Doug Casey on the Violence of the Storm, the Destruction of the Middle Class and the Coming Gold Standard

Interview by Ron Holland
The Daily Bell
Oct. 11, 2010

The Daily Bell is pleased to present an exclusive interview with Doug Casey.

Introduction: Doug Casey has appeared on hundreds of radio and TV shows, and has been the subject of articles in People, Us, Time, Forbes, The Washington Post, and numerous other publications. For nearly three decades, Doug Casey and his team have been correctly predicting major budding trends in the overall economy and commodity markets.

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 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.

...Full Interview Here