International Man: The US government has printed more money recently than it has in its nearly 250-year existence.
It’s the biggest monetary explosion that has ever occurred in the US, and it shows no sign of slowing down.
Retail prices are already starting to soar.
Where is this all headed? Is inflation out of control?
Doug Casey: It doesn’t look terribly out of control yet on a retail level. A Big Mac is generally under $5, and gas is around $3. The tens of millions of Americans earning $10–15 an hour can still scrape by after taking in a roommate to cover rent at say $1000 a month—especially since millions of them are still stiffing their landlords with rent and mortgage “forbearance.” But as that goes away and a radical wave of inflation washes over the country, a lot of them will wind up on the street.
The US monetary and economic situation is going to get insane, with the Fed monetizing $120 billion of debt every month. And the worse it gets, the more dollars the Fed is going to print in a vain attempt to hold the system together. It’s going to throw people who are just holding on off-balance.
So far, the vast majority of the trillions of dollars that the US government/Fed has created have gone into the financial markets. It’s boomed stock, bond, and property prices, making rich people even richer. The situation is still under control.
But it’s going to start filtering down to a retail level.
Here’s an example I encountered just today: As a lifelong car guy, I follow the prices of exotic cars. I saw a 1968 Porsche 911R soon to be auctioned—a low mintage car, but nothing exceptional in my opinion. Just a lightweight 911 with only a 220-horsepower engine. It’s estimated to trade hands for $5.5 million. That’s insane.
There’s been a growing bubble in exotic cars for years, but now it’s cresting. The funny part is that the listing said, “Maybe it’s time for you to take your winnings from GameStop and buy this Porsche.” I don’t know if the writer was being sarcastic or serious, but his words pretty well frame today’s mood.
It’s quite surreal. I’ll wager, however, that within 10 years, there will be hundreds of exotics, now being bought as instant collectibles, that will be found in barns with flat tires, dead batteries, and birds roosting under the hood. Their owners will have lost both their money and their interest in collecting. Nobody will want to be seen driving them for fear of being outed as a rich guy—which isn’t good during a depression. The same thing happened to Cords, V-16 Cadillacs, and Duesenbergs during the last depression
Here’s the bottom line… I think you can plan your life around monetary chaos over the next few years.
International Man: In a misguided effort to address rapidly rising prices, could the US government impose price controls and wage controls? What are the implications?
Doug Casey: At this point, the US government is capable of doing almost anything. Remember that the prime directive of all living entities—whether an amoeba, a person, or a government—is to survive. They’ll do that at any cost. The government isn’t “We the People;” that’s fictional. It’s a discreet entity with a life of its own. Worse, it’s a parasite. It produces nothing but just lives on its subjects.
With an anticipated new injection of $3 to $5 trillion into the market on top of all the other money that has been created in recent years, plus a large drop in production because of COVID hysteria and lockdowns, at some point, prices will absolutely explode across the board.
Of course, people will then clamor for the government to “do something”—not understanding that the government is the cause of all of this.
But the question is: Are they stupid enough to try wage and price controls?
When it was attempted under Nixon in 1971, he created an economic disaster. But neither the government nor the people learned anything from it. They blamed high gas prices and gas shortages on greedy oil companies. They blamed high beef prices on evil ranchers. Politicians think that since they now have much more control over the economy that perhaps controls will work this time. I wouldn’t put it past them to impose wage and price controls, and foreign exchange controls as well. Price controls, likely combined with some form of Guaranteed Annual Income, will absolutely affect the supply of goods and services because it will make the production of some things uneconomic. This will inevitability create shortages.
We haven’t seen anything yet.
International Man: The Argentine government once outlawed the publication of independent inflation statistics. Under the guise of combating so-called “misinformation,” could the US government do the same?
Doug Casey: It’s almost as if the US government is taking lessons from the Argentine government.
Right now it seems that the US is only about one cycle behind Argentina. And it’s not just economic information that is selectively reported and distorted—the problem is much broader than that.
I trust the US government’s figures only slightly more than those of the Argentine government. The problem is that Argentina is a backwater, whereas the whole world revolves around Washington, DC. The problem is that the people currently in control of DC are Bolshevik-style ideologues, identical in nature to the Peronists and Kirchnerites in Buenos Aires. They’ll do to the US exactly what’s happened to Argentina.
The biggest example of phony reporting is in COVID-19. The US government hasn’t made it illegal yet, per se, to say things that run counter to the official story on COVID-19. But it’s minions, Facebook and Google, that have made it almost impossible to get other information out.
As a result, we don’t know what’s really going on with the so-called pandemic. Doctors are actively discouraged from even discussing treatments for the disease. The only palliative on offer are vaccines, which in most cases are unnecessary, appear to be ineffective, and quite possibly are dangerous. But, in the absence of accurate statistics—everything is totally politicized—all we have is unanswered questions. One question I have is “Where are all the carts whose drivers call ‘Bring out your dead’ as they go through the streets every morning?”
International Man: What other second- and third-order effects of out-of-control inflation do you anticipate?
Doug Casey: There are lots of them, and they’re serious. First, inflation wipes out the savings of the average guy.
We have to remember that the average American—if he saves any money at all—saves in the form of US dollars. If those dollars are inflated, it’s going to impoverish many millions of Americans on the low end of the economic scale.
If inflation goes much higher, especially in an environment of artificially low or suppressed interest rates, nobody is going to save dollars for the same reason Argentines don’t save pesos. People will instead redouble their consumption, acting more and more like foolish grasshoppers and less and less like prudent ants. The result will be a dearth of capital. Lots of currency, but no capital, will gradually transform the US into Argentina or Venezuela. Innovation will diminish. Technology, which lives on capital, will slow down. Among other things, it will result in chaotic markets.
Since people don’t understand that the government is the cause of the inflation, they’ll demand more government intervention and planning. Over the last few generations, they’ve come to think of the government as a magic cornucopia.
Political chaos will accompany the economic chaos. Then we just have to wait for a strong man to come along who’ll say, “Look, things are out of control. You need me to get them back into control.”
I don’t see any way out of a downward spiral at this point.
International Man: What are the investment implications?
Doug Casey: In this economic and political environment, “investing” is a poor option. Investing can be compared to the planting of a seed in order to grow an ear of corn. It requires proper conditions in order to succeed. Investing capital requires certain minimums of stability and predictability. Those will be in short supply, along with many other good things. Markets will be going up and down wildly, like an elevator with a lunatic at the controls. That discourages investors.
Speculators, on the other hand, look to prosper in chaos. They don’t try to grow businesses; they just take advantage of politically caused distortions in the market. That’s why they have a bad reputation. But it’s an undeserved reputation since they’re just reallocating capital in the face of chaos—which is necessary and salubrious. In a stable free market, speculators would be largely unemployed—but unfortunately, that’s not the world we live in.
You’re going to have to learn to speculate. In the highly politicized environment we’re facing, there will be plenty of purely psychological panics to the downside and manias to the upside as well.
The next few years will have a lot of bad news for almost everyone, interspersed with some good news for a few.
The bad news is that in an increasingly inflationary, heavily taxed, heavily regulated society such as ours, the general standard of living will decline. One has to become a speculator out of self-defense. Just keep in mind that the public will look to blame speculators—not government—for their problems in the future, much as they have blamed oil and cattle producers in the past.
Reprinted with permission from International Man.
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