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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.
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That's true of the newbies, but sometimes they learn things when actually doing projects.
Seriously Chumba, where do you think all the technology around you came from?
Much of the value created by technology gets skimmed away by bankers.
"where do you think all the technology around you came from"
Are you referring to the leaking nuke plants or electric cars that run on recharges from coal-fired power plants? Or Monsanto terminator seeds? Or new pharmaceuticals that get recalled at about a 50% rate?
Throughout history, science moved forward through dissent among scientists and worldwide sharing of ideas. These days, science is mostly patented, cordoned off, top-down, objectionless, goal-focused, accounting-driven development of frivolous or lethal products. Much like the entertainment industry, major-party politics, mainstream news... In all those sectors, including science, there are still some courageous individuals who dare to experiment and some brilliant and useful things do get made. But that's not the dominant paradigm.
Edison alone was coming out with inventions which were more clearly significant and life improving then what I have noticed lately. Smaller computers and more complex cell phones don't do much for me.
Cramer, Water Boy for the TBTF, Wall Street, and CNBS:
“In fact, I believe one of the proximate causes of this rally is a genuine sense that things have gotten better in this country,” he said.
Gas prices are down, retailers and auto companies are saying better things, most of the recent Federal Reserve reports have been positive and most importantly, Washington has receded from the consciousness of American business, Cramer said.
Ahh, yes, counting on anesthetizing the American public through stupid stock market tricks again. Again. Again. Cramer and CNBS say "You are getting very sleepy, America, your eyes are getting heavy, when I say the words "Buy buy buy" you will reach for your wallet and send me those little green things...."
Only this time the chances of it working are slight. Nobody's really in the game. Joe and Jane have spent down lots of their 401Ks, pulled out money from equity mutual funds, and whatever they've got left has flown to embrace USTs big time. We're now in the age where the thinking is: at least with Treasuries your balance doesn't go down. never mind the piddling yield. Nobody's in the mood for "let's play risk" anymore. Dividends or not.
But there's a much much more serious side to this and thank you, Cramer for illustrating it perfectly and feeding me my lines: as the amnesia induced for the last 30 years is slowly wearing off, the patient is waking up to a hell of a lot of pain and weakness. The state of the economy is inly getting worse more gradually without even a real bounce since the giant plunge of 08-09. There has been no expansion. And as far as jobs it's been a total bust with contracting indices.
As the core of the economy continues to get rotted out (not the high end which is stable), there will be more and more awareness, pain and ultimately anger. It's just getting started. But it's inevitable when those under 25 have no place left to go but the basement and those nearing retirement start living off table scraps. It's all imploding, just more slowly.
c'mon boys...admit it, with a tv salary, we'd all be saying all manner of crazy shit, go to commercial, get some make-up, sip of coffee, check the screens....ohh wait, we don't check screens anymore cause it we get paid stupid money to say crazy shit.
defencev,
Er', scuse me?.
"The idea that US cannot repay the external debt is just bullshit: it is relatively small amount and can be done under appropriate circumstances"
Where I am sittiing 6-7 Trillion is a wad of dollars................easily repaid?.WHAT appropriate circumstances can you come up with that we could remedy that issue so handily(since we are a service economy, and make jack shit?.)
In order to thrive and grow, produce jobs, we MUST manufacture goods,and Export them.
No way we survive as a major anything as a service economy.
May as well be Cabana boys.
Hell, I've got a Hundred Trillion (Zimbabwe) dollars hanging next to my monitor. I'd pay the debt off, but it's hard to find anyone to make change.
Money wont die, next gay story .. . . .. .. ..
Pladizow
WOW, what a desperate attempt to sound educated!
Some confuse book learning with common sense, and I wish I was just 10% as well off as Doug.
What he said makes a hell of a lot of common sense,because it's what we are living.
since the new avatar, well, the lad has .....,,,,,,.......
Casey's philosophy flies in the face of the wisdom of Paul Krugman who argues that paying people to do useless things (like preparing to fight aliens from outer space) adds to the material wealth of a society. And Krugman even has a Nobel Prize in Economics to show us how smart he is. Just like Obama has a Nobel Peace Prize to prove he only drops humanitarian bombs. You just gotta laugh.
"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."
Ohh, yeah, I see them changing their minds ones any type of crisis zooms
IN.. Look how they "trying to get out of dollars now".. Selling
their kids, homes and farms in exchange for 2% Yield 30 years US treasuries.
Anybody else crying loud for reserve currency alternative?
Chavez!! Are you there???
"speak now or forever hold your peace", and shut up already!
I'll worry about the USD after the dollar-denominated CDS blowup occurs, until then, chill out.
When that happens, and it will, you wont have the time to react fast enough.
What is the best way to make maximum $ if you think interest rates in the US will rise in by mid 2013? ZH, has some great minds and I am just wondering what would be the bomb trade! Long TBT? Leaps? What do you think?
What is the best way to make maximum $ if you think interest rates in the US will rise in by mid 2013? ZH, has some great minds and I am just wondering what would be the bomb trade! Long TBT? Leaps? What do you think?
Maybe I'm missing something here. Why would you short treasuries if interest rates rise?
Theoretically, the current price of a bond reflects the present value of the interest payments and return of principal. The present value is calculated with a formula involving amout/(1+interest rate)**#years in future.
So if interest rates rise, the present value is less.
I get the idea, but rising interest rates typically signal a slowdown and people run to term treasuries, not away. Treasuries are interest rate risk minimal.
I guess there is a view that we are so far gone as a country that an interest rate rise on the 30Y from 3% to 6% means a DV01 clusterf*%^. It is kinda scary when you think about it.
A rate rise would collapse the breakeven spread, so trading that would be pretty clean.
Don't insurance companies do well in a rising rate environment? Geesh, it makes me sick to my stomach to even suggest investing in them.
garbage. plain and simple. here we are two years into a recovery and you clowns still don't know the difference between China and Hong Kong. Of course mainland Chinese real estate is a total catastrophe. of course you also want to be dumping copper--as well as silver and gold should the EU currency union disintegrate. Hong Kong/East Asia (starting in New Zealand and moving up through Indonesia, through Malaysia and Thailand--hang a right through Vietnam and then over to Hong Kong (it's epicenter) then up through Taiwan, South Korea and Japan) has been the engine of growth going on 30 years now. throw in Chile, the Western United States, the South-eastern United States, Western Canada, Quebec, apparently parts of the Middle East and Washington DC and I think you have an idea why we really aren't in a Great Depression and are not going to be. stay with the dollar growth economies and the East Asian/American consumer classes and we'll just retitle the masterpiece "Certain Stocks for the long run." Leave "the market" for the morons claiming to be something different.
Once again, disabledvet .....
Funny, it looks like English!
Methinks your disability probably lies somewhere above the neck.
BAHAHA.
okay, yeah sure. /snark off
You forgot to scream YEAH!!!!!!! at the end of your post.
Signed,
Howard Dean ["I Have A Scream" speech]
..."we're going to South Carolina and Oklahoma and Arizona and North Dakota and New Mexico, and we're going to California and Texas and New York ... And we're going to South Dakota and Oregon and Washington and Michigan, and then we're going to Washington, D.C., to take back the White House! Yeah!"
Just remember, the day a newly poor Chinamen trades a oz of gold for some American exported food the trade will be reflected at about $300.00 USD and all your 'friends' at the coin shop will be long gone, with your worthless fiat. lol
@RobotTrader
Let's say that money was coming to an end. What stocks would you own?
Soup stock, gun stock, stockade stock, Woodstock ( for the tunes ) , and overstock the pantry. Any paper stock? Paper books and toilet paper - that's all folks!
"That's exactly why the U.S. is in such trouble; it's idiotically focused on consumption, while only production can create prosperity"
True statement and obvious to most who understand what international trade is supposed to be about ... and USED to be about till the globalist/Freidmanites took over.
What am I missing? I'm 50% allocated in Corp/Muni bonds with duration of 2-3 years and all investment grade. Yes, if I redeem prematurely I could take a hit, but me and most, will simply roll & replace. I just do not understand the risk being emphasized by the author. I hold bonds to maturity. So wheres the risk?
Interestingly last week, it appeared I'd see my first bond default ever (Wenatchee, WA - Toyota Ctr). Its bid dropped 15% in one day last week. Concerned, I put it out for bid, and mine sold surprisingly near 98, which was slightly more than what I orginally paid. Again, what am I missing?
Inflation? Shadow Stats says you lose.
Jim- I am talking about being short treasuries thinking the yield has to rise. Nothing but a simple question to get people talking. I would probably buy TBT and go long long options leaps on it.
All good. I like the idea of trading ideas instead of abuse unless it is really hilarious.
I commented further up, but I'll throw another idea out too:
constant maturity IRS swap spread compression against IG bonds makes a lot of sense. Just not sure if you will get a "knock it out of the park" move.
How about ZSL?
Rising real interest rates would kill silver as a spec, plus rising rates would slow down industrial demand.
A myth is perpetuated here. That a gold backed currency must have $1 worth of gold for every $1 dollar in currency. Not so. All that gold backing means is that the price of gold is regulated by buying or selling gold from storage or creating or storing currency to keep the prices in line.
Simple.
Price gold in molecules not ounces.
TA DA.
Middle cllass savers can keep their molecules on deposit at, lets say... The First Molecule Bank and Trust until they save enough molecules to make 1/10 of an ounce, which they can withdraw. Now everybody's in the Gold Rush.
Sweet baby Moses in a basket... Doug Casey F'ing gets it.
It goes like this:
Value is subjective.
Voluntary transactions increase the wealth (value aggregates) of both parties.
Governments subsist by involuntary transactions (force), incurring a loss of wealth for their citizens.
Governments are parasites in the human ecology.
About 2 weeks ago I have suggested a new subject called "What is the Plan"?
Nobody was interested...
I wrote :
From my view the comparisons with the Roman Empire are irrelevant...
Recently I read ( still on zero edge ) that the deal offered by Nixon ( and Kissinger ) to Deng Xiaoping was a bad one for the US... May be, but at the time it seems to me that they had a problem with China and they have solved it..
Of course, it seems that right now they have got another problem with China ( China becoming too much (?) powerful ) but I guess that they will be able to "solve" it again. Ie. China got 10% of this Oil from Lybia ( now controlled by Nato...) and more from Iran...
In matter of armaments few more years ( but not too many..) will be needed for China to really be able to challenge the US and to be able to expel the US from South East Asia... So, seems that another "problem" will have to be solved in a given time frame...How ?
To definitely solve the "problem", one way would be to break China in several countries ( nationalities )..
Today Casey think about the same but from a different ( less extreme ) perspective...
f888
I read your earlier post.
I agree that comparisons to Rome are irrelevant. Unless you consider the First Rome to be the beginning of the rise on the left side of the bell curve of western civilization and the Second Rome to be the end of the decline on the right. Simplistic, but to the point.
Will WWIII end the depression? Deja vu.
"Lengthy talks were held between the U.S. and Japan. When Japan moved into the southern part of French Indochina, President Roosevelt chose to freeze all Japanese assets in the U.S. The intended consequence of this was the halt of oil shipments from the U.S. to Japan, which had supplied 80 percent of Japanese oil imports. The Netherlands and UK followed suit. With oil reserves that would last only a year and a half during peace time (much less during wartime), Japan had two choices: comply with the U.S.-led demand to pull out of China, or seize the oilfields in the East Indies from the Netherlands. The Japan government deemed it unacceptable to retreat from China"
And then there's this.
"China Set to Launch First Space Lab Sept. 29 or Sept. 30, 2011
By Laura Matthews | September 27, 2011 12:46 PM EDT IBTimes
China is to set enter its own Space Age with the launch of its first independent space lab module.
The Tiangong-1, which translates to "Heavenly Palace," is anticipated to usher in a new era of Chinese space exploration that includes a proposed space station China intends to build around 2020.
The three-story cigar-shaped module will be used to practice robotics and docking needed for any eventual space station, Chinese officials told Xinhua, the China's state news agency.
The rocket is set to blast off either Thursday or Friday, depending on the weather outlook in northwest China, Xinhua reported."
Space stations are sneaky ways of dropping bombs on your enemy, which avoid antimissile defense systems.
If the world community does not pull together in the teeth of this economic crisis and a very real outlook of the depletion of the earth's supply of oil, we shall look like:
"The Raft of the Medusa",
Gericault's 16 ft. X23 ft. painting of the "survivors" of that famous ship wreck which hangs in the Louvre.
If you don't know it, google it..
If money dies, gov can also nationalize mines. Won't mining stock goes to zinch ? Also, when money dies, why would one expect stock market still function ? The only sure way I can think of is to have something physical, and considered valuable internationally. For now, precious metal, fuel and food.
Not.
Mining stocks are... wait for it... stocks. Equities are going to tank. I see miners continuing to be undervalued compared to the metal.
Also, we're looking at a conflict between fiat currencies inflating due to runaway presses, meanwhile we suffer economic contraction and possibly deflation. Gold is trapped in the middle, it wants to go up but who can buy it when they've got no jobs?
Central Banks and Sovereigns
Casey has good advice. Start here: http://www.manexresourcegroup.com/
Excellent.
" I simply advocate an honest, overt default; that would serve to punish those who, by lending to the government, have financed its depredations."
Those evil widows and orphans.
Generals should fight the last war. Economists, in an overwhelming depression, should not fight the last depression. And ours are not now.
This depression was not caused by too much debt. This depression was caused by a yet to be acknowledged shortage of oil.
But that seems too hard for us to think about.
Btw, DC try to avoid saying "On the other hand." You remember what Truman said how he preferred one handed economists.
.
hmm, It think buying PHYSICAL precious metals is the best hedge against dying money!
Very interesting situation in Germany: http://www.silver-info.com/from-gold-and-silver-world.htm 2011 - 09 - 27
German Order volume for physical precious metals @ absolute record levels
If you aren't speaking german (and we suppose you aren't), we'd like to summarize the most important facts from the below excerpt for you, published by one of the most important German precious metals online shops, westgold.de:
- this monday (September 26) was the day with the hitherto highest sales in the history of the company
- the former sales peak was exceeded by around 50% and absolute capacity limits were reached
- telephone communication temporarily collapsed
- demand in the entire market is about 200 to 300% above the average of the past years
- the seller-to-buyer ratio is currently at about 1:20 (while it was somewhere between 1:4 to 1:8 over the past weeks)
Pretty incredible numbers from Germany.
I just want to thank all the contributors/commenters on ZH. I've been lurking here for about a year and have found your insight invaluable if not way over my head.
I'm 22 years old and just starting to get my feet under me so I appologize if I need to be babysat while I get going here. When I read articles like this and all the subsequent comments i get confused. Can someone just tell me: If I read something that sounds to be bullish on gold, can I take that to mean physical silver will be impacted in a similar fashion?
I've been putting half my savings in physical silver as I have not been able to afford but the gold flakes that come in a bottle of Goldschlager. Then I read all this info on physical gold with no mention of silver and I get worried I'm wasting my time and I should save cash until I can turn into gold.
I know some of you are actually nice here and will offer some help. Am I doing an OK thing with silver or should I be worried?
Come on in; Vlad is very nice! If you're convinced physical is the place to be (as I am) then you're right on with your silver accumulation plan. Silver and gold tend to rise and fall in relative tandem through this bull market since the Lehman shock. Silver tends to be hit by bad industrial news while gold does not, but the general trend over the past 5 years has been silver catching up to gold in valuation. 'Course they're all hit by bogus margin calls on the paper stuff. Google gold/silver ratio. This is the number you will want to follow. If you can't put much fiat into gold, feel good about silver slowly marching up to gold. Currently the ratio is around 1/55; it was 1/40 or so a week or two ago. Sprott expects it to reach a historically stable plateau of around 1/16. Keep stacking. One member you'll want to pay attention to (I don't see him here much anymore) is Rocky Racoon (yeah, he spells it weird.) His tips have saved me quite a bit in my accumulation.
Thank you, fine sir.
Yes, he's correct, and I have silver, but you need some gold if the worst-case happens.
Think about central banks, how many of them have silver? Answer: None. They know the shit is going to hit the fan, and when it does, you better have some gold.