supplie s
of the Massachusetts m i l i t i a . The Declaratio n of Independence was-announced on-the
4th of J u l y , 1776. King George had o f f i c i a l l y declare d America i n r e b e l l i o n on
Augusts 23, 1777. The Constitutio n was agreed upon f i n a l l y on September 17th, 1787,, -
but i t was onl y r a t i f i e d when the nint h stat e agreed, New Hampshire, on June 21,
1788. The B i l l of Right s di d not become law u n t i l December 15th, 1791. I f we were
t o begi n from the r a t i f i c a t i o n of the Constitution , we produce the followin g
targets . 1788 - 1825 - 1862 - 1900 - 1937 - 1974 - 2011.98
We'can see that there i s a 13 year differenc e between the 1775 and 1788 tim e
series . Looking at the f i r s t 1775 time series , we can see tha t the next targe t was
1812. Thi s I s the time serie s tha t began from the beginning of the Revolutionar y
War. I n 1812, Congress declare d war on B r i t a i n on June 18th. The B r i t i s h invaded
the Unite d States , captured Washington, DC, "and burned a l l " the publi c b u i l d i n g s ,
on August 24th, 1814. While the war ended wit h the Treaty of Ghent o f f i c i a l l y on
December 24th, 1814, yet i t was not r a t i f i e d u n t i l February 17th, 1815. Thi s war
di d have the e f f e c t of destroyin g the Federalis t Party , who had fought f o r greate r
Executiv e power to create a standin g army. Thi s was the essence of bi g government.
The part y collapse d afte r the revelatio n of a secre t meeting i n Hartford , Conn, tha t
was allege d to support secessio n from the union t o creat e t h e i r v i s i o n of an author-
i t a t i v e stat e i n 1816. The Federalist s were New Englanders - i . e . John Adams.
During t h i s 13 year phase d i f f e r e n t i a l between the 1775 and 1788 time s e r i e s ,
the natio n swung decisivel y toward the " l i b e r a l " Republicans. As we move i n t o th e
1825 turning-point , we see als o the s h i f t i n g p o l i t i c a l Ideas wit h the slaver y issu e
marked by the Missour i Compromise of March 23, 1820 where slaver y was allowe d up
to the M i s s i s s i p p i River, tha t was repealed' i n 1854. The f i r s t woman's c o l l e g e
;

began i n 1821. By 1823 there was the Monroe Doctrin e opposing European i n t e r v e n t i o n
in the Americas. With the Federalis t Part y collapse , New England began t o emerge
as more " l i b e r a l " i n favor of the people rathe r than the Government. The f i r s t
woman's s t r i k e took'place i n Rhode Islan d i n 1824, and I l l i n o i s , where L i n c o l n
would emerge, outlawed slaver y tha t same year. The P r e s i d e n t i a l e l e c t i o n became
deadlocked wit h t h i s cycl e and i n 1825, John Quincy Adams was electe d by th e House.
Both times serie s c l e a r l y present a very d i s t i n c t and i n t e r e s t i n g i n t e r a c t i o n
of target s and s h i f t i n g philosophies . The I n d u s t r i a l Revolutio n wit h hindsigh t
may appear to be j u s t f a n t a s t i c . However, whil e i t was takin g place , ther e was
a profound transfe r of economic power. Jus t as you saw AOL come out o f nowhere
and merge wit h Time Warner, a w e l l establishe d company, the same was t a k i n g plac e
during the I n d u s t r i a l Revolution . Agricultur e was perceive d t o be wealth . Even
Thomas Jefferso n when he needed money, sol d everythin g but land , because lan d
was s t i l l i n s t i n c t i v e l y wealth. I n 1870, about 80% o f the economy was s t i l l
a g r i c u l t u r a l based. Even by 1929, t h i s had f a l l e n t o about 40% whil e i t d i d not
drop s i g n i f i c a n t l y u n t i l the Great Depression, the Dust Bowl, and economic hardshi p
that force d the d o l l a r t o recor d highs. Agricultur e accounted fo r about 3% o f
19
 the work forc e f i n a l l y by about 1980. Jus t as the interne t has been changing the
curren t economy leavin g behind the brick-and-motor stores , the I n d u s t r i a l Revolutio n
l e f t behind agricultur e and u n s k i l l e d labor . An example of the resistanc e i s s t i l l
r e f l e c t e d i n many stat e laws, a l b e i t no longer enforced. For example, there was a
law that i f you drove down the stree t i n your automatic carriage , should a horse be
freightene d by the contraption , you were require d to p u l l i t of f the road. I f the
horse was s t i l l freightene d by the new invention , you were require d by law to then
disassemble i t . Technology was not always embraced.
The Turning poin t of 1887 i n the 1775 Time serie s was als o i n t e r e s t i n g . Marx
died i n 1883, but the ideas were widespread and resiste d the I n d u s t r i a l Revolution .
By 1890, the Sherman Anti-Trus t Ac t took place . This was used to breakup .Standard
O i l Company, American Tobacco Company, and severa l other larg e firm s not t o mention
AT&T I n our modern l i f e t i m e . There were even crimina l prosecution s f o r given any
discount s to volume c l i e n t s . This became viewed as a denia l of equal protection !
The 1914 passage of the Clayton A n t i t r u s t Act targete d pric e discriminatio n and
made crimina l agreements between a deale r and a manufacturer tha t barre d them from
s e l l i n g a competitor's product. These regulation s were a l l Marxis t based. I t was Marx
tha t j u s t i f i e d the power of crimina l regulatio n .of commerce j u s t as Keynesian idea s
were used to support endless d e f i c i t spending (not what he t r u l y advocated).
The 1924 targe t on the 1775 time serie s was the reactio n low befor e the huge
explosio n of investment that drove the stock market int o the h i s t o r i c a l hig h going,
int o 1929, whereas the 1788 time serie s produced 1937, the f i r s t r e a l cras h a f t e r
the 1929 and Great Depression era . The next date was 1961 on the 1775 s e r i e s saw
the inauguratio n John F. Kenney, the Bay of Pig s i n Cuba, the s t a r t o f the Space
Race wit h the f l i g h t of Alan B. Shepard, J r . and the Cuba M i s s i l e C r i s i s i n 1962.
I n the 1788 time series , the targe t of 1974 marked the s t a r t of the impeachment
proceedings agains t Richard Nixon tha t was followe d by hi s resignatio n August 8th .
The US evacuated Vietnam on A p r i l 29th 1975.- I t was t h i s targe t tha t als o marked
3

the l e g a l i z a t i o n fo r American to once again own gold a f t e r i t was outlaws by FDR

back i n 1933.
13 Years D i f f e r e n t i a l
We can see tha t these two time serie s pla y
an i n t e r e s t i n g rol e wit h each other. I t i s hard 1775 1788
to say one i s more v a l i d tha t the other. The phase /\
differenc e between 1775 (star t of war) and 1788 / /
( s t a r t of government) of 13 years i s a c r i t i c a l
time duration i n - a n d - o f - i t s e l f . We are therefor e
lookin g at 1999 and 2011 as a very c r i t i c a l window i n time. This 13 year differenc e
between the two time serie s i s what we c a l l a Phase-Shift . They appear to o f f e r very
d i s t i n c t h i s t o r i c a l differences . The 1775 serie s begins wit h WAR and appears t o be
closel y relate d to such events, whereas the 1788 serie s seems t o mark more of the
p o l i t i c a l changes tha t follow .
The Cycle of A l t e r n a t i n g P o l i t i c a l Philosoph y
Perhaps i t i s inherent i n human nature tha t one generatio n tends to move i n the
opposite directio n of ideas from the previous . The 1960s was such a r e b e l l i o n . But
t h i s Hegelian concept of opposing idea s seems to be shockingl y self-evident . Many
s h i f t s i n p o l i t i c a l theory take plac e over time. For example, Democrats were durin g
the C i v i l War the slav e owners inten t upon maintainin g salvery . Lincol n was th e more
" l i b e r a l " Republican followin g i n the s p i r i t of Jefferso n & Madison. We must r e a l i z e
that during' the War of 1812, the Republicans fought agains t even maintainin g any
standing Army. They looked back and saw the previous 224 years of Euorpe as creatin g
20
 the very i n s t i t u t e of a self-perpetuatin g government against the i n t e r e s t s of the
people. The 'noted researcher , Gordon S. Wood, commented on t h i s t r a i t .
"From the sixteent h century through the eighteenth centur y the
European monarchies had been busy consolidatin g t h e i r power
and making out t h e i r authorit y withi n c l e a r l y designated
boundaries and m i l i t a r y force s i n order to wage war, and tha t
was what they di d through most decades of thre e centuries . Thi s
meant the buildin g of ever more centralize d governments and the
creatio n of ever more elaborat e means fo r extractin g money and men
from t h e i r subjects . These e f f o r t s i n tur n le d to the growth of
armies, the increas e i n publi c debts, the r a i s i n g of taxes , and
the strengthening of executiv e power."
Revolutionar y Characters, What made the FOUNDERS Different , Gordon S. Wood
The Penguin Pres s 2006
Even the Second Amendment reasoning has changed over time. The r i g h t t o r e t a i n
. a gun was i n s i s t e d upon by the " l i b e r a l " Republicans l i k e Thomas Jefferso n who were
deeply concerned about the e v i l of allowin g standin g armies. Even James Madison
shared t h i s deep concern. A standin g army was power tha t fed the kin g or the executive
, tha t they viewed as a threa t agains t the l i b e r t y of the people. They als o opposed
any form of direc t taxatio n (Income Tax) because i t would infring e upon the people by
f o s t e r i n g greater governmental powers to keep trac k of everyone and what they earned.
The Constitution , before the ideas o f K a r l Marx took hold i n 1909, f o r b i d any such
d i r e c t taxatio n relegatin g such revenue t o i n d i r e c t taxation . Both of these l i b e r t i e s
tha t Jefferso n and Madison advocated, are eliminated .
Today, the Republicans are the F e d e r a l i s t s despit e thei r claim s of being th e
"conservative " part y fo r lesso r government. The P a t r i o t Act eliminate s any such
claims . What standing armies could not accomplish by invasion , Bi n Laden accomplished
by settin g i n motion the s e l f - i n t e r e s t of the Executiv e to expand i t s powers. I t was
Thomas Paine's Common Sense that captured the s p i r i t of the times and i l l u s t r a t e s
how the Republicans of today are a hybri d of what they once opposed, the F e d e r a l i s t s
who stood precisel y fo r greater expanded Executiv e powers.
War "from i t s productiveness, as i t e a s i l y furnishe s the pretence
necessit y fo r taxes and appointments to place s and o f f i c e s , become
a p r i n c i p a l par t of the system of ol d governments, and t o e s t a b l i s h
any mode t o abolis h war, however advantageous i t might t o be nations ,
would be t o take from government the most lucrativ e of i t s branches."
Paine Collecte d Writing s
The Democrats are now the " l i b e r a l " part y whose core base i s New England. We
can see tha t the same regio n has changed not partie s so much, but "ideas " tha t i s f a r
more important. The very concept o f p o l i t i c a l idea s als o go through c y c l i c a l trend s
tha t i s perhaps what Hegel saw i n the swing between opposites and what I saw i n th e
s h i f t between confidence residin g i n the stat e (Publi c Wave) and the people ( P r i v a t e
Wave). The ideas of Adam Smith stood i n oppositio n to the Physiocrat s who were French
philosophers . .The Physiocrat s postulate d tha t wealth was only derive d from natur e
such as a farmer, whereas.,the blacksmit h l i v e d of f of the wealth of the farmer.
Thi s ide a sparked the age of imperialis m t o creat e vas t empires grabbing lan d t o
increas e wealth. Jefferso n was an advocate of new Inventions , but he was s t i l l a
farmer who would s e l l anything he owned before land . I t was t h i s ide a of wealt h
tha t motivated Adam Smith to writ e the Wealth of Nation s i n 1776, showing tha t
i f a farmer and a blacksmith both sol d t h e i r product t o France from England, the n
both returned wit h gold, which contribute d t o the wealth of the nation .
21
 The 37.33 Year Monetary Crisis Cycle

The 37.33 Frequency

As there are 37.33 weeks withi n a 8,6 month cycle , there are als o 6 waves of
37.33 years within. a 224 year P o l i t i c a l Change C3 cle. These are the cycle s of
r

major economic uphevals. ^hey are l i k e a Longitudina l Wave insofa r as they s i g n a l

a major chaoti c perio d where the undiscipline d management of government comes home
and they t y p i c a l l y hunt down those i n the privat e secto r t o blame. The l a s t 4
target s w i t h i n the Unite d State s economy revea l a shocking degree of order.
The Financial Monetary Crisi s Cycle 37.33yrs

1896 1934 1971 2008

The l a s t fou r targets'o f t h i s cycl e were 1896, 1935, 1971 and r i g h t now 2008.
Le t us begin wit h the 1934 event. I t was here that Roosevelt confiscate d gol d from
the people ending the lawfu l ownership of gold and forcin g upon the people a p l a i n
paper monetary system. The gold standard died as we knew i t i n 1934. He announced he
was confiscatin g gol d on A p r i l 19th, 1933. This was f i n a l l y r a t i f i e d by Congress on
June 5th , 1933. Indeed, 1933 was the l a s t year the Unite d States minted any gol d
coin s as money. The new reduced s i z e Federal Reserve Notes began t o be issue d i n
1934..- The nest i n t e r v a l of the 37.33 year cycl e brings us t o 1971 where on August
15th, 1971 Richard Nixon cut the t i e s t o gold completely even between nations . Thi s
was not a new monetary system tha t was designed by some world gatherin g as a t
Bretto n Woods 'back i n Jul y 1944 where 44 countrie s gathered to creat e the IMF and
the World Bank als o establishin g the US d o l l a r as the reserve currency of the
world . The 1971 turnin g poin t was t r u l y chaos. The new monetary
system tha t emerged by defaul t di d so only because of a trade dispute where
Presiden t Nixon close d the gol d window and would no longer redeem, dollar s fo r gol
d fo r the French and the Swiss. Thi s brought an end to Bretto n Woods. I t was not
planned. I t was not even discusse d a t a major world meeting. I t was simply a trade
disput e tha t was t o be . temporary, but found i t s e l f distracte d by other events -
namely OPEC. The f l o a t i n g exchange rat e system thus emerged. T t was not taught i
n schools. Economists did not know even what t o teach. This was the f i r s t time a f l o
a t i n g exhange rat e system emerged worldwide. Previously , the United States
abandoned the gold standard during the C i v i l War. Gold traded on the New York Stock
Exchange i n the form of "greenbacks" t o gold . That l e d t o Black Frida y i n 1869 wit
h a r i o t as investor s dragged the bankers out and hung them i n the streets . That i s
what "black f r i d a y " r e a l l y meant. The r i o t was so bad, the Government had t o send
i n troops t o suppress the chaos when gold h i t $162 back i n 1869. Adjusted fo r i n f
l a t i o n , tha t may be fa r beyond $10,000 today. The 37.33 Year
Financia l C r i s i s Cycle has been exceptionall y accurat e governing a s p e c i f i c reactio
n withi n the political-economi c structur e of the Unite d States . The 1971 turnin g poin
t produced a completely new type of world currency system by default . The 1934 turnin
g poin t produced the confiscatio n of gol d and the b i r t h o f a two-tie r financial
system, whereby gold was confiscate d domestically , but used i n t e r n a t i o n a l l y . Yet,
when we loo k back to 1896, we f i n d another major c r i s i s .
22
 In 1895, J.P.Morgan reorganized departin g from hi s former a l l i a n c e wit h the*
important Philadelphi a famil y of Drexel , tha t was known as Drexe l Morgan & Co.. I t
was i n 1895 that the s p l i t create d J.P.Morgan & Company. Nevertheless , the grea t
f i n a n c i a l c r i s i s of 1896 l e d t o J.P. Morgan gatherin g a consortium o f worl d banks
to bailou t the United State s Government. J.P. Morgan's fir m sol d a l l o f a $62 m i l l i o
n Government bond issue . The sal e ended a gold shortage i n the U.S. Treasury , tha t
had been instigate d by the desir e t o creat e i n f l a t i o n through a l t e r i n g th e g o l d - s i l
ver ratio. . By valuin g s i l v e r at a higher rat e t o gold , other nation s delivere d s i
lver to the Unite d State s exchanging i t fo r gold tha t le d to a vast shortage o f
gol d where i n effec t the Government coul d no longer pay i t s obligation s i n i n t e r n a t
i o n a l trade . I t was the 1896 turnin g poin t tha t marked the economic turmoil . I
t was t h i s ver y targe t year when Willia m Jennings Bryan delivere d hi s famous speech
a t the Chicago Democratic Convention.
"Having behind us the producing masses of t h i s natio n and the world ,
supported by the commercial i n t e r e s t s , and the t o i l e r s everywhere,
we w i l l answer t h e i r demand fo r a gold standard by sayin g t o them;
You s h a l l not press down upon the brow of labo r t h i s crown of thorns ,
you s h a l l not c r u c i f y mankind upon a cross of gold. "
The 1896 Financia l C r i s i s was the Government tryin g t o d e l i b e r a t e l y creat e •
i n f l a t i o n at the request of farmers and s i l v e r miners. Those lobb y groups fough t
hard and t h e i r overvaluatio n of s i l v e r drove gol d to Europe bankruptin g the f e d e r a l
Government.
What does t h i s cycl e suggest fo r 2008? Unfortunately , t h i s i s a monetary
c r i s i s cycl e of major proportions . When i t comes int o play , we somehow end-up
wit h changing the monetary system i t s e l f . We w i l l be headed s t r a i g h t Int o the
worl d of a one-currency system based upon the recent model - the Euro. The
spread of the economic chaos around the world w i l l provid e the incentiv e t o
make thing s better . I t may be hel d in . a d i f f e r e n t locatio n so the name w i l l
change from "Brenton Woods" t o perhaps the'new Treay of Paris . I see no othe r
soloutio n f o r we are dealin g wit h not the "greed" of Wal l Stree t i n i s o l a t i o n ,
we are als o dealing, wit h the vas t debt structur e tha t was create d by endless
p o l i t i c a l promises. We w i l l not go back t o the gold standard. For Smith
was correct , the wealth of a natio n was i t s people and producive capacity . But
make no mistake, i t i s als o the Rule o f Law. I f c a p i t a l cannot be secure i n th e
t i t l e to propert y and enforcement of r i g h t s - i t simply leaves :
Europe knows a l l about cancellin g currencies . Americans do not. The d o l l a r
remains l e g a l tender sinc e inception . I n Europe, a l l nation s cancelle d currenc y
pre-Euro every 20 years of so. There may als o be the reestabllshmen t of a two-tie r
currency system where the one-world currency serve s between nations , and the l e s s o r
domestic versio n provides fo r c i t i z e n s . This would allo w more f l e x i b i l i t y t o do the
defaul t on domestic obligation s coverin g i t wit h new currency. During the 1870s, th e
Unite d State s Issued two s i l v e r d o l l a r s : (1) Trade Dolla r and (2) S i l v e r D o l l a r .
Internationa l payments were made wit h the Trade Dolla r tha t was 1 tro y ounce o f
s i l v e r whil e domestic s i l v e r d o l l a r s were about twenty-fiv e percent l e s s . South
A f r i c a als o had a two t i e r currency, the! Rand and the Financia l Rand fo r i n t e r n a t i o n a l
settlements . A two-tie r i s now possible .
The 37 33 Year Monetary C r i s i s Cycl e targe t fo r 2008 appears t o be a seriou s
targe t that w i l l se t i n motion a/cascade of changes that-shoul d plac e stres s upon
the world economy going i n t o 2011. The hig h dependency upon foreig n c a p i t a l t o fund
the US debt, w i l l als o tend t o dry up f o r c i n g greate r monetizatio n o f the debt and
the inevitabl e collaps e of the f l o a t i n g rat e system by as earl y as 2011 i f we ge t
past 2008. .
 The .8.6 Year Economic Confidence Model

1589.9S
2DB7,f£

. 1994.25 20iO'2J85 2011 A'S

Copyright Marti n A. Armstrong a l l r i g h t s reserved

To the shock of many, despit e the lac k of publishin g sinc e 1999, the 8.6 year
Economic Confidence Model performed once again p r e c i s e l y to the day f o r the major
. top on t h i s curren t 8.6 year Cycle Wave. So much fo r those who argued tha t the onl
y reason the model worked precisel y to the day was because too many people l i s t e n e
d to the forecasts .
Thi s model correctl y showed the declin e i n the economy and the deflationar y
mode tha t drove the d o l l a r int o record highs fo r 1985. The B r i t i s h pound f e l l to
$1.03 on the major low. This was the b i r t h ' of the G-5 (Group of Fiv e now Eight )
whereby nation s gathered together to coordinate intervention , i n t e r n a t i o n a l l y i n
an e f f o r t to manipulate the economy. Thi s i s when I wrote the Presiden t Reagan
warning tha t you cannot manipulate the economy t o creat e a r t i f i c i a l objectives .
The Chief Economic Advisor Mr. Sprinkl e wrote back thanking me fo r the advice , but
statin g tha t u n t i l someone els e had a model to support my warnings o f a sharp r i s e
i n v o l a t i l i t y , they coul d not r e l y upon only one model. When the next turnin g poin t
created the v o l a t i l i t y from world foreig n exchange markets manifestin g i n t o the
1987 Crash precisel y to the day 1987.8 (365 x .8 = 292 days = October 19th, 1987),
I suddenly was urgentl y calle d asking fo r what would happen now? Amazingly, i t
seemed everyone agreed, v o l a t i l i t y was the number one problem. The 1989.95 turnin g
poin t pinpointe d the Tokyo peak that .December, and the collaps e int o 1994.25
marked the precis e day of the low fo r the S&P 500 that year beginning the b u l l
market tha t has reached a hig h 13 years l a t e r i n 2007.15 (February 27th) . But then we
als o have the 1998.55 turnin g poin t that produced the high Jul y 20th wit h the
collaps e of Russia and the retes t of support fo r 2002.
We must r e a l i z e tha t t h i s model i s a globa l model. I t not based exclusivel y
upon the US economy, markets or events. Thi s r e f l e c t s the " c o l l e c t i v e " behavior
of mankind throughout the ages. I f we look at the 198Q.95 turnin g point , i t i s
true tha t thi s pinpointe d the major a l l time high i n the Nikke i 225 as w e l l as
the Japanese economy. However, t h i s als o marked the end of communism as we knew
i t . In China, we saw Tiananmen Square on June 3rd-4th 1989 followe d by the f a l l
of the B e r l i n Wal l 5 months l a t e r i n November 1989. What the model i s r e f l e c t i n g
i s a natura l tendency to l i m i t s the behavior and idea s of mankind to define d and
d i s t i n c t periods . I t i s l i k e holdin g your arm i n the a i r . I t i s no problem, but
keep i t there. Suddenly you cannot hol d your arm up any more — i t I s j u s t too
heavy. Thi s model r e f l e c t s a s i m i l a r nature that' no matter what i t i s , ther e i s
a l i m i t to sustainin g any trend . Thi s i s what Margaret Thatcher sai d t o me - the
Conservatives would los e because " I t i s j u s t time!"
 Economic Oodi&J.eriLce Modle3

(C) Copyright Marti n Armstrong

2015.75 2024.35

We have now crossed that peak i n the curren t wave — 2007.15 (February 27th ,
2007). we can see tha t the Economic Confidence Model project s out beyond my l i f e
expectancy and i t w i l l functio n lon g afte r I am gone as i t di d lon g befor e I was
born. These 8.6 year waves tha t r e f l e c t the Business Cycl e are calculate d by takin g
the per cent of 365 days fo r tha t year. For example, 2015.75 produces (.75 x 365)
that i s 273.75 days int o that year = October 1st , 2015. The low f o r t h i s curren t
economic devacle should be 2011.45 = June 13th, 2011.
The minor mid wave turnin g point s break down as the f i r s t le g bein g 2.15 year s
or a quater of the 8.6 year wave. The next quarte r wave i s t y p i c a l l y broken i n t o
hal f again creatin g two 1.075 year waves. We can see tha t i n the curren t wave, th e
mid-wave turnin g point s were 1008.225 (March 23, 2008) and 2009.3 (March 19th,
2009). Typically , these waves do not produce s p e c i f i c turnin g point s t o the day as i
s th e case a t the major turnin g points . Thi s i s due to the fac t that i n t e r n a l l y
ther e i s yet another laye r of a c t i v i t y , the 8.6 month cycl e that constitut e 6
waves w i t h i n each le g of the 8.6 year cycle . Again we see the structur e followin
g groupings o f 6 units . Thi s 8.6 month l e v e l of a c t i v i t y consitute s 37.33 weeks.
There i s ye t another laye r beneath t h i s calculate d i n 8.6 week i n t e r v a l s ,
followe d by s t i l l another, 8.6 days, hours, mintues and believ e i t or not
seconds. The hidden order does not end there . This i s l i k e
a Mandelbrot se t o f j u s t amazing order of pattern s r e p l i c a t i o n the same patte r
from one l e v e l of time t o the next. S t i l l , we w i l l als o shortl y explor e how the
i n t e r a c t i o n of t h i s cor e frequency I refe r t o as the Economic Confidence
Model, wit h the grouping cycl e that causes the self-organizin g pattern s of i n
t e n s i t y ( v o l a t i l i t y ) . For example, takin g the major hig h of the l a t e r 51.6 year
Publi c Wave, 1981.35, adding th e the f i r s t wave of 6 years, we a r r i v e at
1987. Thi s i s what caused tha t u s u a l l y minor turnin g poin t t o produce the
precis e date f o r the 1987 crash , 1987.8 (Oct. 19th, 1987). The next time t h i s 6
year wave l i n e s wup wit h the 8.6 year w i l l be 2011. Unless we understand time,
we w i l l be compelled to repeat h i s t o r y again .
25
 The 8.6 Month Interna l Cycl e (37.33 Weeks)

Cycl e 2007.146
Withi n the 8.6 Year Cycl e

r-t o
r-»
CO*

CM A CM CM
i O
O
O i—<
CM
\ CM
o
/\
o
t—i

\ \/ \

"2011.44
2002.85
Copyright Marti n A. Armstrong 2008
There are 37.33 weeks withi n a 8.6 month cycle . Looking a t the 8.6 month
turnin g point s withi n the 8.6 j^ear wave structure , we have the followin g
dates:
11/6/02 2007.86 11/10/07
2002.85 07/23/03 2008.57 07/27/08
2003.56 04/12/04 2009.29 04/16/09
2004.28 12/27/04 2010.01 01/04/10
2004.99 09/16/05 2010.726 09/22/10
2005.71 06/06/06 2011.44 06/10/11
2006.43 02/23/07
2007.146

Note we have 6 waves within ' each hal f of the 8.6 year wave. Thi s i s caused
by the p a r a l l e l wave that, groups 12 waves o f 6 i n t o the 72 i n t e r v a l wave. We can
see that the differenc e between 2008.57 and 2009.29 i s again .72% of a year.
Once more we see the i n t e r j e c t i o n of the number 72.
The i n t e r a c t i o n between t h i s 8.6 month cycl e withi n the 8.6 year cycl e i s
c r i t i c a l t o comprehending how the natura l c y c l i c a l force s functio n I n a l l aspect s
of our physcia l world. On the 8.6 year wave, the f i r s t reactio n low a f t e r the j o m a

r hig h at 2007.15 i s 2008.225 corresponding t o March 23rd, 2008. You w i l l notic e

tha t t h i s date does not appear on the l i s t of dates above. Thi s turnin g poin t was
the low fo r the AMEX O i l Index, from which a r a l l y moved int o May 21st , 2008 j u s t
afterwards. Many commodities reached turin g point s plu s or minus 1 week from the
March 23rd trage t such as c a t t l e , sugar, coffee , cotton , wheat, and soybean o i l
j u s t to mention a few. When we compare the 8.6 month cycl e (37.33 weeks), we see
the targe t of Jul y 27th, 2008. Here we f i n d again turnin g point s generall y plu s
or minus 1 week of so. The Australia n d o l l a r reached a hig h on J u l y 15th, 2008 f o r
the year. The Mexican peso peaked August 4th . The Euro peaked on Jul y 15th. Now
i f we loo k at the Swiss franc , the hig h was March 17th , 2008, th e hig h I n the
Japanese yen was als o March 17th, 2008. Le t us now tur n t o the B r i t i s h pound, here
the hig h i s November 9th, 2007 and the Canadian d o l l a r peaked November 7th, 2007.
Looking at the above l i s t of 8.6 month dates, we see November 10th, 2007.
26
 3/23/08 7/27/08 11/10/07
AMEX O i l Index Australia n £ B r i t i s h POUND
Cattl e Mexican peso Canadian $
sugar EURO NASDAQ 100
coffe e Swiss fran c
cotto n FTSE 100 Index
wheat DAX Index
soybean o i l S&P Midcap 400
Russel l 2000
Natura l Gas & Crude O i
l
Those markets or index indicator s that have peaked with the 2007-15 major
wave targe t was the NIKKEI 225 stock index i n Japan, tha t reached i t s hig h on
February 26th, 2007 along wit h the debt markets and the US-economy. Thi s i s not
b u l l i s h f o r Japan. The Nikke i 225 w i l l f a l l i n 1932 percentage" terms causin g a
massive s e l l i n g o f foreig n investments tha t w i l l driv e the yen to ne highs again .
Exceeding the high s of Dec. 1999/Jan 2000, w i l l signa l the contraction.tha t may
peak i n 2009. The S&P 500 exceede the Feb 2007 high , but t h i s peaked on the *.6
month cycl e on Oct. 11th 2007, j u s t shy of the 11/10/07 target . Japan w i l l be a key
t o watch i n 2009. The 37.33 Month Cycle Frequency
I n "The Business Cycl e and the Future (Par t I I ) " , I provided the 37.33 month
frequency i l l u s t r a t i n g tha t ther e were 37.33 weeks withi n the 8.6 month cycle , but
I als o pointe d out l i k e the 72 year cycl e follow s the 224 year .likewis e we find tha t
major turnin g point s ofte n 37.33 months afte r major monthly turnin g points .
"For example, usin g the breakout hig h of 1997 i n the NASDAQ 100
i n January o f tha t year project s a hig h fo r March 2000. Lookin g
at the Jul y 1998 major high that coincide d wit h the model project s
a low fo r September 2001 wit h high v o l a t i l i t y . The next turnin g
poin t would be projecte d from the Jul y 1999 hig h bring s us to
September 2002 fo r a probable major low at tha t turnin g point. "
Of course we do not have t o go i n t o what happened fo r the September 2001 targe t
wit h the hig h v o l a t i l i t y . That seems t o be i n l i n e wit h the model'. What we must come
t o understand tha t time i s merely a dimension tha t can be s l i c e d up very n i c e l y . The
key t o the v a l i d i t y of any cycl e frequency i s tha t t o v e r i f y i t s existance , i t must
appear on a l l level s of time.
The 37.33 month cycl e i s equal to 3.11 years. Thi s als o i s very clos e t o P i
being 3.141. To show the hidden order, I w i l l fo r the f i r s t time p u b l i c l y or even
p r i v a t e l y i l l u s t r a t e a point . Take the high of the previou s wave 1998.554298. Add P i i n
terms of years and months 3.141. This produces the date 2001.695. Take 365 days and
multipl y .695 yield s 253.675 days int o the year 2001. That amounts t o September 11th,
2001. So much fo r the CFTC claimin g tha t my forecast s manipulate the world economy
because nobody can predic t a s p e c i f i c day years i n advance. For as much as thing s
may appear to be random, i t i s more l i k e Neo i n the Matrix . Suddenly he can see
not the walls , but the code. ' .
I t i s a l l over the interne t thanks to former employees who believe d t h e i r job s
may have been destroyed because of my r e f u s a l t o work fo r the CIA. To c l a r i f y , a f t e r
the model correctl y forecas t the collaps e of Russi a i n 1998, which was covered by the
London F i n a n c i a l Times who attended my lectur e d e l i v e r i n g tha t forecas t i n London,
the CIA c a l l e d the o f f i c e . They recognized the power of the model, but f o r m i l i t a r y
purposes. They wanted me to work i n Washington. I declined , o f f e r i n g t o run any stud y
they might l i k e from Princeton . They declined , s t a t i n g they had to own the model. I t
i s evident , the model could pic k up g e o p o l i t i c a l events because they are preceeded
by economic events. I create d a model f o r the Universa l Bank o f Lebanon, tha t indeed
predicte d the war because those who knew, abnornall y moved c a p i t a l changing the.flows .
27
 The Self-Organizin g Intensit y Cycl e
For decades I have explaine d tha t the
Economic Confidence Model build s int o groups
of 6 waves from 8.6 years int o 51.6 years
that i n tur n build-int o 6 waves of 309.6 yrs .
I have not before explained why t h i s i s so.
Just as the electromagnetic wave has two
d i s t i n c t components, e l e c t r i c and magnetic
f i e l d s moving together,_al l c y c l i c a l waves
appear to be multidimentiona l beyond what the
mind can see at f i r s t blush . The organizin g
p a r a l l e l wave that creates the grouping and
produces the i n t e n s i t y ( v o l a t i l i t y ) , unfold s
not as a derivativ e of the 8.6 year cycle , but
i s e n t i r e l y independent.
The core frequency comes i n waves of 6 unit s of time. These b u i l d up Int o
a large r wave of 72 tha t flow s at twice the formation of the Economic
Confidence Model. The uni t of 6 i s transferre d to the 8.6 year wave causing i t
t o group i n formation of 51.6 years. But t h i s does not distur b the independent
inten s ity frequency i t s e l f , which means we s t i l l have a p a r a l l e l effec t tha
t w i l l appear i n a l l a c t i v i t y simila r to a "giant " or "rogue" wave insofa r as
i t may appear to be coming from nowhere.
Thi s was i l l u s t r a t e d wit h the 224 year Cycle tha t i s a derivativ e of the
8.6 frequency. Afte r every 224 years , we see a 72 year catastrophy tha t appears
to come unrelate d to the 8.6 year or.224 year cycles , inasmuch as i t i s merely
a derivativ e of the 8.6 year wave. I f we begin wit h the l a s t peak on the 51.6
year Economic Confidence Model we can see again how the 6 year i n t e n s i t y wave
running p a r a l l e l had c o l l a t e r a l e f f e c t .

Note tha t i f we use the high (1981.35) and the low (1985.65) of the l a s t 51.6
year Economic Confidence Model tha t marked the high i n I n f l a t i o n and the formatio n
of the G-5 (Group of Fiv e Nations) t o coordinate globa l economic manipulatio n tha t
i s now coming back i n t o vogue, projectin g forward onl y the Intensit y Cycl e usin g
the uni t of 6 years, we a r r i v e at the 1987 crash, the 1999 low i n gold , and numerous
other turin g points , wit h the i n t e n s i t y once again pointin g t o 2011. We can see
als o 2009, but t h i s should provid e the reactio n high tha t may form durin g th e f i r s t
or second week of March of tha t year. However, we can see tha t 2011 i s coming up
on numerous waves that are independent, suggesting very strongl y tha t we ar e indeed
facin g a major Great Convergence.
There i s yet a deeper l e v e l of the self-organizin g nature of t h i s wave. Thi s
require s f a r more_complex math tha t i s f r a c t a l based tha t create s the s e l f - r e f e r r a l
to replicat e continua l pattern s of organization .
28
 The God P a r t i c l e / Cycle ?
We have a l l heard tha t i n p a r t i c l e
*m *) physics , s c i e n t i s t s are searchin g f o r the
J / j unifyin g theory and have surmised tha t j u s
t simply stated , there must be a mysteriou
s p a r t i c l e tha t exist s they have c a l l e d
the "God P a r t c i l e . " Whether t h i s i s the
same thing , I am not e n t i r e l y sure. Perhaps i t i s a coincidence . But what I can
say, i t presents an i n t e r e s t i n g subjec t fo r debate tha t i s more r e a l world than
the Da V i n c i - Code.
The "Born-Again" Christian s or Fundamentalists have been lookin g fo r th e sig n
o f the Second Coming of Chris t based upon the stor y of the Apocalypse found i n the
Revelation s of the New Testament sai d t o have been writte n by Sain t John the Divin e
whil e he was i n e x i l e i n the I s l e of Patmos. Aside from the fac t tha t t h i s book has
been the most widely disputed fo r hundreds of years leadin g even Sain t Jerome t o so
declar e tha t i t was subjec t to 7 e n t i r e l y d i f f e r e n t interpretations , nevertheless ,
i t s controversy has endured the ages. The famous stor y of the A n t i - C h r i s t and tha t
we s h a l l know who he i s by the number of h i s name, 666, i s a r e f l e c t i o n of th e ol d
number systems. Before the introductio n of numbers as writte n d i s t i n c t from l e t t e r s
by the Arabs, both the Hebrew and Greek alphabet composed of purel y l e t t e r s , serve d
als o as the number system. For example, A- J would represent 1 t o 9, K=10, L=20, M=30,
N=40, 0=50, P=50, Q=70, R=80, S=90, T=100, U=200, V=300, W=400 and so on. . I t . was
the Romans tha t created numerals tha t were s p e c i f i c l e t t e r s to represen t numbers as
IZ=9, 1=10, 11=11 fo r example. Therefore, what i s meant by the phrase tha t we s h a l l
known someone by the number of t h e i r name i s to use the ol d system assignin g a valu e
to each l e t t e r i n a name and adding them up.
The reason I have chosen t o refe r t o t h i s p a r t i c u l a r cycl e as the "God Cycle "
i s not to j u s t follo w the l i n e of p a r t i c l e physics , but because th e frequency o f
t h i s cycl e seems to be extremely profound both i n the a c t i v i t i e s of man and nature .
I t .happens to match, a l b e i t perhaps by coincidence , the numerical number i n Hebrew
f o r the name of God - "Jehovah" tha t i s i l l u s t r a t e d i n ancient Hebrew above. I n
hebrew that reads i n the opposite d i r e c t i o n , i t i s "He Vau He Yod" tha t we t r a n s l a t e
to englis h as "Yod-He-Vau-He" making the word "Jehovah."
Jus t about everyone knows the "666" omen, but s t r i k i n g l y , most do not know the
number of the name the Jews gave to God - "Jehovah." I f we use the ol d Hebrew system
we can f i n d the number of God. Yod =10 , He = 5, and Vau = 6. Therefore , the name
o f God i n Hebrew He Vau He Yod equals 5 + .6 + 5 + 10 = 26. The number of the name
assigned to God by the Jews i s 26.
I explained that I discovered the 8.6 year cycl e by adding up the t o t a l number
of f i n a n c i a l panics between 1683 and 1907, which create d a time-space o f 224 years .
I found that there were 26 f i n a n c i a l panic s and then divide d tha t i n t o the 224 year s
to obtai n an average. That produced the 8.6 year frequency. Only when i t began t o
projec t to s p e c i f i c days, then I decided to study much deeper. There .is,th e f a c t
tha t I t appeared to be i n t e r i c a t e l y complex running concurrent wit h countles s othe r
c y c l i c a l behavior be i t natura l or man himsel f i n a sor t of time-space tube create d
by an interdependent, s e l f - r e f e r r a l f i e l d network whereby, the output of each and
e v e r y l t e r a t i o n becomes the inpu t fo r the next generatio n perpetuatin g patern s of
order i n such a dynamic, structure , tha t one cannot see the order of the whole f o r
the mask of s u p e r f i c i a l chaos. There simpl y i s yet a separate and d i s t i n c t cor e
frequency of 26 running, through the cente r of the f i e l d causing not merely Phase-
Transitions , but als o Phase-Shift s and Phase-Cancellation s when two cycle s indee d
c o l l i d e of equal yet opposite forces .
29
 1929 - 1955 - 1981 - 2007
The above sequence of dates provides a simple demonstration of th e i n t e r e s t i n g
relationshi p of 26 to the Economic Confidence Model. The hig h on the l a s t P r i v a t e
51.6 y r Wave was 1929.75. I f we simply take the annual count of 26, we produce the
above time series . The great expansion of U.S. debt began from the 1955 post-war
targe t where spending without regard to maintainin g the r a t i o to gol d may safel y be
defined as the s t a r t of the perpetual,.spending. The next targe t 1981, was the hig h
of th e Publi c Wave of 51.6 years marked by the peak i n interes t rate s and the open
battl e agains t i n f l a t i o n . Thi s bring s us to 2P07, where the model has c o r r e c t l y given
the high 2007.15 that targete d to the day, the s t a r t of t h i s economic d e c l i n e .
Previously , we looked a t two time series , one beginning from 1775 marking the s t a r
t of the American Revolution , contrasted wit h 1788 tha t marked the beginnin g o f the
federa l government wit h the Constitution . The d i f f e r e n t i a l between these two series ,
i s h a l f the 26 cycl e - 13 years. I t i s twice 26 tha t produces the number 52 tha t we
w i l l see i s centra l to the Maya, but was als o the observatio n of th e commodity cycl e
noted by Kondratief f - the Russian economist. We can see tha t the timin g i n t e r v a l of
26 i s a c r i t i c a l and i n t e r e s t i n g number to say the l e a s t .
Whether 26 i s the "God Cycle " i s interesting . Hipparchus of Rhodes observed
around 150 BC tha t the equinoxes moved wit h time. Thi s i s where the Sun's path
crosses the c e l e s t i a l equator. He r e a l i z e d that these were not f i x e d i n time and
space but travele d i n a c y c l i c a l manner. The movement was extremely slow i n a
westerl y d i r e c t i o n . This amounted t o but les s than 2° i n about 150 years . Thi s slo w
movement i s known as the "Precessio n of the Equinoxes" and require s generation s
to even observe. I t i s les s than 2° movement every 150 years, bringin g t h i s als o t o
a v i r t u a l number of clos e to 26,000 years to complete one cycle .
Trut h = the Rule o f 9
Another kabal a number of mystery has been
attribute d to the famous Gaon From V i l n a who
discovere d tha t the Hebrew word fo r trut h ( t a f-
mem-aleph) produces the number taf = 400, mem=40,
and aleph=l added together 441 = 9.
I t was argued tha t God create d the world based upon truth , which i s the number
9. I f you take any number greater than 9, add the i n d i v i d u a l numbers, and subtrac t
the o r i g i n a l , we end up wit h a number d i v i s i b l e by 9. For example, 10=1 - 10 = 9.
150=6 - 150 = 144 / 9 = 16; 278=17 - 278 = 261 / 9 = 29. The examples ar e obviousl y
endless : 3255 = 15 - 3255 = 3240 / 9 = 360. Whether t h i s proves God create d the
world upon " t r u t h " i s open fo r debate. But i t c e r t a i n l y produces a very Inte re sting
mathematical mind-twister .
Revelatio n o f Fibonacc i
Fibonacc i perhaps became more widel y known wit h the DaVinc i Code where the
numerical sequence writte n on the f l o o r was the combination to the vault . Thi s
i s the name by which he may be known, but the r e a l name of Fibonacc i was Leonardo
Pisano. Perhaps the name i s a r i d i c u l e meaning "blockhead" coming at a time when
knowledge poured from the East was seen as perhaps e v i l by some. Whatever the
reason Pisano was stuck wit h the name Fibonacci , has long been l o s t i n time. Yet ,
Fibonacc i to.day_is widely used bv technica l anal yst s steming from h i s study of
rabbit s i n Libe r Abaci .
30
 Fibonacc i was presented wit h a problem. How many rabbit s w i l l be born i n th e
course of one year from an o r i g i n a l pai r of newly born rabbits ? Rabbit s can start
to breed afte r onl y 2 months from b i r t h . Fibonacc i assumed that every month a p a i
r of rabbit s would produce another pair . He concluded, at the end of the year ,
ther e would be 233 rabbit s from the o r i g i n a l pair . He s t a r t s wit h 1 p a i r who do
not even breed fo r 2 months'. By the fourt h month, the o r i g i n a l pair' s offsprin g
would s t a r t to "breed on t h e i r own. Thi s exercis e produced the famous Fibonacc i
sequence: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233
I f we dive deeper, we can see the r e l a t i o n between each number both moving i
n a forward and backward d i r e c t i o n . For example, l e t us take a number and divid e
i t int o the previou s number.
1 1.2 0.5
2/3 = 0.666
3/5 0.6
5/8 — 0.625
8/13 0.615384615
13 / 21 = 0.619047619
21 / 34 = 0.617647058
34 / 55 = 0.618181818
55 / 89 — 0.617977528
89 / 144 = 0.618055555
144 / 233 0.618025751
The above tabl e shows the precis e calculations . They are rounded'to 0.618
which the Greeks c a l l e d the "Golden Mean" upon which a l l proportio n i s based.
I f we divid e the highe r number by the lower number, we end up wit h 1.618 (rounded).
Now we are ready f o r the next interestin g proof. I f we take the square roo t of 5,
2.24, - 1 gives us 1.24 and divid e tha t by 2, we retur n t o 0.618.

Before, I explaine d tha t I discovered the Economic Confidence Model by s t a r t i n

g wit h a serie s of panics between 1683 and 1907 tha t equals 224 years i n time wit h
26 panics therein . Taking 224 / 26 = 8.6153846615. Now look at the Fibonacc i number
above 8 / 13 = 0.615384615. Thi s i s the same decimal of the 8.6 c a l c u l a t i o n . I f we
loo k at the square root-o f 5, we als o see 2..24 x 100 - 224 years. I f we use the
Kabala method of reductio n adding every d i g i t i r r e s p e c t i v e of the decimal point ,
and we subtrac t 1, the proof becomes 86153846615 ~ 53 ~ 1 = 52, twic e the uni t 26.
The Mystery o f the Maya
There has been of l a t e almost a c u l t awaitin g the f a t e f u l day when the Mayan
Calendar reaches i t s end on December 21st, 2012. Of a l l the calendar s devised by
man, there i s t r u l y nothing l i k e the Maya investigation . They seem t o be an ancien t
people who understood time. How, I am not sure. But t h e i r calculation s ar e
astonishin g and are not based upon the planets , but upon the c y c l i c a l force s of
natur e tha t they perceived . They c e r t a i n l y thought dynamically , rathe r than l i n
e a r , suggestin g a more Asian- foundation compared to European.
The number 26 als o shows up i n the Mayan calenda r that i s quit e remarkable. The
calendar consist s of a r i t u a l cycl e of 260 named days and a 365 day year. Both ar e
running i n a complex concurrent r e l a t i o n s h i p . These components combine creatin g a
cycl e of 18,980 days constitutin g 52 years of 365 days known as th e "Calendar Round"
where at the end a s p e c i f i c day designated i n the 260 day cycl e return s t o the s t a r t
insofa r as i t recur s i n the same positio n i n the year. The 260 day cycl e i s formed
by the combination of numerals 1 through 13 tha t meshes wit h a r o t a t i n g wheel of 20 .
names i n an ordered sequence. I f we take 260 days and divid e by 5, we end back a t 52.
31
 The Mayan calendar i s complex, shows dynamic thinking , and i s f a r more i n t r i g u i n g
from a mathematical perspective . The 365 year cycl e was divide d by IS named months
of 20 named days, wit h 5 days" of mysti c e v i l omen. The Mayan named years based upon
the f i r s t name of the day tha t appeared. However, the 365 days could be divide d by 5
y i e l d i n g 73 days (clos e to the 72 i n t e n s i t y cycle ) and the number of named days being
20 was als o d i v i s i b l e by 5, resulte d i n only 4 names combined wit h 13 numbers tha t
could ever begin a year. These seem to be c a l l e d "Year Bearers " and were assigne d
accordin g t o the 4 quarters of the world and were given 4 s p e c i f i c colors . Thi s
becomes aki n to the sayin g involvin g the 4 corners of the world, and the 4 winds.
The manner i n which the Mayan recorded dates i s s t i l l complex and shows a highl y
tuned s t y l e of d3 namic thinkin g rathe r than l i n e a r . To specif y a date i n the "Calender
r

Round" they use the designated day by i t s numeral and name d i s t i n c t i o n , and added the
curren t month by prefixin g the number of days that had passed wit h the correspondin g
number f o r tha t month using 0 - 1 9 rathe r than 1 to 20. A date writte n i n t h i s curiou s
manner would occur only once i n every Calendar Round resultin g i n I n t e r v a l s of 52 years.
Yet the Maya were s t i l l concerned about r e f l e c t i n g time i n a much longe r space
dimension. The Mayan show a dynamic thinkin g process fo r time and a keen sense of
histor y tha t they needed to be able to r e f l e c t . The Mayan devised the "Long Count"
tha t was based upon a system of a count of - 20 - , they strangl y used 18 as the
m u l t i p l e r (18 x 4 "= 72). Therefore, the dates were writte n as: k i n (day) ; m'nal (20
days); too. (18 uninal s or 360 days); katun (20 tuns o r 7,200 days) ; baktun (20 katuns
o r 144,000 days). Why the Mayan used 18 as the m u l t i p l e r i s unknown. Perhaps the y
notice d th e v o l a t i l i t y of histor y perhaps instigate d by nature. The "Long Count" was
a means t o anchor time i n a continuous time-space dimension tha t they coul d see i n
t h e i r mind . They anchored time t o 4 Ahau, 8 Cumku, which was equal t o 13 baktuns tha t
was 1,872,000 days (or 5128.76 years of 365 days i n our mind). I t i s c l e a r from the
calendar alone, that the Maya conceived time as a dimension through which h i s t o r y i s
formed, but was a c y c l i c a l event of self-organizin g structure . The basi c elements
of the Mayan calendar have l i t t l e to do wit h astronomy. The Mayan seem t o have place d
great significanc e on cycles . There i s the curiou s 819 day cycl e (13x9x7=819) tha t als o
shockingl y produces 2.24 years! The hidden order e x i s t s - i t i s not chaos!
The interestin g aspect of the Mayan calendar i s i t s concurrent and dynamic
structur e of time tha t i s close r to what I have describe d from independent observa-"'
tion s having nothing t o do wit h planetar y movements. The use of both the 72 and 26
unit s of time i s s t r i k i n g . The Aztec calendar followe d the Mayan i n many respect s
but incorporate d a 584 day cycl e from the plane t Venus and two 52 year cycle s were
considere d "One Old Age," when the day cycle , the year , and the perio d of Venus a l l
came together . These were als o noted by the Mayan, but were more important t o the
Aztec . A l l Meso-Americans believe d i n the c y c l i c a l destructio n and re-creatio n of
the world In these great sweeping period s of time.
The core of the Mayan Calendar i s that the world i s destroyed and rebor n time
and time again. While they see the end of t h i s world on December 21st, 2012 tha t
w i l l erupt from earthquakes, tha t i s a separate issu e tha t lackin g the data o f the
previou s cycl e from which the Maya s t a r t t h e i r calendar , there i s no way t o now
projec t forward to even tes t the theory. Lik e most r e l i g i o n , t h i s f a l l s i n t o the
area of f a i t h - not math.
Calendars based upon the moon cycl e of 19 years , known as the Metonic Cycl e
named a f t e r Meton of Athens i n 432BC or the s o l a r cycl e of 365.25 days or th e 28
year cycl e when the same day repeats wit h the same number under the J u l i a n Calendar,
have created interestin g math calculations . The J u l i a n calendar Cycle = 7,980 years
produced by 19 x 28"x~15v "The l a s t • 15- year cycle--is—the-Roman-tax-and-census-cycle
of I n d i c t i o n . There are calendars based upon Jupite r and i t s 12 year cycle . But a l l
are c y c l i c a l ba^ed.
 The Concept o f Self-Refera l
Everything i n nature seeks to recreat e i t s e l f by generatin g a copy of- i t s e l f
tha t refer s back t o the o r i g i n a l entity.. Our childre n look l i k e us, a l b e i t a t times
a blending of both parents. Nevertheless , thi s i s nature's way of extendin g the
cycl e of l i f e through the process of s e l f - r e f e r a l to achieve propagation . Whatever
you may believe , the entir e process of the universe i s based upon r e p l i c a t i o n t o
progress forward int o time. I t may indeed appear to be "chaos" so we dare not t o
look too closely . But there i s a singl e system o f s e l f - r e f e r a l tha t allow s a l l thing
s to propagate from a. viru s to a l l forms of l i f e . But t h i s extends even f u r t h e r i n t
o nature tha t create s whether, • volcanos and earthquakes to how we even behave i
n .a group.
The system of s e l f - r e f e r a l i s a complex process tha t i s a f r a c t a l , reveale d by
Bernoi t Mandelbrot of Yale . Physic s has referre d to t h i s as a r e l a t i o n s h i p o f a
"power law" because the d i s t r i b u t i o n i s describe d wit h an equatio n containin g a
exponent or pwer. Hence, a variabl e i s expressed as an exponentia l power o f the
other such as f(x) = x~ where the product becomes the s t a r t i n g poin t f o r th e next.
a

Mandelbrot demonstrates remarkable order existe d hidden withi n what seemed random.
At the core of a l l c y c l i c a l behavior, i s t h i s very concept o f s e l f - r e f e r a l
tha t i s a means of perpetuatin g the cycle . I t dictate s that the people w i l l indee d
respond i n the same manner irrespec t ofthe century, because human natur e does not
change. There i s a t h i r d inheren t wave structure , tha t i s f a r more complex than:
anything we have been lookin g a t so f a r . I t moves wit h the same waves and may be
aki n to a c a r r i e r wave upon which a l l others t r a v e l through time-space. Thi s i s
the wave tha t recreate s the patterns , whereas the other waves e f f e c t amplitude
through i n t e n s i t y ( v o l i t i l i t y ) _ whereas the main waves vary i n wave lengt h tha t
indeed creat e differen t e f f e c t s , s i m i l a r t o varyin g the wave- lengt h can change the
the wave effec t from x-rays, v i s i b l e l i g h t , to t e l e v i s i o n . Change the wave length ,
we change what the wave control s both i n nature and withi n the human response. But
i t the Schema Frequency tha t i s a c a r r i e r wave of patterns operatin g Independently
withi n the other wave structures . Thi s i s the core of hidden orde r tha t other s ar e
j u s t now s t a r t i n g t o discove r i n other areas of a c t i v i t y .
Unravelin g The Mystery o f Time & Space
Creatin g Replicatin g Pattern s int o the Futur e
The Scheme Frequency
Everything i n nature appears t o be on a quest to r e p l i c a t e i t s e l f . We are
indeed faced wit h what may appear t o be chaos, but i n r e a l i t y , ther e can be no
tru e random chaos, fo r the system cannot surviv e as i f i t were a rogue system
that would soon cause i t s own demise. The entir e univers e i s constructe d upon
the model of s e l f - r e f e r a l tha t r e p l i c a t e s perpetuall y int o the f u t u r e . Thi s i s
a delicat e complex pattern of i n t e r a c t i o n combining to create space, time, matter,
motion, and energy. I t i s the i n t e r a c t i o n between these elements tha t creat e the
beat or pulse of the universe tha t flow s i n waves of energy i n a c y c l i c a l motion.
But there are pattern s that e x i s t , which some observe as i n t e c h n i c a l analysis ,
but what they are doing i s scratching ' a surfac e of extraordinar y complexit y hidin g
a simple stat e of incredibl e order.
There are complex non-linea r example i n nature tha t apply t o human behavior.
A bucket of water wit h a stron g fauce t source w i l l cause a vorte x as the water
flows int o the bucket. The water j e t w i l l creat e a transvers e v o r t i c a l motion
r e l a t i v e t o the water source i t s e l f . E l e c t r i c i t y flow s the same way creatin g a
f i e l d trensvers e t o the curren t i t s e l f .
33
 A non-linea r example from the r e a l world took place between 1980 and 1985.
The issu e arose wit h the US Nationa l Debt h i t t i n g $1 t r i l l i o n i n 1980. We a l l ju
d othe r s by ourselves . Consequently, the Europeans judged i n t h e i r eye the
option s facin g the United State s and presumed that the US would defaul t on i t s
deb.t by cancellin g the currency, and replacin g i t wit h domestic and externa l
dollars . Lik e South A f r i c a , the Europeans expected the US t o create a " f i n a n c
ia l " dollar f o r internationa l settlements and a domestic d o l l a r . Thi s was not
unlik e the two s i l v e r dollar s minted during the 1870-1880 time period .
However, Instead of the s i l v e r "trade " dolla r being 1 ounce with the lesso r
valuabl e s i l v e r d o l l a r of about 75% s i l v e r by weight fo r domestic use, the
Europeans were convinced tha t the table s would be turned and t h i s time i t would
be the Euro-dollar s that would be worth les s than a domestic d o l l a r . Despite the
escalatin g debt, the Europeans withdrew t h e i r Euro deposit s and switched them
to domestic d o l l a r s . This drove the d o l l a r to record highs going int o 1985
where the B r i t i s h pound f e l l to $1.03 Thi s s h i f t i n g of deposit s created a
transvers e wave wit h an e f f e c t opposite i t s intention . The c a p i t a l flows from
Euro-dolla r to domestic d o l l a r s created i n a technica l sense, a "bear r a l l y "
or "short-covering-rally " where the underlyin g i n t e n t i o n i s opposit e of i t s
appearance. Thi s extreme economic pressur e was agai n misunderstood by government
that responded by creatin g the G-5 t o manipulate the globa l economy.
Figur e #1
I l l u s t r a t e d here i s
Wovelenglh
a t r i p a r t i t e wave (Fi g #1) B.6 /
. \ Year Cycl e Wave
wit h three d i s t i n c t i v e
1 \ • A
components, each providing;
a separate effec t withi n
time. These segments are:
(1) 8.6 Year Wave
Economic Confidence
Model - ~ " ' °heu
s

(2) 6 Tear Wave

A

Intensit y ( v o l a t i l i t y )
(3) the Patter n of
Self-Refera l
The Schema Frequency
So fa r I have discussed the 8.6 year wave p u b l i c l y fo r nearl y 30 years . I
have provided v o l a t i l i t y forecast s and even warned the White House back i n 1985
not t o brin g i n G-5 that v o l a t i l i t y would r i s e dramatically . I receive d a repl y
from Mr. Sprinkle , the Chief Economic Adviso r at tha t time, tha t I was the onl y
person, wit h such a v o l a t i l i t y model and u n t i l someone els e agreed wit h my
warnings b a s i c a l l y - Thanks but no thanks! By 1987, I was urgentl y summoned t o
"hurry-Tip; we need to know what your model project s now, sinc e everyone agrees,
volatility i s the number one problem? I have not per se explaine d the i n t e r c o n
ne c t iv i t y between the two models, preferrin g to keep the d e t a i l s to myself u
n t i l I was ready t o r e t i r e . Likewise , I have discussed tha t the frequency
must e x i s t on a l l l e v e l s of time, but t h i s i s the f i r s t time I am t r y i n g to
explai n ye t another mystery - the Schema Frequency that i s an embedded versio
n s i m i l a r t o a code l i k e DNA i t s e l f . I t i s a map of how thing s w i l l unfol d tha t
simply i s astonishing . We know tha t DNA i s revealed i n a sequence. I t i
s a complex code tha t i s the map as to who we are and how readin g that code i n
the womb (DNA Reader) construct s a human person. The Schema Frequency i s a patter
n of s e l f - r e f e r a l tha t i s a t h i r d component of the wave that may even be a c a r r i
e r wave upon which other s become "manifest.' I t dTctates~how the future"""will
unfbid " on "a patter n perspectiv e while- the other wave structure s influenc e the e
f f e c t s and amplitude wit h i n t e n s i t y . 34
 I inten d to publis h a more detaile d analysi s of the wave structur e i n the
future . But i n a basi s concept, the Schema Frequency i s the b l u e p r i n t so t o
speak of a f a r more complex nature. For years I taught at seminars around the
world tha t b u l l market's and bear markets are fundamentally differen t i n timin g
and patter n development. I explained tha t the core basi c b u l l market wave i s 7
unit s and the bear market i s a uni t of 2. I als o explaine d tha t the fundamental
differenc e i s caused by confidence i t s e l f . I t simply takes people longer t o t r u
s t and believ e i n anyone or something, than i t 'takes t o los e tha t confidence .
Therefore, the timin g length s fo r a b u l l and bear market waves unfold s as:
B u l l Markets Orange Juic e Monthly

I f we loo k at Orange Juic e on a monthly l e v e l between 1993-1996, we can see

tha t ther e was a straigh t 7 month r a l l y from the low i n February 1993 tha t reached
a hig h i n September 1993. Thi s was followe d by an i n i t i a l " 2 month sharp collapse :
int o November 1993 wit h a b r i e f 4 month consolidatio n followe d by another thrus t
downward int o a Jul y 1994 low - 10 months from the February 1993 high . Thi s i s
then followe d by a steady drawn out r a l l y tha t laste d 21 months int o the highes t
monthly closin g i n A p r i l 1996. These pattern s emerge no matter what th e market
because i t i s not the objec t we are tracking , .but the human i n t e r a c t i o n wit h tha
t object . For t h i s reason, these patterns are consisten t regardles s of the market.
The major hig h i n 1929 was followed by the major low for-th e Great Depression I n
1932 - p r e c i s e l y on the 3 count.
Thi s i s not the Schema Frequency, but merely a glimpse. The Schema Frequency
i s f a r more complex and w i l l take a l o t more math and explainin g t o revea l i t i n
a proper manner. Nevertheless, i t i s a cycl e wave of varyin g wave length s tha t
takes plac e i n a s p e c i f i c patter n that repeats over and over again . Thi s i s why
I have explaine d i t i s more aki n t o DNA insofa r as i t i s a tru e map of the futur e
tha t impacts the other wave frequencies . As shown above, t h i s i s a mere glimpse of
a patter n tha t i s embedded withi n everything , no matter what we are lookin g at . I t
i s a map wit h the component structur e hidden deeply i n a f r a c t a l or s e l f - r e f e r r a l
tha t create s l i f e withi n c o l l e c t i v e societ y so to speak. Incorporate d w i t h i n t h i s
structur e i s the Phase-Transitio n tha t causes the dramatic shocks tha t appear t o
emerge from nowhere. ,
The Phase-Transitio n i s the exponentia l
chaoti c move tha t i s l i m i t e d to a timin g phase
of 2 on the minimum to 3 on the outsid e or t o
be precis e 3.141 meaning P i . Even lookin g at
gold back going int o the 1980 hig h at $875 on
January 21st , we see the pric e more than doubled
during the l a s t two months of the r a l l y . Now
look t o the r i g h t at the Japanese yen. We see a
2 month exponentia l r a l l y int o A p r i l 1995. The
most dramatic moves always take plac e i n the
shortes t amount of time.
35
 Comprehending Time
Kondratief f was executed by S t a l i n fo r hi s courage to explore economic cycles .
Schumpeter was greatl y influence d by IConradtieff and sought to explai n why such
booms and busts took place . Schumpeter was als o tryin g t o cope wit h Marxism and
t h i s was reflecte d i n hi s l a t e r work, Capitalism , Socialism , and Democracy (1942).
Schumpeter worrie d tha t i n the quest t o balance incomes through stat e socialism ,
we would k i l l the waves of innovatio n he believe d created the business cycle .
Yet Adam Smith was s t i l l correct . I t i s not j u s t the s e l f - i n t e r e s t of the i n d i v i d u a l
, but the s e l f - i n t e r e s t of the stat e tha t als o create s the cycle . The r e a l
differenc e between Capitalis m and Socialism/Communism, i s the differenc e between l i
b e r t y and a controlle d economy. Who r e a l l y benefit s from a 'controlle d economy? I
t i s the stat e fo r they perceiv e t h e i r power as omnipotent. Kondratief f threatened
S t a l i n fo r hi s work int o cycles , Implied the ultimat e f a i l u r e of Communism,
although he di d not expressl y stat e that i n hi s 1926 study, Long Waves i n
Economic L i f e . I t has been the "big " houses tha t ban together
t o manipulate markets t o obtai n those perceive d " r i s k l e s s " trade s tha t has
put the entir e world economy at r i s k . The CFTC and SEC are merely corrup t
cops, who overregulat e the l e s s important smal l firms , whil e turnin g a blind-
eye to the "big " firms . These firm s were responsibl e fo r the insane
accusatio n the CFTC made i n a subpoena tha t I was "manipulating the world
economy" b a s i c a l l y because no-one coul d r e a l l y creat e a model that would
forecas t a s p e c i f i c date 7 years i n advance and watch i t happen. The CFTC
became merely the t o o l as the law was to S t a l i n . S t a l i n had Kondratief f
k i l l e d because he di d not l i k e hi s forecasts . We see the same patter n of an
abuse of power when G a l i l e o supported Copernicus and argued that the center of
the sola r system was the sun, not the earth . Hi s death sentence was commuted to
l i f e i n priso n fo r h i s confessio n or recan t of those theories . We als o see
Socrates was sentenced to death fo r hi s philosoph y tha t the great democracy of
Athens argued corrupte d the youth. Plat o recorded the t r i a l of Socrates..and
hi s repl y tha t he feare d not death, fo r there were onl y two such po s s ib i l it ie s ,
(1) a migratio n of the sou l t o a plac e where hi s ol d f r i e n d s now awaited, or
(2) i t was a slee p so peaceful , one i s not even disturne d by a dream. Plat o f l e d
Athens, vowing he would not allo w two crimes agains t reason.
September 11th, 2001
3.14159 P
The l i s t of casualtie s i s long indeed. i
The stat e ofte n does not l i k e confrontatio n
and don't thin k that somehow the Unite d
State s i s differen t - remember McCarty
To demonstrate that the model i s not about
markets, but marekts are merely the refelec-
t i o n of human' behavior, to the r i g h t i s an
i l l u s t r a t i o n of takin g the peak i n the l a s t
8.6 Year Wave of Jul y 20th, 1998, and then
projectin g forward using simply P i , and we
come to precisel y September 11th, 2001. Let
us stop the nonsense and begin t o respec t
tha t there i s a hidden order t o time i t s e l f .
Socrates debated Thrasymachus, which was recorded by Plat o i n -his Republic .
Socrates argued that in.^._Ikmo^acy_i_because the people were i n charge, j u s t i c e
would always be done. Thrasymachus argued, a l l governments are "the same no matte
r what thei r form, fo r a l l laws are passed only i n the s e l f - i n t e r e s t of the s t a
t e , which i s the stronger . The stat e punishes those i t claim s violate s i t s laws ,
and t-hn.g justice_.is._a2ways„the_same _it_is. merely the w i l l o f the state , who i s
J

the stronger. They k i l l e d Socrates - Thras3nnachus was correct .

36
 Russi a & The 224 Year Cycle of P o l i t i c a l Change
In the Business Cycle And The Future (Par t I I ) Bated October 10th, 1999, I
provides a brie f h i s t o r i c a l review o f the 224 Year Cycle of P o l i t i c a l Change fo r
the Western World, that include d Russia . I explaine d that what thruste d Russi a
both int o a nationa l stat e and a learne d culture , was the collaps e of the Roman
Easter n Empire - Byzantium i n 1453AD. The Ottoman Empire began i n 1326AD and was
on a course of conquest tha t resulte d i n the f a l l of Constantinopl e i n 1453AD
under the reig n of Sulta n Muhammad I I . While the f a l l of Constantinopl e le d t o the
spread of knowledge by the f l i g h t of scholar s to Rome beginning th e Renaissance
i n Western Europe, i t was t h i s same f l i g h t tha t altere d the course of Russia . The
niec e of the l a s t Byzantine Emperor Constantine SI , Sophia Paleologa , f l e d t o Russi
a and married-Ivan ICE (The Great)(1452-1505). Sophia br.ought.her cour t wit h her, but
the c r i t i c a l contributio n that sen Kussia on the course to world r e c o g n i t i o n , was
tne a c q u i s i t i o n of knowledge.
Earl y histor y of Russia can be deivide d int o three 224 year cycle s of
Cimmerian Rule, followe d by l'i cycle s of Scythia n Rule, 1^ cycle s of Sarmatian Rule
, wit h the invasio n of the Goths i n the 3rd Century followe d by the 4t h Century
invasio n of the Huns i n 370AD. Upon the death of A t t i l a i n 453AD, i t was the
Avars who took control , although they were c l o s e l y relate d t o the Huns. This was
followe d by the Khazars who were overrun by the Slav s i n the 9th century. The f i r
s t wr itten hi story came only i n the 12th century. Accordin g to these records of
the Primar y Chronicle , i t was the Viking s who invaded i n the l a t e r 9th century i n v
i t e d by the slavs , from, whom Russia i s sai d to have taken i t s name - the Varangian
Russes. Russia f e l l to the Mongols le d by the grandson of
Genghis Khan tha t destroyed the c a p i t a l Kie v i n 1240AD. Moscow began to r i s e as a
c i t y i n the 14th century . The Moguls were f i e r c e warriors . Genhis Khan had t r i e d t
o conquere China, but broke of f hi s invasio n i n 1218 and turned toward the West. He
die s i n 1227AD, and i t was h i s grandson who turned back to conquer ..China i n 1279.
Hi s dynasty f e l l I n 1368, and so was the fat e of the Mongolian Empire.
( Russia - 224 Year Cycle of P o l i t i c a l Change

1472 1696 1920 2144

Against thi s backdrop, we come t o Ivan The Great and hi s Marriage t o Sophia in
1472 tha t appears to begin the blossoming or Russi a int o a world power. Iva n create d
the f i r s t Rule of Law that i s the cornerstone of a l l nationa l wealth. Thi s foundatio
n of law i n 1497 was predicate d upon the lega l code of Justinia n I of .Byzantium. We
can see from the above i l l u s t r a t i o n of j u s t the wave formations s t a r t i n g wit h the
b i r t h of Russia int o a modern state , the turnin g point s l i n e up wit h th e Revolutio n
i n 1917, the f a l l of economy power i n 1989, tha t was followe d by the r e s i g n a t i o n of
on December 24, 1991 marking the o f f i c a l collaps e of the Sovie t Union w i t h i n weeks
of the turnin g poin t s t a r t i n g wit h the marriage of Ivan and Sophia.
Startin g i n 1472, we come t o 1696 which i s the year Ivan V died handing power
to Pete r I The Great (1682-1725) a f t e r the 1689 Revoloutio n tha t swept Russi a a l s o
followin g the 1688 Revolutio n i n England. 72 years a f t e r 1696, we come t o another
revolutio n i n sympathy wit h the US and France under Catherine The Great tha t was
crushed i n 1775. The next revolutio n was 1917 and 72 years l a t e r we come t o 1989.
Projectin g i n i n t e r v a l s of 37.33 years from 1917, we come to the collaps e o f
1991 withi n weeks, wit h the next targe t projecte d t o be 2010.325 ( A p r i l 28/29).
37
 China & The 224 Year Cycl e of P o l i t i c a l Change

The h i s t o r i c a l review of the p o l i t i c a l

course of events i n China i s a lon g one. We
have seen numerous governments r i s e and f a l China - Important Histor y
l sinc e the f i r s t r e a l stron g dynasty tha t c. 1766-1122BC Shang Dynasty ( F i r s t )
we can draw the l i n e t o defin e China as a c. 1122BC Zhou overthrew Shang
major singl e natio n - The Qin Dynasty 221- c. 500BC Confucius establie d moral value s
206 BC. We can see tha t c i v i l war plagued c. 256BC Zhou d)^nasty f a l l s i n west
China i n the same time frame as i n the 221-206BC Qin Dynasty (1s t c e n t r a l gov't)
202BC-220AD Han Dynasty
United States , 1851-1864 known as the
581-618 Su i Dynasty
Taiping Rebellion . We als o see i n 1900 the
618-907 Tang Dynasty
famous Boxer Rebellio n where foreig n
960-1279 Song Dynasty
national s were murdered. We see r e b e l l i o n
1275-1292 Marco Pol o claim s t o v i s i t
again i n 1912 wit h the forming of the
1279 Mongols conquered China
Republic.o f China, however, i n 1917 where
1368-1644 Ming Dynasty
there i s the Russian Revolution , the same
1644-1912 Manchus rule d as Qing Dynasty
unrest spread t o China. Note 202BC i s the
1842 Treat Nanjing - B r i t i s h Hong Kong
r i s e of the Han Dynasty, the same year
when Rome defeated Hannibal. 1851-1864 Taipin g Rebellio n
Just as major p o l i t i c a l change unfolded 1900 Boxer Rebellio n ( k i l l i n g foreigners )
wit h Frankli n D. Roosevelt and the nonviolen 1912 Republi c of China establishe d
1917 Sun Yat-ser. establishe d r i v a l gov't
t "New deal " came t o power i n 1933, the same
1919 Sun Yat-sen reorganize s N a t i o n a l i s t s
economic pressures brought H i t l e r to power i
1928 Chiang Kai-shek lea d N a t i o n a l i s t
n 1933. When we loo k a t China, we als o see
Gov't 1931 Japan invades Manchuria
the the r i s e of Mao Zedong who led the
1934-1935_Mao Zedong le d Communist march
famous Chinese Communists on t h e i r Long
1937-1945 War wit h Japan shattere d China
March t o Shaanxi. By 1949, the
1949 Communists defea t N a t i o n a l i s t s
Communists defeated Chiang Kai-Shek who
1958 Great Leap Forward depresses economy
flee s to Tiwan, and the new People's 1962 border war wit h Indi a
Republic of China emerges. I f we 1966-1969 The C u l t u r a l Revolutio n
look at j u s t one 51.6 year wave calculate d 1971 China j o i n s Unite d Nation s
from 1949, the beginning of the People's 1972 Presiden t Nixon v i s i s t s China
Republi c of China, we come t o 1989 and the 1976 Mao Zedong die s
s t a r t of the swing back t o capitalis m wit h 1979 China & US begin diplomati c r e l a t i o n s
Tiananmen Square on June 3-4, 1989. We can 1980s Reform t o rela x Gov't control s
see the contagion effec t fo r withi n j u s t 5 1989 Tiananmen Square protes t
months, the B e r l i n Wal l f a l l s by November
1989. Russi a withdrew from Afghanistan als o
i n 1989 i n l i n e wit h the 1989.95 Economic
Confidence Model.
We f i n d tha t i n 1917, Sun Yat-sen se t up a r i v a l government i n Guangzhou as
the Nationalists . We can see that 72 years from t h i s new government bring s us t o
Tinananmen Square i n 1989 and the star t of the new age of Chinese contro l led c ap i
t- alism . In 1919, Sun Yat-sen reorgantize d the part y tha t i n 1928 was l e d t o v i c
tory by Chiang Kai-shek. I t i s i n t e r e s t i n g tha t the takeover of China by the
Communist part y influence d by K a r l Marx comes oh'the 224 Year Cycl e of P o l i t i c a l
Change, i . e . Mongols i n 1279 (1279 - 1503 - 1727 - 1951). We can see a wealth of c
y c l i c a l trends back-and-forth warning tha t 2021 could be a very explosiv e year i n
China. The modern-day warlords of c a p i t a l want more freedom. These
pressure s are now being f e l t . Afte r opening the doors to controlle d capitalism , i
f the contagio n h i t s hard i n China, any expectation s tha t they w i l l . buy debt t o
stimulat e th e US economy may evaporate. I t i s hard to pretend China does not
honor American standards of humaix_rdgh±SLjCwh
lss_uesL_and_..then go hat-in-hand s o l i c i t i n g help to buy the debt. 72 years from
1934-35 Long March of Mao i s 2007-2008. I t i s jus t time again.
 The Concept of Leverage
Leverage i s inherent throughout capitalism . Afte r the f a l l of Rome, the
Catholi c Church adopted the " s i n o f usery " holdin g tha t i f you were a C h r i s t i a n ,
you len t money to a person to help him, not to exploi t him wit h i n t e r e s t . The
bankers were the Jews because both the Catholi c and the Muslim f o r b i d the
earning of i n t e r e s t . The Protestan t Reformation i s where the c a p i t a l i s m t r u l y
begins because i t allowed the banking industr y to become Christian , and thus
expanded widel y throughout Europe. Spain had borrowed so extensivel y upon i t s
expected treasur e from America, tha t out of f i n a n c i a l desperation, i t moved t o
take England i n part hoping t o pay i t s debts to the Venitia n bankers. Of course ,
the Spanish Armada was destroyed i n 1588. Spain defaulte d on i t s debts destroyin g
the I t a l i a n economy wit h i t . The banking industr y moved to Germany, th e Dutch took
i t over, and then the B r i t i s h .
Borrowing money leverages the economy as a whole. For example, houses i n th e
United States were more expensive than Europe in.general . The primary reason f o r
t h i s was the 30 year mortage. I f you can borrow 30 years int o the f u t u r e , then
the pric e of the rea l estat e w i l l r i s e i n proportio n t o availabl e purchasin g power.
I f you can only borrow 10 years out, housing price s w i l l declin e i n d i r e c t porportion
. I f you cannot borrow at a l l , you get t o the Dark Ages i n that propert y w i l l onl y
change hands at f u l l value . This i s the concept of capitalis m tha t Marx f a i l e d t o
consider . Marx saw employers being able t o exploi t workers to the poin t they would
be unable t o consume creatin g the collaps e o f capitalism . Be f a i l e d t o r e a l i z e tha t
the I n v i s i b l e Hand of Adam Smith would prevent the trend , but als o applie s ..to a ;state
. The r o l e of the bank has changed considerabl y from the 1600s. Banks grew as a
guarantor of " r e a l " money. When money was purel y the c i r c u l a t i n g gol d and s i l v e r ,
there was a bi g problem wit h c l i p p i n g and shaving down the coinage. Thi s i s why the
coin s i n your pocket have "reeded" edges t o prevent c l i p p i n g tha t r e a l l y does no t
happen today. Internationa l payments I n the form of a B i l l of Exchange took plac e
because payment i n coinage could be even 10% les s than the o f f i c a l weight. Thus, the
bank became a means to secure " r e a l " money i n internationa l trade . (Wealth o f Nations
, Book IV, Chp I I I , Par t I ) . Banks were t o hol d coin , and issu e r e c e i p t s . No one coul
d withdraw funds, except upon a receip t tha t became a earl y form of c i r c u l a t i n g
paper money. An invadin g army, could even buy up the receipt s a t a premium i n
advance of an invasio n to ensure tha t the treasur e would be there , and not used f
or military advantage. Yet Smith commented upon the earl y forms of "leverage"
create d by banks. "A particula r banker lend s among h i s customers hi s own
promissory notes, to the extent , we s h a l l suppose, of a hundred
thousand pounds. As -hose notes serve a l l the purposes of money, hi s
debtors pay him the same interes t as i f he had l e n t them so much
money. Thi s i n t e r e s t i s the source of hi s gain . Though some of those
notes are c o n t i n u a l l y coming back upon him f o r payment, par t of them
continue t o c i r c u l a t e fo r months and years together . Though he has
generall y i n c i r c u l a t i o n , therefore , notes to the extent of a hundred
thousand pounds, twenty thousand pounds i n gold and s i l v e r may,
frequently , be a s u f f i c i e n t provisio n fo r answering occasiona l
demands. By t h i s operation , therefore , twenty thousand pounds i n gold and
s i l v e r perform a l l the function s whic h a hundred thousand coul d otherwise
have performed." Wealth of Nations, Adam Smith 1776, Book I I ,
Chapter II " Smith explain s that 20,000 becomes the
equivalen t of 100,000. Today, the r a t i o i s 6:100 and the derivative s have increase d
i t dramaticall y i n interban k markets that are unregulated wit h no guarantee
standin g between parties . When confidenc e i s collapsing , there i s a f l i g h t t o cash
tha t contract s the degree of leverag e th»t had multiplie d the money supply.
39
 What Abou t The Derivatives
Le t us s t a r t wit h the l i t t l e known fac t among the general population , t h a t
i t may be tru e that "Derivatives " are f i n a n c i a l instruments that have no a c t u a l
tangibl e valu e of t h e i r own. Yet. Derivative s are the cornerstone of commerce,
even A r i s t o l e explained i n Bock I of. hi s celebrate d " P o l i t i c s " describin g suc h
a derivativ e as a " f i n a n c i a l device which involve s a p r i n c i p l e of universa l a p p l i c-
a t i o n . " The e a r l i e s t derivative s were i n f a c t - "Options" that are instrument s
wit h no actua l value i n and of i t s e l f . I t i s als o tru e tha t the great " T u l i p Bubble
" of the 1600s i n Holland involve d .actuall y tradin g i n options on t u l i p s instea d of
an exchange i n the actua l t u l i p s . The t u l i p dealer s bought options to assur e tha t
they would have inventory fo r futur e sales , which became known as " c a l l s " whil e th e
producers (growers) seeking protectio n agains t f a l l i n g price s would buy option s
with the r i g h t to s e l l thei r t u l i p s a t s p e c i f i c price s tha t were "puts. " I n both
cases, they were transferin g the " r i s k " to a t h i r d part y as a scheme of insurance .
The Tuli p Bubble became the f i r s t publi c exposure'to speculatio n post-Rome. I t was
the publi c buying and s e l l i n g the options , not the dealer s that caused th e wide-
spread leverag e and economic contraction . Other bubbles followed , South Sea and
the M i s s i s s i p p i Bubble i n France based als o on land .
Derivative s are i n fac t essentia l t o commerce. They are what paved the way out
of the dark ages and fuele d exploratio n and world trade . Merchants would not have
taken the r i s k to fund voyages as ofte n when entir e f l e e t s would be destroye d by
a storm a t sea. The derivativ e "insurance" market was create d transferin g th e r i s k •
of cross-Atlanti c voyages tha t furthere d capitalis m and world trade .
Even durin g the C i v i l War, we f i n d both the North and South governments were
using Derivative s to c i r c u l a t e currency and t o issu e bonds while the abandonment of
the gold standard caused the New York Stock Exchange t o trade a Derivativ e l i s t e d
as "greenbacks" - paper currency traded upon the whims of the Fortunes o f War r e l a t i v
e and expressed i n gold. The North issue d paper currency tha t were a Derivativ e of
a bond that displaye d a pa3 ment schedule on the revers e showing what i t would be
r

worth i n the futur e i f you hel d i t . The Confederate Government issue d bonds i n
Europe tha t were Derivative s fo r (1) they created an optio n that the buyer coul d
selec t where t o be paid i n P a r i s , London, Frankfur t or Amsterdam; (2) the currency
could be B r i t i s h pounds or French francs , and (3) pa}^ment could be taken i n cotto n
rathe r than money and the cotto n would be at a fixe d pric e of 6 pence when th e
prevailin g rat e i n Europe was 24 pence. So these bonds were a complex D e r i v a t i v e
tha t offere d (1) hedge against foreig n exchange r i s k i n the currency, and (2) a
hedge agains t i n f l a t i o n using the cotton . Numerous countrie s have subsequently
issue d debt denominated i n foreig n currency to eliminat e foreig n exchange r i s k .
The bottom l i n e ; Derivative s are not. the cause of the death of c a p i t a l i s m any
more than a gun k i l l s a person. People k i l l people i r r e s p e c t i v e of the instrument
and i t i s the people at AIG i n London who issue d CDS tha t were seen as insuranc e
by banks around the world, but simply stated , there was no business to back up
the operation . This was t r u l y a '"Ponzi Scheme" fo r i t was p r i n t i n g money wit h no
actua l business i n insurance (other than the name) to offse t the r i s k s . Thi s i s
aki n to a t u l i p grower s e l l i n g c a l l s agains t a crop he neithe r has, nor intend s to
even plant . The assumption tha t they would never have t o pay on such CDS, was a
self-servin g exercis e i n self-delusion .
An economic implosion i s not caused by Derivative s as a concept. The regulate d
future s and option s exchanges functio n perfectly . I t was the absence of regulatio n
on interbank derivativ e markets that allowed CDSs to become the modern-day Tuli p
fo r there..was..no-guarantee_.standing_he_tween and_.posltions..were not c o l l a t e r i z e d . .
40
 Understanding the'Floatin g Exchange Rate System

FIXED EXCHANGE RATE SYSTEM FLOATING EXCHANGE RATE SYSTEM

% Gain I s Higher Currency

- A -
In Country - A % Gain

% Gain Lower
Investment Investment
Currency - A In Country - J Country -A- Country -B-
= Currency - B Currency
- B -
% Gain

Withi n a f i x e d exchange rat e system under which v i r t u a l l y a l l major economic

theorie s were developed. Smith, Ricardo , Marx, and Keynes, c a p i t a l w i l l only flo w
from country B t o Country A when' i t sees a comparitive advantage, i n Ricard o terms;.
The currency exchange i s f i x e d , and therefore , we have a very l i n e a r worl d tha t on
the internationa l l e v e l appears as a seesaw. While there were s t i l l nonlinea r issue
s working i n a dynamic manner behind-the-secenes, the conceptual worl d was l i n e a r .
Yet, moving t o the f l o a t i n g exchange rat e system, transferre d the r i s k o f maintainin
g the currency value from the stat e t o the privat e sector; -
We can see tha t t h i s g r e
atly expanded the variable s and now even i f the expectations fo r c a p i t a l gai n
do not even e x i s t based upon some comparative advantage, the 40% swings i n the
currencie s alon e can cause a transvers e change i n c a p i t a l flows . I f there i s a p o
s i t ive comparative advantage i n additio n fo r the underlyin g business wit h a 25%
expected gain , a p o s i t i v e currency gain o f 10% w i l l increas e the y i e l d to 35%.
Likewise , a 25% expected gai n in the investment, may s t i l l a t t r a c t c a p i t a l i f the
declin e i n the currenc y i s onl y a 5% expectation .
We must understand the value of the currency can a l t e r a l l othe r economic
considerations . By transferrin g the r i s k from the stat e t o the people , c a p i t a l was
given yet another independent reason t o move. Thi s has manifested i n mature markets
tha t allo w the i n t e r n a t i o n a l community t o actuall y vote i t s confidence buy buying
or s e l l i n g the currency.
Sharp percentage swings i n the currency can als o cause delayed i n f l a t i o n . For
example, i n 1985 when the B r i t i s h pound f e l l t o TJSSi:03, Americans were buying j u s t
about everything i n London. Even the Concord t i c k e t s at 2,000 pounds tha t had been
about $5,000 i n 1980, were suddenly cheaper than f i r s t clas s TWA t i c k e t s . Everyone
starte d f l y i n g the Concord tha t they declare d the f l i g h t a success, and raise d the
pric e t o 4,000 pounds. But then the pound r a l l i e d back t o almost US$2.00 causin g the
pric e of the t i c k e t t o r i s e to over $8,000. The same happened t o car s and housing.
That i n f l a t i o n a r y boom was currency driven . The same was tru e of th e Japanese buying
property i n the US includin g Rockefelle r Plaza . But the declin e i n th e d o l l a r by
almost 40% between 1985-1987, le d t o massive l i q u i d a t i o n s of propert y and the 1987
stock market crash . Currency has become a major component I n d r i v i n g c a p i t a l around
the world. A l l the ol d theorie s no longer work because the system was changed.
41
 The Nature of a Debt C r i s i s
Not a l l f i n a n c i a l panics are a Debt C r i s i s . There are panics caused by the
speculativ e bubble i n a p a r t i c u l a r instrument, such as the t u l i p s i n th e Netherland s
(1634-1637). There are bubbles l i k e we saw i n the .COM boom. We saw s i m i l a r dramati c
exponentia l bubbles i n Rail'Road stock s (Transportations ) i n 1907. The I n d u s t r i a l
Boom of 1929 le d by the auto stocks . The 1989 r a l l y i n the Japanese Nikke i was als o
another Phase-Transitio n r a l l y . We saw the gold and s i l v e r boom int o 1980. A l l o f
these do not emerge because of a debt c r i s i s , but are the natura l exhaustio n o f a
speculativ e bubble conforming t o the Phase-Transitio n exponentia l move.
The t r a d i t i o n a l speculativ e bubble i s create d by a concentratio n of investment
c a p i t a l int o a particula r f i e l d . Such speculativ e bubbles have als o materialize d
i n off-exchange markets such as r e a l estate . We saw an. excessiv e speculatio n i n t o
r e a l estat e creatin g the S&L C r i s i s sparked by taxatio n tha t create d an advantage t o
inves t int o commercial property. Thi s le d t o a huge o f f i c e boom tha t ended up wit h
a dramatic over-supply.
However, ther e i s the fa r more dangerous Debt C r i s i s where the confidenc e i n
the government i s at stake. Unfortunately , American histor y has been l a r g e l y w r i t t e n
wit h a very l i n e a r view tha t f a i l s to grasp the globa l perspective . A d d i t i o n a l l y , .
ther e i s much confusion about how c a p i t a l react s withi n a f i x e d exchange rat e and
a f l o a t i n g exchange rat e system. We tend t o see the speculativ e bubbles more so durin
g a P r i v a t e Wave, rathe r than a Publi c Wave. Nevertheless , where the value s o f
currenc y are f i x e d (by decree or gold standard), c a p i t a l w i l l trave l i n t e r n a t i o n a l l y
onl y when the prospect of greater gains appear on the horizon . Thi s i s what create d
by the famous South Sea Co Bubble (1711-1720), the expectation s of fabulou s
wealt h offshore . There was the M i s s i s s i p p i Bubble burs t about the same time as the
South Sea Bubble i n England, tha t was operated from France and gave b i r t h to term
"millionaire;- " .This irreparabl y harmed the Bourbon Dynasty tha t contribute d no doubt
t o I t s demise j u s t 72 years l a t e r i n 1792. When i t i s the confidence i n the
government tha t i s damaged, we ar e lookin g at a seriou s d i s t i n c t i o n from a P r i v a t e
Wave speculativ e bubble. Because we are dealin g t h i s time wit h the
broader r e a l estat e market tha t i s the home residenc e rathe r than the commercial,
and we are dealin g wit h a wholesal e bank c r i s i s , we ar e on the brin k of a major
economic c r i s i s from which seriou s p o l i t i c a l change i s on the horizon . The Great
Depression was a d i s t i n c t breed of c r i s i s tha t can be c l a s s i f i e d as a Debt C r i s i s
as distinguishe d from the other panics . I t i s tru e tha t the Roaring '20s was a perio
d of i n d u s t r i a l boom built-upo n the innovatio n of the automobile aki n to the .COM
boom. However, what i s not looked a t c l o s e l y was the glarin g fac t tha t a l l of
Europe went i n t o default . Herbert Hoover's memoirs i s the best account wel l
documented as to these events. What was not understood by America, was tha t c a p i t a l
f l e d Europe buying US bonds and notes drivin g i n t e r e s t rate s lower only because i t
was seen as a f l i g h t to quality . When there i s a Debt C r i s i s , c a p i t a l w i l l t rave l
around the globe fo r security . Thi s I s als o furthere d by the f l o a t i n g exchange
rat e system where c a p i t a l travel s als o due t o expectation s not of p r o f i t i n a parti
c u l a r investment, but s o l e l y withi n the currency . A
Debt C r i s i s combined wit h a f l o a t i n g exchange rat e system, w i l l lea d t o the most v
o l a t i l e outcome perhaps we have seen even sinc e the Tulipmania o f the 1600s. What
we are facin g i s the most dramatic combination possible . F l o a t i n g exchange rate
s that ac t as a medium of i n t e r n a t i o n a l votin g on the confidence o f a nation , -
adding, a second__dimension as_ to why^ c a p i t a l w i l l flo w even i n a transvers e wave
contrar y t o l o g i c i n a l i n e a r mind. A Debt C r i s i s simply"Is"~dlstlnguishe d from a~"
speculativ e bubble that rarel y produces long-term economic d i s t r u p t i o n s .
42
 What Now?

We have reviewed the main economic theorie s that driv e government i n i t s

thinkin g process. We have reviewed Adam Smith's (1723-1790) most c r i t i c a l c e n t r a l
core of h i s findin g i n The Wealth of Nations (1776), was tha t everyone act s i n
accord wit h t h e i r own persona l s e l f - i n t e r e s t s . As Smith wrote; " i t i s not from
the benevolence of the butcher ... tha t we expect our diner , but from [his ]
regar d t o [his ] own i n t e r e s t . " Vo l I , p26-27 (Oxford: Clarendon ed. 1976). What
both Keynes and Marx advocated, was tha t somehow the stat e was even capable of
managing the economy, Keynes through f i s c a l p o l i c y of d e f i c i t , spending and th e
r a i s i n g and lowering of taxatio n and i n t e r e s t rate s t o cause mankind t o run i n
p a r t i c u l a r direction s l i k e the ra t i n a maze, and Marx by takin g a l l toys away
from the people and l e t the stat e contro l wealth. In t h i s respect , Keynes and
Marx show l i t t l e difference . Thei r idea s tha t somehow the stat e would be more
capable than the people i s absurd. The concept of a planned economy has proven
t o be disasterou s both i n China and Russia . What everyone seems t o ignor e i s tha t
Smith uncovered the key t o understanding the system dynamics. I t i s not only tha t
those i n the privat e secto r w i l l pursue t h e i r own personal s e l f — i n t e r e s t s as the
p o l i t i c i a n s are now pointin g t o the "greed" o f Wal l Street , but those i n the
f o r t r e s s of government als o respond i n t h e i r own s e l f - i n t e r e s t . When Russi a f e l l
from Communism, i t was suddenly reveale d tha t behind closed doors were the l u x u r i e s
o f capitalis m denied the people.
Both Marx and Keynes open Pandora's Box ( i n ancient Greek i t was j a r ) , and
the e v i l s tha t have swept the world have deprived m i l l i o n s of t h e i r freedom and
t h e i r p o s t e r i t y . Bad economic theorie s have destroyed the l i v e s of so many, when
good theorie s have provided fo r l i b e r t y and progress that advances mankind. I t i s
not i n the s e l f - i n t e r e s t of the stat e t o l i s t e n t o what I have t o say, but the
t r u t h , nonetheless, s t i l l must be understood.
I have explained a dynamic world where th e very nature of everythin g can be
reduced t o a cycle . A major A u s t r a l i a mining company was a c l i e n t . Thei r CFO had
l o s t a l o t of money bettin g on a hedge i n the Australia n d o l l a r tha t was wrong.
The Board of Director s i n s i s t e d tha t he meet wit h me. I fle w i n to see what I coul d
do t o hel p the corporation . The CFO was at f i r s t very h o s t i l e . No matter what I
t r i e d t o explai n about c y c l i c a l a c t i v i t y , he responded i t might be j u s t a coincidence
. I then asked him what was hi s background? He suddenly was on th e defensive . He then
admitted tha t he was a Nuclear P h y s i c i s t by t r a i n i n g . I sai d great . Le t us loo k a t the
market through the eyes of thermodynamics, which i s based upon 2 main laws. (1)
energy I n a system cannot be created nor destroyed, but can be converted from one
form t o another (Phase-Transition) , and (2) tha t a hot object w i l l t r a n s f e r heat to
a colde r object . Entropy based upon the Second Law i s tha t the d i r e c t i o n toward the
maximum chaos or disorde r w i l l occur wit h spontaneous change i n a close d system.
I f you shuffl e a deck of cards, i t i s a highe r p r o b a b i l i t y tha t the cards w i l l move
to disorde r rathe r than f a l l back.to a organized pattern, j u s t randomly. Once I
sai d l e t us look a t the markets i n terms of thermodynamics, h i s eyes opened and
exclaimed; "My God. There has t o be a cycle! " The more government t r i e s t o contro l
the marketplace, the greate r i t w i l l move to disorde r creatin g huge spontaneous
readjustments back to r e a l i t y .
We are lookin g at the peak of t h i s curren t business cycl e tha t took plac e on
February 27th, 2007 precisely . The reactio n should have been t o the downside i n t o
2008, wit h a consolidatio n int o earl y 2009, but another seriou s declin e i s s t i l l
possibl e going int o June 13th, 2011. Do not expect the r e a l estat e markets to
43
 recover by much. Unless the mortgages are taken out of the banks and a genera l
fund i s created t o allo w privat e c a p i t a l t o participate , the r e a l estat e market
may be contractin g f o r some time t o come.
There are a l o t of people espousing the way t o put Humpty Dumpty hack togethe r
again. We can t r a i n a dog to lear n t r i c k s . But we have to t r a i n every i n d i v i d u a l
dog. We can t r a i n a mouse to run a maze to f i n d the cheese. Again, we have t o t r a i n
every mouse. The d i s t i n c t i o n between mankind and a hamster i s we are suppose t o be
manifested wit h a mind capable of more than j u s t a thought, memory, w i l l and f e e l i n g .
We are capable of perceptio n and imagination , wit h the a b i l i t y to formulat e i n t o the
futur e because we are als o self-aware - conscious of ourselves and curren t p o s i t i o n .
Despite t h i s s u p e r i o r i t y , we are no bette r than a hamster. We l i v e f o r the immediate
g r a t i f i c a t i o n . Solve the problem i n a sound-bite and wit h the q u i c k - f i x . Thi s I s
what leads to the Paradox of Solutio n - where today's quick-fi x becomes the ver y
e v i l fo r which we now need another quick-fi x on the next cycle . We may be capable
of being self-aware , but we prefe r t o be the ra t i n the maze - keep i t simple and
stupid , and by the way, where i s the cheese?
The Paradox of Solutio n
The solutio n t o the Great Depression was t o be d e f i c i t spending a t a time when
the i n d i v i d u a l was too a f r a i d t o spend and hide i n the corner of the maze.-Now we
are facin g a Debt C r i s i s where the confidence i n the Publi c secto r may yet collapse *
We are dealin g wit h a contagion tha t i s spreading. I t i s the massive croni c d e f i c i t s
and the mismanagement of the publi c secto r includin g the f a i l u r e t o fun d the futur e
entitlement s combined wit h massive new debt create d to solve curren t problems, tha t
may demonstrate once and fo r a l l the tru e scope o f the Paradox o f Solution . The
c r i s i s we face i s where w i l l the funding come f o r the new debt, more than S i t r i l l i o n
! There are only three possibl e outcomes:

(1) We s e l l the new debt, i t i s absorbed domesticall y and g l o b a l l y ,

causing..the yield-curv e t o steepen as the long-term rate s r i s e f a s t e
r
i n response to the amount of new debt coming to the market, wit h any
possible stimulatio n l i m i t e d t o the debt sol d offshore .
(2) The contagion spreads globall y forcin g interes t rate s t o r i s e broadl y
l i m i t i n g sale s domestically , causin g only a r e d i s t r i b u t i o n of cash
extractin g i t from those who. coul d inves t and stimulat e the economy
whil e the electroni c money supply contract s sharply .
(3) Confidence swings back to the P r i v a t e Sector (not banks) causin g
the new debt to take the form of monetizatio n due t o the i n a b i l i t y
to s e l l the new debt eithe r domesticall y or g l o b a l l y .
The Keynesian model to support Government contro l and d e f i c i t spending may
have been the i n s t i t u t i o n a l i z a t i o n of the Roman p o l i t i c a l system of the o f f i c e o f a
dictator . While Roman p o l i t i c s was based upon a Republic whereby the c e n t r a l power
reside d withi n a senate, there was the o f f i c e of two electe d Consuls. Nonetheless ,
where the two consuls performed perhaps the executiv e function , th e system als o
respected that at times a democratic system does not work. Sometimes, a d i c t a t o r was
necessary because one man had t o take the r e s p o n s i b i l t y to act rathe r than have an
endless course of debates. I noted i n the Greates t B u l l Market I n History , tha t
during the Great Depression, senators stood upon the f l o o r of the U.S. Senate and
state d tha t even a dictatorshi p was preferrabl e t o what we were going through. The
most famous person t o hol d that o f f i c e i n Roman h i s t o r y , was Luciu s Quinctiu s
Cincinnatu s (519-439BC) who handed the troops back along witlp. th e powers of th e
o f f i c e and returned to-his - farm- The power was^never given back by modern
governments and the d e f i c i t spending became croni c addictio n and now when we coul d
use the ide a of magnamious intervention , we f i n d tha t the Paradox o f Solutio n has
create d th e very problem tha t prevents a s o l u t i o n , requirin g new thinking .
 The Paradox of Value i l l u s t r a t e s tha t the key to
understanding what i s honestl y going on, l i k e Einstein' s
Theory o f R e l a t i v i t y , i t depends upon the perspectiv e of
the observer. The Government immediately point s t o the
"greed" of the privat e secto r no matter what form of a
government we are lookin g at , and the privat e secto r now
look s back at the Government. Thi s d i a l e c t i c r e l a t i o n s h i p
i n Hegelian terminology i s fa r too s i m p l i s t i c f o r i t leads
onl y to the process of change i n which a concept or i t s
r a t i o n a l i z a t i o n passes over int o and i s preserved i f not
f u l f i l l e d withi n i t s opposite .
We must understand that t h i s i s a dynamic system
tha t i s foreve r connected. I t may appear t o be a p l a i n
one-dimensional relationship , but i t i s fa r deeper than
meets the eye. While these Privat e and Publi c aspects
s i t on opposit e sid e of a scale , the force s tha t cause
one—side t o r i s e i n proportio n to the declin e i n i t s
opposite are f a r more complex and are multi-dimensional .
I t i s tru e that we are dealin g wit h a predispositio n
toward residin g b r i e f l y withi n time, withi n one stat e of
order or the other .
The problem we face i s the lac k of o b j e c t i v i t y t o comprehend tha t these two
state s are i n fac t connected and co-exis t at a l l times. We are now lookin g a t the •
collaps e i n asse t prices , which i s the r i s e i n the purchasing power of the underlyin
g currency. This i s takin g place because of a collaps e i n the e l e c t r o n i c money
supply created through the privat e secto r banks. As lendin g stops , the r e a l worl d
money supply contracts . Because assets are valued i n terms of currency dependent
upon the supply, they r i s e r e l a t i v e t o a r i s e i n the quantit y (leverage) and
contrac t I n response t o a collaps e i n quantit y (leverage) .
Keynes was correc t i n hi s theory tha t i f Government increase d i t s spending to
allo w f o r a d e f i c i t i n times of contraction , then a supply of cash would be then
increase d causing the asset s t o r i s e again . The money supply i s create d by th e banks
and i s not l i m i t e d i n d e f i n i t i o n t o purel y the paper currency i n c i r c u l a t i o n . Even
i n the time of J u l i u s Caesar, where there was no paper currency, the leverag e was
created by the lendin g and a contractio n i n the a v a i l a b l e leverag e causes th e valu e
of the money i t s e l f to r i s e i n purchasing power terms. The actua l amount, o f paper
currency i n c i r c u l a t i o n i s only about $729.4 b i l l i o n (Source F i n a n c i a l Management
Service , US Treasury, as of 6/30/06). I f we take t h i s as a percentage o f GBP, which
stood at about $13.2 t r i l l i o n i n 2006, we can see tha t the physica l money suppl y
i s only 5% of the economy. Even i f we take $13.2 t r i l l i o n compared t o the n a t i o n a l
debt i n 2006 federall y $8.5 t r i l l i o n , we can s t i l l see $4.7 t r i l l i o n tha t e x i s t s
without bonds or currency, and t h i s i s j u s t the surface .
Keynes was correc t insofa r as i d e n t i f y i n g the p o s s i b i l i t y tha t a d e f i c i t would
increas e the money supply t o offse t the contraction . The problem we fac e wit h croni c
d e f i c i t s using borrowing, we are merely r e d i s t r i b u t i n g wealth solvin g nothin g and
more l i k e l y than not, we are contractin g the money supply furthe r soakin g up even
availabl e cash tha t the privat e secto r would put back t o use i f they have the p l a i n
ol d fashio n "guts" or "courage" to invest , I defin e as. Privat e Confidence. We are
t a l k i n g about the expectatio n of p r o f i t i n the p r i v a t e secto r must exceed th e r i s k
perceived i n the marketplace i t s e l f . Jus t as I helped i n t e r n a t i o n a l companies dea l
wit h where to locat e i n l i g h t of "country r i s k " tha t was e s s e n t i a l l y th e s t a b i l i t y
of the Rul e of Law, we are dealin g wit h the same consideration s domesticall y and
t o create a major boom, require s the concentratio n o f c a p i t a l .
45
 Comprehending th e Problem
We must come t o understand that t h i s i s not the "greed" on Wal l Street . We
can reduce t h i s t o a sound-bite, regurgitat e these slogans l i k e mindles s pawns
i n a p o l i t i c a l pla y and deligh t i n our own applause when we lock—up hundreds of
people from Wal l Stree t and pretend tha t was the solution . Of course ther e was
insane judgment"at AIG that spread through the markets based upon p r o f i t s . But
t h i s has onl y been the catalyst . For j u s t as we saw them writ e the derivative s
•with no backing or offse t at AIG, we have committed the same crime p u b l i c l y by
spending and handing out promises fo r benefit s als o wit h no funding . The Keynesian
solutio n was to tur n t o the Government t o take up the slack . But ther e i s no slac k
and we ar e becoming trapped withi n our own nightmare.
The Differenc e Between Monetizatio n & Borrowing
I t has been presumed that i f we borrow money rathe r than p r i n t i t , somehow t h i s
w i l l be l e s s i n f l a t i o n a r y and i n theory i s somehow more responsible . A clos e
examin- atio n of the problem reveal s i t s f a l l a c y . The nationa l debt i s explodin g
dramaticall y
m o n <M *. - n -
due I f we look a t what has 1980 =
1990 - $3 t r i l l i o n
• taken plac * me +.i u-sTtI •sinc e J T" T - ^
t o ove. r $1T0 t-r i l l i o n, and now we are lookin g a o n m iMnn ^ - n *
2007 = $10.2 t r i l l i o n
t
singl e year . The nationa l debt stood a t $2,125 bn .
i n 1986 tha t rose t o $8,507 bn i n 2006 amounting to a 400% increase . The i n t e r e s t alone
during t h i s same perio d was about $6,142 bn. The increas e i n the n a t i o n a l debt was
about $6,382 bn. We can see that had we simply printe d the money, rathe r than
borrow, we would have a c t u a l l y saved more than $6 t r i l l i o n . When the Government
borrows, i t competes wit h the privat e secto r suppressing economic growth. That c a p
i t a l would have been p r i v a t e l y invested , but-fo r the a v a i l a b i l i t y of federa l debt.
As a nation , we are no d i f f e r e n t than a young couple who bought whatever they
needed usin g c r e d i t cards t o se t up house, and f i n d that they can no longer
affor d l i f e because of the i n t e r e s t payments.
Because Government Borrowing Competes
wit h the Privat e Sector - There I s an Equal & Opposite
Force o f Suppressing Economic Growth I n Proportio n t o Stimulatio n
The inheren t problem wit h applyin g Keynesian theory, i s the differenc e i n
what i s observed j u s t as i n Einstein' s theory of r e l a t i v i t y where the observer on
the t r a i n t r a v e l i n g at near the speed of l i g h t see a l i k e beam t r a v e l i n g normal
from a f l a s h l i g h t on the c e i l i n g to a mirro r on the f l o o r . But the stationar y
observer (Government) see the l i g h t moving sideways as a pulse . Here, we cannot
see the e f f e c t of the stationar y observer because of the inheren t bias . Keynes
argued Government could "stimulate " the economy when the privat e secto r "was then
contracting . But tha t meant we needed t o increas e the money supply, not borrow
the funds takin g from one group and givin g them to another. Thi s i s moving money
from your l e f t t o your righ t pocket, which o f course does not change how much
money you a c t u a l l y have i n the system (pockets) .
The Keynesian model assumed that Government would stimulat e when needed. Yet
what took place , the Government displace d the economy insofa r as i t became the s i n g l e
800 pound g o r i l l a to whom everyone looks . However, i f i t lack s self-awarenes s and
i s too delighte d i n i t s own applause, i t cannot and w i l l not see tha t par t of the
problem. _j.tself... If . the gavernment_;borrows_$3^ does_i t come from?
I f i t soaks up excess cash from the privat e sector , i t i s only r e d i s t r i b u t i n g the
c a p i t a l - not stimulatin g the economy as a whole. Whatever the Government soaks up
i n c a p i t a l , create s an equal and opposite effec t of suppressing economic growth.
 The F i r s t Law of thermodynamics applies . There i s a fixe d amount o f energy
withi n the economy. We can neithe r creat e i t nor destroy i t . A l l we can do i s
t o r e d i s t r i b u t e the energy causing, i t to change form. The reason why c a p i t a l
concentrates i s because that i s the natura l product of any system. There ar e
people who enjoy working - the work—aholic . There are those who prefe r t o be j u s t
provided f o r , and do as l i t t l e as possible . There are those who resen t the wealt h
acquired by the work-aholic , and demand tha t such wealth be redistribute d t o make
i t " f a i r " because one person should not have more than another i r r e s p e c t i v e o f how
much work he does. Communism f a i l e d because they suppresses innovatio n tha t i s the
key t o creatin g new ages of prosperty , i . e . Schumpeter. Distributio n o f wealt h on a
equal basis undermines the I n d i v i d u a l incentive s leadin g to periods l i k e the dark
ages where there i s no cooperation . Even the interne t develops i n cluster s of web-
s i t e s according t o i t s use and thus popularity , not on theorie s of " f a i r n e s s . "
I t i s one thin g to requir e s o c i a l programs t o ensure the childre n are taught ,
there-i s a f i r e department when i n time of need, and no one w i l l starve . Some o f
these issue s are the very purpose of banning togethe r i n society , t o creat e th e
cooperativ e tha t benefit s the whole. However, we can neithe r tak e t h i s ide a t o th e
extreme (communism) nor t o t a l l y abandon s o c i a l obligation s (anarchy). There must
be 'a balance between the two - the p o l i t i c a l ideal s of Jefferso n & Madison stan d i
n star k contras t t o the goals of the Republicans % Democrats tha t both see the
Government as the answer, as di d Marx that le d t o greate r Government c o n t r o l .
I f the Government i s now the 800 pound g o r i l l a , i t cannot stimulat e i t s e l f .
We can assume tha t the Government can make everythin g bette r l i k e our mothers who.
k i s s our knee when we f e l l as a c h i l d . But the Government i s not your mother. We
must honestl y face the fac t tha t borrowing does not reduce i n f l a t i o n long-term ,
and i t w i l l only accelerat e the problem. I t i s time t o monetize par t of the debt a t
the very least , respect what i s r e a l l y happening, and stop deluding ourselve s tha t
if we borrow a $100 on a credi t card , we somehow are not r e a l l y i n g spending and
the interes t i s not important enough t o pay attention . I f we are going to j u s t
borrow a l l the time and r e l y upon foreig n governments to soak up thi s mess, how
can we then have any e f f e c t i v e i n t e r n a t i o n a l influence ? Lik e a government
attorne y lookin g fo r a bi g paying job , under no circumstance s w i l l he i n d i c t a f i r
m he i s hoping t o work fo r i n the future . We have l o s t our way economicall y and p
o l i t i c a l l y . We could have printe d $6 t r i l l i o n les s sinc e 1986 had we j u s t
monetized allowin g the money supply t o grow i n at leas t the proportio n t o the
population . I n 1986, the nationa l debt on a per capit a basi s stood at $8,774
each whereas i n 2006 i t was $28,504 (source Bureau of Publi c Debt) . The
populatio n has increase d from about 226.5 m i l l i o n t o 298.4 m i l l i o n i n 2006. We
have added about 72_ m i l l i o n making i t a increas e i n t o t a l populatio n about 32%
fo r t h i s same period . Thi s means tha t had the money supply simply been monetized
i n proportio n to the populatio n growth, • the nationa l debt would have been
about $11,500 per capit a or $3.5 t r i l l i o n instea d of $10.2 t r i l l i o n . I f we subtrac
t th e i n t e r e s t payments of $6 t r i l l i o n , we s t i l l s t i l l would have saved $700 b i l
l i o n (10.2 - 6 ~ 4.2). Borrowing the money seems t o be more i n f l a t i o n a r y than j u
s t p r i n t i n g the money i n proportio n t o populatio n growth.
I t i s Time To Re-Examine What We Are Doing
I t i s time to s t a r t lookin g a t what i n God's name we are doing. The f l o a t i n g
exchange rat e system emerged without planning . Thi s altere d everythin g i n the f i e l d
o f economics. A l l the theorie s are from times long sinc e past. We r e a l l y need t o
re-examine what i s going on i f we are t o surviv e f o r posterity . F a i l u r e t o do so,
w i l l only _invit e war tha t i s a byproduct of economic depression. The alarm cloc k
just,went off . Good Morning America! Wake up and smel l the coffee !
47
 The Paradox o f Value
.We must understand another problem I refe r t o as the Paradox of Value. When
a market crashes, we measure that -crash i n terms of the currency. We can have an
isolate d bubble where one segment withi n the economy r i s e s dramaticall y without
t r u l y spreadin g to other areas. One cycl e might f i n d i t to be commodities, the
next stocks , and another the rea l estate . As p r o f i t s are earned from .those i n tha t
p a r t i c u l a r segment, they may influenc e other markets by spreading the p r o f i t s . Yet
t h i s may creat e a tag-along effec t that appears t o be more broadl y based, i t i s
distinguishabl e Insofa r as the i n d i v i d u a l segment i s r i s i n g i n a Phase-Transitio n
wit h exponentia l gains that i s not r e f l e c t e d on an even basis i n a l l other such
segments. Where the Phase-Transitio n i s takin g plac e on a broad base perspective ,
we are enterin g int o the zone of the Currency C r i s i s tha t i s joine d a t the hi p
ofte n wit h the Debt C r i s i s or at leas t a s i g n i f i c a n t declin e i n P u b l i c Confidence.
When we see a broadly based exponentia l r i s e i n asse t values i n a l l segments f o r the
most par t (wit h isolate d exceptions) , we w i l l be confronted by the Paradox o f Value
. The Paradox of Value i s the natura l way tha t tangibl e asset s r i s e i n valu e
as expressed i n the l o c a l currency tha t i s i n r e a l i t y a depreciatio n i n the
purchasin g power of the currency. However, when the pendulum swings back th e
opposit e way, we now see the r i s e i n value of the currency r e l a t i v e t o the
tangibl e assets , commonly calle d a "crash " by pundits . What i s takin g place , i s
the contraction i n leverag e (loans) reduces the money supply and therei n creatin
g the paradox. Suddenly,, we are' faced wit h the same amount of currency buying twic e
the amount of tangibl e assets .
Paradox o f Value
In a debt - c r i s i s , the c e n t r a l
purchasing power of the currency
r i s e s i n proportio n t o the asse t
value i n the privat e sector .
I n f l a t i o n sees a r i s e i n a l l
asset s agains t the currency, and
i n a deflatio n the currency rises
agains t a l l asset s

In the 1990s, a s i m i l a r debt c r i s i s h i t Denmark. The Government took over the

banks, and what was c r i t i c a l , they stepped i n to revalu e the assets . Once the s t a t e
made those determinations, i t relieve d the burden from the privat e secto r and tha t
allowed the c r i s i s to be worked out. S i m i l a r l y , we must understand the J u l i u s Caesar
workout. He appears to be the only head of stat e t o understand the nature of the
r e a l problem.
In the midst of a debt c r i s i s , the value of money r i s e s on a purchasin g power
basis . I f the house that was purchased was once $500,000, but i s now worth only h a l f
that amount, the same $500,000 now buys two homes. Forcin g the homeowner t o now
pay the $500,000 becomes a prof i t I n purchasing power terms tha t i s aki n t o a w i n d f a l l
. Juliu s Caesar understood t h i s Paradox o f Value between the tangibl e asset s and
the value of the currency caused by the swing i n confidence between the Publi c
and Privat e sectors . Caesar establishe d an evaluatio n board, which revalue d each
property t o the equivalen t value a t the time the loa n was made. He r e a l i z e d tha t
when asset s decline , i t i s the purchasing power of the currency tha t r i s e s , and
i n such c i r c u m s t a n c e s t h i s becomes a w i n d f a l l t o the., lender. . Likewise., one may.
borrow agains t property as a hedge agains t i t s declin e takin g i n the currenc y now
before i t s valu e declines . Caesar's pla n was t o take a l l i n t e r e s t pa3 ments and
r

p r i n c i p a l payments and apply them t o the loan to s e t t l e the debt c r i s i s .

 C ap i t a l Concentratio n
One of the c r i t i c a l factor s I discovere d i n economic forecastin g I define d
as "Capita l Flow Analysis " that applie s both domesticall y as w e l l as g l o b a l l y . Even
the CIA seemed to acknowledge I invented t h i s form of- forecasting . I t was based on
the r e a l i z a t i o n i n par t upon Marxism. I notice d i n my personal trip behind th e Berli
n Wall i n the l a t e 1970s, was tha t what Marx had created was aki n t o the ol d movie
the Stepford Wives, where everyone seemed strippe d of personal Innovation . I f c ap i ta l
were evenly disburs t i n equal proportion s t o every person, you would creat e a new
dark age. What makes one secto r or natio n r i s e i s the concentratio n of c a p i t a l .
Take the .COM Bubble. Capita l concentrated withi n that p e r t i c u l a r secto r causin g
i t t o r i s e exponentiall y compared to a l l other sector s withi n the US share markets.
When c a p i t a l concentrates i n such a manner, then one secto r can r i s e exponentially .
There i s only a defined amount of cash withi n a system even when leveraged , f o r i t
I s not unlimited . In order fo r a boom i n one secto r to take place , c a p i t a l needs
to concentrate i n tha t sector . What we see i s the "flavo r of th e month" tha t where
i t hecom.es popular to inves t i n one p a r t i c u l a r sector . This i s what create s th e r e a l
"boom" tha t often ends i n the Phase Transitio n l i k e gold r i s i n g t o $400 between 1976
and December 1979, yet jumping t o $875 i n the f i n a l month.
Globa l Capita l Flows

Pacific

C a p i t a l flows from regio n to

regio n and from continen t to
continent . The f l o a t i n g rat e
system i n currencie s foster s
greater incentives , to move
at faste r rate s than
previousl y i n history .
There i s als o a f i n i t e quantit y of c a p i t a l withi n the globa l economy. As I
explained e a r l i e r , i n a f l o a t i n g exchange rat e system, c a p i t a l w i l l be attracke d
on a dynamic basis . I f the expectatio n i s tha t the stoc k market w i l l " r i s e i n the
U.S. by 30%, then as long as the currency i s stable , expected t o r i s e , o r a t l e a s t
not declin e by more than 10%, foreig n c a p i t a l w i l l be attacked i f t h i s net retur n
would be greate r than elsewhere. I gave a lectur e i n Geneva i n the earl y 1980s tha
t was very diverse . One could see the c a p i t a l flow s i n the room. I t became
obvious tha t the same advice to one person denominated i n Swiss franc s had to be
d i f f e r e n t from that given to a Canadian. I t was Adam Smith a l i v e and w e l l . What
became obvious, was c a p i t a l w i l l concentrate even g l o b a l l y . Afte r the 1987 Crash,
the Japanese pulle d back foreig n investment s e l l i n g Rockefelle r Plaz a because
the d o l l a r dropped by almost 40%. They starte d t o inves t domestically . The
Nikke i Index ros e sharpl y i n t o December 1989. When I fle w to Tokyo t o meet wit h c l
i e n t s there , I ra n i n t o broker s who had been i n Geneva servicin g OPEC i n the earl
y 1980s. The Bubble i n Tokyo was caused by the c a p i t a l concentration . When i t
burst , i t moved to Southeast A s i a , then i t moved back to Europe fo r the b i r t h
of the Euro. The flo w o f c a p i t a l create s the excessive growth i n " r e a l " money
supply, freein g up dead asset s domesticall y and increasin g the exponentia l Phase-
Transition .
49
 The Hyper-Inflatio n Outcome
An economy can blow i t s e l f out l i k e a candle. I t can
simpl y di e a natura l death through the force s of publi c
and privat e confidence swings tha t produce the more common
deflationar y outcome, or we can see the the candle blown
out by the externa l winds of i n t e r n a t i o n a l force s that w i l l
produce the hyper-inflatio n scenario , a l b e i t f a r les s than
the storie s of Germany. The fat e of a l l economies swing i n
a constant stat e of confidence between two opposite poles -
the privat e and publi c confidence.
To see the Dow Jones collaps e t o 3,500, what precisel y would cause such a major
decline ? Does the actua l value declin e i n terms of purchasing power? Or i s i t j u s t
tha t the purchasing power of the currency r i s e s agains t a l l tangibl e assets ? In* orde
r f o r the Deflationar y S p i r a l t o unfold , as was the case i n the' cras h of 1929, the
currency must be of a steady quantit y and perceive d to be a preservatio n of c a p i t a l .
During the 1930s, a l l of Europe was defaultin g on i t s debt. C a p i t a l sought t o the n
preserve i t s e l f . I t was not a questio n of p r o f i t or even y i e l d . During such a time ,
c a p i t a l i s s a t i s f i e d wit h v i r t u a l l y zero return . Raisin g and lowerin g i n t e r e s t rate s
has no r e a l effect . The d o l l a r rose t o record highs going int o 1932 not t o obtain-.
i n t e r e s t rat e d i f f e r e n t i a l s , fo r U.S. rate s f e l l t o about 1%, but t o f l e e the p l a i n
uncertaint y i n Europe.
The Dow Jones I n d u s t r i a l Index coul d swing t o record highs i f i t managed to ge t
back above the 13,500 general area on a monthly closin g basis . The economic r e a l
growth prosects look dismal i n any event going int o 2011. Could the Dow s t i l l r i s e
t o new highs i n the middle of sheer chaos? The answer i s yesJ Thi s would not be
a happy outcome to say the l e a s t despit e the numbers, f o r we- are not per se lookin g
a t r e a l value i n purchasing power terms. For the Dow to h i t 35,000, gol d would be
w e l l above 5,000, o i l perhaps a few 100 a barrel .
We must struggl e to understand tha t a Hyper-Inflatio n outcome involve s the sheer
collaps e i n publi c confidence. How does t h i s happen? The new f i s c a l year began on
October 1st, 2008. We know tha t l a s t year the amount of new debt coming to the market
was about $400 b i l l i o n . This implie s we can expect probably at l e a s t $1 t r i l l i o n .
We can expect to s e l l the bonds making a standard presumption. However, t o whom i s
c r i t i c a l . I f the sal e were purel y t o the domestic market, t h i s would become a zero-
sum game from a money-supply perspective . Somone wit h cash, buys the bonds, the cash
i s recirculate d where i t i s needed. I f we s e l l the bonds to China, then new cash
enter s the domestic economy from overseas increasin g money supply tha t stimulate s i n
Keynesian concepts tha t i s more i n f l a t i o n a r y tha t a contractin g r e d i s t r i b u t i o n .
Now, we can see i n our curren t monetary system structure , i f the contaigo n
spreads around the globe i n f e c t i n g a l l economies, we can s l i p int o a new Great
Depression wit h nation s f a i l i n g t o understand what i s going on once again. I f debt
cannot be sol d i n the domestic market, rate s w i l l r i s e beased upon a huge increas e
i n supply . I f the confidence i n the Publi c Sector collapses , then dollar s would
be printe d and we can see the mechanism that would lea d t o a Privat e Secto r wave
of Hyper-Inflatio n tha t i s the collaps e i n the value of the currency i n purchasing
power terms. Thi s becomes the Phase-Transitio n outcome that physic s may c a l l subjec t
t o Power Laws. To .survive, we must respect tha t the leverage i n the.banks i s
collapsing . That i s a money-supply tha t i s imploding when such electroni c money i s
create d by the privat e sector . We must now comprehend the new dynamic structur e and
interconnectivit y of the worl d economy t o even approach the correc t solution . We
are painte d int o a corner facin g als o some $50" t r i l l i o n " coming"in"unfunded
programs fo r the Baby-Boomers. We"must monetize i n combination wit h borrowing
i n a delicat e balance. I f we borrow everything , we w i l l extrac t cash needed to
stimulat e the economy t o cover losse s by th e Bankers. Thi s w i l l place the natio n
at r i s k o f an economic deflationar y implosion .
 Unravellin g the Financia l Contractio n
We have t o understand what i s r e a l l y going on and how di d we get here. To
make I t p a i n f u l l y obvious, how can t h i s happen when we have th e Federa l Reserve, .
Securitie s & Exchange Commission, and the Commodity Futures Tradin g Commission
a l l claimin g the power t o regulate ? In truth , the onl y regulatio n enforced i s
agains t the smal l firms-, never the bi g houses who hir e the Government attorney s
strangel y enough. We have t o question whether or not a system t h a t hire s young
attorneys , allow s them t o decide who t o prosecute exclusively , and then run t o
a bi g paying privat e secto r job as soon as they make a name, f o r themselves i s not
j u s t contrar y to the purpose of regulation ? W i l l someone harshl y regulat e a f i r m
wit h whom they inten d to take one of those " b i g " paying jobs l a t e r ? Not l i k e l y .
Government Attorneys who prosecute the laws are rarel y career people, lackin g any
r e a l p o l i c y or o b j e c t i v i t y i n the enforcement of laws.
There i s excessive regulatio n of smal l business , and v i r t u a l l y no regulatio n
o f the bi g businesses. The CFTC w i l l abuse i t s power t o furthe r career s agains t
the smal l firms , but under no condition s has i t brought a major enforcement a c t i o n
agains t any bi g houses. The future s and options markets i n which the publi c can
trad e are overregulated , whil e the existanc e of interban k d e r i v a t i v e markets ar e
not regulate d at a l l and there i s no exchange standing between p a r t i e s t o ensure
tha t there i s c o l l a t e r a l f o r the transactions . Had ther e simpl y been uniform regu-
l a t i o n requirin g an exchange, there would be no major contractio n i n leverag e .righ t
now and we would have r e a l world transparency. Thi s strongl y suggests tha t we need
t o get r i d of the SEC and CFTC and merge them int o the Federa l Reserve chargin g i t
wit h the sol e regulatio n of a l l f i n a n c i a l markets and banking under one coordinate d
roof . We cannot not affor d the incompetency of overlappin g agencie s wasting money
tha t obviousl y does not provid e any major protectio n f o r the economy.
This i s the same age ol d problem resurfacin g a l l the time, j u s t wit h a d i f f e r e n t
t w i s t wit h respect t o the product, and who i s the targete d market. What we are now
lookin g a t i s yet another form of the Orange County collapse . Chairman of Temple
Universit y was a frien d of mine - Richard Fox. Before the Orange County debacle,
M e r r i l l Lynch approached Temple offerin g a product fo r t h e i r t r u s t fund promising
highe r y i e l d s . Dick t o l d them t o run i t by me f i r s t , and they fle w i n from Chicago.
The scheme b a s i c a l l y was t o leverage say $1 m i l l i o n i n t o $10 buying l i k e 30 year
| bonds and s e l l i n g a l i k e amount of 10 year, r e f l e c t i n g the spread back t o the base
: investment multiplyin g the y i e l d . I pointed out i f i n t e r e s t rate s rose , they would
be i n trouble . They recalculate d the dea l and argued i t would be a break-even, I
decline d t o recommend i t , .and they t o l d Temple I was i n the busines s too long and
di d not understand the "new" way to make money. A few months l a t e r , Orange County
blew up and I believ e M e r r i l l Lynch was being sued fo r $2 b i l l i o n . So much fo r the
"new" derivativ e way to make money. I t i s always the same scheme wit h new objects .
j Gretchen Morgenson of the New York Times wrote an a r t i c l e on the currecn t AIG
; c r i s i s tha t appeared on September 28th, 2008 a t the fron t page. Gretchen understood
tha t t h i s time the "medium" they selecte d was not corporation s o r smal l governments. j
They selecte d mom & pop mortgages.They were put i n t o "pools of loan s s l i c e d i n t o
, tranches and sol d to investor s based upon c r e d i t q u a l i t y of the underlyin g s e c u r i t i e s
. " j Id./page 28. Gretchen explain s tha t the AIG London uni t sol d i n r e a l i t y insurance"
through i t s banking arm tha t was a very aggressiv e tradin g uni t on i t s own. Sinc e
ther e was no regulatio n of interban k derivative s of t h i s nature, ther e was no such
c o l l a t e r a l requirement as e x i s t i n insurance. That was the proble j
As Gretchen Morgenson explained , i t was J.P. Morgan that approached AIG
London tradin g uni t wit h a creativ e idea that AIG should writ e insuranc e on
51
 packages of debt known worldwide today as " c o l l a t e r a l i z e d debt obligations "
o t "CDO" fo r short . The London operatio n create d uncollateralize d insurance
fo r i n s t i t u t i o n s holdin g the CDOs. Their revenue jumped from $737 m i l l i o n i n
1999 t o $3.26 b i l l i o n i n 2005 according to Morgenson. These insurnace products
became known as "credi t defaul t swaps" or "CDS" i n the marketplace. Since i t
was the London uni t of AIG rathe r than the insurance company, tha t was not subjec t
to the same regulation s tha t requir e c o l l a t e r a l t o writ e insurance. Thi s allowed
the CDS market t o be naked, indistinguishabl e from the Tuli p Bubble.
The CDS market expanded sharpl y and even European banks began t o get involve d
as insurance fo r p o r t f o l i o s . This entir e mess create d a fals e sense of confidence
and allowed r i s k concerns t o take a back-seat. The mortgage market was furthe r
expanded because i t became presumed tha t one coul d insur e agains t defaul t and
of course there was Fannie Mae & Freddi e Mac wit h implie d AAA ratings . Bankers
became careless , assuming tha t debt could be insure d so why r e a l l y bother about
the quality ? The AIG London Uni t may be the source of the contagion, but i t was
the absence of any regulatio n of interban k derivative s tha t i s the problem.
Obviously, going forward, we need one e n t i t y , not multiple , the same way they
create d the Homeland Securit y Agency post-911 f o r they found tha t numerous agencies
di d not coordinat e and had informatio n that other s di d not know about.
Consequently, fo r a s t a r t , we need t o f o l d the SEC and CFTC i n t o the Federa l
Reserve wit h one roo f regulatin g the f i n a n c i a l and banking industr y together.
End the duplication , tha t i s p a i n f u l l y self-evident , worthless I Likewise , the
Department of J u s t i c e must als o be c u r t a i l e d where the decisio n to i n d i c t must
come from a centra l body tha t should be the Federa l Reserve. We don't need more
prosecution s of firm s tha t send unemployment higher j u s t to furthe r the i n d i v i d u
a l career s of attorneys . The decisio n to i n d i c t or not must be transparent so the
publi c knows why some firm s are charged and others are not. We need a consisten t
Rule o f Law.
Attackin g the Short s The turmoi l that le d t o
the 1934 turnin g poin t and Roosevelt's confiscatio n was again a f r o n t a l attac k
upon the f i n a n c i a l markets. This time, the Senate als o launched investigation s
tha t Herbert Hoover apologize d fo r i n h i s Memoirs. There are those who rejec t
lookin g at histor y claimin g tha t was then - today i s d i f f e r e n t . That i s j u s t stupid
. For the common reactio n i n every f i n a n c i a l c r i s i s i s t o attac k the "short "
players . S o r t - s e l l i n g was outlawed b r i e f l y afte r the Pani c of 1907. During the
1930s, everyone of siz e was subpoenaed before the Senate and interrogate d as t o
were they "short " as i f tha t was proof of being a t r a i t o r .
The stock market f e l l by about 90% int o the 1932 low. This declin e was so
massive because of the interrogation s of the Senate. Who i n t h e i r r i g h t mind would
take a shor t positio n knowing they would be p u b l i c l y questioned? The famous c u l p r i t
i s always the s h o r t - s e l l e r . But what Government and academics wit h no r e a l world
experience f a i l t o get, i s tha t when a market i s crashing , only the shor t playe r
has the courage t o buy during a declin e to take a p r o f i t . Short-coverin g provide s
the appearance of buying fo r the reason of actua l bullishness . When the short-cove r
r a l l y comes, even government cheers, but l i k e a f o o l , they deligh t i n t h e i r own
applause. Shorts provide the balance and can als o creat e r a l l i e s when ther e i s none.
The witch-hunts w i l l begin. Every time ther e i s a declin e the Government look s
fo r the shorts . They hate them. To be shor t becomes treaso n i n t h e i r mind, which of
course cannot understand how the markets work and usuall y become more of a b u l l i n
a china shop..__ . ._ ._ . ... . — - -
LAW Number 1: NEVER OUTLAW SHORT SELLING
52
 Herbert Hoover apologize d fo r the investigations . The treatment of those i n
the f i n a n c i a l markets that include d brokers and Investor s a l i k e , was deplorable .
You quickl y f i n d out that the Constitutio n means very l i t t l e . Hoover wrote ;
"Sometimes when a government becomes enraged, I t burns down the barn to get the r a
t ." Abuse o f Investigation s
The investigation s that took plac e during the 1930s were devastatin g t o th e
economy. Herbert Hoover recognized what took plac e afte r the f a c t . But i t di d not
change the outcome. The claims tha t both the Democrats and Republican s are going
t o targe t the "greed" on Wal l Street , we must respec t tha t the l i k e l y outcome o f
t h i s w i l l be to send the- United STates back i n t o the primativ e dark ages. We have
alread y l o s t the statur e of being the Financia l Capita l of The world . That now
belongs t o London because of the abuse of prosecutio n generally .
I apologiz e fo r having to c i t e my own case, but the lawyers have been shocked
and perhaps because of my worldwide recognition , i t became l i k e a warning beacon
fo r c a p i t a l to f l e e . My lawyers a t Proskauef Rose, LLP informed me tha t a European
bank inquire d about opening i n New York. They were obligate d t o infor m them of my
case tha t has changed the entir e foundatio n of corporat e law. Once they explaine d
tha t now a t e r r o r i s t has more r i g h t s than a corporat e o f f i c e r , then decided t o k i l l
the ide a of opening i n New York. A t common law, corporation s coul d not be c r i m i n a l l y
prosecuted i n England i n 1789, but t h e i r o f f i c e r s coul d be. The Second C i r c u i t cour t
of appeals i n New York, hel d tha t sinc e a corporat e had no r i g h t s , then neithe r di d
I . Thi s r u l i n g by Chie f Judge John Walker shocked the world. I t was t o j u s t i f y , the
imprisonin g of myself f o r more than 7 years withou t any r i g h t t o a t r i a l o r any r i g h
t to an appeal. He held you can j u s t be thrown i n t o a c e l l where you can di e simpl y
because you had the audacit y to surrende r a l l persona l r i g h t t o work corporately .
The most important facto r i n creatin g nationa l wealth i s the Rule of Law. Judge
Walker would rathe r expand personal powers of judges than defend what makes c a p i t
a l invest . One of the bi g problems i n f i n a n c i a l cases i s the a b i l i t y t o I n d i c t
withou t any accountabilit y or transparency. I n a major case i n New Hampshire i n v o l v
i n g Enterasy s Networks, Inc . the former'Governor was the main shareholder . The head
US Attorne y • was h i s f r i e n d , assiste d him even i n hi s p o l i t i c a l campaign. When
the company was ex- posed fo r accounting i r r e g u l a r i t i e s l i k e ENRON and WORLDCOM, they
hire d Robert Gagali s j u s t . 10 weeks before the news h i t , making him the new CFO. Who
got indicted ? Gagali s who was sentenced t o 11 years, a l i t t l e more than 1 year fo
r every week he worked. The US Attorney had to ste p down, but not hi s o f f i c e ,
because o f the p o l i t i c a l t i e s . The frau d becomes Gagali s was given $2 m i l l i o n i n
stoc k options t o take the j o b , but they were not vested. So the theory becomes, he
commits the cover-up t o eventuall y make the $2 m i l l i o n i n the future .
I n 2000, the United States had 50% of a l l worl d IPOs (new stoc k o f f e r i n g s ) . I f
you were not l i s t e d on the New York Stock markets, you were a nobody. Today, th e
c a p i t a l has been drive n offshor e t o sta y as fa r away from these abusive prosecutions .
The US share of the IPO market has collapse d from 50% i n 2000 t o les s than 5%. I t
has transformed the Unite d States int o a wasteland. With the new witch-hunt s about
to begin , i t i s u n l i k e l y that anyone w i l l fin d an underwrite r i n the US and we may
be back t o the 1700s where the r e a l market i s London once more.
The power to investigat e fo r p o l i t i c a l purposes has been very d e s t r u c t i v e . I n
1912, Congress began an investigatio n of J.P.'Morgan t o t r y to pi n some p o l i t i c a l
reason to destroy him. They were not successful . They ignored not j u s t the f a c t t h a t
Morgan helped the. natio n i n 1893, 1896 and 1907, but tha t hi s e f f o r t s t o fun d new
project s created Internationa l Harvester, AT&T, and General E l e c t r i c . Congress t r i e d
very hard t o destroy Morgan. I n those days, conspirac y laws were both abused as the y
are today. A r t i c l e I I I of the Constitutio n defines what I s treaso n because th e Kin g
53
 would clai m tha t v i o l a t i n g any law was treason. Today, they have accomplished the
same tyranny using conspiracy by threatenin g one person wit h l i f e imprisonment unles
s he agrees t o say whatever the government needs to convic t others. Conspirac y i s
onl y an "agreement" t o do something tha t never a c t u a l l y takes place . Conspiracy was
invented i n Englis h law by the King t o get h i s enemies. There may have been an
American Revolution , but i n a l l honesty, we are s t i l l but "subjects " o f the new
crown. The ol d maxim "The kin g i s dead. Long l i v e the king " i s s t i l l a l i v e and w e l l
i n the United States .
Perhaps you may r e c a l l Charles Keating . He was hel d up as the poster-boy fo r
the SSL C r i s i s . He was found g u i l t y on a theory tha t he conspired t o s e l l bonds
he knew he intended t o defaul t on 7 years l a t e r . Who plans t o go bankrupt 7 years
i n advance? The theorie s used are disconnected from r e a l i t y , but they use the amount
of money to portra y you as some common t h i e f , even when not one $1 was ever diverte d
to some personal account as i n my case. I n f a c t , ther e was not even a defaul t and
where the privat e notes were simple unsecured contrac t borrowings of Japanese yen,
they constructivel y claimed tha t a l l tradin g i n the Unite d States was f o r the benefi t
of a noteholder even when the notes pai d only a f i x e d rat e of i n t e r e s t . The judges
are worthless , fo r the court s are stacked wit h pro-government judges tha t w i l l never
rul e agains t the prosecutor - they are on the same team. No matter much I t r i e d t o
f i g h t , i t mattered not. B a s i c a l l y , the theory became i f you borrow money from a back,
you are somehow constructivel y managing monej " fo r the bank, even when the bank'has
1

no l e g a l t i t l e t o any investments be there a p r o f i t or l o s s .

The treatment of Howard Huges by Congress was als o dispicable . Whenever ther e
I s a privat e interes t tha t can contro l the p o l i t i c a l process as Pan Am di d t o t r y
t o destro y Hughes, the dignit y of the government s u f f e r s . But l i k e w i s e , whenever the
Government create s the mess, they hunt fo r those i n the privat e secto r t o s a c r i f i c e
t o the mob. Under the abuse of Conspiracy, tha t the non common-law nation s never
adopted as a crime i n Europe, both Hughes and Morgan would have been convicte d i n
today's climate . The McCarthy witch-hunts are another example. What you suddenly see
i n times of turmoil , p a r t i c u l a r l y when the 37.33 Yearl y Cycle h i t s , the Constitutio n
i s j u s t suspended informall y by Congress and the courts . The Constitutio n means l i t t l
e durin g p o l i t i c a l witch-hunts. They w i l l be rounding-up countles s people t h i s time
fo r t h i s event. • '
The Abandonment of the Rule of Law
Leads t o the Destructio n of Nationa l Wealth
I n internationa l investment, the common term one hears.i s "countr y r i s k " tha t
translate s int o the lac k of a consisten t Rule of Law. At the conference i n 1997
wit h former Prime Ministe r of Great B r i t a i n , Lady Margaret Thatcher, a member of
the audience asked the question, "Which country would you inves t i n . Russia or China?"'
Lady Thatcher state d she would not inves t a dime i n e i t h e r , because they di d not
respec t the Rule of Law. Indeed, the Rule o f Law I s the cornerston e o f capitalis m
tha t cannot exis t as long as judges clai m the ultimat e power of " d i s c r e t i o n " t o
withhol d the judgment of law. In the New Testament a t Luke 18 i s the parable of the
corrup t judge and the widow. The Widow keeps p e t i t i o n i n g f o r her r i g h t s . The judge
believe s he has so much power, he has the d i s c r e t i o n t o withhol d the judgment of
law. Jesus Chris t himsel f refer s t o t h i s as a corrup t judge. In Magna Cart a we f i n d
the same complaint tha t the King agrees t o appoint onl y those who know the law and
are w i l l i n g to uphold i t , Chapter 45. The age ol d source o f a l l corruption , i s when
the court s are stacked t o a l t e r the Rule of Law t o prefe r one r e l i g i o n , class , or
group agains t a l l others . This was l i k e the Supreme Court decisio n o f Dred Scot t
(1795-1858) whose case was decided by a pro-Government cour t r u l i n g tha t black s
were merely property. That was the Supreme Court of the Unite d States , (Scott v
Sanford (1857). Then there was the Japanese inturnment Korematsu v US (1948) tha t
allowed c i t i z e n s to be arreste d merely because of t h e i r ancestry .
 Unfortunately , the Rule of Law i n the United States i s fa r from any bindin g rul e
and the federa l courts have been stacke d wit h "conservative " judges who are no more
"conservative " that FDR. The court s have once again been stacked wit h judge s tha t w i l
l only rul e i n favor of the Government. The crimina l convictio n rat e o f th e infamous
Sta r Chamber was about 96%, The Spanish I n q u i s i t i o n was about 97%. These ar e the most
notoriou s tyrannica l i n s t i t u t i o n s i n history . We have beat a l l of them. At th e very
least , the convictio n rat e i n the Unite d States I n federa l courts i s now 98.5-99%.
We have even surpassed Adol f H i t l e r . Thi s Idea tha t the government must always win
has made the prediction s of Thomas Jefferso n come true .
" I t has long ... been my opinio n ... tha t the germ of d i s s o l u t i o n o f
our Federa l government i s i n the constitutio n of the federa l j u d i c i a r y ;
an irresponsibl e body, ( f o r impeachment i s scarcel y a scarecrow,)
working l i k e gravit y by nigh t and by day, gaining a l i t t l e today and
a l i t t l e tomorrow, and advancing i t s noiseles s step l i k e a t h i e f ,
over the f i e l d of j u r i s d i c t i o n , u n t i l a l l s h a l l be usurped from the
States , and the government of a l l be consolidate d int o one."
The Writing s of Thomas Jefferson , Chp XV, p331-32.
The independency of the court s I s gone. Even the Supreme Court has abdicate d
i t s constitutiona l duty and by Rule 10, i t has hel d tha t i t i s i t s own d i s c r e t i o n
" i f " i t decides to l i s t e n . A federa l judge who p o l i t i c a l l y decides your case, r u l e s
only fo r the the Government, the appellat e court w i l l rubber stamp whatever the
government wants (jus t look at the r a t i o of conviction s overturn — l e s s than 1%),
and then you have no r i g h t to be heard by the Supreme Court. So much f o r Due Proces s
of Law and Equal Protection . The pure s t a t i s t i c s do not l i e . Even i n v i o l e n t crimes ,
DNA evidence has overturned more than 1,000 conviction s fo r murder and rape. One
must ask, how are so many innocent people being convicted?
The abandonment of the Rule o f Law i n favor of p o l i t i c a l agendas, has caused
c a p i t a l f l i g h t j u s t as i t had f l e d from places l i k e Cuba and Iran . The Rule o f Law
i s the cornerstone of a nation' s wealth . Thi s was als o noted by Willia m E a s t e r l y of
the I n s t i t u t e fo r Internationa l Economics and Ross Levine of Universit y of Minn-
esota. Back i n 2002, they conducted a detaile d study of 72 r i c h and poor nations .
The question they asked: "What makes one country r i c h e r than another?" One would
assume the wealth of a natio n i s determined by i t s natura l resources , i t s i n f r a s t r u c-
ture , and perhaps i t s productiv e capacit y wit h a s k i l l e d labo r force . What E a s t e r l y
and Levine found was tha t the most s i g n i f i c a n t facto r tha t determines the wealt h of
a natio n was i t s s o c i a l technology tha t was b u i l t upon the Rule of Law tha t secure d
property r i g h t s , a well-organize d banking system, economic transparency, lac k o f
corruption , and other s o c i a l and i n s t i t u t i o n a l s e c u r i t i e s . 'While I would not disput e
t h e i r findings , my personal s p e c i a l t y of i n t e r n a t i o n a l corporate advisor y work, the
Rule of Law was the number one f a c t o r . I f there was no consisten t Rule of Law, a l l
other consideration s became secondary. I f you could not trus t the government, i t
mattered not how tempting the o f f e r might be, when you were force d t o count your
finger s afte r shaking hands, who needs the r i s k .
Recently, there has been an outcr y to regulat e speculatio n i n o i l . On September
12th, 2008, the Wall Stree t Journa l reporte d tha t even Walter Lulcken, the Actin g
Chairman of the Commodity Futures Tradin g Commission ("CFTC"), warned about more
regulatio n may "forc e business overseas. " Id/page C3. The backlash t o the e n t i r e
ENRON, WoldCora, Tyco prosecution s has been the unnecessary regulatio n of corporat e
management that has create d such draconia n penalties , the United State s l o s t i t s
f i n a n c i a l statur e of being the F i n a n c i a l Capita l of the World.
55
 The Desir e To Publicl y Punish
May Irreparabl y Damage Our Own Economy
There was no doubt tha t the Secretary of the Treasury's attempt to s l i p i n
an immunity clause int o the bail-ou t fo r the bankers was disgraceful . Nevertheless ,
we als o cannot affor d a wholesale prosecutio n to s a t i s f y some p o l i t i c a l agenda nor
to quench the t h i r s t fo r blood i n some inherent p r i m i t i v e need to get even. There
are those who honestly committed crimes, but there are a whole l o t more who w i l l
be found g u i l t y j u s t because where they worked.
Recently, the New York Times ran an a r t i c l e i n I t s Science Times s e c t i o n on
October 7th, 2008 e n t i t l e d : "Wired f o r J u s t i c e , " by Benedict Carey. I t was pointe d
out tha t there may j u s t be a hard-wire response i n people that needs t o punish . I t
was als o r i g h t l y explained ; "Some experts believ e tha t Japan's disastrou s dela y i n
b a i l i n g out I t s banks i n the earl y 1990s was caused i n par t by a c o l l e c t i v e urge t o
punish corrup t bankers, and they fea r a simila r outcome today." Id/Front page. The
New York Times explain s tha t t h i s may j u s t be i n s t i n c t i v e . American court s ar e not
of a forgivin g nature, and w i l l do everythin g i n t h e i r power to i n f l i c t punishment
on those who appear before them to extremes. Thi s may be c y c l i c a l . For the Crue l &
Unusual Punishment p r o h i b i t i o n i n the Eight h Amendment was directe d at t h i s ver y
problem of arrogant judges. The famous t r i a l of Titu s Oats may be the source f o r
the nove l Count of Monte C r i s t o . Titu s Oats was t r i e d and found g u i l t y of perjury ,
a misdemeanor at the time. Lor d Chie f Justic e Jeffrey s of the l i n g ' s Bench hel d -
tha t sinc e i t was •• only a misdemeanor and not a felon y tha t was subjec t t o death,
the judges could do whatever they wanted, as long as they did not order h i s death.
Jeffrey s ordered tha t Oats would walk the lengt h of London fo r 2 days whil e bein g
whipped. He would then be place d i n the p i l l o r y (stocks ) i n three location s i n
London where c i t i z e n s coul d throw variou s items a t him. He then sentenced him t o
l i f e imprisonment, but on the anniversar y of hi s crime, each year he had t o repea t
the same punishment. Judges have h i s t o r i c a l l y viewed the punishments they orde r t o
be a form of personal vengeance during those days. I t appears the cycl e has made i t s
f u l l c i r c l e once again. Under B i b l i c a l law, property crimes were punished onl y
by r e s t i t u t i o n . That was changed i n 1987 i n the Unite d States , where i n a dissent ,
Justic e Scali a noted tha t h i s t o r i c a l l y the maximum j a i l time fo r such offense s was
45 days, Mistrett a v US, 488 US 361 (1989). The eye-for-an-eye standard i n the
B i b l e i s a statutor y maximum, p r o h i b i t i n g the i n f l i c t i o n of any punishment greate r
than the harm caused. The l i f e imprisonment CEOs face today, not onl y offend s th e
laws of God, but are destroyin g the economy.
By pledging to prosecute those "greedy" people on Wal l Street , the Government
has exonerated i t s e l f , i d e n t i f i e d the g u i l t y , t r i e d them fo r a l l futur e j u r i e s , and
se t i n motion, what could be the fat e of capitalis m i t s e l f . Histor y stands as witnes s
to the sad fac t tha t wit h every bubble and f i n a n c i a l c r i s i s , the government, no
matter who tha t may be, increase s i t s power and blames the targete d c l a s s . For H i t l e r
i t was the "greedy" Jews who controlle d the banks and financ e along wit h commerce.
For Nero" i t was the Christain s who he blamed f o r burning down Rome settin g i n motion
almost 300 years of spectacl e spor t - feedin g the Christain s t o the.lions . For
Marx, i t was the "greed" of the "bourgeoise" - the wealthy select , group of the
Middle Class . I t matters not who i s i n power. I t matters not i f I t i s a
monarchy, d i c t a t o r s h i p , or a democracy, a l l governments throughout histor y
respond i d e n t i c a l l y . They poin t t o a s p e c i f i c targe t of people, attac h the blame
tha t exonerates themselves, and then ' l e t the games begin.
There i s a very seriou s threa t tha t i n the desir e to exonerate the government
fo r not-doing the jo b i t should have'"dohe, we w i l l ' u t t e r l y destroy the" f i n a n c i a l
industr y sending the American economy made int o a primordia l stat e tha t we become
a banana republi c wit h nuclea r weapons.
56
 I am not advocating to cover-up " r e a l " crime. We j u s t must be very c a r e f u l
to ensure tha t the crimina l laws are not once again used f o r p o l i t i c a l o b j e c t i v e s .
This has been the curse of mankind fo r centuries . I f we do not understand how the
crimina l laws work and how they are put int o practice , the the people w i l l no t
even know i f the righ t people are being prosecuted, or are we prosecutin g a batc h
of innocent people to save those who are r e a l l y g u i l t y , but have friend s i n ver y
hig h places .
, —Criminal~-Laws ' i n - Anglo-American- Histor y - A r e - P o l i t i c a l — T o o l s —
The crimina l law has als o been used as a revenue r a i s i n g device. Even i n Magna
Carta , the kin g was then prohibite d from f i n i n g people - c a l l e d amercements. He
contrive d a l l sort s of offense s t o r a i s e revenue. Indeed, the revenue t h i r s t of the
King created the entir e c r i m i n a l law. Since B i b l i c a l Times, i f someone murdered a
famil y member, he was prosecuted by the family , not the state . In Athens, th e
only crime prosecuted by the stat e was a crime agains t the stat e or the Gods, as
Socrates was charged, see Plato' s The Laws. There was T r i a l by Battl e where the
v i c t o r was seen as being vindicate d by the hand of God. There was t r i a l by ordea l
where the accused was burned, thrown int o water, and again the ide a was a innocen t
would be saved by God. But a f t e r Magna Cart a and the p r o h i b i t i o n agains t
amercements, the King of England _inserte d himsel f int o privat e dispute s claimin g tha
t any such privat e event "disturbe d hi s peace" and thus he was now e n t i t l e d to
compensation. 2
Never was the prosecutio n f o r the benefi t of society , i t was t o
furthe r the s e l f- interest s of the King. I t was Marx that create d the s o c i a l
compact idea s tha t were fuele d by hi s demonization of the r i c h fo r the benefi t of
the state . We must understand, tha t with' the turnin g of t h i s
cycl e downward and th e Great Convergence we now face , the stat e w i l l always tur n
agains t i t s own people, and tha t has been j u s t par t of the process. Even the c
l a s s i c work of Edward Gibbon i n hi s celebrate d the Declin e and F a l l of the Roman
Empire observed tha t one of th e primary reasons tha t c a p i t a l contract s and shys
away from investin g i s when th e Rule of Law collapses . When the stat e becomes
desperate fo r funds, i t s own s e l f- interes t always prevail s over the right s of
the i n d i v i d u a l no matter what the form of government sinc e he who r u l e s , als o
control s the Rule o f Law. Edward Gibbon noted tha t corruptio n had i n f i l t r a t e d the
entir e crimina l law process and tha t indee d a " d i s t i n c t i o n of every kin d soon
became c r i m i n a l . " Id./Chp IV. Under the r e i g n o f Commodus, the son of Marcus
Aureliu s and immediately followin g the 224 Year hig h i n the Cycle o f P o l i t i c a l
Change (the same poin t at where we ar e today) , he too targeted the r i c h and the
l o s s of economic power he faced , he reverse d and blamed the privat e individual s
making the mere "possession of wealth " the j u s t cause f o r becoming the targe t
and "[s]uspicio n was equivalen t t o proof; t r i a l t o condemnation." i b i d . The r i g h t s ,
p r i v i l e g e s , and immunities disappeared and the sol e thrus t of the rul e of law
became the quest fo r absolute victory. . The prosecutors , so t o _speak, were the "most
worthless of mankind [who] are not a f r a i d t o condemn In other s th e same disorde r
which they allo w i n themselves; and can r e a d i l y discove r some n i c e differenc e
of age, character , o r statio n t o j u s t i f y the p a r t i a l d i s t i n c t i o n . " I d . / Chp VI.
The Rule of Law i n Rome simply became "corrupte d by the m u l t i p l i c i t y o f laws " tha t
were "interprete d ... accordin g to the dictate s of p r i v a t e i n t e r e s t " and tha t the
promotion of government lawyers "was pregnant wit h mischie f and disgrace. "
I6./Chi> XVII.
2.) Alexander, G.J. " T r i a l by Champion" (1984) Santa Clar a Law Review 34(3): 545-64
Landsman, S/ (1983). "A brie f survey of the adversary system" Ohio Stat e Law J r n l
44(3): 713-739
Weef, M. & Nige l S. (1974) "The Adversary Nature of the Am Lega l System from a
_ H i s t o r i c a l Perspective " New York Law Forum, 20; 123-164
see also : Encyclopaedia Britannia , Macropedia 1982,
Law of Evidence,'Legal-7:1-6 and Lega l Professio n 10: 779-784
' 57
 White C o l l a r Crimes Are The Most
Abused Prosecution s In Federal Courts
For decades, lawyers have been complaining tha t the frau d statute s are too
vague and allo w themselves to be abused fo r p o l i t i c a l purposes. No matter how
many times the l e g a l arguments have been made tha t the mai l and wire fraud statute s
are too vague and unconstitutiona l f o r they do not provide notic e t o a c i t i z e n tha t
he i s even committing a crime, the court s always r u l e i n the favo r of the Government.
What you should understand, i s tha t mai l or wire (telephone) frau d i s per each time
you use tha t instrument. So i f ther e i s a frau d of $1 m i l l i o n tha t onl y involve d
one phone c a l l , tha t i s 20 years. I f another used the phone 5 times f o r the same
$1 m i l l i o n , he now face s 100 years. I n the f i n a n c i a l industry , ther e w i l l be no-one
who the government could not demand l i f e i n prison , and there i s no l i m i t of the
amount of money nor i s there a minimum, fo r the court s als o clai m i t i s not the
amount of money that i s an element of the crime, but the use of the mai l or the
telephone that constitute s the crime.
Therefore, fraud i s the perfec t p o l i t i c a l crime that can be applie d t o anybody
who uses the mails , FedEx (privat e c a r r i e r s ) , telephones, or emails. So j u s t about
anythin g can be used to create the crime. Thi s broad sweeping applicatio n i s not
understood u n t i l i t i s too l a t e . Yet, frau d i s suppose to be some sor t of a scheme
tha t involve s a deliberat e misrepresentatio n wit h the objectiv e of "embezzlement"
where the money at stake i s to be f o r "one's own use," according t o the Supreme Court
, Carpenter v US, 484 US 19, 27 (1987). There i s suppose to be a "manipulatio n or
deception " used to create the fraud , Dirk s v SEC, 463 US 646, 654 (1983), and the
objec t of the frau d must be the "property " i n the hands of the s p e c i f i c v i c t i m ,
Clevelan d v US, 531 US 12 (2000). The "misrepresentation " i s als o suppose t o d i r e c t l y
cause the loss , known as "los s causation. " Dura Pharmaceuticals v Broudo, 544 US -
(2005). A major problem i s Rule 10 of the Supreme Court denies any r i g h t t o be heard
claimin g i t i s the prerogativ e of the Court t o l i s t e n . There can be no Equa l Protectio
n as, lon g as court s clai m the prerogativ e of d i s c r e t i o n . Unless there i s an absolut e
r i g h t t o be heard, ther e i s no Rule of Law. Thi s i s the entir e problem tha t i s behind
undermining the economy, for.^as John Stuar t M i l l s wrote i n On L i b e r t y , 'we ar e not yet.
fre e of the "stai n of l e g a i persecution. " Unfortunately , you and I do not have the
" d i s c r e t i o n " t o decide whether we want to work yet -the employer has t o pay regardless .
Only judges can clai m they have the " d i s c r e t i o n " t o honor any r i g h t s . And i f you thin k
you can recuse a judge; Forget i t ! I doubt tha t even 1% of recusa l motions are ever
granted and most lawyers fea r challengin g the judge because the judges w i l l prejudic e t h
e i r firm s and other c l i e n t s . There i s no Rule o f Law, f o r you cannot compel any court
to f o l l o w the law and they can throw you i n j a i l on contempt fo r decades without any
t r i a l at a l l . Candidates are running commercials at a l l l e v e l s , vowing now t o get
those e v i l "greedy" people on Wal l Stree t tha t have destroyed your l i f e . The
prosecution s w i l l be p o l i t i c a l to exonerate the Government i t s e l f . Let us not
pretend. What we have seen i n a l l the big white c o l l a r t r i a l s , i s the " l i f e s t y l e "
prosecution . For example, i n the Tyco case, you heard about a part y fo r h i s wif e wit h
i c e sculpture s and how much he spent on a shower curtain . They show how you l i v e d ,
how much money you made, and argue t o the jury , you must'be g u i l t y f o r "greed"
tha t i s somehow a unwritte n crime . I f they argued a black youth must be g u i l t y because
he "hung" on a s p e c i f i c corne r i n a hig h crime area , there would be outrage t o
argue someone must be g u i l t y because of where and how he l i v e d . But i n white c o l l a r
cases, forge t i t . You are g u i l t y because you made money irrespectiv e of the fact s
and don't pretend tha t the prosecutor s do not push t h i s button. If . you thin k
you personall y have to.do something, "forge t i t . I t i s presumed you have
"constructive " contro l over everybody and knew p r e c i s e l y what any "employee under"
-

ydu^oul d have dbne"."The whole purpose" of' "conspiracy " i s - t h a t-

-
someone els e may
do the crime, you di d nothing , but they argue you agreed and when they cannot
even prove an agreement, they r o l l out the good ol d "conscious avoidance"
58
 i n s t r u c t i o n to the jury . They then loo k at your l i f e - s t y l e , and presume tha t you .
must have known t o make a l l tha t money and therefor e you "consciousl y avoided any-
actua l knowledge of the crime. So k i s s the wif e and kid s good-by. The land of grea t
opportunit y i s f a r more Marxis t than you ever imagined.
We can expect hundreds of people t o be prosecuted fo r i t w i l l be i n d i r e c t pro-
portio n to the s i z e of the bailou t and the pai n and sufferin g on main s t r e e t . I t
matters not i f there was a crime per se, fo r i t b o i l s down to someone has t o simpl y
j u s t go t o j a i l t o s a t i s f y the mob. Make no mistake about i t . Even the c r i m i n a l
defense lawyers are not stupid . They are there for•ceremonia l purposes only . I f you
thin k tha t you have the protectio n of a grand jur y tha t was t o prevent .the
government from i n d i c t i n g j u s t anybody fo r p o l i t i c a l purposes, thin k again . The
Supreme Court hel d tha t ther e i s "no supervisor y j u d i c i a l authority " over what
takes plac e i n th e grand jur y room, US v Williams,.504 US 36 (1992). I t was hel d
that only Congress may creat e e t h i c a l r u l e s , and they di d not bother to do so. Three
wel l known judge s of the Seventh C i r c u i t Court of Appeals I n Chicago state d b l u n t
ly : " R e a l i s t i c a l l y , federa l grand j u r i e s today provid
e l i t t l e protectio n fo r crimina l suspects whom a US Attorney wishes
t o i n d i c t . Neverthe- l e s s , tha t i s not a realis m t o which judges
are permitted t o y i e l d . US v Ross, 412 F3d 771, 774 (7th Ci r 2005)(Judges
Easterbrook, Posner & Evan) The entir e purpose of the grand j u r y t o
prevent p o l i t i c a l prosecution s has been removed by the courts . The government can
say anything they l i k e . There i s no r u l e and you have no r i g h t to even appear.
They can l i e t o the grand jurv , and nobody w i l l -ver know because a l l records are
seale d and the publi c has no r i g h t t o know! The Absence of Disinteres t
In Prosecution s Lends i t s e l f t o Corruptio n
Government o f f i c i a l s are targetin g CEOs and t r y i n g to curb how much they make,
but they do nothing to correc t the i n t e r n a l problems withi n government. The U.S. i s
precisel y opposite of China, where young lawyers become prosecutor s lookin g f o r the
bi g case t o get t h e i r name i n the papers and lan d them one of those " b i g " paying
jobs . Back i n 1987, a l l the SEC lawyers tha t prosecuted Milken , I believe , qui t the
SEC and took job s paying $1 m i l l i o n or more. Instea d of experienced lawyers takin g
up the government at the end of t h e i r careers , who would not be lookin g fo r tha t bi g
case t o lan d a bi g bucks job , we have the revers e model prone t o corruption . Thi s
als o lend s the crimina l law to be nothing more than a p o l i t i c a l t o o l a t the federa l
l e v e l - Murder and rape cases, t r a d i t i o n a l violen t crimes, are stat e cases not federa l
unles s connected t o organized crime or bi g drug rings . These young lawyers w i l l not
prosecute the "big " houses because they are the futur e employers or c l i e n t s of the
bi g law firms . Eithe r way, you cannot prosecute those who you ar e lookin g t o l a t e r
hir e you as a lawyer. Thi s i s why you w i l l never see crimina l cases of bi g houses.
, The prosecutio n always avoid the bi g New York players . Thi s i s not a coincidence .
The Framers of the Constitutio n had a t o t a l l y d i f f e r e n t understanding of the basi c
requirement to be a " d i s i n t e r e s t e d " person. As Gordon S. Wood point s out:
" [ D i s i n t e r e s t e d [ i ] s being 'superio r t o regard t o privat e advantage
not influence d by privat e p r o f i t , ' and tha t was what the founders
meant by the term. We today have l o s t most of t h i s e a r l i e r meaning.
Even educated people now use disintereste d as a synonym f o r uninter-
ested , meaning 'indifferen t or unconcerned.' I t i s almost as i f we
cannot quit e imagine someone who i s capable o f r i s i n g above a pecuniary
i n t e r e s t and being unselfis h or impartia l where an i n t e r e s t might be
present."
Revolutionar y Characters, Gordon S Wood, pl6 , The Penguin Press
59
 Even Ben Frankli n was not t r u l y respected u n t i l he. r e t i r e d from privat e
enter- p r i s e t o become a "disinterested " man of dignity . The los e manner i n which
we allo w those i n Government to operate i s astonishing . I f government attorney s
can be hire d .by those who provide the l u c r a t i v e jobs , they cannot be
"disinterested " withi n the meaning that founded t h i s nation . Thi s allow s the bi g
firm s who now need bailouts , to engage i n r i s k y business wit h no fea r of
prosecutio n or even regulatio n tha t w i l l ever i n t e r f e r e wit h t h e i r business
operation . I n f a c t , those same sources of jobs , can als o be used to create,
investigation s and prosecutions of competitors . The sad r e s u l t , i s the complete
collaps e of the i n t e g r i t y of the f i n a n c i a l markets f o r there i s no t r u l y
"disinterested " regulation . Even Charles
Dickens has writte n about how corrup t the l e g a l system had become back i n
1853. Dickens wrote i n Chapter I , "In Chancery" of h i s celebrate d Bleake House,
"Suffe r any wrong tha t can be done you, rathe r than come here!" Indeed, the
curren t stat e of American federa l court s has once again reached the lowest
poin t completing the revolutio n of the wheel of p o l i t i c a l fortune .
Perhaps ,.;this I s i n l i n e wit h what we should expect wit h the 224 Tear C y c l i c a l hig h
i n the Cycle o f P o l i t i c a l Change. Those who are i n the f i n a n c i a l Industry , k i s s the
wif e and kid s good-bye, fo r you have l i t t l e chance. As Herbert Hoover wrote, "Some-
times when a government i s enraged, i t burns down the barn t o get the r a t . "
The Manipulatio n Of Markets.
The D i r t y L i t t l e (Big) Secret
There was a l o t of t a l k about regulatin g speculatio n because of o i l r i s i n g t o
unprecedented l e v e l s . Let us make t h i s very clear . There has been a core group of
firm s that manipulate markets t o obtai n that "guaranteed" trade without ' r i s k . I t has
been l i m i t e d t o the currencie s and commodities i n general , fo r these are markets
that are regulate d by the generall y incompetent CFTC. What the lawyers have t o l d me,
i f you can't get a job at the Justic e Department. You can't get a jo b a t the SEC.
Then what you do i s go to the CFTC. I t i s true , t h e i r attorney s are not the sharpes t
n a i l i n the box nor are they the brightes t bulb i n a l i g h t shop.
Many people knew that I would routinel y warn about which market was going t o
be manipulated next. I had a network of brokers who were not par t of the "club " who
would als o help monitor what was going on. I refraine d from ever sayin g "who" was
doing the manipulation , tha t was not my job the way I saw i t , p a r t i c u l a r l y when the
Justic e Department, CFTC and SEC were never intereste d i n prosecutin g manipulatio n
cases. Lawyers t o l d me the government attorneys sai d they were d i f f i c u l t cases t o
prove. Of course when the manipulators were the bi g houses who were the ones doin g
the h i r i n g of government attorneys , I suppose tha t had nothing t o do wit h i t . S t i l l ,
I hope i t has not gone unnoticed tha t o i l has crashed by about 50% c u r i o u s l y enough
when a l o t of firm s have blown—up (AIG i n p a r t i c u l a r ) , yet there does not seem t o
be any corresponding change i n the fundamentals. There i s s t i l l the war, and th e
globa l consumption has not decline d by 50% i n such a shor t time. So was o i l a l s o
being manipulated? Chances are, you w i l l never know because those who were' par t o f
the "club " were protected by government attorneys who looked the other way.
The s i l v e r manipulation may be responsibl e fo r my entir e case. As c l i e n t s ar e
wel l aware, I came out i n September 1997 warning tha t they were going t o manipulat e
s i l v e r from $4 to $7 going int o January. I t seems, tha t t h i s may have s t a r t e d th e
b a l l r o l l i n g fo r the "club " was known as the " B i l l i o n s r e ' s Club " made up o f a l o t
of the "big " houses and p a r t i c u l a r i n d i v i d u a l s . I was " i n v i t e d " to j o i n th e " c l u b "
by Republic Nationa l Bank i t s e l f . I was tol d f l a t out,_"stop " f i g h t i n g everyone and
joi n wit h them f o r once. I decline d s t a t i n g bluntly , I di d not believ e i n manipulatin g
narkets fo r I believe d i n my model would prevai l i n any event. I t was not the f i r s t
:ime I .was " i n v i t e d " to j o i n i n . Nevertheless, I reporte d that they intended t o tak e
60
 s i l v e r up to $7 statin g - "They're back!" I t appears that t h i s time they got mad.
Instea d of ignorin g me and s i t t i n g back comfortably knowing they had the force s
tha t could do anything safel y i n t h e i r pocket, they decided to t r y t o manipulate
the pres s agains t me. What they f a i l e d to appreciate , was I was p r i m a r i l y a seriou s
corporat e and i n s t i t u t i o n a l advisor . I di d not r e l y upon the " r e t a i l " newslette r
trad e so gettin g the press t o t r y t o d i s c r e d i t me, di d not impress me very much.
A frien d of mine became a board member of AIG i n London, he was the former
economic adviso r to Prime Ministe r Margaret Thatcher. I receive d a c a l l from him, t o
see i f I would be availabl e i n my o f f i c e i n Princeton , New Jersey . I sai d sure.
He then a r r i v e d the next morning c l e a r l y under pressur e from the head trade r fo r
the London AIG o f f i c e . I was asked not to t a l k p u b l i c l y about manipulatin g
markets. I t o l d him I never reveale d who was doing what, j u s t tha t certai n
manipulation s would take place . I found i t strange tha t AIG was becoming
concerned about my publi c comments t o hop on a plane and f l y to the United States
. Nevertheless , I apparentl y made a mistake i n under-estimating the concern I
appeared to be creating . I had no Intentio n to go running to the CFTC or SEC,
as they were incapabl e o f ever goin g a f t e r such schemes. So I paid the warning
no mind. S t i l l , i t was AIG London tha t was a major playe r i n t h i s nefariou s
profession . One of the "brokers" was P h i l l
i p s Brother s i n Connecticut. I believ e they had • an analys t on the p a y r o l l so t o
speak who had developed contact s i n the press . I believ e the stupi d decisio n was
made to t r y t o get the press a f t e r me to sto p the forecasts . A j o u r n a l i s t from
the Wal l Stree t Journa l c a l l e d , accusin g me o f bein g shor t s i l v e r and tryin g to
t a l k the market down. He was very h o s t i l e . We argued and I bluntl y t o l d him i f
I was shor t why would I be sayin g i t would r i s e from the mid $4 range to $7? The
conversatio n turned almost int o a screaming match. He i n s i s t e d I t e l l him who
was behind the manipulation . I t o l d him i t didn' t matter because he would never
p r i n t the name. We y e l l e d back and f o r t h and f i n a l l y I j u s t sai d fine , i t was
Warren Buffett . He laughed sayin g Buffet t di d not trad e commodities. I ju st
commented, that' s how much you know, and slammed the phone down.
They create d a f l u r r y of press about me and s i l v e r . I believ e even one of th e
London newspapers was induced to running a stor y c a l l i n g me the " l a r g e s t " s i l v e r
trade r i n the world. Thi s was a jok e to me, f o r anyone tha t knew me, would never
take such s t o r i e s seriou s - p a r t i c u l a r l y about s i l v e r . Thi s became a very bi g
mistake on t h e i r part , because once they induced the press t o s t a r t running s t o r i e s
about me an market manipulations, they were l i f t i n g the rock under which they had
been hidin g fo r a very long-time. The CFTC coul d very e a s i l y j u s t loo k and see
who was the largest ' s i l v e r trader . They knew tha t was c e r t a i n l y not me. Thi s
attentio n from the press create d the very pressur e on Government they di d not
want. The CFTC c a l l e d me, because of the pres s s t o r i e s they i n s t i g a t e d , and very
bluntl y asked where was the manipulatio n seein g I had no positions . I t o l d them
i t was i n London out o f t h e i r j u r i s d i c t i o n , and they sai d they coul d get t o the
bottom of tha t anyway. I never expected the events that followed , tha t was c l e a r l y
because they t r i e d to get the pres s afte r me t o stop t a l k i n g about manipulations .
To my shock, my telephone rang. I t was a broker who was not par t of the "club "
t o l e t me know the Bank of England c a l l e d a meeting i n the morning of a l l s i l v e r
brokers . I was t r u l y shocked. Obviously the pres s didn' t want to believ e me, but i t
seems the Government^ s di d l i s t e n . This was onl y a couple of hours a f t e r the c a l l
from the CFTC. Then came the r e a l Shockwave. Late r that same day, Warren B u f f e t t came
out t o head-off the Bank of England and p u b l i c l y admitted he bought $1 b i l l i o n
worth of s i l v e r , he denied manipulatin g the market, and sai d i t would be a long-term
investment. The Wall Stree t Journa l c a l l e d back the next day. The J o u r n a l i s t was i n
t o t a l shock. He asked me how di d I know I t was Buffett ? I tol d him i t was my jo b t o
know, and I hung up the phone, preferrin g not t o get involved .
61
 I was not tryin g to save the world. I was not tryin g to expose i n d i v i d u a l s . I t
was ray job t o t e l l the t r u t h about the markets. That i s what the c l i e n t s expected
from me. They knew i f I sai d something, i t was v e r i f i e d . The reason why I di d not
expect the CFTC to defend the markets and was shocked that they even c a l l e d the Bank
of England, was because t h i s was not Buffett' s f i r s t commodity speculatio n int o s i l v e r
. According to my sources, i n 1993 there was another attempt to get involve d wit h the
s i l v e r market. I believ e Buffet t was going through P h i l l i p s Brothers . The CFTC t h i s
time notice d the tradin g and went to "PhiBro " as they were known. They wanted the name
of who they were dealin g for . PhiBro refuse d to giv e upBuffett' s name. The CFTC then
j u s t ordered they get out of the position s never demanding the name. S i l v e r crashed
and a l o t of people got hurt . The CFTC decline d t o investigat e the "big " names.
So forgiv e me i f I lac k the confidence i n the regulator s a c t u a l l y regulating .
There i s no " d i s i n t e r e s t " among those who ar e suppose to guard the markets. As
lon g as government attorney s are lookin g f o r a bi g pa3 ing job , ther e i s " i n t e r e s t "
r

at foot .
John Maynard Keynes wrote; "When the c a p i t a l development of a country becomes
the byproduct of the a c t i v i t i e s of a casino , the jo b i s l i k e l y t o be i l l done."
The General Theory o f Employment, Interes t & Money, NY Harcourt, Brace, 1936, pl59 .
Between the AIG CDS withou t c o l l a t e r a l backing, the concept of manipulatin g the
markets to creat e guaranteed wins, i t i s i r o n i c tha t the "big " houses were t r y i n g
t o creat e r i s k l e s s trades , but i n the process, destroyed i t a l l . As Hegel saw, ofte n
what develops i s precisel y the opposite . I t i s the t o t a l lac k of regulatio n of
r i s k tha t has le d to t h i s mess. I t has been the attempt by the "big " houses t o
contro l the trade to "avoid losses , tha t has le d t o sheer chaos.
The degree of attempts to contro l the markets knows no bounds. I was als o
s o l i c i t e d t o j o i n i n wit h the " B i l l i o n a r e ' s Club" regardin g Russia . Edmond Safra ,
the major shareholder of Republi c Nationa l Bank t r i e d to get me t o j o i n i n wit h
them on Russia . I warned them my model-was forecastin g tha t Russian debt would
collapse . Safr a rented the entir e Nationa l Galler y i n Washington, DC, f o r the
IMF honorary dinner. Every p o l i t i c a n was ther e of any note as were former Federa l
Reserve chairman. I was i n v i t e d t o show me tha t I was wrong. They had insid e
track s t o the IMF and assured me that the loans t o Russi a would continue . I was
asked t o j o i n i n wit h Safr a and others t o inves t i n Russi a gettin g huge return s _
= i n hig h i n t e r e s t rate s when the IMF was going t o back Russia . Safr a se t up Hermitage
C a p i t a l , and t r i e d t o get me to j o i n . I decline d warning my model forecas t a decline .
They believe d i n manipulating markets t o creat e the guaranteed investment without risk. '
The model was correc t - Safr a and the "boys" were f l a t l y wrong, and blamed me.
I know there were rumors and s t o r i e s that the woman who was running f o r the i
Mayor of St Petersburgh who was executed being shot i n the head was a pawn of a
major western financie r who was supposed t o be myself. I believ e t h i s was another
stor y tryin g t o discredi t me some how. I never met her, and the onl y los e connection
was tha t her son worked i n our London o f f i c e by coincidence . Let me als o se t the
record s t r a i g h t , we had more than 200 employees worldwide, and I di d not do the
h i r i n g and f i r i n g . We had partners In every country who ran t h e i r own d i v i s i o n s
but we worked around the world together gatherin g the best privat e i n t e l l i g e n c e
network tha t perhaps ever existed . Governments shared intimat e knowledge tha t they
wanted out i n t o the marketplace, but could not p o l i t i c a l l y make such statements.
We became the United Nations i n financ e and c l e a r l y there were some who resente d
that intensely .
Edmonpl_Sa^ra_XJfa^ld_ejve_jwas_ j e e p l y jLnyolyed_in a plo t t o takeover Russia . Thi s
may have been the crowning audacit y of market manipulations . I believ e he was i n
partner s wit h two Russians Berisnofsk y and Gazinsky, who were very powerful and
even controlle d the privat e media i n Russia.- I believ e the r e a l stor y provide d t o
62
 me by the son of a w e l l connected "Russian diplomat, and s t i l l others , amazingly was
that '%he Bank of New York prosecutio n fo r a clai m £7 b i l l i o n money launderin g scam
was i n r e a l i t y $7 b i l l i o n stole n from the IMF (Internationa l Monetary Fund) loans ,
at the directio n of Y e l t s i n himself . I t was Republic Nationa l Bank, whom I. believe ,
ran to the Feds pointin g out the transaction . I believ e "Republic even t e s t i f i e d
i n Congress.
As you w i l l r e c a l l , Y e l t s i n had vowed he would run fo r e l e c t i o n again i n 2000.
The Bank of New York dea l came out i n August 1999, about 30 days before my case
tha t was als o instigate d by Republi c Nationa l Bank running t o the Feds. As the stor y
goes, Y e l t s i n was being-blackmailed , tha t he would be protected i f he stepped down
and appointed one of the two Russians as the next leader. Y e l s t i n , i t was t o l d t o
me, turned instea d to Puti n once he r e a l i z e d he was set-up. Puti n accepted the
appointment and protecte d Y e l t s i n and the whole IMF scandal. Both Barisnofsk y and
Gazinsky f l e d Russia whil e a l l t h e i r asset s were confiscated . My case began on
September 13th, 1999. Y e l t s i n announced he was steppin g down i n November, and by
December 3rd, 1999, Edmand Safr a was k i l l e d i n Monaco. Within 1 month, my lawyers
were r e t r o a c t i v e l y disgorged of a l l fees , and I was thrown i n t o priso n on " - c i v i l
contempt" that the statut e 28 USC 51826 state d I had an absolute r i g h t t o an
immediate appeal withi n 30 days. Presiden t Bush's cousin , Chief Judge John M. Walker,
Jr ., grabbed my appeal, hel d I had no such r i g h t t o ever appeal, and tha t
allowed the . government to a r b i t r a r i l y imprison me fo r more than 7 years on
"contempt" o f cour t denied, lawyers, denied any r i g h t t o appeal, and denied any t r
i a l by j u r y or any l i m i t a t i o n upon the duratio n of imprisonment. They did not
want t o go t o t r i a l and showed the world tha t i f the US Government wants t o
loc k you up, wel l guess what - you r e a l l y have no r i g h t s at a l l .
The murder of Safr a remains a mystery. Some sources have intimate d tha t he
was murdered f o r Y e l t s i n as a favo r on orders of Putin . To make more of a paradox
of t h i s enigma, they charged the male nurse wit h settin g the f i r e i n Monaco
and als o spent at leas t 6 years i n prison . Then, the Supreme Court where you do
have a r i g h t to be heard i n France, reverse d the convictio n s t a t i n g tha t the judge
and the prosecutor conspired togethe r to deprive him of a f a i r t r i a l . He was then
ordered released , and sent back to the Unite d States . Never would an American cour t
ever say that about i t s e l f . Even the Supreme Court of I s r a e l vacated a convictio n
of the allege d "Ivan the T e r r i b l e " when i t came out that American prosecutors , who
knew he was not the man, extradicte d him anyway and withhel d evidence tha t showed
he was not the person sought. The S i x t h C i r c u i t , only afte r the Supreme Court of
I s r a e l vacated the conviction , was embarrassed enough to say tha t US Government
Attorneys committed frau d upon the court , Demjanjuk v Petrovsky, 10 F3rd 228 (6th
Ci r 1993). The question that jumps from the pages, i s why are American'courts so
pro-Government to the poin t they w i l l cover-up action s and allo w knowingly innocent
people t o be even executed?
Safr a began hi s career i n exchanging coin s i n the middle east . The main s i l v e r
coi n tha t was used i n trade was the Mari a Theresa barin g the p o r t r a i t of o f a woman
that was not considered acceptable t o the Arabs. Safr a tol d me he use to buy them
at a discount from the Arabs and tha t i s how he starte d hi s empire. He was ver y
much a gol d bug, and would c a l l New York and speak d i r e c t l y t o h i s metals dealers .
This i s why, i n my opinion , he was obcessed wit h Russi a to get hi s hands on the
metals tha t existe d there .
The "club " i s always lookin g f o r the r i s k l e s s trade . They are not r e a l
investment managers. They have t o r i g the game to ensure they make money and
never lose . In t h i s respect , yes, i t i s the "greed" tha t drive s them because
63
 they always have t o win. They do no ana^z e the markets, they have t o c o n t r o l
them. They have targete d so many areas, you would be shocked. They even di d
the rhodium market tha t i s purel y cash. Perhaps the most outrageous, was th e
platinum market. There, they bribe d Russian o f f i c i a l s who recalle d a l l t h e i r
platinum to take an "inventory. " Of course, they were already long . They the n
drove platinum up dramatically . They sol d at the top, reversed, and then took
shor t position s t e l l i n g the Russian i t was time the "inventory " was over. The
p r i c e collapsed . They took advantage no t j u s t of smal l speculators , but they
targete d the auto industry . Ford Motors f i l e d a lawsui t over tha t scam.
In the summer of 1998, I delivere d a lectur e i n London. The F i n a n c i a l Times
attended..They reporte d the forecas t I delivere d tha t Russia would collaps e i n
about 30 days. V e i l i t did . Even Long-Term Capita l Management was involved. , I
believ e that viewed tha t they had the IMF i n t h e i r pocket, and tha t my forecast s
were contrary t o t h e i r goals . Thei r collaps e and los s they blamed on me. I
believ e tha t t h i s i s what starte d the e f f o r t to stop the Princeto n forecast s at
a l l costs . I believ e that they were t e l l i n g the CFTC behind the scenes tha t I
was "manipulating" the world economy because I j u s t had too much influenc e and
too many c l i e n t s . I am sure, they did not bother t o t e l l the Government tha t they
were on .the other-sid e tryin g t o seek r e a l manipulatio n wit h bribe s and e f f o r t s
to manipulate markets tha t had nothin g to do wit h analysis .
Another inciden t where I clashed wit h the "force s t o be" came als o i n
March 1999. I warned at a seminar i n Tokyo tha t "they" were targetin g the yen
and were lookin g fo r tha t "guaranteed" trade . Every March, the Japanese sol d
t h e i r offshore investments and returne d the cash fo r March 31st accounting . They
would then immediately s e l l the yen and go back t o the short-ter m investments .
The "club " knew t h i s , and were i n search of a quick few b i l l i o n p r o f i t . They
would manipulate the yen over t h i s r o l l - o v e r t o creat e a wide spread between the
buy of the yen and the resal e of the 3'en. So I warned the c l i e n t s tha t the yen
was the "new" targe t and t o t h i s time loc k i n the sal e at the same time they
had t o buy the yen t o come home. This would eliminat e the p o t e n t i a l l o s s . They
l i s t e n e d , and the "club " l o s t . No doubt they got r e a l l y mad one more time. The
way I saw I t , I t o l d them to trad e l i k e men. But they wanted tha t " r i s k l e s s "
trad e assuming tha t " r i s k " was fo r f o o l s . I f i n d - I t i r o n i c that t h i s time the y
blew themselves up so bad, and they can't blame me.
Due Process of Law Died I n 1987
Again, I apologiz e fo r c i t i n g my own case. But since , I am w r i t i n g t h i s l i k e
Kondratief f from a c e l l servin g a 12 year sentence fo r a pretended offens e tha t by
law cannot j u s t i f y more than 5 years when g u i l t y , my a b i l i t y to quote a u t h o r i t a t i v e l
y to sources other than my own i s l i m i t e d . Those who know me, r e a l i z e I hate to c i t
e something as fac t unles s I have proven i t to myself.
My case- has stunned the f i n a n c i a l community fo r the government can f o o l the
genera l majorit y a l l of the time, but they cannot f o o l the professionals . That may
be why S t a l i n purged the populatio n of the i n t e l l e c t u a l s who can see through the l i e
s. We issue d privat e unsecured notes borrowing yen a t (1) fixe d rate s o r (2)
swapping a note fo r a pre-existin g p o r t f o l i o of Japanese stock s that we down 30-
50% wit h an unlimite d amount of time to pay o f f the note. Therefore, we were not
managing money any more than borrowing from a bank makes you a fund manager or
buying damaged port- f o l i o with a face value converts tha t int o a managed account
any more than takin g out a mortgage transforms you int o a caretake r fo r the bank. The
SEC allege d t h i s was a Ponz i scheme and there was commingling of accounts whil e the
CFTC allege d I was r e a l l y running a commodity poo l tha t not registered . I t came out a
t the h a i l hearin g tha t there^as no defauTtr on~any~note v Any' f iiiallyT^dien the -
- - - - _

governmen1r-real-ized--they—got - the whole theory wrong, they moved to get r i d of a l l

the lawyers .SEC v PEI, 84 FSupp2d 443 (SDNY 2000) and then create d te h contempt
because we were i n s i s t i n g on a speedy t r i a l by March of 2000 t o save the
companies.
 Tou thin k tha t as an American we are honest and the best. Think again . When
the government does not want you t o know the truth , you w i l l not know i t . And as
fo r the p o l i t i c i a n s , wel l .they are more l i k e those s i t t i n g above the cloud s who
pontificat e on what i s r i g h t , but the force s below coul d careles s what they do or '
say. On A p r i l 24th, 2000, Judge Owen i l l e g a l l y close d the court , ordered the recor d
delayed to hide the event, and threw the Associate d Pres s out, which they reporte d
on A p r i l 27th, 2000 questingin g whether I coul d get a f a i r t r i a l i n New York. I f
you thin k what takes plac e i n cour t i s publi c record because i t i s felon y of 5 years
to change the t r a n s c r i p t s , guess what.' The Souther D i s t r i c t of New York f e d e r a l cour
t created i t s own r u l e t o negate Congress allowin g judges to e d i t the recor d
changing the events and the words you speak. That i s a crime 18 USC §2071(a), but
the J u s t i c e Department w i l l never prosecute a judge f o r helpin g them. The Second C i
r c u i t had t o admit t h i s was a practic e and ruled : "Courts do not have the power t o
a l t e r t r an s c r ip t i n camera [ p r i v a t e l y ] and t o conceal the alteration s from the p a r t i
e s . " PS v Zxchet t e l l o , 208 F3d 72, 97-9S (2d C i r 2000), but then claimed they
lacke d the power t o order t h e i r own judges t o obey the law. So much fo r the Rule
o f Law. We have become a banana republi c where the government i s never wrong, but
wit h nuclea r weapons. The bureaucracy allow s us t o believ e i t i s a democracy, but
they operate accordin g t o • t h e i r own desires . I t r i e d t i challeng e t h i s practice .
I got Judge Owen t o admit even publicl y he was a l t e r i n g the record , but the Court o f
Appeals refuse d t o do anything ! JUDGE RICHARD OWEN:." I don't remember ever making
any change t o a t r a n s c r i p t of any substance whatever.. I may
have stuc k i n a coma, I may have stuck i n a dash. But I don't
remember ever changing anything of substance." (99-Clv-
9667 SDNY: Tr; 9/23/03, p45, L7-11) Frank Quattrone of F i r s t Boston had
the same judge. The pres s was w e l l aware of shenanigans going on. I even met wit h
Mr. Sorki n of the New York Times who was covering Quattrone's t r i a l s . They knew
of the editin g by Judge Owen i n my case, and were paying very clos e attentio n
to what Judge Owen was doing to Quattrone. The New York Times reported what
Judge Owen had ruled , and the Second C i r c u i t i n overturnin g Quattrone's
convictio n where i t r e a l l y had no choice , blaste d the pres s and i n t h e i r writte n
opinio n c r i t i c i z e d the press s t a t i n g they misreporte d events. I spoke t o Sorki n
afte r tha t report , and he confirmed to me tha t what he reporte d was correc t and
he too believe d tha t perhaps the t r a n s c r i p t s were changed by Judge Owen. This i s
the sad stat e of a f f a i r s i n federa l courts . I f you are not g u i l t y , they can a l t
e r what was sai d l a t e r t o sure up a convictio n when necessary . And the Second
C i r c u i t claims somehow i t has no power to enforc e the la w when i t i s one of t h
e i r own v i o l a t i n g i t . So much fo r the Rule o f Law. A
l o t of people are awaitin g fo r me to speak out. Trust me, tha t day has come. But
what I am more concerned about i s the complete collaps e i n the Rule o f Law, We
cannot maintai n the confidence i n society , i n government, and i n the futur e a
s long as the court s are nothin g more than a den of thieves . We cannot f i x the
economy unless the Rule of Law i s established . This i s a complaint tha t been around
sinc e B i b l i c a l times when Chris t delivere d the parable of the widow and the corrup t
judge who think s hi s persona l power include s the " d i s c r e t i o n " to withhol d the r u l e
of law. Thomas Jefferso n saw t h i s as the bigges t threa t t o the i n e v i t a b l e destructio n
of the United States . We are running out of time. I f the game i s not f a i r , the game
cannot surviv e what we are going through. Perhaps i t i s time fo r a J u d i c i a l change
l i k e Jefferso n di d i n 1800. Or at leas t the Judiciar y Committees o f the House and
the Senate have t o stop appointin g pro-government judges and s t a r t p o l i c i n g the mess
they have approved. Nobody i s i n charge and c a p i t a l w i l l continue t o f l e e as lon g as
the game i s rigged . You cannot inves t i n a natio n where your r i g h t s depend upon the
mood and personalt y o f the judge you end-up wit h tha t day. Being a judge was not t o
be one step shy of a monarchy, but tha t i s what it-has_become. Thev can i n t e r p r e t
the law anyway they l i k e , and then rul e tha t no one els e can disagree . We need r e a l
s t a b i l i t y , dignity , and honesty. The Rule o f Law cannot be measured as they use t o
say, by the lengt h of the judge's foot .
65
 So What Happened t o the Model?
Former employees have tol d some key part s of the stor y tha t has appeared on
the Internet . Yes i t i s tru e tha t I als o taught the computer t o communicate by
r a t i o n a l verba l exchange. I n other words, I coul d t a l k to the computer, ask key
questions, and i t would respond verbally . I t was a shocker to those who f i r s t
saw t h i s type of interface . I worked on tha t par t of the design i n the earl y '80s
and constructe d a desktop versio n fo r my childre n tha t probably cost me as much
as a Porsche back then. My daughter would communicate wit h the computer typin g
i n questions and the computer would then engage i n a conversatio n wit h her on
a l l sort s of topics , learnin g who she was, what she l i k e d , and.i t became a f r i e n d .
When she came' home from school one day, I had the computer i n pieces . She, got
upset and thought he was dead. I assured her, he was f i n e .
By 1985, I had constructed a verba l i n t e r f a c e . My daughter contribute d not
knowing tha t she had been my tes t p i l o t t o giv e the computer a personalit y and
t o teach i t human behavior. As my childre n grew older , they outgrew the need
fo r a computer frien d and I moved on to bigger and more challengin g projects .
What you may see i n the recent movie Ironman wit h the activ e verba l i n t e r f a c e
of the computer, i s what I create d out o f necessity .
I r e a l i z e d tha t the greates t d i f f i c u l t y i n forecastin g i s the prejudic e o f
the analyst . One cannot forecas t what he does.not believ e i s possible . Kondratief f
was correc t fo r hi s time. But the economy evolved and transformed from a commodity
world dominated by the prejudice s create d by the Physiocrat s int o the I n d u s t r i a l
Revolution . Jus t as Rome matured, i t s people wanted greate r pleasure s and th e more
lobo r intensiv e job s f e l l to the provinces . Augustus (27BC-14AD) had even passed
famil y laws forbiddin g men to remain unmarried. As wealth accumulates, labo r wants
more and more u n t i l the job s leave . These are natura l tends where both the labo r
and the consumer seek t h e i r s e l f - i n t e r e s t s . One demands the highes t wage, and the
other demands the lowest cost . I t i s not the mere greedy corporation s and th e e v i l
employers as Marx targeted . This i s a h i s t o r i c a l balance o f the economy.
Money supply i s t y p i c a l l y define d as a product of v e l o c i t y - how much i s
changing hands. This can be increase d dramaticall y through lendin g and d e r i v a t i v e s .
This als o create s an opposing forc e tha t must be understood. I n truth , ther e are so
many variable s tha t need to be tracked , you head explodes. The model had t o r e f l e c t
my unbiased thinkin g process. Correlat e everything , understand time, the Phase-
Transition , and the dynamics of c o l l e c t i v e behavior. Allowin g the computer t o t e s t
a l l p o s s i b i l i t i e s , allowed i t to see war, changes i n p o l i t i c s (1989), and above a l l
to comprehend time. This opened the door to managing the future . I t cannot be used
t o a l t e r the tren d turnin g highs int o lows, but i t can mitigat e the decline s by the
comprehension of when and where t o apply the pressure as Keynes believed .
I needed to create a system tha t would mirro r my own mind. Something tha t I
could teach how to thin k and analyze the data . Once tha t was done l i k e teachin g your
c h i l d how to walk and t a l k , the end resul t would be astonishing . The f i r s t glimpse
of thi s potentia l was a forecas t the model made regardin g the B r i t i s h economy. I t
projected tha t B r i t a i n would e s s e n t i a l l y i n v e r t and depart a c o r r e l a t i o n wit h tha t
of Europe i t s e l f . I was shocked by the forecast . I at tha t time could only inquir e
" by typin g In a question - why? The computer s p i t out a c o r r e l a t i o n t o crude o i l
tha t was so obvious, I could not believ e how stupi d I had been not t o see I t myself.
With the discover y of the North Sea O i l , B r i t a i n began t o evolve as an economy. I
remember^m^g--a-W-show-a t-the-^t-i-me-^d-t-h-a—g^od—^r-iand—o^.mine,-JWalter
j
Br_e.sser£.,____
a true leade r i n c y c l i c a l theory. I delivere d that forecas t i n or about 1983, and
watched the pound drop to about $1.03 by 1985.
66
 I taught the computer how t o thin k and how t o analyze. Since I took the traxnm
g wheels of f allowin g i t t o check soybeans agasln t the Hang Sang Index, it_woul d be
abl e to study c o r r e l a t i o n s tha t were not l i m i t e d t o my personal observations . The
verba l interfac e made i t f a r easie r to communicate. But i t was the s t r u c t u r a l
design tha t was the key.
Yes i t i s tru e tha t I was i n v i t e d to China end was offere d the exclusiv e f o r e-
castin g contract , which I agreed. China di d not i n s i s t upon having the source code.
They wanted t o work together* The . CIA saw only the m i l i t a r y aspects and wanted me t o
construc t a separate system fo r them i n Washington. I declined , because I was f a r
t o busy, o f f e r i n g instea d t o run any study they might l i k e . They t o l d me f l a t l y ,
they had t o own i t . Some s t a f f have implie d tha t Princeto n Economics was destroye d
because o f my r e f u s a l to work wit h the CIA. Perhaps. But I believ e i t was coming
from another source. I can confirm , tha t the system was lace d wit h a v i r u s . I f i t
was ever removed from the o f f i c e , i t would know and s e l f - d e s t r u c t . That I believ e
took place,,,'for i t appears the Government seize d the computer, took i f t o a la b
at the World Trade Center, i r o n i c a l l y where i t was destroyed i n the attack . The
Receiver and h i s questionabl e attorne y Tancred Schiavoni , force d the closur e of th e
Princeto n Economic I n s t i t u t e . Marti n Weiss of F l o r i d a , a publishe r of stoc k a n a l y s i s ,
offere d t o ren t the I n s t i t u t e t o keep the forecast s going . They would not allo w tha
t and sent him a emai l s t a t i n g I had t o turnover the source code to keep the company
going. I decided tha t the court s were j u s t corrup t and I was i n t h i s b a t t l e t o
the death. I decided even i f i t cos t me my l i f e , I would not regenerate th e source
code fo r Mr. Schiavon i and Alan Cohen whom I believe d were beyond a l l morals
whatsoever. To sure up t h e i r p o s i t i o n , they asked Judge P. Kevin Caste l fo r absolut e
immunity fo r any of t h e i r action s agains t myself, my family , employees or. even th e
allege d victims . Even the SEC objecte d that t h i s would creat e a precedent tha t would
a l l o y them t o embezzel funds without any sanction s c i v i l l y or c r i m i n a l l y . ,To even
ask fo r absolut e immunity r e t r o a c t i v e l y fo r whatever they have done, i t a sig n i n
my opinio n tha t ther e are some r e a l l y dark secret s s t i l l lurkin g i n the wings. Yet ,
the Southern D i s t r i c t of New York i s j u s t of f the reservatio n when i t comes t o your
c o n s t i t u t i o n a l r i g h t s . I believ e they haul you int o New York because ther e I s j u s t
no possibl e way to obtai n a f a i r t r i a l wit h the p r a c t i c e of throwing the press out ,
c r i t i c i z i n g the press t o intimidat e them as. Judge Caste l di d on A p r i l 27th, 2007;
and the practic e of allowin g judges t o even edi t the very words spoken i n court .
I believ e tha t case agains t me was instigate d by the "club " t o eliminat e the
forecastin g fo r on Oct 3rd , 2000, the CFTC & SEC c a l l e d a hearin g to clos e the
I n s t i t u t e . An employee, James Smith, showed up wit h a writte n request from th e Dep't
of-Energy requestin g we creat e a model because our forecas t o i l would r i s e from $10
i n 1999 to tes t $100 by 2007. Judge Owen would not allo w Smith t o t e s t i f y and denied
the I n s t i t u t e any r i g h t t o h i r e a lawyer. The "club " t h i s time went wit h the forecast ,
but manipulated i t t o increas e the amplitude up t o nearl y $150. Jus t as they l o s t on
the manipulatio n of Russi a and the IMF causing Long-Term Capita l Management collapse ,
they blew themselves up again . A monthly c l o s i n g back below $62signal s a changed trend
The Government wit h i t s Receiver Alan Cohen and h i s lawyer Tancred Schiavoni ,
were determined t o seiz e a l l evidence I gathered on the "club " and the manipulations .
I documented everythin g and coul d prove whatever a l l e g a t i o n I made i n w r i t i n g . I had
given some tapes to my lawyers fo r safekeeping. They attacke d my lawyers demanding
the tapes claimin g they might lead to asset s a p l a i n l i e . On February 7th , 2000, I
stood up i n open cour t and objected :
" I di d a number of piece s and monitored a s i g n i f i c a n t e f f o r t
by a number of investment and fund managers who attempt t o
organiz e togethe r i n manipulating markets. I wrote extensivel y
about severa l on that , and I made tapes t o back up myself i n
-

support of that "

(99-CIV-9667 SDNY, Tr; 2/7/00 page 4) , l i n e s 16-21)
 I continue d t o objec t agains t t h e i r i l l e g a l seizur e s t a t i n g p l a i n l y tha t they
were made I n a j o u r n a l i s t i c manner under the F i r s t Amendment. That of course, j u s t
meant nothing . There i s obviousl y no free-pres s but i n America when i t counts.
"These ar e tapes that are , again , I do not see where they are p a r t i c u l a r l y
relevan t t o t h i s p a r t i c u l a r case, your Honor. They have s i g n i f i c a n t
implication s fo r a number o f wel l known player s and Investment banks
on the stree t tha t probabl y do revea l crimina l behavior , but tha t
does not necessaril y involv e t h i s case. They were thing s I wrote about.
I t i s wel l documented tha t I was exposing the s i l v e r manipulation s tha t
were — went by a number of firm s includin g Republi c Bank. The. CFTC
even contacte d me personall y fo r information I n tha t i n v e s t i g a t i o n .
and as w e l l as tha t l e d to the Bank of England gettin g involve d int o
the i n v e s t i g a t i o n . "
I b i d / pg 4-5 (2/7/00)
The Receive r Alan Cohen had the audacit y t o argue tha t ther e was no p r i v i l e g e .
Judge Owen refuse d t o allo w me t o speak, as di d Judge Caste l l a t e r on. Judge Owen
stated : "Please , no. 1 am very trouble d by your standin g up her e and saying'thing s
which are purportedl y f a c t s and you are askin g me to r e l y of them as facts."
Id./pg29 Lin e 14-17. He allowe d pure speculatio n by Ala n Cohen t o seiz e everything',
which I believ e has been destroyed. Cohen was then give n a jo b a t one o f the firm
s I was tracking , Goldman Sacks. I f you thin k the "club " .cannot c o n t r o l the
courts , you ar e wrong! There i s never a coincidence . AfterCohen S Schiavon i
removed a l l lawyers, the lawyer appointed, David Cooper, J u s t so happened hi s wif e
was counsel t o AIG. I believ e t h i s i s why I was thrown Into priso n on
contempt o f court.denie d my lawyers, denied any t r i a l ever, or any r i g h t t o
appeal. There i s c l e a r l y a way tha t federa l court s can s t r i p you of a l l r i g h t s , j u
s t c a l l i t contempt. The C o n s t i t u t i o n was intended t o be a r e s t r a i n t upon the
Government. When you stac k the court s wit h former prosecutor s t o pretend they are
now f a i r judges, t h i s i s what you get. At my sentencing, Judge John F. Keenan on A
p r i l 10th, 2007, t r i e d t o d i s c r e d i t the model a l l e g i n g tha t I got•the ide a from a
movie c a l l e d " P i " by an Australia n company tha t was about a man who create d a
computer model based upon P i . The problem i s , tha t movie was based upon me, and
di d not come out u n t i l X was i n priso n a f t e r 1999. Thi s bothered me because i t
completed the c i r c l e involvin g the court s i n an attempt to rewrit e h i s t o r y . The
court s believ e they can dictat e t o the poeple, rewrit e th e t r u t h , and deligh t i n t h e
i r own applause regarding t h e i r cleverness . The US Attorne y seems i t even
intimidate d the WY Times complaining about a front , page a r t i c l e questionin g my g u i
lt .
The forensi c accountant, Michae l M. Mulliga n (FCL Advisers , Great F a l l s , Va.)
wrote to the cour t questionin g my g u i l t , whether there was even a crime , a complained
tha t fo r more than 6 years the Government would never provid e evidence. Republic' s
own s t a f f were i l l e g a l l y tradin g i n the accounts and about 25% o f a l l trade s were
backed-out as error s by them, which made me believ e the "club " was parkin g trade s
I n my accounts usin g the cash fo r margins or a t leas t R e p u b l i c s s t a f f were.
The "club " can contro l government attorney s when they are ther e onl y lookin g fo r
a "big " paying job . P o l i t i c i a n s can be prosecuted fo r such schemes, but who w i l l ever
prosecute the prosecutors ? Seriou s e t h i c a l revision s are desperatel y needed.
The Government seize d the computer, but i t self-destructe d when moved. They then
used the I n s t i t u t e as a t o o l . Schiavon i sent an e-mail to Marti n Weiss o f 'Florid a who
offere d to ren t the operatio n to keep the forecast s going, but to do so, they demanded
the source code, which Weiss state d he di d not need. I decline d and the I n s t i t u t e was
close d by Judge Owen. I f i n d i t i r o n i c tha t the model designed to help i n times of a
major c r i s i s , was destroyed by the "club " because they coul d not manipulate markets
agains t i t and i n the end, destroyed t h e i r own industry .
68
 The Solution Rea l Money Supply
CONTRACTION
tr 1

W
<!
We must come t o face the r e a l f a c t s . T r a d i t i o n a l ' o l d
W
world economics i s no longer applicable . The greates t erro
r of the money supply being fixe d t o the gold standard,
was tha t the discover y of gold determined the supply of
>
money a l t e r i n g p o l i c i e s of government and subjectin g the
privat e secto r to swings i n the boom and bust sense tha t
would be influence d wit h respec t to amplitude incresin g
v o l a t i l i t y . We can see such period s followin g the Gold
Rush of 1849 i n C a l i f o r n i a and the consequences of the
deliberat e i n f l a t i o n create d by the " S i l v e r Democrats" tha
t le d t o v i r t u a l bank-
ruptc y requirin g J.P. Morgan to b a i l out the government i n BORROWING =
1896.
No doubt there w i l l be those who would never conside r
deliberat e i n f l a t i o n as f i s c a l i r r e s p o n s i b i l i t y . However,
when Pau l Volke r was f i g h t i n g the commodity boom int o 1980 REDISTRIBUTION
and raise d short-term interes t rates , we must r e a l i z e tha t
the bigges t spendthrif t withi n societ y i s the government.
By deliberatel y r a i s i n g interes t rate s to stop privat e secto r spending, th e n a t i o n a l
debt was put on an exponential growth path. The Government cannot be the stationar y
"disinterested " observer i n Einstein' s theory of r e l a t i v i t y . I t cannot see i t s own
action s because i t i s so busy t r y i n g t o a t t r i b u t e blame t o everyone else . Thi s i s
the fat e of our natio n at stake. Thi s i s the futur e of our children . Are we t o be so
irresponsibl e l i k e a drug addic t who steal s today wit h no regard fo r the consequences
j u s t t o obtai n that quick f i x ?
I f we merely borrow to fund the economic b a i l o u t ,
we have two major problems. The contractio n of leverag
e f a r outnumbers the actua l money supply even i f we
now count a l l cash and outstanding debt as money.
Because ther e has been no regulatio n of the amount
of leverag e between banks as I s done withi n the
exchanges who r a i s e and lower margin requirements i n
future s t o manage the amount of leverag e ("gearing"),
we are lookin g a t a contractio n tha t could exceed
the GDP i n m u l t i p l e s . We must r e a l i z e tha t borrowing
to bailou t th e banks, i s economically
indistinguishabl e from moving money from your l e f t
pocket t o your r i g h t . We are a c t u a l l y furthe r adding t
o the economic contractio n by soaking up cash i n the
system and r e d i s t r i b u t i n g . Thi s i s merely a form
of Marxism. What we must t o i s t o expand the sheer
actua l money supply t o o f f s e t the contrac t i n the " r e a l "
money supply create d by the privat e secto r i n e l e c t r o n i
c format tha t i s als o indistinguishabl e from suddenly discoverin g gol d i n C a l i f o r n i a
back i n 1849. The f i s c a l polic y of the natio n has been usurped by the bankers, who
di d not even understand what they were doing.
We need to review the Keynesian theory. Borrowing does not stimulat e f o r i t w i l l
liot~increas e the money-supply to compensate f o r the contraction . Even buying
69
 the debt from the backs by i n j e c t i n g more c a p i t a l , i s pouring bad money a f t e r 'even
worse money. The Sub-Prime Mortgages should be • purchased from the banks a t curren t
market value , place d i n a p u b l i c fund not managed by bankers, allo w th e
mortgages'to be renegotiate d i n t o a fixe d rate , extending the time i f necessary, bu
t revaluin g the property as J u l i u s Caesar did , and settin g up a reasonable
payment schedule. I f the homeowner cannot cope wit h the payments, then they los e
the home. The bankers have to suffe r t h e i r f a t e . Le t the banks reorganiz e and
consolidate , and ther e must be the s u r v i v a l o f the f i t t e s t . That i s not t o say we
should abandon FDIC. We must stand behind a l l bank deposits . That i s the pric e we
must pay as a natio n fo r the f a i l u r e the regulat e the " b i g " houses as we do the
"small " players . We must c o l l e c t th e Sub-Prime Mortgages int o
a singl e fund tha t shoul d then allo w privat e investment.Individual s could inves
t even t h e i r 4013£s i n part , and we must c u r t a i l government borrowing a t a l l costs
. Those who do not want t o see the " s o c i a l " spending of the Democrats, we should
r e a l i z e tha t there would have been fa r more than a chicke n i n every pot had we
not spent so much on i n t e r e s t . I n f a c t , had there not been i n t e r e s t payments, we
coul d have spent the same amount of money and there would be a nationa l healtcar e
l i k e tha t i n England. We must confron t what i s going on. I t i s time we restructur e
Government i t s e l f . Lockin g up every person i n Banking or Wal l Stree t w i l l not solv e
the problem. Capitalism i s not a t f a u l t . The "club " seeks " r l s k l e s s " trade s and r
e l y upon Government t o cover losse s so why bother worrying about r i s k ? Long-Term
Capita l Management collapse d when the IMF coul d not continue to support Russi a
tha t the "club " was buying t h e i r paper a t 50-100% rate s of Interest . Thi s i s the
same problem. The Sub-Prime Mortgages displce d r i s k fo r they looked to the
Government as a guaranteed trade . That i s not c a p i t a l i s m - tha t i s p l a i n old-
fashio n corruption . Le t us deal wit h the truth ! The
bad p o r t f o l i o s i n Japanese corporate s were purchased wit h a note removing the
problem allowin g them to get back to business . Do not allow , the banks t o work-out
these problems and do not h i r e bankers to c o n t r o l the bailout . Hir e q u a l i f i e d fund
managers who w i l l not protec t the banks. A lawyer who represent s "himself , has a f o o l
as a c l i e n t . Bankers protec t bankers. How can you prosecute the people I n charge o f
the bailout ? We need independent management and consolidatio n o f SEC, CFTC and the
Federa l Reserve i n t o one regulator y body tha t protect s the system, not i n d i v i d u a l s .
I t i s time fo r seriou s reorganization .
Stop the Marxism! We need t o retur n t o basics . End the Income ta x & replac e i t
wit h a 10% Nationa l Sale s Tax (excludin g raw food & basi c clothing ) tha t als o includ
e r e a l estate . China has boomed because i t had no income tax ! Thi s i s what the men
who establishe d t h i s natio n establishe d u n t i l Marxism began wit h the passage of the
income tax only f o r the r i c h i n 1909, that now applie s t o everyone. Stop borrowing
money from the poorest wit h no i n t e r e s t masking i t as a "refund " ,neck confusin g
them to-make i t appear as a g i f t . Do t h i s , and we w i l l reestablis h job s i n America
and i t w i l l matter not i f someone i s an i l l e g a l a l i e n or not fo r they w i l l ' s t i l l
pay t h e i r f a i r share. We ar e l o s i n g job s because of hig h taxes and hig h heathcar
e cost s tha t j u s t make i t cheaper t o se t up servic e oriente d job s i n India , P h i l i p
p i n e s , or Mexico. I t i s time the 800 pound g o r i l l a l o s t a l i t t l e weight. Thi s w i l l
creat e a o f f s e t t i n g economic boom tha t w i l l save the nation . Marxism does not-
work. We cannot be a l i t t l e - b i t pregnant. The Constitutio n was establishe d to
preserv e the "Blessing s of L i b e r t y " t o a l l posterty , not depending upon race , creed ,
or c l a s s . Marxism was a disaster . I t should o f f e r no model fo r the future . Jus t
loo k a t Russi a and China. I f we do not reorganize , Ayn Rand w i l l be correct !
We can s t i l l have the benefi t of a c o l l e c t i v e societ y tha t afford s common goal s
to secure the i n d i v i d u a l way of l i f e . There must be the funded programs wit h the
growth In spending l i m i t e d to the GDP growth tha t must be se t by a globa l economic
independent organizatio n not subjec t t o the p o l i t i c a l pressures of one nation . The
 economic s t a t i s t i c s are bogus. They are p o l i t i c a l l y manipulated l i k e i n f l a t i o n
t o reduce government sepending where many areas are indexed to CPI. Government
w i l l always corrup t i t s e l f . The reason we have the "Julia n Callendar " i s because
th e Romans knew the moon callenda r was incorrec t and that a d d i t i o n a l days had to
be inserte d to maintai n the seasons. Thus, someone had to be give n the j o b to
decide how many days to i n s e r t and when. That jo b was given to the High P r i e s t
("Pontif f Max"), who was r o u t i n e l y bribe d t o s t a l l election s by i n s e r t i n g months
a t a time. When J u l i u s Caesar walked i n t o government, he di d massive reforms and
thus he eliminate d the corrup t jo b of managing the callendar . Thi s i l l u s t r a t e s
tha t we must remove the temptatio n to manipulate economic s t a t i s t i c s t o e f f e c t
c e r t a i n p o l i c i e s . As they say, s t a t i s t i c s can be made to ensure they do not t e l l
the truth . Carrot s are very dangerous,because everyone who has ever eate n one has
eventuall y died ! Every country calculate s t h e i r s t a t i s t i c s accordin g t o a unique
formula . How can we even compare economic growth from one natio n t o another ?
We can monetize par t of the debt by redeeming a s p e c i f i c quantit y wit h newly
generated cash. There should be some control s on the quantit y of d o l l a r s create d
i n t e r n a t i o n a l l y through regulatio n carrie d int o place by the Federa l Reserve. We
must als o reestablis h the e n t i r e purpose of the numerous branches o f the Fed. That
was put i n plac e a f t e r 'the San Francis o Earthquake and the Crash of 1907. I t was
understood tha t there was a problem of regiona l c a p i t a l flows . To preven t a
shortage of cash tha t le d t o bank f a i l u r e s i n some regions , each branch was
autonomous tha t allowed f o r i n t e r e s t rate s t o be higher i n some regions . We - saw
thes e problems i n the 1980s, where a singl e nationa l i n t e r e s t rate s was used t o
stop stoc k market speculatio n tha t depressed farmers, because f o r World War I I
, a l l p o l i c y was usurped i n t o Washington because ther e was t o be a great expansion
i n debt. We need to stop usin g a gian t club t o stop one effec t by punishin g
everyone. Do not forget , lower i n t e r e s t rat e may not entic e • investment (see
Japan 0.1%), yet i t w i l l depriv e the e l d e r l y who are one of the larges t savers,
from earning an income when the y no longe r can work.
Jus t l i k e a company gone i n t o d i s t r e s s , we j u s t have t o dea l wit h the whole
problem. I f we thin k we can j u s t have bi g publi c t r i a l s l i k e Nero di d wit h the
Christain s to cover-up the burin g of Rome,then we are going t o have no future .
You can execute a l l those on Wal l Street . I t s t i l l w i l l not help . We need r e a l
l e g a l reform and stop the abuse of prosecution s fo r p o l i t i c a l purposes. The tru e
wealth of a natio n i s i t s consisten t Rule o f Law that protect s not merely the
persona l l i b e r t y of c i t i z e n s , but t h e i r property . I f the Rule of Law i s not going
to be upheld and can be even manipulated fo r r e l i g i o u s purposes, then we are j u s t
reducin g ourselve s t o a Banana Republi c wit h nuclea r weapons & c a p i t a l w i l l f l e e !
We need seriou s reform of how government operates. We need a singl e agency
to regulat e the f i n a n c i a l markets and banking. We have t o stop the buylng-of f of
Government attorney s and i f they are not intereste d i n a career , then get your
experience someplace else . We need i n t e g r i t y t o be restored . We must stop the
abuse of "big " firm s i n s t i g a t i n g the government agencies to remove competitors .
Thi s i s eithe r going to be a natio n of tru e l i b e r t y , or melt-down the statut e of
l i b e r t y and use i t fo r handcuffs and stop the propaganda. We must r e a l i z e that
" r e a l " c a p i t a l w i l l f l e e i f we are not f a i r and consisten t i n our treatment of
a l l those withi n our society . I f we are so i n t o l e r a n t that the C a l v a n i s t i c force s
tha t seek t o gai n contro l o f the law to e f f e c t r e l i g i o u s objects , we are no better ,
than the Taliba n i n Afghanistan . True l i b e r t y and freedom i s a give n that i s devine.
Everyone has the fre e w i l l t o pray or t o s i n . A s i n t o one group i s not a s i n t o
another. There are a host of variation s i n Islam, C h r i s t i a n i t y , and Judaism. Who i s
r i g h t and who i s wrong i s not fo r court s or government to l e g i s l a t e . We must defend
the r i g h t t o speak f r e e l y f o r everyone, or we w i l l silenc e ourselves . I t was the
hatre d of the Protestant s agains t the Cathoic s tha t not only tor e England and Irelan d
71
 apart , but le d to "prohibition " i n the United State s to creat e laws t o impriso n
th- c a t h o l i c I r i s h and I t a l i a n s . That create d the Mafia , was responsibl e fo r
countles s deaths, untold waste of nationa l wealth, and was repealed i n the end.
No more! As Margaret Thatcher once s a i d , " I t i s j u s t time, " She i n s t i n c t
i v e l y knew tha t cycle s e x i s t because people j u s t get t i r e d o f the same ol d
thing . We have an absolut e r i g h t t o good honest government. That i s the b a t t l
e cr y o f every c i v i l war known to history . Jus t as J u l i u s Caesar was a man
of th e people who was cheered when he crossed the Rubicon, we need someone o
f i n t e g r i t y so bad, unles s we obtai n honest reform, we are perhaps i n v i t i n g
the Gods of War to return . The people crave a fres h s t a r t , and they crav e f i s c a l
r e s p o n s i b i l i t y . Where ar e the aspirations , dreams, and promises of Jefferso n &
Madison? Where have they^ gone?
Edward Gibbon (1737-1794) wrote a most notabl e epitap h i n hi s celebrate d '
The Declin e and P a l l of the Roman Empire f i r s t publishe d between 1776 amd 1788,
describin g two men who ascended the Capitolin e H i l l i n Rome to survey tha t which
remained. One remarks t o the other :
"Her primeval state , such as she might appear i n a remote age,
when Evander etertaine d the strange r of Troy, has been delineate d
by the fancy of V i r g i l . Thi s Tarpeia n roc k was then a savage and-
s o l i t a r y thicket : i n the time of the poet, i t was crowned wit h
the golden roof s o f a temple; the temple i s overthrown, the gold
has been pillaged , the wheel of fortun e has accomplished her
•revolution , and the sacre d ground i s agai n disfigure d wit h thorns
and brambles. The h i l l of the C a p i t o l , on which we s i t , was formerl y
the head of the Roman empire, the c i t a d e l of the earth , the t e r r o r
of kings ; i l l u s t r a t e d by the footstep s o f so many triumphs, enriche d
wit h the s p o i l s and t r i b u t e s of so many nations . Thi s spectacl e of
the world , how i s i t f a l l e n ! how changed! how defaced! The path of
victor y i s obliterate d by vines , and the beneches of.th e senator s ar e
concealed by a d u n g h i l l . "
Id./Chapter LXXI
We have a choice , f i x what I s broken, o r di e leaving'behin d nothing of any
s i g n i f i c a n c e as the dreams tha t once f i l l e d t h i s lan d evaporate int o o b l i v i o n . The
impatience of c a p i t a l w i l l not long suffe r the suspence of truth.. C i v i l unres t and
even war follo w economic declines . The cloc k i s t i c k i n g . The C i v i l War cycl e turned
i n 2002. The Clas h of reason i s on the horizon . I t cannot be business as usual .
Indeed, i t i s only a matter of time. Marxism, socialis m and communism are'not
the alternativ e fo r true capitalis m i s freedom. The "club " di d not seek capitalism .
They als o sought t o contro l the fre e markets fo r persona l gain , usin g government.
We need r e a l reform. Jus t as ther e must be a separatio n o f church and stat e tha t
the Religiou s Righ t does not respec t tryin g t o manipulate the law fo r r e l i g i o u s
purposes no d i f f e r e n t than the Taliban , we desperatel y need e t h i c a l reform t o stop
the desir e to r i g the game. Adam Smith was correct . But keep i n mind, everyone has
a s e l f - i n t e r e s t and act s upon i t . I want t o preserve freedom fo r my postert y and
to stop the corruptio n that leads t o l e g a l persecution s .of groups, industries. , o r
even i n d i v i d u a l s . Libert y w i l l not be known by our p o s t e r i t y unles s we j u s t once,
see the lesson s of time and stop the l i n e a r q u i c k - f i x answers tha t ar e never a s
o lu t i on Marti n A- Armstrong
Former Chairman of
Princeto n Economics International '
& former Chairman of
The Foundation fo r the Study of Cycle s