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: You're well known as one of the most consistent hard-money commentators in the world, and one of the most famous. After so many decades of diligently tilling the fields, do you feel your work is having an even more significant impact?
Doug Casey: Well, in many ways it is the law of large numbers. I have sold several million books through conventional means. A certain percentage of those books are read, a certain percentage of the readers agree with what I have said, and a certain percentage of them have always believed in these things intuitively or implicitly but never had them spelled out.
In many ways, I attribute much of the success I've had to having stood on the shoulders of other people, such as Ayn Rand, Harry Browne, and Murray Rothbard, to name three. They opened my eyes to an economic way of thinking, or actually more than that – an anarchic-economic way of thinking, because my view is one of an anarcho-capitalist.
It is unfortunate that capitalism has gotten a bad name because people like Republican George W. Bush have always talked about freedom, capitalism, and liberty, but although they have talked the talk, they have never walked the walk.
Daily Bell: How does this time period differ from the 1970s, when you were among the most prominent voices along with Harry Browne and some others?
Doug Casey: The U.S. government in particular, but all governments in general, have been doing some incredibly stupid things. For many years, distortions and misallocations of capital have been building up – that will have to be liquidated. So, the economy could have, should have, and almost did go over the edge in the ‘70s and especially in the recession of the early ‘80s, but the government was able to prop up the house of cards and build it even higher. So I expect that what we are going into now will be much more serious than what would have happened if things had collapsed in the ‘70s.
Daily Bell: So you are not surprised at the vehemence of this collapse. Do you see the green shoots that some speak of?
Doug Casey: Insofar as there are any green shoots, they are weeds. No, everything the government is doing is not only the wrong thing, it is the exact opposite of the right thing. The way to solve the problems that have been exposed at this point is for the government to not do anything; in fact, to entirely get out of the money game, to stop regulating, and vastly reduce their taxes. Of course, they're doing just the opposite.
The government is in essence the biggest single problem that we have, by an order of magnitude. The unfortunate thing is, everybody is looking to the government as providing a solution when it is actually the problem. It is completely perverse. It is one of the reasons why I call what we are going into not just a depression. This is going to be the Greater Depression – much more serious and different from what we had in the 1930s.
Daily Bell: Do you agree that the regulatory apparatus could be blamed for the current difficulties, or should it be Wall Street, or is it central banking that was the primary culprit?
Doug Casey: The ultimate cause of our problems is the inflation of the currency caused by central banks. Unfortunately, it is the investment bankers and the brokers that are going to be blamed for it, but they are just the immediate cause, not the ultimate cause. Everything they have done, which was incredibly stupid, has only been possible because of the structure of our current system. Normal humans are to blame for doing natural things. The problem lies in the government and how it has structured the system.
Daily Bell: Do you think the dollar is finished, or do you see any other scenarios that would allow it to continue?
Doug Casey: Why should the fate of the U.S. dollar be any different from the fate of every other paper currency throughout history? It is an "I owe you nothing" on the part of that bankrupt entity called the U.S. government. So no, the dollar is a dead duck.
This is very unfortunate, because not only do Americans hold the vast majority of their wealth in dollars, but it is the de facto currency in 50 other countries around the world. In addition, it is the major asset of most central banks around the world. So a collapse of the dollar is going to be more serious than any previous monetary collapse in history, for just that reason.
Daily Bell: Can you expand on the potential for a global currency? We believe much of the current ruckus about a global currency comes from China trying to control how much inflation hits its store of greenbacks. But we believe the real push towards a global currency still lies in a regional approach, meaning first Europe, then America and Asia will end up with regional currencies. We think this approach is favored by the Anglo-Saxon axis. Do you agree with this perspective?
Doug Casey: Well, I am sure that these governments are going to try to do something to keep paper money in circulation. Even though government should have absolutely nothing to do with money – that's entirely a market function – governments are not going to get out of the currency business, at least voluntarily, for many reasons. None of the world's currencies are sound. The euro is best viewed as the Esperanto currency – it's a flight of fancy. And in fact, the euro could disappear before the dollar does. If the dollar is an "I owe you nothing," the euro is a "Who owes you nothing." So, coming up with a euro for the Western Hemisphere and a euro equivalent for the Orient is pure idiocy, and the same is true for using the SDR.
Look, money is a medium of exchange and a store of value. There is no reason why government should be involved in money on any basis whatsoever. Of all the 92 naturally occurring elements, some are better for some things than others. Iron is good for making bridges, aluminum is good for making airplanes, uranium is what you need for nuclear reactors, and gold is particularly well qualified for use as money.
This is no secret. Aristotle defined the five reasons why gold is the best possible money in the 4th century B.C. To wit, it is durable, divisible, convenient, consistent, and has value in and of itself. Aristotle failed to mention a sixth reason: it can't be created out of thin air. But paper money didn't exist in his day, so his omission is understandable. Money should not be a political football; so the market should determine money, not some foolish bureaucrat working for some government.
Daily Bell: Do you think the monetary elite was prepared for the force and violence of this economic downturn, and more importantly, do you believe they have handled it well?
Doug Casey: No, they were completely unprepared for it – in fact, they caused it. Look, the monetary elite are just a bunch of bureaucrats that are indistinguishable from your average DMV employee… except for the fact that they wear more expensive suits and went to more prestigious universities. These people do not have a clue.
Daily Bell: We think the Internet is turning out to be a huge problem for those who wish to extend the current central banking era and centralize it further. Do you agree?
Doug Casey: Completely. I am a total fan of the Internet, as I am of all technology. Technology has always been the friend of the common man and the enemy of the ruling powers. Gunpowder is probably the best example of that historically, but the Internet is almost like a new gunpowder.
One of the important things about the Internet is that it is allowing people all over the world to find out who their real countrymen are. I was born an American, but I do not consider the average American a countryman. I do not share any values with the average American to start with, because over 50% of Americans are net recipients of benefits from the government. They are not even taxpayers at this point.
So the average American is a parasite living off me. I have much more in common with a friend in the Congo, though we do not share the same race, native language, or culture. But we do share interests and philosophical values – which are much more important. The nation-state, I think, is on its way out. The Internet is allowing people to find each other all over the world, and the fact that you share a common identification document, like a passport, or live in geographical proximity or under the bailiwick of some government, is increasingly meaningless.
One of the most wonderful things about the Internet (like the telephone, television, and the jet airplane) is that it allows people to relate to each other as individuals. It helps to cut out the state as a middleman.
Daily Bell: If there were a return to a hard-money standard, where do you stand on private free banking, including private fractional reserve banking? Do you agree with Selgin and White, or with Rothbard, that any sort of fractional banking is a crime?
Doug Casey: I believe in completely free banking, with no licensing or regulation. In a free market, they would have to compete on the basis of their soundness. Central banks serve no useful purpose. They should be abolished. Banks are basically no different from any other kind of commercial enterprise, whether it be a car company, or a furniture sales company, or a restaurant.
Look, historically you have got two kinds of bank deposits: demand deposits and time deposits. With demand deposits, better known as checking accounts, you pay the banks for the privilege of transferring your money and storing it safely. With time deposits, the bank pays you interest, perhaps 3% historically, and may lend out your money for 6%. You can't get your money back until the bank gets it back from the borrower.
There is no room for fractional reserve banking. Fractional reserve banking is intrinsically fraudulent and inevitably leads to the kind of abuses that we have seen.
Daily Bell: Do you anticipate inflation, deflation, or both in the near future?
Doug Casey: We are going through a deflationary period at the moment. Trillions of dollars that have been created out of nothing over many years are disappearing through bankruptcies and defaults on bonds and mortgages. Unfortunately central banks are creating trillions more as rapidly as they can.
So after we pass through this deflationary period, we are going to see extremely high levels of inflation, not just in the U.S. but all over the world. The central banks are doing the same thing all over the world.
Daily Bell: Do you believe junior gold and silver stocks will begin to rally toward the end of this business cycle?
Doug Casey: Yes, I think so, because high levels of inflation cause people to concentrate not on working and producing real wealth, but on speculating to preserve what they do have. In an environment where gold and silver are going to go much higher, people will therefore look for leveraged ways to profit from that, because everything else is going to hell in a hand basket. That's why I am very bullish on mining exploration stocks.
Daily Bell: How far does the hard-money business cycle have yet to run? We think it will end around 2015 – probably because all of this stimulation is just prolonging the pain. We also think we could see hugely inflated gold and silver prices. Where do you see these prices at the end of the cycle?
Doug Casey: The only way to look at it is in terms of current dollars today. I do not know what the dollar is going to be worth three or four years from now. But it seems to me in terms of relative purchasing power to other things, that you have to look at $4,000 or $5,000 gold in terms of today's dollars as being a reasonable figure. It's hard to say. It may overshoot that by a lot.
I am very bullish about gold because it is only the financial asset that is not simultaneously somebody else's liability. And that is going to become very critical in the kind of economic and financial chaos I think we are going to see in the years to come.
Daily Bell: Is there a chance of hyperinflation?
Doug Casey: Yes, there is an excellent chance of hyperinflation. I think that you ought to plan on the U.S. dollar disappearing and being replaced by something else. I expect that is going to be gold. At least I hope so. But before that happens, we'll probably see foreign exchange controls, and god knows what else.
Daily Bell: What are some of the most important issues pertaining to free markets, in your opinion?
Doug Casey: It has to be understood from a philosophical point of view. As I had mentioned earlier, this is one of the horrible things in the United States: Republicans, such as Bush, who was a total disaster as a president, fail to understand free markets. They talk about them, but when it comes to doing things, they act like socialists or fascists.
I think it is important to understand that the free market is not just something that is convenient – which it is, and it produces more wealth than anything else – but it is actually philosophically good and should be studied from that point of view, from a moral point of view, even more than from an economic point of view.
Daily Bell: What endeavors are you involved in that you want to point out to our audience? What is most important to you that you would like our audience to be aware of and support?
Doug Casey: There are two things that I am doing right now that I think are interesting. I have traveled to 175 countries and lived in 12, and one of my favorites is Argentina. The government has been an economic disaster, at least since Peron, but it is an excellent country to live in.
Therefore, I have been putting together a 6-star resort that has, perhaps not surprisingly, tended to draw free-market-oriented people. It is the kind of place where a civilized person can live like a Renaissance man – at very low cost with a very pleasant climate and sympathetic and interesting neighbors. So I am doing that, and you can find out about it by going to laestanciadecafayate.com.
Another thing that has been a hobby of mine for a long time is talking to governments of third-world countries to try to convince them that they want to see a free-market revolution in their countries. I have talked to about a dozen governments over the years, and right now I am still involved in that – in particular with a country in the South Pacific, which is showing some promise. Those are the two things that I am most interested in personally at the moment.
Daily Bell: You have written so much and so well. What are the most important seminal works of yours that you would encourage everyone to read? Where can they be found?
Doug Casey: Well, all my books are currently out of print, but I think the best one is Crisis Investing for the Rest of the ‘90s. It is available on Amazon.
Daily Bell: On behalf of all of our readers, we thank you for sharing your views with us and hope to hear from you again soon. We encourage all readers to visit your site, CaseyResearch.com, and consider learning more about your tremendous body of work.
One of the most important points that Doug makes here is that the free-market is not just a series of talking points. Significantly, he tells us that, "Republicans, such as Bush, who was a total disaster as a president, fail to understand free markets. … I think it is important to understand that the free market is not just something that is convenient – which it is, and it produces more wealth than anything else – but it is actually philosophically good and should be studied from that point of view, from a moral point of view, even more than from an economic point of view."
Doug of course has the vantage point of a long and successful career, but this is a fundamental perspective. The gravest disappointment of Western politics, in our opinion, is a two party system that never yields less government. The Internet, as Doug points out, has been a great force for good in the fight for freedom, but more than that, it continually illustrates the ephemeral nature of the two-party debate. When a campaign is being pursued, the viewpoint seems fairly clear cut with one side focusing on more regulation and the other on less. But the Bush presidency, the second real Internet presidency in the United States, showed that reality and rhetoric were often poles apart.
This is a significant issue in America, and will eventually be a significant issue in Europe too. It is expected that Democrats (Labour in Europe) come down on the side of centralized governance. But when the opposition party ends up on the same side, once in power, then the body politic becomes confused and restless. It searches for alternatives.
The Internet cast a cold light on the Bush presidency in America just as it has educated many in Europe about the illusory nature of the European Union. In fact, in Europe's just-finished elections, socialists received a trouncing. The Labour Party in Britain has also been set back. In America, meanwhile, a full-fledged Libertarian movement grows apace. In less than a year, the Campaign for Liberty – Congressman Ron Paul's brainchild – has grown to almost 160,000 members.
America is in the next phase of the Internet revolution, and the Campaign for Liberty is leading the way. It is certainly a product of the Internet, which revealed much of the true colors of both the Clinton and Bush administrations. As a result, tens of millions of Americans have now turned away from the major parties and are searching for something new. We are only at the beginning of this phenomenon.
It is very difficult to work for the expansion of freedom within the political process itself. Thus, the Internet-engendered freedom movement may eventually supersede politics. Eventually, technology may provide further alternatives that will tend to challenge and then vitiate 20th century-style governance. In the meantime, the Internet and the emerging post-Democratic consensus will tend to make a muddle of the 20th century political process.
We will look to Doug Casey to help us make sense of it as we have in the past. We depended on him years ago when there were few to tell the story. In the 21st century we are fortunate to have someone of his stature to rely on for continual common-sense observations about the nature of government, freedom and, importantly, wealth-gathering.