Martin Armstrong: Who Will Collapse First?

Monday, October 3, 2011
By Paul Martin

With continued turmoil in global markets, today King World News interviewed internationally followed Martin Armstrong, Founder and Former Head of Princeton Economics International, Ltd.. Armstrong’s firm rose to be perhaps the largest multinational corporate advisor in the world and by the 1997 Asian Currency Crisis, Armstrong was invited by China and he flew to Beijing to advise the Central Bank. Many people don’t realize that Congress went to Martin Armstrong for help as the fires were burning during the financial collapse of 2008.

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September 30, 2011

When asked what Congress wanted, Armstrong replied, “One question (From Congress) was, ‘How could everything collapse overnight like that?’ The difference was very simple, the mortgage-backed securities that they were using, they rated them AAA. That’s why S&P and so on are being investigated because once they were rated AAA, then you could post them in the repurchase agreement market, the repo market.

In the repo market you post securities, the next day you get cash for them and the next day you have to pay back the cash. So it’s a 24 hour market. Now if you have these time bombs that are rated AAA, and it has to be AAA paper to go into the repo market, and it blows up, you have 24 hours to come up with the cash.

Whereas, if they were not AAA, if they were even AA and they blew up, then they are just sitting on a company’s books. That has to be reported on a quarterly basis and they have the time to work it out, take charge offs, whatever. Lehman would have survived. Most of the other companies would have survived….

“This is what a lot of people didn’t understand. That is why a lot of people (Congressmen) ended up coming to me because I understand these markets, how they were created, I was there when they were created.”

When asked which currency will collapse first, Armstrong responded, “Americans tend to focus really just on the United States. The United States is, among the Western countries, it’s actually in the best shape. Europe is going to largely collapse first. What you have to understand with the dollar is that the dollar is the reserve currency. What that means is that about 40% of the interest that we pay goes overseas.

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