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Q: Doug, you’ve
been, as one subscriber recently dubbed you, "the town crier of America" for some time now, warning about what you call the Greater Depression. Do you
really see that as being what’s ahead for America? You have seen the
country seemingly headed for the precipice before, but it somehow missed
going over the edge… what makes you think that it’s going to
happen this time?
Doug: Clearly it’s a
judgment call. There are things that could put off what I see as the
inevitable, for another cycle. It seemed in the ’70–’71
recession that things could have gone over the edge. Even more so in the
’74 recession. Things were even more serious in the
’80–’82 recession. And actually, in the early ’90s,
it once again looked like we were going to bite the dust.
But every time, the
government came to the rescue. As unemployment went up, businesses started to
fail, and the stock market went down, they "solved" these problems
by lowering interest rates and printing up money. And those things are not
the solutions to the problem but are ultimately the cause of the problem.
When you have a house
of cards, you should let it collapse – and build a proper house. Using
the financial equivalent of chewing gum and bailing wire to build the house
of cards even higher can’t prevent it from eventually falling after it
reaches some ridiculous height. Fifty stories? A hundred stories?
That’s exactly what they’ve been doing, and it’s going to
be a big mess to clean up.
As to whether
we’re actually going into the Greater Depression now, can I be certain
about that? Well, perhaps not. Perhaps friendly aliens will land on the White
House lawn and gift us with a magical technology that will solve all these
problems. It’s a judgment call, and I don’t see any way out of it
this time.
As bad as things were
in the past, we’ve never had six or seven trillion dollars outside of
the U.S. We’ve never had such an acute and chronic balance of trade
deficit as we have today – which, incidentally, is a sign that the
country is consuming more than it’s producing. We’ve never gone
into a really nasty downturn with interest rates already at historic lows.
I think the odds of
this being the start of the Greater Depression are extremely high.
I don’t see any
green shoots.
Q: Don’t see
’em, or don’t believe ’em?
Doug: There’s always
a certain cyclicality to everything. In the episode from 1929 to 1933, it
didn’t go straight down. In 1930 and 1931, people thought they saw
signs of recovery along the way. I think it’s going to be very much the
same way this time.
One thing to remember
is that while the depression that started in 1929 may have come to a bottom
in 1933, it took a long time to recover. There was a cyclical recovery in
1937, and why was that? Roosevelt had the good luck to have been elected dead
flat at the bottom. So it wasn’t his policies that cured the last
depression, it was luck and good timing, combined with the fact that they
were creating a lot of money after Roosevelt took the dollar off the gold
standard. That resulted in a false recovery, from 1933 to 1937, and it went
downhill again.
People say that World
War II cured the depression, but in fact, it made it worse. As bad as things
were in the ’30s, they were worse during the war in the ’40s. You
couldn’t get shoes. You couldn’t get gasoline. You couldn’t
get tires. You couldn’t get just about anything that was being used for
the war. The war prolonged and deepened the depression. The thing that ended
the depression was not the war but the fact that since people could not
consume, they were forced to save. That delayed consumption resulted in a
huge amount of savings, and that’s what caused the recovery in the late
1940s.
The point I’m
making is this: You’ve heard the old saying that history doesn’t
repeat, but it rhymes? I’m afraid that for many reasons, the government
is doing just about everything possible to push the economy over the edge. First
of all, the government is much more powerful than in the 1930s. People are
much more used to thinking of the government as being the solution to the
problem, instead of being the cause. They are going to make exactly the same
mistakes – but bigger this time.
They are going to
wind up destroying the currency.
It’s probable
that American will end up in a war, for a number of reasons.
What we’re
looking at is something that’s going to be long, dismal, and really
unpleasant – much worse than what happened in the ’30s and
’40s.
Q: Okay, so this is
what you see coming, and it’s a big part of why you advocate setting up
a crib outside of the U.S. We get a lot of questions from readers about that,
which you’ve answered with your comments about Argentina and Thailand, etc. But we also hear from those who don’t want to leave or feel they
can’t for any number of reasons. Is there a way for those who stay to
insulate themselves from the coming Greater Depression? There are fixed-rate,
long-term mortgages, as we spoke of last week – what else can people
do?
Doug: For those who stay
in the U.S., the answer to the economy’s problem is going to be the
same as the answer to every individual’s problem: you have to produce
more than you consume and save the difference. Regardless of what happens to
the economy in general, if you do that as an individual, you will survive and
prosper.
But remember,
it’s not going to be easy.
Listen, all the real
wealth in the world is still going to exist. It’s just going to be
reallocated from old owners to new owners. And you can become one of the new
owners of the wealth that people have created over the millennia by producing
more than you consume. That’s the key. It’s also just the
opposite of what most Americans have been doing for the last couple of
generations.
I’ve got to
say, however, that there are a lot of reasons not to want to stay in the U.S.
Government controls of all sorts are going to become more stringent. There’s
going to be a lot more state surveillance, a lot more police activity. The
crime level is going to go up as things get bad – the government is
going to respond to that. Despite the fact that everyone’s got a
flat-screen TV and a McMansion, I think it could get quite unpleasant in the U.S.
Q: If things really get
that chaotic, do you think the U.S. could slip into open revolution? If
things turn as ugly as you say, the government will go for people’s
guns, and there are a lot of those in the U.S. who have sworn to use them
rather than lose them.
Doug: Yes, I’ve met
some of those people. I think it could get that unpleasant, I really do.
One of my favorite
songs is Al Stewart’s "On the Border," and one of the lines
from that song I like a lot is: "On the wall, the colors on the map are
running." This has happened throughout history. These arbitrary lines on
maps are not written in stone. They can change very easily for all kinds of
reasons.
People say that the
U.S. Civil War – which is a misnomer; it should be called the War
Between the States – settled the issue of entities leaving the U.S.
I don’t think
so. I think it could happen in any of a number of ways, formally or
informally over the next generation or two. If the entity controlled by those
in Washington looks at all the same in 100 years, or even 50 years,
I’ll be very surprised.
Things change.
Why people think that
borders and governments are set in stone is actually beyond my comprehension.
People forget that there are areas of France, Spain, and Britain, to name just a few among old and stable European countries, where even today,
people are actively talking about leaving. And they’re at least as
stable as the U.S. is – and notice that I call it the United States, not America. As far as I’m concerned, America has disappeared. America was an idea, not a place, and it’s been replaced with the United (by force)
States.
Doug Casey
Caseyresearch.com
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