Doug Casey discusses the impending “greater” depression that will make the 1930s look like boom times, how the world’s governments are working in unison on economic problems – but are completely wrong, the increasing difficulty of rolling over US government debt and the growing chance for a major war between world powers.
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For Antiwar.com and Chaos Radio 95.9 in Austin, Texas, I'm Scott Horton, and this is Antiwar Radio.
And now on to our next guest, it's Doug Casey, and he is the author of, I had a couple of books written down here, didn't I?
Strategic Investing, Crisis Investing, The Madness of Crowds, I like that.
The website is caseyresearch.com, and libertarians listen to him because apparently he's made gigantic piles of money in the markets because he understands how they work.
And has therefore bought himself such credibility.
Welcome to the show, Douglas, how are you doing?
Good, Scott, just gratified to see that you are a smoker, although I must say I just returned from a place on the beach here in Punta del Uruguay, where I am at the moment, where I was having a cigar with one of my best buddies, a guy named Mike Battles, who you may or may not know of.
He ran a famous mercenary company in Iraq at the start of that recent adventure.
Oh, right, yeah, I have heard of that guy.
Refresh my memory, please.
What was it that he did?
He ran a company called Custard and Battles, and they had, among other things, the franchise for guarding that notorious road between the airport and Baghdad.
And he got into a lot of trouble with the US government for what was said to be war profiting.
Mike is, believe it or not, although he's a West Point graduate and ex-Green Beret and all the rest of that stuff, he's as sound a libertarian as I, or I presume you are.
Really?
Yeah, he's a guy that I think if you had him on the show, he'd entertain your readers.
We've been friends for about five years.
And you're saying that, okay, so this guy that ran, I guess runs or ran the company Custard Battles there in Iraq, you're chilling on the beach in Paraguay with him right now, is that what you said?
Uruguay.
Oh, Uruguay.
Uruguay.
I spend a lot of time here in Argentina and Uruguay.
It's a very pleasant part of the world to hang your hat.
And Mike does too, so we spend a lot of time together.
Well, I mean, I guess I'm interested that you would say that he's as libertarian as you or I. I mean, you wouldn't make a Triple Canopy or a Blackwater company of mercenaries to make your billions, would you?
Off the Pentagon budget, Doug?
That's not a very libertarian thing to do.
Well, you know, it's a more complex question than perhaps it appears on the surface.
Okay.
And yes, I might have, not at this point in my life, but certainly at times in the past I might have.
A lot of times people get into these things without any particular ideological views.
They do it for the adventure and the money, and only later on does it occur to them that there might be certain ideological contradictions.
Well, I think that really is kind of the score.
That's kind of the story of our economy, our warfare economy in America, right, is that most businessmen act simply kind of, well, I think as you just described it, amorally, really, if not immorally, where if your business can make a bunch of money off a Pentagon contract, well, that's just what you do.
If your bank can create a bunch of money out of nothing, well, you do that.
And nobody ever thinks that they shouldn't just because they can't.
And so that's how we get stuck like this, right?
Well, you're quite correct, but it's the thoughtful person that goes back and figures it out after the fact as opposed to going back and doing more of it.
And I'm definitely one of those people.
But unfortunately, we live in a very corrupt world where people that think in a Larian way are such a small minority that we're almost genetic freaks.
So one of the problems with the markets the way they are today is that there's almost nothing that I find in the whole world that cuts good value.
So I guess you have to make money where you find it, don't you?
You know, there's a liberal or progressive named Nick Turse who wrote a book called The Complex.
And basically his point is it's the military, industrial, everything complex, toothpaste and shoelaces and university departments and all of the scientists and all every part of the market.
Every part of the market is intertwined with the Pentagon at this point.
Yeah, of course.
And of course, my view on this is that the Pentagon and the U.S. military not only don't serve a useful purpose anymore, but it's ridiculous if they call it the defense department.
If there's anything that's going to bring down a hail of destruction on the U.S., the U.S. military not only can't defend the U.S. from anything, but it's actually going to be the cause of the hail of destruction coming down on the country.
It's completely perverse.
Yeah, it sure seems like it.
Well, OK, so let me ask you this.
There's an interview of you, a written one, published at LewRockwell.com today.
And I believe, if I could paraphrase you here, you're basically predicting in some sort of near term, I believe, what Mises called the crack up boom, where everyone panics and dumps all their dollars at once and the whole world catches on fire or something.
What the hell?
Well, I call it the greater depression, because this has been predictable for a long time.
We're going into something now that is not only going to be much worse, but much, much worse than what we had in the 1930s.
And it's already begun.
Wait, wait, wait.
Much, much worse than what happened in the 1930s is what we're facing?
My argument is this.
It's that the greater depression, which has been predictable for some time, has already started.
And at this point, it's going to get worse.
The reason it's going to get worse is that everything, not just the U.S. government that's doing, but all the governments of the world, all the major governments of the world, the Chinese, the British, all of them, is not only the wrong thing, but it's exactly the opposite of the right thing.
They're creating trillions of dollars of their various currency units to patch up the sinking ship.
And what should have been done with things like Fannie Mae and Freddie Mac, General Motors, General Electric will probably be the next one to go.
They should have been allowed to collapse.
These brokerage firms should have been allowed to collapse.
The real wealth in the world would still be there.
It would just be reorganized under different management with different shareholders, and life would go on.
The whole world has been living above its means for many years, and that's one of the things that inflation does.
It makes people think they're richer than they really are.
Just as if you deposited $1,000 in everybody's bank account next Monday morning, they'd act like they were a lot richer than they really are, which means they'd be consuming more and producing less.
But the way you become wealthy is by producing more than you consume, not by consuming more than you produce.
And these idiots are trying to get people to consume more, thinking that's going to solve the problem, and go further in debt to keep old patterns of production and consumption going.
So of course it's going to be bad, and they're going to wind up this time destroying the dollar.
The U.S. government has to finance rollover old debt in the amount of about $1.5 trillion, and finance a billion dollar deficit in addition to that.
So they've got to find $2.5 billion worth of buyers for their paper this coming year.
That's going to be very hard to do with these low interest rates, artificially low interest rates that they're setting.
It's not going to happen.
It's going to be very problematical.
So what you're looking at now, what's going on for the last year, where the markets have bounced up and all that, is really just an Indian summer.
And the going is going to get very heavy indeed in the years to come.
And one further comment that I'd have is that as people start blaming one another for, it's your fault, no it's his fault, and so forth, all these different governments, they're going to get unhappy with each other, and the likelihood of a major war, not some ridiculous sport war like we have in Iraq or Afghanistan, but a major war is growing.
So that's one good reason to be here in South America, where the weather is good, the cost of living is low, the lifestyle is delightful, and you're pretty much out of harm's way.
So you, in other words, you think that, for example, conflict between us and China or something like that is possible here?
You better keep buying our debt or we'll nuke you, that kind of thing?
Well anything can happen, because these people that are running these countries all suffer, as far as I can tell, from serious psychological aberrations.
They certainly don't understand anything about economics.
Well let me ask you a little bit about the idiocy of the policy here.
You talk about the stupidity of Ben Bernanke, the genius here.
Everybody always said that Alan Greenspan was the maestro.
Are these men just corrupt and this is premeditated murder here?
Or are they really stupid?
How exactly does that work?
How can you have people who are the masters of the universe who don't know what they're doing, Doug?
Well, you have to define the word stupid.
It's usually used in a pejorative way.
In other words, when we say somebody's stupid, that normally is meant to mean a person of low intelligence.
Well, yes, it can certainly mean that, but I prefer to use it with another definition.
It's an unwitting tendency to self-destruction.
And that's what Bernanke's guilty of.
He's not a non-intelligent person at all.
To the contrary.
But he is stupid, because everything that he's doing is evidencing an unwitting tendency to self-destruction.
So you can't create trillions and trillions of U.S. dollars and not expect that those dollars are going to lose value.
And it'll probably happen very, very quickly as people all over the world start saying, I don't want to hold this hot potato.
I don't want to get stuck with an old maid card at the end of the game.
And they're going to start unloading them.
But then the question becomes, to whom?
Because the U.S. government won't give you anything for them.
So you've got to hope that the Chevrolet dealer – oops, forgot about that.
That's owned by the U.S. government now.
You've got to hope that the Chevrolet dealer will.
And no, inflation is going to become catastrophic in the years to come.
But of course, along the way, it's still possible that we could have a catastrophic deflation, where there's so much debt that's defaulted on that the government can't patch up the holes in the sinking ship fast enough.
I'm very bearish, quite frankly.
That's the bad news.
The good news is most of the real wealth in the world will still exist.
Of course, a lot of it will fall apart.
You've got to look at Detroit.
That was all real wealth that's kind of ceased to exist because patterns of production and consumption have changed.
But I think it's going to be rather ugly, quite frankly.
Well, so let me ask you about that, because if you do have all these bad loans out there and all the deflationary effect of them all defaulting, could that cancel out the inflationary effect and the destruction of the dollar effect from all the creation of the new money?
And by the way, how much new money have they created in the last year anyway?
Well, I don't think they know.
I actually think they don't know at this point.
It's out of control.
These people are like a gambler on tilt at this point.
They're acting in desperate ways to keep things going.
And will a deflation from a destruction of debt, defaulted bonds and so forth, will that cancel out the inflation?
Well, yeah, in a way it will, but just like in a – look, you can have a serious inflation where prices are rising, but at some point, the price of caviar and filet mignon goes way up because people think they're very wealthy because of the inflation, and the price of rice and beans goes down because nobody wants to eat the poor people's food.
And then at other times, it can reverse.
So it's a question of who owns the debt and who owns the assets.
Now, remember they used to say, hey, don't worry about the debt.
We owe it to ourselves.
But we don't owe it to ourselves.
Some of us owe it to others.
Yeah, so, no, there's a lot of things that are going to be sorted out.
Unfortunately, the fact that something like 15% of Americans are on food stamps today, and somebody who was an expert in this matter estimated that actually 30% of them are now eligible for food stamps, but they haven't applied for them, either because they don't know they can or because the social stigma still overcomes them.
So this is really serious when you've got that number of people that are eligible for food stamps.
And of course, in the United States, more than half the people don't even pay income taxes.
Now, of course, I believe in the abolition of the income tax.
So I think it's good that they don't pay income taxes.
But the problem is that these people are basically living off the taxes of the other 50%.
So there are a lot of distortions that have been caused in society and have become ingrained in it over generations.
I'm sorry that we're up against the time wall here, but if I could ask you just very quickly what you think an attack on Iran might do to the world economy, short of one of those catastrophic wars against a major power like you were talking about earlier, what about strikes against Iran's nuclear equipment and so forth?
Well, that would be incredibly stupid, but I wouldn't put anything past these people.
I actually thought that even Bush would be intelligent enough not to have attacked Iraq.
Well, do you think that the attempt to occupy all of Eurasia, I guess south of Russia and east of China there, and west of China and India there, is that an attempt somehow to shore up the dollar in a way?
That our military hegemony and our dollar hegemony are linked together in that way?
Some people say that, you know?
Well, you know, I can't really say what's going on in these people's minds, because you're trying to dig into aberrant psychology at this point.
But I'd say that the character of this next war, it's not a so-called war against terror, which is a ridiculous concept to start with, it's actually morphing into a war against Islam.
So it's a continuation of the Crusades.
So it's a thousand-year-old war that's having another flare-up.
Except this one's really serious, because there's nuclear weapons involved here, and I think both sides will be willing to use them.
Alright, I'm sorry.
We've got to go, because we have to debunk all the lies about Iran that would justify that war, if possible.
I want to thank you very much for your time on the show today, Doug.
I'd be happy to do it again any time.
Okay, great.
I hope we can do that.
Everybody, that's Doug Casey.
He's got a great article today, at LewRockwell.com, which, what I do with it here, it's Doug Casey on Bungling Ben, and his own website is CaseyResearch.com.
If you have any money at all at this point, you know, you might look for some good advice about how to protect what little wealth you've got by looking at CaseyResearch.com.
That's what I would do if I had any money.
