Exclusive Video Footage of Doug Casey from 1980 - What He Got Right, Wrong and Why

[Editor's Note: The following post is by TDV Editor-in-Chief, Jeff Berwick]

In the early 2000s, Doug Casey put me down a path in the liberty world that I am still on today.  I consider him in many ways to be a mentor much like Jeffrey Tucker looks upon Murray Rothbard.  Or Lew Rockwell looks upon Ludwig von Mises.  

So, when Doug recently mentioned to me that he was on the Phil Donahue show telling people not to vote in the election in 1980 I had to see it!  But a copy could not be found anywhere.  So, we put out a bounty to the first person who could find it and someone was able to acquire it and now we can relive a bit of history thanks to YouTube.

I suggest you grab a beverage and sit back and watch the earliest known video interview of Doug Casey from nearly 34 years ago.  Afterwards, read on as I will have some comments on the video including some interesting nuances as well as what Doug got right, what he got wrong and the reasons why.  I think it is very important to look back at things we or like-minded people have said and give a rational judgement on its merits and where it was right or wrong so we can continually learn and try to get better.  A constant re-analysis of our premises is time worth spent.

FIRST TAKE

For me, having met Doug in person for the first time in 2002, I always wondered what he was like when he was younger.  I had seen some older photos such as one of him smoking a cigar while talking to Fidel Castro and giving him a knowing smirk but I had never seen any video footage at all.

So, this video quenched my curiosity in that respect!  And, said very humbly, I showed the video to my wife and asked her if she knew who it was.  My wife has met Doug but she did not recognize him in this video.  She said, “Whoever it is, he reminds me of you.”  A kinder word couldn’t have been said from my perspective.

My other immediate reaction was, wow, sets for TV programs were incredibly cheap and ugly back then!  The Phil Donahue show, at its time, was one of the most popular talk shows in history on the level of Oprah of the last decade yet it had a few potted plants, a crappy wooden table and incredibly poor lighting.  It just goes to show how far things like that have progressed with our 4k HDTV’s of today.  Even the most budget, local PBS talkshow has a better set and production values.

CRISIS INVESTING

Doug was on the show to promote his book, Crisis Investing, which was the #1 selling book on the New York Times Best Seller list for a total of 12 non-consecutive weeks in 1980 and is just as applicable to today as it was then… I’ll explain why that is further on.

On an interesting side-note, a few years ago Doug asked me to help him rewrite Crisis Investing to re-release it.  What I found however, is that I can’t write like Doug.  Only Doug can.  Anyone who read what I re-wrote for it would instantly identify the author as being myself as I, as you may know, am fairly opinionated and not shy about being so, so what I ended up writing for the updated version of Crisis Investing actually forms a significant amount of my own upcoming book and both Doug and I realized that I was not the right man for the job to help update Crisis Investing.  Lesson learned and no harm done.

But, still to this day, even in its 1970s form, many read the book and gain a lot of knowledge from it (you can buy it here).

WHAT DOUG GOT RIGHT

Filmed in 1980 he was predicting a depression.  He got that part generally right.  Those who lived through the 1980s remember that it was a very difficult time economically.  Whether the Keynesian government spinmasters call it a recession or depression is meaningless because of their arbitrary calculations but Doug was right about the coming depression… he was incorrect, as we will discuss below, on how bad it would be in the immediate future.

The show was taped one day in advance of the 1980 election between Ronald Reagan and Jimmy Carter and Doug stated on national television that he was not going to vote and gave four reasons why voting is an immoral act (3 minute mark).  The audience reacted with boo’s, as programmed, but Doug carried on valiantly to rationally explain why not-voting is a valid and moral act.  And, remember, this is on the biggest television talk show program in the US a day before the election… a fairly taboo thing to do.  Doug gets cajone points here.

Also, Doug stated that with gold at $640, down from highs above $800, that gold was not a good speculation at that time but more a form of insurance… which it still is today.  At some point this entire system will collapse… and I’ll explain below why it didn’t collapse in the 1980s and why it will collapse this time.  He also, if you watch the entire interview, said numerous times that everything at that moment in time was speculative and told people if they did want to buy gold or silver to ease into the market as it could just as easily go down as up in the coming year.

Doug’s prediction on the Dow Jones Industrial Index was half-right in that he said it would likely rise from 900 to 3,000 before it collapses.  The first part did turn out to be true as the Dow did go on to rise to 3,000 within a decade but he got the “collapse” part wrong, so far, and again I’ll explain why below.

Probably his best point, for me anyway, was in refuting Phil Donahue on how the “capitalist system” has resulted in such a large inequality of wealth (which is much larger today).  Doug refuted it perfectly by stating that what existed in the US in 1980 was not capitalism… and today it is even much less so.  He further said unemployment should be calculated as the amount of people unemployed and those who work for the government.

WHAT DOUG GOT WRONG

His most obvious poor prediction (and remember this was 34 years ago, not many would have made a few errors in hindsight in the preceding years!) in the interview was that gold will go to “$3,400 per ounce in the next five years”.  Since I’ve known Doug he has always stated that it is very dangerous to make predictions that both include a time and a price at the same time.  This prediction may have been the one that made him more careful in doing that!  But, as I’ll explain below, it was perfectly rational to think that was possible then and why it is different this time – as much as I hate to use those words!

He was right, for the time on real estate and saying to sell as the 1980s were a very bad time to own real estate in many parts of the US but that ultimately turned out to be incorrect, until 2007… and even now with new housing bubbles being blown up in places like New York, London and Miami… but it will be correct again soon.

Doug’s outright most incorrect prediction is that fast food restaurants would soon perish.  One look at the US and the 400 pound megamonsters that walk the malls shows that was not true.  And, in fact, things are getting so bad today as many people are so overworked and impoverished in the US that the only meal they can afford and have time to eat comes from fast food franchises.  However, this prediction will still likely come true in the US when the real Greatest Depression hits.

WHY?

This is probably one of the most vehement arguments against people like Doug Casey, myself and others like us today, that “You said it would all collapse in the 80s and it didn’t”.  I didn’t, personally, as I was only 10 and more interested in cartoons than economics and politics but many of the people who have formed many of the premises which I carry on today did.

This can be explained, in retrospect, in two forms.  First, I’ll bet Doug never would have believed that this Empire could have gotten this corrupt, indebted, criminal, war-like, communist, fascist and a police state as it is today in 1980.  I’d mark that down to a lesson learned.  Doug, and many like him, probably thought humanity, and especially American citizens, could ever have gotten this bad.  This puts a lot of truth in the old saying, from John Maynard Keynes of all people, “that the market can stay irrational longer than you can stay solvent.”

But, after more than a decade of intensive research I think I can nail down why Doug was wrong about how bad it would be in 1980 and why he is totally right today.  It all comes down to debt.

Until 1971, with the dollar still somewhat constrained by the semi-gold standard it could not get out of control on spending nor debt.  When it did begin to do so with the “Great Society” of LBJ and the military industrial complex’s war of terror in Vietnam, Nixon severed the dollar’s connection to gold and it caused an entire decade of chaos as markets re-adjusted to a completely fiat currency system.

Unrestrained by a gold backing the US government and the Federal Reserve began spending, borrowing and printing money at never before seen amounts.  Within a decade it nearly collapsed the entire system as prices came close to reaching escape-velocity for hyperinflation.

But!

And this is the key.  The US government had not built up enough debt at that time that they could allow the market to heal somewhat by unrestraining interest rates, resulting in them rising to nearly 18%.

But, because US Government debt had only had a decade unrestrained by gold, it had only managed to build a total debt of $900 billion by 1980.  At the time the US had a GDP of $2.7 trillion.  So, debt to GDP was “only” 33%.

Today, the US GDP is approximately $17.2 trillion (2013).  The admitted to federal government debt is also currently at $17.6 trillion, meaning a debt to GDP ratio of over 100%.  Forgetting for the moment the unfunded liabilities which have already been spent, which would leave the figure at closer to 500%, an interest rate of 18% on the current debt would require $2.9 trillion per year in payments.

The total tax theft “revenue” of the US Government in 2013 was $2.9 trillion.  In other words, the only way to end the current state of affairs in the US and “save” the dollar would be to allow interest rates to rise to market rates… and if they rose as high as they did in 1980, when things were much better in general, every penny of money stolen from US tax slaves would be used just to pay the interest on the debt.

In other words, this time around, unlike in 1980, to flush out all the malinvestments in the economy they cannot allow the interest rate to rise to the market level… if they did it would surely surpass 18% and the US government would be insolvent.  This time around they are keeping the QE (Quantative Easing) metal to the pedal until hyperinflation.

And so, Doug was wrong that the Greatest Depression would happen in 1980 but he is dead right this time around.  This chart alone says all there is to need to know between then and now.

Notice how insignificant 1980 looks on that chart.  And look at it today.

What Doug was predicting in 1980 didn’t fully come to fruition but what he and I are both predicting today, given how massively worse every conceivable statistic and indicator has become means that the coming collapse will be far worse than even Doug or I can conceive.

IN CLOSING

My favorite part of the entire interview was near the end.  You could see most of the audience was frightened, confused and standoff-ish… that’s when Doug kicked into high gear and you could see it in his body language.  One woman said, “I’m concerned with your statement not to vote, what would happen if nobody voted?”, and Doug responded, “What would happen if they gave a war and nobody came.”

And the coup-de-grace, for those of us who are Austrian economics adherents, came when one man said, “Who believes you?”

Doug was quite humble and didn’t respond quickly but when prodded, he said, “Like a particular economist?  Alright, Friedrich von Hayek, Murray Rothbard, Harry Brown…” and named numerous others but those first three we now know today as being the brightest minds in liberty and economics.

If any of the aforementioned were alive today none of them would believe how far this has gotten.  And this time nothing can save it.  Get into our Five Killer B’s: bullion (precious metals), bitcoin, bullets, bud (legalized marijuana) and being (subscribe to the TDV newsletter for more detailed information).

The “being” part probably being the most important.  If you survive this coming fasco-communist, Keynesian, collectivist created collapse mostly in tact consider yourself lucky.  

What do you think of our analysis?  Click here or comment below to weigh in.