 Special
Report © 2009 Casey Research
Street Fighting Man
From Doug Casey
Chairman, Casey Research
Published Jul 29, 2009
With many thanks
to Casey Research for giving us permission to publish this special,
subscribers-only report, written, I think, in March of this year.
For decades, Doug Casey,
legendary contrarian investor and financial best-seller author,
has been foretelling the advent of a "Greater Depression."
Recently, as we are drawing closer to feeling its full impact,
Doug has been elaborating on the economic ifs, hows, and whats
of the imminent crisis. In this article, he focuses his, as usual,
politically not-so-correct musings on how it will change the
face of American society.
Longtime readers know my standard
response to questions about the severity of the Greater Depression:
It's going to be worse than even I think it's going to be. "Coming
Collapse" books will undoubtedly accumulate into an entire
genre in the next few years, as they did a generation ago. This
time it's not just fear mongering, although things won't get
as bad as in James Kunstler's book The Long Emergency and
certainly not as rough as in the movies Road Warrior or I
Am Legend. But it's a good bet that a lot more is going to
change than just some features of the financial system. Let's
engage in a little speculation as to the shape of things to come.
I've long believed that this
depression would not only be much different but much worse than
the unpleasantness of the '30s and '40s. In those days, only
a few people were involved in the financial markets; now almost anyone with any assets at
all is a player. In those days, there were no credit cards, consumer
debts, or student loans; now those things are ubiquitous. It's
true that nobody will lose any money because of bank failures
this time around; instead, everybody is going to suffer a loss
from a collapse of the U.S. dollar, which is much worse.
In the '30s and '40s, the U.S.
population was still largely rural in character, including people
living in the cities. The average American was just off the farm
and had a lot of practical skills as well as traditional values.
Now he has skills mainly at paper shuffling or in highly specialized
technologies, and it doesn't seem to me that the values of hard
work, self-reliance, honesty, prudence, and the rest of the Boy
Scout virtues are as common as they once were. In those days,
the U.S. was a creditor to the world and the world's factories
to boot; now there are perhaps 8 trillion dollars outside the
U.S. waiting to pour back in, and the country is all about consuming,
not producing. Even with what the New Deal brought in, there
was vastly less regulation and litigation, leaving the economy
with much greater flexibility to adjust and innovate; today,
few people do anything without consulting counsel.
Of course things are immensely
better today than 80 years ago in at least one important way:
technology. I love technology, but unfortunately, improvements
in that area do nothing to prevent an economic depression or
many of the ancillary problems that will likely accompany this
one. In fact, it can be a hindrance in some ways.
So, accepting the premise of
a depression, let's examine some of its likely consequences.
Civil Unrest
I've puzzled over who will
go into the streets as the depression deepens and when they'll
do it. Nikolai Kondratieff, of Long Wave fame, was of the opinion
that the natives tend to get restless at economic peaks (like
the late 1960s, when riots broke out all over the world) and
at economic troughs (like the 1930s, when the same thing happened).
His reasoning is not dissimilar from that of Strauss and Howe,
authors of The Fourth Turning. At peaks, people are just
feeling their oats, which can evidence itself domestically in
riots inspired by rising expectations, and internationally in
optional sport wars, like that in Viet Nam. Such peak-time disturbances
are troublesome but don't really threaten society. That's largely
because when times are good, people feel they have a lot to lose
and they believe things can get even better. In prosperous times,
people don't usually feel like overthrowing the government or
transforming the basis of society.
Not so at economic troughs.
People believe they have little to lose, they're eager to hang
those they believe responsible for their problems, and they'll
listen to radical or violent proposals. We're now just entering
what will likely be the worst economic trough since the Industrial
Revolution.
But why do humans tend to riot
when the going gets rough? How can they think that solves anything?
Do they believe it's going to make their jobs or money reappear?
Perhaps I ask that question only because I can't see myself rioting.
You and I might discount the thought of Americans going wild,
because we wouldn't likely join them. But we're not, I suspect,
the average American. People, throughout history, have always
been prone to violence when times get tough. Is there any reason
that should change now?
Recently, there have been --
really for the first time in this downturn -- reports of large,
angry demonstrations all over the world. The UK, France, Eastern
Europe, now China. If a place like Iceland, as placid and homogeneous
as any in the world, can blow up, then any place can. And probably
will.
A rioter is typically an angry
person looking for vengeance because he blames someone else for
his problem. So far, rioters seem to be directing their attention
at governments. Correct target, of course, but they don't have
the rationale quite right. They're not angry because governments
inflated the currency, promoted fractional reserve banking, and
nurtured all the cockamamie socialist programs that caused this
crisis. Not at all; they rather liked all that. They're angry
only because their governments haven't adequately protected them
from the consequences of what they did. So as conditions worsen,
we can expect governments worldwide to pull out absolutely all
the stops to show they're "doing something." And round
up scapegoats to satisfy the mob and divert anger from themselves.
I fully expect civil unrest
to spread everywhere, simply because the depression will spread
everywhere. It will be worst in places that have been most overextended,
most debt leveraged, most urban, and have the largest numbers
of unemployed workers -- the U.S., Europe, and China.
In the last couple of generations,
most rioters in the U.S. have been students who basically just
raise some hell on their campuses and inner-city blacks who burn
down their own neighborhoods. Maybe the students who've wasted
a huge amount of time and money in gender studies and sociology
will get angry as they figure out they're not going to have jobs
when they graduate -- forget about making $100,000 plus as an
investment banker. Maybe blacks, who have apparently been hurt
the worst by subprime lending and still may be the last hired
and first fired, will take to the streets. Maybe. But I think
it's more likely the turn of the Mexicans and other Latinos.
They're the ones raided by la migra and stopped at checkpoints,
whether they're legal or not. They're the ones who may be implicated
in the wave of violence flowing up from northern Mexico. There
is a real strain of revanchist nationalism throughout their community
that hopes for the reconquista of lands the Anglos stole in the
19th century. And they have all the other problems you might
expect with an ethnic underclass.
But will ordinary middle-class
Americans riot? I don't expect it until later in the game. Union
members will be treated well by the Obama regime. And most whites
live in the suburbs; it's tough to get people who live in detached
houses out into the streets. Ozzie and Harriet just don't seem
likely to burn down their house, even if the bank owns it. Besides,
a lot of the parents are on Prozac and their kids on Ritalin.
Of course, on the other hand, most of the people who perpetrated
mass murders over the last 25 years were on some type of psychiatric
drug.
Is there a catalyst that could
turn your neighbors into a mob? Two possibilities are gun control
and higher taxes, discussed below. But my guess is that riots
will be headed off by the police, who are far more numerous,
militarized, and better equipped than ever before, and by the
military itself. You may think the cops and the military (and
today most cops are exmilitary) would never turn on their fellow
citizens, but you'd be wrong. Cops and soldiers are far more
loyal to their colleagues and their organizations than they are
to either some constitution or, absolutely, the mob that's throwing
bricks and bottles at them. They are also among the forces pumping
for gun control.
Gun Control
This issue is potentially explosive.
Although, sadly, gun culture in the U.S. isn't nearly what it
was even a generation or two ago, it's still pretty strong in
some regions. Most states make the open or concealed carrying
of handguns a simple matter, and there's evidence lots of people
are taking advantage of it. Personally, I find it hard to fathom
the psychology of people who want to disarm society. From a strictly
practical point of view, the idea of having to engage in hand-to-hand
combat, half naked, with an intruder in the middle of the night
is most unappealing. Especially since the odds of that happening
are going way up in the near future. Everyone should have a gun
in his nightstand, at a minimum.
But that's only a fraction
of what gun ownership is really about. A free person should have
the right to possess whatever he desires. End of story. And only
slaves, or those with a slave mentality, comply with no thought
of resistance when they're told what they can or cannot own,
especially if compliance means disarming themselves.
I've often wondered what would
have happened in Germany after Kristallnacht if every Jew had
been armed. None were, of course, because strict gun control
had been imposed shortly after Hitler came to power, and like
good little lambs, the population complied with the law. But
my guess is that few would have defended themselves against the
Gestapo anyway. Partly because they would have figured they were
certain to get into serious trouble if they resisted, and partly
because they couldn't imagine the fate that actually awaited
them. It wasn't until the Warsaw Ghetto uprising in 1944, very
late in the game, that people could finally read the writing
on the wall and summoned the courage to fight.
If you follow these things,
you'll note that there's been a lot of buzz about severe firearms
regulation since Obama's inauguration. Bills are being discussed
about things like a national firearms registry, reinstituting
the so-called "assault weapons" ban, requiring secure
locks on all weapons, prohibiting the import of ammunition, and
levying a substantial tax on ammunition, among other things.
No outright prohibition, because they know that would catalyze
gun owners. But they keep dialing up the pressure, moving toward
a de facto ban.
I'll guess there are at least
two to three million Americans who adhere to a couple of succinct
mottos: 1. You can have my gun when you pry it from my cold,
dead fingers, and 2. It's better to be tried by twelve than carried
by six. This is a group that could catch fire at some point.
But I don't think it's imminent, simply because the chances of
outright prohibition of gun ownership are slim. The analogy of
the frog in a gradually heating pot is apt. The taxpayer must
also feel like a frog.
Tax Revolt
State and municipal governments
all over the country are operating with rising outlays and radically
declining incomes and so are running large deficits that add
to their already massive debt. Since they can't print dollars,
they'll raise taxes further, as New York and California have
recently done. Most people don't have any philosophical objection
to taxes; they accept them, considering them part of the human
condition, like disease or death. That's unfortunate, of course,
in that taxation is neither moral nor necessary. But such fine
points of philosophy absolutely never enter the public debate.
What will be debated is the
level of taxation. The last time we had widespread agitation
on taxes was during the last serious recession, in the late '70s.
The result was things like Prop 13 (which capped property taxes
in California for some homeowners) and the Reagan tax reforms.
I expect there will be serious
whining about taxes this time around as well, but little will
come of it. To start with, like every other organism on the planet,
government puts its own interests first; society comes in a distant
second. Actually a distant third, after powerful individuals
who are wired to politicians and bureaucrats, and groups that
hire the right lobbyists. Every level of government is more desperate
for money than ever. Your taxes are going through the roof, and
you're going to see lots of new ones. Don't expect any support
from Boobus americanus. About half don't earn enough to pay income
tax. Most are net tax beneficiaries. And low taxes have somehow
become associated with the late disastrous crackup boom and the
corrupt Bush regime. So a popular tax revolt looks like a real
long shot.
At the same time, a portion
of the productive people in the country feel genuinely resentful
at having to subsidize the losers and ne'er-do-wells. What are
they going to do? I think they have only two alternatives. Tax
evasion, which is both hard and increasingly risky, since the
IRS will be hiring plenty of freshly unemployed financial workers.
And expatriation. My guess is that scores of thousands of Americans
are going to make "the Chicken Run" (as Rhodesians
called it) in the next few years.
But the biggest danger to your
personal freedom and your wealth, as well as to the U.S. as a
whole, is likely to be war.
War
It always impressed me as odd
that while Obama ran on a platform of ending the pointless and
counterproductive adventure in Iraq, he wanted to ramp up the
war in Afghanistan. What possible reason could anyone have for
wanting to fight an optional war in what may be the most backward
and xenophobic place on the planet? Even if every Afghan made
a personal pledge of Death to America (which they eventually
will, thanks to the occupation), who cares? Who cares if the
Pygmies of the Ituri Rainforest or the Yànomamö of
the Amazon join them? It's strange that no one ever questioned
Obama on this nonsensical and contradictory policy.
Now it seems he's very slow
in leaving Iraq. I expect the reason is that the U.S. has built
elaborate bases the size of small cities that they're loathe
to leave, partly on general principles and partly because they
might be needed to attack Iran or Pakistan. The Obama regime
is literally asking for trouble in both places. And partly because
he knows that the collaborators set up to run the Iraqi government
will promptly be deposed, and probably executed, by whoever might
win the civil war that would ensue if the U.S. really left. The
USG is apparently set on having a stooge in charge of both Iraq
and Afghanistan.
The National Security State
has a life of its own. Renditions haven't been stopped. Guantanamo
still operates, as do other overseas prisons holding thousands.
Military spending not only won't be cut, it will likely rise.
Wars start for all kinds of
reasons. But tough economic times probably rank number one as
a cause. The 1930s were a natural overture for the '40s. Politicians
like to find a foreign enemy to blame problems on. Theft of foreign
resources can seem like a good idea. And part of the economic
mythology fabricated by the malevolent and repeated by the ignorant
is that WWII cured the last depression.
Will there be another 9/11?
It's a good bet, but there's no way it will involve airplanes;
the 50,000 zombies employed by TSA serve absolutely no purpose
except to accustom Americans to being treated like prisoners.
One possibility is the surreptitious placement of one or more
nuclear devices in U.S. cities. As Pakistan disintegrates, their
nuclear arsenal may fall into quite irresponsible hands. Or,
perhaps, devices could be procured in a number of ways from Russia,
India, Israel, or North Korea. Another, much more likely scenario
is a repetition of what happened in Mumbai recently. A small
force of dedicated and well-armed operatives could create unbelievable
havoc in a U.S. city or in several at once. And probably will.
Americans just don't appreciate how little people in the Islamic
world like having aggressive, blue-eyed teenagers kick their
doors down in the middle of the night, among other pranks.
You may be thinking that, with
the American military the most powerful in the world, it's not
about to lose a war. I question that. The bloated military is
a major factor in bankrupting the U.S., and a bankrupt country
can't win a war. Its $6 billion carriers, $1 billion B-2s and
$400 million F-22s are all built to fight a kind of enemy that
no longer exists. They're sitting ducks for massive numbers of
cheap missiles and jihadists that can swarm them where they're
parked. The military wanted to fight WWI with cavalry and WWII
with battleships. They're seemingly doomed to a repeat performance
in the next major conflict.
In short, everything on this
horizon looks very grim for a long time to come. Incidentally,
the U.S. military is by far the world's largest single consumer
of oil.
Peak Oil
There hasn't been much discussion
of this since oil has come down from its July 2008 peak near
$150 to its recent low of close to $30. Longtime readers know
I'm philosophically quite reluctant to give credence to any theory
that would seem to imply we can run out of anything. I come down
firmly on the side of Julian Simon. Which is to say resources
are essentially infinite, and technology and capital can solve
almost any problem in the material world. That said, there are
problems that need to be solved. One is presented by the geological
theory of M. King Hubbert, who predicted in the 1950s that the
production of light sweet crude in the continental U.S. would
go into irreversible decline by the early '70s. He was correct.
He also predicted that the same would happen on a worldwide basis
in the first decade of this century. It now appears production
has maxed out at about 80 million barrels a day and is headed
down.
This isn't the time or place
for a detailed discussion of why and how this is true. It's certainly
not the end of the world, as some appear to believe. Just a major
inconvenience. Practically infinite power is available from a
wide variety of sources, starting with nuclear. The problem is
that oil is a particularly concentrated, convenient, and (in
the past) cheap source, so the entire world's economy has been
built around it. It will take a decade or so to adjust to the
much, much higher prices that will be needed to bring consumption
into balance with production. And absolutely everything that
relies on oil is going to become much more expensive -- especially
transportation (for obvious reasons) and food. Food is interesting
in that mass production is highly mechanized and oil intensive,
as well as fertilizer and pesticide intensive -- which again
rely on hydrocarbons. The oilfood problem is aggravated by so
much of what we eat being shipped very long distances.
Anything is possible, of course,
but I think the most likely scenario is simply a large reorientation
in patterns of production and consumption as a result of $200
oil. This would be tough enough by itself. But it's going to
put tremendous extra strain on the average American at exactly
the time he's already under maximum strain from a shrinking economy.
Right now things aren't so
bad, because energy prices are low. The depression has cut oil
consumption and, conveniently, prices as well. That's taken a
lot of pressure off the average American's pocket book and at
a felicitous moment. And prices may stay low for a year or so
as people the world over economize. But oil consumption doesn't
need to rise to put pressure on the price; from here, the main
pressure is likely to come from falling supply, not rising demand.
So oil prices are likely to start heading up, for strictly geological
reasons, even as the depression grows deeper. That will prove
most uncomfortable. And will have significant consequences for
two mainstays of U.S. culture: cars and suburbia.
Collapse of
Suburbia and the Car Culture
Suburbs are creatures of the
automobile. I've been a car buff my entire life. I love cars
for their technology. I love them because they're fun. But most
of all, I love them because even more than the ship, the train,
and the airplane, they liberate the average person to -- cheaply
and quickly - go anywhere he wants, whenever he wants. They've
made it possible for people to break the mold of the medieval
serf tied to the community he was born into. I don't think cars
are going to disappear, but the internal combustion engine is,
as a result of Peak Oil, on its way out. I suspect battery power
will start rapidly replacing gasoline and diesel. The problem
lies in the transition, which is going to be expensive, considering
the huge sunk investment in the current technology. There's going
to be an interim period, when people can't afford to drive their
pickups, SUVs, or practically anything else hundreds of miles
a week to distant work places and kids' soccer games or on promiscuous
shopping trips. But neither
will they be able to afford a new electric car.
American culture revolves around
the car. The car facilitated the growth of suburbs and exurbs,
shopping malls and big boxes, most of which will become completely
uneconomical with the rapid decline of the car. That's entirely
apart from the suburbs and exurbs being exactly where people
already can't make their mortgage payments. And can't afford
to shop. They can't get by even at current bargain oil prices
in the $40 to $50 range. It's going to be much tougher when gas
is $8 a gallon; if they can get a job, they're going to have
to live within a few miles of it.
Entirely apart from that, people
aren't going to be buying much stuff to store in the houses they
can't afford. As George Carlin pointed out in his famous routine
about "Stuff" (http://www.youtube.com/watch?v=MvgN5gCuLac),
that's what houses are for -- storing stuff. And people are going
to be liquidating what they have, not buying more, when they
won't even have a proper place to store it. I'd hate to be in
the furniture business over the next decade. Even if unemployment
weren't going much higher.
Unemployment
The official numbers say unemployment
is 7.6%. But just as the definition of inflation keeps evolving
to accommodate a number that looks better than the reality, the
same is true for unemployment figures. John Williams' Shadow
Government Statistics (www.shadowstats.com) computes the
figures the way the government used to -- mainly by adding back
in parttime workers and those considered "discouraged."
They show 17.5% as the historically comparable unemployment figure.
Society has been living above
its means for well over a generation, long enough to ingrain
unsustainable patterns of production and consumption in the economy.
Did everybody need/have a personal trainer 20 years ago? Was
"shopping" a major recreational activity in the days
before everyone had a pocketful of credit cards? Do all kitchens
really need granite counter tops? I think not. As people cut
down to the bare basics to enable themselves to rebuild capital,
millions and millions more workers are going to have to find
other things to do. And, while they're figuring out what, cut
back their consumption drastically as well.
I suspect the readjustment
will push unemployment to at least the levels of the Great Depression,
which would mean going past 25%. But some will argue: "Yes,
but we now have a safety net to catch the fallen. That will make
it less serious." No, it will make it more serious and more
prolonged as well. The so-called safety net consumes capital
that could have been used productively. It decreases the urgency
for each person to find a solution to his own problems. And it
has given people a false sense of security, leaving them to save
less for a rainy day. The looming collapse of things like Social
Security and Medicare will be a bigger disaster than all the
banks failing. The Social Security "trust fund," which
has been a swindle, a Ponzi scheme in slow motion, and a moral
wrecking ball almost from its beginning, is going to go much
deeper into the red. Before they collapse, Medicare, Medicaid,
and their cousins will be expanded by some form of free care
for the legions of the newly unemployed. Will doctors and nurses
be made indentured servants (such as through mandatory voluntary
community service) to provide care for everyone who may need
it? Perhaps not as long as taxes can be raised further on the
middle class.
Sorry this has all been so
gloomy so far. Now that the mood is set for recounting all the
problems that are going to beset us, some of you are probably
saying to yourselves: "Yes, and that's on top of global
warming."
Global Smarming
This is on just about everybody's
list of Big Problems. Except mine. I'm not a professional climatologist,
or even an amateur, so I lack any technical qualifications for
commenting on the subject - like almost everybody else who does,
prominently including Al Gore. But my guess is that in the next
decade, the global warming hysteria (and that's exactly what
I believe it is) will be viewed, with embarrassment, as one of
the great episodes in the history of the delusions of the crowd.
Have you noticed that "global
warming" is gradually being supplanted by "climate
change"? The fact is that the earth's climate has been changing
constantly for at least 500 million years and has generally gotten
much cooler over that time. It has certainly warmed since the
end of the last Ice Age, 12,000 years ago, and was much warmer
than now at the height of the Roman Empire. It cooled during
what became known as the Dark Ages, warmed again during medieval
times (when grapes grew in Greenland and northern England), and
cooled again during the Little Ice Age (which ended about 200
years ago). During the '70s, as you may recall, some magazines
ran cover stories featuring glaciers intruding into New York
City. And for the last ten years, it appears the Earth has been
cooling, although that's not widely reported. Change is a constant
when it comes to the climate, and warmer is generally better.
Is the science "settled"
on the subject? The very concept strikes me as ridiculous, in
that science is rarely "settled" on anything short
of it being proclaimed a law of nature. And, contrary to popular
opinion, it seems most scientists with credentials in the field
are either agnostic on the question or debunk the proposition
of anthropogenic global warming. But the intellectual climate
is such that most scientists are afraid to question out loud
the reality of warming. Since almost all funding today comes
from politically correct sources, namely the government and foundations,
the money goes to those who are known to be looking for the "right"
answers. Science has been corrupted.
Of course man can change the
environment. But our power to do so is trivial next to the sun,
volcanism, cosmic rays, and the churning ocean. None of those
forces gets any mention in the popular press, which fixates on
carbon, which has replaced plutonium as public enemy #1. Carbon
may be the basis of life on earth, but it's supposed to be our
new enemy nonetheless. The masses, who don't even know carbon
is a "natural" element and think the periodic table
is a piece of antique furniture now feel guilty about breathing,
because exhaled breath is a source of CO2.
Interestingly, a rise in atmospheric
carbon dioxide levels doesn't precede but follows, by several
hundred years, phases of global warming. Everything you hear
about saving the planet through carbon credits is as ridiculous
and counterproductive as recent disastrous programs to turn corn
into ethanol. In any event, carbon dioxide's effects as a greenhouse
gas are completely overwhelmed by those of water vapor. God forbid
anyone warns the public of the numerous dangers posed by compounds
like dihydrogen monoxide (also known as hydroxic acid).
As a lifelong science buff,
I find the whole subject quite interesting and am tempted to
do an article on it. The reason I mention it here, however, is
that the global warming hysteria, as opposed to possible cyclical
global warming itself, has serious economic consequences. The
chances are excellent that governments will direct scores of
billions of dollars into further research, devising computer
projections of catastrophe to come, and fighting the presumed
warming.
Much more serious are laws
they'll pass in the war against carbon (and methane, which amounts
to a war against cattle and sheep), which could retard the economy
by hundreds of billions of dollars. Most serious, in the long
run, is likely to be a discrediting of science itself in the
eyes of the common man once anthropogenic warming is exposed
as a giant false alarm.
The Political Future
We can be quite confident the
economic future is going to be grim. The military future, ugly
and busy. The social future, turbulent. So is it reasonable to
expect politics as usual? That would be rather anomalous. Especially
since the trend towards much more State power, centered strongly
on the executive, has been in motion, and accelerating, for at
least four generations in the U.S., even during the best of times.
No surprises there. That is pretty much what observers of history
from at least Plato on would expect.
In that America is recently
deceased and only the United States survives, I see no reason
that the trend won't continue accelerating, to be supercharged
by the next Black Swan that might land. After the next real,
fabricated, or imagined 9/11-style incident occurs or major war
begins, it will be surprising if a state of emergency isn't declared.
Perhaps martial law in the U.S. will, perversely, provide the
impetus needed to "bring the troops home," in that
they'll be needed more in the U.S. than in Fuhgedabouditstan
or wherever.
I leave the practical implications
of that entirely to your imagination. But to maintain what little
will be left of domestic tranquility at that point, the authorities
will almost certainly feel compelled to round up dissidents,
potential troublemakers, tents, libertarians, and the usual suspects
generally. It seems inevitable to me, and I'd prefer to be somewhere
else when it happens. I'm loathe to make outlandish political
predictions, if only because the inevitable isn't necessarily
the imminent. But if the U.S. survives the current crisis in
its present form, I'll be surprised.
As always, there's a bright
side. Obama will be a one-term president. And, as middle- and
upper-middle-class Americans come to see the government less
as a cornucopia -- that's inevitable, because the cupboard is
empty -- they'll start to see it ever more as a predator. The
government will become increasingly delegitimized in the eyes
of what's left of the middle class. But what will they do? If
they still have a home in the suburbs or a condo in the city,
they're not going to burn it down like the poor. I'm not even
sure they'll riot. But they will see the discontent. New affinity
groups will coalesce. And they'll wait until something really
catalyzes them. Is another revolution possible? Why not? The
U.S. is just another country at this point.
I'm convinced that the nationstate,
which is to say countries with governments based on geography,
is on its way out fairly soon. And good riddance. Perhaps the
U.S. will be among the first. What form of social organization
will replace it? [Note:
That will be the subject of an article soon to come in The
Casey Report.]
In the near future, though,
there will be a struggle between the best features of what little
is left of America and the worst elements of humanity, whom we
have in some abundance.
Emigrants
and Sociopaths
Americans no longer appear
to be a special breed. Of course absolutely every nation likes
to think it's a special, better breed - the Chinese, the Japanese,
the British, the French, the Germans, absolutely everybody. It's
a stupid but universal conceit, like the one putting God (presumably
Yahweh) on their side during a war.
I used to fancy Americans actually
could be a cut above simply because they're all the progeny of
emigrants, and there are at least three reasons emigrants tend
to be the "best" kind of people -- at least from the
point of view of someone who values freedom. First, emigrants
tend to be more enterprising than their neighbors at home, willing
to leave everything they have to pursue opportunity. Second,
they tend to be harder working, since they know they'll get nothing
they don't earn from strangers in a new land. Third, they tend
to be anti-political, since political elites and conditions are
usually what caused them to emigrate in the first place. Whether
these things are because of a genetic predisposition or whether
it's simply a cultural artifact within some families and groups,
or both, I think it's a fact.
From the founding of the country,
America has always had a strong emigrant ethos, and that's one
of the things that has made it different and better. But all
things degrade and revert to the mean with the passage of time.
The country is now a fugitive from entropy.
Another reason for taking a
pessimistic view is that -- notwithstanding the point I made
above -- there's no reason not to believe there's a fairly uniform
distribution of sociopaths across time and space, including in
America today. All countries, in all eras, have them -- but in
good times, they stay under their rocks. Who would have guessed
that the Germans of the last century, who had much more than
their share of writers, composers, philosophers, scientists,
plain middle-class shopkeepers, and a well-educated, orderly
population would have bred the Nazis? The Turks in the '20s,
the Russians in the '20s and '30s, the Chinese in the '50s and
'60s, the Serbs in the '90s, the Rwandans It would be easy to
recount dozens of recent examples of perfectly ordinary countries
that have gone bonkers. The fact is that your neighbor or your
mailman, who pets his dog, hugs his kids, and plays softball
on the weekends, might exhibit a much less appealing, indeed
an appalling, side when social conditions change.
You've, of course, heard of
the Milgram experiment, wherein researchers asked members of
the public to torture subjects with electric shocks, all the
way up to what they believed were lethal levels. Most of them
did it, after being assured that it was "alright" and
"necessary" by men in authority.
The problem arises when a society
becomes highly politicized. In normal times, a sociopath stays
under the radar. Perhaps he'll commit a common crime when he
thinks he can get away with it, but social mores keep him reined
in. However, once the government changes its emphasis from protecting
citizens from force to initiating it with laws and taxes, those
social mores break down. Peer pressure and moral opprobrium,
the forces that keep a healthy society orderly and together,
are replaced by regulation enforced by cops funded by taxes.
And sociopaths start coming out of the woodwork and are drawn
to the State, where they can get licensed and paid to do what
they've always wanted to do. It's very simple, really. There
are two ways people can relate to each other: voluntarily or
coercively. The government is pure coercion, and sociopaths are
drawn to its power and force.
After a certain point, a critical
mass is reached. The sociopaths who are naturally drawn to government
start to dominate it. They reset the social mores of the country
they control. And it's game over. I suspect we're approaching
that point.
A Happy Note
There's no telling how bad
things will actually get. The worst thing that could happen is
a major war. But, barring that, what's happened in Zimbabwe,
surprisingly, actually offers cause for some optimism. I was
last there a couple of years ago, when, although it was a disaster,
it hadn't descended into the absolute catastrophe that's going
on now. Still, with draconian taxes, regulations, and hyperinflation,
life goes on.
Plumbers, electricians, and
mechanics still repair things. Farmers still grow things -- albeit
on a much smaller scale. Stores still stock merchandise, even
if there's not much of it. And I just heard yesterday from an
ex-Zimbabwean that some of his friends there still play polo.
And Zim is about as bad as it gets. But maybe it's also reason
for pessimism. Why, out of the whole damned country, wasn't there
at least one man with the courage to shoot Mugabe?
Look at Eastern Europe. After
a horrible depression that lasted from about 1930 to 1990, the
whole region blossomed in the space of a decade. It went from
the grimmest dystopia, a veritable hologram of Mordor itself,
to being almost indistinguishable from Western Europe. It shows
how quickly things can improve, as long as there isn't a backdrop
of purposeful stupidity. Try as governments may to destroy it,
there's an immense amount of capital that the world has built
up over the past few centuries. Individuals and small groups
will continue building their capital everywhere, notwithstanding
any kind of State action. The pace of technology should continue,
if not accelerate.
As someone who always looks
at the bright side, the final bit of good news I can offer you
in this extraordinarily troubled milieu is that things are likely
to be very interesting, even quite exciting, over the years to
come. Notwithstanding the well-known Chinese curse, I'm not completely
averse to interesting times. And remember, you don't have to
be adversely affected by them; they set up opportunities for
greater profits than even the wildest bull market.
***
Note: Even though we are facing
tough times, you can make it through the crisis virtually unscathed
- if you take proper action.
The secret of keeping your
wealth intact and profiting handsomely while most investors are
losing their shirts is simply to "make the trend your friend."
That's what Casey Research's flagship newsletter The Casey
Report is all about: recognizing emerging market trends way
ahead of the crowd... analyzing the trend and finding the best
ways to profit... and finally, utilizing the opportunities that
present themselves.
With this strategy, subscribers
have had the chance to literally make a fortune... like when
we recommended shorting bank insurer MBIA for a gain of 1,000%
in just 9 months.
Don't miss another issue of
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With our 100% money-back guarantee, try it and if you don't love
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here to learn more.
Doug Casey
---
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