Doug Casey: Likely to be a Super-Bubble in These Crappy Little Mining Stocks – 10/5/14
This week, we’re delighted to present returning guest, Doug Casey. Doug is the founder and chairman of Casey Research, a natural resource focused newsletter service, which has made a lot of money for it’s subscribers. Doug has been fairly consistent throughout the thousands of interviews his done the last 3-4 decades, when it comes to his views on economics, government, and the liberty movement. We brought Doug on to talk about some of the aspects of his own life that has shaped his views, and led him to become libertarian oriented.
His first political awakening happened when he was six years old, while he was driving through the slums of Chicago, where black people were living in run down old buildings. He wrote a letter to president Eisenhower, with the help of his mother, asking the president to do something about it. But, as Doug puts it – a six year old knows about as much as a ‘liberal’ does today.
Later in his evolution he was influenced by Ayn Rand and became an objectivist, but following Ayn Rand was similar to being in a religion. But early on, even as he went to grade-school, he didn’t like people telling him what to do, that is what makes him conclude that libertarianism really is a genetic condition.
Next, when asked if boom-bust cycles occur in a free market with no intervention from government, Doug says that they definitely do. It’s the “heard mentality” that makes this happen, that people see something, and suddenly they all want to get involved. Doug further says that bubbles can be created as solely a matter of psychology, but when that happen, they tend to be not too serious, and they tend to be localized.
The problem is, Doug continues, is that when you have an unsound banking system, like the fractional reserve system. There is a lot of “free money” around, that allows these bubbles to get much, much bigger than usual. If he was going to put his finger on one particular problem that should be fixed in that regard, it would be the elimination of the fractional reserve system.
In classical times, even up to the nineteenth century, anyone could open a bank, and you basically had two types of bank accounts. You had a checking account, where people payed you to store money, and you gave them the right to write checks against them. and you had a savings account type of deposit where the bank payed the costumer to store their money. That’s how the system used to be run, and times were much more stable back then. “I lay most of the problems that we have in the economy today on the modern banking system”, Doug says.
On the topic on living internationally, Doug states that the U.S. used to be the most advanced country in the world 50 years ago, but the rest of the world has more or less picked up the pace. The standard of living is now not much different in the U.S compared to Europe, Asia or parts of South America. From a personal freedom point of view, Doug says that you’re actually freer when living in a lot of other countries in the world, because the local government doesn’t treat you as a possession, as your own government would.
In Doug’s opinion, the answer to where you can go to be totally free today, is that you have to live in a place where you’re not a citizen and not a tax payer. Which means, to maximize your personal freedom, you have to wound up spending time in two, or even three countries per year, so you’re not caught in any governments ‘net’.
Next, on the discussion of gold. In the epic gold bull market of the 1970’s, Doug had monthlong stretches where his portfolio was gaining 10-15 percent per day. The main attractor of capital in mining in those days was the South African gold stocks, which was historically big dividend payers. Those stocks normally yielded 15% in dividends in the beginning of the 1970’s, but the mining business has changed dramatically from those days. And it’s a much more difficult business to be in now.
Nevertheless, Doug thinks that in times like these, when the governments print up trillions of currency units and creates new bubbles all the time, one of the next bubbles will be in the mining stocks. Chances are excellent that we’re gonna have a “super bubble” in these ‘crappy little mining stocks’. “It’s always darkest before the dawn, and I think right now is the right time to buy them.”
Finally, speaking on the U.S dollar, Doug says that even though the dollar is losing ground in absolute terms, it’s actually gaining ground to other currencies, and even commodities at the moment. It’s almost a paradox. But, there is now 8-12 trillion dollars (no one knows for sure), outside of the U.S, and the foreigners that hold them, don’t have to use them as the Americans do, and at some point they’ll want to dump them and they will all come back to the U.S, in exchange for real wealth. That’s when inflation will explode.