International Man: Inflation, as measured by the federal government’s own uneven CPI data, just recently struck a 40-year high. What is going on here?
Doug Casey: The Consumer Cost Index (CPI) itself has been completely damaged throughout the years, mainly by altering definitions of what it involves. That’s why it’s fascinating to follow the work of a site called Shadow Stats, where John Williams determines the CPI and other federal government data utilizing the criteria of 40 years ago.
He’s found that if the CPI was determined the method it remained in the Reagan period, that the actual reported CPI wouldn’t be 7%, however 15%. That makes intuitive sense to me. For over a year, I’ve asked people whether they think their lying eyes or the federal government statistics concerning the CPI. The basic price level is quickly up 15%. That’s conservative. In my view, the US CPI is just marginally more reputable than its equivalent in Argentina– a country whose index is completely political and laughably inaccurate.
I believe consumer rates are going much greater. Even Powell has actually dropped his unethical and idiotic use of the word “temporal” in regard to it. That’s since the Fed, the US central bank, continues to generate income from $120 billion a month of federal government deficits. The money supply is escalating upwards. At the exact same time, the Biden regime is implementing loads of brand-new regulations which act to reduce production.
On the other hand, totally free handouts continue to discourage millions of Americans from working. The enormous drops of helicopter money during the Covid hysteria has in fact taken shape a modification in the culture– it now seems socially acceptable to survive on the dole. In some parts of society, the capability to consume without producing has actually ended up being evidence not of how worthless, however of how clever you are.
The money supply is up while actual production is down. Naturally, inflation is greater. And that’s just part of the cancer growing in the economy. We’re taking a look at a wholesale catastrophe over the next 3 years. And likely over the remainder of the decade. Even if the Democrats are changed in 2024, it will just be due to the fact that a Republican politician will guarantee even “bolder”–“more foolish and damaging”– new options.
The option isn’t more, or various, government programs. It’s to eliminate them and promote a real free-market society. But removing the ethical rot underlying present patterns– ignore changing them with real capitalism– will take years. If ever.
International Guy: What will the Fed do when it can no longer maintain the charade that inflation is under control?
Doug Casey: First of all– and this has to be stated over and over once again– the Fed itself should be eliminated. It serves no useful purpose in today’s world. It’s absolutely nothing however an engine of inflation that’s creating enormous distortions in the economy. Asking what the Fed “must” do just legitimizes its presence. The concern amounts to asking how best to reorganize the deck chairs on the Titanic.
The 2nd point is that gold must be reinstated as money. Cash needs to have concrete worth and should not be created out of thin air.
Third, the banking system should return to classical parameters, with strictly segregated time deposits and demand deposits. Fractional reserve banking is a criminal breach of trust.
I understand that saying these things sounds extravagant and even incomprehensible– especially to more youthful individuals. They’ve never ever been taught anything beyond Keynesian theories. In truth, the situation is worse. Many have actually been taught and think in Marxist doctrines.
Rather than enter into the details here, let me refer individuals back to the early chapters of my financial investment books, Crisis Investing, and Strategic Investing. And specifically Crisis Investing for the 90’s— which is still quite timely, despite its anachronistic title.
International Man: The Federal Reserve has 2 choices: 1) keep printing trillions and let inflation skyrocket or 2) tighten up financial policy and enjoy the marketplaces crash.
In other words, it can compromise the stock market or the dollar.
What do you believe they will do?
Doug Casey: The very first option. Instead of let the bubble collapse, which will occur if they stop printing, the Fed will print more cash. If they stopped, it would be a redux of what happened in 1929, a deflationary depression. So they’ll keep printing in the hope that either magic will take place or that when it all comes apart, it’ll be on somebody else’s watch.
They’re caught in between Scylla and Charybdis. In the 80s and 90s, people discussed “bond vigilantes.” There was an idea that when cash printing and inflation got too high because of foolish Fed policies, fund supervisors would dispose bonds, which would send long-term rates of interest greater. That would apparently force the Fed to restrain itself.
It was an incorrect hope. Huge managers like BlackRock, Goldman, Fidelity and the rest of them are now cheerleaders for more money printing. They don’t desire the stock, bond, and property markets to crash. No one does, naturally. Artificial good times are a lot more fun than the very real bad times. It’s understandable why “The Authorities” would want to put off the inevitable, even if doing so makes the eventual result much even worse.
In any occasion, the Fed, not the market, now dominates the price of bonds and long-lasting interest rates. At some time soon, I expect there will be a tidal wave of bond sellers who see that inflation’s running 15%, quickly to be 20%, while bonds are just yielding 2%, 3%, or 4%. Pension funds, insurer, and money managers will start disposing them. The Fed can’t purchase them all.
Long-lasting rate of interest are now headed way up despite what the Fed does. I’ve been brief 30-year bonds in the futures market, generally by selling naked calls, and I anticipate to stay short.
In fact, rates of interest have to go up if the economy’s going to endure. That’s due to the fact that low-interest rates discourage conserving, and conserving is what creates capital. Without capital development, you can’t have serious clinical improvement, brand-new markets, or even small businesses. Lack of capital is one factor poor countries stay bad. At this moment, I’m betting on much greater rates of interest.
International Man: Ludwig von Mises, the godfather of free-market Austrian economics, summarized the Fed’s problem:
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is just whether the crisis needs to come quicker as the result of a voluntary abandonment of further credit expansion, or later on as a last and overall catastrophe of the currency system included.”
What are your ideas?
Doug Casey: He’s absolutely right on that, in addition to about everything else he’s written. It’s one reason that I have actually stated for several years that we’re heading towards something I have actually called The Greater Anxiety. It’s going to be The Greater Depression because it’s going to be much worse, much longer-lasting, and much different than the unpleasantness of 1929 to 1946.
That’s worth repeating over and over once again till people finally begin to grok the principle.
International Male: What do you believe is coming next, and what can the average person do about it!.
?.!? Doug Casey: Well, this is not just going to be a basic financial upset where the stock exchange goes down, and a few speculators lose some cash. It’s not even going to be simply a financial upset, where lots of individuals become unemployed, and companies declare bankruptcy. Financial and financial effects are bad enough, naturally. However we’re likely taking a look at a social upset, a political upset, and a cultural upset also. Those are far more severe.
In an interview on Doug Casey’s Take, I discussed what’s happening with the Canadian truckers strike. I hope it spreads out all over the Western world since it’s a response against federal government overreach. It’s the modern-day equivalent of a middle ages Peasants’ Revolt.
Peasants’ Revolts have a really fascinating and worthy history. However, traditionally, Peasants’ Revolts– even severe ones with thousands and even hundreds of thousands of casualties– have never ever truly altered anything. The ruling elites have actually always handled to put them down for numerous factors. It’s regrettable that this Peasants’ Revolt, with the Canadian truckers, is not likely to alter much either. With luck, they’ll a minimum of get rid of a couple of particularly objectionable wannabe totalitarians like Fidel Castro’s boy, who’s presently ruling Canada.
It’s always a long shot to reverse the tide of history, which is presently rolling against the fundamental underpinnings of Western Civilization. I’ll try to compose a short article for next week’s edition on Peasant’s Revolts. And then one detailing the essential and distinct aspects of Western Civilization and what’s replacing it.
Like it or not, that’s what’s going on right now. And these things are becoming part and parcel of the Greater Anxiety.
Editor’s Note: The economic trajectory is troubling. Regrettably, there’s little any individual can virtually do to change the course of these patterns in motion.
The best you can and need to do is to stay notified so that you can secure yourself in the best way possible, and even benefit from the scenario.
That’s exactly why bestselling author Doug Casey and his coworkers simply launched an urgent new PDF report that discusses what could come next and what you can do about it.