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Doug Casey on the Continuance of the Greater Depression and the Brighter Prospects for Gold
With Anthony Wile - September 04, 2011
The Daily Bell is pleased to present this exclusive interview with Doug Casey
Introduction: Doug Casey has appeared on hundreds of radio and TV shows and has been the subject of articles in People, US, Time, Forbes, The Washington Post and numerous other publications. His books include The International Man, Crisis Investing (17 weeks at #1 on the New York Times Bestseller list), Strategic Investing (seven weeks on the NYT list) and, most recently Totally Incorrect. He's the Chairman of Casey Research (caseyresearch.com), which publishes about two dozen newsletters and numerous special reports. Doug Casey, who's travelled to over 175 countries, and his team have been correctly predicting major budding trends in the overall economy and commodity markets for over three decades.
Daily Bell: Welcome, Doug. Let's jump right in. Are you still convinced we are heading into a "Greater Depression"?
Doug Casey: Yes. There is no question in my mind about that. Governments all over the world have created trillions of currency units since 2007 in the mistaken idea that it would create prosperity. The Americans – but also the Europeans, the Chinese and others – have papered things over for the short run mainly by inflating the stock markets, artificially depressing interest rates, and slowing the fall of the real estate market. All that extra currency has made people think they're richer than they are, and has encouraged extra consumption – which is a large part of the problem. Now they're out of bullets.
We are coming out of the eye of the hurricane and it's going to be much, much more serious than it was in 2007, 2008 and 2009. That's because all those currency units they created are causing tremendous price rises on the retail level. It's going to be devastating for the average guy.
Daily Bell: How long do you expect it will take before there is a complete breakdown in confidence of the US dollar?
Doug Casey: It's happening right now. The Chinese – or at least their central bank – have more US dollars than anybody else, and they want to get rid of them. They are trying to offload those dollars, for instance in Africa, to get rid of them for real wealth. Nearly everybody in the world feels this way. The new deals that they cut, with the Iranians and the Argentines for instance, are almost like barter deals. Nobody wants to use the paper currency of an unreliable third party. The US dollar is like an Old Maid card; nobody wants to get stuck holding it.
I think in five years the dollar will have lost its reserve status completely. It may be more like two or three years. I hate to put such a near-term time frame on something that's so momentous in size. But I don't see any way out.
Daily Bell: Will there be accompanying civil unrest – rioting, looting and assorted acts of criminal behavior?
Doug Casey: Almost certainly. I think the riots we have seen recently in London, the various flash mobs we have seen around the US, and even the rioting that happened in Vancouver, are just an overture. When people don't have jobs – and actual unemployment in the US is running at over 20% if it is calculated the same way it was 30 years ago – they become very unhappy, while they have lots of time on their hands. Combine that with the fact a vastly higher number of people live in cities than was the case in the '30s – trouble always arises from cities. Combine that with skyrocketing inflation and a generally collectivist/statist psychology on the part of all segments of the population, and the result is inevitable. Living in a big city, or even a suburb, impresses me as a mistake.
Daily Bell: Is there any way of stopping this train wreck from occurring?
Doug Casey: Right now the US Government is spending over a trillion and a half dollars more than they are taking in – but that's as good as it's going to get. We're already in the best of all possible worlds, considering what's happened. It gets vastly worse from here. As unemployment and business failures start going up the government's deficit will rise to $2 trillion per year. They talked about cutting $2 or $3 or $4 trillion, but that's over 10 years and it's loaded towards the end of the 10 years; their supposed cuts are inconsequential, trivial, and meaningless. In addition, there's no reason to believe that spending won't skyrocket from here, because Congress is going to change next year, and again two years after that. They'll all have new cockamamie spending ideas. So this is all a complete charade.
To answer the question, the only ultimate cure for this is that interest rates go back up to the 12 or 14% level, which would reward prudent savers and punish borrowers. But that's just a start. Military spending should be cut 90%, with the closure of all foreign bases, covert operations, and aid. Regulatory agencies like the SEC, the FDA, HUD, USDA, DOE, OHSA, FAA, EPA, etc., etc. should be abolished. The Fed should be abolished and gold reinstituted as money. The national debt should be overtly defaulted on for numerous reasons, but certainly because it acts as a mortgage on future generations. But none of that's going to happen, rather than the opposite. These prescriptions, while economically and morally correct, are a complete political pipe dream.
A big part of the problem is that people have been consuming more than they have been producing. So the way to get the economy back on track is for people to produce more than they consume and save the difference. High interest rates encourage that. But the government is opposed to high interest rates, partly because it runs counter to Keynesian theory and partly because it would greatly accelerate the bankruptcy of the government.
Let's say interest rates go from the 2% level they are now to a 12% level. That's going to mean that interest payments on the whole national debt – which has basically been financed short term and has to be rolled over annually – will go from say $300 billion per year (2% of $15 trillion) to $1.8 trillion per year. The deficit, therefore, must increase by another $1.5 trillion dollars a year if you do the single most important thing to slow down this train wreck.
So, I think they have actually gone beyond the point of no return. There's no way to avoid a genuine catastrophe, much worse than what happened in the 1930s. There are several ways this could end, but I suspect the government will choose the worst alternative. I suspect the destruction of the US dollar is in their minds. How are we going to get rid of all this debt? Well, destroying the US dollar is the only way. Their first priority is saving the US Government.
But they're not considering that the people who will be hurt the worst are the prudent people, people who have saved dollars. They will destroy the prudent parts of society that actually try to produce more than they consume and save the difference. Prudent middle class workers are going to be wiped out, and the people who borrow and are deeply in debt are going to be rewarded by having their debt wiped out. That's perverse. It is going to wipe out the middle class in the US and all over the world. Everywhere in the world, people have preferred to save in US dollars where they can, and those people are going to be wiped out. Perhaps even worse, it's going to put the US government temporarily back on a manageable financial basis. That means they won't have to fire all their employees or disband all these agencies and get rid of the military, which is what should be done. They'll wind up destroying the productive parts of the economy to save the government; the parasite will kill the host. It's a total disaster, with wide-ranging consequences, and it's going to happen in this decade.
Doug Casey: I don't think so. The US electorate is entirely too corrupt at this point. Half of the people in the US get more from the US government than they pay out in taxes; no way are they going to break their own rice bowls. Plus, you have all these interest groups – you've got the union people, most of the blacks, the professional political classes, the government employees, the average guy who thinks the government is a cornucopia, everybody who has been taught FDR's insane policies cured the last depression – none of them are going to vote for Ron Paul. He's got a coterie of libertarians, classical conservatives and students, but they are trivial in number. The Republicans will nominate some demagogic nationalist, some Bible-thumping warmonger. The field of possible Republican candidates makes my skin crawl.
There is also a media blackout that has been enforced against Ron Paul, as well as Gary Johnson, the ex-governor of New Mexico – a decent man who impresses me as Ron Paul Lite. At the Iowa straw poll Ron came in second, but nobody even noticed. Michelle Bachman basically bribed all of her people and there were still only 150 more votes from her than for Ron Paul. Jon Stewart is a hard-core leftist but he has some refreshing intellectual honesty, and did a great job covering that. (Watch that video here.) But straw polls in Iowa are meaningless in the context of a national election
Daily Bell: Do you think mainstream media has an agenda that includes the alienation of Ron Paul? Why? How does that happen?
Doug Casey: The mainstream media needs to be flushed. I'd like to believe that even the average American, corrupted as he is by government welfare payments and government schools, can increasingly see the mainstream media is just a parrot; they don't say anything of value.
To me, one indicator of the worthlessness of mainstream media was the self-immolation of Tom Ball, a few months ago. (See this article for details). Here we have a guy who set himself on fire, for political reasons, on the courthouse steps of a small town in New Hampshire and there was absolutely zero notice any place but the local paper. You would think that something as outrageous as an American setting himself on fire in a small town in America for political reasons would get some kind of recognition. But no, it was a total news blackout. The mainstream media is for entertainment purposes only.
Daily Bell: Let's suppose Ron was to win the GOP nomination and subsequently the US presidency. Would he be able to actually make the necessary changes?
Doug Casey: No, even if by some miracle Ron Paul was elected. I can tell you what would happen. Before he could do anything he would get a visit from the heads of agencies like NSA, CIA, FBI and others, including a bunch of generals, and they would very seriously lay down the law to him. That's because the president and Congress don't run the government, it's these gigantic Praetorian agencies. The guys with guns, and no ethics, who absolutely and reflexively follow orders, have all the real power. They are not going to let their rice bowls be broken. So, forget about it. Ron's candidacy, like those of Harry Browne in the 90s, is useful only for advertising sound values. It's a pipe dream to think he can be elected by the mob. And a fantasy to think he'd be able to change anything if he was.
Daily Bell: Recently, Alan Greenspan said on NBC that the US would never default because the Fed can always print more money. (Watch that video here.) Isn't that default by devaluation? Who does it hurt the most?
Doug Casey: Yes, that's exactly what they are going to do – print – and it's going to devastate the middle classes, the people that save. That is in fact what they are going to do. As I said before, it would be far better if they defaulted overtly – that would punish those who lent the government money, it would ruin the government's credit, it would force the government to cut back radically and would likely save the dollar. But they'll do none of those things. Greenspan and Bernanke should both be hung by their heels from a lamp post as an example, although it probably wouldn't do any good in that they're both just stooges, caught up in a tide of events far beyond their control at this point.
Daily Bell: Was Bernanke's announcement to keep Fed rates low for at least the next two years surprising to you? Is it going to help the economy?
Doug Casey: Bernanke is an utter fool, an academic with no experience in the real world, operating on totally fallacious and destructive theories. Holding rates to arbitrary and artificial low levels is exactly the opposite of what should be done. Interest rates have to go up to stop people from borrowing and get them to save. It's one of the things that ensures they are going to destroy the dollar.
Daily Bell: What do you think about QE3? Will it happen? Will it help?
Doug Casey: It's happening now. It has to happen because how else are they going to finance a trillion and a half dollar federal deficit? And that deficit is going to go higher. It's happening as we speak. Foreign central banks can see what's going on. Nobody wants to buy treasuries; the Fed is the only buyer at the low interest rates that they have engineered. The Fed should be abolished. The only good thing about what they're doing is that they're going to destroy themselves. But the government will just replace them with a new central bank.
Daily Bell: Since you were last here, gold has made quite an impressive move against the US dollar. Did the recent increase to over $1,900 an ounce shock you?
Doug Casey: Well, as a bottom fisher, I hate to buy things that have run up as far and as fast as gold, or silver for that matter. That said, I fear that over the next year or so they are going much higher. Gold is the only financial asset that's not simultaneously somebody else's liability, and nobody is going to want to hold dollars or any other currency. Gold is going to be driven much higher by fear, greed and prudence – a deadly combination. Gold will turn into a mania, a bubble.
Of course, everything else in the world has been driven to high levels. There are no bargains, anywhere in the world. The stock market's not a bargain by any parameter I can think of. Real estate hasn't reached a bottom in the US, and it's just started collapsing in places like Australia, Canada and the UK. The bond market is a terminal short sale. What can you buy? There is virtually nothing you can buy other than some commodities and gold at this point. So, gold's going higher, if only for a lack of reasonable alternatives. So I am not surprised. But I'm unhappy about the fact that it's too late to buy for low risk speculative gains. The name of the game now is to conserve assets.
Daily Bell: Do you think the subsequent correction is healthy for gold or will the volatility of it scare off a lot of people and keep them from transferring out of devaluing dollars?
Doug Casey: Yeah, I think it would be great if it went down some more. I bought my gold at drastically lower levels, of course. But I earn a lot of money, and I don't want to keep it in dollars – so I want to buy more gold, at the lowest prices I can. But now a buyer has to compete against central banks from all over the developing world that are belatedly building positions with all their excess dollars. There will be a bubble in gold. There is likely going to be a bubble in gold mining stocks, too. If all these excess dollars look for some place to hide, there's going to be a real mania.
Daily Bell: The war in Libya against the Gaddafi regime – how do you feel about US involvement in that situation?
Doug Casey: It's idiotic and counterproductive, just like all the wars they are engaged in. Apparently the rebels are going to take over. But what they are going to find is that there's not a cohesive group called "the rebels." There's going to be a dozen different rebel groups, tribes, clans, liberal parties, Islamist parties, foreign stooges and god knows who and what else. You are likely to have a civil war, and chaos that's going to last for years while these people fight it out with each other. Libya, like most countries in Africa and the Mid East, should actually break up into several countries – at least as long as we still labor under the backward and destructive illusion that countries are necessary. But that's another subject...
So it's going to be very much like what happened in France in 1789 where they got rid of Louis XVI, which was a good thing. But then they got something worse, in the form of Robespierre. And then they replaced him with something even worse, in the form of Napoleon. Chaos and repression is likely to dominate the area for a long time because they have a lot of oil and other resources. These people aren't used to producing anything, so they'll fight continually to steal resources from each other. That is what you are likely to see in all the countries in the Middle East. Meanwhile, meddlers from the US and Europe are going to talk about democracy in Libya.
Daily Bell: Is democracy a good thing?
Doug Casey: No. Democracy is just mob rule, dressed up in a coat and tie. It's too bad people conflate democracy, which is mob rule, with liberty and freedom. Democracy in most of the world is everybody voting for the person that promises him or her the most stolen goods from other people. Democracy is a political system, and all political systems rest on institutionalized coercion. I don't care whether it's a king, a president, a congress, or a mob of chimpanzees that tell me I have to pay 50% of my income over to them so they can fund wars, welfare programs, the police state, oligarchic corporations, or whatever. That's what democracy is today. Regretably, the average person has been programmed to think democracy is a high moral good, much as his ancestors were programmed to believe that monarchy was the way Yahweh, or whoever, wanted the world organized.
The only kind of democracy that I support is the democracy of the free market. You vote with your dollars. Anything that you want or need can be gained by production and trade. The democracy we currently know is a fraud and a delusion.
Daily Bell: Why do American taxpayers allow their government to spend trillions of dollars spreading "democracy" in other countries – strapped to the barrel of a gun if necessary?
Doug Casey: First, only half of American voters are taxpayers, and very few have ever been outside of the United States. They don't know anything other than what their government and the puppet media tell them. They don't know or care what's going on, at least once you get beyond their narrow lives, and what they see on reality TV.
Think Snooki on "Jersey Shore." It's not a question of democracy; it's a question of the Defense Department and all these extremely aggressive and dangerous agencies like CIA, NSA, FBI, DoD, and Homeland Security amusing themselves, putting themselves into a position to buy new toys and steal money. The American voters or taxpayers don't have anything to do with it at this point. The US Government has a life of its own, it's so large that it's impossible to control and, in fact, it's completely out of control. Nor is there any realistic prospect of bringing it to heel until it collapses under its own weight.
Daily Bell: Is Ron Paul correct that the troops should come home and focus on defense of the national borders rather than offensive maneuvers?
Doug Casey: Of course. There should be zero US troops in any country, anywhere in the world. And the US military should be cut down by at least 90%. But should the US military be defending US borders? Against who? The Canadians? The Mexicans? I don't think the US military should even be doing that.
Here's something the mass media-besotted group-thinker hasn't considered: The US military no longer serves a useful purpose. In the first place, it's bankrupting the country, which ensures the defeat of the US if a real enemy actually materializes. Apart from that, the US military is not actually defending the US; it's going out and making enemies, and is going to provoke a gigantic war at some point. It's going to be much more serious than these insane little sport wars in a half-dozen countries against "terror" – whatever or whoever that is.
So the US military is counterproductive, and it's actually extremely dangerous, both to foreigners and Americans. The worst thing is that the average American thinks it's great. The mob now worships soldiers – a big turnaround from the Vietnam days. I've got nothing against the kids in the military; some joined because they needed a job, some because they wanted an adventure, some because they have a misguided sense of service. Most soldiers are just refugees from ghettos, barrios and trailer parks. What do you expect from 18 year olds? They are not bad, but neither are they the best and the brightest out there. The best and brightest don't become government employees. They are just poor kids that need a job, are misdirected and are brainwashed by corrupt old gangsters in the Pentagon.
Daily Bell: Do you think that 9/11 was blowback against US foreign intrusions into the backyards of others or was it really an attack against Americans because the "terrorists" didn't like American values?
Doug Casey: People that say they attacked us because they "hate our freedom" are, without exception, fools, idiots, and/or liars. Muslim fighters today are pretty much motivated by the reasons that Osama bin Laden listed. But, stupidly, nobody ever listens to what the man actually said. It shows how incompetent and thoughtless people in general, and US leaders in particular, are.
In a conflict, the first thing you do is find out who your enemy is, then listen to what he says, and then try to figure out why he is doing things. Osama spelled out the three reasons why he and his colleagues (and there are lots of them besides al-Qaeda) are attacking the US.
1) We have troops in Muslim homelands; this is a perfectly legitimate beef. Americans wouldn't want a Muslim army running wild in the US either.
2) We are propping up the destructive quislings running their countries; he was quite correct on that. This is part of what the "Arab Spring" is about. And,
3) the US is propping up Israel, which they perceive as an usurper and sworn enemy. I have nothing against Israel, nor do I have anything against Muslims or the Palestinians; I wish them all well. But getting involved in others' squabbles is nothing the US should be doing.
The way to solve the problem is not by redoubling our efforts, planting armies in some Muslim countries and killing suspected enemies in others with drones. We must withdraw our soldiers. Apologize for having put our armies there. Stop propping up stooges and supporting groups, including the Israelis, which they consider to be their enemies. You can't win a war against hundreds of millions of people, short of genocide. And there's no reason to provoke a war, which is what we're doing, in the first place.
Daily Bell: Should a new 9/11 independent commission be established to get to the bottom-line truth of what really happened that day?
Doug Casey: Yes. Inquiries so far have been an embarrassing charade. But it will never be established by the US government because the US government is full of people who have their own agendas, and who have dirty hands – like Bush and Cheney, who were itching for a war, and should be tried as war criminals. Of course, they've already established what was supposed to be an "independent" commission to determine what happened on 9/11, but they never even addressed things like why Building 7 came down in a perfect pancake on its own footprint eight hours later, when it wasn't even hit by a plane. That and a dozen other significant questions were never even addressed. The idea of an independent commission is a non-starter. It's never going to happen. It's just another sign of how thoroughly corrupt the US has become.
Daily Bell: Is there any such thing as al-Qaeda? Was Osama bin Laden their leader?
Doug Casey: I've never met an al-Qaeda operative, at least to my knowledge. I guess they exist because they occasionally publish a magazine called Inspire. Frankly, all anybody knows, or rather think they know, is what comes through the media. So nobody, including myself, can have any confidence in what the reality is. But I wouldn't worry about al-Qaeda. What I would worry about are dozens and scores and hundreds of other groups that are inevitably going to attack the US and Western interests. And the response of Western governments.
We are not fighting a little organization called al-Qaeda, where if they are destroyed the war is won. This is the era of open-source warfare. Any two guys – even one guy – can go on the warpath, maybe because a drone has killed one of his friends or relatives during a wedding, or because he just resents US soldiers breaking his door down at 3AM. An individual can have a successful war against the empire. The best way is by blowing up enemy infrastructure. It's easy, very hard to defend against, and offers a huge return on investment. You don't need B-2 bombers – in fact, they're dinosaurs, and you wouldn't want them even if you could afford them.
What you are going to see is a lot more informal, open source style attacks. The guerrillas may not like or even know each other. But they'll actively learn from each other in fighting their common enemy, and that's a war that the empire can't win. We invest a million dollars, directly and indirectly, training every US soldier. But a young Jihadi only has to invest 20 cents for a bullet for an AK-47 to kill that soldier.
We invest $250 million for an F22, and a Jihadi might be able to take one down with a thousand dollar RPG. Some well-placed explosives take out a $200 million refinery, plus cause a couple billion of collateral economic damage. It will be like that throughout the spectrum, with thousands and thousands of variations. And it will happen exactly when the US and Europe are staggering under an economic depression of their own making. Osama said his objective was to bring down the enemy mainly by economic means. A war against Islam is pointless, and unwinnable, short of genocide. A war against terror, which is what the West is currently said to be fighting, is actually insane. You can't fight a war against a tactic, and that's what terror is.
Daily Bell: Did Osama die as Obama said he did, via a SEALS mission?
Doug Casey: I don't see the evidence for his death. All we have is the word of government operatives, and there are all kinds of unanswered questions and conflicting stories. Why wasn't a real defense put up? Why wasn't he even armed, after hearing a helicopter crash in his yard? Why would they kill an unarmed man who would have been the best possible intelligence asset to capture? What ever happened to the people in the crashed helicopter? What happened to the other people in the house? Why would they, against all logic, dump the body at sea? Why haven't we heard any firsthand testimony from the SEALS? Were they, by an odd coincidence, the same SEALS who were killed in another helicopter crash last month in Afghanistan?
We know nothing except some unreliable news reports and an article in the New Yorker last month that was full of holes, written by a reporter whose father is a high military official. I have no idea how or when Osama died. It is said, very reasonably, that he died ten years ago. Nobody knows the truth. But the average American is not only bovinely accepting, but gleeful, in believing whatever he's told.
Daily Bell: Is there a global conspiracy by a monetary elite to install one world governance and a single currency unit?
Doug Casey: I don't believe in conspiracies because it's hard to even get two or three friends to decide what movie to see or what restaurant to go to. So as hard as that is, and as hard as it is to even get my secretary to do what I want her to do, it seems it would be impossible to get hundreds of the most corrupt and powerful people in the world to agree on an agenda like that. I think the reason it looks like conspiracy is because these people are sociopaths. They are essentially destructive, but their interests are occasionally roughly aligned in some ways. So it looks like a conspiracy but it's not.
It's like these ridiculous notions that circulate about a few bullion banks suppressing the price of gold and silver. Of course governments would prefer gold stay low, for lots of reasons. But that's different from thinking they can keep it low. If that's how stupid and incompetent they are, still going short, trying to suppress the price, with gold at $1800, after having idiotically lost maybe hundreds of billions fighting one of history's great bull markets, then we have nothing to worry about. If there was any truth to it, traders would have been snickering about it over drinks for the last decade. And any trading department that wrong for that long... it's impossible, because they would have been turfed after the first quarterly report. But, then again, since a lot of people are credulous enough to believe nonsense like that, even now, maybe we do have something to worry about. It would appear some gold friendly folks don't have much of a clue how the market, or even the world at large, works.
Daily Bell: Will the Internet Reformation slow this drive towards global governance as more and more people wake up to how the world really works? Will the elite take a step backwards?
Doug Casey: Well, the Internet is the best thing that's happened since Guttenberg's invention of moveable type. It's the most powerful weapon that the average man has. I'm of the opinion that most people are decent human beings. They may be misguided, they may have been corrupted, but they are essentially good. So power to the people is also a good thing; it decreases the relative power of the rulers. Furthermore, the Internet allows you to identify who your countrymen really are. They aren't necessarily the same people born in the same stupid nation state you were. The Internet allows you to hook up with people everywhere in the world with whom you really share values.
I suspect the Internet is the one thing that is most likely to bring down the nation state. I think it's extraordinarly important, and will have the same effect on the ruling classes as gunpowder and the printing press did. That's why in the future you are going to see lots of effort on the parts of governments to shut it down or regulate it so it can't be used effectively.
Daily Bell: What are your thoughts on China's economy at this time?
Doug Casey: I think they are in a massive bubble centered on real estate, and it's going to collapse. Apart from that, their exports to Western Europe and the US are likely to collapse simply because the West will have to cut back consumption so much. As a result it's likely there is going to be chaos in China. Now that's the short run.
In the long run, this century is going to be the Chinese century. The cat's out of the bag; the average Chinese has tasted some freedom, is hard working, and wants to be wealthy. He will succeed. The Communist Party is just a continuation of the mandarins ruling China for the past two millennia. Essentially, the Communist Party is just a scam allowing people who are members to steal 10% right off the top. I suspect the Internet will be the big factor to get rid of the Party.
In the long run, China is going to become the epicenter of economic and political power in the world and they are going to be joined by Korea and Vietnam and, of course, Japan and Singapore. They don't suffer from much of the destructive cultural baggage that the West does – Marxism, democracy, and dogmatic religion were Western imports, after all. The East has a long commercial tradition. And they don't have welfare systems or aggressive foreign policies. I hope they come to integrate the best things from the West – individualism and a respect for personal freedom – to a greater degree. Those are the big things.
So the long run is fine, but in the short run they are going to suffer financial and political problems.
Daily Bell: Any emerging markets you consider worth looking at from an investment point of view?
Doug Casey: I was just in the Middle East and one of the countries I visited was Egypt. I am buying, with some friends, real estate in downtown Cairo. I believe in buying when blood is running in the streets. There is some real value to be had there, but it's an anomaly.
Stock markets all over the world are overpriced and I wouldn't touch any of them. I think that the time is going to come when you can pick up stocks everywhere in the world for 10-15% in dividends, after current dividends have been cut. The time will come when nobody will even want to hear that stock markets exist. That will be the bottom, not now.
The only stock market that I am interested in right now is playing with junior resource stocks, in the hope that a bubble is ignited. I am not doing it for fundamental value reasons.
Daily Bell: How about the mining industry? We notice that during the recent bull moves in gold, mining stocks really haven't performed well. In fact, for the past three years they have underperformed gold. Why?
Doug Casey: I think it's because the kind of people that buy gold are doing so now for prudence, safety and insurance. Those are not the reasons that you buy gold mining stocks – certainly not junior explorers.
Gold mining is a crappy business and you buy for exactly the opposite reasons. You buy miners for speculative capital gains because you want to hit a home run and maybe get 100/1 on your money. So the buyers of gold are not necessarily the buyers of gold stocks. People are looking for safety and there is no safety in gold stocks.
But even though they are not particularly cheap at the moment, I am buying them because I suspect there are so many currency units being created that there will be a frothy bubble created in mining stocks. It's not a guarantee but I think the odds are pretty high, and if I am right I could get 10/1 on my money.
Daily Bell: What types offer better investment leverage – explorers or producers?
Doug Casey: Well, you've got to remember that the explorers are mostly burning matches. They don't have any gold; they don't have any nickel, uranium, silver, whatever it is. They mainly have hope.
But that said, they are mainly what I speculate in. But I don't invest in a broad group of them; there are several thousand of them in the world, most of them worth nothing. I only invest in the ones where we know the management, we know the properties and we think the odds are good of their finding a large economic deposit. I stick to the ones my friends Louis James, Marin Katusa or Rick Rule have zeroed in on.
As far as the majors are concerned, I'll go back to what I said, that the mining business itself is a crappy, 19th Century, choo-choo train business where you have all the environmental types fighting against you. They don't seem to know or care that you can't have civilization without metals. And of course, mining businesses can't pick up and leave and go someplace else. They are sitting ducks for taxes and royalties and regulations. But, all that said, I think they're buys now. The risks are clear, but I think the rewards outweigh them.
I think the big companies are going to do well, but once again, in the kind of environment we are in today I would rather buy something where I've got 1000% upside potential in the course of a year than 50% potential.
Daily Bell: What do you think about Chavez in Venezuela nationalizing gold mines?
Doug Casey: He's a socialist and a fool – but then I repeat myself. On the other hand, I think it's very interesting that Chavez is trying to take delivery of all of his gold from where it's stored in Europe and the US. He's afraid, with good reason, that it may not be available in the future. After all, why should the government of Venezuela, or any other government for that matter, trust another government? They, better than most, know how reliable governments, and the kind of people that run them, are. Better to have your gold where you control it. I mean, he's a lunatic in most ways, but I think it's very prudent of him taking delivery of Venezuela's gold. And I will be very interested in seeing if that alone doesn't start a fire under the market if he has trouble taking delivery of it.
Daily Bell: Where do you see good opportunity for people seeking secondary residency options?
Doug Casey: I am a big fan of South America. I think the best place to be is the southern cone, which is to say Argentina, Chile and Uruguay, for all kinds of reasons. That's where I live most of the year.
Daily Bell: Tell us about your real estate development project in Argentina. How is it going?
Doug Casey: It's a runaway success. We are completing our world-class gym and spa. Our championship golf course is totally playable, as is our first polo field. And our social clubhouse - including a billiards room, media room, cigar lounge, a rather spectacular library, and a whole bunch of other amenities - will be nearly completed this time next year. There are 50 houses built or currently under construction and by this time next year there will be twice as many. It's actually the finest resort community in the world. It is true you can run but you can't hide, because all these governments all over the world are predatory and dangerous. But from my point of view, it's got everything that I want. Let me give you the website: http://cafayateliving.com. Argentina is far behind the times in many ways, but that's a good thing in today's context.
Daily Bell: Any final thoughts you would like to share with us?
Doug Casey: I invite people to go to CaseyResearch.com and invite them to free Conversations with Casey every week. And, in particular, you should sign up for a free, but really in-depth, online conference we're sponsoring on Sep 14. In addition to all of us at Casey Research, John Mauldin of "Outside the Box," Mike Maloney of Goldsilver.com, and Lew Rockwell will be featured. This is where you can sign up: American Debt Crisis.
Daily Bell: Thank you again, Doug. You are so generous with your time.
Doug Casey: You are very welcome. It's a privilege to say what needs to be said.
The Daily Bell
Doug Casey makes two very important points in this interview that we wanted to comment on. He maintains there is no power elite, only a convergence of interested parties. But we have to point out here that an entire infrastructure of world government has been erected in the post-World War II period.
This includes the BIS, World Bank, International Criminal Court, UN, WHO, IMF, etc. Central banking itself has expanded around the world in the past 100 years – and while one can maintain all of this is a kind of coincidence, the Internet has shown us patterns that make such skepticism less warranted.
We have gone so far as to point out that the patterns – especially the military ones – repeat over and over again. It may be coincidence. But we can use Occam's Razor to come to a more sinister perspective.
A second point that Doug Casey raises in this wonderful and comprehensive interview is that China is headed for a crash. We wholeheartedly agree, but while our analysis has stopped at the "crash" part, Doug Casey has pointed out some other salient facts.
His point is that the Asian and Chinese resurgence is a kind of unstoppable cultural and national expansion, one eventually divorced from the today's rulers. He may be right in this regard. If so, then we would expect China to look like Russia for a while (after the crash to come).
We think it may wipe out the Communist Party and cause a kind of leadership vacuum. We're not prepared to speculate on what would come then. But perhaps it would be better than what came before. We'd like to think so anyway.