Doug Casey: How To Prepare For When Money Dies
Submitted by Casey Research
An eye-opening interview with renowned speculator Doug Casey, conducted by Karen Roche and JT Long of The Gold Report. Doug explains why fiat currencies around the world are destined for collapse… and what investors can, and should, do to protect themselves.
If dollar-dumping turns from a trickle into a flood, look out. Exploding prices (aka exorbitant inflation) resulting from the devaluation of the dollar will compound the problems we saw in 2007–2009. Catastrophe will come when everybody realizes that the dollar is an "IOU nothing." That's the downside in the decade(s) ahead, according to Casey Research Chairman Doug Casey. But an optimist at heart, in this exclusive interview with The Gold Report, Doug also identifies some reasons to be hopeful.
The Gold Report: You've been talking about two ticking time bombs. One is the trillions of dollars owned outside the U.S. that investors could dump if they lose confidence. And the other is the trillions of dollars within the U.S. that were created to paper over the crisis that started in 2007. Are these really explosive circumstances that will bring catastrophic results? Or will it just result in a huge, but manageable, hangover?
Doug Casey: Both, but in sequence. One thing that's for sure is that although the epicenter of this crisis will be the U.S., it's going to have truly worldwide effects. The U.S. dollar is the de jure national currency of at least three other countries, and the de facto national currency of about 50 others. The main U.S. export for many years has been paper dollars; in exchange, the nice foreigners send us Mercedes cars, Sony electronics, cocaine, coffee—and about everything you see on Walmart shelves. It has been a one-way street for several decades, a free ride—but the party's over.
Nobody knows the numbers for sure, but foreign central banks, and individuals outside the U.S., own U.S. dollars to the tune of something like $6 or $7 trillion. Especially during the recent crisis, the Fed created trillions more dollars to bail out the big financial institutions. At some point, foreign dollar holders will start dumping them; they are starting to realize this is like a game of Old Maid, with the dollar being the Old Maid card. I don't know what will set it off, but the markets are already very nervous about it. This nervousness is demonstrated in gold having hit $1,900 an ounce, copper at all-time highs, oil at $100 a barrel—the boom in commodity prices.
Some countries are already trying to get out of dollars, but it could become a panic if the selling goes from a trickle to a flood. So, yes, it's a time bomb waiting to go off, or maybe a landmine waiting to be stepped on. If a theatre catches fire and one person runs out, soon everybody rushes toward the door and they all get trampled. It's a very serious situation.
TGR: If panic erupts on the U.S. dollar, would products manufactured in the U.S. become super-cheap or super-expensive?
DC: They would become super-cheap. Everybody says that devaluing the dollar will stimulate U.S. industry because the products will become cheaper and foreigners will buy them. This is a huge canard everybody repeats and nobody thinks about. Yes, it is true for a while, but if devaluation were the key to prosperity, Zimbabwe should be the most prosperous country in the world as it has already collapsed its currency.
A strong currency is essential for a strong economy. Sure, a strong currency can hurt exporters for a while. But, a strong currency encourages manufacturers to invest in technology, and become more efficient. It rewards savings and results in the growth of capital that's critical for prosperity. A strong currency allows businessmen to buy foreign companies and technologies at bargain prices. It results in a high standard of living for the country, and yields social stability as a bonus. The idea that decreasing the value of currency to stimulate exports is a short-lived, stupid and counterproductive solution to the problem. People seem to forget that while the German currency was rising about sixfold from its level of 1971, and the Japanese yen about fourfold, those countries became the world's greatest export economies. It didn't happen despite a strong currency, but in large measure because of it.
TGR: Given that the U.S. is the world's biggest consuming nation, wouldn't fleeing the dollar create a big consumer vacuum in the international community? Doesn't the rest of the world want to keep up the high level of exports to these U.S. consumers?
DC: That's exactly why the U.S. is in such trouble; it's idiotically focused on consumption, while only production can create prosperity. The world doesn't need to stimulate consumption. This is another canard, because everybody has an infinite desire for goods and services. I know for myself, I'd like not just a car, but 10 Ferraris, a couple of Gulfstreams and 10 houses around the world. So, by myself, I have an infinite desire for goods and services. Multiply that by 7 billion other people. The only way to gratify those desires is by producing enough to trade with other people to give you what you want. When so-called "economists" think the problem is that we don't have enough consumption, that shows that the profession itself is bankrupt. It's actually quite embarrassing.
TGR: But other countries currently produce enough of what the U.S. wants. With U.S. dollars, that trade won't look good on their side eventually.
DC: The problem is the U.S. doesn't produce enough in return. The U.S. has been lucky to have a currency that has, so far, been accepted by everybody. But when everybody realizes that the dollar is an "IOU nothing" on the part of a bankrupt government and a society that doesn't really produce anything anymore, it's going to create a worldwide catastrophe. Those $7 trillion held by foreigners are going to become instant hot potatoes.
TGR: Considering what you said a moment ago, that the world doesn't need to stimulate consumption, you must find some irony in the Obama administration's plan to stimulate consumption again in the U.S. as a way to spur some economic growth.
DC: I'm afraid that after being counseled by the fools that surround him, Obama talking about economics is like the blind leading the doubly dismembered. They want to spend $450 billion trying to create new jobs—but these are government jobs, where you have people digging holes during the day and filling them up at night to create the appearance of employment. No government has any idea what the market really wants and needs. There should be zero government involvement in this. The government cannot and should not even try to create jobs. If Obama wants to stimulate the economy, he can decrease the size of the government. I would say a 90% reduction would be a good starting figure.
TGR: But that will create even more unemployment. That's one of the big concerns. States laying off employees could increase unemployment even more.
DC: It is wonderful that states are starting to lay off employees. Once they lose their state jobs, which suck wealth from taxpayers, maybe those people can find real, productive jobs providing goods and services that people actually want and will pay for voluntarily. So I'd argue that getting rid of state employees is essential to a sound recovery plan.
TGR: You warned early on in the 2008–2009 economic crisis that it would really be more of a hurricane. In the last year or so, we've been in the eye of the hurricane and there's more turmoil to come. Will the other side of the storm be worse than the first? And given the recent economic news, do you think we have moved out of that eye?
DC: Yes, I think we are moving out of the eye and going into the other side of the storm. This storm will be much more severe because we haven't solved any of the problems that caused the hurricane in the first place. The fact that governments all over the world have created trillions of currency units has only aggravated those problems. Now, I expect exploding prices to compound the problems that we saw back in 2007, 2008 and 2009. That will devastate the prudent people in society who saved money. They saved it in the form of currency, and wiping out their savings will be catastrophic.
TGR: Will this affect only North America and Europe?
DC: Mostly North America and Europe, but it's going to be very serious in Japan, too. It could be even more disastrous in China. The Chinese real estate market bubble is very inflated, driven by the lending of Chinese banks that won't be able to recover their loans. They will all go bankrupt, taking out the Chinese populace's savings with them. At the same time, those who own real estate will find it worth vastly less than what they paid for it. Those problems will create social disruptions in China, leading to riots, perhaps even revolution, and who-knows-what. The fallout is going to be terrible.
TGR: Many pundits and economists still project growth in China, albeit at a lower rate, and anticipate further expansion of the middle class.
DC: The 21st century will be the Chinese century, but the distortions and misallocations of capital that have occurred over the last 30 years—notwithstanding the truly phenomenal progress the country has made—are serious and have to be washed out. I am a huge bull on China for lots of reasons, but I am bullish for the long run. I think it is going to go through the meat grinder over the next 10 years. I don't know how it will come out; maybe China will break up into five or six different countries. Actually, that would be a good thing. Most of the world's nation-states are artificially constructed and too big to be manageable as political entities.
TGR: Your outlook on China fits right in with something you've been saying for years—about this being the "Greater Depression," which is also the topic of your upcoming presentation at the sold-out Casey Research/Sprott Inc. "When Money Dies" summit next month in Phoenix. Your opening general session talk is entitled, "The Greater Depression Is Now." We are now four years into it, based on your 2007 start date.
DC: Actually, depending on how long a historical scale you look at, you could say that, for the working class in the U.S. anyway, the depression started in the early 1970s. After inflation, after taxes, their take-home pay hasn't risen in real terms for 40 years. But the definition of a depression that I use is "a period of time during which most people's standard of living drops significantly."
Net savings shows that you're living within your means and putting aside capital for the future. In the U.S., people have been living above their means for many years—that is what debt is all about. Debt means that you are borrowing against future production, which is exactly what the U.S. has been doing.
TGR: So, how long will this Greater Depression last?
DC: It doesn't have to last long at all. It could be quite brief if the U.S. government, which is basically the root cause, retrenches vastly in size and defaults on the national debt, which is essentially an enormous mortgage, an albatross around the neck of the next several generations of Americans. The debt will be defaulted on one way or another, almost certainly through inflation. I simply advocate an honest, overt default; that would serve to punish those who, by lending to the government, have financed its depredations. Distortions and misallocations of capital that have been cranked into the economy for many years need to be liquidated. It could be unpleasant but brief. The government is likely to do just the opposite, however. It will try to prop it up further and make it worse—compounding the problem by expanding the wars. So, it could last a very long time. In that sense, I'm not optimistic at all. I think there is little cause for optimism.
On the other hand, I'm generally optimistic for the future. There are only two causes for optimism. First, smart individuals all over the world continue, as individuals, to produce more than they consume and try to save the difference. That will build capital, which is of critical importance. They should just save by holding paper currency. Second, expanding and compounding technology will increase the standard of living. Remember that there are more scientists and engineers alive today than have lived in all previous history combined. Those two factors countervail the government stupidity around us. Whether they will be overwhelmed and washed away by a tsunami of statism and collectivism, I don't know.
TGR: You say that the U.S. government is the root cause of this problem. Isn't that putting too much blame for a worldwide problem on one nation?
DC: The institution of government itself is the problem, and the problem is metastasizing like a cancer all over the world. But, sad to say, the U.S. is the most serious offender because it is currently both the most powerful and the most aggressive nation-state. It has been greatly abetted by the fact that the U.S. currency has been accepted globally. The U.S. dollar is, in effect, the reserve that backs all the other currencies in the world. That is why the U.S. government has been the most destructive from an economic point of view. Furthermore, military spending—which in the U.S. equals that of all the other militaries in the world combined—is purely destructive. It serves no useful economic purpose at all. The military is no longer "defending" anything—least of all liberty. It's actively creating enemies and provoking conflict. So, yes, I think the U.S. government is actually the most dangerous force roaming the world today.
TGR: Do you see that changing after the next election?
DC: No. I think the chances of Obama being reelected are high, simply because more than half of Americans are big net recipients of state largesse. The U.S. has turned into a larger version of Argentina politically, where the electorate is effectively bribed to vote for the biggest thief. It is likely to turn out much worse than Argentina, however. Unlike the Argentines, the U.S. government is fairly efficient. And, unlike Argentina, the U.S. is rapidly turning into a police state.
Electing a Republican might be even worse, though. With the exception of Ron Paul and Gary Johnson, the potential Republican candidates absolutely make my skin crawl. So, no, there is no help on the horizon. The U.S. government is spending about $1.5 trillion more this year than it takes in, and it is not going to cut that. In fact, foolish spending to bail things out will increase. And, worse than that, the Fed has artificially suppressed interest rates for three years. Interest accounts for roughly 2% of $15 trillion official national debt, or $300 billion per year. As interest rates inevitably rise, that interest amount will grow. At 12%—and I'm afraid they'll have to go even higher than that—it would add another $1.5 trillion just in interest payments.
I absolutely see no way out without a collapse of the U.S. currency and a total reordering of the U.S. economy.
TGR: When Money Dies, the title of your summit, implies some return to a gold standard. How do you see that playing out?
DC: Nothing is certain, but when the dollar disappears—and it's going to reach its intrinsic value soon—what are people going to use as money? Will we gin up another fiat currency like the euro? The euro is likely to fail before the dollar. My suspicion is that people will want to go back to gold. It's not because gold is anything magical, but simply the one of the 92 naturally occurring elements that—for the same reasons that make aluminum good for planes and iron good for steel girders—is most useful as money. In fact, the reason that gold has risen as high as it has is that the central banks of third-world countries—places that don't have large gold reserves, such as China, India, Korea, Russia, even Mexico—have been buying the stuff in size.
TGR: The concept of going to a gold standard seems impossible in the sense that there is only so much gold above ground—6 billion ounces? Maybe $11 trillion worth? But it's only a fraction of the U.S. GDP. Even with gold at $2,000 an ounce, that leaves an immense gap. In that scenario, how do you convert to a gold standard?
DC: In terms of today's dollars, gold should probably be a lot higher than it is. I don't know what the number will be, because a lot of those dollars will disappear in bankruptcies; they will dry up and blow away. It's like a real estate development that was worth $1 billion on somebody's books; when it fails, that's $1 billion destroyed. It's a question of the battle of inflation (with the government creating dollars to prop things up) against deflation (where businesses fail and wipe out dollars). But put it this way: the U.S. Government reports it owns about 265 million ounces. Its liabilities to foreigners alone are at least $6 trillion. If they were to be redeemed for a fixed amount, that would require roughly $22,000/oz. gold. And that doesn't count dollars in the U.S. itself.
I'm a bargain hunter and a bottom fisher, and bought most of my gold at vastly lower prices. But I think gold is going much higher because most people still barely even know that the stuff exists. As inflation picks up, they are going to want to get rid of these dollars—but what other monetary commodity can they turn to? So, gold is going higher. I'm still accumulating gold.
TGR: You said that the storm as we emerge from the eye of the hurricane will be worse than it was on the other side. If they don't own gold, how do investors protect themselves?
DC: It's very hard to be an investor in today's world because an investor is someone who allocates capital in a way to create new wealth. That is not easy in today's highly taxed and regulated economy. It's late in the day, but not too late, to buy gold, silver and other commodities. Productive assets are good to own. Of course, the easiest way to buy most productive assets is through the shares of publicly traded companies, but the stock market is quite overvalued in my opinion, so that's not the best option right now.
In addition to trying to build personal holdings of gold and, to a lesser degree, silver, I think people should learn to be speculators. This is not to be confused with gamblers, who rely on random chances. Speculators position themselves to take advantage of politically caused distortions in the marketplace. In a true free market society, you would see very few speculators because there would be few such distortions. But regulations, taxes and currency inflations are likely to keep markets very volatile. Good speculators will position themselves to take advantage of bubbles, and identify bubbles that have been blown to their maximum and are about to deflate.
Government actions are going to force people to become speculators, whether they like it or not. Most won't like it, and very few will be good at it.
TGR: What bubbles might speculators look to exploit?
DC: I'd say the world's biggest bubble is real estate in China, but real estate bubbles are just starting to deflate elsewhere, too—in Australia and Canada, for example. It's relatively hard to short real estate, of course. Shorting bank stocks is an indirect way to play it. I'd say bonds are the short sale of the century. They're going to be destroyed. Bonds pose a triple threat to capital because:
- Interest rates are artificially low, and as interest rates rise—which they must—bonds will fall.
- Bonds are denominated in currencies, and most currencies, let's say dollars, are going to lose a lot of value.
- The credit risk of most bonds, certainly those issued by governments, is high.
On the long side, mining stocks are very cheap relative to the price of gold right now. I'd say there's an excellent chance of a bubble being ignited in gold mining stocks, especially the small ones; in fact, I'd put my finger on that as likely being the easiest way to make a killing.
TGR: Technology was one of the two areas of optimism you mentioned earlier. Do you see a bubble forming there?
DC: You have a point, but I'm not sure you can talk about technology stocks as a whole; technology is too variegated, too vast a field. Although, I've long been a huge believer in nanotech, which is likely to change the world as we know it. With gold stocks, however, you can jump into a discrete universe, that's likely to become a mania.
TGR: Thank you for the tips, Doug, and as always, for your thoughtful insights.
(26 votes)
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gold bug +1. gimme the gold i want the gold where the gold at?
ps. cocaine on walmart shelves? i'm going out to walmart. and speaking of empty chinese cities, we should 'export' the poorest, most unproductive welfare recipients to china and have them repopulate those empty cities.
Check this guy out:
http://nietzschesportfolio.blogspot.com/
Bad mouthing ZH...
Why are you driving trafic to this shit?
I see you know what you are talking about, n'est-ce pas?
Don't care for DC and his sales pitches.
I bought US 30 year Treasuries , ZROZ and EDV.
The top 3 investments, better than his picks!
I didn't have to subscribe to his self-serving dribble.
.
Ron Paul and Gary who???
Please oh please check back here in two years and let's see how you do versus the Casey portfolio.
There's a reason people pay for Doug Casey's insights. I'll give you a hint: it's the same reason you're talking your book in an unprovable way.
But hey, good luck to you. May you make tons of clownbux.
Hey tramp,
did you espy the fact there are no comments posted to any of nietzsches articles?
I looked all the way back to 2010, that is the date of conception for that little blog, you should see his other blog "Bankstocks" it's set up, but not active.
**WARNING** that site is spurious! check the twitter comments, he had 44 tweets on the 22 sep, this site is run by a borg. Almost all the sites followers are realestate people.
I did find this jem of an article, from Wednesday, October 20, 2010
3 months from now no one will be even talking about 'Foreclosure Gate' Video- James Altucher Says the Prophets of Doom Are All Wrong
Why on Earth would the Chinese WANT our poorest, most unproductive welfare recipients?
Soylent Green?
Organ donors? Of course they must be arrested first, but China is the only country with more felons than America....
fertilizer......
Do you think the Chinese will force them to pull their pants up over their asses?
Spare Parts
The last thing China wants is more mouths to feed unless they contribute to the bottom line.
On the topic of When Money Dies... read the book by the same name "When Money Dies by Adam Fergusson" its a very elaborate timeline on germanys descent into Hyperinflation..
read that book too. I'm seeing some very big similariites between then and now.
http://www.abebooks.com/servlet/SearchResults?sts=t&tn=%22when+money+die...
Weimar HyperInflation When Money Dies PDF file Pat...
buy gold and books
http://expose2.wordpress.com
Unfortunately, when the deflationary, deleveraging "cataclysm" hits, gold mining stocks will go down 300% faster than any other sector in the S & P 500.
As witnessed a few days ago when the F12 punching GATA boys and CIGA's were getting margin called.
Heh, if Fidelity or Vanguard just sold 1/10th of their position in AAPL alone, and used the proceeds to buy the GDX, that could have actually made the gold stocks go up, not down.
But so far, the "Big Money" is not really interested in the sector. They would rather scan the "largest percentage gainers" list and find the next CMG, LULU, PCLN, FOSL, or even some bottle rockets like TZOO, which skied and subsequently crashed, yet it has still outpeformed NEM over the last 2 years.
Unfortunately Rotot you can not have your deflationary cake and eat it to (stocks soar gold falls) ...you clearly are not a trader.
Traitor...yes...trader....no!
... only if the metals go down with them... a big if.
the metals go nowhere... paper does.
I heard some funds were shorting the mining stocks to hedge gold exposure and that kept them down in price comparison.
I agree with you though, at some point, they will be hit big when the next QE comes along; but they won't really be down long term until the central banks quit debauching their currencies (which may not be until after the next big war).
"As witnessed a few days ago when the F12 punching GATA boys and CIGA's were getting margin called."
Really Robot? I sersiously doubt the GATA boys and CIGA's are playing with paper. Thanks for once again displaying your I DON'T GET IT club card.
i'm not liking gold stocks more and more,,,,,,i think when the hammer fall oil will be priced in gold therefore crimping the miners to get the gold out of the ground
One word bitchez - Nationalization. Due you diligence!
RT, that's the second time you've asserted that mining stocks are 3 times more sensitive to a downdraft than ordinary stocks. Do you have a jot of evidence to support your assertion?
Based on NEM, the one mining stock you did identify, its beta is 0.45, positively correlated w/the market, but not excessively so. Indeed, that measure alone suggests it will fall LESS than the market, which seems logical. That is, when people flee the momo darlings you chase, they will have to put their sales proceeds (or what's left of them) somewhere--PMs and the companies who dig them out of the ground seem a likely place.
So, yes, mining stocks seem likely to fall as the rest of the market deflates, but on a relative basis, they should be among the safer plays. Good luck, however, with your picking-up-nickels-in-front-of-a-steamroller strategy. What could possibly go wrong?
p.m. mining stocks don't do badly in recessions, check out american barrick in the depression http://www.oilngold.com/analysis/research/gold-a-gold-stocks-during-peri... and note mr. hussman's (a more historically based analyst than robo, also his performance is audited and reported) comments http://www.hussmanfunds.com/wmc/wmc110926.htm
As one who trades these stocks on a cash basis, meaning I don't day trade and don't use margin, Robot is right to some degree. The trick is to buy them after they fall three times faster than the rest of the market because the other side of that coin is the big gains they make when they correct. I buy the crappy ones like GSS and GBG when they really get washed out and then sell them when they go back up 10%. If you can make 10% on your trade in a few days to a week you are doing pretty well.
I have been trading in and out of KGC since April. That one takes me longer to get in and out of because it's less volatile. I have traded 22,000 shares and made $25,000 on it in the last four months. Maybe that is picking up nickels in front of a bulldozer too in your opinion. I have some long term positions in the miners that I hold and then trade around them. I have traded KGC, GSS, CDE, SIL, GG, HMY, GBG and HL. Right now I am getting killed in HL, that one has been a downer since I started buying it so I have had to resort to buying it's dips and selling it's rebounds. I bought it at $5.65 on Tuesday and sold it at $6.10 yesterday. I bought GSS at $1.89 Tuesday and sold it at $2.09 yesterday. Those are examples of short term trades that I make in order to recoup some longer term positions I get stuck in. Ultimately I will make money on the HL position but my money is tied up right now unless I want to accept a loss which I don't have to. Of course that is the risk with buying stocks, they go down in addition to going up.
The other thing you have to know about the gold stocks is that they don't always trade with gold, sometimes they trade against gold when the Ratio Trade is in command. The gold stocks are confusing because funds still play them but the Ratio Trade uses them as a hedge against gold profits. Given the beat down that gold has taken lately which means flushing many of the hedge funds out, the Ratio Trade has been less pronounced and the miners are more aligned with the POG and POS. That of course isn't so good in this environment. On the other hand, the HUI:GLD ratio should begin to rise back to a more normal value if the Ratio Traders are getting out. That alone should be good for miners if gold can stay above $1500.
As to being relatively safe plays, I wouldn't bet that any stock is a safe play. There is just too much volatility in the market to expect a safe play in any sector.
what's happened to all the posts on the home page? Only 4 posts showing up... I can't get my daily fix...
same here
OzLand is sooo overpriced relative to income. The median house price there is OVER $635,000!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! I read.
The median income is under $70,000.
POP!
POP, goes the weasel! The gubberment there thought it was cool repeating what The Bernank-Timmy-Barry Team was doing so they gave tax credits to new home buyers....but get this, $16,000 tax credit!
"You reap what you sew."
It's no wonder defaults and delinquencies are soaring there.
Fuggetit
The median price in Sydney might be $635,000 (9.2 x household income) but in the nation as a whole the median would be more like $450,000 and falling. Some high end houses in the seaside areas have fallen 40%.
>>
As interest rates inevitably rise, that interest amount will grow.
>>
How does that happen in a world with no growth? Why should they rise if there is no growth? They were lowered to stimulate growth. If it doesn't happen, the movers and shakers don't convene and say . . . okay we have no growth, the answer must be higher rates, to worsen the deficit and suppress growth further.
I think you are seeing only part of the picture. Rates must rise because the "stimulation" must continue. "Stimulation" requires investment, from foreign and domestic players. Foreign investors are already drying up....and this trend will continue as the EU crisis reaches its climax and the Chinese economy inevitably reaches a peak. Rising rates are one way to generate investor interest; the more likely route is debt monetization. Either way money loses value.
must......order.....more.....heirloom.......seeds.......
Bcause you reap what you sew?
If I read another article telling me that miners are a good buy i'm going to sew their mouth shut, and sow them 6 ft. under. They removed their misspelled comment, I guess we got to them :) Right clicking words underlined in red is your fren.
Seriously, an IQ of 145 and you do not know the diference between sew and sow? Dear Lord in heaven, please forgive him for lying about his IQ and adding 100 points.
...at least they werent "airloom" seeds he was after...
I sew what I rip and reap what I sow..... But thats just me and I'm me and you're you.
Hey genius, it's "sow". Otherwise you can rend what you sew.
IQ 146
And there are those who will reap what they sow.....
On mining stocks being a bargain: I'll jump just before the hard landing to mitigate the impact and grab me a handfull.
Gold stocks? Bull SHIT!! It will only take one, possibly two, more attacks via margin hikes/calls or short sellers, and the price of physical will become completely and forever unglued from paper fantasy. BTFD and stack! Nothing else will protect you. NOTHING!
I'd rather own physical metal rather than mining stocks - way too much risk based upon uncertain politics, energy costs, and risk of nationalization.
Good to see the sentiment remains ever bearish.
Fully agree with stacking physical, and physical in preference to mining stocks, but how will producers sell their gold in order to fund their mines, pay workers, pay suppliers etc if the paper price is divorced from physical?
Good question. They could always pay in physical if the counter party would accept. They could also sell the physical into a demanding market and pay with mountains of paper for parties that still want paper. My point is not that mines will be in trouble. Exactly the opposite is most likely true, as the mines will have one of the few assets still worth anything should money 'die'. The paper holders will be the only loosers IMHO.
I hope he's right, I put my whole IRA into PM mining stocks in Spring of '09 after studying deflation/inflation & recessions/depressions.
So far, it's been the right bet.
It got bubblicious last November/December after gaining 200%, but I'm still ahead.
Right you are... and they are severely undervalued as we speak. BTW, you can diversify a little with the metals... Sprott Gold (and Silver) trusts are the real deal, and are elegible for IRA investment... I'm about 30% right now and plan to increase if we get a good pop in the mining stocks on the next leg up... good luck!
I did it in '03 and spent 5 years listening to people tell me I was an idiot while they continuously cash-out refied and bought toys... Many of them went bust, a few saw the light and think I'm some kind of freakin' oracle now...
Doug Casey is an idiot
Mmmm, nothing persuades thinking people over to your side of an argument like a random ad hominem.
I believe he was legitimately overcome with self-righteous indignation. The deeply understood position he was ready to articulate was thrust aside, as emotion took over.
This is why I so look forward to coming to this web site every day. (Being an American, we do not often see the Mensurschläger wielded so artfully.) Bon mot, Sir. Bon mot.
I'm willing to stipulate that he's fundamentally uneducated in the areas in which he pontificates; but basically he's just talking his book.
WOW, what a desperate attempt to sound educated!
It was the misplaced use of the word "stipulate" that clued me in.
(let's quote it before he edits)
"I'm willing to stipulate that he's fundamentally uneducated in the areas in which he pontificates; but basically he's just talking his book."
[I'm willing to stipulate that he's fundamentally uneducated in the areas in which he pontificates...]---IQ 145
I like Doug Casey. He smokes cigars. And, I agree with him 75%.
Fundamentally uneducated in PMs? No. Degree in geology, and has over 30 years professional investment experience. Years of first-hand experience in world trade and mining. DC has more passport stamps than you have IQ points.
I'm willing to "stipulate" your Self-esteem Quotient is 45.
Oh really?
Doug Casey's newsletetter, in 1981 was called Crisis Investing.
I remember one recommendation: Buy high rise apartments in Hong Kong. The impending end of Great Britain's 100 year lease caused great fear that the Chinese would shut down elevators. He though otherwise and suggesed: Buy them, and rent them out.
Recommended: Buy apartments/condos at $20,000 to $40,000.
Today: Annual RENT for such apartments: $30,000 to $50,000.
Idiots don't make such nice calls.
Oh noes!! Doug Casey was wrong on one of his recommendations. Blast that charlatan for his sub-1.000 batting average.
Cherry picking is easy, that's probably why you pasted the above (with no link no less). If you'd read even a fraction of Casey's newsletters you'd know the bulk of his recommendations have been exceedingly prescient (PMs, miners, commodity stocks, etc.)
If you're replying to the post by Stevious, I think you need to read it again.
Uh if you bought high rise apartments in Hong Kong in the 80s you'd be making a killing now. This market might not see its 1997 highs but it might once the Chinese government gets involved in housing subisidies and the rising migration to Hong Kong there is still lots of money to make yet. That bubble is going to pop, though and once it does it won't be pretty.
Crap, you guys are right. My apologies, Stevious.....I didn't read your post closely enough.
True that. Bloody things sell for Over HK$16mill now and those ones have 'Roaches' as pets
btw, how does fiat die if the world deleverages and all of that debt destruction leaves a limited money supply? we could have this fiat survival scenario in a deflationary plunge:
europe implodes, panic run to the dollar, the piigs are wiped clean of debt, much destruction of banks/credit, excess cleared, eu/euro survives, then....
u.s. implodes, everybody runs away from the dollar, back to euro now that its fundamentally sound, debt destruction occurs here, more deflation, dollar also comes out stronger.....
What did you just say? You are about to get your head handed to you by spitzer in 5...4....3...2....1.
I couldn't agree more.
Fiat dies when people ask for gold, tobacco, liquor, food, or ass in exchange for goods or services.
We are particularly leveraged as our Fiat house of cards is now based upon ethereal 1's and 0's floating about in the databases and "bank accounts".
There isn't enough bill and coin to cover what people would try to use as currency when the digital ponzi crashes.
"There isn't enough bill and coin to cover what people would try to use as currency when the digital ponzi crashes."
When the fiat ponzi collapses, that is when the real printing starts. Those wheelbarrows full of money don't actually exist, yet, but they will soon. The only question is, "Will you be able to carry enough $100 bills in just one barrow to buy a loaf of bread?"
Go long [big] wheelbarrow futures.
Screw the paper.
No matter what happens, a single $2 roll of nickels will always buy one loaf of bread.
(Nickels are 75% nickel, and 25% copper) $1000 face value = 220lbs, thus $1000 face value = melt value of (today)= $1045 See:
http://www.coinflation.com/coins/basemetal_calc.php
And that includes a ~25% drop in the value of nickle and copper over the recent past.
Nickels are the single item (other than pre-1982 pennies) of currency in our entire monetary system that is worth holding.
Even in the Weimar Republic hyperinflation, anything metal (copper/nickel/silver/gold) retained it's purhasing power. Near the end a small handful of gold coin could buy a row of fine houses. But even copper and nickel had intrinsic value and could be sold for its purchasing power even as the value of paper currency became worthless.
You're gonna go through all that shit for an extra $45 or $50 or $100 bucks?? No thanks.
Maybe a few rolls of real nickels in the desk drawer as cheap food insurance not that much trouble Mr. Leghorn.
Doug has been saying the same for 30 years now? or more? maybe it will become reality, maybe not.. sounds like Pretcher, always the same moto, till the end.
And he wont be proven right until the end!
rsi1.. another one that can't use the spell check feature, or figure out how to upload a .gif image to pretty up his boring moniker
Whatever validity his PM scenario, a curiously blinkered economic/political perspective (putting 100% blame on gov and citizen stupidity) ignores corporate oligarch & banksta capture and control of gov and their massive, fraud-based looting operations, at the root of the world financial crisis.
Sorry to be offtopic again (I mean do I really need to say that I am bullish about PMs? Come on! You know that, yes, you!), but this is just in:
“About 300 people living in several villages in the municipality of La Frontera, on the island of El Hierro, will be evacuated this evening at the risk of occurrence of landslides by seismic zone is recorded.
The Canary Islands government has taken this decision to the expectations of the scientific teams that indicate that earthquakes are occurring on the island, more than 8,000 since July, will increase in intensity and frequency from this midnight, though the traffic light volcanic risk level is still yellow and not expect an imminent eruption."
http://www.02.ign.es/ign/resources/volcanologia/energia_HIERRO.jpg
As you can see from this chart, the accumulated energy is almost parabolic recently - a magma bubble so to speak.
Sure, in terms of volcanoes you can never be absolutely sure, but Magma is definitely rising - it could be that it stops somewhere on the way. An eruption is not imminent, but could happen within the next weeks. The earthquakes are stronger recently.
Somehow that is very fitting, if you think about the whole Euro-show. El Hierro once triggered a gigantic tsunami wave (if such a wave would happen again, oh dear...):
"That the Canaries constitute a danger was shown 300 000 years ago when a part of the island El Hierro slid into the sea, triggering a mega-tsunami which carried rocks as high as a house for many hundreds of metres into the interior of the east coast of what is today the USA. The danger of a similar island collapse is seen by scientists particularly at the island of La Palma in the Canaries. Here, following a volcanic eruption in 1949 almost half of the mountain range of 20 km moved westwards towards the sea, leaving a large tear in the volcanic basalt. In the event of a fresh eruption, a huge part of the volcano could loosen itself due to differences in the types of rock and diverse water deposits within the now active volcano. As a result, the densely populated east coast of America would be massively threatened." (http://www.tsunami-alarm-system.com/en/phenomenon-tsunami/occurrences-at...)
Now, that's unlikely, but it would be the wet dream of Darth Krugman.
Bullish.
Wow! It's not uncommon to see natural disasters coincide with horrible bear market troubles...In fact, they are somewhat synonymous! They seem to feed on each other! Parabolas are never good it seems! Lots of bad weather/geological 'stuff' is happening all over the world...
PY, thanks for the update. That parabola looks like the Nasdaq in 1999....scary steep and just as dangerous to one's health and wealth, I gather.
I got my water wings ready...blow, baby, blow....
EAST COAST TSUNAMI threat. Read PY-129-20's post above.
keep your eye on the Canaries.
Love Doug Casey's work. He's helped me make a shitload of money over the years.
Shitload, n'est-ce pas? Just Merde.
Est-ce que vous croyez que vous êtes plus intelligent quand vous écrites en Français sûr un blog ou la langue première est Anglais?
You kind of remind me of one of those pompous French waiters, just saying...
(Yes, I know the grammar is likely terrible- we don't have much reason to speak French in these parts, and it's been years.)
c'est toujours vous que est en retard.