Interviewed
by Louis James, Editor, International
Speculator

Recently
by Doug Casey:
Facebook and Beyond, Part 2

In an interview
with Louis James, world traveler and legendary speculator Doug Casey
makes a compelling case for becoming a “permanent tourist” to be
best able to survive the coming economic crash.

Louis
James: So Doug, you’re off to FreedomFest
2012 shortly, where people will be able to hear your latest
thoughts on many subjects. Maybe you can give us a sneak preview
on whatever is uppermost on your mind today.

Doug:
FreedomFest should be especially outrageous, since I’ll be tag-teaming
with my friend Jeff Berwick of the Dollar Vigilante for
a featured lunch. I’m not sure exactly what topics we’re going to
discuss, but I hope we aren’t prosecuted for breaking too many federal,
state, and local statutes at one sitting.

Anyway, lately
I’ve been thinking about the EU’s rising tide of troubles. We talked
about this last January, when
I said it was coming, but it seems to me that at this point
it’s rapidly coming to a head. A major financial and economic catastrophe
in Europe is unavoidable. From there, it’s likely to spread out
to the whole world.

L:
I fear you’re right, but the latest headlines have it that the EU
bigwigs are taking measures to make it easier for Greece’s new pro-bailout
government to honor its austerity obligations. Doesn’t that mean
the EU has dodged the bullet for now?

Doug:
As far as I can tell, they’re doing absolutely nothing except print
up more currency, in hope that will move the problem further into
the future, when a deus ex machina device will magically
appear.

I haven’t seen
any hard numbers published as to exactly what Greece has to cut
to meet its EU-imposed austerity obligations, nor how that fits
into Greek budgetary realities. But, as usual with popular reporting,
the terms used are inaccurate, which makes clear thinking impossible.
These idiots aren’t even capable of framing the problem, much less
solving it.

First of all,
it’s not “Greece” we’re talking about, but the Greek government.
It’s the Greek government that’s made the laws that got people used
to pensions for retirement at age 55. It’s the Greek government
that’s built up a giant and highly paid bureaucracy that just sits
around when it’s not actively gumming up the economy. It’s the Greek
government that’s saddled the country with onerous taxes and regulations
that make most business more trouble than it’s worth. It’s the Greek
government that borrowed billions that the citizens are arguably
responsible for. It’s the Greek government that’s set the legal
and moral tone for the pickle the place is in.

Second, the
term “austerity” is used very loosely by the talking heads on TV.
It sounds bad, even though it just means living within one’s means…
or, for Europeans, not too insanely above them. But who knows what’s
actually included or excluded from what the EU leaders think of
as austerity? Take the Greek pension funds, for example: exactly
how are they funded? I’d expect that private companies make payments
to a state fund, as Americans do via the Social Security program.
I suspect there’s no money in the coffers; it’s all been frittered
on high living and socialist boondoggles. Tough luck for pensioners.
Maybe they can convince the Chinese to give them money to keep living
high off the hog…

L:
Social Security. Now there’s a misnomer. No one I know my age or
younger actually expects to ever get a penny of that money back.

Doug:
Yes, my generation, the Boomers, will have totally looted what little
viability is left in it by the time you never get your check. Sorry,
Lobo. It was our supposed “Greatest Generation,” however – who are
mostly gone now – who really got a cushy ride. But the point at
the moment is that just because the Greeks voted – basically to
stay in the EU in hopes of economic benefits outweighing the pain
of whatever the austerity requirements are – that doesn’t mean they’ll
actually be able to deliver. Once the new half-measures begin to
bite, I expect to see more angry mobs back out on the streets. These
people have become so corrupt that they think the government is
some kind of a magic cornucopia, when first and foremost it’s really
just a vehicle for institutionalized theft.

And it’s not
just austerity, and it’s not just Greece, nor even Spain,
which has formally asked for a bailout. All of these European economies
are rigidly regulated: first, by their national governments; and
then, even worse, by this extra layer of unbelievably oppressive
regulation from Brussels. I understand there are some 30,000 people
working for the EU, making new rules and regulations like an army
of spiders, spinning their webs, sucking the life out of their victims.
None of these rules are constructive. They’re a waste of time at
best, and most are actively destructive – like for instance, the
EU rules telling the French how to make cheese.

I was reading
in David Galland’s report
from Portugal last Friday that the EU forced the Portuguese
to destroy half of their fishing fleet. Not because there was anything
bad, dangerous, or wrong with the boats, but because they were too
good and the Portuguese were too successful as competitors; it’s
life imitating Atlas
Shrugged. He also said that most of the oranges grown in
Portugal are either thrown in the trash or trucked to Spain, where
they can’t be eaten but must be made into marmalade, which is then
sent back to be sold to the Portuguese. Apparently about half of
the chickens in Portugal are about to be executed – just killed,
not eaten – because they were raised in conditions the EU doesn’t
consider appropriate. The list goes on and on, and the madness is
happening all over Europe.

The proposed
austerity measures will change absolutely nothing important; at
best they’ll just lengthen the economic agony. Instead of austerity
programs, cutting back marginally on the salaries of public employees
and national pensions, all these hordes of Eurocrats should be summarily
fired, and their agencies totally abolished. The markets should
be liberated.

And individuals
should plan for their own retirements. They should behave like adults,
not children who spend today with no thought for tomorrow, as state-sponsored
retirement benefits encourage them to do.

L:
Excessive regulation and disincentives to production created by
government intervention in the economy. Can you give us some examples
of this happening and what the consequences are?

Doug:
The classic example is the Roman
Empire after it passed through its time of troubles in the third
century. After 50 years of utter chaos, constant crisis, and recurring
civil wars, Diocletian gripped it in a stranglehold, regulating
everything from top to bottom. I suppose, given a choice between
chaotic violence and a police state, people will opt for the latter
– as if there are no other alternatives. He instituted all manner
of price controls and “people controls,” including forcing sons
to take up their father’s occupations. The ultimate collapse of
Rome and the success of the barbarian invasions wasn’t due to superior
barbarian military technology or tactics, but Roman economic collapse.
Romans were actually deserting the empire to live among the so-called
“barbarians,” where they could both be free and prosperous. History
is repeating itself.

L:
That’s pretty dramatic, Doug. You think Europe is in a similar death
spiral now?

Doug:
Yes. Those governments are all bankrupt. But much more serious than
financial bankruptcy is their total moral and intellectual bankruptcy.
At this point the Europeans are so craven and degraded they deserve
to be indentured servants of the Chinese, which they will be. The
debt they are using to finance their bulging bureaucracies, bloated
welfare rolls, giant pensions, and so forth is largely coming from
the banks. But the banks are all bankrupt too, partly because they’ve
lent so much capital to bankrupt governments. So you’ve got two
sets of bankrupt institutions trading debt back and forth between
themselves. It doesn’t help to say that it’s the PIIGS that are
in the worst shape, because it’s the banks in the supposedly wealthier
countries that own the PIIGS’s debt. They are all tied together.

It’s much worse,
on a global scale, because Europe is China’s largest trading partner.
When the EU really goes into reverse and suffers a major economic
collapse, the Chinese are going to lose their main customers – and
end up owning a lot of chateaux. That also means the Chinese will
stop buying the raw materials – commodities – they use to make what
they sell to the Europeans. That will hammer the Australian, Brazilian,
Canadian, and other resource-driven economies.

And the problems
with Japan are even worse, though somewhat different, than the
ones in Europe. Chronically corrupt and now depopulating
Russia is headed for a fall; its economy produces nothing but
raw materials and weapons. The problem is truly global. The headlines
keep pointing at Europe right now, but the EU is just the tip of
the iceberg the global economy is aimed at.

L:
In this context, it’s not encouraging that the French have not only
elected a socialist president, but a socialist parliament. I’d be
fighting severe nausea right now if I were a French taxpayer.

Doug:
And France is not one of the PIIGS on the periphery, but one of
the two big countries at the core of the EU. I don’t understand
how anyone can conduct a profitable business in France today. It
seems heroic to me, if anyone can do it, but it’s getting just about
impossible. And now France is going to slide a couple standard deviations
further to the left. If I were a Frenchman with any money, I would
get my money and myself out of France – tomorrow morning.

L:
I read somewhere that Cameron in the UK announced that French people
with money were welcome in the UK.

Doug:
I heard that too. But if I were a Brit, I’d also liquidate my assets
and get out; there’s no reason to believe the situation is any better
in Britain. It’s just not currently in the news. These governments
are completely out of control, forces unto themselves, and they
view their populations as milk cows. Governments all over the world
are following Diocletian’s example.

L:
If it’s happening all over the world, what’s the point of packing
up and leaving?

Doug:
Well, there really is almost no place you can run, no one place
where it’s reasonably safe to be a citizen these days. We’re heading
toward a time like in the book, Atlas Shrugged, when the
productive people in society are just going to stop producing. Why
should anyone work hard to create value when a substantial portion
of that value will get diverted into fighting off regulators and
other government goons, only to have half of what you do make seized
to pay for those very same thugs?

L:
Are you telling all the Atlases out there that it’s time to shrug?

Doug:
I think so, on a moral basis. I’m sick and tired of supporting my
oppressors. It makes me feel like dissipating my capital on high
living, simply because that will deny it to the state. It’s perverse,
how they’ve structured society with incentives to be a consumer,
not a producer. Why save, when it’s likely your savings will be
stolen?

L:
Well… I guess that explains why you’re building a house in a beautiful
but rural corner of Argentina. You’re on strike, no longer wanting
to be your brother’s financial keeper. But Argentina’s government
is just as scary as any other.

Doug:
Yes, but that’s why I’m an Uruguayan resident, have my bank accounts
in various jurisdictions other than Argentina – or the US, for that
matter – and I’m also working on becoming a Paraguayan taxpayer.

L:
But Paraguay doesn’t have a personal income tax…

Doug:
Exactly. And this is my message to the Hank
Reardens of the world: become a “permanent
tourist.” There’s no such thing as a real tax haven anymore
– even Swiss bank accounts, if you can get one, are not what they
used to be. You ask what the point is of leaving when all governments
look at their subjects as milk cows? Well, a tourist is an honored
guest who spends money in the local economy; he’s welcome and largely
left alone. No one place is perfect – certainly not Argentina –
but if you distribute your life across various jurisdictions, none
of them consider you to be their cow. I simply prefer Argentina
as a place to spend most of my time. Other countries are to be used
for different things for different reasons.

L:
So where’s the least-bad place to have your corporate office these
days?

Doug:
I think you’ve got to look at Singapore. Hong Kong is still very
good. Dubai offers some advantages in that part of the world. Other
than that, you’ve got to go to a place where the government is small
and incompetent.

L:
Hence your interest in Paraguay.

Doug:
Exactly. But that’s not a place I’d actually want to live; it’s
a backwater, with little more than farms and a capital that’s like
a small Midwestern city with colonial architecture in the center.
The weather is unbearably hot during the summer. I also have to
caution readers that the OECD is pressuring Paraguay to adopt a
personal income tax – though none has yet been implemented, and
it’s currently a good place to be a taxpayer.

L:
The US is still an economic powerhouse and a place where a lot of
people make a lot of money…

Doug:
Yes, it’s shocking to me, though, how the US has gone downhill.
In past decades, if anyone wanted to set up a business, the US would
almost certainly have been the best place to do so. But it has become
less and less so over the years. Now it’s just asking for trouble.
But everything is relative. I’d advise anyone with capital to deploy
it elsewhere, not in the US, because it has just become too dangerous,
financially and morally. But if I had nothing, if I were a landless
serf struggling to live in Nigeria or Burma or Venezuela, sure,
I’d try to make it to the US. Bad as it’s getting, it’s vastly better
than where they come from – and will likely be for years.

The fact that
there are some 50 million people relying on food stamps these days
– about one in six US citizens gets money for food – just goes to
show how bad things are getting. And worse, government agencies
are trying to get more people on to these programs, instead of helping
them to stand on their own two feet. According to a Wall Street
Journal article I was reading the other day, Republicans
and Democrats alike have blocked reform of the food stamp program,
even minimal and sensible reforms like means testing. The program
is projected to spend more than $700 billion over the next ten years.

L:
Gee, Doug: doom and gloom and dark despair. But that’s not a new
tune for you. Let’s suppose that your analysis is essentially correct;
what makes you think that the pot’s about to boil over? How can
we know that this is not just more grumbling from a permabear?

Doug:
Well, it’s true: “inevitable” is not the same thing as “imminent.”
When people see that something is inevitable – and I’m guilty of
this mistake myself – they tend to believe those things are also
imminent, even when that’s not so. But the inevitable is
inevitable, and that means it must happen. We usually can’t
predict exactly when – and such things often take far longer to
arrive than we imagine they possibly can – but once things to start
unravel, they tend to accelerate quickly. The crisis seems far off
for a long period of time, and then suddenly it’s upon us.

It’s much like
the ground rush effect when you’re sky diving. When you first exit
the plane, typically at around 7,500 feet for a 30-second free-fall,
it seems like you could fall forever. That’s partly because it takes
5 or 10 seconds to reach terminal velocity and partly because of
the way geometry plays with your visual perception. At around 2,500
feet, though, you can see the ride is coming to an end. By 2,000
feet, you don’t need to look at your altimeter to figure when to
pull, because you’re feeling urgent ground rush. Europe is under
1,000 feet, and even if they do pull the ripcord, they’ll find there’s
no chute… just a bunch of dirty laundry their economists packed
as a joke. It’s pointless to talk about anything but a very, very
hard landing. Unfortunately, when we’re talking about the economy,
the analogy breaks down a bit. That’s because you actually don’t
need a parachute to go sky diving. You only need one to go sky diving
twice.

L:
[Laughs]

Doug:
Let me change the metaphor. Europe is in hot water. One of the things
that has me thinking the water in the pot might hit its boiling
point this summer is that people generally prefer to riot in the
summer… for all kinds of reasons. Feeling ripped off by “the system”
is a really big one. Take the bank runs in Greece – to the tune
of a billion dollars a day. If I were a resident of any European
country, I’d definitely run to the bank and get cash. Sure, it’s
just paper, but that’s better than nothing if the bank fails and
governments don’t bail it out quickly enough.

Even the US
has seen many bank failures since 2008, but the FDIC and the Fed
always paper it over. And yet, more and more people are recognizing
that the system rests on nothing more than confidence. More and
more people are going to physical cash in their physical possession
all over the world. Most people don’t have a lot of financial sophistication,
but they read enough and see enough, and have enough sense to be
scared. When that’s the case, they’d rather have more cash in their
pockets or mattresses than they would normally. That’s because money
left in banks can become suddenly inaccessible if there’s a problem
with the banking system, or if the government declares a bank holiday,
or if the government just takes it, alleging tax evasion or money
“laundering”…

Note to those
living in the US: this can happen to you, too. I’d definitely
recommend building up a stash of twenties and hundreds, enough for
several months’ living expenses, in case banks suddenly don’t have
cash on hand. Better yet, put it in gold and silver, because you
never know what the banks will give you when push comes to shove
– or if anyone will accept what the banks give you in exchange for
goods and services you need … especially if Bernanke dumps too many
hundred-dollar bills from helicopters. All these paper currencies
are rapidly headed for their intrinsic values. And when they reach
them, billions of people all over the world are going to feel very,
very pissed off – and basically at the same time.

During the
last Argentine crisis, some people thought they were being smart,
keeping their savings in dollars in banks. Well, the government
declared a bank holiday, and when the banks opened, their dollars
were converted to pesos – and devalued by about 75% to boot. Essentially
the same thing happened in the US when Roosevelt devalued the dollar.

L:
So… the short version would be that what’s inevitable may or may
not be that imminent, but on such matters, it’s better to be a year
early than a day late?

Doug:
That’s exactly right. And I really do think we’re getting close
to the edge of the precipice.

You know, people
can read this and just view it as entertainment, or dismiss it as
just another opinion. But it’s like the old oak that was there for
a hundred years and looked like it would last another hundred years,
but fell suddenly in a storm. Only then did we see that it was hollow
and had long been close to collapse. That’s where the world’s financial
situation is: it’s rotten to the core because of fractional reserve
banking and fiat currencies, and totally corrupt because of state
intervention in the marketplace.

L:
I remember how we – people who understood market economics – all
knew the Soviet Union had to collapse from its internal contradictions
and economically self-destructive policies. But we didn’t know how
long it could last, and sometimes it seemed like it would be forever.
But then when it came unglued, it fell apart with breathtaking speed.

Doug:
Just so. But when the Soviet bloc collapsed, at least the West was
there to help them out. Who’s going to bail out the West? A giant
reset button will get pushed, with unpredictable results. Personally,
I am buying more gold every month. I anticipate a genuine world-class
and world-spanning crisis. And it wouldn’t just be financial and
economic; everything will be in turmoil – society, the military,
culture, education, art, science – everything. Really interesting
times are coming up here. But on the bright side, I have a low threshold
of boredom. I admit I’m something of both an adrenalin and an entertainment
junkie.

L:
Right. But for those of us still working to amass the kind of capital
it takes to be able to regard a global calamity as an adrenalin
rush, it should be noted that this crisis will bring loads of opportunities
to those who see it coming and prepare.

Doug:
Word to the wise. More on that in future conversations.

L:
And our newsletters, of course.

Doug:
Of course. The markets are going to be full of great speculations
for the next few years. And, eventually, some great investments
as well. I trust that by now our readers know the difference.

---

When an event
becomes inevitable, the only thing left to do is prepare oneself
for it. With the stock markets teetering recently and precious metals
prices fluctuating, many investors have parked capital in CDs and
other bank accounts, thinking that’s the safest place for their
money for now. That is a grave mistake. As the ancient saying –one
Doug fully agrees with – goes, “Fortune favors the bold.” These
shifting trends can be played for outsized gains… and you can
be in on it.

June
30, 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
Research

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