The Next Fall Guy in the Wag-the-Dog Show
Interviewed
by Louis James, Editor, International
Speculator
Recently
by Doug Casey:
The Collapse of the Euro and the EU
L:
Doug-Sama, I’ve heard you say you think the US is setting Iran up
to be the next fall guy in the
wag-the-dog show – do you think it could really come to
open warfare?
Doug:
Yes, I do. It could just be saber rattling during an election year,
but Western powers have been provoking Iran for years now –
two decades, really. I just saw another report proclaiming that
Iran
is likely to attack the US, which is about as absurd as the
allegations Bush made about Iraq bombing the US, when he fomented
that invasion. It’s starting to look rather serious at this point,
so I do think the odds favor actual fighting in the not-too-distant
future.
L: Could
they really be so stupid?
Doug:
You know the answer to that one. We’re dealing with criminal personalities
on both sides, and criminals are basically very stupid – meaning
they have an unwitting tendency to self-destruction. One thing to
remember is that most of those in power in the West still believe
the old economic fallacy that war is good for the economy.
L: The
old broken-window fallacy. Paraphrasing Arlo Guthrie, it’s hard
to believe anyone could get away with making a mistake that dumb
for that long. Our friends at IHS put together a great, brief video
debunking the fallacy.
Doug:
People like those in power still suffer the delusion that it was
World War II that ended the Great Depression for the US. Actually,
it was only after the end of the war that the depression ended,
in 1946. In his book World
Economic Development: 1979 and Beyond, Herman Kahn documented
long-term growth throughout the 20th century. Between 1914 to 1946
– a very tough time, with WW I, the Great Depression, and WW
II – the world economy still grew at something like 1.8%. I
believe real growth would have been several times as great, were
it not for the state and its products. But people still believe
that spending money on things that explode and kill and destroy
is somehow good for the economy.
L: I
suppose they think it’s okay if it creates jobs here and destroys
lives and livelihoods “over there.” But aside from the
fact that it’s not safe to assume today’s enemies are not capable
of bringing the battle onto US soil, it still ignores the fact that
you’re spending money on stuff that gets destroyed – like broken
windows – and that impoverishes us all. Worse, the cost is
not just economic.
Doug:
That’s right. This coming war with Iran has the potential to turn
into something resembling WW III, with enormous consequences.
Now, it’s hard
to speak with any certainty on such matters, because most of what
we have to go on are press reports. Governments keep most really
critical facts on their doings to themselves, and what you read
in the press is as likely as not just a warmed-over government press
release – in other words, propaganda. Meaningless, if not actively
deceptive. It is correctly said that in war, truth is the first
casualty.
L: But
we do have the Internet these days, with indie reporters offering
coverage ignored by the talking heads in the mainstream media.
Doug:
True; it doesn’t keep the chattering classes honest, but it does
provide some diversity of spin, from which we can try to infer what’s
really going on. And from all the various sources – mainstream
and alternative, Western and from within the Muslim world –
I have to say that it appears to me that the Iranians are not
actually developing nuclear weapons.
L: Then
why do they act in such aggressive and bombastic ways?
Doug:
Western powers are pushing them around, telling them what they can
and cannot do, and treating them like children or mental incompetents
with no right of self-determination. How else would you expect them
to react? They may have a collectivist theocratic regime, but it’s
also a proud and ancient culture.
Now, as you
know, I don’t think there should be any countries at all –
not in the sense of the modern
nation-state, and I’m certainly no fan of the Tehran regime,
but Iran is a sovereign state. The Iranians resent people
from other countries assuming the right to tell them what they can
and cannot do with their uranium enrichment program, just as people
in the US would if Iranians told them what to do withÂ… well,
anything.
L: Do
you have specific data to substantiate your view that Iran is not
focused on creating nuclear weapons?
Doug:
I was just reading about an official
report that says that Iran is still not able to enrich uranium
to the level needed to make nuclear weapons.
Uranium occurs
in two isotopes with half-lives long enough to make it possible
to find reasonable amounts of them in the earth’s crust: U235 and
U238. Most of it is U238 – 99.3% – but it’s the U235 that’s
fissile, meaning, it’s the one you want for making nuclear reactors
and weapons. So you have to enrich your uranium – to about
20%-30% U235 to make reactor fuel and 90% or better to make weapons.
L: That’s
why the Russians are able to sell “downblended” uranium
from decommissioned nuclear weapons for use as reactor fuel. So,
you’re saying the reports indicate that Iran is not capable of enriching
uranium beyond the level needed for reactors?
Doug:
Yes. But again, I have to stress that reliable information is very
hard to come by. Remember when the US accused Iraq of having a program
to develop so-called weapons of mass destruction? Apart from the
fact that, except for nuclear weapons, that term is a complete misnomer,
they had no such thing. It was either lousy intelligence or outright
fabrication – and I suspect the latter. So how can we trust
what they tell us today? Only a fool would be so naïve.
L: Indeed.
Doug:
In any event, why shouldn’t Iran have nuclear weapons? I wish none
of these countries had them, but they do. No one stopped China,
no one stopped North Korea, Pakistan, Israel, India, France, nor
any of the others in the disreputable club that have them.
L: Wasn’t
it too late to intervene by the time those countries announced their
nuclear capabilities?
Doug:
I don’t think so. Israel was friendly, so Western powers looked
the other way. North Korea was too rabid, so they were left alone.
The other countries are too big. The cat’s out of the bag at this
point; any country can develop nuclear weapons, if it really wants
to. But it’s easier and cheaper to bribe a general – or maybe
just a supply sergeant – in India, Pakistan, or Russia to get
what you want.
Moreover, with
the US on the rampage, prosecuting its counterproductive and unwinnable
War on Terror, a lot of governments, especially ones unpopular in
the West, have got to be thinking about acquiring nuclear capabilities.
If Saddam had actually had nukes, the US would have left him alone,
just as they’ve left the Kims to rot in the workers’ paradise they’ve
made out of North Korea. It makes sense for a country stricken from
the US’s official “nice” list and moved over to the “naughty”
category to have some nukes. Everyone needs and wants a slingshot
to keep the bully of the block at bay.
If you oppose
nuclear proliferation, your first target should be US foreign policy,
which is the biggest impetus behind the scramble to arms.
L: What
about the argument that Iran would use nuclear weapons on Israel,
if it had them?
Doug:
That’s ridiculous. It’s true that just one or two nukes would turn
most of Israel to glass, but it’s a matter of mutually assured destruction
(MAD), just as the détente between the US and USSR
was. Israel is reported to have about 200 nuclear weapons, and the
Iranians know it. Even if they launched a successful first strike
against Israel, they would get wiped off the face of the earth in
response. The regime in Iran is repressive and borderline lunatic,
but they aren’t that stupid. No way are they going to attack Israel
with nukes. They not only cannot, but should not, be singled out
for exclusion from the nuclear club.
L: But
they’re part of the axis of evil, don’t you know?
Doug:
Speaking of evil, it’s evil to initiate the use of force or fraud.
If Iran enriches uranium or even builds tools for war, that’s not
evil per se. But using force to stop them from doing something that
is not in itself wrong is wrong, and that would make Iran’s attackers
the axis of evil.
In my mind,
the US is the biggest threat to peace in the world today. I can
easily imagine those in power in the US starting a war over any
silly pretext, real or imagined. It could easily happen by accident
at this point. Things go wrong. Maybe some young hotheads in Iran’s
Revolutionary Guard decide to take a boat out and attack a US frigate
– launch a few RPGs at it before they’re blown out of the water.
Then the US feels it needs to mete out some punishment and launches
a strike against the base the boat came from – which would
be attacking the Iranian mainland – and the thing spins completely
out of control. Could happen at the drop of a hat. Maybe the commander
of a US ship has a streak of General Jack D. Ripper from Kubrick’s
Dr. Strangelove in him. Maybe the Russians or the Chinese –
who are aiding the Iranians – mount a false flag incident,
because they want to see the US get involved in another tar baby.
L: SoÂ…
another case of not just doing the wrong thing, but the exact opposite
of the right thing, with economic, political, and ultimately physical
world consequences.
Doug:
That’s right. Just look at what they’re doing now, trying to isolate
Iran from the world with an embargo. That could be seen as an act
of war.
L: Well,
wait a minute. A blockade is regarded as an act of war, but if Western
countries decide to harm their own economies by not trading with
Iran, that’s unfriendly, but not force or fraud.
Doug:
Well, it would be forcing citizens in those Western countries to
pay higher prices for things, denying them the choice of buying
oil from Iran if they wanted to. But I agree; that’s more a matter
of criminal tyranny and stupidity than an act of war. Still it sure
is prodding Iran, throwing rocks at the hornets’ nest, as the US
did with Japan before WWII. The Japanese basically have no domestic
oil production and were getting their oil from the US and the Dutch
East Indies. The US cut off both supplies, backing them into a corner,
leaving them little choice but an aggressive response.
At any rate,
I think all of this could backfire on the US. Since the Iranians
apparently can’t clear deposits through New York, where international
dollar trades clear, they’ve made a very commonsense move to cut
the US out of the middle and sell their oil directly to India, without
using dollars. I think other countries will follow – and then
what? Iran isn’t going to want bushels and bushels of rupiah or
yen or whatever. I think the odds favor them turning to gold. It’s
said that’s one of the means of payment the Indians will be using.
Gold is the
logical choice and the next step in the demise of the US dollar
as the world’s reserve currency. There’s a lot of demand for the
dollar to buy and sell oil. If countries stop using it, demand for
the dollar would fall, at the very time the US is greatly increasing
the supply of dollars. The day is coming when trillions of dollars
outside the US will only be spendable inside the US. At that point
it’s game over for the dollar.
L: You’ve
talked about the world going back onto a gold standard before. What
do you say to the people who say that gold is a barbaric relic from
the past that doesn’t work in a modern economy – they can’t
go around with pockets full of doubloons to buy cars or chests full
of treasure to buy housesÂ…
Doug:
Such people are not thinking rationally and are economically ignorant.
As always, we should start with a definition: what is money? The
short answer is that it’s a store of wealth and medium of exchange.
For reasons we’ve discussed and as Aristotle outlined over 2,000
years ago, gold
is simply the best form of money ever adopted. And in our modern
world, you don’t have to physically cart the stuff around. You can,
but you can also transfer ownership of physical gold electronically,
through services like GoldMoney.com.
L: Note:
We do endorse GoldMoney.com as a convenient and reliable way to
own, trade, and transfer gold, but readers should be advised that
Doug is an investor in GoldMoney.com.
Doug:
Right. I like to put my money where my mouth is.
L: Okay,
so you see this trend being bullish for gold, clear enough. But
most of the gold ever produced in the world still exists in purified
form in various vaults around the planet. Gold doesn’t get used
up like silver does, so there’s plenty of supply. So, would the
physical need for gold as money really impact the price of gold
and related equities, or would that be more a function of governments
further debasing their currencies?
Doug:
Well, it’s estimated that there are some six billion ounces of refined
gold in human possession around the world, or, somewhat less than
one ounce per person. Global gold production is said to be about
80 million ounces a year, or about a 1.3% annual increase in the
supply of gold. That would be the steady, “natural” rate
of inflation if we were on a gold standard. The amount of various
currency units in the world is increasing at a much, much faster
pace than 1.3%. Nobody really knows, not even the Fed, but depending
on how you define the money supply, it would take $10,000 to $50,000
– or more – per ounce to back all of the dollars in existence
with gold. Whatever the correct number is, I expect gold’s price
in dollars to increase dramatically as the world moves closer to
and eventually adopts a gold standard.
L: So,
any investment implications beyond the obvious? Buy gold and silver
for prudence and protection, buy gold stocks for speculative leverage?
Doug:
That’s the basic recipe. And diversify your holdings internationally.
You can never tell when the government of your home country will
have a psychotic break.
L: What
do you say to the people afraid that in a world so traumatized as
to go back onto a gold standard, the risk of owning any paper asset,
including gold stocks, would be too high? No one will trade gold
stocks for a can of dog food in a Mad Max worldÂ…
Doug:
That’s a valid concern. You can’t eat paper, and even owning shares
in a gold mine may not be of much use in a real economic cataclysm
– the US government shut down gold mining during WW II as a
nonessential industry. It could happen again. But that’s why, as
you said, we own gold for prudence, and the stocks are strictly
speculative vehicles.
But let’s have
some perspective. The security of your stock portfolio may become
the least of your concerns if the US starts a war with Iran that
touches off WW III. If that happens, the US government and population
will both turn hysterical, and the whole country will be locked
down like a prison. What was once America will become even more
of a police state than it is now. Who knows where that would end?
So, one of
the most intelligent things you can do is as I’ve been saying for
years: diversify your assets and your physical presence internationally.
Having some place you like to spend time off the beaten track, where
you can ride the storm out, should be top priority for everyone
who can afford it. Preparing for the worst at home should be top
priority for those who can’t.
L: Would
you care to put odds on open war between the US and Iran?
Doug:
I’d say it’s highly probable within the next two to four years –
say, between 50% and 75% – that an actual shooting war will
break out.
L: Not
much time to prepare. I sure hope all our readers are doing what
they can.
Doug:
Me too.
L: Right
then. Thanks for your thoughts and guidance, Doug.
Doug:
You’re welcome. We’ll talk again soon.
The best speculative
leverage for gold and silver comes from the companies that are perfectly
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that you can be among those who profit.
February
3, 2012
Doug
Casey (send him mail)
is
a best-selling author and chairman of Casey
Research, LLC., publishers of Casey’s
International Speculator.
Copyright
© 2012 Casey
and Associates