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December 2, 2015

Sitting Ducks in China's Bathtub, an Overture to World War III?

By Doug Casey

It’s always been true, as Bourne said, that “war is the health of the State.” But it’s especially true when economic times get tough. That’s because governments like to blame their problems on outsiders; even an imagined foreign threat tends to unify opinions around those of the leaders. Since economies around the world are all weakening, and political leaders are all similar in essential mindset, there’s good reason to believe the trend towards World War III is accelerating.

Many politicians and pundits in the U.S. blame “those damn Chinese” for taking “our jobs” by filling Walmart with tons of cheap goods, and the swarthy ragheads for making the price of oil too high (usually, but now too low).

The Russians, the Iranians, the Taliban (who will soon reconquer Afghanistan) and ISIS (which is carving out a new nation-state from the ruins of Syria and Iraq) are permanent members on the list of Bad Boys.

But now, since the Obama regime has decided to “pivot to the East,” you can underline China’s name on that list.

The “pivot” being the U.S. government’s new focus on meddling in Asia, as opposed to meddling in the Middle East and Europe. U.S. Defense Secretary Ash Carter says the U.S. will be the principal security power in the Pacific “for decades to come.” I’m sure the locals, including the Chinese, were thrilled to hear that.

It’s said that the U.S. government has combat troops (or advisors, as highly trained special ops guys are usually euphemistically termed) in about 100 countries. It’s hard to keep track of their latest “intervention”…although “interference” is a better word. Note that I said “they,” not “us,” in reference to Washington. The city has a life of its own and its interests are not necessarily those of the country it rules.

Let’s see…sending arms to a puppet government in Kiev to help put down a secession in Donetsk and Lugansk. Sending jets, and now ground troops, to Syria, which will quite possibly create an incident with the Russians. 150 soldiers to Uganda to fight the Lord’s Resistance Army and 300 to Cameroon to fight Boko Haram. And more troops to Iraq and Afghanistan to help out our “allies.” For the moment, they’re the best allies money can buy.

It’s hard to keep track of them all, with something new almost every week. But, on the bright side, war is nature’s way of teaching Americans geography.

So, with that in mind, we now have to learn where the Spratly Islands are. Let’s start with a map.

Map of the South China Sea Region (Photo: John Bretschneider)

You’ll note the red line. In 2012 China decided that the entire area, right up to the shorelines of Vietnam, Taiwan, the Philippines, Malaysia, and Brunei, was part of its economic zone. The governments of all those countries also have claims to parts of the South China Sea, and the Spratlys in particular. You’ll also note the Paracels, another zone of contention, between China and Vietnam.

Believe it or not, from 1956 to 1972 (when he was jailed for his efforts) a Filipino businessman, one Tomás Cloma, also attempted to claim part of the Spratlys, and make it an independent country, Freedomland. This caught my attention, in that I was (very marginally) involved in three other island independence movements in the ‘70s: Nagriamel, Abaco, and Minerva. Those, however, are stories (all a mixture of tragedy, comedy, and pathos) for another day.

Until very recent times, the Spratlys were best known as a hazard to navigation, with about 750 islets, reefs, and sandbars, total land area about 1.5 square miles, spread over about 160,000 square miles of the South China Sea.

I’ve never been to the Spratlys. But their potential value is clear. It’s said up to 30% of the world’s fish catch comes from the South China Sea. And, almost needless to say, it’s conjectured that the area contains a lot of oil.

So, you’re probably asking yourself, “What is that to me?” The answer should logically be “Nothing, really, unless it’s a question on a quiz show.”

But the U.S. government, although it, as usual, has no dog in the fight, has decided to get involved. The catalyst for it acting now is that China is in the process of transforming at least seven reefs into usably large artificial islands, several with long airstrips.

I’ve looked at the history of who has used, and claimed ownership, of the islands over the centuries. All the adjacent countries have somewhat reasonable-sounding claims. And the Taiwanese, Filipinos, Malaysians and Vietnamese each have a military presence on one or more of the Spratlys. But only the recent Chinese efforts have drawn the U.S. government’s attention. Recently, they sent a guided missile destroyer, the USS Lassen, within the 12-mile limit of Subi Reef, which the Chinese are currently expanding. Reports are conflicting whether the ship was just innocently passing through, or trying to create a precedent.

I’d like to ask, how do you, I mean you personally, feel about that? I’d like to know. Scores of millions of Asian locals, who’d previously never even heard of the islands, and certainly can’t find them on a map, are getting worked up because their governments told them the islands were “theirs.” And now the U.S. is further complicating the matter. But here’s my take.

The Chinese seem quite out of line claiming the whole South China Sea as their economic zone. Shame on them. But how is that the problem of the U.S.? It’s the problem of the locals. Should the Chinese be able to build artificial islands? That’s a somewhat different question. I’d say, why not? Disputed or unclaimed land belongs to the person who uses it.

One thing is for sure: the U.S. government is asking for trouble flying military aircraft off the coast of China and sailing warships into waters they claim. How would the U.S. react if Chinese planes and warships were often seen off the West coast? Or if the Santa Catalina or San Juan islands developed independence movements that the Chinese backed?

The U.S. government feels pretty bold about its intrusion into the South China Sea, since no other government has a naval force even remotely comparable to its 12 aircraft carrier groups. But that boldness is foolish and unjustified. I’ve said for many years that those carriers are exactly analogous to battleships before World War II, or cavalry before World War I. They’re essentially sitting ducks, highly vulnerable to all manner of cheap, accurate missiles, both cruise and ballistic, that could swarm them en masse.

It will be a huge embarrassment to Americans (but a treat to divers a couple generations hence) when they’re sunk, and sprouting barnacles like the Japanese fleet in Truk Lagoon.

The U.S. knows that it’s China’s backyard, and they could sink any U.S. taskforce if they choose to. But they probably won’t. Why start a war when your enemy has a superior military, but you are growing your economy several times faster than he is? It makes more sense to wait…so it’s likely to remain a Mexican standoff, as opposed to an overture to World War III. But these things have a way of escalating unpredictably. In any event, it makes no sense to go to the other side of the globe just to provoke someone.

In the meantime, the U.S. carrier groups are prestigious, and great for sticking the U.S. government’s nose into far-off places where it’s not welcome. But they’re hugely expensive, at about $6 billion a ship, plus another billion or two per copy for its half-dozen escorts, plus another $200 million for each of the 50 or so F-35 fighters they’ll soon carry. Plus a few billion a year to keep each group operational. Not to worry on that score; the Chinese will surely lend the U.S. government more money to enable that.

There’s plenty of reason to be concerned about the roughly $1 trillion a year the U.S. spends on the military and “security.” Even though it’s more than the next 28 countries combined, it’s apparently not enough to keep America safe. In fact, it’s actually making the country less safe, by provoking and threatening other powers.

And if it doesn’t start a war in the short run, it’s going to guarantee a U.S. bankruptcy in the slightly longer run. All the “hawks” running for president this year (which is to say, almost every candidate) seem oblivious to the fact that, in anything but the briefest conflict, economic power completely trumps military hardware.

In conclusion, whenever you see a mention of the U.S. Navy and the Spratlys in the same paragraph, you’re seeing a reminder of an open vein helping to bleed America dry. And that’s the best case.

Editor’s Note: Unfortunately, there’s little any individual can do to practically change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

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November 16, 2015

The World's First Cashless Society Is Here - A Totalitarian's Dream Come True

By Nick Giambruno

Central planners around the world are waging a War on Cash. In just the last few years:

  • Italy made cash transactions over €1,000 illegal;
  • Switzerland proposed banning cash payments in excess of 100,000 francs;
  • Russia banned cash transactions over $10,000;
  • Spain banned cash transactions over €2,500;
  • Mexico made cash payments of more than 200,000 pesos illegal;
  • Uruguay banned cash transactions over $5,000; and
  • France made cash transactions over €1,000 illegal, down from the previous limit of €3,000.

The War on Cash is a favorite pet project of the economic central planners. They want to eliminate hand-to-hand currency so that governments can document, control, and tax everything.

This is why they’re lowering the threshold for mandatory reporting of cash transactions and, in some instances, simply making it illegal to pay cash.

In the U.S., central planners ratchet up the War on Cash every time the government declares a made-up war on something else…a war on crime, a war on drugs, a war on poverty, a war on terror…

They all end with more government intrusion into your financial affairs.

Thanks to these made-up wars, the U.S. government is imposing an increasing number of regulations on cash transactions. Try withdrawing more than $10,000 in cash from your bank. They’ll treat you like a criminal or terrorist.

The Federal Reserve is at the center of the War on Cash. Its weapons are inflation and control over the currency denominations.

Take the $100 note, for example. It’s the largest bill in circulation today. This was not always the case. At one point, the U.S. had $500, $1,000, $5,000, and even $10,000 notes. But the government eliminated these large notes in 1969 under the pretext of fighting the War on Some Drugs.

Since then, the $100 note has been the largest. But it has far less purchasing power than it did in 1969. Decades of rampant money printing have inflated the dollar. Today, a $100 note buys less than a $20 note did in 1969.

Even though the Federal Reserve has devalued the dollar over 80% since 1969, it still refuses to issue notes larger than $100. This makes it inconvenient to use cash for large transactions, which forces people to use electronic payment methods.

This, of course, is what the U.S. government wants.

It’s exactly like Ron Paul said: “The cashless society is the IRS’s dream: total knowledge of, and control over, the finances of every single American.”

Policymakers or Central Planners?

On stories related to the War on Cash, you may have noticed that the mainstream media often uses the word “policymakers,” as in “policymakers have decided to keep interest rates at record low levels.”

When the media uses “policymakers,” they are often referring to central bank officials. It’s a curious word choice. As far as I can tell, there is no difference between a policymaker and central planner.

Most people who want to live in a free society agree that central planning is not a good idea. So the media uses a different word to put a more neutral spin on things.

To help you think more clearly, I suggest substituting “central planners” every time you see “policymakers.”

The World’s First Cashless Society

In 1661, Sweden became the first country in Europe to issue paper money. Now it’s probably going to be the first in the world to eliminate it.

Sweden has already phased out most cash transactions. According to Credit Suisse, 80% of all purchases in Sweden are electronic and don’t involve cash. And that figure is rising.

If the trend continues - and there is nothing to suggest it won’t - Sweden could soon be the world’s first cashless society.

Sweden’s supply of physical currency has dropped over 50% in the last six years. A couple of major Swedish banks no longer carry cash. Virtually all Swedes pay for candy bars and coffee electronically. Even homeless street vendors use mobile card readers.

Plus, an increasing number of government restrictions are encouraging Swedes to dump cash. The pretexts are familiar…fighting terrorism, money laundering, etc. In effect, these restrictions make it inconvenient to use cash, so people don’t.

So far, Swedes have passively accepted the government and banks’ drive to eliminate cash. The push to destroy their financial privacy doesn’t seem to bother them. This is likely because the average Swede places an unreasonable amount of trust in government and financial institutions.

Their trust is certainly misplaced. On top of the obvious privacy concerns, eliminating cash enables the central planners’ latest gimmick to goose the economy: Negative interest rates.

Making The Negative Interest Rate Scam Possible

Sweden, Denmark, and Switzerland all have negative interest rates.

Negative interest rates mean the lender literally pays the borrower for the privilege of lending him money. It’s a bizarre, upside down concept.

But negative rates are not some European anomaly. The Federal Reserve discussed the possibility of using negative interest rates in the U.S. at its last meeting.

Negative rates could not exist in a free market. They destroy the impetus to save and build capital, which is the basis of prosperity.

When you deposit money in a bank, you are lending money to the bank. However, with negative rates you don’t earn interest. Instead, you pay the bank.

If you don’t like that plan, you can certainly stash your cash under the mattress. As a practical matter, this limits how far governments and central banks can go with negative interest rates. The more it costs to store money at the bank, the less inclined people are to do it.

Of course, central planners don’t want you to withdraw money from the bank. This is a big reason why they want to eliminate cash…so you can’t. As long as your money stays in the bank, it’s vulnerable to the sting of negative interest rates and also helps to prop up the unsound fractional reserve banking system.

If you can’t withdraw your money as cash, you have two choices: You can deal with negative interest rates...or you can spend your money. Ultimately, that’s what our Keynesian central planners want. They are using negative interest rates and the War on Cash to force you to spend and “stimulate” the economy.

If you ask me, these radical and insane measures are a sign of desperation.

The War on Cash and negative interest rates are huge threats to your financial security. Central planners are playing with fire and inviting a currency catastrophe.

Most people have no idea what really happens when a currency collapses, let alone how to prepare…

How will you protect your savings in the event of a currency crisis? This just-released video will show you exactly how. Click here to watch it now.

 
The article was originally published at internationalman.com.


November 16, 2015

The “Bloodbath” in Canada Is Far From Over

By Justin Spittler

The oil price crash continues to claim victims…and many of them are in Canada.

The price of oil hovered around $100 for most of last summer. Today, it’s trading for less than $45.

Weak oil prices have pummeled huge oil companies. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which tracks the performance of major U.S. oil producers, has declined 36% over the past year. The Market Vectors Oil Services ETF (OIH), which tracks U.S. oil services companies, has declined 30% since last November.

Weak oil prices have even pushed entire countries to the brink. Saudi Arabia, which produces more oil than any country in the world, is on track to post its first budget deficit since 2009 this year. If oil prices stay low, the country could burn through its massive $650 million pile of foreign reserves within five years.

•  Oil’s collapse is also creating big problems for Canada’s economy...

Canada is the world’s sixth largest oil producer. Oil makes up 25% of its exports.

Last month, The Conference Board of Canada said it expects sales for Canada’s energy sector to fall 22% this year. It also expects the industry to record a net loss of about C$2.1 billion ($1.6 billion) in 2015. That’s a drastic change from last year, when the industry booked a C$6 billion ($4.5 billion) profit.

Major oil firms are slashing spending to cope with low prices. Last month, oil giant Royal Dutch Shell plc (RDS.A) said it would stop construction on an 80,000 barrels per day (bpd) project in western Canada. The company had already abandoned another 200,000 bpd project in northern Canada earlier this year.

The Canadian Association of Petroleum Producers estimates that Canadian oil and gas companies have laid off 36,000 workers since last summer. Most of these layoffs happened in the province of Alberta...

• For the past decade, Alberta was Canada’s fastest growing province...

Its economy exploded, thanks to the booming market for Canadian tar sands.

Tar sand is a gooey sand and oil mixture that melts down with heat from burning natural gas. More than half of Canada’s oil production comes from tar sands. In Alberta, they account for 75% of oil production.

Tar sand is generally more expensive to produce than conventional crude oil. Canadian tar sand projects made sense when oil hovered around $100. But many of these projects can’t make money when oil trades for $45/barrel. Last year, Scotiabank (BNS) said the average breakeven point for new Canadian oil sand projects was around $65/barrel.

This is why giant oil companies are walking away from projects they’ve spent years and billions of dollars developing.

•  All these cancelled oil projects are making Alberta’s economy unravel...

Alberta lost 63,500 jobs from the start of year through August. It hasn’t lost that many jobs during the first eight months of the year since the Great Recession.

The decline in oil production is also draining government resources. Last month, Reuters reported that Alberta was on track to post a $4.6 billion budget deficit this year. Economists say it could be another five years before Alberta runs a budget surplus.

The crisis isn’t confined to the oil patches either…

•  A real estate crisis is unfolding in Calgary...

Calgary is home to 1.2 million people. It’s the largest city in Alberta and the third largest in Canada.

On Tuesday, Bloomberg Business reported that Calgary’s property market is starting to crack:

Vacancy is already at a five-year high in Calgary and rents are the lowest since 2006 after thousands of office jobs were cut.

In downtown Calgary, the vacancy rate jumped to 14 percent in the third quarter, the highest since 2010 and compared with 5 percent for downtown Toronto, according to CBRE Group Inc. .... That doesn’t include as much as 2 million square feet of so-called "shadow vacancy" or space leased but sitting empty, which would push vacancy to 16 percent, the most since the mid-1980s.

Demand for office space is falling because of massive layoffs in the oil industry. That’s because oil companies didn’t just lay off roughnecks. They also laid off oil traders and middle managers, which means they need a lot less office space.

According to Bloomberg Business, a principal at one Calgary real estate office called the situation “a bloodbath” and said “we’re at the highest point of fear and uncertainty now.”

•  Casey readers know the time to buy is when there’s blood in the streets...

But it looks like Calgary’s property crisis is just getting started.

Bloomberg Business reports that the city has five new office towers in the works. These projects will add about 3.8 million square feet to Calgary’s office market over the next three years. More office space will only put more pressure on rents and occupancy rates.

Real estate developers likely planned these projects because they thought Canada’s oil boom would last. It’s that same thinking that made oil companies invest billions of dollars in projects that can’t make money when oil trades for less than $100/barrel.

•  Doug Casey saw this coming...

In September, Doug went to Alberta to assess the damage first-hand. E.B. Tucker, editor of The Casey Report, joined Doug on the trip.

Doug and E.B. spoke with the locals. They even tried to buy a Ferrari. They shared their experience in the October issue of The Casey Report...

E.B. went on record saying Canada was in for “a major wakeup call.” He still thinks that’s the case. In fact, he thinks the situation is going to get a lot worse.

When we were in Alberta, we heard over and over again "It'll come right back...it always does." It's not coming back.

I expect the situation to get worse. And I see the Canadian dollar going much lower.

When that happens, E.B. thinks Canada’s central bank might do something it’s never done before:

Vacancy rates are rising in Canada’s heartland cities. Jobs in Alberta are disappearing. Unemployment is climbing. And there’s still a global oversupply in oil. None of this bodes well for Canada’s economy.

Canada’s economy is in a midair stall. The locals certainly didn’t grasp this when we visited Alberta last month. That's usually the case when things are going from bad to a lot worse.

If you’re a central banker in Canada looking at the data, there’s only one decision: print...

•  E.B. says Canada’s central bank will launch its own quantitative easing (QE) program...

QE is when a central bank creates money and pumps it into the financial system. It’s basically another term for money printing.

Since 2008, the Fed has used QE to inject $3.5 trillion into the U.S. financial system. If the Fed’s experience with QE is any indication, money printing wouldn’t help Canada’s “real” economy much. But it would inflate asset prices. That, in turn, would only make Canada’s economy even more fragile.

E.B. is confident the situation in Canada will get worse. And he can’t wait to go back to Canada to collect on bets he made during his last visit:

Doug and I made a lot of side bets with business owners during our visit. One of them promised to sell us a Ferrari if things got worse...that's how sure he was that we were wrong. Looks like we'll be headed back to collect on that one...

You can read all about Doug and E.B.’s visit to Alberta by signing up for a risk-free trial of The Casey Report. You’ll even discover how to make money off the oil industry, despite the collapse in the price of oil. Click here to learn more.

The article The “Bloodbath” in Canada Is Far From Over was originally published at caseyresearch.com.

November 8, 2015

Doug Casey on the Nanny State’s Interference in Our Lives

By Doug Casey

(Interviewed by Louis James, Editor, International Speculator)

This interview was first published on March 14, 2012

Editor’s Note: In yesterday’s Weekend Edition, Casey Research founder Doug Casey explained why you should be skeptical of government “science.”

In today’s edition, Doug says the nanny state is tightening its grip on people’s lives…

Louis James: If we end up in a totalitarian police state or nanny state, I don't want my children to lift their manacled wrists before my eyes and ask me why I didn't resist while resistance was possible.

Doug: Indeed. In spite of the blatantly obvious and disastrous results of Prohibition, politicians have declared open season on drug users, then smokers, then gun owners - All Things Fun. How far can it be from regulating politically incorrect eaters to regulating just about everyone's choices on every subject?

L: Not far…

Doug: And it gets worse. Now that we have socialized medical services in the U.S. (which is not the same as health care), genuine bad health choices that used to be individuals' problems have become everyone's problems, because we all have to pay for them. Socialized medicine is terrible; it's entrusting medical services to the same bankrupt organization that can't even deliver the mail reliably. It's also a powerful excuse for the nanny state to monitor, inspect, interfere with, and control all aspects of our lives, from what we eat and drink all the way down to what we do in the privacy of our bedrooms...because everything can impact our health, which is now society's obligation.

L: But it's all for our own good. “If it saves one child…”

Doug: If it saves one child, how many children does it kill? If you ban Freon over an unproven fear that it contributes to ozone depletion, for example, and require use of a more expensive, less efficient, and incidentally more toxic and corrosive substitute, all because it might save one child, how many babies did you kill with spoiled milk and meat? What other consequences to your intervention are you ignoring?

This reminds me of the time Madeleine Halfbright was told that the sanctions she saw imposed on Iraq had killed about half a million children, and she answered: “Yes, it was costly, but we think it was worth it.” These people are hypocrites, and extremely dangerous. Sociopaths. They don't care about saving human lives; they are more than willing to expend any number of them, like pawns on a chessboard, to advance their quest for power.

L: Bastiat's broken window all over again: “the seen and the unseen.” But you've got to have a good cover story, like saving children's lives.

Doug: Of course. If you say you're doing it for the children, you can get away with almost anything.

L: Clearly, you don't subscribe to the precautionary principle, the idea that no new technology or innovation should be implemented until it can be shown to be safe.

Doug: It's a load of horse manure, and you can quote me on that.

L: I will.

Doug: Good! If our ancestors had been stupid enough to adopt such an absolutely paralyzing idea, we'd still be shivering in caves, ravaged by dread diseases, and hunted by animals larger and more powerful than we. No, I misspeak; most likely, we'd have gone extinct.

If the car were invented today, it would never be approved for use. The idea of millions of people racing towards each other at high speeds in vehicles they control themselves, with tanks full of explosive gasoline…it would never make it through OSHA, EPA, or a dozen other agencies. The idea of air travel, forget about it. We're just lucky these things were in common use before the nanny state came into its own.

L: Extinction…another strong statement. That's what you think would happen now if the precautionary principle were adopted and enforced by law?

Doug: 'Fraid so. Life without risk is a patent impossibility. Almost a contradiction in terms. And life without risk, innovation, new horizons, would hardly be worth living. But that's the way the world is headed.

You know, most people hardly pay any attention to such matters these days. Important news hardly gets discussed, while Rush Limbaugh insulting some law student is headline news for a week. (Whether or not the student in question is a slut, as Limbaugh said, is her business, not mine or Limbaugh's, and the whole issue is a matter of manners, not even deserving of a mention in the back of the society section of the papers.)

The issue of the student's call for expanding the U.S.'s socialized medical system to include free birth control, however, is a suitable issue for conversation. The costs affect us all, and it's another tightening of the grip of the nanny state on people's lives. All this squabbling over what should be paid for by the state would be eliminated if nothing were covered at “public” expense (i.e., using other people's money). But most people don't even think about that possibility.

We've already beat up on Limbaugh, so we don't really have to go there, but while it's on my mind, I have to point out that he really showed what an ignoramus he is when he defended Joseph Kony and the Lord's Resistance Army last year. He apparently thought they were Christians fighting Muslim tyrants, not the kidnappers and murderers the preponderance of evidence says they are. There's a video about Kony that's gone truly viral on YouTube, with over 75 million views in just one week.

The fact that an ignorant hypocrite like Limbaugh, who wanted to have drug users executed even as he was getting phony prescriptions for his Oxycontin habit, has such a large following is another sad sign of our times. It's not just the socialists advocating the nanny state who are the problem. So-called right-wingers are just as dangerous to personal freedom as left-wingers.

L: Any way to stop this train wreck?

Doug: None. It's like I said to begin with: This is a sign of advanced decay in a society that has lost its élan. It's not something you can fix independently of fixing the whole rotten mess; nanny-state thinking goes hand in hand with the entitlement mentality, which goes with irresponsible and self-destructive behavior. That accelerates the other, “male” side of ever-expanding state power that people like Limbaugh favor: The warfare state; the paternalistic, authoritarian state.

The bottom line is that, with more than half the U.S. population on one form of government dole or another, we've crossed the point of no return. We're going to have to go through the wringer before things can improve. The current situation is unsustainable. It's going to collapse.

Incidentally, as unpleasant and inconvenient as it will be, a collapse and reboot is necessary and will be a good thing. Hopefully, it will destroy the nanny state, if only because the nanny state is a dead hand on the development of technology. The most positive thing going on in the world today is the advance of technology. But, just as the car and the airplane likely couldn't be developed today because of the safety-first nanny state, there are lots of other technologies that won't ever come into existence, and we might never know it. Our conversation on technology is an example of what I mean by that. Anyway, we've got to pay the piper first…and the bill is rapidly coming due.

L: [Sighs] Okay, before we go all poetic, are there investment implications to the rise of the nanny state?

Doug: Yes. On the wealth-preservation, and health-preservation, side, it's vital to understand that today's wealthy Western countries are increasingly hazardous to the well-being of the people who live there. They have the power and the motive to do harm to any citizen as suits the short-term goals of those in office. That's long been the case financially and is increasingly becoming the case physically, both in terms of health and safety from police brutality. Just as we said last week in our conversation on cashless societies, the time is approaching, if not here already, when the wisest course of action is to get out of Dodge…or at least out of countries with powerful governments.

On the investment side, the West's increasingly irrational attitudes about meat may create more buying opportunities in the cattle business. Even if every single person in the U.S. stopped eating meat, those eating more in China and the rest of the developing world would make up the difference before long. At the same time, herds continue to go into liquidation in the West. Cattle have been in a bear market for many, many years, making it one of the best contrarian plays in decades. That's why I'm building my own herd: I'm buying low so I can later sell high. But we've talked about that before. Like any good speculator, I plan on making a lot of money while performing a public service.

Other implications are as we've discussed many times: Buy gold and silver, speculate on gold and silver mining stocks, own long-term energy plays and technology plays that will do well in hard economic times, harden your assets, and diversify yourself internationally.

L: Well then, I think our readers know what to do. Thanks for another interesting conversation.

Doug: Any time.

L: Next time.


Doug Casey is a multimillionaire speculator and the founder of Casey Research. Today, Doug predicts that we're headed into the worst financial crisis of the last 100 years. His latest book, Going Global 2015, is a groundbreaking step-by-step manual on how to survive - and even prosper - during the coming financial crisis. In this book, New York Times best-selling author Doug Casey and his team describe the three ESSENTIAL steps every American should take right now to protect themselves and their family.

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November 4, 2015

Doug Casey on the Nanny State

By Doug Casey

(Interviewed by Louis James, Editor, International Speculator)

This interview was first published on March 14, 2012

Editor’s Note: As you may have heard, the World Health Organization (an arm of the United Nations) issued a major report this week. The report claims that eating processed meat, like bacon, causes cancer. The report also says eating any kind of red meat may cause cancer.

In today’s Weekend Edition, Casey Research founder Doug Casey explains why you should always be skeptical of government “science”…

Louis James: Doug, you're going to love this. There's a new study out purporting to show that eating any amount of any kind of red meat is bad for you; making you 13% more likely to die, in fact. So, with your growing herd of cattle in Argentina, you're close to becoming a mass murderer.

Doug: I saw that. I wonder what you have to do to make it 26% more likely to die. If I go back to skydiving, does that mean I'm 1,000% more likely to die? It's rather strange, in that I always thought we're all basically 100% likely to die.

It's yet another sign of how degraded U.S. society has become, that something so ridiculous can be passed off as news. According to the LA Times article I read, the "study" was just a survey of people's reported eating habits. So, at best (assuming people responded accurately and honestly) the survey might show us a correlation. But even a high-school student should be able to tell you that correlation does not establish causality. The typical science journalist may be even more ignorant and misinformed than the typical financial journalist, which is saying something. It's why I read the papers mostly for entertainment.

L: The study failed to consider, for example, if those who reported eating more meat happen to include more people who ride motorcycles, party hardy, or engage in other higher-risk behaviors, which could easily be true of steak lovers. This survey wouldn't catch such patterns. And yet I read one of the authors claiming:

"This study provides clear evidence that regular consumption of red meat, especially processed meat, contributes substantially to premature death … On the other hand, choosing more healthful sources of protein in place of red meat can confer significant health benefits by reducing chronic disease morbidity and mortality."

Doug: It sounds as if the authors might have a political agenda. But what do you expect from government "science?" Much of it is politically driven, and if you don't arrive at politically correct answers, funding might dry up.

L: But this was a Harvard study…

Doug: Sure it was—but paid for by a branch of the U.S. government health bureaucracy, the NIH. These so-called scientists may well be hacks who got paid a lot of money because they were deemed likely to deliver a result that meshes with the agendas of various politically correct groups.

One of those is the anti-meat fanatics, including the animal rights activists at PETA; they're relatively few in number but very strident. Another is the environmentalists who fear the methane cows and sheep produce; because methane (CH4) is a "greenhouse gas." They believe it will turn this rock with its thin skin of an atmosphere, floating in the cosmos where the average temperature is a couple degrees above absolute zero, into an inferno. Actually, termites and decomposing vegetable matter emit hundreds of times more methane than domestic animals…not to mention volcanoes.

I'm of the opinion that these greens don't really love animals; what's really going on is that they hate people in particular and life in general. Anyway, these types have taken to using science as a cover. There should be a separation of science and state, for the very same reasons there should be a separation between church and state.

L: What would you say to people who say you're biased because you're in the cattle business?

Doug: Yes, the busybodies have convinced Boobus americanus that anyone who actually makes his living dealing with nature shouldn't say anything about it. People who mine minerals, drill for oil, farm, grow animals…people who actually know something about these things, and make them available for use have largely been intimidated into silence. They're commercial, and to be commercial is bad, QED. Of course, that's a completely insane attitude. But the self-righteous busybodies have managed to claim the moral high ground and discredit the producers. They've done this by capturing the government, academia, and the media.

Anyway, I'd say the average "consumer" (which is itself a perverse and degrading way to describe a person) should start using what's left of his own brain instead of relying on experts, whether those be government-stooge scientists or…me. Just think about it: humans evolved over millions of years eating meat, and as much of it as they could get, whenever and wherever it was available. The conclusion of the anti-meat study, at least as broadly stated in the press, has serious credibility problems on its face.

L: The study does make a point of saying that processed meats, like hot dogs, are supposed to be much worse for us. That would seem to have some face validity.

Doug: Yes, I can see that. When you're providing mass quantities of stuff for the masses through industrial processes, it seems inevitable that all kinds of additives, chemicals, and preservatives will get into the mix. Indeed, how much pure beef remains in a typical modern hot dog? I think they're mostly cereal and artificial flavoring these days, plus a good measure of the "pink slime" the USDA puts into lunchmeat for school kids' government-mandated meals.

Equally important, in my view, is that almost all meat these days is from cows raised on unnatural diets, pumped full of steroids and antibiotics, eating cardboard and unnatural food, living miserable lives, shoulder-to-shoulder in feedlots. How many survey respondents would know or care what kind of chemicals and pharmaceuticals went into the meat they are eating? I doubt they could give accurate answers to such questions, if they were even asked. I'd guess the researchers didn't even bother.

Here in Argentina, all my beef cows eat grass on wide open and quite pleasant pampas. No antibiotics, steroids, or cardboard are necessary. I understand that if you're going to provide meat for the masses, that quality may suffer. But that's all the more reason to elevate yourself out of the masses. Entirely apart from the fact "the masses" is a term Marx originated…

Trends in demonized foods are like trends in fashion. For some time, salt was the greatest bogeyman…until some people, particularly an Iranian doctor I once knew named Batmanghelidj, pointed out the obvious, namely that salt is essential to life, and that problems attributed to too much salt are usually problems with not enough water. You need a lot of water washing through your cells. But anything in excess can be a problem, including water. If it's not salt, then it's sugar. If it's not sugar, then it's fat. Red meat has had its turn as demon du jour before, and it looks like it coming back into fashion again.

L: I see Dr. Batmanghelidj's book on Amazon: You're Not Sick, You're Thirsty. I remember the salt scare; that was a big thing back in the '70s, as I recall. The odd thing is that post-scare, salt still seems to have a bad name, but consumption has moved toward gourmet salts. Plain old iodized Morton's salt is not to be found in certain politically correct cupboards, but sea salt or rock salt you grind yourself is acceptable.

Doug: Yes, rich people can't be denied their gourmet designer salts, even though what we generally call "salt" is made of sodium and chlorine: two of the deadliest elements on the periodic table. It's all part of the War on the Periodic Table of the Elements. Plutonium was perhaps the original enemy element, then uranium, then sodium. Gold is considered an evil element by many. Now the most evil element of them all is carbon, which is the essential component of all organic matter, and hence all life on this planet.

L: Hm. Now that you mention it, sodium ends in –ium, like thorium, so it must be bad.

Doug: Yes, and if it weren't for government policy, we'd likely be generating power from thorium instead of uranium; it's a much better fuel. But that's another story. I'm sure that once the Greens discover that its atomic number 90, it, too, will join the enemies list in their general war on the periodic table.

This reminds me of all the government-funded crash programs to find the cause of AIDS. Lo and behold, they found one and called it the Human Immunodeficiency Virus (HIV). But as I understand it, there are people who have AIDS and no HIV, and there are people who have HIV and never show any symptoms of AIDS. And yet, to question the HIV orthodoxy is to invite accusations of being a "denialist," homophobe, and maybe even a remover of those tags you're not supposed to take off mattresses under penalty of law. Fortunately, the AIDS hysteria, which was supposed to destroy the human race, has pretty much burned itself out.

And then there's the "overwhelming evidence" of anthropogenic global warming that fearmongers proclaim. Again, with a lot of government "science" involved. It's turned into an industry that destroys capital.

If we could get the state and its corrupting influence completely out of the science business, I'd be much more inclined to accept what the majority of scientists believe on "soft" sciences, like climate studies and epidemiology. Those things aren't at all the same as physics and chemistry; they're far above things like psychology and sociology, but hardly in the same class with mathematics. Certainly, as long as there's government money with a political agenda involved, I'm inclined to take so-called consensus views with at least a grain of gourmet sea salt, or even as possible contrary indicators for the truth.

L: That's a pretty strong statement, Doug.

Doug: It pays to be skeptical…about everything. Most of the reading that I do is either science or history, so I consider myself fairly knowledgeable in those areas, although I'm not a professional in either. But I didn't say I would refuse to believe anything supported by solid evidence just because I didn't like its source. I said that if the data comes from what I regard as a corrupt source, I proceed with greater-than-usual caution.

Although the corruption of science is very bad, what's even worse is the continuing and accelerating encroachment of the "nanny state." This meat study—and others like it—can easily be used to manufacture a scare. The scare will then be used to implement more laws and restric­tions on people's freedom to live their lives as they see fit… and to destroy another industry. One example of that is the FDA's campaign a­gainst farmers who sell unpasteurized milk to those who prefer it.

L: So, whether or not red meat is good for us, we all have a natural or God-given right to eat what we want and go to hell in our own way? Big Brother, step aside, Big Momma is gonna make us eat our veggies.

Doug: Exactly. I'm of the opinion that quality of life trumps quantity of life. That's the exact opposite view from what rulers and would-be rulers hold; they view the rest of our species as milk cows, to be kept alive and milked for as long as possible, no matter how much joy is taken from them. The purpose of life, however, is to enjoy yourself. It's not to be treated like part of a herd and be fed what your master wants for his own purposes.

L: Is that why is it that politicians bother meddling with whether people eat hot dogs or salads?

Doug: That, among many other reasons, they can win brownie points with very vocal activists if they beat up on an unpopular personal choice, like smoking. That's very valuable to them come election time. Politicians, with the possible exceptions of the likes of Ron Paul, always want to increase the state's (and thereby their own) power. Any scare is a great tool for manipulating people into handing over more of their freedom, which is to say, increasing their power over people.

L: Crisis and Leviathan.

Doug: Right. That's an important book everyone should read. The whole trend is very ominous. It's as Martin Niemöller said during WWII: "First they came for the communists, but I didn't speak out, because I was not a communist."

L: "And then they came for the Jews ... And then they came for me, and there was no one left to speak out for me."

Doug: Right. I believe in speaking out, even though it probably doesn't do any good. I do it because I have to live with myself. I do it because I believe in karma.

L: If we end up in a totalitarian police state or nanny state, I don't want my children to lift their manacled wrists before my eyes and ask me why I didn't resist while resistance was possible.

Doug: Indeed. In spite of the blatantly obvious and disastrous results of Prohibition, politicians have declared open season on drug users, then smokers, then gun owners - All Things Fun. How far can it be from regulating politically incorrect eaters to regulating just about everyone's choices on every subject?

L: Not far.


Doug Casey is a multimillionaire speculator and the founder of Casey Research. Today, Doug predicts that we're headed into the worst financial crisis of the last 100 years. His latest book, Going Global 2015, is a groundbreaking step-by-step manual on how to survive - and even prosper - during the coming financial crisis. In this book, New York Times best-selling author Doug Casey and his team describe the three ESSENTIAL steps every American should take right now to protect themselves and their family.

These steps are easy and straightforward to implement. You can do all of these from home, with very little effort. Normally, this book retails for $99. But this book is so important, especially right now, that we've arranged a way for U.S. residents to get a copy for just $4.95. Click here to secure your copy.

The article Doug Casey on the Nanny State was originally published at caseyresearch.com.


October 30, 2015

One of America’s Largest Companies is Stockpiling Food and Gold for the Next Financial Crisis

By Justin Spittler

One of America’s largest companies is taking a controversial stance on employee benefits.

In a move that is sure to draw criticism from the mainstream press, Jonathan Johnson, chairman of online retail giant Overstock.com (OSTK), publicly stated that the company has stockpiled gold and food in preparation of a U.S. financial crisis.

Johnson recently told an audience at the United Precious Metals Association:

We are not big fans of Wall Street and we don't trust them. We foresaw the financial crisis, we fought against the financial crisis that happened in 2008; we don't trust the banks still and we foresee that with QE3, and QE4 and QE n that at some point there is going to be another significant financial crisis.

Quantitative easing (QE) is when a central bank creates money from nothing and injects it into the financial system. It’s basically another word for money printing.

Johnson went on to explain the company’s preparations.

So what do we do as a business so that we would be prepared when that happens? One thing that we do that is fairly unique: we have about $10 million in gold, mostly the small button-sized coins, that we keep outside of the banking system. We expect that when there is a financial crisis there will be a banking holiday. I don't know if it will be two days, or two weeks, or two months. We have $10 million in gold and silver in denominations small enough that we can use for payroll. We want to be able to keep our employees paid, safe, and our site up and running during a financial crisis.

We also happen to have three months of food supply for every employee that we can live on.

Taking preventive steps to keep family and friends safe in a financial crisis is common sense to many people. But to the limousine liberals in mainstream press who tow the line for big banks and the government, this type of preparation is only for “weirdos” and “conspiracy theorists.”

•  Longtime Casey Research readers are familiar with our stance on financial crisis preparation.

Just like it makes sense to wear a seatbelt…just like it makes sense to buy home insurance…it makes a lot of sense to stay prepared and own insurance against a major financial catastrophe.

Right now, this kind of preparation has never been more important. In other words, we think Overstock's moves represent sound thinking.

In an unprecedented monetary experiment, global central banks have kept interest rates at near-zero levels and printed trillions of new currency units since the 2008 financial crisis. All this “easy money” has warped the global economy and led to trillions of dollars in malinvestment.

We can’t say when this will end, but we can say with certainty that it will end badly. For the sake of your family and friends, we hope you’re taking some simple steps to prepare.

•  Owning gold is the single most important step you can take to protect your money from the next financial crisis…

While governments and central bankers can destroy the value of paper currencies, they can’t hurt the value of gold. Gold has held its value through every financial crisis in history. That’s why humans have been using gold as a store of value for thousands of years.

We also recommend keeping plenty of cash on hand. Unlike gold, cash will likely lose at least some value during a crisis. But when a crisis hits, you may need cash to pay for everyday goods and services.

Keep enough cash on hand to last you and your family three to six months. Remember, it can be difficult to get cash during a crisis, as we saw in Greece this summer

During the Greek financial crisis, the Greek government declared a “bank holiday.” The government closed all the banks in the country to prevent everyone from pulling their money out and crashing the banking system.

Even after the banks reopened, the Greek government set strict daily limits on how much money people could withdraw from ATMs. For weeks, Greek people could only withdraw €60 ($67) of their own money per day from ATMs.

•  We also recommend opening a foreign bank account…

Putting money in a foreign bank account is a smart way to move some of your money outside your home country. If your home country has a bank freeze, you’ll still be able to access your cash that’s held in a foreign bank account.

If you’re not sure how to get started, we recommend reading Going Global 2015. This hardcover book explains in detail everything you need to know in order to open a foreign bank account. It includes details on the one country that has never had a bank failure, where it’s easy for Americans to open a bank account. Going Global 2015 will even tell you about a bank in this country where you can open an account starting with just $400 (on page 120).

And that’s just one chapter. As Casey Research’s “financial survival guide,” Going Global 2015 will walk you through all the best ways to protect your money.

Thousands of people have paid $99 for this book. Right now, we’re giving it away for just a $4.95 processing fee. Click here to claim your copy.



We Have Some Bad News

By Justin Spittler

The stock market just finished a brutal third quarter…

The S&P 500 fell 8%...and so did the Dow and the NASDAQ. It was the worst quarter for U.S. stocks since 2011.

Stocks around the world dropped too. The MSCI All-Country World Index, which tracks 85% of global stocks, also had its worst quarter since 2011. The STOXX Europe 600 Index, which tracks 600 of Europe’s largest companies, fell 10%. It was the worst quarter for European stocks since 2011 as well.

China’s Shanghai Composite fell 28% last quarter, its largest quarterly decline in seven years. The MSCI Emerging Markets Index fell 19%. It was the worst quarterly decline for emerging market stocks in four years.

In total, last quarter’s selloff erased nearly $11 trillion in value from stocks around the world.

•  Casey Report readers know this is part of our “script”…

In the latest issue of The Casey Report, E.B. Tucker called the end of the six-year bull market in U.S. stocks that began in 2009:

We believe the era of asset prices soaring on a wave of easy credit is over. Last month’s major stock market decline is the start of a very tough time for stocks and the economy…

Regular readers know the Federal Reserve’s response to the last financial crisis was extraordinary. The Fed cut its key interest rate to effectively zero in December 2008…and it’s left it there ever since.

The Fed made it ridiculously cheap to borrow money. Consumers borrowed to buy homes they would never be able to afford in a “normal” economy. Property developers borrowed to build new houses. And investors borrowed to buy stocks.

Easy money allowed a buying binge that sent prices soaring. Many asset prices have completely lost touch with reality. We recently explained how U.S stocks are roughly 50% more expensive than their long-term average, according to a popular valuation metric called CAPE.

•  Many currencies also had a horrible quarter…

As a group, Asian currencies had their worst quarter since the 1998 financial crisis. The Malaysian ringgit fell 14% against the dollar. And the Indonesian rupiah fell 9%.

On top of that, emerging market currencies as a group hit their lowest level since 2002. The Brazilian real lost 23% during the third quarter…the Russian ruble lost 16%.

Regular readers know commodities have not been spared from the bloodbath

The Bloomberg Commodity Index, which tracks 22 different commodities, had its worst quarter since 2008. It fell 15% and is now at its lowest level since 1999. Wheat, lumber, and oats each fell more than 17%.

Oil was hit the hardest. It had its worst quarter since 2009. A barrel of oil now costs 26% less than it did three months ago…and 50% less than it did a year ago.

•  Regular readers know China’s slowing economy is a big reason for the commodities selloff…

China is the second largest economy in the world. It’s also the largest commodity consumer. China consumes half of the world’s aluminum, nickel, copper, steel, and coal.

China also consumes 60% of the world’s concrete. Last December, Microsoft founder Bill Gates pointed out that China poured more concrete between 2011 and 2013 than the United States did during the entire 20th century.

But now, China is growing at its slowest pace in 25 years. That means it’s building fewer buildings, roads, and bridges. So China doesn’t need as much steel, aluminum, concrete or other “building block” commodities.

This is hurting countries that rely heavily on commodity exports to keep their economies going…like Australia, New Zealand, and Canada. The Australian dollar, the New Zealand dollar, and the Canadian dollar have each lost more than 16% against the U.S. dollar since last September.

•  With financial markets around the world looking extremely fragile, “Dr. Doom” says the “U.S. could be on the verge of an economic collapse”…

Marc Faber is one of the world’s most respected contrarian investors. He predicted 1987’s Black Monday, when the Dow lost an incredible 23%. It was the worst day in the history of the U.S. stock market. Faber also predicted the Asian financial crisis of 1997-1998.

Faber’s knack for calling huge crashes has earned him the nickname “Dr. Doom.” Now he thinks the recent selloff in U.S. stocks could be the start of something very dangerous. He’s been warning investors about a coming crash for months.

During a July interview with CNBC’s Trading Nation, Faber said the market was beginning to crack. It was a bold call…at the time, U.S. stocks were still near all-time highs. But Faber predicted U.S. stocks were going to plunge: “In the U.S., the market could easily drop 20 to 40%, easily.”

The next month, the S&P 500 lost 11% in six days. And, for the first time in four years, the U.S stock market entered a correction. (A correction is when an index falls 10% from a previous high.)

Faber also said the U.S stock market was in “a stealth bear market.” And he listed a few reasons stocks could keep falling:

….the valuations, as you know, are relatively high. And we have numerous other problems in the world: [including] excessive debt loads in the most advanced economies; slowing down Chinese economy that, in my opinion, will go into recession; and collapsing commodity prices, especially on the industrial side.

•  Faber had simple advice for investors...

He said it’s time to get defensive. And he urged every investor to have “some money outside the financial market and outside the financial sector.”

Like us, Faber thinks gold is the best defense during a market collapse…the ultimate form of financial wealth insurance.

Later this month, Faber will join us at the 2015 Casey Research Summit. At the Saturday night banquet dinner, attendees will have a chance to eat dinner with Dr. Doom himself. If you sit at Faber’s table, you can pick his brain about where the economy and stock market are headed while sharing a meal and a glass of wine.

And if you don’t sit at Faber’s table, you can sit with one of the other investing legends who will be there…including multi-millionaire entrepreneur James Altucher, famous trend forecaster Gerald Celente, and of course, Doug Casey himself. Not to mention senior Casey Research editors like Louis James, Bud Conrad, and E.B. Tucker.

The Summit is only two weeks away…on October 16-18 at the five-star Loews Ventana Canyon Resort in Tucson, Arizona. We hope you can join us, but you have to act soon…Click here for more information on the 2015 Casey Research Summit.

The article We Have Some Bad News was originally published at caseyresearch.com.


August 31, 2015

Why Stocks Could Fall 50% if the Fed Makes the Wrong Move

By Justin Spittler

One of the most brilliant investors in the world just made a stunning call…

Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund. Dalio manages nearly $170 billion in assets. He has one of the best investing track records in the business. When he speaks, we listen.

Dalio has been saying for a long time that governments and businesses around the world have borrowed far too much money. He thinks their high levels of debt have created an extremely fragile and dangerous situation.

The stats back up Dalio’s view. In the United States, government debt as a percentage of gross domestic product (GDP) is 102%...its highest level since World War II.

Countries around the world are in a similar position. Japan’s debt-to-GDP ratio is at 226% and climbing. In Italy, government debt/GDP jumped from 100% in 2007 to 132% in 2014.

Dalio explained how these extreme debt levels are one reason for the recent market volatility we’ve been telling you about…

These long-term debt cycle forces are clearly having big effects on China, oil producers, and emerging countries which are overly indebted in dollars...

•  In an article published yesterday, Dalio said the Fed should start another round of quantitative easing…

Quantitative easing (QE) is when a central bank buys bonds or other assets to lower interest rates and boost asset prices. It’s mostly just another name for money printing.

The Fed started QE in a desperate attempt to stave off disaster during the 2007-2008 financial crisis. It launched the first round in November 2008…a second round in November 2010…and a third round in September 2012. It stopped its last round of QE last October.

The first three rounds of QE fueled a big bull market in US stocks. The S&P 500 has gained 113% since the Fed started QE in 2008.

Dalio thinks the Fed should bring QE back. It’s a bold call, and one that most economists disagree with. Most economists expect the Fed to raise rates soon. Raising rates would tighten monetary conditions…essentially the opposite of QE.

•  Dalio is worried the Fed won’t get it right…

Dalio thinks the Fed will raise rates, even if it’s just to “save face.” He pointed out that the Fed has threatened to raise rates so many times that not raising rates would hurt its credibility.

Dalio’s big concern is that the world is too indebted to handle a rate hike. He thinks it could cause a financial disaster like a stock market crash, or worse.

In a letter to clients earlier this year, Dalio made a comparison to 1937, when the world was in a similar situation of having way too much debt. He explained that the Fed made a huge mistake by raising rates, and it caused the stock market to plummet 50%.

The danger is that something similar could happen if the Fed raises rates today.

•  We asked Dan Steinhart, executive editor of Casey Research, for his take…

Here’s his response…

I don’t know what the Fed’s going to do. That’s a guessing game. What’s important is Dalio’s point that we’re in an extremely fragile situation. The world has too much debt, and the Fed’s margin for error is tiny. If it takes a wrong step and stocks plummet 50%, it could cause a bigger financial crisis than in 2008.

So the real question is, do you trust the US government and the Fed to manage this dangerous situation?

I don’t. This is the same Fed that blew two huge bubbles in the last twenty years. First the 1999 tech bubble…then the even bigger housing bubble, which almost took down the whole financial system when it popped in 2007.

And keep in mind – this is all a gigantic experiment. The Fed is using tools, like QE, that it had never used before the financial crisis. No one in the Fed, the US government, or anywhere else knows how this is going to work out.

Who knows…maybe the Fed will surprise us and successfully guide the economy through this dangerous period. But that’s not an outcome I’d bet my savings on.

Dan went on to explain two things you can do to prepare for another financial crisis…

One, own physical gold. Unlike stocks, bonds, or cash, it’s the only financial asset that has value no matter what happens to the financial system.

Two, put some of your wealth outside the “blast radius” of a financial crisis. We wrote a new book with all of our best advice on how to do this. And we’ll send it to you today for practically nothing…we just ask you to pay $4.95 to cover our processing costs. Click here to claim your copy.




August 11, 2015


The Next Financial Disaster Starts Here

By Dan Steinhart

Individual investors take note…

Some of the world’s best money managers are betting on the biggest financial disaster since 2008.

You won’t hear about this from the mainstream media. Networks like NBC or CBS don’t have a clue… just like they didn’t have a clue the US housing market would collapse in 2007.

Carl Icahn, a super successful investor who’s the 31st richest person in the world, said this investment is in a bubble. He said that it’s “extremely overheated”… and that “there’s going to be a great run to the exits.”

And this investment isn’t some complex derivative that only Wall Street and hedge funds can buy. Millions of investors hold it in their brokerage accounts.

The dangerous investment is junk bonds.

Junk bonds are usually issued by companies with shaky finances. They pay high interest rates to compensate investors for their high risk.

Low interest rates have pushed investors into these risky bonds. Junk bonds are one of few places where investors have been able to get a decent income stream.

In 2008, the Federal Reserve cut interest rates to near zero to fight the financial crisis. It has held rates near zero ever since. Right now, a 10-year US government bond pays just 2.3%. That’s half its historical average, and near its all-time low.

Investors looking for income have turned to junk bonds. This chart shows the growth in junk bonds since 2002. As you can see, junk bonds didn’t grow much from 2002 to 2008. But when the Fed cut rates to zero in 2008, junk bond issuance took off:

JPMorgan reports that the number of junk bond issues soared 483% between 2008 and 2014.

You might be thinking that you don’t own junk bonds… so why should you care?

It’s true that many investors don’t own junk bonds directly. But many do own them through junk bond ETFs.

The Financial Times recently explained why junk bond ETFs are dangerous:

… junk bond ETFs give the illusion of liquidity. Not all that long ago, bankers and asset managers promised to turn subprime mortgages into gold-plated, triple-A rated bonds.

Today, the apparently miraculous transformation is of deeply illiquid credit instruments, such as junk bonds and leveraged loans, into hyper-liquid exchange traded funds.

Junk bonds are not “liquid.” That means there aren’t many investors buying and selling them every day. The Wall Street Journal reported that each of the top 10 bonds in the largest junk bond ETF traded just 13 times a day on average.

That’s not a typo. Investors only buy and sell these junk bonds 13 times per day on average. For comparison, investors buy and sell 47 million shares of Apple (AAPL) on average every day.

Junk bond ETFs are extra dangerous because they make junk bonds appear liquid. HYG, the largest junk bond ETF, trades more than 6.8 million shares per today on average. That’s more than McDonald’s stock.

But as Howard Marks, hedge fund manager and one of the most respected investors in the world recently explained:

No investment vehicle should promise greater liquidity than is afforded by its underlying assets. If one were to do so, what would be the source of the increase in liquidity? Because there is no such source, the incremental liquidity is usually illusory, fleeting, and unreliable, and it works (like a Ponzi scheme) until markets freeze up and the promise of liquidity is tested in tough times.

Because junk bond ETFs create the illusion of liquidity, most investors don’t see the danger. They think they can sell their junk bonds ETFs just as easily as they could sell shares of Apple.

They’re wrong. If too many people sell junk bonds at once, it could overwhelm the market and cause prices to crash.

Now, none of this has been a problem yet because junk bonds have been in a bull market. According to Bank of America, junk bonds have gained 149% since 2009.

But as Howard Marks added, ”Nothing is learned in the investment world in good times.” … “Most of these vehicles haven’t been tested in tough times.”

All bull markets eventually end. When this one ends, junk bonds could cause huge losses to investors who don’t know about these risks. Junk bonds could easily drop 15% or more in one month.

And here’s the craziest part…

Some of the world’s smartest and most successful investors are are betting on this exact outcome. They’re betting that the junk bond market will crash.

They’re calling it “The Next Big Short.”

You probably heard about the few hedge fund managers who made a killing when US housing collapsed in 2007. Dallas-based hedge fund manager Kyle Bass made $500 million by betting against housing. John Paulson made $4.9 billion by betting against mortgages.

Today, one of the largest private equity firms in the world is raising money to bet against junk bonds... just like Bass and Paulson bet against housing in 2007.

The Wall Street Journal reports:

Apollo [one of the world’s largest private equity firms] has been raising money from wealthy investors for a hedge fund that snaps up insurance-like contracts called credit-default swaps that benefit if the junk bonds fall. In marketing materials reviewed by The Wall Street Journal, Apollo predicted: ETFs and similar vehicles increase ease of access to the high yield [junk] market, leading to the potential for a quick ‘hot money’ exit.”

Other hedge funds like Reef Road Capital and Howard Marks’ Oaktree Capital are also raising money to bet on a junk bond crash.

As you can see from the chart of HYG’s (the largest junk bond ETF) price, junk bonds are down since June:

There’s no way to know if this is the beginning of the end of the junk bond bull market. But if it is, huge losses could come very soon.

If you’ve made money investing in junk bonds, it’s time to cash in. Don’t bet against some of the best investors in the world who expect junk bonds to crash. We recommend selling junk bonds now.

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The article The Next Financial Disaster Starts Here was originally published at caseyresearch.com.

July 21, 2015


It Was the First Time the CIA Overthrew a Government…

By Nick Giambruno

62 years later, the aftermath is still troubling global politics.

Operation Ajax was a pivotal moment in US and world history. It was the first time the CIA overthrew a government.

Yet even today the US government would rather not talk about it. That’s why it remains an unknown story for many Americans.

The year was 1953. The objective was to oust Mohammad Mossadegh, the elected leader of the Majlis, Iran’s parliament.

Mossadegh was not a communist or a radical Islamist. He didn’t follow any objectionable ideology. Instead, he was a secular nationalist. But he was inconvenient.

Like many Iranians, he was proud of his Persian heritage. (Until 1935, Iran was still known as Persia.) Persia once was an imperial civilization, like Rome. Twentieth-century nationalists channeled that glorious past, and they were keen on independence.

So it’s no surprise Mossadegh was earnest about ridding the country’s politics of foreign influence.

At the time, Great Britain was the most active outside power in Iran.

For decades the British had enjoyed a sweetheart oil deal struck with a former, corrupt Iranian leader. It allowed them to control Iran’s petroleum industry and, by extension, the country’s entire economy.

To nationalists like Mossadegh, this was intolerable and infuriating. It would be like China getting a sweetheart deal from President Obama for control of the US auto industry. No red-blooded American would stand for such a thing.

It was the early 1950s. The smoke from World War II, a war that killed over 60 million people, still lingered. The horrors were fresh in everyone’s mind. Access to oil had been a decisive factor in that war. Had Hitler succeeded in securing his supply in 1942, the world might look very different today.

It was a concept not lost on the British. If any country wanted to win a big war, it needed oil. Lots of it. It was a matter of life and death.

Iran was a major source of oil for the British. Access to it was a strategic military asset of the highest order. One the British would not give up for any price.

Mossadegh understood this. He concluded that the only way to claw back the oil industry was to nationalize it. On May 1, 1951, he did just that. Shortly afterward, he stated:

Another important consideration is that by the elimination of the power of the British company, we would also eliminate corruption and intrigue, by means of which the internal affairs of our country have been influenced. Once this tutelage has ceased, Iran will have achieved its economic and political independence.

The British were not about to give up. They hatched a plot to regain their influence in Iran. But they couldn’t do it alone. They would need help from the US. But the US just wasn’t interested. So the British undertook a campaign to paint Mossadegh as a communist.

The Brits played America’s Cold-War fears like a piano. They convinced the US government that the commies were making inroads in Iran. Given that Iran was just south of the expanding Soviet Union, the story was plausible… but not true.

In the end, it worked. The Americans came on board. Operation Ajax was born. The objective: overthrow Mossadegh’s elected government and replace it with something more pliable.

MI6, the UK’s foreign spy agency, and the CIA would organize the coup. Kermit Roosevelt, a grandson of former US President Teddy Roosevelt, was the CIA officer in charge.

The goal was to return the monarchy of Mohammad Reza Shah Pahlavi (also known as “the Shah”) to power. (In Farsi, the Persian language, “shah” means “king.”)

The CIA and MI6 used classic methods of subterfuge. They paid Iranian goons to pose as communists and wreak havoc in Tehran, the Iranian capital, and vandalize its business district. The police couldn’t restrain them, and the violence grew.

The coup plotters knew such events would disgust ordinary Iranians, who were fearful of communism. It would cause them to demand action. That action would include the Iranian military stepping in. As part of the plot, the CIA and MI6 had corrupted key Iranian generals for just this moment.

As if on cue, the generals took charge and deposed Mossadegh’s government. The Iranian people didn’t resist. Instead, they cheered. They thought the military was saving them from a violent communist revolution.

Mossadegh’s government was out of the way. The coup’s operatives in the Iranian military had seized power. The path had been cleared for the Shah.

The Shah knew he owed his position to the US and UK. What they giveth, they could taketh away. The Shah was more than willing to do whatever the US and UK wanted him to do. Operation Ajax was a success… but it would not be an enduring one.

The Iranian people would eventually figure out what really happened. Many of them would come to despise the Shah as a puppet of a foreign power. To maintain his position, the Shah became more despotic… which only fed the opposition.

In 1979, 26 years after Operation Ajax, a popular uprising overthrew the Shah. A power struggle ensued, and Ayatollah Khomeini’s Islamist forces prevailed. The Islamic Republic of Iran was born. This time, it was an anti-American government that came to power. Decades of animosity followed, and it continues to this day.

It’s unthinkable to most that the Islamic Republic of Iran could offer any sort of investment opportunity. Many find the mere mention of the country distasteful.

There’s another country that most would have considered unthinkable to invest in at one time. Many got hot under the collar just at the mention of its name too: the People’s Republic of China.

If you had followed their thinking, you would have missed out on one of recent history’s most powerful economic booms. That’s precisely why you should ditch the conventional wisdom when it comes to thinking about profiting from Iran. If you don’t, you could be letting a once-in-a-generation opportunity pass you by.

Recently, I discussed investing in Iran with legendary investor Jim Rogers. He told us:

I bought Iranian shares in 1993, and over the next few years, [they] went up something like 47 times, so it was an astonishing success.

That was then. Now, additional sanctions make investing directly in Iran off limits to Americans and most Europeans. But that could soon change.

The conclusion of the negotiations on Iran’s nuclear program means the economic floodgates will open. Persia will once again be open for business. It would be a big deal: Iran’s $370 billion economy is by far the largest still excluded from the international financial system.

Iran has the world’s third-largest proven oil reserves (10% of the world’s total) and the second-largest proven natural gas reserves (17% of the world’s total). A tremendous amount of wealth is waiting to be developed.

Iran’s economy is not all about natural resources. The country is home to advanced nanotechnologies and the Middle East’s largest car manufacturer. Its young population of 78 million yearns for iPhones and other Western products, and there’s enormous built-up demand. That demand is getting ready to explode like Mt. St. Helens.

European and Asian companies have been scrambling to Tehran to line up business deals.

In short, the opening of Iran is a massive opportunity.

Even if the West doesn’t lift the sanctions, Iran will simply turn to the East to do business. Either way, the Iranian economy is on course to experience one of the greatest booms in recent history. It’s on a scale the world hasn’t seen since the opening of China. Opportunities like this don’t happen every day, every year, or even every decade.

But for the average American, Iran is at the bottom of the list of potential investment destinations. That’s what more than 30 years of hostility and charter membership in the “Axis of Evil” will do.

The sentiment couldn’t get any worse. As a contrarian, that’s just how I like it. But only if there is a solid reason to believe that the negative sentiment is misplaced. In the case of Iran, I am certain that it is.

In the not-so-distant past, I used to live in the United Arab Emirates… right across the Persian Gulf from Iran. Being there gave me the chance to see the country firsthand.

On the Ground in Iran

Hands down, Iran is the most fascinating country I’ve ever been to.

I’ve been to almost every country in the Middle East. Iran stands out for a number of reasons. Unlike most other states in the Middle East, Persia is not an artificial construct. By race, religion, and social history, it is a nation. And European bureaucrats didn’t dream up Iran by drawing zig-zags on a map. The map reflects the geographic reality of a country with natural, fortress-like, mountain borders.

For an American, getting there isn’t easy. But that’s part of the allure.

You can’t simply hop on a flight to Tehran from New York, like you would to Vancouver or London. You can’t enter the country unless the Iranian government has granted you permission in advance. And they take their careful time.

The US has no diplomatic relations with Iran. There is no Iranian embassy or consulate in the US at which to apply for a visa, but there is an Iranian interests section in the Pakistani embassy in Washington, DC, that can handle such requests. I was living near Dubai at the time, so it was easier for me to go to the Iranian consulate there.

But you can’t just drop in to the Iranian consulate and apply for a tourist visa. You have to work with an authorized service to assist you in the process, which is what I did. After I submitted my paperwork and waited a number of weeks, and then waited another couple of weeks, the Iranian government approved my application.

I immediately noticed that the Iranian visa in my passport was not the kind of cheap stamp you often get from Third-World countries. Instead it carried holograms and other anti-counterfeiting features. Things that are associated with documents from developed countries. It was a clue that Iran, a seemingly isolated and underdeveloped place, was more sophisticated than I had expected.

Sanctions have disconnected Iran from the international financial system. Your ATM and credit cards won’t work there. You need to bring cash (US dollars or euros work best) and exchange it for Iranian rials. Iranians also have increasingly returned to gold as a store of value and medium of exchange. This is no surprise. People in all corners of the globe have used gold this way for thousands of years.

As soon as my flight landed in Tehran, my Iranian “tour guide” greeted me. The Iranian government requires that minders accompany Americans at all times. It’s a result of the Iranian government’s not-necessarily unreasonable paranoia. They’d like to prevent Operation Ajax 2.0.

Having a mandatory tour guide wasn’t all bad. Mine was a dual American-Iranian citizen named Ali. Ali had spent a lot of time in California and spoke perfect American English. He took me everywhere I wanted to go. At the end of some days, Ali would let me go off on my own. This gave me the chance to explore Tehran’s affluent northern suburbs and legendary bazaar.

No matter where I went, everyone was genuinely kind and hospitable… even after figuring out I was American. Not what you would expect for a place known for its “Death to America” chants. It became obvious the average Iranian harbors no hatred for Americans. (For more on what life is really like in Iran, I’d suggest you watch travel writer Rick Steves’ video, Rick Steves’ Iran.)

The trip to Iran helped solidify my belief that the country is the ultimate contrarian opportunity. It revealed the reality hiding behind the frenzied sentiment of conventional thinking. It was just waiting for the right catalyst. And now that catalyst is at hand. The conclusion of the nuclear negotiations and the relaxation of sanctions will release all the massive, built-up economic potential.

The rationale for profiting from the opening of Iran is clear. Finding a practical way to do so is not. There is a way, however… and a good one. One that is easily accessible through any brokerage account to US investors and is completely legal for them. For all the details click here to check out the latest issue of Crisis Speculator.

 
The article was originally published at internationalman.com.