Doug Casey on the Violence of the Storm, the Destruction of the Middle Class and the Coming Gold Standard !
- Gold is money for 5000+ years, throughout history and spread across many empires. Originally, paper currencies are certificates of gold. You can take your paper currency and claim from the central bank a fixed amount of gold. In 1929, this was US$20/oz ie you could claim an ounce of gold for every US$20/-. Until 1971 gold was fixed at US$35/oz. This meant that the world had a stable currency system backed by real hard asset ie gold. In 1971 Nixon decided to remove this linkage because America did not have sufficient gold to backed the USD. Since then, all fiat currencies are really ‘Monopoly’ funny money.
- An entire generation has grown up thinking that fiat currencies have some intrinsic value and gold is just another investment for speculation. Gold is not an investment it is real money. It is not speculative to hold physical gold. The sheeple will wake up soon and realize that they have all been under a fiat currency con job.
Doug Casey on the Violence of the Storm, the Destruction of the Middle Class and the Coming Gold Standard
Daily Bell: Have things improved with the economy since this summer?
Doug Casey: No, not fundamentally. The money they threw at the auto industry with the Cash for Clunkers program just stole sales from the future, and destroyed hundreds of thousands of serviceable vehicles. The tax rebates they offered to the people buying houses also stole sales from the future, but more importantly induced a bunch of people who couldn’t really afford houses to buy, and get in debt – this as the market heads lower. Some of the 100s of billions of dollars that they created in these, and other stimuli, have filtered down into the economy – although most of it has just enriched the bankers and made some people feel richer than they really are. But that’s exactly what’s caused the problem; it’s not a solution. These things only make people think they are richer than they really are, induce them to live above their means, and dig themselves into a bigger hole. Everything that the government has done is not just wrong; it’s exactly the opposite of the right thing. So the economy will get worse based on what the government has done.
Daily Bell: Are we still headed for a Greater Depression?
Doug Casey: There is no question about that as far as I am concerned. The Greater Depression has started in earnest. Let’s define the term. A depression is a period of time when most people’s standard of living drops significantly; that’s actually happening in the United States. Another definition of a depression is a period of time when distortions and misallocations of capital in the economy are liquidated – that happens largely through bankruptcies and unemployment. Both of those things are already high, and are going to increase significantly. Regrettably, and unnecessarily, the Greater Depression is going to last a long time. It was caused by government intervention in the economy, and the government is ensuring it will go on much longer than need be. We can’t talk about recovery in a matter of months or even in a couple of years. I’m afraid this is going to be quite dismal for a lot of people …
Daily Bell: You indicated we were in the eye of the storm in the summer. Are we emerging on the other side?
Doug Casey: I think as we come out the other side of the hurricane, it’s going to be much more violent and longer lasting and further reaching than it was in 2007 and 2008 when it was quite unpleasant, so hang on to your hat. They’ve likely averted a deflation but have almost guaranteed very high levels of inflation. But it’s not all gloom and doom. Many individuals will continue creating capital, and technology will continue advancing.
Daily Bell: Where is gold headed?
Doug Casey: I have been a gold bug philosophically for many, many years, but not always a gold bull. The higher something goes, generally, the less I like it. Although I always keep in mind that “the trend is your friend”, I’m essentially a value buyer, not a trend follower. But the fact of the matter is, I don’t know what else you can be in besides gold, and silver today. We are in a strange twilight zone right now, where there are no bargains in the world right now, everything seems to be over priced. Gold itself is not cheap anymore, the way it was 10 years ago. But on the other hand, the gold bull market is intact and I think it is going significantly higher for a lot of reasons. You’ve got to own gold. It’s the only financial asset that’s not simultaneously someone else’s liability. What’s really hard to understand are “dollar bugs”.
Daily Bell: What’s going to happen to the euro?
Doug Casey: As I said before the euro is an Esperanto currency, a completely artificial construct. All of these countries in Europe have very different cultures, they speak different languages; they have different financial structures. The euro can’t possibly last. It’s going to fall apart. Like all fiat currencies, it’s going to reach its intrinsic value.
Daily Bell: Are we closer to a break up of the EU?
Doug Casey: I think it’s inevitable that it will fall apart, it’s just a question of time. That trend is still underway. Europe’s history is one of constant wars and conflicts. Why should that change now? It’s likely that we’ll see more political entities evolve. Orwell was right in many ways, but we won’t see three or four “super states”, as he posited. It’s much more likely there will be more breakups – like Yugoslavia and the USSR.
Daily Bell: Is Britain out of the woods? Supposedly the downturn is over.
Doug Casey: That’s wishful thinking, propagated by fools who think everything will be fine if you just put on a happy face, and pretend. The new Prime Minister there is better than the old one but nothing fundamental has changed. He’s just making a few adjustments at the margin, when he ought to be hacking away at the state with a giant meat axe. This is not just a cyclical downturn; this is something really major. The only thing that can be done to improve the situation is to radically cut taxes, and much more radically cutting government spending, abolishing government agencies and regulations. But they are not doing that; they are doing exactly the opposite. So, there is no reason at all for optimism based on that.
Daily Bell: What about America? Can America dig itself out?
Doug Casey: America is somewhat better off. Europe is going to be the biggest loser in all of this. But things are not good in the US. The big winners of this are going to be the developing economies. Places like India in particular. China has it’s own problems. The business cycle exists in China just as it does in Europe and the US; China is in for some really tough times ahead. But let’s keep this in context. People forget that before the industrial revolution, India and China were much wealthier than Western Europe. It was only with the dawn of the Industrial Revolution that the West became wealthier. We are returning to the previous trend at this point. People in the Orient are saving money and building capital at this point, and that’s how you become wealthy – by individuals saving. That is not happening in the United States. People in the West still think they are supposed to be “consumers”. China has some problems but that’s where the future still lies.
Daily Bell: Update us on China. We think the inflation there is overwhelming.
Doug Casey: Well interest rates are suppressed all over the world by these governments who think that they need low interest rates to stimulate their economies. People want to save, but they’re afraid to save in the form of paper currency. So they get into stocks and real estate. The stock market fluctuates erratically in an environment like that, and stocks are really just paper, at least fro one point of view. So many people are more comfortable with real estate, in that it has use value. As a result there’s been massive construction in China, financed heavily with bank loans, and that’s going to be a disaster. The consequences for these banks and the Chinese national currency can’t be good. The two trillion dollars in foreign exchange reserves that they have could dry up and blow away if the government tries to bailout the real estate market. Assuming they’re not inflated out of existence by the US first … China has gone from nothing, literally, to fantastic development in just 30 years. That will continue; those people know they’re on to a good thing. But they’re in for a political revolution, since everyone knows the ruling Communist Party is just a corrupt scam. And I’ve touched on the economic problems … At some point I’ll be a big buyer of Chinese stocks. But only after the crisis.
Daily Bell: When does the bubble burst?
Doug Casey: I think the real estate bubble in China is peaking and don’t know what the consequences of that will be. Scores of millions of really angry people, for openers. I’ve watched, and been involved in the Hong Kong property market since the mid-80s, and I can tell you prices are simply out of control. It’s time to hit the bid.
Daily Bell: Where do people turn now? Is gold a good buy?
Doug Casey: Like I said before, the question is: what are the alternatives? The higher anything goes, whether it’s a stock, a commodity, or a piece of real estate, the less I want to own it. In the United States and Canada, you can’t buy real estate. Canada is a bubble. The bubble is going to burst. In the US the bubble has burst and going to go a lot lower. So you have to forget about real estate in North America. You have to forget about bonds, which are another big financial disaster waiting in the wings, perhaps the biggest of all; when interest rates go from their present all-time lows to new all-time highs – which they will – the pension funds and insurers that own them are going to be in huge trouble.
Daily Bell: How about silver?
Doug Casey: Silver could be better than gold because gold has gotten so expensive. It is the poor man’s gold. But it’s also a hi-tech metal with increasing uses. Of the 92 elements, it’s the most reflective and conductive. I continue to be a bull on silver. Back in 2000 I commissioned an artist friend of mine to make a solid silver Buddha for me from 1000 ounces of the stuff, because it was so cheap. Now I’ll buy more, but only in coin form.
Daily Bell: How about stocks? Will the American stock market continue to go up as it did in September?
Doug Casey: I don’t want any part of the stock market, anything could happen to it. Sure, it could go up but I am not interested in gambling at this point. Fundamentally, it’s way overpriced. And not only are earnings likely to collapse, but P/E ratios are likely to fall; we’re in a major bear market. In a depression the most important thing is to keep what you have.
You can’t be in the stock market today because earnings could collapse and the stock market is not cheap by any parameter. So where are you going to put your money and your assets? Gold is no longer cheap but in relative terms it’s the cheapest thing that I can think of out there. I am anxious to trade my gold for common stocks, but I doubt I’ll pull the trigger until I can get good companies for 8-10% dividend yields—which could well be when gold goes into a mania, and hits $5,000. So it’s not that I am planning to hold gold forever but it’s still the best place I can think of. But I am accumulating certain junior mining stocks.
Daily Bell: Will the Fed and other central banks continue to print large volumes of money even though quantitative easing is not working?
Doug Casey: There is nothing else that they know how to do. If they don’t continue printing money they’re going to bring on a credit collapse. Of course ultimately that’s the best thing that could happen. But these fools don’t think of ultimate consequences, they only think of immediate consequences. They think if they can keep putting things off into the future, magic might occur. So they will keep printing money.
Daily Bell: Could we end up with a commodities bubble – even a bubble in gold or silver?
Doug Casey: Oh, especially a bubble in gold and silver. One consequence of all this money being created is that other bubbles will appear. I feel confident that one of the bubbles will be in precious metals; it will be driven by both fear and greed, but also by prudence. That’s a powerful combination. With a little bit of luck it’s going to appear in the precious metals stocks as well, but we are not there yet. I don’t doubt that before this thing is over that gold is going to be moving up a $100 per day.
I’ve long specialized in small mining exploration companies. They’re the most volatile class of securities in the world, cyclically running up 1000% – with leaders going 10,000% – then losing 95% or more. They’re in a position now that I think we could see a giant bubble, a real mania, in them. Let me just caution people to do some real research and look at them very hard. Most of them are just burning matches – although that fact won’t have much to do with how high they go if a real mania hits.
Daily Bell: What is the point of all the above? Is there any plan to what’s going on? Is there a power elite of influential people who are making a mess of things? Or are they trying to destroy the middle class, if they exist.
Doug Casey: The middle class is being destroyed. Taxes are going up. All these governments are bankrupt, and a government should not be conflated with the country, or “the people.” It’s an entity with its own interests, and will always put it’s own interest first. It treats its subjects as milk cows and if it has to it will treat them as beef cows. In any event, the middle class is being ground by taxes and unemployment, and productive members of the middle class who have saved their money are going to be destroyed by inflation in the future. It’s not a good scene for the middle class at all. They can’t get the legal advice and accounting advice they increasingly need in today’s highly politicized environment. Nor can they generally afford proper investment advice – assuming such a thing really exists in a world where markets are going to go up and down like an elevator with a lunatic at the controls. The middle class is in big trouble in developed countries.
Daily Bell: Are they attempting to create a one-world currency? Where does it end, as we asked you before? A new political order? A new currency? What or who is behind it?
Doug Casey: The next currency is going to be gold. That’s because none of these governments can trust each other, or their fiat currencies. That being the case, they are going to stop accepting each other’s paper, so what are they going to use? SDRs from the IMF? The IMF is going to disappear over the next generation – one of the good things to come out of The Greater Depression. So, yes, the world is going to go back to using gold as it’s currency and it’s not because of any kind of magic, it’s simply because of all the naturally occurring elements, it is the one that is best suited for use as money. Just like aluminum is bested suited for building airplanes, steel is best suited for building bridges, gold is best used, and is, primarily a currency. It is a great store of value and great medium of exchange. So that’s what is going to happen. The only question is, what’s the price of gold going to be relative to other things? What’s it going to be relative to the stock market? Automobiles? Real estate? And so forth. It’s got to go higher.
Daily Bell: What is your best advice to savers and investors now?
Doug Casey: I think you have to continue buying gold and buy a position in silver. I hate to make it sound so simple. The other thing to remember is that there will be other bubbles ignited with the trillions of currency units that most of the governments of the world are creating. Overall that’s disastrous, but it does create the potential for making gigantic real gains in wealth. But let me make another comment on gold, especially at these levels. It’s not something to make money, it is something to preserve the wealth you have – that is most important thing people should be considering. I have also said this is going to be a speculators delight in the years to come.
- The Illuminist plan is a global economic, financial and monetary collapse leading to world war 3. Their religion is a cult of death. War and chaos are a necessary solution to them, not peace and order. They want to usher in their Luciferian New World Order by destroying the current order. Their plan calls for the destruction of national sovereignties, local currencies, economies, norms, religions, local laws, customs, language, entire generations…. They believe in creative destruction economics where man is just a highly evolved monkey consumer! Ie. dispensable just like ants!
Fears of global currency war rise
Thailand is introducing a tax on foreign holdings of bonds, the latest in a string of attempts by emerging economies to curb destabilising capital inflows amid fears of a global currency war. The Thai cabinet on Tuesday imposed a 15 per cent withholding tax on capital gains and interest payments for government and state-owned company bonds, a clear signal that it would take tough measures to curb inflows of “hot money”. A surge of money into Thailand has driven the baht to its highest against the dollar since just before the Asian crisis of 1997-1998.
Emerging markets have been caught in the middle of a seemingly intractable dispute over exchange rates and capital flows between the US and China, on evidence again at the International Monetary Fund meetings in Washington over the weekend. While the US accuses China of undervaluing the renminbi, China blames loose US monetary policy for driving money into emerging markets that threatens to destabilise their economies.
Jean-Claude Trichet, president of the European Central Bank, added his voice to warnings about the dangers of a global currency war, saying in New York the international community “must say ‘no’ to protectionism and ‘no’ to beggar-thy-neighbour policies”.
The Thai announcement signals a lack of confidence that the issue will be resolved at next month’s meeting of G20 heads of government in Seoul, South Korea. “Most countries in Asia are moving in the direction of capital controls,” said Dariusz Kowalczyk, a strategist at Crédit Agricole. “But I doubt they will be successful. There is so much liquidity, and there will be even more from quantitative easing in Japan and the US, that the tide will be just too high.”
Korn Chatikavanij, Thai finance minister, played down the move, saying Thailand was only rescinding a 2005 tax waiver for foreign investors. “This is not capital controls,” Mr Korn told the Financial Times. “We are equalising the tax treatment between foreign and local investors”. But he conceded that the recent inflows were “problematic”. Mr Korn said foreign holdings of Thai bonds had increased “unnaturally” over the past month, shooting to 10 per cent of the total, and eclipsing a previous record of 4 per cent.
The move follows a doubling of taxes on foreign bond purchases in Brazil and sustained — though denied — currency market intervention by the South Korean authorities to hold down the won. The Thai authorities have already intervened in recent months to prevent the baht rising, but to little effect.
Capital controls have been recently endorsed by the IMF as a legitimate short-term weapon for reducing the impact of volatile capital flows, but many economists remain sceptical about their effectiveness. After an initial dip, the baht was the only Asian currency to appreciate against the dollar on Tuesday.
There has been recent speculation in India and the Philippines that some form of controls might be introduced, but senior officials have played down the reports.Pranab Mukherjee, the Indian finance minister, said on Monday that there was no need for intervention to take the steam out of the rupee, or for capital controls on fund flows.
- The world is heading towards a monetary meltdown engineered by Illuminist banksters! This is not pure speculation. Many experts are highlighting the global currency war leading towards monetary collapse and a new monetary system. Gold and silver are protection from this coming financial, economic and monetary collapse.
For decades we have been stuffing, or trying to stuff, gold into clients’ accounts. We have advanced all the economic reasons, but above all we have said money will be no good, governments will have to print, government policies will lead to hyper-inflation and soon. We have also used the same argument to encourage investors to buy other stocks representing hard assets. But, after all the verbiage, after all the decades and after markets have clearly started to scream roughly the same story, many investors just don’t get it. When, many ask, should they take profits?
At a time when the Western World’s economic system, such as it is, could blow up and most currencies could be on the verge of turning into confetti, dragging each other into a messy abyss, investors worry about gold? They shouldn’t. After decades on the sidelines it’s just coming back into its own.
Indians, along with nearly all non-Westerners, generally assume that, rather than the gold price being up, the money is down. Put differently, gold is gold, copper is copper, it’s the money that changes. Only in the Anglo-American world do investors consider money stable and things (gold, copper, whatever) volatile. It will prove a fatal mistake.
There are four principal groups in which meltdowns can occur: currencies*, real estate, commodities and stocks. Meltdowns usually happen without much warning and they often happen very quickly. Who forecast the Asian currency meltdown twelve years ago? Or any of the stock market crashes that have livened up Wall Street from time to time? The Lehman balance sheet had been a joke for years, but everybody assumed “too big to fail.” When Argentina was on the brink in 2001 the US and the IMF urged the usual dose of austerity and: “hold the line” on the Peso. Westerners believed them, but Argentina (wisely) pulled the plug. Devalued.
And meltdowns mean different things to different groups. Real estate and stocks went down together a few years ago, but stocks will generally go up when currencies get killed. France in the 1950s, Argentina, Zimbabwe, Germany more than once – there is a long list of collapsing currencies leading to strong stock markets. And, of course, they produce strong commodity markets. Our flight out of money scenario.
Today the signs are all there for an earth-shaking currency collapse, but we are all like a bunch of rabbits, glued to the highway, mesmerized and immobilized by the glare of an oncoming eighteen wheeler. In fact, a convoy of eighteen wheelers. If the first one doesn’t get us, the second certainly will. Ireland, the US, Euroland, California, Greece, Spain, the UK, Ontario – the list of walking wounded is long. But, as is always the case when problems loom, ministers of all shapes assur us that these and other issuers of debt will sort out their needs. And even borrow more next year! It’s economic hallucination. But what else can we expect from Ministers? In Canada, where we have lost hundreds of thousands of jobs, in part as a result of the government’s strong dollar policy, the same government is increasing the payroll tax on jobs. And doing so with a nauseating aroma of complacency – they justify it by saying they aren’t increasing the tax as much as they could have! And most Western economic leaders are proposing the same austerity as was proposed nine years ago for Argentina, a sure way to collapse GNP and generate a few riots.
The business press is complicit with Governments and only rarely takes them to task. A grade school arithmetic student can connect the dots and conclude that Irish paper has no greater chance of survival than Enron paper. Not, that is, unless somebody prints up the hundreds of billions of dollars to bail them out. No major country’s currency has more than a shred of backing and all the basket case countries have unsupportable debts. Yet the press gives these issues a wide berth. Little comment, less analysis and none of the ridicule that policy makers deserve.
Nor will the press even entertain the idea of hyperinflation or its consequences. …..Regardless, for those who cannot stomach gold, buy Bell, Atco, Imperial, Labrador, maybe even Bombardier. Real stuff. And avoid paper at all costs – it may take a month, it may take a year, but the meltdown is coming.