Episodes

Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value published by Stansberry Research. This week, we'll talk with my old friend Doug Casey. Doug is a very wise fellow. He's lived in something like 100 – or he's been to something like 150 or 160 or 170 countries.

I don't even know how many at this point. We'll talk to him about that and a whole lot more. In the mailbag today, very little. Write to us [email protected]. And remember, you can also call the listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show.

For my opening rant this week, the prettiest mare at the glue factory. We'll talk about that and more right now on the Stansberry Investor Hour. The prettiest mare at the glue factory. What in the world does that mean? It sounds horrible, doesn't it? I'm just referring to the U.S. dollar.

Another way to say it is that it's the worst currency in the world except for all the others. It's just a comment on the basic flaw of fiat currencies and having a fiat currency be the world's reserve currency because when inflation hits, it hits a lot of people because a lot of people use U.S. dollars. And so this is actually the title of my most recent Stansberry Digest, which goes out to paying Stansberry subscribers, and I think there's a real good point to be made here. I got onto this kick last week because Deutsche Bank put out a report and they said that the first half of 2022 saw the worst performance of the 10-year U.S. Treasury note since 1788.

I didn't even know they kept records that far back. The worst first half six-month performance since 1788, since the 10-year Treasury was invented. And of course bonds in general really did horribly. Just look at any of the bond ETFs and they're all down. This is a bad thing on a number of fronts, but there's something interesting here, see? The interesting thing to me is an issue that I've discussed before and I've discussed the research of Christopher Cole from Artemis Capital, and now a new research piece on this same phenomenon I'm about to discuss is about by a firm called AQR.

They both really sort of make the same point. They make a lot of different points, but there's one point that they both make, which is that stocks and bonds have negatively correlated, just call it, since the turn of the century, turn of the 21st century, so the last 22 years or so, and before that stocks and bonds positively correlated, which means during the '70s and '80s and '90s stocks and bonds went and down together, but after that time, in the past couple of decades here, stocks and bonds have tended more often to travel in opposite directions so that your bonds went up when your stocks went down, right? That was one of the main reasons why you wanted to hold them.

This is the important trend behind the 60/40, the very popular – and I don't even know why it's popular because it was a terrible idea – the 60/40 stock/bond portfolio where you have 60% in stocks, 40% in bonds. Your bonds tamp down the volatility when your stocks aren't behaving well. But now stocks and bonds, of course, you know, they've certainly correlated the last six months, haven't they? Because they've both gotten killed, and they've both gotten killed because inflation is bad for business, it's bad for just about every business you can name.

Even the ones that people hold as an inflation hedge, it's still bad for their business. And it's bad for bonds because what are bonds? Well bonds are loans where you buy this bond, you're lending someone money, and they're agreeing to pay you back so much each year, and when there's inflation, each year the dollars they pay you back in are worth less and less. This is one of the reasons why home ownership with a 30-year mortgage is such a great deal because the currency is – really there's always some amount of inflation, so the currency is constantly degrading in value.

Then when you get times like the present when inflation ticks up to 8.6%, you know, that's when you really do great because you've still got that fixed mortgage and you're still paying whatever, you know, $1,000 a month or whatever, and that $1,000 makes less of a dent in your pocketbook as long as your income has generally tracked inflation, right? So it hurts less over time. And yet, the asset itself, the house, tends to track with inflation. So it's a great deal. You're paying it back with depreciating dollars and the asset is appreciating.

But back to this stock/bond correlation thing. I think that the bond market getting whacked is a pretty clear sign that inflation is for real and we had better take it seriously. All the transitory talk is a thing of the past, and now the Federal Reserve is saying, "Oh boy, inflation is serious. It's going to be around longer than usual." And the other central banks, you know, Bank of England, European Central Bank, they're all coming up to this same conclusion that inflation is kind of here to stay for some amount of time.

And I think any talk of inflation peaking or anything like that is premature. Inflation is stickier than people realize and for a very good reason because what is it? It is an increase that is too large, too fast in the amount of money available. People like to say it's more money chasing the same amount of goods, right? So relatively fewer goods and services then.

And of course that money bids up the price of assets and goods and services, and that is the symptom of inflation but inflation itself is that too-rapid increase in the amount of money in circulation. And it happened very obviously because when the government borrows money it's creating money. When you say the government is borrowing money you may as well say it's printing money. Now of course you know what I think you should do about this, because I've said it over and over again. I think you should own gold.

And people who complain about the performance of gold, you know, down a couple of percent, I mean, are you paying attention? Because the whole rest of your portfolio is down 15%, 25%, 35%, 40%, 50%, 60%. So by virtue of not getting destroyed this year, gold has vastly outperformed and has preserved value for you. So, you know, I still think it's a lot better than bitcoin because what happened to bitcoin? It got whacked along with everything else and it peaked along with everything else.

For all we know, all we could tell by the trading of bitcoin, and the price action of bitcoin is what I mean, is that it's just another speculative asset, and that's where we are. We are in a bear market. People are talking about finding the bottom. I think it's really premature. I think we're just getting a little seasonal uptick here lately.

And you may not know this. I think we mentioned this on the show but it's worth mentioning again. The folks at SentimentTrader did some neat research, and it basically shows that if you just owned stocks in June, July, and August, since like 1940, just bought in June, July and August every year and then sold at the end of that period, you would've made less than 200%. I forgot the exact number. And then if you had bought stocks in the other nine months of the year every year since 1940 you would've made, like, 11,000% or something.

It's just overwhelming. Now of course the holding period is triple, right? It's nine months versus three months. So that's part of the effect. But it's also true that that reveals a weakness in the summer months, generally speaking. But there's this period right in the middle, late June, early July – sort of in the middle I guess – where you get an uptick, generally speaking. Historically speaking, there's a pretty strong uptick, and we've gotten that. And I think this is a dip in the buy commodities and be afraid of inflation trade, right?

Buy gold, buy commodities, count on inflation being much more persistent than anyone is really talking about. The money doesn't go away. It's not like, you know, the government can go out there and just sort of call the money back in. It sort of can but it never does, right? [Laughs] So the money is out there. Trillions and trillions of dollars were printed because governments locked down the global economy and that depressed everything, so they had to print a bunch of money to help people out, etc., and here we are.

We're never going back to pre-pandemic conditions. It will never be back there. This is a whole new ballgame, and how this plays out is its own thing, right? This idea of going back to the pre-pandemic economy, it's gone. Dismiss it. Forget it. It's over, right?

The speculative bull market is over. Actually, the blowoff speculative top is over, but stocks are still extremely expensive. The S&P 500 is just like – basically, U.S. stocks in general are just right down to the level of the peak of the 1929 bubble, so still very expensive. And of course, bonds a couple years ago were at their 5,000-year top in price, low in yield when the 10-year was like 0.5%. That was the 10-year yield.

The U.S. 10-year yield was 0.5%. I mean, [laughs] you know, what a horrible deal, right? You lend the government money for 10 years and they pay you 0.5%? I mean, it's just – you know, it was obviously a bad deal and it was obviously a moment to be highly, highly cautious about bonds.

I've been talking this way for a while, but now it's all starting to come true, and I think that from here on out I think it makes sense that all these macro things, all this money printing and coming out of the COVID depression and all this stuff, I think we're probably getting back to the positive correlation of stocks and bonds for a while. So that changes a lot of things because a lot of people figure, well, I'm going to retire soon so I don't want to take a lot of risk. So instead of buying a lot of stocks, I'll buy more bonds. But now bonds are behaving like stocks.

They're correlating with stocks. So it's really kind of thrown a monkey wrench into asset allocation, and a lot of assets are allocated that way. Trillions and trillions of dollars are allocated with this idea of bonds will protect you from volatility in stocks, and they've failed to do that this year. My point is I think they're going to keep failing to do it. And when this stuff happens, I say it's time to own some more gold.

Look, the fact that inflation has gone from diddlysquat to 8.6% in less than a year and gold is down 2% this year in 2022, I don't like it but I have to recognize that gold has still dramatically outperformed all those other assets that got murdered. Period. And I think that's a hint actually. I think that the volatility you see in, I don't know, maybe lumber or maybe – maybe not lumber is a good one, but maybe copper and some other commodities, and commodity in general, the commodity indexes.

Oil, the big one, the mac daddy commodity. I think this may be a buyable dip. I think Warren Buffett bought the buyable dip in oil. There was a story a couple of weeks ago where he was buying more of whatever that oil company is that he buys a ton of. Continental, I think it is. So I think that's where we are.

I think this summer sort of rally in stocks is really a buyable dip in commodities and a buyable dip in the inflation trade. I'm going to leave you right there, and now we're going to talk to somebody who has done quite a bit of thinking about inflation and other similar money-related topics, my old friend Doug Casey. Let's talk with him right now.

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OK, it's time for our interview. Looking forward to this one. I always enjoy talking with my old friend Doug Casey. Little do many of you know Doug is one of the main reasons I got into this business. His work inspired me decades ago, and well here I am thanks to him.

I consider Doug one of the iconic voices in finance today. Nobody else sounds like Doug Casey, and if you haven't heard him speak before you will learn that today and you will be happy about it, I promise. So with that, Doug, welcome back to the show.

Doug Casey: Thanks, Dan. I'm very flattered and it's a pleasure to be here with you as always.

Dan Ferris: So Doug, last time we spoke we tried to do this interview and you were in Uruguay I believe at the time, and it didn't go so well. So we're regrouping and now you find yourself stateside, and I'm curious to know how much time an international sort of fellow like you spends in the States?

Doug Casey: Well, you know, I used to travel a lot around the world, but I don't like traveling around the world anymore especially since this COVID hysteria has overwhelmed the planet. It's become more unpleasant than ever. In addition to the fact that the connections that you can make and so forth are unpredictable. There are massive cancellations everywhere of planes.

You really can't fly into or out of a lot of places in the Orient, China, Hong Kong, New Zealand, Australia. So the world has changed. And frankly, having been to 155, 160 countries, most of them several times each, having lived in 10 countries, I kind of feel like I've been there and done that. So I think my days of running around are over. I'm going to be watching the drama mostly on my widescreen from a distance and perhaps undisclosed location over the next couple of years.

Dan Ferris: OK. [Laughs] Distant and undisclosed. All right. Well I won't probe further about that. We will respect your privacy there.

Doug Casey: No, no. I just think that things are going to get wild and wooly, and I'm in the U.S. now in a very pleasant place but I think the world is going to start getting really wild and wooly for a lot of reasons over the next couple of years. So it's a good time to kind of duck and cover and keep your head down.

Dan Ferris: Sounds like you, along with me and others I've spoken with, are expecting – I don't know how else to put it, Doug – violence in the streets.

Doug Casey: Yeah. I do. Several years ago I started writing in my blog – I don't have a paid newsletter anymore – about the possibility of an actual civil war in the U.S. You know, I went through the '60s and could see the structure of the U.S. starting to bifurcate a bit, but at this point people that identify as red or blue, they actually hate each other. They can't communicate with each other. They're a different culture.

And of course the United States itself has turned from one identifiable country with common traditions and culture and religion and language and race and all that – it was more or less an integrated place – now it's turned into a multicultural domestic empire where everybody is clawing for favors from their government entities, national, state, local. So the character of the country has changed I think rather radically.

Dan Ferris: Yeah. I don't think anybody would really disagree with that. I think you'd really have to be drinking the Kool-Aid to disagree with that. It's a funny thing though, isn't it? Because you said you're in a very pleasant place right now. I live in a very pleasant place on a golf course with lovely view of the mountains and everybody around here is very pleasant and so forth and nobody's sticking their nose in my business every five minutes.

Having said that, however, it seems that everywhere I go the conversation – like if I'm in an airport or just about anywhere, the conversation quickly turns to basically what's on television, Doug. What's on television about Roe v. Wade and what the blue side is doing and what the red side is doing and whoever I'm speaking with thinks is right. And I do find it odd. I feel like politics has hijacked civil life in America. Is that too far or no?

Doug Casey: No, I completely agree with you. I despise politics, and the reason for that is that politics is actually institutionalized coercion. It's all about the government and who runs it. The government is an entity that holds a gun to your head – subtly or overtly – and tells you to do what you're told or very bad things will happen to you. So increasingly, American life is revolving around the state, the government, and what it does. And that's putting people really at odds with each other.

It's very disturbing. You know, it used to be even a century ago the U.S. government only took about 5% or something on that order, a very small portion of the economic activity of the U.S. We didn't have sales taxes, we didn't have income tax – import duties basically and excise taxes basically around the government. But now it's absolutely everywhere, and over half the country is a net recipient, they say, of benefits from the government so that it's really turned into a bit of a war of all against all. Even though we look outside today, it can be a beautiful day, and in our local area everything is mild and mellow and your local neighbors are friendly, I don't think that characterizes the country as a whole anymore.

And then we've got the underlying problems, the financial problems, the monetary problems, the economic problems, the social problems, and brewing military problems that could bubble to the surface anytime.

Dan Ferris: Right. I'm glad you brought this up, how the government has grown. I've tried to frame it in a nonideological way, and I've noticed that in conversations with strangers and neighbors and friends and things, the notion that one ought not to have this central power that can be exploited for the betterment of this group or that group, it's something everyone takes for granted. No one seems to question it. Everyone seems to just sort of tacitly unaware – they're unaware that they agree with this idea that that power ought to be used to seize resources and push them over here and push them over there, and if you oppose that notion, that top-down running of our lives by, you know, whatever, 600-odd people or 535 people in Washington, D.C., not to mention an army of locals, if you oppose that idea of having your life run from the top down, either you're derided outright or you're just kind of given this quizzical look, this sort of dog with its head tilted toward the side saying, what is he talking about?

Doug Casey: Yeah, you're absolutely right. This attitude has insinuated itself throughout U.S. society so that it's almost like we're fish swimming in water, whether the state and politics are all around us and we don't even notice it anymore because it's so pervasive. But at the same time, it's so dangerous and it's so different from the way things were in the past, and I don't think it's going to change, Dan. As a matter of fact, the trend is in motion and accelerating. It's rather unbelievable that people with collectivist and statist orientation have gotten so bold that with the election of the Biden regime – and I do call it the Biden regime, quite frankly, because these people are exactly the same people that took over France in 1789 and took over Russia in 1917. They don't call themselves Jacobins or Bolsheviks, but their psychological makeup, their philosophical attitudes, their beliefs about the way the world works are identical. They're the same people, just wearing different clothes in a different time.

And they're very dangerous. And now that the so-called Progressives have total control in Washington – well, not total control but pretty much in Washington, D.C, they're really going to try to impose their values on all these people in the hinterland. It's actually the situation, more than France or Russia, it's actually turning into something like China in the '60s, a great cultural revolution where this idea of Build Back Better, they actually want to change the culture and they've said that. I don't care what kind of personal habits anyone has, what peculiarities or what they're – but it's just impolite to push all this stuff on a public forum into everybody else's face and try to change their culture. It's nasty and it's dangerous. But that's just one of many things that we're confronting.

And I don't doubt, like you said before, Dan, that before the summer's over we're going to see riots and violence. We'll see. I'm not making an absolute prediction, but I'd say the odds are high.

Dan Ferris: I believe the odds are high. That type of activity in the way that you framed it and with which I agree, that type of activity, in all of those previous historical episodes, it tends to have the common feature of inflation. You know, there's inflation somewhere around and people suffer under inflation. And I noticed something recently in one of the pieces by Jeff Thomas that I wanted to point out, and I thought you guys were spot on to point it out and I didn't know this, that in fact, the definition of inflation, the real one, of course, is an increase in the money supply, as you pointed out, and it was changed in, what was it, the American Heritage Dictionary I think it was.

One of the big dictionaries, to a general increase in prices, which of course is wrong, right? That's what they want you to believe so they can blame it on somebody other than the government. I thought that was a fascinating historical tidbit.

Doug Casey: Yeah. It's natural that these people would attempt to confuse cause and effect, and it's part of the general degradation of language where words are poorly defined, and if they're poorly defined they're misunderstood. Where people mean two different things, it makes it very hard to communicate with anybody else if one person's speaking French and the other person's speaking German. I mean, of course they don't know what they're talking about and this leads to all kinds of other problems.

Yeah, but you're right, inflation is the process of printing up money, purchasing media. It's not the result of that, which is higher prices. So yeah, you're absolutely correct. Just part of the general –

Dan Ferris: And we now see the –

Doug Casey: Yep, go ahead. I'm sorry.

Dan Ferris: Oh, OK. I was just going to see and we now see the absurdity of Gavin Newsom printing up inflation relief checks. [Laughs] Handing out inflation relief checks.

Doug Casey: [Laughs]

Dan Ferris: The irony is thick.

Doug Casey: It really is, and they don't seem to realize that we've been through this drill before in Weimar, Germany. When prices got high they had to give people more money so that they could afford the prices, and the same thing happened more recently in Zimbabwe. Need more money to afford things, so print more money up. I mean, it's actually stupidity, which is there are many definitions of stupidity, and it's interesting to look at what the word stupid actually means.

But one good definition of it is it's an inability to see the indirect and delayed consequences of actions because even a six-year-old can usually see the direct and immediate consequences of actions, but an adult is stupid if he can't see the indirect and delayed ones, and these people can't do that. Oh, but it's more than that. I think we're dealing with people out there that actually could be defined as evil, and evil means – I'll give you another definition – it means purposefully destructive. Because the kind of people that go into government, they're not the best and the brightest.

They're people that – look, there's two kinds of people, people that like to control the physical universe, you know, wood and metal and build things and stuff like that, and then you got people that like to control other people, and those are the kind that go into government, and the more powerful government gets the more they're drawn to government the same way that gamblers are drawn to Vegas or criminals are drawn to the mafia. So it's serious. The trend is in motion and still accelerating.

Dan Ferris: I want to go back to something, an image you evoked of fish in water, and if I can take a little turn just into the financial markets for a minute – and we don't have to stay there if you don't want to – but lately I've taken to saying that people are in markets the way fish are in water, and we don't control the wind and the tides and that the belief in this institution of the Federal Reserve, that they're going to save you, the market has been too thoroughly inculcated with that. We've gotten too used to it, we believe too deeply in buying dips, and I think that – you know, Doug? I've listened to you over the years say, "Boy, things are really going to get bad, they're really going to get bad," and I think you and I are finally one on that.

Doug Casey: [Laughs]

Dan Ferris: I think that we're going to see a worse inflation and a worse recession out of it than I ever thought before, and I feel as though even with markets down as much as they are, you ain't seen nothing yet, and I think part of it is this belief in these institutions that come in from the top down with really crude tools and create untold unintended consequences. And we can see them doing it in real time right now. But anyway, it was the fish in water. I think people are in markets the way fish are in water, and we don't control the wind and the tides.

Doug Casey: Well yeah, that's right, Dan, and it's much more the case since it's ever been in the past I think because the entire country has been greatly over-financialized. It's all about credit and manipulating interest rates and propping up the bond market and the floating government debt and so forth. In a stable, capitalist free market society people produce and they consume and they save, but it's not a question of, you know, hello, New York buy, hello, Chicago, buy, hello, Los Angeles sell. New York and Chicago were buying and watching the screen all day. The world has been over financialized and it's top heavy with this type of thing, and it's going to come crashing down. As concerned as I am about the financial consequences of what's going on here, the fact that everybody's got their Robinhood account and is buying NTFs to speculate on them and all kinds of goofy cryptocurrencies – incidentally I'm a fan of bitcoin but almost nothing else in that area – people aren't thinking in terms of producing as opposed to gambling.

And as inflation gets out of control which it will, they're going to be forced to try to speculate to stay ahead of the destruction of their money, and after a while there becomes no point in saving because your savings vanish before your very eyes, and that destroys the actual structure of society. This is much more serious than the talking heads ever mention on TV or whatever or most newsletters, quite frankly.

Dan Ferris: It's Lenin's idea, right? Debauch the currency.

Doug Casey: Yeah. Exactly. Because, you know, everybody in a free market society can get ahead. You simply produce and you consume less than you produce, and then you save the difference and you build capital. So everybody, I don't care who you are, can become a capitalist as they build capital. But when the currency is inflated – and of course you save currency. You don't save nuts or stuff like that. We save dollars.

And when they destroy the dollar it means you can't save and you can't get ahead, and when you can't save you don't have money to invest. So this is actually really serious and criminal, and people don't look at it, and you've got people in the government like these idiots – and they really are fools, dangerous fools – saying, well, we want to see inflation at 2% per year. No, you don't. You don't want to see any inflation at all.

In fact, if we lived in a free market society the dollar would become more valuable every year, making it even more worthwhile saving, which means producing more than you consume. We live in bizarro world, increasingly.

Dan Ferris: We do. The century before the Fed took over was one, generally speaking with episodes here and there, of deflation, of maintaining the value of that dollar. Since the Fed, well we know what's happened. The value of that dollar's declined to, what, 95%, 96% and continues the pace.

Doug Casey: But this thing could – because they're created an environment where there is so much debt in the world that some people owe to other people, and some people may not be able to pay that debt back, and they're in trouble because they can't pay it back and the people that that debt, they thought it was their asset, that vanishes. So at the same time as we're moving into much higher levels of inflation I believe anyway, we could have a catastrophic credit collapse. It's potential chaos on the horizon. You know, back in these last two financial upsets we had – let me see, there was the Internet bubble and the real estate bubble, and what can they do to paper things over this time? I really didn't think they'd be bold enough to create trillions of new dollars and show them out onto society, and I didn't think they would be bold enough to reduce interest rates in some places to less than zero, which I thought that was metaphysically impossible.

But I don't know what they can do next. I guess their next thing to keep this game going might be central bank digital currencies. I think that's definitely on the runway.

Dan Ferris: Goodness. And the implication there, of course, it's not simply one of controlling money supply. It's one of tracking us all in a very Orwellian kind of way because they'll know where every bit of that currency is at any given time, and suddenly it becomes a lot easier to track us by our spending.

Doug Casey: That's right.

Dan Ferris: That's the troubling part for me.

Doug Casey: Yeah.

Dan Ferris: Because I already know the inflation is going to be there.

Doug Casey: Yeah. It's going to be quite a problem. And of course the younger generations are so used to using their smartphones for everything, they'll think it's a great convenience to have everything, all their money digitized, but they don't seem to realize that those digits can be added or subtracted from their account or denied to them if they're deemed to be naughty. And of course the next step, which we're right on the edge of, is adopting a Chinese-style social credit system where you're rated based upon what you say and what you do and who you associate with and so forth. It's very much part of the civilization in China now, or lack of civilization I might say, and we're going to get it here.

You know, I get the impression from bumping into generation Millennials and Zs that they're really proud of having high credit scores, so they'll play the game, and they've been thoroughly indoctrinated by going to government schools their whole lives and being told this is the way things ought to work, so it's a gloomy prospect. God, I hate to be so gloomy about the way things are going, because there are good things happening.

Dan Ferris: There are good things. I was going to mention one of them on that somewhat gloomy note. [Laughs] And one of them I noticed is the trend in so-called constitutional carry of firearms in the United States. There are, at latest count, I think it's 24 or 25 states – and the laws are somewhat different, you have to be a resident in someplace and so forth – where you don't need a permit to conceal carry a firearm, and I found this trend fascinating because certainly, you know, you could mark dates, you could say since the Obama administration or the Brady Laws or before that you can go back as far as you want, but for some time it has seemed that the government really, really wants to take our guns away and they really, really want to restrict our ability to carry them. And yet, this trend is pretty clear.

It's unmistakable. And of course the events of 2020 have led to a dramatic increase in firearms ownership, not only among us old white guys who always like guns but black people, women, young people, all these other demographic groups that were not as interested in owning firearms now are much more interested. They're outpacing us old white guys in the purchase of firearms. And this is – I don't know, I think it's a good thing overall.

Doug Casey: Oh, I think it's a very good thing because historically – I mean, we're talking about ancient history, back to Greek and Roman times and before, one of the main distinctions between a free man and a slave or a villain was the right to arm yourself and defend yourself. So our right to own weapons, as far as I'm concerned, it has really nothing to do with the Second Amendment. It's nice that it's written on a piece of paper someplace, but the U.S. Constitution has basically been interpreted out of existence. It's something that is natural to a free person as opposed to a surf. So yeah, it's –

Dan Ferris: Absolutely.

Doug Casey: It's a favorable trend. But then at the same time, the current regime has apparently passed these red flag laws, and what it means – I guess what it means depends on your sheriff or whatever, that if some maniac doesn't like you and they say, "He's got a gun and he's dangerous, they can come over to your house and disarm you." Is that the way you understand it?

Dan Ferris: It is, it is, and it seems purposely ambiguous, and you and I both know that this is precisely the type of thing that will be abused. It's put in place, I would say cynically so or not, to be abused. It really is. They want to have leeway. They don't want to – the government doesn't want to be restricted by the law, right? [Laughs] They need the law to work for them, not us.

Doug Casey: Well, you're right, and I would mention in that context that this idea about the government is we the people and – no, it's not we the people. It's some people that are in the government that, you know, are part of a club, and you're not in it if you're not part of the government. It's like the police. I mean, I've got ambivalent feelings about the police because frankly, the police are, for that matter, the military.

Their first loyalty is to their fellow cops or soldiers, their second loyalty is to the people that pay their checks, their wages, and only then the third loyalty are the people they're supposed to serve and protect. They've become like a private club. So I'm all for the police to protect you from things, but you can't rely on them. They're like a club that you hope are your friends but may not be because they just do what they're told. They take orders.

Dan Ferris: Yeah. That taking of orders is really the part that bothers me. Ostensibly, the military is, at this point in our history, a group of people who have volunteered to stand between me and oncoming bullets and even to go in the wrong direction where the bullets are coming from, so I appreciate that certainly. But yes, that following of orders has always bothered me, because when we study history, we say, "Well, Hitler was a bad man and Lenin was a bad man, Stalin was a bad man," etc., but they're only bad because thousands and thousands and thousands of people obeyed them. That is the disturbing part to me, is the mass obedience.

Doug Casey: Exactly. So the military and the police could easily change from being our friends and defenders to our enemies because they do what they're told. And actually, the nature of the police and the military has changed a lot I've found in the last generation or so because the police have been militarized. Every little town, I don't care how small it is, has a SWAT team now, which is very militarized. Most cops today are ex-military, where they pick up the habits that you pick up in the military, and I don't mean just saying yes ma'am and no ma'am and shining your shoes, I mean other ways of thinking.

So the police have been militarized and the military has become professionalized so that, for instance, at Fort Benning Georgia, where the paratroops and special forces and so forth are trained, the JSOC, the Joint Special Operations Group, these people are like an army within an army at this point. They have as much discretion to do things that the CIA does, which is very dangerous because I'm of the opinion that the CIA and many, many individuals in it are self-funding at this point because they've got badges and power and a gun and taking advantage of it. Same thing is happening in the military too, and the military isn't defending the U.S. The military is going out and aggressively attacking all kinds of regimes and people and God knows what all over the world.

It's not like GIs passing out candies to kids, liberating them from the bad guys. I mean, these are special operators that are, you know, basically – so this has changed too.

Dan Ferris: I tried to paint a good picture there with the gun trend, but it's difficult to look around and see wonderful things, but it is a wonderful life and more people are better off, I believe, just in terms of their physical standard of living now than ever before. That is certainly a good thing. The ascent of man is an unassailable trend in my opinion.

Doug Casey: Yeah. No question about it. I think so. I see that for two reasons. No. 1, it's that people are basically wired like squirrels. You know, we put away nuts for the cold winter and it's kind of like genetically becomes a part of our character over hundreds of thousands of years of being human. OK, that's very good. And the other thing – that'll continue. That builds capital.

Unless the government destroys capital too fast through the dollar and through inflation which we talked about earlier. And the other thing is the increase in technology, Moore's law, where technology is compounding upon itself at accelerating rate, and hopefully that's going to continue too at least as long as we have capital to allow research and development by science and engineers. But if you destroy the capital markets then you're going to destroy the progress of technology too. You know, I look at these things and I say, you know, most people live in cities today, and that's a good thing for all kinds of reasons.

All kinds of reasons we can talk about why cities are good. But frankly, it's been said we're only six meals from chaos and barbarism and basically eating each other. So if the supply chain breaks down we're six meals from big problems, and that could happen. I'll tell you what scares me, Dan.

It's that things get wild and wooly at some point here in the future – the financial system breaks down, the economic system – you know, unemployment and bankruptcies, the rest of this type of thing – what's going to happen is you're going to get somebody who's going to come up and say, "Look, I can cure all this. I can kiss it and make it a little better. So elect me and give me a few powers." And people, you know, believing in government will say, "Yeah, OK," and that's how you get a Stalin or a Hitler or a Mao. And history is replete, of course, with other examples too, isn't it?

Doug Casey: Yes.

Dan Ferris: And that is a genuine worry. I always like to point out that, you know, hunting licenses alone in the United States are five times the size of the Chinese army, the largest army in the world, and there's many more firearms than that even still. So we do have that going for us. In fact, we're unique in the world in that respect. And I hate to keep coming back to it, but it really is so different. It's effectively illegal to defend yourself all over the world, almost everywhere.

Doug Casey: Yes. Yeah.

Dan Ferris: And we're doing better than other countries in that respect, I feel.

Doug Casey: Yeah, we are, but we're going downhill. Because, you know, during the '60s, when I grew up, for instance, one time I flew from Chicago to Washington, D.C. I was – what was I? I must've been 17, I guess. I put my rifle, .22 rifle – pistol, .22 pistol and a shotgun, all three guns, carried them onto a plane, put them in the overhead compartment. Nobody thought twice about it.

It was obviously what they were. Both ways. So that happened. You used to be able – you can't do that today. That's out of the question. So we've gone, you know, backward in some ways, when a teenage kid could do that and now it's totally beyond the pale.

Dan Ferris: Right. Travel has become unpleasant.

Doug Casey: Oh, it has, it has. I mean, it has. It used to be that when you were stopped for speeding, for instance, it used to be you'd get out of your car and you'd walk – at least I always thought it was this way, maybe walk halfway between your car and the cop's car, and now you better just stay where you are, put your hands on the wheel and, you know, the cop is 45 degrees in back of you. The whole thing has changed.

Dan Ferris: All right. We are near the end of our time. I always like to ask my final question of every guest, which is the same final question for every guest, which is if you could leave our listener with a single thought today, what would that be?

Doug Casey: Hm. Well, you kind of took me by surprise there, but that's probably part of the drill. [Laughs] Well, try not to sweat the small stuff.

Dan Ferris: Oh, OK.

Doug Casey: Yeah, I'd say just don't sweat the small stuff. Could things get bad in the next few years? Yeah, sure, but it's unlikely to be anything like it was in Berlin in 1945, so just try to live an ethical life. Try to be happy, try to be mellow, and things will take care of themselves. I don't know. No cosmic breakthroughs. I wish I could give you one right now, but I'm short on instant cosmic breakthroughs, at least right now, Dan.

Dan Ferris: [Laughs] No, that's OK, that's OK because don't sweat the small stuff and it's not going to be as bad as Berlin in 1945. That's pretty darn good actually as final answers go, so thanks for that. And thanks for being here too, Doug. It's always a pleasure.

Doug Casey: OK. Well maybe we should do this at least annually and see how the world progresses in whatever direction it decides to go off into.

Dan Ferris: Yeah. I'd actually like to get back with you maybe near the end of the year, beginning of next year even.

Doug Casey: Yeah. That'd be good. I'll be back in Argentina or Uruguay at that point as opposed to here in the U.S., and I hope I'm dead wrong in my thinking that things are going to get nasty out there over the next six months, but we'll see. We'll be intellectually honest in assessing the facts.

Dan Ferris: Yes. Yeah. All right. Looking forward to it, Doug.

Doug Casey: OK, Dan. Thank you.

Dan Ferris: All right. We'll talk to you soon. Bye-bye.

Wow. I always enjoy a good conversation with my old friend Doug Casey. As you heard for yourself, he's very widely and well read. He knows history, he knows politics, he knows finance, and as he said at one point, he's been there and done that. He was talking about travel, but he's been there and done that in many ways. There are a lot of ways for you to sort of tap into his wisdom, like you can go to InternationalMan.com, you can find him on YouTube, he does a great podcast on there with Matt Smith, and read his books, man.

Read The High Ground novel series. The first one's called Speculator and then Drug Lord and Assassin. Those are the three titles that are out so far. And they're really incredibly because – like if you ever read an Ayn Rand novel, you know, it's 12 pages and there's these 100-page philosophical speeches. It's a little bit much. But Doug's version of that, it's similar but the effect is much more exciting and relatable, and the characters are more up to date and relatable. I thoroughly enjoy those books, and it really even has nothing to do – well I won't say it has nothing to do with the philosophical angle, it's just good writing.

It's good storytelling, and it's fun that it has this sort of anarcho-capitalistic kind of world that his characters operate in. It's great stuff. Anyway, that's the commercial. I didn't mean to do a whole commercial for Doug's books, but I just really enjoy reading them that much and I'm sure you will too if you like reading as much as I do. All right. That was great.

Now let's take a look at the mailbag. Let's do it right now.

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In the mailbag each week, you and I have an honest conversation about investing or whatever's on your mind. Send questions, comments, and politely worded criticisms to [email protected]. I read as many e-mails as time allows and respond to as many as possible. You can also call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show.

This week, very little in the mailbag. Really only two questions and only one substantial question, and it comes from James K. And James K. says, "First of all, thank you very much for providing an interesting and informative podcast. I always come away having learned something new and I appreciate your frank perspective. Forgive me in advance if I misunderstood what you were saying, but I felt like you contradicted yourself in a recent episode. Early in the episode you said roughly inflation is expansion of the money supply, not rising prices. I agree with you wholeheartedly."

And then he says, "Later in the episode you lamented the fixed supply of bitcoin as deflationary and suggested that was an obstacle to its adoption as money, presumably because deflation is bad? Am I wrong? Is deflation bad for economic growth or did I misunderstand you? I am not claiming that bitcoin will prevail as money, but I am claiming that it's fixed supply is not in any way a drawback," sincerely, James K.

James, yes, I think you have slightly misunderstood. If I said bitcoin was deflationary I hope – I hope I didn't say that, but if I did I was dead wrong. What I should've said and what I think I said was simply that bitcoin has this fixed supply. It cannot grow with demand for money, like the demand for money grows. If money doesn't grow with the economy, then there's more and more demand for money and money is more expensive, right?

And it's OK that there can be general deflation over time, but people need money. Money can't be in short supply. It just has to be in ready supply. So the amount of money when there's a population of 10,000 people is going to be a lot smaller than the amount of money needed when there's a population of 300 million, right? So money does need to grow. The amount of money in circulation does need to grow.

The fact that it can be printed up in the snap of a finger under a fiat system is the problem because then you can print trillions and trillions of units instantly, and that's the problem, right? There's no response to a genuine economic need. There's only a massive attempt, really politically driven in great part, to fill a hole that the government created, right? They create this big hole by shutting the economy down and then they have to fill it up with trillions of newly printed dollars, but it's all the same amount of goods and services and assets. So what happens?

Well, all those goods and services and assets are suddenly more expensive because it takes more currency units, because the currency has gotten way cheaper really fast. Right? It's stability. You want stable money. That's the point. And it has to grow in a stable fashion with the economy.

And when you said is deflation bad for economic growth or did I mean that deflation is bad, absolutely not. The century from the end of the Napoleonic Wars to World War I was a century of deflation and gold standard, and it was a good thing. You know, the world sort of grew up economically during that period in a pretty good way, and it was largely a century of deflation. There's a paper on global financial data, which I think the website is GlobalFinData.com or it might be GlobalFinancialData.com, and I think the paper's called A Century of Inflation.

I didn't plan on talking about this but I just remembered it. They talk about this, about the century of deflation that preceded the century of inflation that we've just had since 1913, so really 1914 when the Fed went into business. The Federal Reserve Act was passed in 1913, the Fed opened its doors in 1914, and ever since then, the value of the currency has declined steadily. Then we get these upticks in inflation like we've had recently because they all of a sudden print a lot of it.

Now bitcoin has a problem because it can't grow, so it's like a small-cap stock. A whole lot of demand for it all of a sudden or just any amount of increased demand for it creates volatility, and then when that demand reverses there's volatility in the other direction, right? Volatility goes in both directions. So the price is like all over the map and it's behaving like a speculative asset, and it does correlate with the stock indexes.

I saw another bit on the correlation of bitcoin in the S&P 500 recently, because people are just trading it as a speculative asset and it has that quality of being like a small-cap stock, right? A thinly traded small-cap stock with the supply of shares not growing nearly as fast as the demand can suddenly grow. And it doesn't grow with the economy gradually the way money does, right? Gold grows gradually over time with the economy, and it requires work and capital expenditure to do that.

It can't just be printed up out of thin air. That's one of the reasons why it works so well and why it has worked for 5,000 years. I hope I've shed some light on this, James. Monetary topics are not my specialty, but I feel like we all need to know a little bit about them, and that's my little bit right there. The other questions we got this week were about the public company that owns Stansberry Research. Yes, it's called MarketWise, the symbol is MKTW, and no, I'm never going to probably never say another word about it because I think I might be considered an insider because I work for the company, right?

So I really have no business talking about it, and if you want to research the company you're on your own, I'm afraid. All right. Well, that's another mailbag and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. And remember, we do have a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy.

If you like this episode and know anybody else who might like it, tell them to check it out on their podcast app or at InvestorHour.com. And do me a favor, subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram. Our handle is @investorhour.

On Twitter, our handle is @investor_hour. Have a guest you want me to interview? Drop us a note at [email protected]. Or call the listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. Till next week, I'm Dan Ferris. Thanks for listening.

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