February 13, 2009
In their annual forecast edition, the editors of BIG GOLD asked Casey Research Chairman and contrarian investor Doug Casey to provide his predictions and thoughts on issues everyone’s thinking about these days. Here is an excerpt of what he said (full article at Financial Sense):
The $1.1 Trillion Budget Deficit
Over several generations, huge distortions and misallocations of capital have been cranked into the economy, inviting levels of consumption that are unsustainable. In fact, Americans refer to themselves as consumers. That’s degrading and ridiculous. You should be first and foremost a producer, and a consumer only as a consequence.
In any event, the government is going to destroy the currency, which will be a mega-disaster. And they’re making the depression worse by holding interest rates at artificially low levels, which discourages savings – the exact opposite of what’s needed. They’re trying to prop up a bankrupt system. And, at this point, it’s not just economically bankrupt, but morally and intellectually bankrupt. What they should be doing is recognize that they’re bankrupt and then start rebuilding. But they’re not, so it’s going to be a disaster.
The U.S. Economy in 2009
My patented answer, when asked what it will be like, is that this is going to be so bad, it will be worse than even I think it’s going to be. I think all the surprises are going to be on the downside; don’t expect friendly aliens to land on the roof of the White House and present the government with a magic solution. We’re still very early in this thing. It’s not going to just blow away like other post-war recessions. One reason that it’s going to get worse is that the biggest shoe has yet to drop... interest rates are now at all-time lows, and the bond market is much, much bigger than the stock market. What’s inevitable is much higher interest rates. And when they go up, that will be the final nail in the coffins of the stock and real estate markets, and it will wipe out a huge amount of capital in the bond market. And higher interest rates will bring on more bankruptcies.
The bankruptcies will be painful, but a good thing, incidentally. We can’t hope to see the bottom until interest rates go high enough to encourage people to save. The way you become wealthy is by producing more than you consume, not consuming more than you produce.
Deflation vs. Inflation
First of all, deflation is a good thing. Its bad reputation is just one of the serious misunderstandings that most people have. In deflation, your money becomes worth more every year. It’s a good thing because it encourages people to save, it encourages thrift. I’m all for deflation. The current episode of necessary and beneficial deflation will, however, be cut short because Bernanke, as he’s so eloquently pointed out, has a printing press and will use it to create as many dollars as needed.
So at this point I would start preparing for inflation, and I wouldn’t worry too much about deflation. The only question is the timing.
It’s too early to buy real estate right now, although a fixed-rate mortgage could go a long way toward offsetting bad timing. It would let you make your money on the depreciation of the mortgage, as opposed to the appreciation of the asset. Still, I wouldn’t touch housing with a 10-foot pole – there’s been immense overbuilding, immense inventory. And people forget: a house isn’t an investment, it’s a consumer good. It’s like a toothbrush, suit of clothes, or a car; it just lasts a little bit longer. An investment – say, a factory – can create new wealth. Houses are strictly expense items. Forget about buying the things for the unpaid mortgage; before this is over, you’ll buy them for back taxes. But then you’ll have to figure out how to pay the utilities and maintenance. The housing bear market has a long way to run.
The U.S. Dollar and the Day of Reckoning
It’s very hard to predict the timing on these things. The financial markets and the economy itself are going up and down like an elevator with a lunatic at the controls. My feeling is that the fate of the dollar is sealed. People forget that there are 6 or 8 trillion dollars – who knows how many – outside of the United States, and they’re hot potatoes. Foreigners are going to recognize that the dollar is an unbacked smiley-face token of a bankrupt government. My advice is to get out of dollars. In fact, take advantage of the ultra-low interest rates; borrow as many dollars as you can long-term and at a fixed rate and put the money into something tangible, because the dollar is going to reach its intrinsic value.
This isn’t a recession, it’s a depression. A depression is a period when most people’s standard of living falls significantly. It can also be defined as a time when distortions and misallocations of capital are liquidated, as well as a time when the business cycle climaxes. We don’t have time here, unfortunately, to explore all that in detail. But this is the real thing. And it’s going to drag on much longer than most people think. It will be called the Greater Depression, and it’s likely the most serious thing to happen to the country since its founding. And not just from an economic point of view, but political, sociological, and military.
For a number of reasons, wars usually occur in tough economic times. Governments always like to find foreigners to blame for their problems, and that includes other countries blaming the U.S. In the end, I wouldn’t be surprised to see violence, tax revolt, or even parts of the country trying to secede. I don’t think I can adequately emphasize how serious this thing is likely to get. Nothing is certain, but it seems to me the odds are very, very high for an absolutely world-class disaster...
January 13, 2009
Every so often in the history of international affairs, a great transnational turbulence shakes the foundations of the world and brings many of its older structures tumbling to the ground, as we witnessed in 1919, 1945 and 1989. In the confusion and babble that follow, it's difficult to see through the dust and recognize the shape of the altered strategic landscape.
Peering through the wreckage of the past year's financial crisis, it seems clear that every nation was a loser in 2008. The world's developed economies have taken a heavy beating, whether measured by their collapsing industrial production, tumbling exports, surging unemployment, frozen credit markets, or the near-paralysis of maritime trade.
Yet we also hear cries of distress across the globe. Vladimir Putin's proud Russia is reeling toward internal collapse. China is sending factory workers home to the countryside. The International Monetary Fund is trying to rescue Iceland and Ukraine from economic oblivion. Brazil's currency is plummeting against the U.S. dollar. And the brief honeymoon for commodity-exporting African countries is over. Which national economy didn't take a blow to the head in this annus horribilus?
When the dust settles, will we see all countries equally battered, like the streets of Dresden after the Allied bombings in February 1945? Will every power simply have taken several steps backwards, so that the "order of things" that existed in January 2008 will be the same in December 2009? I doubt it.
In the midst of general turmoil, there are always relative winners and losers. Those who are likely to lose most in the coming year will include Russia, Venezuela and Iran (too dependent on oil), most of Africa and Latin America (too tied to commodities), and Japan, Taiwan and South Korea (too wedded to exports, shipping, electronics).
By contrast, and unless it falls into the trap of a Pakistan war, India will advance; none of its banks (so far) are on the Bear Stearns Cos. track. China will take hits, but that probably means an increase in economic growth of 5 percent or 6 percent, deriving more from domestic development and less from cheap exports.
Europe's prospects for 2009 are mixed, which is simply another way of saying that here, too, there will be relative winners and losers. Norway will ride the storm on its still-massive currency reserve, and the rest of Scandinavia has strength in depth - unlike the less competitive economies of East and Central Europe. Germany's combination of ultra-high-quality production, superb infrastructure, and financial caution (few Germans use credit cards: Americans, take note!) give it strengths that are lacking in the U.K., France, Italy, Spain, Greece and other European countries that fell for easy credit and large government deficits. Prussian fiscal rectitude will keep the euro high and compound the dollar's weaknesses.
The biggest question concerns the United States. My instinct tells me it will lose ground in 2009. I simply don't see how the Treasury can print $1 trillion to cover deficit spending, offer those bills at very low interest rates, and expect foreigners (not Americans, because we don't have the savings) to buy them, persuading the world to keep afloat its greatest debtor since Phillip II of Spain. Why should sensible Chinese investors do that when they can buy Swiss bonds, gold, or Scottish real estate? Yet if Asians decline to buy tens of billions of Treasuries each month in 2009, U.S. interest rates will have to go up again.
So: India up, China up, Germany up (all relatively). The developing world down, Russia down, most of Europe and Japan down, and President Barack Obama's America down and down. I'd like to believe I am very wrong. I worry that I'm not.
Paul Kennedy is professor of history and director of International Security Studies at Yale University. He is the author/editor of 19 books, including The Rise and Fall of the Great Powers. He wrote this column for Bloomberg News.
January 9, 2009
The new year is going to bring major suffering to the U.S. economy and society. On the one hand, the Bank Panic of 2008, started in and by America, will continue to ravage the recessional economy. On the other hand, large swaths of the American demographic who voted for Obama are expecting miracles that the U.S. government simply cannot provide.
As industry after industry lines up for government handouts, and as large scale money printing to meet those demands escalates, the depressionary bought will, by mid year, turn into a raging inflationary bonfire. Savings will disappear over night. Add to this continued mass layoffs that will reach another 2 to 3 million people, an unofficial unemployment rate of 15%+ (official U.S. statistics are so doctored as to make them worthless), and a series of wars that will continue to drain lives and treasures and the dashed hopes of tens of millions, and the U.S. is in for a very hot and horrid summer.
Demonstrations, riots and looting will break out in various sections of the country hardest hit by the collapsing economy. The government in the U.S. has a history of using draconian tactics once violence starts (or as in the case of Seattle in 1998, there was no need for violence for the police to unleash hell on peaceful demonstrators), which will lead to casualties and an escalation of tensions. The U.S. army's North American Command will be called in to affect areas, forcing martial law and gun confiscations.
By late summer, early fall, the foundations of the Civilian Defense Corp will be laid down. Echos of the Waffen SS anyone?
On the international front, the U.S. will continue its imperial hubris, though maybe with a little more of a kinder face, but do not bet on it. Europe's disappointment will come fast.
The economic collapse in the UK will continue a foot with the U.S. Rights of the citizens will continue to be usurped by the state and all pretenses of civil rights will disappear after the Islamics in the city center start to agitate and push out through direct violence all remaining British nationals. England will start to look a lot like Sweden with the cities owned by the immigrant Islamics and the refugee locals forced to pay the Islamics' welfare.
Once the majority starts leaning to the hard right and violence starts to break out between the military Islamics and the ultra nationalists, the UK government will drop all pretenses of the citizens rights and clamp down with martial law. Welcome to the Police State. If the public does not rise up at this point, the UK is lost.
To keep the audience nice and fearful, look for the British powers to escalate a Cold War with Russia at any cost.
The article (full article here) has been reprinted with the kind permission from Stanislav Mishin and originally appears on his blog, Mat Rodina.
February 9, 2009
In 2008, I wrote a book entitled No More Taxes, which gave concerned Americans and foreigners the historical and spiritual perspective on taxation. I revealed how Jesus actually felt about tax collectors and the cunning Jewish Temple which sold out his small nation to the heavy-hand of the Roman oppressors. No More Taxes clearly depicts Jesus the Christ being murdered, by crucifixion, for his wildly public commentary against Caesar’s orders to collect a Poll Tax from all Jews living in Judaea and abroad.
Unfortunately, our country and our world doesn’t have a revolutionist like Jesus any longer. He stood firmly against everything big government sought to take away from the individual. He insisted on love than hate, giving up one’s accumulated riches than hoarding, turning the other cheek than striking back, and so on.
If Jesus walked the earth in our present age, the Illumunati, our world leaders, and co-conspirators would have much to fear! Certainly, they would conspire to kill a rebel with such an outspoken stance against taxes and government.
Since we no longer have Jesus to stand up for us, what if we lived like he did and revolted against the fraudalent system that has become the United States federal government? What if all citizens throughout the world, no matter their nationality or ethnicity, stood against their governments and refused to pay taxes?
Queen Boadicea from East Anglia started a revolution attributed to the corrupt tax collectors in the British Isles. In 60 ADE, the revolt she led killed all Roman soldiers within a 100 mile radius. Her No More Taxes revolutionary resistance movement was able to seize London. It is reported 80,000 Roman soldiers were massacred during her revolt. Those 80,000 soldiers faced an unexpected army of 230,000 armed tax resisters.
Maybe it is time for people everywhere to stand up against their governments and revolt.
In fact, the United States might be the last of the nations to stand up. Other people in different countries are already rioting, insisting their governments bow down to their will and desire. A lot of Americans, all throughout the country, seem to enjoy the financial rape that has been forced upon us and our future generations. When will we finally stick up for ourselves and our children’s children?
Gerald Celente predicts a rebellion will hit the United States with widespread food riots and a tax revolt by the year 2012. Celente, the man who predicted the 1987 stock market crash, said in a recent interview:
“There will be a revolution in this country,” he said. “It’s not going to come yet, but it’s going to come down the line and we’re going to see a third party and this was the catalyst for it: the takeover of Washington, D. C. in broad daylight by Wall Street in this bloodless coup. And it will happen as conditions continue to worsen.”Will a tax revolt hit the United States in 2009? According to Gerald Celente, it’s the first stage in overthrowing the corrupt goverment leaders and forcing them to listen to the People.
“The first thing to do is organize with tax revolts. That’s going to be the big one because people can’t afford to pay more school tax, property tax, any kind of tax. You’re going to start seeing those kinds of protests start to develop.”