What's Really Happening in Iraq - and Why it Matters to Investors

Soldiering on: Why Our Military Adventures Matter to Investors

By David Galland, The Casey Report

Recently, I read a book titled The Good Soldiers that also serves as an object lesson in the disconnect between what’s going on in Washington D.C. and reality. It was written by David Finkel, a Pulitzer-winning author, and it came to me via a friend who is going through a stage where she feels drawn to books about war, mostly about World War II. Showing flexibility, her interest has expanded to the ongoing conflict in Iraq – the theater of operations that serves as backdrop for The Good Soldiers.

Despite it going solidly against my literary preferences, I dragged the book along during a quick trip to Florida – a spur-of-the-moment thing to attend a golf school (I figured it was either that or get thrown off the local course for energetic exclamations of elaborate expletives resulting from my golf shots constantly flying off in unexpected and unwelcomed directions). Out of courtesy if nothing else, I figured I’d read a few pages of the book before putting it down – and so was surprised when it sucked me in, and kept me in, pretty much until I was finished.

The background story is that the author of the book traveled to Iraq with a battalion of U.S. soldiers sent as part of the “surge,” then lived with them for the 14 months of their deployment. As far as I can tell, he approached his topic with no overt political intentions – rather, he just wanted to document the war as experienced by a battalion operating from a small base in one of the worst corners of Baghdad.

As one might expect, as they departed from the United States for Baghdad, the soldiers and their brigade commander, Col. Ralph Kauzlarich, were full of fight, patriotism, and the confidence that only a chosen people can possess. It was, in their view, a just war and they deeply believed that in no time at all they'd use their superior war-making capabilities – supported by the sure knowledge that they held the moral high ground – to clean the bad guys out of Dodge and get the whole mess straightened out pronto.

Reality, however, turned out to be significantly different, starting with the fact that rather than being welcoming, the population was overtly hostile – so much so that almost every time the soldiers drove off the base (which was part of the daily routine), the locals would try to maim and kill them. And they had considerable success at it.

In addition to trying to kill them, the community’s leaders seemed uninterested in the outreach efforts the colonel was instructed to make, including an initiative to rebuild the sewers and fix the power and water delivery systems in the area around his command. Of course, it didn’t help that it was the blunt-force approach used by the U.S. military in capturing Baghdad that destroyed so much of the infrastructure in the first place. Regardless, all attempts at doing “good works” were stalled and disappointed at every turn, with billions of dollars wasted in the process.

As the book progresses, the author juxtaposes President Bush's and General Petraeus' rosy comments about how well the surge is working with the on-the-ground realities. And those realities are presented as raw and graphic as they are – with the tops of soldiers’ heads being taken off by IEDs, or burning to death in Humvees while friends watch helplessly.

So successful was the military and political leadership in convincing Congress and the media that the surge was a winning strategy that, to this day, its acceptance as a fact has become a meme throughout the body politic. Back on the ground in Iraq, however, the daily grinding down of the front-line forces continues apace.

During the period of time covered in The Good Soldiers, the Iraqi insurgent attacks lightened up only slightly – but only because the ruling mullah in the battalion’s area of operation unilaterally called a cease-fire. The resulting dialing-back of attacks on U.S. forces was immediately pounced upon by the military leadership and the Bush administration as proof that the surge was working.

That that wasn’t the case became clear the day the same mullah called off his cease-fire and hell opened up. One minute the area was relatively quiet – the next, the streets were filled with armed gunmen and snipers, and bombs were going off on what seemed like every corner.

One of the more remarkable aspects of the war, an aspect that largely goes unreported, was just how sophisticated the Iraqi opposition became in their attacks against the occupying forces. Not only did their roadside bombs become murderously powerful – so powerful that they could almost evaporate a fully armored Humvee – but the Iraqis began attacking the U.S. bases using everything from mortars to rockets and even homemade missiles.

The lob bomb, for example, was created out of propane tanks, filled with ball bearings and shrapnel, with a triggering device welded to the nose, and a rocket on the rear. In one instance, two large dump trucks drove near the base; after tilting up their backs to drop their loads, they revealed rails which were then used to guide a barrage of lob bombs, resulting in millions of dollars of damage to the American base.

By the end of the battalion’s stay, the soldiers were mentally and, in many cases, physically ruined. One chapter near the end of the book, which recounted Col. Kauzlarich’s visits to some of his wounded soldiers back in the States – soldiers who suffered truly catastrophic injuries – I had to skip after just a couple of pages. It was just too painful to read.

Lessons from The Good Soldiers…

There are a number of important lessons that can be derived from The Good Soldiers, including:

• The on-the-ground commanders and soldiers being sent into places like Iraq and Afghanistan have only the best of intentions. Though their reasons for joining up may vary, as they head off for war, most believe their leaders wouldn’t deploy them unless there was good reason to do so. Thus when it becomes clear to them just how ill-used they have been – that they have lost friends and limbs for no discernable purpose – it creates a deep sense of disillusionment. The odds of another Timothy McVeigh emerging from the crowd of returning vets are very high.
   
• Despite the U.S. government spending tens of millions of dollars a day in Iraq – with the total spent now approaching $1 trillion – the mission has accomplished nothing other than antagonizing the Iraqis whose doors the U.S. troops kick down regularly. When I say “accomplished nothing,” that is actually an overstatement. In fact, other than toppling Saddam, the outcome of the mission has been to create an everlasting antipathy between many Iraqis and the United States, blowing wind into the sails of the most radical elements of Iraqi society. What a mess.
   
• The U.S. occupation has turned into a very effective laboratory for the insurgents. At the beginning of the conflict, the resistance fighters were relatively weak – but as time has gone by, the natural ability of humans to adapt and improvise has led to the development of an array of inexpensive but seriously lethal antipersonnel weaponry. That these technologies are now spreading throughout the region can be seen in the recent death of eight U.S. soldiers in Afghanistan, in a single blast.
   
• Short of staging a scorched-earth form of warfare – turning these cities into parking lots – the U.S. cannot possibly ever win one of these conflicts. There is no fixed enemy that the U.S. can target with its superior weapons. And it’s unrealistic that the military can hunt down all of the opposition by going door to door.
   
• The U.S. political and military leadership is straight out lying to its troops and to the public at large. It is hard to comprehend why, but I dare you to read The Good Soldiers and come away with any other conclusion. Maybe they continue the tragic farce because to cut and run – as we ultimately did in Vietnam – is just too embarrassing. Maybe it’s because they are so effectively lobbied by the war profiteers – may they eventually rot in the hottest corner of hell. Maybe it’s because they are allowed to wage war from a safe distance (no politicians visited the forward operating base where Kauzlarich and his battalion were based during their stay there, and Petraeus only made a single, quick stopover).
  
  Meanwhile, the U.S. continues to bleed billions in these misguided wars, while the soldiers just bleed.

Someone, and probably a lot of people, should be held accountable for this travesty – as in being brought up on serious charges and, if found to have propagated lies resulting in the loss of lives and the wasting of hundreds of billions of dollars, sent to jail for a very, very long time. Or, better still, turned over to the Iraqis to punish. I’m sure they’d figure out something appropriately medieval.

Why This Is Important to Us as Investors

Given the urgency of addressing the U.S. debt and deficits, the bloated U.S. military budget is clearly the most obvious place to start making cuts that will actually matter. Yet Congress made no such cuts when passing the $690 billion budget requested by the Defense Department – doing so last week by an overwhelming margin.

That budget includes another $119 billion to flush down the toilets of Iraq and Afghanistan. Showing that it has learned no lessons, the Obama administration – encouraged no doubt by new friends in the military-industrial complex – has already managed to spend $750 million in the undeclared war on Libya.

There is a way to use this understanding that the bankrupt U.S. and its allies are doing little more than breaking furniture and making enemies in the Middle East to one’s advantage. Simply, unless and until the U.S. politicians muster enough spine to pull out of Iraq and Afghanistan and slash the military budget, the government’s massive budget deficits will continue.

And if the budget deficits continue, then the trend for the U.S. dollar is sharply downward (though I remain convinced we’ll see a rally in the near term, a topic we’ll be tackling in greater detail in the upcoming edition of The Casey Report).

That is not conjecture, but the unavoidable conclusion uncovered by a number of objective analyses done on past sovereign debt crises by folks such as Kenneth Rogoff and Casey’s Chief Economist Bud Conrad.

To those readers who think that cutting the military budget, or pulling out wholesale from the Middle East, will increase threats to the continental United States, we will have to agree to disagree. In my view, destroying our economy to wage war – in the process squandering the huge commercial advantage of providing the world its reserve currency – is far more destabilizing. As is making yet more enemies by continuing to lob bombs and kick in doors here, there, and everywhere.

Unfortunately, the U.S. leadership and, I guess, some significant swath of the voting public who supports that leadership are suffering from some sort of mass psychosis (or maybe it’s paranoia), that actually has them thinking that it is somehow in the country’s interest to continue flinging billions of dollars and the lives of its good soldiers into lost causes overseas.

But don’t take my word on the topic – do yourself a favor and pick up a copy of The Good Soldiers today. As I can’t know where you stand on these wars, I can’t say whether or not reading the book will change your mind. But I can guarantee you that its on-the-ground perspective will enlighten you as to the true and disturbing nature of what’s really going on, and the futility of it all. It is anything but entertaining, but is very well written and very illuminating.

Meanwhile, use the military budget as a proxy for the seriousness (or lack thereof) of the government’s intent to reduce its spending by any significant amount. And, absent any serious cuts in that spending, continue to take measures to protect yourself against wholesale debasement of the currency.

Every month, David Galland and his co-editors – among them Doug Casey – of The Casey Report research and analyze significant events in the U.S. and global economy, as well as in politics and the markets. Their goal is to recognize the trends in the making that will directly or indirectly affect investors… and to provide the best profit opportunities, even in a time of crisis. Learn how you can outpace rampant inflation by crisis-investing like the pros in this free report.

Ed. note: I am a Casey Report subscriber and affiliate.

How To Answer Your Census, Christopher Walken Style - Hilarious Video

In the latest Casey Report, Doug Casey has a great rant about the pointless US Census - we'll see if we can republish it here at some point.

Towards the end, Doug shared a link to a Christopher Walken SNL skit that is absolutely hysterical. If you, like me, are disgusted at the entire process - from the teaser threats on the envelope, to the farcical "job creation" - you'll enjoy this one especially.


Want more civil disobedience? Be sure to check out Casey's guest piece about the virtues of anarchy.

Doug Casey: No Government is the Best Form of Government

Is government a necessary evil, or is it completely unnecessary altogether? We've touched on this subject briefly before, when I shared my thoughts on The Market for Liberty, in which Linda & Morris Tannehill make the case not only for limited government, but for NO goverment at all! (Man I'd love to have been around for those dinner conversations!)

If you have libertarian readings, this interview will Doug Casey will be a real exciting read for you. It's published in its entirety below.

And one final recommendation before I let you go - if you like these topics of personal freedom, I'd HIGHLY recommend Harry Browne's classic How I Found Freedom in an Unfree World.

***

Doug Casey on Anarchy

(Interviewed by Louis James, Editor, International Speculator)

L: Doug, you keep saying you're an anarchist. I suspect most of our readers know that doesn't mean you like to wear black army boots and throw Molotov cocktails at McDonald's restaurants during WTO protests, but I'm not sure how many really know what it is you do mean. And since this is central to your world-view and hence touches on all your thinking as an investor and speculator, it seems useful to clear the air. Few may agree with us on this topic, but let's talk about anarchy.

Doug: Sure. If people aren't open-minded enough to even consider an alternative view, they're their own worst problem, not my ideas. In point of fact, anarchism is the gentlest of all political systems. It contemplates no institutionalized coercion. It's the watercourse way, where everything is allowed to rise or fall naturally to its own level. An anarchic system is necessarily one of free-market capitalism. Any services that are needed and wanted by people - like the police or the courts - would be provided by entrepreneurs, who'd do it for a profit.

Look, I'd be happy enough if the state - which is an instrument of pure coercion, even after you tart it up with the trappings of democracy, a constitution, and what-not - were limited to protecting you from coercion and absolutely nothing more. That would imply a police force to protect you from coercion within its bailiwick. A court system to allow you to adjudicate disputes without resorting to force. And some type of military to protect you from outside predators.

Unfortunately, the government today does everything but these functions - and when it does deign to protect, it does so very poorly. The police are increasingly ineffective at protecting you; they seem to specialize in enforcing arbitrary laws. The courts? They apply arbitrary laws, and you need to be wealthy to use them - although you're likely to be impoverished by the time you get out of them. And the military hardly defends the country anymore - it's all over the world creating enemies, generally, of the most backward foreigners.

In a free-market anarchy, the police would likely be subsidiaries of insurance companies, and courts would have to compete with each other based on the speed, fairness, and low cost of their decisions. The military presents a more complex problem, beyond our range here, although we've gone into a lot of aspects in our discussion on terror last week and the military a couple months back.

L: That's a lot for most mainstream folks to swallow at once, Boss. On the other hand, the way I see it, it would be inconsistent with my libertarian principles to demand that anyone agree with me - but I don't need to be helping those who would enslave me to make money anyway. That said, let's try to ease into this...

Doug: So, let's start with a definition. Many people think of anarchy as being chaos. They see riots and chaos on TV from some place in conflict and think, "What anarchy!"

L: That's if the talking heads don't tell them that what they are seeing is anarchy to begin with.

Doug: Right. But chaos and bomb throwing are not anarchy. Chaos is the actual opposite of anarchy. Anarchy is simply a form of political organization that does not put one ruler, or ruling body, over everyone in a society. Whether that's actually possible is a separate matter. This is what it means. And I see it as an ideal to strive for.

L: I'm looking at Webster's, and it says that anarchy is: A: Absence of government. B: A state of lawlessness or political disorder due to the absence of governmental authority. C: A utopian society of individuals who enjoy complete freedom without government. People might say you're focusing only on C.

Doug: Look at the etymology. It comes from the Greek anarchos, meaning "having no ruler," an-, not, and archos, ruler. Definition B has come into popular use, but that doesn't make it right.

"Anarchy" is a word that's been stolen and corrupted by the collectivists - like "liberal," It used to be that a liberal was someone who believed in both social and economic freedom. Now a liberal is no better than a muddle-headed thief - someone who's liberal only with other people's money.

I refuse to let the bad guys control the intellectual battlefield by expropriating and ruining good words.

In any event, there's no conflict whatsoever between anarchy and the rule of law, since there are private forms of law and governance. That's what Common Law is all about. So the correct definition is a combination of A and C.

But I never said a truly free, anarchic society would be a utopia; it would simply be a society that emphasizes personal responsibility and doesn't have any organized institutions of coercion. Perfect harmony is not an option for imperfect human beings. Social order, however, is possible without the state. In fact, the state is so dangerous because it necessarily draws the sociopaths - who like coercion - to itself.

What holds society together is not a bunch of strict laws and a brutal police force - it's basically peer pressure, moral suasion, and social opprobrium. Look at a restaurant. The bills get paid not because anybody is afraid of the police, but for the three reasons I just mentioned.

L: I saw some of this in Argentina over the last few days. Here we are at your Harvest Celebration. Two hundred people, most of whom have never met before, a hundred miles from nowhere - I don't know if the nearby town of Cafayate even has a cop, but if it does, he's well hidden. For all anyone can see, it's us, the grape vines, and the mountains.

And yet, there was order. The Estancia is private property. Your people organized things, and the guests went along with it and had a great time. Why? I don't think many of them calculated the odds of getting killed if they tried to use violence to get everything they wanted, though a rational person making such a calculation would decide it wasn't worth it.

Most people are brought up to be decent, and the people you tend to attract have a certain moral fiber. In other words, the event was governed by a culture of voluntary and honorable cooperation.

Doug: Just so. It's like when people form lines at movie theaters or ski lifts. There doesn't have to be a cop with a gun there to make everyone take turns. Everyone knows that if they take turns, it all works out better for everyone - and they are brought up to act that way, so they usually don't even have to make that calculation.

A more obviously government-like example is Disneyworld, which is nothing less than a private city, complete with numerous rules that would be called laws if it were run by politicians instead of a corporation.

Why would anyone go along with rules that aren't laws? Because they want to go to Disneyworld. They agree, and for the most part, they go along, and if they cause too much trouble, Disney kicks 'em out - which they have every right to do as owners of their private property.

As Pareto's Law indicates, there's inevitably a bad element in most places. 80% of folks are truly decent, and 20% are perhaps problematical. And 20% of that 20% are bad apples. You have to have a culture that keeps them hiding under rocks, rather than rising to the top - as they wind up doing quite often in government.

The reaction of a person to the idea of a truly free society is an excellent moral litmus test. The more negative the reaction, the more likely you're dealing with a sociopath.

L: What would you say to people who point out that when the government collapsed in Somalia a few years ago, bloodshed ensued, or that when the government disappeared from New Orleans in the wake of Hurricane Katrina, ugly chaos did erupt?

Doug: It's as you said: a cultural matter. If you have people who've been brought up to believe that the only limits on what you can or should do is the force exerted by the authorities, it's no surprise that when the greater power disappears, they reach out to take whatever they want, by force.

That's clearly the case in Somalia, but it's also true of the people stranded in New Orleans, who were primarily those with no money to flee - in other words, the inhabitants of government housing projects. It's not politically correct to point this out, but those people had, on average, a distinctly different culture from that of the average American.

Actually, ex-police states are the most dangerous places - like Russia in the early '90s, the Congo in the early '60s, or Haiti today, because they have a culture of repression that's like a pressure cooker. When the lid comes off, it's a mess.

L: I seem to recall a flood in West Virginia in recent years that wiped out half of a small town. Instead of raping and robbing each other, those not hurt helped the victims. They housed them, fed them, and even helped them build new houses. And no one made them do it. It wasn't a case of better government - it was just their culture to do so.

Doug: And culture is a matter of education, which means that societies that function on voluntary cooperation, as in Cafayate, Disneyland, or the town you're talking about in West Virginia, are possible.

There is nothing in human nature that makes it impossible to create a society of people who respect each other's rights and follow accepted systems for working out differences, like getting in lines at movie theaters. There would still be criminals and sociopaths to deal with, as these occur in a standard distribution in every population - but the point is that the society doesn't have to be built around an essentially criminal organization, the state.

L: And those sociopaths would be limited to whatever mischief they could wreak personally, instead of having access to the machinery of the state to multiply the harm they can do. But I think most people would balk at your characterization of the state as essentially criminal.

I know that's a big topic people have written whole books about, but can you give us something brief to substantiate your view?

Doug: Well, it's really not that complicated. We can probably agree that it's wrong for me to point a gun at you and take all your money. Some people might feel sorry for me if I did that to buy medicine for my dying mother, but it's still a crime, because it violates your human rights. And it's still a crime if I ask someone else to do the same thing for me - and still a crime if a whole bunch of people vote to ask someone with a spiffy uniform and a badge to do the same thing.

It wouldn't matter any more if a group of people calling themselves Congress went through some rituals that involved a leader putting some ink on some paper and said a violation of your rights was now "legal" than if a witch-doctor told a tribe's warriors that it was okay to take slaves and sacrifice them to the gods. Laws are just a "civilized" man's taboos.

L: Obamacare is a case of exactly this. Socialized medicine puts you and me in the position of the tribe's sacrifice, because the mass of voters want free goodies at the expense of those who produce more than they do.

But to get back to the word "criminal" - you're saying that the state is inherently criminal because it violates human rights. But does it have to be that way? Didn't Ayn Rand have an idea for a kind of government that would not violate anyone's rights?

Doug: I don't think she ever came up with a detailed plan. I find it interesting that her "Galt's Gulch" in Atlas Shrugged was clearly a private city. It was built on land owned by Midas Mulligan, and people who bought in agreed to his terms. There was no mention of police or elected officials. What Rand said was that a moral government could not violate anyone's rights, and that meant raising revenues through user fees and other voluntary means - no taxes. That's a great step in the right direction, but leaves a lot of unanswered questions as to how to do this.

Here's the rub; imagine that the Quebecois decided unanimously that they really didn't want to be part of Canada anymore but wanted to be an independent, French-speaking country. So they peacefully vote and take their marbles to play their own game. In doing so, they don't violate anyone's rights, so there is no moral way the government of Canada can stop them. They could use force, but that would violate the rights of the Quebecois, who would not be hurting anyone. And if the Quebecois could do this, so could Disneyworld, or your neighborhood - or you individually.

There's no moral way to prevent peaceful secession - but if a state doesn't prevent secession, it soon disintegrates. People always want to do things differently, and they would if the threat of force from the state didn't stop them. Brute force - although gussied up with myth, propaganda, and red, white, and blue bunting - is what holds the state together. That force is ugly and corrupting.

No matter how benign a state might be, even one that found a way to fund all of its activities without resorting to force, it must still violate the fundamental human right of self-determination in order to preserve its own existence. That's why the state is inherently a criminal organization - it must rely on force. Even the best of them are never based entirely on consent of the governed; there is coercion of the non-consenting minority. And there are always some who do not consent.

Democracy is no solution - it's just 51% bossing the other 49% around. For God's sake, Hitler was democratically elected. Democracy is just mob rule dressed up in a coat and tie.

You and I do not consent to Obamacare, but we're forced to accept it. Of course socialized medicine is totally counterproductive, as we discussed in our conversation on health.

I suppose I can live with the idea of a state, as long as there were about seven billion of them in the world - and everybody had one. That would show that the whole idea of the state is just a scam, where everyone tries to live at the expense of everyone else. But the only people who really benefit are the guys on top.

L: The state's requirements for self-preservation are why people so often say that the state is a "necessary evil." It must violate some rights to exist, but people think that the state's protection and support of civil society, which is a great value, is worth the violation.

Doug: I find the concept of a necessary evil rather repugnant. It's largely sophistry, usually trotted out to justify some type of criminality. Can anything that's evil really be necessary? And can anything that's necessary really be evil?

Entirely apart from that, people say the state is necessary because that's all they've ever known. But it's not, in fact, part of the cosmic firmament. There have been times and places in history when central authority was so distant, or negligent, that the people did function - and prosper - in what was essentially a functioning anarchy.

David Friedman draws attention to medieval Iceland as one example of this. I recommend his book The Machinery of Freedom for lots of great discussion on how society would work without the dead hand of the state suppressing it.

L: And the reality is that there are all sorts of private institutions that provide regulatory and governance systems, from private cities like Disneyworld, to Underwriter's Laboratories that puts "UL" seals on electronics they deem safe, to churches, some of which govern their members' most intimate life functions - all through voluntary subscription.

The Mormon Church, for example, exerts a very significant amount of regulation of the private behavior of its members. I'm not a Mormon, of course, but I've lived in predominantly Mormon communities, and I have to say they tended to be cleaner, nicer, safer, etc. I'd say the Mormon religion exerts more control over its adherents than any state's laws have ever exerted over citizens - but those regulated like it. They believe they benefit from it, and most important of all, they are physically free to leave any time they want.

Not so for the state. This is why I've said in the past that the state is not a necessary evil but merely necessarily evil.

Doug: Good example. The Amish and Mennonites provide other examples, although religious communities are entirely too uptight to suit my taste. And UL is a good one too, because people worry that businesses would all turn rapacious if the state weren't there to regulate them. But electronics producers are not required to get UL seals on their products. They go to the extra expense of meeting UL standards because they know they'll make more money if their products have the UL seal of approval on them.

L: Best Western hotels are the same way. Best Western doesn't own the hotels; it's largely a private regulatory agency that inspects hotels and gives those that make the grade the right to put a Best Western sign out front, which is worth a lot to a small mom-and-pop joint.

Doug: There are lots of private regulatory services. Insurance companies also exert a lot of influence on the insured, who have to go by certain rules to stay insured. And, of course, there's a huge private security industry used by those who want to protect their assets, rather than call 911 after they've been robbed, etc. All by subscription.

You don't need government for anything; if something is needed and wanted, an entrepreneur will provide it for a profit. And do so far better and cheaper than anything a government could possibly hope to.

The economic arguments for a free-market anarchy are overwhelming. I'm of the opinion we'd already be living with the technology of Star Trek if it wasn't for the state slowing things down. But that isn't the reason I'm an anarchist. The real argument is moral and ethical.

L: You know, I keep sending "unsubscribe USA.gov" messages to Washington, but I never get a response.

Doug: Good luck. To them, you're cattle. They care only so much as you and all the others don't stampede. Other than that, you exist for their benefit and have as much say in the matter as a steer.

L. Maybe that's true for most people, but I can still vote with my feet. I've done it before, and I'll do it again. And so have you. Which is why I was looking at property in your neck of the woods in Argentina.

Doug: It makes a lot of sense to be in a place where they have to treat you as a guest, to be courted, rather than an asset to be exploited. Of course, all governments are dangerous, destructive, and annoying. But the ones that are incompetent and disrespected are easiest to deal with...

Anyway, love to have you as a neighbor.

This brings up another problem with the nation-state - it forces obligations upon you. I'm a big believer in being neighborly, but when the state tries to force you into a relationship with other people, it only breeds resentment. I like communities that are self-selecting, where you can assume neighbors share some basic premises about the way the world works.

L: I loved the Estancia. Those mountains would probably convince me if you and your friends didn't. But anyway, there are a million directions we could take this conversation, a million objections I could raise for you to answer, but I'd like to move from theory to practice. Even to those who agree with you, at least in spirit, this all sounds very theoretical - of no practical consequence since the whole planet, as you've observed, is covered with nation-states.

I've been your friend for the better part of 20 years, and I've worked with you closely for most of the last six of those. I know this is not all theory for you. You live your philosophy. I've seen you get up in front of a large lecture hall with hundreds of people and tell them that the whole of the law should be: "Do what thou wilt - but be prepared to accept the consequences." They laugh or roll their eyes, depending on their beliefs, but I doubt many realize that you are not only completely serious, but that that is exactly how you live your life.

You're not shy, but you're not a braggart either, so I'll go ahead and say that I have watched you match deeds to words. You routinely go in "Out" doors, you light up under "No Smoking" signs, you walk through metal detectors with your belt on, you get back on polo ponies regardless of what your doctors tell you, you leave your electronics on when all the other sheep on the airplane turn theirs off... I could go on and on.

The beauty of it is that most of the time, nothing happens. You did exactly as you pleased, hurt no one, and enjoyed life on your own terms. On the occasions when some busybody does confront you, you usually respond calmly and say, "Oh. Well, what should we do about it?" The worst that happens when you are confronted is usually that you end up where all the submissive people put themselves to start with. Sometimes you even fight back. I've watched you make fools of airport security guards or take your business to another hotel.

The important thing is that you start out doing what you want, not what the busybodies want. You may end up penned in with the sheep sometimes, but not as often as most people would think. And you start out doing things your own way. I admire the heck out of that.

Doug: Well... You're Don Lobo, a well-known anarchist in your own right - well known for not cooperating with the state. But, like you, I'm very easy going, and always try to observe others' rights to the fullest.

While it's true the most basic law is "Do as thou wilt - but be prepared to accept the consequences," you can extrapolate that out, as a practical matter, to two others. One, do all you say you're going to do. And two, don't aggress against other people or their property. Everybody understands those laws, and you don't need a corrupt, and corrupting, government to elaborate on them any further, as far as I'm concerned.

The people I like to hang out with, like you, observe those things. Besides that, I find you're quite good at keeping your cool while questioning minions of the state... maybe you do it just to see if there's actually a real human in that uniform they wear.

L: Okay, okay, but I don't want to comment in print on all the things I've done. The point here is not to flatter you, or myself, but to point out to people that submission is a choice, not a foregone conclusion. Freedom is something you never get by waiting for permission but by exercising it as vigorously as your creativity and energy allow. By pushing back against the barriers - like when you told the Inn at Aspen where to shove the city's "No smoking in the bar" rule, and that you'd accept the responsibility if the mayor walked in.

In the most general terms, I think it's a mistake to think of freedom as a noun, rather than as a verb. And your actions show the world the consequences of doing freedom, rather than waiting to be given freedom.

Doug: Well, that's true. And, not to pat myself on the back, it's worth noting that there have been times when I've had my setbacks and even a substantial negative net worth - but it was my problem and nobody else's. So not having any money is no excuse for not taking charge of your own life and living it the way you want to. I wasn't given freedom by my parents or the government.

L: Hear, hear! So... Investment implications?

Doug: Attitude is everything, and that matters. If you let yourself be treated like cattle or herded like sheep, you won't invest so as to maximize your freedom. There's a lot we could say about this, but we've gone on long enough. The place to start is with diversifying your assets across political jurisdictions, making it harder for each would-be Big Brother to corral you. This is a rule almost everyone forgets - but it's the most important single thing in today's world.

I would like to recommend a book here. Along with Rand's The Virtue of Selfishness, I'd say it's the most important I've ever read, and had the most practical effect on my thinking: The Market for Liberty by Tannehill. It describes, clearly and precisely, how a society without government would likely work. Best of all, it's now a free download from the Mises Institute's web site. If you understand the basics, you'll feel much less obligated to support the destructive institution of government - because you'll know it's unnecessary.

L: As we covered in our conversations on currency controls and living abroad - and Argentina, of course. What else?

Doug: Don't feel guilty about finding the lowest-tax jurisdictions for reporting your income, owning property, etc. Shopping with your feet is not only your human right, it's a positive good for the whole world; the more everyone shops for the least onerous governments, the more governments will have to compete for being less onerous, and the better off we'll all be.

L: And the easier it will be for people to exercise their freedom as you do. What about trends?

Doug: Just the ones we've already covered - but now the need to take action is getting more urgent. I see that the new employment bill Obama just signed has new currency controls buried in its guts. It doesn't necessarily prohibit anything new. But it has new reporting requirements and penalties. It's an overture to what's coming. As Mencken said, nobody's life or property is safe while Congress is in session.

L: I figured you were right about this being in the cards, but I have to admit it's started sooner than I thought it would.

Doug: Sometimes I hate it when I'm right. And I still think things will get worse than even I think they will. Remember my mantra: Liquidate, Consolidate, Create, Speculate.

L: No specific investments?

Doug: Nothing looks particularly good to me right now, except gold. If you don't have a serious position in gold, you should build one post-haste - with as much as possible outside of the U.S.

L: Okay then. See The Casey Report for details.

Doug: Right.

L: Very good. Talk to you next week.

Doug: Yes. Perhaps we should have a closer look at the implications of Obamacare.

L: Looking forward to it.

Doug and the other editors of The Casey Report tell it like it is -- so you can see what's coming. The government meddling in all sectors of the economy... systematic dollar devaluation... the state and fate of other countries around the globe... and the investment implications that can make or break your future wealth acquisition. Learn all about how to take advantage of any crisis and profit while others lose; click here for more.

Doug Casey: How You Can Survive the Upcoming Financial Apocalypse

Here's an excerpt from the latest issue of Conversations with Casey - an absolutely must read that Doug Casey and his team publish every Wednesday. If you're not yet a subscriber, I'd highly recommend it - it's a free pub, so you can't beat the price, and Doug definitely doesn't pull any punches!

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(Conversations with Casey: Interviewed by Louis James, Editor, International Speculator)

L: Doug, last time we spoke, you said quite a bit about debt, in the context of your expectation that the euro is on its way out. At the end of that conversation, you mentioned, of course, that the problem is not limited to Greece, nor the eurozone. America as a country has become a world-class debtor, and many Americans seem to think a maxed-out credit card is a reason to get a higher credit limit, not to economize. It’s like a global epidemic. Let’s talk about debt.

Doug: Sure. This is a story that’s going to end very badly for a lot of people. I’ve said this before, in many different ways, but I think it’s worth saying again, because most people just don’t grok it…

L: Grok. From the Martian word for “drink” and “understand.” In Heinlein’s novels, water was a critical element of Martian culture – makes sense, for a desert planet. When you grok knowledge, as when you drink water, you don’t just hold it in your mouth and spit it out. You take it into yourself, it goes into your blood, and eventually into every cell in your body; it becomes part of you. This is heavy-duty understanding… Sorry for jumping in with the spontaneous lecture. I just suspect many readers will not know the term.

Doug: Or put another way, in the negative case, most people just don’t get what money really is – and what it isn’t. They take it as a given, as part of the cosmic firmament. But it’s not. A prime example of this is the mistaking of debt for money, a phenomenon David Galland pointed out in a Casey’s Daily Dispatch a few weeks ago. This is why the entire world’s monetary system today is headed for a disastrous failure. And this is absolutely inevitable. There’s no way around it.

L: Why?

Doug: Because you can’t use debt as money. As I’ve pointed out before, Aristotle, in the fourth century BC, was the first person to define what money is. And what is it? It’s a store of value and a medium of exchange.

The paper we use today is a medium of exchange – it got that way because governments made it illegal not to accept it – but it’s not a good store of value. And it’s rapidly and radically becoming less of a store of value. What we use as money today is actually not money; it’s currency. Technically, that’s simply a word that indicates a government substitute for money.

What does make for good money? Again, Aristotle gives us the answer. It’s something that has five characteristics: it’s durable and divisible, consistent and convenient, and has value in itself.

L: Some of our readers who’ve studied Austrian economics challenged us on that last bit, last time we talked about gold, because, as the Austrians pointed out, value is subjective. But you don’t mean some sort of value that’s independent of people making value judgments. You mean that people value something that makes for good money, because of its innate qualities – not something “valued” because of government threats of force.

Doug: Right. And for these reasons, gold is almost certainly the best thing to use for money. Not because I say so, nor because Aristotle said so, but because, over time, people have found it to be the most durable, divisible, consistent, convenient, and inherently valuable thing to use. Silver is also good, but it’s less durable because it corrodes. And less convenient, in that it takes about 60 times more of it – at the moment – to offer the same value as gold. Copper is the next traditional step down the ladder.

L: That, plus one reason that’s pertinent today but was not a problem in Aristotle’s world: gold can’t just be printed up on the arbitrary whims of those in power.

Doug: That’s the big one. Using metals as money takes the whole matter out of the hands of the government and its bureaucrats.

L: But we don’t use gold today…

Doug: No, as per David’s example, it’s as though a bunch of friends without any real money started exchanging IOUs for money, and then after a while forgot that the IOUs were supposed to represent, and be redeemed in, real money.

The problem with this is that, in the case of the IOUs between friends, paper is based solely on hope and trust. One can move away, or die, or turn dishonest, or become insolvent – many other things could happen. A guy stuck with a dead man’s IOU has nothing.

With government IOUs, or currencies, it’s worse, because they can increase the number of IOUs in circulation without telling anyone – that’s what inflation is. Since the government creates the IOUs, it gets the benefit of spending them before the inflation they create raises prices, which is basically stealing from the people. And, of course, sometimes governments do “die,” leaving the holders stuck with nothing, just as with the IOUs between friends. In fact, it’s arguably far more likely that such problems will arise from trusting a government to print IOUs than from trusting a friend.

[To read the full 8-page interview with Doug Casey and what he thinks will happen to the American middle class, sign up here.]

Why Doug Casey Sees Market Crash, General Electric Bankruptcy Likely

Doug Casey was a little bit early on his impending disaster call - like a decade or two - but he seems to be on the beat of this unfolding economic disaster right now.

To Doug's credit, Crisis Investing for the Rest of the 90's is a fantastic read, even though the title is not exactly one that stood the test of time! In fact I avoided reading it for awhile because I mistakenly thought it wouldn't be relevant. That was a big mistake - it was one of the best investment books I've ever read.

I am a longtime subscriber and affiliate of Casey Research, so I may be a bit biased, but I devour everything I read from Doug. Enjoy this interview, as he elaborates on the unfolding of what he deems The Greater Depression...

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Doug Casey: "Stock Market Set to Crash"

(Interviewed by Louis James, Editor, International Speculator)

L: So, what's on your mind this week, Doug? I understand you've had a "guru moment"…

Doug: Well, it's nothing but a gut feeling, but I think the stock market is riding for a big fall this year.

Everyone was afraid the world was going to come to an end a year ago, and it almost did. But governments all around the world stepped in and printed up trillions of their various currency units – it's not just the United States. And still, retail price inflation hasn't blossomed. It seems that governments are bent on keeping asset prices up to avert panic. They focus on controlling perception instead of fixing the problem. It stems from an economic version of the theory that all we need to fear is fear itself. As long as we have the right psychology, everything is going to be okay – total nonsense.

L: That old saw: as long as there's confidence, all is well.

Doug: Yes. It's the Wile E. Coyote theory of economics. As long as you never look down after running off a cliff chasing the roadrunner, you can keep treading air. Unfortunately, although the power of positive thinking may help in many ways, it's of zero use if you continue living above your means and making stupid decisions.

L: Insolvency doesn't seem to matter; as long as everyone has confidence that things will keep going, the experts believe they will. But in the real world, you can't remain insolvent for long, even if "you" are the United States as a whole society.

Doug: Exactly. My thinking about the stock market is this: corporations have done as "well" as they have mainly by cutting expenses. Laying people off, that sort of thing. So the bottom lines have not fallen as far as we might expect – but the top line has been hit. Revenues are falling for corporations across the board.

L: And the market has to notice this reality sooner or later.

Doug: Yes. The world's financial system has to adjust to a new reality, one with lower levels of consumption and differing types of production. The legions of unemployed are not going to go back to work anytime soon, at least not doing anything like what they were doing before the bubble burst. The economy is going to continue deleveraging. There's going to be less debt to allow the purchase of all this stuff people have been buying, resulting in lower corporate earnings. So it's hard to see revenues doing anything but continue to spiral downwards for years to come.

And then there are financial "accidents" waiting to happen.

L: Like the bank failures the government has admitted it expects this year? The FDIC says there will be more bank failures in 2010 than in 2009, with the spin being that 2010 will be the peak of the crisis.

Doug: Sure. But I also expect corporate bond failures. And there are other things out there. As Porter Stansberry (whose style as an analyst I really like) has pointed out, General Electric – which is really just a hedge fund disguised as an industrial concern at this point – is leveraged thirty to one. It's a dead man walking. It's the next AIG. When something like that happens, it really shakes Wall Street to its foundations.

So, I've been bearish on general equities for years, based on fundamentals. Whether they go up is no longer a reflection of prosperity – it's a reflection of how much money the government creates and where it goes. But I am feeling particularly strongly bearish on Wall Street right now. That's my gut. The social mood of the country is going to turn ugly and gloomy; people won't want to call their brokers and "get into the market."

The Greater Depression is going to be really serious. I can't see buying stocks until dividend yields are in the 6-12% range. And people have forgotten the market even exists. Anyway, Baby Boomers, who own most stocks directly and indirectly, are going to be selling them to support themselves in retirement.

L: Would you recommend shorting GE?

Doug: It should be an easy bet, but the government is certain to try to prop it up, as it has other dinosaurs pursuing business models that no longer work, like General Motors – although it didn't help their shareholders. "Too big to fail." That makes shorting riskier. But GE still has a $179 billion market cap, so it should fall quite a bit from here, if not all the way to zero.

L: No way out for the stock market?

Doug: Well, the government has been suppressing interest rates for a long time now, which is exactly the opposite of what they should be doing. These artificially low interest rates discourage people from saving and encourage them to gamble, hoping to outrun inflation. But eventually the market will force interest rates to go higher, and that will kill the stock market, because the stock market does tend to fluctuate inversely with interest rates. High interest rates almost always mean a low stock market, and low interest rates tend to mean a high stock market. So it seems to me that there simply is no good news on the economic front. Interest rates are headed way up, both out of a need for capital and as a reflection of the high price inflation ahead.

L: This doesn't sound like a guru moment – a flash of the famous Casey inspiration. This sounds more like a well-reasoned argument to me.

Doug: Well, when you get a really strong gut feeling, it's usually because you intuit many things that are out there, subconsciously if not analytically. Look, dividends are dropping across the board. Top line earnings are dropping. Where net earnings have been maintained, it's been by expense cutting.

L: Even if margins are maintained, the companies are getting smaller, and people are making less money, on the whole.

Doug: Right. And interest rates are at all-time lows. That's the short sale of the decade, if you want to short something. Bet against bonds. And there's more.

[Doug Casey is one of the few investment visionaries whose forecasts have been spot-on. Don’t miss what Doug predicts for 2010 – to read the rest of this FREE interview, sign up here.]

Doug Casey on Investing Opportunities in Cattle

What's the cheapest commodity on the board right now? It's probably a toss up between cattle and natural gas. Both are beyond beaten down; both are at near historic lows; both are just cheap.

That doesn't mean they can't get cheaper. But if you're looking to make some big bucks in commodities, it's usually wise to find something really cheap to buy (which is safer than finding something expensive to short, since your downside is limited).

Doug Casey's been on the cattle beat for a while - so long, in fact, that he started his own herd! Though I doubt most readers have the means (or energy) to take steps like that, I found his insights on cattle very interesting. Here's a guy who's bearish on nearly everything...so when he turns bullish on something, it must be for a good reason.

Enjoy Doug's guest piece!

Doug Casey on Cattle (Interviewed by Louis James, International Speculator) L: Doug, we talk a lot about metals and energy, but you’ve also made money in agriculture, as have our subscribers who got in early on corn and potash. In the February 2008 issue of the International Speculator, you made the case for speculating on rising cattle prices. Would you explain your rationale for that and give us an update? Doug: Sure. There is such a thing as a cattle cycle, and right now, all over the world, cattle are in liquidation. Farmers and ranchers just can’t make any money on cattle. Nobody has made any money on cattle in North America or Europe for years, and it’s especially serious now. So worldwide, cattle herds are being slaughtered, and that’s depressing the prices. The interesting thing is that even as prices are being depressed by all the selling, counter-intuitively, cattle herds are collapsing. That means the number of cattle and the price of cattle are going down at the same time. That obviously can’t go on forever; at some point, the relative number of cattle is going to be quite small, and prices are going to explode upwards. Why? Because people in China, the rest of the Orient, and across the developing world are going to want more beef -- in addition to the traditional consumers. And the numbers of cattle are going to be very low. I think that cattle is an excellent place to be. L: If it’s not a traditional part of their diet, why would such people want more beef? Doug: As you are becoming wealthier, you want better-quality food. Beef is generally at the top of the food chain. Why is that? It takes about two pounds of grain to produce a pound of chicken meat; four pounds of grain to get a pound of pork; seven pounds for a pound of beef. So from a production point of view, beef has always been, and I guess will always be, the most expensive type of meat to eat. L: Of common meat animals. Some unusual meats are a little more expensive… Doug: Yes, of common meats. Bald eagle drumsticks are much more expensive [laughs]. But beef is traditionally the rich man’s food. Crisis notwithstanding, a lot of people around the world are getting wealthier, particularly in China. India is not far behind, but there is a cultural issue with beef and Hindus, of course. I think we have a rare opportunity right now to buy low, while beef herds are collapsing. That’s exactly what I’ve done with a number of friends; we’ve bought a lot of land in Argentina and are raising cattle. L: It’s basically a bet on rising global affluence as the underlying trend. Doug: To a degree. But it’s more a bet on significantly lower supply combined with steady demand. In real terms, cattle prices are at about 40-year lows. As bad as the global economy has been, one might think they could have gone even lower -- the economy does affect them -- but they’re very low. In fact, the worst day I ever had trading commodities personally was back in 1987, when I thought that cattle were quite cheap. And you remember that day in 1987 when the stock market fell out of bed like five hundred points or something like that. L: Black Friday. Doug: Yes, Black Friday. And I was personally one of the largest players in the cattle market at that point. I was short puts and long contracts, of both feeder cattle and live cattle. It was a horrible day, because the day after the market collapsed, the cattle market collapsed. Everybody figured: “Oh my god, it’s a depression, nobody is going to be able to afford beef, so we better sell.” It was a nightmare for me [laughs]. So, you’re quite right; cattle are a play on prosperity. So why, if I believe we’re sliding into the Greater Depression, am I long cattle? Because you’ve got to be a buyer when everybody else is a seller, and everyone else is a seller right now, because no one can make any money on cattle. That’s number one. Number two is that, despite the fact the world is going into a depression, the world population will continue growing, and the countries in the Orient are going to do relatively much better than countries in the West, so I’m willing to bet on rising beef consumption. Number three, real cattle prices are at generational lows. But I’m not speculating in cattle; I’m investing in cattle. I’m not doing anything with them in the futures market. L: There’s no leverage on what you’re doing; you are actually buying cattle. Doug: Yes. I’m buying land in northwest Argentina, which to me is the most attractive part of that country – and the country itself is very attractive indeed. We’ve bought a number of large, dormant farms where we clear the land, fence it, put in wells, and plant in grasses the cows like. We bought Braford females – heifers – and they calf every year. We now have about fifteen hundred cows. Every year we get about twelve hundred new babies, and then the babies have babies. We sell the male calves for current income, to finance the clearing and fencing of more land and putting in more wells. And we let the heifers grow and reproduce. It’s a form of compound interest. Plus, the land is worth considerably more after we improve it -- a big bonus. And since our cattle are all grass-fed, and we own the land for cash, and the Gauchos earn roughly two hundred and fifty dollars a month, we don’t have much in the way of costs. I’m a big fan of grass-fed beef. Most cattle spend the best part of their adult lives in feed lots. They’re packed chock-a-block next to each other (moving burns calories and takes off weight). They’re fed things cows don’t naturally eat. And they’re pumped full of growth hormones and antibiotics. The end product is okay for a mass market that wants cheap beef, but it isn’t what I want. L: Is your reason for doing this in Argentina because the market is there (Argentines love to eat beef)? Or is it because land and labor are cheap, and it’s such a good place to be in the business? Why Argentina? Doug: I picked Argentina because out of the hundred and seventy-five countries I’ve been to, the fact of the matter is: I just like Argentina more than any other place I can think of. L: Even Thailand? Doug: Well, it’s perverse. Thailand is exactly the antipodes of the globe; it’s as far from Argentina as you can get geographically, and it’s about as far as you can get from Argentina culturally as well. They are just opposite and antithetical in so many ways. But the fact of the matter is, those are my two favorite places on the planet. L: But Argentina edges Thailand out… Doug: It does. That’s because I like the wide-open spaces. I like the estancias [ranches]. I like the barbeques. And in Thailand, as much as I like it, the fact is that as a Westerner, you are never going to be a part of Thai society. Forget about it. No matter how many Thai friends you have and so forth, you’re still always going to be an outsider. But that’s not true in Argentina, because it’s the most European country in the world. It’s more European than Europe at this point, quite frankly. And, completely unlike Thailand, it’s a country of immigrants. So, especially as my Spanish improves, I can actually become part of the society. Entirely apart from the fact that the upper classes, and the kids, all speak excellent English. On the other hand, in Thailand maybe there’s an advantage to not being part of the society, because… you really don’t exist. You are like what Chinese would call a Quai Loh – a foreign ghost or foreign devil. You are not an element to officialdom; you’re a permanent tourist. It’s a double-edged sword; it depends on what you like. L: If you’re an anarchist, why would you want to be part of society? Doug: Well, I’m a fairly social anarchist. We like society as well as anyone -- we just don’t like the state. I just want to be left alone by the authorities. An anarchist can feel pretty mellow in Thailand because of the foreign-ghost effect. And pretty good in Argentina for different reasons – it’s full of Spanish-speaking Italians who don’t like to do what they’re told. We got into the cattle business as a consequence of wanting to buy estancias, because the land prices were so low. They were just begging. The country is so pretty, and the society is just so nice, I wanted to become a part of it. When you have this land, you have to do something with it. In addition to buying a beef cattle herd with some friends, I personally bought a dairy farm -- but, again, with no cattle. I bought the dairy herd from another farmer – a wealthy guy – who wanted to get rid of it. This was during the soybean and corn boom of eighteen months ago. He had a hundred and thirty Holstein dairy cows, and he told his farm manager: “Get rid of these things. They are a rounding error on my balance sheet, and the ground they are taking we can use to plant soybeans and corn.” So I bought them at an excellent price. In fact, the deal I cut with the guy, because dairy herds were also already in liquidation then, was this: he said, “Alright, you take the cows in exchange for one year’s milk production from them.” So, the cows graze on land – that doesn’t cost me anything. And my Gauchos, they were just sitting around, and I had to find something for them to do. So now they can milk the cows, and I just gave him a year’s milk production. L: So, in addition to the beef play, is there a dairy play? I’ve heard that not only beef cows are in liquidation, but milk cows are being turned into hamburgers. That should create a supply crunch, and there should be money to be made in the dairy business. Is that right? Doug: That’s totally true. Dairy prices have fallen about fifty percent in the last couple of years. L: But are dairy prices really falling? It doesn’t seem that milk is any cheaper in the supermarket… Doug: They must be, because the milk prices the farmers receive most places in the world are down fifty percent. Going back to what you said earlier, one of the reasons I thought that Argentina would be the best place to do this, is because of the stupid fascist government down there. They try to control everything, including the price of beef. All your input costs are very low, partially because it’s a depressed economy, and partially because of price controls. Land and labor are extremely cheap. But when you sell beef, you don't sell it at the world market price in Argentina. And when you sell milk, you don’t sell it at the world market price in Argentina either. So, I’m looking for significant profit from the fact they are now controlling the prices. But that will come to an end. Want to hear something unbelievable? It’s possible Argentina will soon become a net beef importer. One reason is the drought in Buenos Aires province, which is exacerbating the already extraordinary liquidation of herds. But more important by far are the price controls. Between the drought, the boom in grain prices, and the controls -- meant to artificially depress beef prices to bribe poor voters -- Argentina is creating a beef shortage for itself. It’s like creating a sand shortage in the Sahara. Reality alone will bring the controls to an end. Also, I have a feeling that we may see a shift to the right when the next elections come up in 2011. Two of the leading candidates to replace Christina [Argentine President Christina Kirchner] are both free-market-oriented guys. I don’t mean radically free market, but pretty free market. Either could turn the place around, however, much the way Roger Douglas turned New Zealand around in the mid-eighties. And if that happens, Argentina could boom and blossom, and the value of my land and cattle would jump just from the releasing of controls. Joining the real world market could result in a double overnight. L: So, there’s a political speculation as well. Doug: Yes. The best speculations always capitalize on a politically caused distortion. My dairy herd, within the next couple years, will be up to three hundred cows, which is the maximum capacity of my milkery or tambo [the word “tambo” comes from the Inca language, and in Argentina it’s a synonym for dairy farming]. And eventually, we should get our beef herd up to ten or twelve thousand head. And of course, when we are up to twelve thousand head, we’ll have ten thousand head that we can sell into the market every year. This would be a significant income stream. I think it’s a good time to get into the business, and Argentina is the right country, because of the price controls. L: For people who don’t want to go to Argentina or fear that the price controls may never be lifted, what other countries would you recommend? Obviously you wouldn’t want to do this in the U.S. Where would you go, if not to Argentina? Doug: The U.S. and Canada are huge beef producers, but they’re not ideal environments. For one thing, they have long, cold winters, especially in the plains states and Alberta. Cold takes weight off animals, so you have to feed them more. And the winter pretty much precludes their eating grass, so you’re feeding them hay or silage -- very expensive. Surprising to most people is that the largest beef-producing state in the U.S. is Florida. The winters are perfect -- but the summers are way too hot, and heat is also the enemy of beef. Plus, the pasture is generally very poor. Beef cattle can live on Florida grass, but horses, for instance, absolutely cannot. And the insects are a problem in a lot of places. Where we are in Argentina, the climate is ideal year-round, the grass is good, and insects aren’t a problem. I’d be willing to look at Brazil or Bolivia. Paraguay is very interesting, actually, in a lot of ways. The problem with Paraguay is that there are no transportation facilities there, besides trucks. It’s one of the best places in the world for growing everything from cattle to corn to soybeans, but the transportation for shipping the stuff out is very problematical. And if you want to get even stranger than that, I would go to the eastern provinces of Bolivia, the so-called Media Luna. Bolivia is really at least two different countries that are sociologically, demographically, and geographically as different as night and day. I think there is an excellent chance that Bolivia is going to split up in the future into at least two countries. The Santa Cruz/Media Luna area, which is the agricultural lowland, is also an excellent, politics-based speculation. The land in the Media Luna is very cheap and it’s really beautiful, albeit in the middle of nowhere. Let the Quechua and Aymara [the languages and the people who speak them in the Bolivian highlands], which Morales [Bolivian President Evo Morales] belongs to, in the dry highlands have that area. I like Brazil, too, but it has done so well in recent years, it’s not particularly cheap anymore. So I’d rather go for places that are cheap, where I can see a possible explosive upside as opposed to a place that’s nice like Brazil, but where the market recognizes that it’s nice, and that’s already reflected in the prices. L: Are there places you might go outside of Latin America? Europe is as controlled as the U.S., but some governments might decide to support some agriculture. Say, Denmark suddenly decided it’s going to subsidize the dairy business, would you consider going there? Doug: Well, dairy is the biggest form of agriculture in Denmark; and since it’s Europe, I presume it’s already heavily subsidized. But I don’t know of any such opportunities there right now. Western Europe is high cost, high regulation, high tax. And too far north to be very productive. I’d forget it. Eastern Europe is a possibility. Land is still relatively cheap in Serbia. L: Yes, and they have a flat tax structure and free trade with Russia – so you’d have access to the whole Russian market. Doug: Yes. Ukraine and Romania might also be interesting, since the Eastern European property market has collapsed. But the problem with farming operations is that you’ve got to supervise them. There is a saying in Spanish: El ojo del amo engorda el ganado. L: “The eye of the master fattens the cattle.” Doug: Yes. The fact is, if you are not there, and you don’t have people who are really reliable… L: I get it – as you said, you like living in Argentina. So you’d have to like living in Serbia or the Ukraine for it to make sense to get into the cattle business there. Doug: Right. That goes for Argentina too [Laughs]. So that’s the problem with investing in farming, on a first-hand basis; you’ve got to be on the spot several times a year, and you’ve got to have some degree of confidence in the guys on the ground running the operation. But I think it’s a good thing to do if you have an inclination, have the capital, and want to spend time there. L: And for the people who don’t want to buy a ranch, is there an ETF in cows? Or is there an easier, less laborious way to invest that you can recommend? Doug: Yes, there are a couple of relevant ETFs – at least one for cows. There are futures in all the agricultural products. But that’s a day-to-day kind of thing that requires its own due diligence and effort. L: If you grow your own herd, you don’t have to be right on the timing, you just have to be long when the time is right? Doug: That’s right. When you are actually growing the cattle, you just have to be right on the trend, as opposed to picking the right day when you are speculating. All things considered, I think the countries in South America are the most interesting, for all kinds of reasons. But part of that is my taste. The key is this: if you’re going to buy real estate abroad anyway, for the kinds of reasons we discussed in our conversation on currency controls, or others, you should pick land in a place you enjoy being. And if you’re going to do that, you might as well put the land to work – with cattle and dairy herds being an obvious way to do that. For me, this adds up to a working estancia in Argentina. For others… it’ll be wherever the stars align for them. L: Got it. You know, I do like Serbia… and Belarus… I wonder… Doug: Have fun. Doug Casey is the chairman of Casey Research and co-editor of Casey’s flagship publication, The Casey Report. One of Doug’s favorite sayings is that the Chinese word for “crisis” consists of two symbols – one means danger, the other opportunity. And that’s what Doug and his team are best at: with an unfailing instinct for emerging trends and budding opportunities, they consistently have been making double- and triple-digit gains for their subscribers. Right now, one of their favorite plays is betting on an economic development that is all but inevitable… Click here to read more.

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