Troubling political developments in the US are on
the rise; they signal that the door to expatriating your assets – and
maybe even yourself – may soon slam shut.
(Interviewed by Louis James, Editor, International Speculator)
L: Doug, a lot of readers have been asking for guidance on how to know
when it's time to exit center stage and hunker down in some safe place. Few
people want to hide from the world in a cabin in the woods while life goes on
in the mainstream, but nobody wants to get caught once the gates clang shut
on the police state the US is becoming. How do you know when it's time to go?
Doug: Well, the first thing to keep in mind is that it's better to be a
year too early than a minute too late. David Galland
recently read They Thought They Were Free: The Germans, 1933-45, by Milton Mayer. He quoted a passage in his column
of last Friday. It goes a long way in explaining why Americans appear to be
such whipped dogs today. They're no different from the Germans of recent
memory. For those who missed it, let me quote it:
"You
see," my colleague went on, "one doesn't see exactly where or how
to move. Believe me, this is true. Each act, each occasion, is worse than the
last, but only a little worse. You wait for the next and the next. You wait
for one great shocking occasion, thinking that others, when such a shock
comes, will join with you in resisting somehow. You don't want to act, or
even talk, alone; you don't want to 'go out of your way to make trouble.'
… In the university community, in your own community, you speak
privately to your colleagues, some of whom certainly feel as you do; but what
do they say? They say, 'It's not so bad' or 'You're seeing things' or 'You're
an alarmist.'
"These
are the beginnings, yes; but how do you know for sure when you don't know the
end, and how do you know, or even surmise, the end? On the one hand, your
enemies, the law, the regime, the Party, intimidate you. On the other, your
colleagues pooh-pooh you as pessimistic or even neurotic… the one great
shocking occasion, when tens or hundreds or thousands will join with you,
never comes. That's the difficulty. If the last and worst act of the whole
regime had come immediately after the first and smallest, thousands, yes,
millions would have been sufficiently shocked… But of course this isn't
the way it happens. In between come all the hundreds of little steps, some of
them imperceptible, each of them preparing you not to be shocked by the next.
Step C is not so much worse than Step B, and, if you did not make a stand at
Step B, why should you at Step C?"
The fact is that the US has been on a slippery slope
for decades, and it's about to go over a cliff. However, our standard of
living, while declining, is still very high, both relatively and absolutely.
But an American can enjoy a much higher standard of living abroad.
On the other hand, if I were some poor guy in a
poverty-wracked country with few opportunities, I'd want to go where the
action is, where the money is, now. Today, that means trying to get
into the United States. The US is headed the wrong direction, but it's still
a land of opportunity and a whole lot better than some flea-bitten village in
Niger.
L: By the time things get worse than some Third-World dictatorship in
the US, such a person could have remitted a whole lot of cash back home.
Doug: And you'd have a whole lot of experiences that would give you a
competitive edge back where you came from, or in the next place you go to.
The one-eyed man is king in the valley of the blind. People have to lose that
backward, peasant mentality that ties them to the land of their birth. Sad to
say, although the average American has somewhat more knowledge of the world
– mainly due to television – his psychology is just as
constrained as that of some serf from central Asia or some primitive village
in Africa. It's all a matter of psychology.
But if you're not poor, you want to go someplace
that is safe, nice – whatever that means to you – and with a
lower cost of living. As most readers know, for me that's Cafayate, Argentina, but one size does not fit all. It needs to be a
place you actually enjoy spending some time, with people whose company you
enjoy.
L: Fair enough. But our readers want to know if your guru-sense is
tingling yet, or how close you think we are to it being too late to leave
– or at least too late to leave with any meaningful assets.
Doug: I'm a trend observer. This is one of the advantages of studying
history, because it shows you that things like this rarely happen overnight.
They are usually the result of trends that build over years and years,
sometimes over generations. In the case of the US, I think the trend has been
downhill, in many ways, for many years. Pick a time. You could make an
argument, from a moral point of view, that things started heading downhill at
the time of the Spanish-American War. That was when a previously peaceful and open
country first started conquering overseas lands and staking colonies. America
was still in the ascent towards its peak economically, but the seeds of its
own demise were already sewn, and a libertarian watching the scene might have
concluded that it was time to get out of Dodge –
L: [Laughs] That would have been a bit early…
Doug: [Chuckles] Yes, that would have been way
too soon. As Adam Smith observed, there's a lot of ruin in a country.
L: On the other paw, it would have gotten you out before the War
between the States, a disaster well worth avoiding.
Doug: No, the Spanish-American War was in 1898.
L: Oops! Sorry, I was thinking of what Americans call the Mexican-American War, but which Mexicans call the "American
Invasion" –
Doug: [Laughs]
L: I'm not joking. That's what they called it in the history books I
was given in Mexican schools when I lived there in the '70s. It has long
seemed to me that that was an ominous turn for the worse for the US and a
clear example of conquering a weaker neighbor purely for pillage – not
just Texas, but everything from there all the way to California.
Doug: That's right. Davey Crockett and the boys, we love them, but in many
ways they were the equivalent of today's Mexicans who want to recolonize the
southwest and turn it back into part of Mexico, in what they call the
Reconquista.
L: Indeed, but this is ancient history to most US taxpayers today
– I'm reminded that it's not correct in many cases to call them
Americans.
Doug: Yes, just as it was a misnomer to call the people who lived in the
Roman Empire after Diocletian Romans – because Roman citizens were once
free men. After about 300 AD most of them were bound to the land or their
occupations as serfs. But the slide for Rome started at least 120 years
earlier, after the death of Marcus Aurelius. Politically, the decline started
with the accession of Julius Caesar 240 years before that. So, when did the
slide – politically, economically, and socially – really start
for the US? When were there no more trends going up?
L: FDR? The New Deal was really a moral, economic, and political turning
point.
Doug: You could make that argument, but the US still grew economically,
despite the roadblocks FDR threw in its path. US military power and global
prestige continued growing from that point, although, paradoxically, the
accelerating growth of the US military was directly responsible for the
decline of the US economically and in terms of personal freedom. One reason
for the ascendancy of the US after World War II was that we were the only
major country in the world not physically devastated by the war.
L: Ah. Right.
Doug: So it seems to me that the peak of American civilization was in the
1960s. As for evidence, well, I like to put my finger on the 1959 Cadillac. Those twin bullet taillights, the opulence of
it… In terms of then-current technology, things couldn't get much
better.
L: "Opulence. I has it."
Doug: [Laughs – a real belly laugh] That's my favorite TV commercial! Anyway, that was the peak, in my mind. Though
things continued getting better for a while, the US started to live out of
capital.
L: Had to pay for guns and butter.
Doug: That's right. The Johnson administration's so-called Great Society
created vast new federal bureaucracies that promised Americans free food,
shelter, medical care, education, and what-have-you. Americans became true
wards of the state. But the real, final nail in the coffin for America was in
1971 –
L: Nixon taking the US off the gold standard.
Doug: Nixon taking the US off the gold standard – open devaluation of the dollar, combined with wage and price controls for some
months. And that was not long after the so-called Bank Secrecy Act, which
abolished bank secrecy, and required the reporting of all foreign financial
accounts. Nixon was, in many ways, even more of a disaster than Johnson.
Republicans are usually worse than Democrats when it comes to freedom, partly
because they like to couch their depredations in the rhetoric of defending
the free market. While everyone understands that Democrats are socialists
just under the surface, Republicans actually give capitalism a bad name. Baby
Bush is a perfect, recent example.
L: But don't you worry your pretty little head about devaluation
– it's just a "bugaboo" – and as long as you're not one
of those unpatriotic people wanting to buy imports or vacation abroad, your
dollar will be worth just as much tomorrow as it is today. The scary thing is
that the Belarusian dictator Lukashenko said almost
the same thing when the Belarusian ruble lost two thirds
of its forex value earlier this year, asking his countrymen why they
need to go on vacation in Germany or buy German cars…
Doug: You see why I like to study history? It doesn't repeat, but it sure
does rhyme…
L: With a vengeance.
Doug: So, anyway, since 1971, some things have improved largely due to
technological advances, but the America That Was has been fading into the past.
It was a decisive turning point. You can see that in the accelerated
proliferation of undeclared wars we've had since then. I don't just mean the
penny-ante invasions of Granada and Panama – the US has always lorded it over Caribbean and Central American banana
republics; those are just sport wars. But Iraq and Afghanistan are alien
cultures on the other side of the world – apart from never posing any
threat to the US. Now it looks like Iran and Pakistan are
on the dance card, and they're big game. The War Against Islam has started in
earnest, and it's going to end badly for the US. I explained all this at
great length in the white paper, Learn to Make Terror Your Friend, that I wrote for The Casey Report
last month.
Domestically, saying that the US is turning into a
police state when you started this conversation was quite accurate. You can
see more and more videos spreading over the Internet, not just of police brutality,
but demonstrating the militarization and federalization of police, who are
being inculcated with both disdain for and paranoia about ordinary citizens.
In the old days, if you were stopped for speeding,
the peace officer was polite – you could get out of your car, meet the
cop on neutral ground, and chat with him. You didn't have a serious problem
unless you were obviously drunk or combative. Now, you don't dare make a
move. You better keep your hands in plain sight on the steering wheel and be ready for a Breathalyzer test without probable cause.
The law enforcement officer will stand behind you with his hand on his gun.
And you're the one who'd better be polite.
L: There has been a polar reversal. The cops used to address citizens
as "sir" or "ma'am." Now, the correct response in a
traffic stop is: "Yes, sir! I would love to inspect the bottom of your
boot, sir!"
Doug: [Laughs] That's right. My friend Marc Victor gives out magnetized
business cards. People ask, "Why?" He answers that it's so clients
can put them on the bottom of their cars or refrigerators, so they can see it
when the cops throw them to the ground.
L: Marc's a good man. There's a handy video on Marc's website, offering advice on what to do if you're pulled over by the police in a
traffic stop.
Doug: A good public service announcement. At any rate, I think there's no
question that the US has turned the corner on every basis: politically,
socially, morally, and now, economically…
L: Okay, but, Doug, you said that in 1979 too. The question is, how do we know when the door is going to close?
Doug: [Laughs.] Well, sometimes I feel a little like the boy who cried
wolf. But Roman writers like Tacitus and Sallust saw where Rome was going
before it got completely out of control. Should they have said nothing, for
fear of being too early? Here in the US, it should have gone over the edge
back in the 1980s, but we got lucky. There was still a lot of forward
momentum, which can last for decades when you're speaking of civilizations.
There was the computer productivity boom. The Soviet Union collapsed, China
liberalized, and Communism was discredited everywhere except on US college
campuses. The end of the Cold War opened up vast areas of the world to the
global market. And most surprising of all, Volker tightened up the money
supply and interest rates went high, causing people to save money and stop
borrowing to consume.
L: That's not happening this time.
Doug: No. We got lucky back then. Since the '90s we've had a long and
totally phony, debt-driven boom that's now come to an end. I feel very confident
that there's no way out this time. There are huge distortions and
misallocations of capital that have been cranked into the system for two
decades. And not just in the US this time, but in Europe, China, Japan, and
elsewhere.
The US is very clearly on the decline. The fact that
in spite of bankrupting military expenditures to no gain for the American
people, those in power are talking overtly and aggressively about attacking
more countries – Iran and Pakistan in particular – is extremely grave.
The fact that they attacked Libya – which, incidentally, is going to
turn into a total disaster, a civil war that will last for years –
shows it's not stopping. Sure, Obama brought troops home from Iraq –
another disaster that's going to remain a disaster for years to come –
but at the same time he put a company of combat troops in Uganda, of all
places and Marines in Australia, to provoke the Chinese.
Back home, I've read reports that people are being
stopped for carrying gold coins out of the US, in Houston in particular. Now
we have authorization of the military to
detain US citizens, on US
soil, with no trail, and indefinitely, on the verge of becoming law. And Predator Drones have been used to hunt down
farmers on their
own ranches.
I could go on and on. This is not like spotting
early signs of decay in America's expansionist wars of the 19th century
or things getting worse with FDR. Most people can't see it with all the noise
and confusion, but we've reached the edge of the precipice.
L: Don't worry about exactly where the edge is, just assume it's there
and take appropriate action?
Doug: Yes. It really is there. It's a clear and present danger. But most
Americans are as oblivious as most Germans were in the '30s. In fact, most of
them support what's going on, just as most Germans supported their government
in the '30s and '40s.
L: So… don't worry about figuring out exactly when the gates will
shut. Assume they are shutting now?
Doug: That's right. One should be actively and vigorously looking to
expatriate assets, cash, and even one's self. A prudent person will always be
diversified politically and internationally.
L: What about people who have jobs they can't continue doing from
abroad and who need the income?
Doug: They should still prepare, as best they can, to be ready to go on a
vacation when things get hot – a vacation from which they might not
return for a long time. All that needs happen, with the hysteria that's
building in the US, is for a major terrorist incident – real or
imagined – to occur. Homeland Security will lock the country down. I
hate to admit it, but I'm almost starting to credit the stories about those FEMA camps.
Look, I know it sounds extreme, and the comparison
to pre-WWII Germany has been made many times, but it bears repeating. Germany
was the most literate, civilized, and even mellow, in some ways, country in
Europe. It was much admired all around the world – a nation of
shopkeepers, small farmers, and scholars. But the whole character of the
place started changing in 1933, and it just got worse and worse. By the end
of 1939, if you weren't out, you were done.
L: [Pauses] Well, not a cheerful thought. Actions to take?
Doug: Things we've said before: Set up foreign bank accounts in places you
like to travel, while you can. Set up vault arrangements for physical precious
metals outside the US. Buy foreign real estate that you'd like to own,
because it can't be forcibly repatriated. Offshore asset protection trusts
are a good idea too. Become an International Man. Let me emphasize that US taxpayers should stay
within all US laws, because the consequences of breaking them are
unbelievably draconian.
Generally, one simply must internationalize one's
assets. The biggest danger investors face, by far,
is not market risk – huge as that will be – but political risk.
The only way to insulate yourself from such risk is
to diversify yourself politically and geographically.
L: Right then… words to the wise. Thanks for your insight.
Doug: You're welcome. Most won't, but I just hope readers listen.
[For more
specific investment advice and big-picture observations from Doug – as
well as insightful analyses from other Casey Research experts, including
Chief Economist Bud Conrad – give The Casey Report a test drive. It is
absolutely risk-free for ninety days… and will give you a solid boost
in becoming a rational speculator.]
Happy Holidays from Casey Research!
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