Doug Casey On G20 Economic Suicide

Doug Casey Interviewed by Louis James, Editor, International Speculator

LewRockwell.com

L: So Doug, the G20 declared that there will be no currency war. Other than a belly laugh, any reactions?

Doug: First, we should define what a currency war is. I’d say it’s a competition between governments to devalue their respective currencies, accomplished by creating lots more new dollars, euros, yen, or what have you. The idea is to increase exports and decrease imports, with the supposed bonus of stimulating the economy. It’s an idiotic idea, proof that the people struggling for control of the world’s economy are both knaves and fools. The worst part is that people apparently think somebody actually can and should try to control the economy. The world is imitating Argentina.

I believe that Argentina is still a member of the G20, although hanging on by its fingernails. It would be interesting to see the transcript of the meeting and see what the Argentine representative said, because they’re inflating the currency down here at a rate of about 30% per year, even while they’re trying to maintain an artificial exchange rate. My suspicion is that the general level of economic knowledge, competence, and ethics among the participants of that conference is not much above that of Argentina.

L: That may be, but it strikes me as being… just so ridiculous. I mean, the US is printing money by the helicopter load and sending much of it abroad, which prompts other countries to try to do the same. Bernanke says it isn’t so, but everyone can see it is. How can they say there’s no currency war? Is this an attempt at a Big Lie?

Doug: The new Japanese prime minister has come out and said that the Bank of Japan needs to redouble its efforts to create new yen. The Chinese are creating yuan in hyperdrive. The Europeans are doing the same with the euro. In the US, they’re printing new dollars at a rate of about 100 billion per month. And that’s just among the four big players. It’s as though they believe their own lies and think that the driving force of an economy really is public opinion. Believing that, they have no problem admonishing people to pay no attention to the man behind the curtain; everything will be fine as long as people believe it will be.

This reminds me of the story of the guy who jumps off a 100-story building and yells as he passes the 50th floor, “So far, so good!”

L: Does anyone even know if it’s possible for the G20 economies to grow at a rate that would make their deficit/debt levels manageable?

Doug: I understand that it would take growth on the order of what made China famous in the previous decade, but if anything their growth rates are going down. I think they are heading toward collapse. That’s in part because of the ongoing currency debasement, but also in part because the inevitable response of these governments to the harmful effects of that debasement is to impose more rules, regulations, and controls.

Consider again the example of Argentina. The government here recently made it illegal for newspapers to publish advertisements that include prices for things like food. Since Argentina now has price controls for food, they say it’s unnecessary and will only excite the public. This is the kind of thinking that permeates the economic establishment today. Everywhere.

I should pause and emphasize, however, that as difficult as Argentina is for doing business, it’s a fantastic place to live. I doubt that will be true of the US in a few years.

L: Sounds pretty crazy, and this is a place that already prosecutes journalists for publishing inflation statistics that contradict those of the government. It does seem par for the course worldwide, however, for governments to intervene in the marketplace, cause disruptions, and then use those disruptions as mandates for establishing new regulations and laws.

But Doug, let me push back a little here. You’ve been saying for some time now that we are on the verge of exiting the eye of the storm. I look at the data, I look at the logic, and I can’t disagree with you, but this has lasted several years now… Why should anyone think it’s going to happen now?

Doug: Fair question. I could point out that the recent negative GDP numbers from Germany – and all of Europe – are extremely bearish: the endgame for the EU can’t be too far off. A number of large US retailers are closing scores, even hundreds, of stores. The earnings of fast-food outlets are falling as people find they can’t afford to eat out. But still, even if the natives are restless, they’re still not out in the streets with their torches and pitchforks. Perhaps this summer…

But really, this is an almost philosophic question. The economy consists of the values and actions of seven billion people, all doing different things for a million different reasons. It’s hard enough to make any prediction about such a complex system; it’s extremely difficult to get both the prediction and the timing of the events right. That said, I admit to sometimes conflating the imminent with the inevitable.

L: It’s like a sort of Heisenberg’s uncertainty principle for economics.

Doug: That’s a good analogy. People may be growing tired of hearing me predict the same gloomy near-term economic outcome, but that doesn’t make me wrong. Here at Casey Research, we have an economic model of the way the world works. It’s not our model exclusively (people who would like to know more should do a search for “Austrian economics“). This model has been shown to be correct and to have excellent predictive power time and time again over the last century. It’s been shown to be totally correct in the recent past as well. But knowing you’re right doesn’t necessarily give you the power to know when you will be proven right. It’s just not possible to be absolutely certain when something inevitable like this has in fact become imminent. We’re talking about predictions that are far more complicated than predicting at 11 o’clock that the hands on the clock will point at the number 12 in an hour.

continue at LewRockwell.com:

http://lewrockwell.com/casey/casey153.html