To Save Your Money and Your Life
by Doug Casey:
Facebook and Beyond
I think there
are really only two good reasons for having a significant amount
of money: To maintain a high standard of living and to ensure your
personal freedom. There are other, lesser reasons, of course, including:
to prove you can do it, to compensate for failings in other things,
to impress others, to leave a legacy, to help perpetuate your genes,
or maybe because you just can't think of something better to do
with your time.
But I'll put
aside those lesser motives, which I tend to view as psychological
foibles. Basically, money gives you the freedom to do what you'd
like and when, how and with whom you prefer to do it. Money
allows you to have things and do things and can even assist you
to be something you want to be. Unfortunately, money is a chimera
in today's world and will wind up savaging billions in the years
As you know,
I believe we're into at least the fourth year of what I call The
Greater Depression. A lot of people believe we're in a recovery
now; I think, from a long-term point of view, that is total nonsense.
We're just in the eye of the hurricane and will soon be moving into
the other side of the storm. But it will be far more severe than
what we saw in 2008 and 2009 and will last quite a while
perhaps for many years, depending on how stupidly the government
There are reasons
for optimism, of course, and at least two of them make sense.
The first is
that every individual wants to improve his economic status. Many
(but by no means all) of them will intuit that the surest way to
do so is to produce more than they consume and save the difference.
That creates capital, which can be invested in or loaned to productive
enterprise. But what if outside forces make that impossible, or
at least much harder than it should be?
reason for optimism is the development of technology which
is the ability to manipulate the material world to suit our desires.
Scientists and engineers develop technology, and that also adds
to the supply of capital. The more complex technology becomes, the
more outside capital is required. But what if sufficient capital
isn't generated by individuals and businesses to fund further technological
There are no
guarantees in life. Throughout the first several hundred thousand
years of human existence, very little capital was accumulated
perhaps a few skins or arrowheads passed on to the next generation.
And there was very little improvement in technology it was
many millennia between the taming of fire and, say, the invention
of the bow. Things very gradually accelerated and improved, in a
start-stop-start kind of way the classical world, followed
by the Dark Ages, followed by the medieval world. Finally, as we
entered the industrial world 200 years ago, it looked like we were
on an accelerating path to the stars. All of a sudden, life was
no longer necessarily so solitary, poor, nasty, brutish or short.
I'm reasonably confident things will continue improving, possibly
at an accelerating rate. But only if individuals create more capital
than they consume and if enough of that capital is directed towards
Those are the
two mainsprings of human progress: capital accumulation and technology.
Unfortunately, however, that reality has become obscured by a morass
of false and destructive theories, abetted by a world that's become
so complex that it's too difficult for most people to sort out cause
and effect. Furthermore, most people in the OECD world have become
so accustomed to good times, since the end of WW2, that they think
prosperity is automatic and a permanent feature of the cosmic firmament.
So although I'm very optimistic, progress certainly over
the near term isn't guaranteed.
These are the
main reasons why the standard of living has been artificially high
in the advanced world, but don't confuse them with the two reasons
for long-term prosperity.
is debt. There's nothing wrong with debt in itself; lending
is one way for the owner of capital to deploy it. But if a society
is going to advance, debt should be largely for productive purposes,
so that it's self-liquidating; and most of it would necessarily
be short term.
But most of
the scores of trillions of debt in the world today are for consumption,
not production. And the debt is not only not self-liquidating, it's
compounding. And most of it is long term, with no relation to any
specific asset. A lender can reasonably predict the value of a short-term
loan, but debt payable in 30 years is impossible to value realistically.
All government debt, mortgage debt and consumer debt and almost
all student loan debt does nothing but allow borrowers to live off
the capital others have accumulated. It turns the debtors into indentured
servants for the indefinite future. The entire world has basically
overlooked this, along with most other tenets of sound economics.
is inflation. Like debt, inflation induces people to live above
their means, but its consequences are even worse, because they're
indirect and delayed. If the central bank deposited $10,000 in everyone's
bank account next Monday, everyone would think he were wealthier
and start consuming more. This would start a business cycle. The
business cycle is always the result of currency inflation, no matter
how subtle or mild. And it always results in a depression. The longer
an inflation goes on, the more ingrained the distortions and misallocations
of capital become, and the worse the resulting depression. We've
had a number of inflationary cycles since the end of the last depression
in 1948. I believe we're now at the end of what might be called
a super-cycle, resulting in a super-depression.
is the export of dollars. This is unique to the US and is the
reason the depression in the US will in some ways be worse than
most other places. Since the early '70s, the dollar has been used
the way gold once was it's the world's currency. The problem
is that the US has exported about $7 trillion in exchange for good
things from around the world. It was a great trade for a while.
The foreigners get paper created at essentially zero cost, while
Americans live high on the hog with the goodies those dollars buy.
But at some
point quite soon, dollars won't be readily accepted, and smart foreigners
will start dumping their dollars, passing the Old Maid card. Ultimately,
most of the dollars will come back to the US, to be traded for the
title to land and businesses. Americans will find that they traded
their birthright for a storage unit full of TVs and assorted tchotchkes.
But many foreigners will also be stuck with dollars and suffer a
huge loss. It's actually a game with no winner.
three factors have enabled essentially the whole world to live above
its means for decades. The process has been actively facilitated
by governments everywhere. People like living above their means,
and governments prefer to see the masses sated.
The debt and
inflation have also financed the growth of the welfare state, making
a large percentage of the masses dependent, even while they've also
resulted in an immense expansion in the size and power of the state
over the last 60-odd years. The masses have come to think government
is a magical entity that can do almost anything, including kiss
the economy and make it better when the going gets tough. The type
of people who are drawn to the government are eager to make the
state a panacea. So they'll redouble their efforts in the fiscal
and monetary areas I've described above, albeit with increasingly
become quite aggressive with regulations (on what you can do and
say, and where your money can go) and taxes (much higher existing
taxes and lots of new ones, like a national VAT and a wealth tax).
And since nobody wants to take the blame for problems, they'll blame
things on foreigners. Fortunately (the US will think) they have
a huge military and will employ it promiscuously. So the already
bankrupt nations of NATO will dig the hole deeper with some serious
but distracting new wars.
It's most unfortunate,
but the US and its allies will turn into authoritarian police states.
Even more than they are today. Much more, actually. They'll all
be perfectly fascist private ownership of both consumer goods
and the means of production topped by state control of both. Fascism
operates free of underlying principles or philosophy; it's totally
the whim of the people in control, and they'll prove ever more ruthless.
So where does
that leave us, as far as accumulating more wealth than the average
guy is concerned? I'd say it puts us in a rather troubling position.
The general standard of living is going to collapse, as will your
personal freedom. And if you're an upper-middle-class person (I
suspect that includes most who are now reading this), you will be
considered among the rich who are somehow (this is actually a complex
subject worthy of discussion) responsible for the bad times and
therefore liable to be eaten. The bottom line is that if you value
your money and your freedom, you'll take action.
much more to be said on all this. I've said a lot on the topic over
the past few years, at some length. But I thought it best to be
brief here, for the purpose of emphasis. Essentially, act now, because
the world's combined economic, financial, political, social and
military situation is as good as it will be for many years... and
a lot better than it has any right to be.
No new advice
here, at least as far as veteran readers are concerned. But my suspicion
is that very few of you have acted, even if you understand why you
should act. Peer pressure (I'm confident that you have few, if any,
friends, relatives or associates who think along these lines) and
inertia are powerful forces.
you should do the following.
significant bank and brokerage accounts outside your home country.
Consider setting up an offshore asset protection trust. These
things aren't as easy to do as they used to be. But they'll likely
be much less easy in the future.
- Make sure
you have a significant portion of your wealth in precious metals
and a significant part of that offshore.
- Buy some
nice foreign real estate, ideally in a place where you wouldn't
mind spending some time.
- Work on
getting official residency in another country, as well as a second
citizenship/passport. There's every advantage to doing so, and
no disadvantages. That's true of all these things.
One more thing:
Don't worry too much. All countries seem to go through nasty phases.
Within the lifetime of most people today, we've seen it in big countries
such as Russia, Germany and China. And in scores of smaller ones
the list is too long to recount here. The good news is that
things almost always get better, eventually.
better news is that US citizens can actually take steps to not
just preserve their current wealth, but increase it during this
ongoing Greater Depression. Doing so could mean the difference
to your entire family's well-being for decades... and who wants
to risk that while holding out for better times? Start
learning how to dodge the American debt crisis now.
Casey (send him mail)
a best-selling author and chairman of Casey
Research, LLC., publishers of Casey’s
© 2012 Casey
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