Monday, June 14, 2010

On America, Somalia and You

Great insights from a Doug Casey interview with the Daily Bell (
Daily Bell: How about America? How are America's finances?

Doug Casey: The era of one trillion dollar plus annual deficits is definitely here. And those are just the official deficits, which are going to be running a trillion or a trillion and a half dollars per year for the indefinite future. And on top of that you've got $100 trillion of unfunded liabilities of Social Security, the Medicare, the Medicaid. In a few years, you are going to have Obama-care, which is going to make the problem considerably worse. Then add on the probable federal bailouts of numerous bankrupt states like New York and California. And then hundreds of billions more for the FDIC, which is also totally bankrupt. Just like Fannie and Freddie. Then the Pension Benefit Guarantee Corp., will be hundreds of billions more – that hasn't hit the front pages yet. General Electric is just like a gigantic, 30-1 leveraged hedge fund; that's going to be bailed out too! Amtrak, which despite its outrageously high fares, continues to loose a couple billion dollars a year; of course that's just chicken feed in today's context. And of course these wars – and supporting military bases in over 100 countries...

Daily Bell: Let's turn to China's archrival. Is Barack Obama doing a good job?

Doug Casey: No, he's doing a horrible job. But I have to put that in the context of what's come before him. You have to look at this much the way you would have looked at the Roman Empire. When Tiberius died, the Romans were thrilled because Tiberius was such a degraded being; they foolishly thought it couldn't get any worse. He was replaced with Claudius, who was an embarrassment. After Claudius was assassinated they thought perhaps it would get better – but they got Caligula. Then after Caligula they thought how can it get any worse?? And they got Nero... I think the US is at a stage now where we can expect that our emperors will pretty much follow the pattern of the Romans. In other words, one is not better than the other; they're just different.

But one of the problems with Obama is that he is a sincere believer in all these destructive actions that he is taking. At least Bush, who was a numbskull – at once thoughtless, unintelligent, arrogant, and certain – at least kind of talked the free market talk. At least he probably didn't really believe in all the stupid domestic economic policies he implemented – like the Medicare Drug Benefit, No Child Left Behind, TARP, and so many more. But that was probably only because he had no core beliefs. But Obama apparently does – and all his appear bad. Look at the $400 million he wants to give the Palestinians. Actually, we shouldn't care, since the money is borrowed from the Chinese. It's really their problem I guess. Obama, unlike Bush, has a high IQ, but he has the instincts of a Chicago ward healer, or small-time community organizer. He's a statist, through and through.

We will see who comes after him; I believe he will be a one-term president. I am sure the next guy will even be scarier than he is, since we'll then be in the throes of a real crisis. God forbid Americans then opt for a strong leader, in the mold of leaders in the 1930s and 40s

US presidents like, Clinton and Bush and Obama... they are nothing-nobodies, that came out of nowhere. I wonder how can this be? Is it now impossible for person of substance be elected to the office of president? People with the character of Washington, Madison or Jefferson or Adams? Probably. What manner of person would be willing to do what is necessary to be elected? So now we get non-entities. No one has even heard of these people before, because they've accomplished nothing with their lives, except for politicking. I mean I don't believe in conspiracy theories, but these people are characters at once so trivial and misdirected it makes you want to believe it's a cosmic joke of some kind.

Furthermore the ethical fiber of the country has eroded. You've got 40 million Americans getting food stamps; that number is going much higher. People feel no shame in living on extended unemployment benefits. No shame in living in a house for a year or more after defaulting on the mortgage. No shame in gaming the system – which is encouraged by a plethora of laws. America was once a great idea – in fact America IS an idea, much more than a place. But now it's just another corrupt nation state.

So, I don't see any way out, I just think it's going to get worse for the United States...

Daily Bell: Absent wars, will the American economy now recover? Economists say that the US economy is starting to look "healthy" again.

Doug Casey: That's a delusion. Maybe it's more than a delusion; maybe it's an outright lie, although I suppose it's possible they just don't know any better. I suppose it's possible the people running the show in Washington are just fools, not knaves – but the odds are they are both.

Look, the whole US economy has been directed and oriented toward consumption, not production, for generations. Artificially high levels of consumption, financed by debt. This is coming to an end, and there are a lot of people in economically unsustainable occupations that will have to become unemployed, and find new jobs at much lower wages. They're competition isn't other Americans and Europeans; it's billions of smart and motivated Chinese and Indians, among others. The same is true for a lot of companies, as well.

The "recovery" is mostly PR because, for some reason, the political apologists who masquerade as economists think this is all a matter of psychology, not reality. They believe if you think everything's going to be all right, everything will be all right. So, they put out happy PR. This is basically Wile E. Coyote economics, where after he runs off the edge of the cliff, he doesn't start falling until realizes he's walking on thin air...

I would say that most of the nation-states of the world are on their way out; they're anachronistic at this point. Just as nation-states replaced kingdoms, and kingdom's replaced tribal forms of organization. I think that nation-states – where you give your loyalty to some government because you were born in a certain geographical area – are going to lose the loyalty of their subjects in the years to come. They'll prove unable to provide needed services, and will mostly be disliked for burdensome taxes and regulations.

The Internet has changed the game. Your real countryman will likely be people that you find that you share values with, no matter where in the world he might be. That's who you are going to be loyal to. Not some guy whom you have little in common with but the same passport. Most of your fellow citizens today are basically liabilities to you, recipients of your tax money. I expect the Greater Depression is going to last quite a while, and it's going to turn a lot of what you see today completely upside down, things are going to be very different. I think the world is going to re-organize itself in ways that are going to impress people in the future as very different than what we have today...

The Internet is one of the most important things that's ever happened. Certainly when it comes to communication, it's the most important thing since Gutenberg invented moveable type – more important actually. This is exactly why government's all over the world are looking to regulate it, control it, and tax it. The Internet lets people relate to each other purely as individuals, instead of viewing themselves as American or French or Brazilian, seeing themselves as citizens of some nation-state. I think in the future people are likely to see each other as citizens of informal organizations – not countries – and will seek each other out on the Internet and join together on that basis. The nation-state is going to be replaced by groupings of people that find each other on the Internet
Here's where things get real interesting. Doug Casey on Somalia:
Doug Casey: Now, let me say something that may be a bit shocking. I think that Somalia is kind of a straw in the wind for the future. They supposedly have a national government, and it's a UN member, but the place actually no longer exists as a real nation-state. The government is a fiction. It's been hollowed out, and I think this is going to happen to a number of countries around the world. People will no more look to their current national governments for various services than the Somalis do; they'll give their loyalty to different groupings and organizations – and I don't mean warlords, although there will also be some of that. This trend will include Europe and the US. I hope that in this evolution they don't have to go through a chaotic stage like that of Somalia right now. But I actually think that, although individual freedom is rapidly diminishing all over the world right now, as governments go bankrupt, and nation-states fail, things will get better. There could be a renaissance of individual liberty. This is why the bankruptcy of governments in the years to come doesn't concern me – at least from a historical point of view
In my view, a Somalized world, the way Casey presents it, is the optimistic view of the current global instability. What actually will occur is unknown. Things are too unstable, and it is impossible to know what twig will set off what reaction where. Though it is obvious that the structure is shaky and that any number of factors could cause movement or collapse, in this direction or that, no one knows what the series of chain events will be.

It is really time we all stop thinking the way we were brought up. What's going on in the world does not appear to be simply a hiccup where things return to normal, the way they always have in the past. We are far from normal. Whether totalitarianism or greater freedom is the next stop from here can not be determined, simply because the various trends and countertrends emerging will impact different people differently and the reactions of those people can not be known in advance. In this sense the problem of understanding how the crisis evolves is the Hayekian problem of  not possibly being able to centrally plan an economy because of all the individual factors that can't be known to one mind. In the same way, all these individual factors make it impossible to understand how the current global instability will evolve. I should note here that I am talking beyond just the business cycle and discussing the truly super-trends that are certainly instigated by the business cycle but are greater than the cycle itself. That is, we are witnessing a period where the governments of the world almost simultaneously will not be able to deliver on their promises, at a time when the average man does not have the basic understanding of economics to know what to demand to resolve the problem. Thus who knows who will demand what, when the Social Security checks and medicare checks start to bounce--or are paid out with money from the money presses?

The most important thing to do at this time is be alert and be prepared. Do not assume anything you are doing or using will be available to you in the future. Do not expect any current trend to necessarily continue into the future. The crosstrends are very powerful. This means those properly positioned will have the opportunity to make huge fortunes if they are the first to understand a trend and understand how to profit from it. For most however, it will be a long period of declining  living standards, perhaps dramatic.


  1. Thanks for posting this. I enjoy Doug Casey's commentaries, he is a wide-ranging and integrated thinker. Interesting that he's already left the country, and that he still feels like commenting on it.

  2. The United States has FINALLY "tipped it's hand" as the IMAGE OF THE BEAST in Revelations.

    For those who DON'T read (and that is practically EVERYONE) and allows another flawed and imperfect human to tell you what the BOOK means (who actually just spews the propaganda of the the company he represents for the purpose of making MORE MONEY)

    The US is the mirror image of Rome...especially when you add the spread of homosexuality, the breakdown of the educational system, the collapse of th family unit to the financial debacle.

  3. Interesting and amusing comments - but c'mon fella... these nobody from nowhere past presidents are just foolish guys who happened to get into the office?

    And nation states are just kinda gonna disappear?

    And 'groups on the internet' are going to kinda sorta somehow take their place?

    And you 'don't believe in conspiracy theories?'

    That which you don't believe in is going to come up and bite you on that place that makes contact with a chair when you sit down, pal.

  4. Wow! My son told me to read this. He is a marine and is now totally depressed. What does a mother tell her son to encourage him to not let the state of the world fall on his shoulders? Loss of hope is a serious detrement to performance and what action can any of one of us take that will make any kind of difference? What can I say to him to let him know that his efforts are not futile? Just as you are what you eat, you are what you think. Are we really all FUBAR? Anyone???

  5. I feel for you. Many people are realizing now where the game is taking us, and it is the hardest thing to deal with. Maybe you could tell your son that his depression is a chance to rethink what to do with his life. Maybe there is some purpose he can find. Here in Germany the masses get to hear nothing of what is really happening in America, and the soccer WM is on top volume in what seems like every street of every city.

    Best from Rome, Berlin ;-)