FRA: Hi, welcome to FRA’s Roundtable Insight .. Today we have Doug Casey. He’s an American writer, philosopher, investor, and the founder and chairman of Casey Research. He literally wrote the book on profiting from periods of economic turmoil, his book Crisis Investing spent multiple weeks as number one on the New York Times bestseller list and became the best selling financial book of 1980 with over 400,000 copies sold. He’s lived in 10 countries and has visited over 175, today you’re most likely to find him in La Estancia de Cafayate (Casey’s Gulch), an oasis tucked away in the high red mountains outside Salta, Argentina. And recently he’s been writing a series of fiction books as part of a series High Ground Novel Series. The one that is most recent I guess is Drug Lord and just wondering if you’d like to start on that to give us some idea what that book is about, what the meaning and message you’re intending to convey? Welcome, Doug.

Doug Casey: Thanks, Richard I appreciate it. I’m talking to you today from Aspen, Colorado which is where I usually spend the northern summer, and the rest of the year I’m usually down in Argentina and Uruguay. But talking about Drug Lord, it’s the second to the series of 7 novels and when I decided to do novels as opposed to nonfiction is that it’s a different audience, different people buy fiction then buy nonfiction number one. And number two, you can say a lot of things in fiction that you really best not say in nonfiction, and that’s why I decided to do this series. Last year we completed- because I’m working with my coauthor John Hunt who’s a medical doctor who doesn’t really want to be a doctor anymore for all kinds of obvious reasons, Speculator. Which what we’re trying to do is take unjustly besmirched and highly politically incorrect occupations and we form their reputations. So last year was Speculator, which is about a bush war in Africa and a gold mining fraud and so forth and talks about the theories of speculation. This year Charles, after seven years running, or Charles Knight, our hero decides to get into the drug business. Both the legal drug business regulated by the FDA and the illegal drug business that’s kind of regulated by the DEA. And I think its quite interesting because its instructive as to how the drug business works and all these books are morality tales of course. So, we show that you can be a good guy in the illegal drug business dealing in things that are highly illegal. So that’s Drug Lord and I think you’ll find it a very very good read.

FRA: And what type of message did you have in mind in this particular book? Like is there something that you wanted to convey in general?

Doug Casey: Yeah, of course. I’m a philosophical anarchist and I don’t believe that the state as an institution serves a useful purpose or for that matter even have a right to exist. So, I’m naturally for the full legalization of any kind of drugs. The argument that I make is basically that your primary position, the thing that you own most personally, is your own body. And of these government officials to try to dictate what chemical substances you can or can’t use is insane, it’s immoral, and it creates huge distortions in the marketplace. It’s just like what they did in the 1920s with alcohol when they tried to dictate that no one could drink in the U.S. and all it did was double or triple the size of the liquor industry and give the mafia a way to become the creature it is even today. So, everything the government does along these lines is counterproductive. Of course, as far as drugs are concerned, I’m a believer in Aristotle’s golden mean, it’s that some things are- everything is good in moderation and all things. And I don’t advocate that people take potentially destructive drugs such as heroin and cocaine, although our hero Charles Knight comes up with a marvelous new drug which could actually change the face of civilization but that’s another story. But these things shouldn’t be illegal and people forget that before Harrison Act was passed in 1914 that all these things were completely legal. A grade school kid could go down to the corner drugstore and buy heroin or cocaine and it was not a problem, nor was drug addiction a problem in the country. So almost everything the government does whether it be drugs or anything else turns out to be counterproductive.

FRA: What do you make of the trend in the cannabis industry now?

Doug Casey: Ah this is a very interesting thing, it’s going to be huge. I’m not personally a big fan, personally, I don’t do drugs and I generally choose a company of people (inaudible) why? Because most of these popular recreational drugs including alcohol if you would, cloud the mind and keep people from thinking clearly as well. And the problem with pot has always been that it clouds the mind. So, I’m not a huge fan of it personally. But huge medical uses which have been suppressed so far which are coming to the floor and so people that you know some people it just takes the edge off of them psychologically and they don’t have to get goofy by taking too much of it. So, the answer to your question is there have been scores and scores of marijuana stocks that have come public in Canada primarily where cannabis is going to be legal nationwide shortly and its legal now for practical purposes, just as it is in many states in the U.S. right now. But it’s going to be big. I think that the amount of pot grown in North America and the rest of the world after its legalized is going to multiply by a factor of 10, so this is a great place to be at the moment if you can find a quality company run by ethical guys. Yeah, pots going to be big and people are going to make fortunes on these stocks. And of course, many of people have already made fortunes on them and as a result, there are a lot of frauds out there in the cannabis space, but that’s true when anything becomes too popular, the frauds just always step in.

FRA: Interesting. And another big event happening these days is what’s happening in Spain, Catalonia, what do you make of what’s happening there?

Doug Casey: I think its absolutely wonderful. My ideal scenario would be to have 7 billion nation-states on the face of this planet. As I said, I’m a philosophical anarchist, I don’t believe the space has a right to exist. But what is happening in fact, this is what I like to see, but what’s happening, in fact, is that nation-states all over the world now are starting to break up. It’s not just Catalonia and Spain, the Basque region just north of Catalonia I think might be next on the runway for becoming an independent movement. And throughout Europe, there are a couple score of independent movements. For instance, in the Venezia region around Venice, in Lombardy around Milan, Sardinia, even the Pharaoh Islands belonged to Denmark. And of course, Scotland, I think that’s going to come back as an issue for independence. I think it’s great, if you’re going to have a nation-state, then the nation-state should at least have people that share ethnicity, culture, language, perhaps religion so that they’re similar, they share values. If it’s a multicultural enterprise where they don’t share any of these things, then the state just becomes a vehicle for theft of the group that gets in charge of the government. So, I think this a step in the right direction with Catalonia, that’s the good news. The bad news is that most of these independent movements are run by doctrinaire socialists, of course, all European politicians are doctrinaire socialists, but these people they tend to be even more doctrinaire. But I think it will work out very well in the long run.

FRA: And from the perspective of Spain, could this be a blueprint or a precedent on how indebted governments may act in the future against some of their regions or just the private sector in general as for example the pension crisis unfolds entitlement programs crisis unfolds?

Doug Casey: Oh yeah, you’re absolutely right, Richard. Because I think the main reason that the government in Madrid doesn’t want to see Catalonia break off is because Catalonia sends money, twice as much money, to Madrid as Madrid sends back to them in the form of national services. So, Catalonia is like a milk cow for the Spanish government and of course they don’t want it to go away. They want to keep it there, keep it producing so they can allocate the goods. And of course, this is all the more reason why the Catalonians want to break off, but the fact that the Spanish government in Madrid has clamped down so hard and so violently against the Catalans, I think its actually going to, I think reinforce the Catalans so that even the ones that don’t want to see a doctrinaire socialist Catalonian government are probably still going to vote for it simply because they’re so angry at being exploited by Madrid. And eventually I think that even after Catalonia splits off and like I said the Basque region will probably be next anyway, they’ll probably go to more free market style policies and become realistic. Because you can only have a socialist country where there are others to exploit. If we had 7 billion little nation-states in the world, there would be no socialism. Because how can you exploit yourself?

FRA: Yeah, exactly. And from considering your views on the economy and financial markets and the geopolitical landscape, what is on your mind today? Do you see any trends taking shape?

Doug Casey: Well I’ll tell you what’s really surprised me, and this has been true for several years now. It’s that after the world economy entered the eye of the gigantic financial hurricane in 2007, or entered leading edge of the financial hurricane we’re in, in 2007. And then we went through the leading edge in 2008 and 2009 and now we’ve been in the eye of the storm which has been papered over by not just trillions, but hundreds of trillions of new currencies units created not just by the U.S and Europe, but China, Japan, and all the little countries too. And that’s poured oil on the water and what I fear is that even now as we speak we’re entering the trailing edge of the hurricane and it’s going to be much longer lasting and much worse, and much different then what you might recall from 2008 and 2009. So, I think this is a good time to batten the hatches down, I mean the fact that the DOW is trading at new all-time highs and interest rates are still at or near zero, or I think they’re still below zero in some places, actually, as metaphysically impossible as that seems. I think that this isn’t a cause for rejoicing, this is really like the tidal wave going out before it comes in and washes away everything. So, it’s a good time to batten down the hatches and I don’t like the idea of being involved in the stock market or the bond market. Which isn’t just a bubble, it’s a hyper bubble, it’s a super bubble right now the bond market. So that’s my feeling on the economy in general.

FRA: In what ways will this sort of second part or a second phase of the financial crisis be different from the first phase?

Doug Casey: Well, things really went over the edge back in 2007 and 2008 and 2009 as a deflationary collapse. If the governments hadn’t created these trillions of new currency units, you would have seen the collapse of not only Lehman but Goldman Sachs and AIG and Chase, Morgan, all of them, they all would have collapsed. And that would have been deflationary in nature, we would have seen something that would have resembled 1929, it would have been a deflationary collapse. But they forestalled that and this time, since they’ve already shot most of the arrows in their quiver with ultra-low interest rates, increasing and printing up trillions and trillions of new currency units they called quantitative easing, it’s kind of cute that they make up a phrase like this and everybody just parents it rather than just say inflating the currency. I think that what we’re going to see this time around though is going to be much higher levels of inflation. Because all that money went into the financial end of the market as opposed to the consumer end of the market. So, its created a number of bubbles, stock market bubbles, bond market bubbles, real estate bubbles they’re a number of many many cities around the world. So, when those bubbles break, I don’t know the currency, we’re going to see, I think we’re going to see very high levels of inflation. So, it’s going to be very ugly for the average guy I think.

FRA: And speaking of bubbles, a lot of people see a bubble in the cryptocurrencies, what are your thoughts on cryptocurrencies?

Doug Casey: Yes, that’s very interesting. I was introduced to them about, oh how long ago was that? 2013 when somebody actually gave me a physical Bitcoin when I was in Argentina. It was worth $13 at that time and now the bitcoin is worth 5,600 something in that area today. Good news-bad news, look initially I snookered myself. I liked the idea of it as a private currency, a fiat currency created out of nothing, true, but with a limited number of units, unlike these national fiats currencies. And I missed at the time, the value of these cryptocurrencies. I missed the fact that they are excellent transfer devices. In other words, they obviate the SWIFT system which is expensive, which is slow, which is unreliable, where all your money has to go through New York, its horrible. By using cryptocurrencies to send money across borders, its private, instantaneous, cheap. So, this is a really really big thing, this is what gives Bitcoin and others its value. Like gold has value because its one of the 92 naturally occurring elements, so it has many many uses and more everyday in a high-tech world. But the cryptocurrencies are A primarily a transfer device, and then there’s a second thing that I failed to catch back then and that was that 2/3s of the people, 3 quarters of the people in the world live in 3^rd world countries. Where if they want to save, if they want to produce more then they consume and save the difference, you’ve got to save ridiculous things like Zambian Quatches and Argentine Pesos and ridiculous fiats currencies like that. And when they save them, they’re all inflated badly and they’re worthless outside of their home country. But if they save in Bitcoin, its got the same value everywhere in the world, so this is a very big deal. So, I’ve become a convert, cautiously because it is bubbly. Anything that’s gone up 300 times in a few years kind of looks bubbly, but I can see why the bubble going to get a lot bigger. So, the answer to your question, I mean I was a recent investor in something called Hive blockchain which is about the only publicly traded company that mines these cryptocurrencies, this thing’s gone from $.30 to $30 in the last six weeks, I expect it’s going higher. So, it’s a bubble, but it’s going to get to be a bigger bubble, Richard.

FRA: And so, the value you see is being based on the payment transfer utility, but also you sort of referencing as a store of value as well?

Doug Casey: Yes, especially for people in the third world, two-thirds of the human race which don’t really have the opportunity to bank, not that the banks in those third world countries, Africa, Central Asia, places like that, are worth saving in. They’re all insolvent and the local currencies are horrible so this is a boon for the average guy in the third world, this is a very big deal. So, this is the two things, transfer device and a savings device for third world people. Now I don’t know how it’s going to end because eventually there’ll be a Bitcoin version 2.0 and what happens to version 1.0? Does anybody want it? Is everybody going to dump it all of a sudden? So, there’s risks, there’s dangers here. But right now, the trend is still up, the bubble is going to get bigger. In principle, it’s an excellent idea. And its also, I’ve got to point out, it’s going to draw peoples attention to the nature of money. Which people don’t think about, they only thing they’ve got their local currency or the dollar. But then they see oh, Bitcoin, why is Bitcoin worth something? And eventually, it’s going to grow their attention to gold because eventually there’s going to be one of these cryptocurrencies that will become very popular that launches instantaneously going to gold to silver and so forth. So, it’s going to expose a lot of flaws in the current monetary system, it’s good from every point of view.

FRA: Do you see governments getting into cryptocurrencies perhaps as a way of doing away with cash or implanting negative interest rate policies for example?

Doug Casey: Oh yeah, unquestionably that’s going to happen. It’s happening now, all these governments want to get rid of cash. Cash is only paper but at least paper cash allows you privacy, secrecy, it lets you transfer things and own things that are unbeknownst to the authorities. So, they’re trying to get rid of cash, they’re trying to get rid of the U.S. $100 bill, they’re getting rid of the €500 note, they want to get rid of even the U.S. $50, the U.S. $20. So, they’re going to come out, and some governments have come out already with their own digital currencies. And it’s a disaster when governments do that because they will manipulate them and inflate them but worse than that, they’ll know where everything you have is, everything you buy and sell, they’ll know absolutely everything about you financially. And they will control you totally, they can just shut off your iPhone and you’ve got nothing. So as wonderful as cryptocurrencies are when the government gets a hold of them they’ll corrupt and destroy them like everything else, so it’s a huge danger also.

FRA: Wow, great insight as always. Doug, how can our listeners learn more about your work?

Doug Casey: Well, they can go to www.internationalman.com, that’s one website. And the other website is www.internationalman.com they’re both totally different with different products, we have lots of excellent free articles posted on them and so forth, they’re good websites. So, people should check in there and send me a note if you’ve got any reactions or whatever at either of those websites.

FRA: Great, thank you very much, Doug, for being on the show.

Doug Casey: Well, thank you, Richard. And I hope that a few listeners decide to go out and pick up a copy of Drug Lord

Transcript written by Jake Dougherty <jdougherty@ryerson.ca>

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