Doug Casey: America is Another Corrupt Nation

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Daily Bell: How about America? How are America's finances?


Doug Casey: The era of one trillion dollar plus annual deficits is definitely here. And those are just the official deficits, which are going to be running a trillion or a trillion and a half dollars per year for the indefinite future. And on top of that you've got $100 trillion of unfunded liabilities of Social Security, the Medicare, the Medicaid. In a few years, you are going to have Obama-care, which is going to make the problem considerably worse. Then add on the probable federal bailouts of numerous bankrupt states like New York and California. And then hundreds of billions more for the FDIC, which is also totally bankrupt. Just like Fannie and Freddie. Then the Pension Benefit Guarantee Corp., will be hundreds of billions more – that hasn't hit the front pages yet. General Electric is just like a gigantic, 30-1 leveraged hedge fund; that's going to be bailed out too! Amtrak, which despite its outrageously high fares, continues to lose a couple billion dollars a year; of course that's just chicken feed in today's context. And of course these wars – and supporting military bases in over 100 countries.
Furthermore the ethical fiber of the country has eroded. You've got 40 million Americans getting food stamps; that number is going much higher. People feel no shame in living on extended unemployment benefits. No shame in living in a house for a year or more after defaulting on the mortgage. No shame in gaming the system – which is encouraged by a plethora of laws. America was once a great idea – in fact America IS an idea, much more than a place. But now it's just another corrupt nation state.
So, I don't see any way out, I just think it's going to get worse for the United States.


Daily Bell: Where does China and its yuan stand in all this?


Doug Casey: I have always been a big bull on China. Instead of thinking of the "rise and fall," as with the Roman Empire, you have to think of the "fall and rise" of China, because for many centuries they were way ahead of the West. Western culture overtook them, but now they are regaining their historic prominence. That is the long term view.
But in the short term, the business cycle exists, and it exists in China too, despite the fact it's supposed to be a centrally planned economy. Since the collapse of communism, China has, in fact, become more economically free than the US. Communism was nothing but a gigantic swindle perpetrated upon the Chinese people, but it only lasted thirty-some years. That is a blip on the screen of China's history, almost meaningless! Mao was just the founder of a different, short-lived dynasty of corrupt emperors, of which they've had many.
So the good news is that Maoism and communism have collapsed totally, but the bad news is that one of their leading imports has been stupid ideas from the West – first Marxism, then Keynesianism in more recent years. They have ignited a gigantic real estate bubble in that country which is going to bust with the consequences of bankrupting most of their banks and bringing down real estate speculators, which are widespread in China. The size of their bailouts, in response to this crisis has been even bigger proportionate to the size of their economy than in western countries, so I think it's got the potential to be very ugly in China. But in the long run, after they get through this misadventure over the next ten or fifteen years, China is going to be resurgent again.
Look at it this way, you have the average Chinese making $1 per hour for what the average American is making maybe $10 or $20 per hour. The fact is that the Chinese guy has better work habits, he's just as smart or smarter, and the company he works for doesn't have any legacy costs in the form of medical benefits and pensions, and there are a lot less regulations and taxes. So eventually Chinese wages and western wages are going to meet in the middle. Chinese incomes are going much higher, and western incomes are going to be much lower. This is tough luck for the average person in the west, whose standard of living is going to drop. And of course, if they start blaming the Chinese foolishly, which they probably will, this is potentially another cause for conflict in the future.


Daily Bell: Let's turn to China's archrival. Is Barack Obama doing a good job?


Doug Casey: No, he's doing a horrible job. But I have to put that in the context of what's come before him. You have to look at this much the way you would have looked at the Roman Empire. When Tiberius died, the Romans were thrilled because Tiberius was such a degraded being; they foolishly thought it couldn't get any worse. He was replaced with Claudius, who was an embarrassment. After Claudius was assassinated they thought perhaps it would get better – but they got Caligula. Then after Caligula they thought how can it get any worse?? And they got Nero... I think the US is at a stage now where we can expect that our emperors will pretty much follow the pattern of the Romans. In other words, one is not better than the other; they're just different.
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