We have witnessed extraordinary events coming out of Greece. There is little doubt that its bonds are now rated as junk. However, there is a lesson to be learned from the 1931 Sovereign Debt Crisis. After each nation defaulted and was relieved of its debt, their economies reversed. Even Great Britain recovered before the United States once it was forced off the gold standard. An as for the United States, well when Roosevelt confiscated gold from the banks and devalued the gold relative to gold from, $20.67 an ounce to $35, the worst was over. Why do defaults and devaluations relieve the economy? Ironically, as long as capital hoards and people are not investing, they drive the value of the currency higher just as if they had bought stocks. In this case, they buy the currency, which reduces economic output further creating DEFLATION.

What we are looking at is Greece being the first to crack, should also be the first to start to recover. Look East to Greece and you shall know your fate. Those calling for a pending Great Depression fail to grasp the real mechanism at work. They tout gold and a Depression at the same time. This is simply not the way things move. Gold rose in purchasing power during the Depression because it was money. Today, it would decline under those conditions because it is not money. For gold to rise there must be INFLATION not DEFLATION and thus we cannot have austerity, depression, and rising gold. The system today is set for inflationary trends, not a Great Depression.

The Greek share market declined for 56 months. It is starting to come to life. Here are the Monthly Bullish Reversals to watch. Pay attention to Greece, for as she goes so will the rest of the world. The rise in tangible assets reflects that shift in PUBLIC to PRIVATE investment strategies. With government debt being the risky nonsense lacking any security, smart capital will shift toward the PRIVATE sector. As that takes place, you will see this index begin to generate Monthly Buy Signals.

Here is the Forecast Timing Array for the next year in the Greek General Index. This will give us a good perspective of when to pay attention. We will be looking at Greece and the Euro nations in detail at the Berlin Conference and will provide a special report on the region.

About Martin Armstrong

“In Armstrong’s view of the world where boom-bust cycles occur like clockwork every 8.6 years, what matters is his record as a forecaster. … He called Russia’s financial collapse in 1998, using a model that also pointed to a peak just before the Japanese stock market crashed in 1989. These days, as the European sovereign-debt crisis roils markets worldwide, he reminds readers of his October 1997 prediction that the creation of the euro “will merely transform currency speculation into bond speculation,” leading to the system’s eventual collapse.” – Ed Note: Much more HERE