Peter Schiff And Doug Casey On The "Real" State Of The Economy

Tyler Durden's picture

Submitted by Nick Giambruno of Doug Casey's International Man blog,

One of my favorite podcasts to listen to is The Peter Schiff Show (

Peter always does an excellent job of dissecting the latest economic news and cutting through the smoke and mirrors of government statistics.

Recently he had Doug Casey on his radio show to discuss what’s really happening with the economy. And it’s nothing close to what the talking heads in the financial media would have you believe.

I’m happy to bring this fascinating discussion to International Man readers. I think you’ll not only enjoy it, but you’ll also learn something too.

Until next time,

Nick Giambruno, Senior Editor

Peter Schiff: Joining our program now is Doug Casey, and if you don’t know Doug, he is a libertarian economist. He is a bestselling financial author. He’s an international investor, entrepreneur, and founder/chairman of Casey Research. They publish a monthly newsletter, Casey International Speculator, and most recently Doug has produced a 30-minute documentary called Meltdown America, which I watched just yesterday on the Internet for free. I would encourage everybody to watch it. It’s a very entertaining half hour.

Doug, welcome to The Peter Schiff Show.

Doug Casey: Thanks, Peter. It’s my pleasure.

Peter: So in particular about your movie, which I thought was well done, the story that was most compelling to me was the interview with the gentlemen from Zimbabwe who had lived there most of his life. He was prosperous, had a business, and then had the foresight to read the writing on the wall, leave everything behind, and flee to Australia. He warned his friends—who made fun of him—and they then ended up having their property seized.

Doug: Yes, it’s an absolutely true story, of course. I’ve spent a lot of time in Zimbabwe and before that in Rhodesia over the years. I think the first time I went there was in 1976. His story is quite accurate about what happened in Zimbabwe, but it’s happened in a number of places in the world, and it’s going to happen in other places in the future. This is because most people don’t realize that as big as their investment risks are today with many markets being overinflated and so forth, their biggest risks are actually political risks. The biggest danger to you is your own government. In his case it was the Zimbabwe government. I guess most of the people listening now are Americans, and actually the US government is like a predator stalking us on the African plains.

Peter: What really is compelling about the story and what people should really take to heart is the attitude that pervades is that, well, it’s not going to happen here. It can’t happen here. People don’t want to think about that worst-case scenario. They want to assume that things are going to be okay, and if somebody is warning about this potential doomsday, that is the person whom they ridicule, who they say, oh, you’re crazy, that’s never going to happen, and, it happens in places like Zimbabwe. But expand on it, because it’s happening in America.

Doug: Well look, I hate to sound like a Cassandra, a gloomy Gus. I hate to say the sky is falling, and I know you do too. But you’ve got to be realistic. I don’t call it America anymore. I call it the US because although America is a fantastic idea, a wonderful idea, America as a concept is rapidly disappearing from the land area called the United States. So yeah, I hate to sound gloomy, because there are lots of reasons for optimism that we can recount. We have more scientists and engineers alive today now than we’ve had in all previous history put together. So that’s cause for optimism. But there is a lot of cause for real pessimism certainly in the short term, in the next decade or so in the US, and it could get worse from there. So you and I are pretty much on the same page economically, and it makes me a little uncomfortable having to be gloomy, but I have to be. I have to assess the facts.

Peter: Yeah, you can’t ignore the facts. So you don’t like to say that the sky is falling, but then if you see it falling, you don’t want to just pretend that you don’t see what you see because that’s worse. I mean, it’s better to warn about the catastrophes. Maybe your warnings could help put into effect policies that might avert the catastrophe, or if you can’t do that, at least help as many people as possible prepare for it in advance so that they don’t get hit by surprise.

Doug: Yes, although I greatly discount the odds of things changing because policies and governments have a momentum of their own. Imagine a village at the bottom of a valley, and that 100 years ago collectivism and statism started out as a small snowball, and now that snowball has turned into a giant avalanche. Now once it gets to the giant avalanche stage, you can’t stop it. So I’m afraid that the village at the bottom of the valley is going to be smashed, so you’ve got to run for high ground. I don’t think we can stop it at this point. The trend is too entrenched, too far in motion, and the fact that 50% of Americans are reliant upon the government for their income alone is a guarantee of bad things to come.

Peter: Yeah, and Doug, you have been an observer, a critic of this trend that has been ongoing in America for a long time. I mean, it’s not like we suddenly find ourselves on the precipice of disaster. We’ve been on that precipice for a long time. It’s kind of amazing that we haven’t fallen over just yet, but it’s been a long time building. Even my dad was in this camp back in the ‘70s, issuing warnings. But what do you see today that might make you think that this is the endgame? I mean there can’t be another couple of decades where you’re going to be sounding the alarm.

Doug: Yeah, that’s a very interesting point, Peter. When do we reach the actual endgame as opposed to just an accelerating downturn? I would say that it started in 2007. I think that’s the endgame because the Fed’s balance sheet—which is the best indicator of how much actual new money they’re creating—has gone from $500 billion to $4.5 trillion just in the last five years, and they’re still creating more. So they’ve shot all their arrows and when the economy turns down again—and I think it is in process of doing that now—there’s nothing they can do. They have already reduced interest rates to near zero, the Chinese and the Japanese aren’t buying any more government debt, and the official number is $500 billion a year of deficit now, so the Federal Reserve is going to be printing up money wholesale. This is a very scary thing, so yeah, I think we actually have reached the actual edge of the precipice.

Peter: And the amazing thing, too, and you point this out is they’re telling us we’ve been in a recovery for five years. This means statistically we’re also getting close to the next recession. Just by the probability, how long the expansion has been, yet we’ve never begun a recession where rates are still at zero. We’ve never begun a recession while they are still stimulating us from the previous recession. And nobody seems to worry about the outcome of entering a recession from the position that we are in right now.

Doug: And the numbers that they crank out to make everybody feel good are almost as phony as the numbers that the Argentine government cranks out. I live in Argentina most of the year and there, the Cristina Fernández government says well, we only have 10% inflation. But everybody knows that it’s 30 to 40%. And here they say we have 1-2% inflation. I would say that inflation is realistically in the 8-10% range here in the US—and it’s going much higher.

Peter: And that makes a lot more sense to me, given what I’m observing in the actual economy. The critics who argue that that’s impossible, that the people who think that inflation is more than 2-3% percent, they say they must be wrong, because that would mean that the economy has not experienced any legitimate economic growth. And to that I would say, absolutely, it hasn’t. The growth is all a fantasy. It’s all a result of the assumption that there is no inflation, when there really is because what we have is inflation masquerading as economic growth. But the bottom line is the economy is really contracting, that’s why the labor force is shrinking, that’s why we’re using less energy, that’s why the people’s standard of living is going down, and real incomes are falling and job opportunities are disappearing. It’s because we’re in a recession and no one wants to admit it.

Doug: You are absolutely right, and from this point it is going to get much more obvious and get much worse. I just wonder what the social consequences are going to be when the economy goes into a free-fall again, maybe by the end of this year. I think certainly next year. I mean it’s an open question whether people will riot.

Peter: You can already see the frustration. I often joke, if this is the Obama recovery, imagine how bad the recession is going to be. And you know, we’re running these deficits. The president is bragging now that the deficit is finally below $1 trillion, that it might be $600-700 billion, but that’s the deficit in the recovery. If we slip into a legitimate or acknowledged recession, where are the deficits going to go, $1.5 trillion, $2 trillion? And how can we possibly finance that when the world is already saturated with the debt that we’ve issued to stimulate us out of prior recessions?

Also, I’ve got to get to gold and silver, something that I know you’ve been advocating for a while. When it comes to gold and silver, I’ve never seen an environment where you have so many central banks embracing inflation as a goal, that they want more inflation, and they somehow think that it’s going to help the economy; and at the same time you have complete complacency on the part of investors to any of the risks associated with inflation that all these central bankers are promising to create.

Doug: As you are well aware, Peter, it was Lenin who said the best way to destroy a country is to debauch its currency. It’s perverse and idiotic what all the central banks around the world are doing at this point. But some are worse than others. The Europeans are out of control. The Japanese are out of control. The Chinese Central Bank and of course the Fed here in the US are out of control. So that’s one reason why I continue accumulating gold. It’s the only financial asset that’s not simultaneously somebody else’s liability.

Peter: Yeah, and you’ve been a buyer for a long time, a regular buyer and holder of metals. What do you think it’s going to take, though, to convince the skeptics who are so in love with paper and who make fun of the gold bugs for their irrational obsession with this obscure obsolete yellow metal? What do you think it is going to take for the mainstream to start buying into gold and silver, and of course the mining stocks?

Doug: I think it’s going to take a financial and economic collapse. I hate to say it, but I think we are on the edge of something that is much worse than what we had in 2008 and 2009. I look around the world at places where you can put your capital, real estate is overpriced, the stock market is greatly overpriced, the bond market is in a historic bubble, that’s about the best short sale I can think of in the world. So what are you left with? Gold is not a giveaway the way it was in 2001 at $250 an ounce, but it is reasonably priced, so I’m going to continue to buy it. I think there’s going to be a panic into gold, quite frankly.

Peter: You know, Doug, I think it could be just as big a giveaway now. If you look at the cost of production of gold today versus what it was 12 years ago, it costs a lot more to produce gold, and if you look at the amount of money that the central banks have created over the past 12 years and the amount of money that they are threatening to create, I think you could make a case that gold is cheaper now at $1,200 than it was at $300.

Doug: Well, when you look at the cost of mining new gold, there are about 80 million ounces produced every year, and there are perhaps six billion in total existence. Most of the mining companies in the world, the big ones like Barrick and Newmont, it’s not profitable for them to produce gold even at $1,300 an ounce when you consider all the costs of mining. So yes, I wouldn’t argue with you.

Peter: You talk about a bubble in assets like stocks and real estate. The irony of it is, the professional investors who are happily paying ridiculous valuations for stocks, the only bubble that they can identify is the one that doesn’t exist—except in their minds—and that is the bubble that they see in gold.

Doug: Yes, that’s right. The real bubble is in the bond market, and the bond market is much bigger than the stock market, so when the bubble in bonds bursts, it’s going to be very ugly. I’ve got to make a distinction, and I think you will agree with this. I’ve bought gold my whole life. I’ve never sold one ounce because I buy it for safety, for savings, prudence, and insurance. But I’ve also been very involved in gold stocks for many years, and gold stocks are a different animal than gold itself, and I treat them as a speculative vehicle because gold stocks are perhaps the most volatile class of securities in the world. The Vancouver Stock Exchange, which trades about 1,500 supposed gold companies, regularly goes up ten for one and then collapses 95%. As we speak at this time, it’s at a cyclical bottom. So I think it’s an extremely high-potential speculation to get into gold stocks at this time.

(Editor's note: You may want to check out our Casey International Speculator publication which specializes in finding high-potential speculative opportunities in junior mining companies.)

Peter: Yeah, I agree with you. Of the nations that you travel to, which would you consider to be the most stable, maybe the ones that offer the best not only investment opportunity, but opportunity to live if you want to leave the United States?

Doug: Well, the fact of the matter is that all over the world these governments collude with each other in these clubs they belong to like the United Nations, the IMF, and the OECD, and they are all going in the wrong direction, which is to say more state power, more taxes, and more control. I’ve been to most of the countries in the world, and where I spend most of my time is in Argentina. The people there are used to stupidity from their government and despise their government.

Peter: Well, that’s for sure, Doug. They are prepared for stupidity, unlike Americans who are going to be surprised by it.

Editor’s Note: Be sure to check out for more on Peter’s superb radio show. Also, don’t forget to catch our new free documentary Meltdown America, which discusses how to survive an economic collapse with examples from Zimbabwe, Argentina, and Yugoslavia. You won’t want to miss it.

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Chris Jusset's picture

This is key:

"Inflation is realistically in the 8-10% range here in the US—and it’s going much higher.  ... The growth is all a fantasy. It’s all a result of the assumption that there is no inflation, when there really is because what we have is inflation masquerading as economic growth. But the bottom line is the economy is really contracting, that’s why the labor force is shrinking, that’s why we’re using less energy, that’s why the people’s standard of living is going down, and real incomes are falling and job opportunities are disappearing. It’s because we’re in a recession and no one wants to admit it."

PrecipiceWatching's picture

I suppose technically we are in a "recession".

But take away the insane and criminal shell game of debt paying for debt, and we are in Depression, or more likely, some area of uncharted FuckedUpedness, MUCH worse than the 1930's


hobopants's picture

Youtube video of the interview if you're lazy like me.

philipat's picture

Casey sounds quite rational here yet just two weeks ago he made the statement that it is absurd to think that CB's are manipulating the price of Gold.......

BigJim's picture

Yes, his studied ignorance on the subject is interesting.

He knows a lot of us believe the market is rigged,

He knows this belief is based on analysis of bid/ask data in the paper market, and statements made by political 'leaders'... as well as evidence from history, when groups - clandestine at the time - controlled the price (London Gold Pool, for instance)

He surely knows there's an entire website devoted to the subject (GATA), and he surely knows the monetray authorities have i) the means, and ii) the motive, to try to manipulate the price.

So his shallow deflections of any analysis of the subject are quite telling. Telling of what, I'm not so sure ;-)

Badabing's picture

Back in 2008 we didn't believe the gold market was leveraged with 100 to one paper contracts and now we all know the truth.
That in it self is manipulation, and today is consitered the norm.

Fíréan's picture

IMHO, Casey says whatever ( he thinks) will sell his lastest newsletter subscriptions. I'm not buying.


(edit: it's and infomercial )

Carpenter1's picture

He believes what he preaches, you make it sound like he preaches whatever is in the newsletter.  He first believed, then wrote, then preached.  Nothing wrong with that. 

Tarshatha's picture

"Casey sounds quite rational here yet just two weeks ago he made the statement that it is absurd to think that CB's are manipulating the price of Gold......."


That does seem odd. 

Miggy's picture

Yeah I always wondered how Japan can be buying US Treasuries and they are broke.


John 3:16

BigJim's picture

 That's simply not true, they have no, zero, external debt, it's all debt which is owed to it's own people.

Is that true? All JGBs are owned by Japanese residents? Or any JGBs owned by foreign investors are balanced by Japanese holdings of debt denominated in those foreigners' currencies? Do you know this for a fact?

Our debt is both internal and external, meaning we owe other country's money, and lots of it. If we default to asia or russia, it will prolly be reported as a local war or some sanctions being applied, where as overseas it will be reported as a default with poor leadership and the locals will wonder why they are entering a deflationary mode.

We may owe other countries money, but 'our' debt is denominated in USD and the US need never nominally default. The Fed can print up as many USD required to buy the debt and then extinguish it when it expires. Poof! Gone.

And as long as other counteirs keep demanding USD in payment for commodities (oil in particular) there's not even that much price inflation (I mean, by hyper-inflationary standards).

Are Saudi/Qatar/Kuwait/Iraq/Canada?Mexico/US producers accepting anything other than USD in exchange for their oil?

Until that day, it's all just talk.

Seer's picture

I wonder if either one of them can comprehend that it's contraction from here on out, and the the growth system is dead.

Chris Martenson has it called correctly: Peak Prosperity.

Bananamerican's picture

Ludwig Von Mises bats last:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Bananamerican's picture

"Dear diary: today I made a Keynesian cry"

caShOnlY's picture

did some moron really down arrow the MISES quote?   That is not a quote but the verbal roadmap as to where we have been, are now and going to.

BuddyEffed's picture

Publicly recognizing it as contraction would result in serious status quo changes, and possible social backlash.  It's a fait accompli, but those in control want to manage it.  Order is better than disorder.

Atomizer's picture

Great post. However, Steve Liesman has a propaganda bridge to sell you. The CFR is working OT to kick the perverbial can down the road. 

duo's picture

The real economy is 30% smaller than it was in 2007 by any realistic measure.

TeethVillage88s's picture

Kinda long. First impressions of first paragraphs:

We kinda are involved as guys like Doug Casey who visited Zimbabwe... I would guess he was a business buy kinda taking advantage of the local people. I don't know him. I can't say shit. I don't know shit. But I have traveled and felt a little weird sometimes as to what I was doing.

So the other thing is that We don't fight OR Sound Off on the Problems that we see. Maybe it is Tyranny or worker abuse or abuse of women or children workers... I don't know. THere are a lot of problems in all countries. We can't be responsible for most problems even if we see 15 big problems in Zimbabwe.

So I sort of question our morality in traveling & making deals in foreign countries. Sure, the money might be Great and We feel so lucky to make that kind of money. But look there are losers... usually it is the poor people, the serfs, the people that own nothing. I'm just saying.

Of course we have a military Republic or a Military Fascist Government that dominates all others. Some moral questions there. Controlling business and handing the best contracts to certain companies is fascism.

Yes, Peter Schiff, we should learn about Hyperinflation. Our people should be taught by people like you that have a passion for it. So please keep going. Keep driving forward. We are grateful.

CH1's picture

I sort of question our morality in traveling & making deals in foreign countries... there are losers... usually it is the poor people, the serfs, the people that own nothing.

Huh? If you make a voluntary deal, the other party WANTS it. No losers there.

Now, if you're dealing with a guv or someother real oppressor (pistols being involved), then sure, that's a bad thing to do.

Greenskeeper_Carl's picture

hows argentina working out for you, doug? not saying the dollar isnt in trouble, but seriously? the last few years, casey has been encouraging everyone to migrate to the safety and security of that socialist paradise of argentina. no thanks

Manthong's picture

What Casey does I believe, is reside in Chile, but live less than 6 months a year in Argentina to enjoy the country and economy as a tourist and avoid the burden of Argentinean financial repression and insanity. 

Greenskeeper_Carl's picture

ya ive heard that too. I just remember him promoting his 'galts gulch' type place in argentina. I just find it amusing that he has promoted how grea that place was for years, even implying owning a business or property and keeping some wealth there. Being a foreigner and owning assets in a country going throuh default/bankrupcy is a horrible idea, as you are a ripe target, and the natives arent going to give a shit about you. Just pointing out that no one has ever called him on it. That said, I do like much of what he writes, and generally always like what schiff says, Just pointing out how, noting all those downvotes I have, apparently criticizing doug casey is verboten around here, and no one has really told me how i was wrong.

BeanusCountus's picture

At least Argentina is being forced to deal with their problems straight up. Losses will be realized, decisions can be made to avoid them in the future. If they make them. Or it will happen again. Way better in my book than masking things to avoid tough decisions. For now. Because they eventually have to do the right thing. Unless you believe that spending more than you make can continue forever?

TuPhat's picture

It should be obvious to everyone that the Argentinians believe they can spend more than they make and it will continue perhaps forever.  They are much worse off than the US but we are going to go down fast.  Leaving a sinking ship to get on board one that has already sunk doesn't make sense to me.  Going to a foriegn country so that you can feel isolated from the problems of the local people is not the answer.

Greenskeeper_Carl's picture

not what i was implying at all, that we can continue this charade forever. Just pointing out a glaring mistake in casey's history. And obviously it doesnt do the argentines a whole lot of good to be forced to deal with these probelms straight up, nor did they learn they can't spend more that they take in. This is the second time they ave gone through this in the last decade or so. The problem, that people never seem to understadn, is and always will be government. The root of all problems, giving too muh power to a govt. And im just pointing out that casey tells people to leave the US, to go to another socialist basket case in argentina. I will grant him this though- at least their govt is incapable of making their country into an electronic concentration camp like the US

WTFUD's picture

Think of a number . . . .

Wipe your tears, come on get happy , get ready for judgement day.

livefreediefree's picture

OK, all you smart, informed, driven posters: Why shouldn't I totally disregard this the-sky-is-about-to-fall article like I've disregarded the last 642,701,534 similar the-sky-is-about-to-fall articles? I have cultivated an extraordinarily high tolerance for chaff, so I've read pretty much all the past 642MB columns, but the only conclusion that seems to make sense is to disregard them all. After all, the predictors are zero for 642,701,535, so we gotta be talking sure thing. Ergo, the US economy will not implode anytime soon, or at all.

Spitzer's picture

So you are buying into the propaganda ? The US's economy is good ? That's news to me.

livefreediefree's picture

You missed the point: Every single one of the-sky-is-falling predictions have not become true. Every single one. Normally, when one deals with logic, facts, and rationality, one relies upon logic, facts, and rationality. Every single one of the-sky-is-falling predictions have not become true. Every single one.

Grouchy Marx's picture

No, on the contrary, we all understand your point and we just disagree with it. What we understand and you fail to, is that the sky falls slowly at first before it caves in. Employment is at an ALL TIME low, I would say that for the millions unemployed or underemployed or working three part time jobs, the sky has fallen. Most people I know are worse off from a cash flow basis than a few years ago. Debt is at historically high levels. But wait - the equity markets are reaching new highs - doesn't mean squat. It is only the appearance of wealth. 

I guess what I did fail to realize was that I was responding to a the posting of a brick, and I should have gathered that from your avatar.

livefreediefree's picture

You missed the point: Every single one of the-sky-is-falling predictions have not become true. Every single one. Normally, when one deals with logic, facts, and rationality, one relies upon logic, facts, and rationality. Every single one of the-sky-is-falling predictions have not become true. Every single one.

booboo's picture

Or "My dog has not died in 2920 days therefore it will live forever"

John_Coltrane's picture

The old absense of evidence is not evidence of absence argument.  

Doctor:  We can't detect any cancer Mr. Rational Determinism, so you are certainly cancer free!

Sorry, but our new test shows you have about 6 months to live.  May we empty your bank account for you with a variety of procedures based primarily on the placebo effect and save you any estate planning issues?

Life is short, eat dessert first, since we are all fooled by randomness (especially, it seems, AGW climatologists).

livefreediefree's picture

You, too, failed to address my main point: Every single one of the-sky-is-falling predictions have not become true. Every single one.

techstrategy's picture

Said differently...  As the train approaches the cliff at 80 miles per hour, your observation is that the train is still functioning fine...  Ours is that the people aboard would be far better off if it came to an immediate grinding halt...  Extend and pretend simply makes it harder to get to the right place.  It is easier to course correct early, but we ran the ponzi finance so long that folks can't see the way out (which is to reliquify the system through gold to bring financial assets back into balance with real assets without the deflationary cascading default).  All we are doing with the gold manipulation is transferring real wealth to other nations.  If the Fed was looking out for our citizens, it would have used the printed currency to buy gold rather than repair bank balance sheets...

livefreediefree's picture

Sorry, but the only way to prove what you say is for the US economy to implode. It hasn't imploded yet.

livefreediefree's picture

Sorry, but the only way to prove what you say is for the US economy to implode. It hasn't imploded yet.

BeanusCountus's picture

I'm not smart. Or driven. Merely an observer of all that takes place across the globe. Observation: Ask the people in Argentina if you should disregard what these people are saying.

Juno Rock's picture

Or, the guy falling from the observation deck of the empire state building. As he passes the 14th floor he shouts;  "So far - so good!" Its not the fall that kills you. Its the sudden stop!


John_Coltrane's picture

As he passes the 14th floor he yells, gravity is the weakest of the 4 fundamental forces, so no worries, mate!

Its not the fall that kills you, its the Pauli exclusion principle (don't you wish you were a boson and not a bozo!)

COSMOS's picture

You can die quite easily just in the Newtonian world, I do believe that was what he was referencing.  So in this case you are the Bozo and the boson.

tonyw's picture

the turkey believes the guy feeding it every day is just great all that free food in return for nothing, then suddenly turned upside down and it all goes dark.


livefreediefree's picture

You miss the point: Every single one of the-sky-is-falling predictions have not become true. Every single one. These the-sky-is-falling predictions seem to be the raison d'etre for Zerohedge. Yes, it's easy to go negative, but it's very hard to admit that every single one of the-sky-is-falling predictions have not become true. Every single one

RaceToTheBottom's picture

Go with the majority, yeah that will work.