 Casey Files:
All the Trouble in the
World
By Doug Casey
BIG
GOLD
Chairman, Casey Research, LLC
Jan 24, 2008
If you credit Austrian School
economic theory, which I certainly do, you're forced to believe
that the Business Cycle exists. The Business Cycle is driven
largely by government intervention in the economy, in the form
of taxes, regulation and, most importantly, currency inflation.
These things give false signals to businesses and investors,
which cause distortions in the market, and misallocations of
capital.
When, inevitably, the errors
start to be corrected, the result is an economic downturn. It
will be called a "recession" if the government succeeds
in preventing widespread bankruptcies and unemployment through
one more dose of inflation.
Or it will be called a "depression"
if today's economic tempest slips out of the government's control.
From a financial point of view, a depression is a period when
the distortions of an inflationary boom are liquidated - a mass
die-off of the economically misbegotten. From an economic point
of view, it's a period when the general standard of living decreases
significantly. (This is an entirely too brief discussion of a
really important subject; I urge you to check the appropriate
chapters of any of my three investment books.)
The point is that the more
highly taxed, regulated, and inflated an economy is, the more
likely that it's eventually going to experience a real depression.
Perversely, the more control
a government has, the longer it can put off the day of reckoning.
But the longer the artificial structure is propped up, the bigger
the mess will be when it eventually collapses. From my point
of view, what will happen next is almost written in stone. The
only real question is: when?
In 1980-82 things almost did
go over the edge. But the recession was serious enough, and some
subsequent extraneous positive events (the collapse of the USSR,
the coming of age of China, and now India) were significant enough
to pull things out.
But now, more than a generation
after the last serious crisis - and four full generations after
the Great Depression - I think there are lots of reasons to be
afraid. Very afraid.
Am I predicting the Greater
Depression may be upon us?
Let me preface my response with a disclaimer. I'm not a fortune
teller. But my gut feel is: yes. I'm not going to mount all manner
of statistics to buttress the assertion. My point here is to
draw your attention to the fact that there's a lot that's likely
to go wrong besides the central problem of the Business Cycle,
a problem that is now evidenced in the collapsing housing sector
and all the pain associated with that collapse.
The "other" problems
now include the Forever War against Islam, peak oil, increasing
political control over virtually all aspects of life, the potential
for social unrest (within the U.S. Mexican community, for instance),
the historically high level of foreign holdings of U.S. dollars,
a rise in nationalism and protectionism, etc. While not always
obvious, all of these things are related, so it's likely that
when one of them starts running out of control, so will the others.
What will, in fact, happen? Nobody knows, including myself. But
I'm quite afraid we're in for truly stormy weather in the next
few years. Most people aren't adequately, or even at all, aware
of this prospect.
I suggest you stay with the
approach we advise in our monthly BIG
GOLD advisory. And that approach has a foundation in gold
and carefully-selected gold stocks.
As I am in for the long haul
at this point, selling only reluctantly and when absolutely necessary
to keep Caesar mollified or for portfolio rebalancing, I still
view any weakness positively.
Making mid-stream adjustments
to your portfolio based on these buying opportunities is important.
Being bold when others are timid can make a big difference.
In my opinion, gold isn't just
going through the roof in the next few years. It's going to the
moon. And gold stocks are a leveraged way to capitalize on it.
Doug Casey is chairman of Casey
Research,
LLC and author of the best-selling Crisis Investing. Each week,
Casey Research provides unbiased research and recommendations
to an audience of over 50,000 self-directed investors. To learn
more about Casey's BIG GOLD, which follows a cautious
portfolio of producing and near-producing gold stocks, mutual
funds and gold ETFs, click
here.
Doug Casey
Casey Archives
321gold Ltd
|
