Rising Prices and Falling Values—Inflation and Social Decay
Doug Casey

International Man: Whether it’s at the grocery store, the mall, restaurants, or airports—anywhere you turn—people are finding inferior goods and services at higher prices.

Living standards have taken a big step backward recently and are trending even worse.

What is really going on?

Doug Casey: People have a natural inclination to blame the producers—the butcher, the baker, and the gasoline maker—for higher prices. But that’s a huge mistake. Higher prices (barring a natural catastrophe that destroys real wealth) are 100% caused by increases in the money supply. It’s perverse that producers are blamed for price inflation while the Fed and the government are lauded for fighting inflation. The public’s perception is the exact opposite of reality.

Producers fight the effects of government currency debasement. Surprisingly, few people confront the fact that the government doesn’t create anything of real value; it doesn’t weave, spin, or sew. It only produces regulations, taxes, fiat currency, and fiat credit. These things take prices higher. Inflation of the currency, which is to say increasing the amount of purchasing media above the increase in real wealth, amounts to the State subtly stealing capital and wealth from its subjects.

But reality be damned. The average citizen sees his government not as a predator, but a protector. He’s been taught that in “our democracy,” the government is “We the People.” Producers are blamed as exploiters. The real enemy, however, is the State and its central bank, the Fed.

There are only two ways to survive: By producing and trading, or by stealing what others have produced. Currency inflation doesn’t “stimulate“ the economy; it’s a fraud permeating society. It works to overturn trust and standards of morality. It’s a poison that creates a class of parasites and eats away at the middle-class citizen’s standard of living.

In a truly free market society, prices would drop constantly, and the standard of living would rise. The Fed’s target of 2% inflation is not only crazy but evil.

International Man: How does inflation erode ethical standards? You mean it leads people to cut corners, lie, cheat, or even steal as they try to maintain their living standards?

Doug Casey: Absolutely. The prime directive of all living things is: survive! That’s true whether we’re talking about governments, corporations, individuals, or amoebas. They’ll do whatever necessary to survive. In the case of individuals and corporations, survival is about producing.

Inflation is about theft—not production. It’s a subtle form of theft, like embezzlement, that’s hard to diagnose. Theft discourages production. If there’s less and less production, more and more people resort to theft in order to survive. Theft breeds more theft.

Economics is the study of how men produce and consume in order to survive. The average person may not understand much about economics, but they have an intuitive understanding of morality. When the currency loses value they sense a theft. Especially if they see the “elite“, the heads of governments and large corporations, becoming wealthy. The elite set a country’s moral tone. They’re also in a position to profit from inflation. It’s said that a fish rots from the head down; the same is true of a country.

Currency inflation leads to violence, revolution, and overturning of civil society itself.

International Man: How does inflation contribute to a more litigious society, with people increasingly looking to take money from others through the legal system?

Doug Casey: Although the average person doesn’t understand economics very well, he does understand that some people are getting rich without producing anything. In today’s US, a certain class of people have gotten rich because of inflation (theft), not production. How so? They’re wired to the government and the Fed. When fiat money is created, it goes to them first and in the largest amounts. The average guy doesn’t benefit from trillions of government spending. The “elite“ and members of the Deep State, however, benefit immediately and directly from fiat currency creation.

The broad public suspects a theft is going on. They just can’t quite figure out who the thieves are. So they blame the producers. Which suits the government perfectly; they can “step in“ and pretend to be the hero.

A society based less and less on production and more and more on the theft of pre-existing wealth inevitably becomes a Hobbesian warzone of all against all. The legal system is supposed to protect society from theft by offering an alternative to physical violence. However, as society is increasingly captured by non-producers, they corrupt the legal system. Millions of laws and regulations have made the US legal system a vehicle of theft and a playground for parasites.

Let me paraphrase Al Capone. “One thug with a gun can steal $100 from a store. If he’s caught, he’ll go to jail for years. But a lawyer with a pen can rob a country of millions, never get caught, and become a leading citizen.” That’s what’s going on.

The US legal and monetary systems have become corrupt. The fact that the US has almost 1.4 million practicing lawyers is a symptom of corruption. They’re used as weapons to steal from producers. The law has become so complex and degraded that its extreme costs and slowness throws sand in the gears of the economy.

International Man: What are some historical examples of inflation leading to significant social and cultural degradation, and what lessons can we learn from them?

Doug Casey: The destruction of the currency always leads to a social upset. That’s because people who produce typically hold their savings in the national currency. But if the national currency is destroyed, a huge portion of what they’ve worked for throughout their lives is also destroyed.

Inflation upsets the entire basis of civilized society. It was a major reason why Chiang Kai-shek’s regime collapsed in China after World War II. That’s a major reason why the Communists—whatever else they’ve done to China—have been reasonably competent managers of their currency.

The Weimar Republic in Germany after World War I completely destroyed the Mark, and the social upset that inflation caused led to rioting in the streets between the Nazis and the Communists throughout the 20s, followed by a Nazi victory in 1933 via a democratic election.

Some countries suffer from perennial inflation, which results in constant attempts to take over the government. Why? The same reason Willy Sutton robbed banks: “That’s where the money is.”

When real wealth becomes hard to produce, a certain type of person is drawn into politics. They realize they can become wealthy through political power, as opposed to producing things. It’s why countries with unstable currencies become unstable socially, economically, and politically as well.

International Man: You have frequently discussed how to protect yourself from inflation’s financial and economic effects with gold and other hard assets.

However, aside from the financial effects, how do people protect themselves from inflation’s negative social, cultural, and political effects we’ve discussed today?

Doug Casey: The most important thing you can do is gain skills. Lots of skills, both in breadth and in depth, so that no matter how things sort out, you’ll always be in a position to produce things that people want.

Let me share my favorite Robert Heinlein quote about this.

“A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.”

For many years, I’ve considered college to be a complete misallocation—even worse, a counterproductive waste—of four of the best years of your life and a lot of money. Why pay to have your head filled with incorrect ideas? Once planted, they’re corrosive and hard to wash away.

So the answer to the question: What should one do right now? Prepare yourself intellectually, psychologically, physically, financially, and skill-wise for tough times.

Put yourself in a position to produce more than you consume. Save the excess in precious metals, and learn to invest and speculate with that capital. Keep your wealth from being inflated away by your government.

As the impetus behind the International Man project, Doug Casey is an American-born free market economist, best-selling financial author, and international investor and entrepreneur. He is the founder and chairman of Casey Research, a provider of subscription financial analysis about specific market verticals that he has focused his investing career around, including natural resources/metals/mining, energy, commodities, and technology.

Since 1979, he has written, and later co-written, the monthly metals and mining focused investment newsletter, The International Speculator. He also contributes to other newsletters, including The Casey Report, a geopolitically oriented publication.

Doug Casey is a highly respected author, publisher and professional investor who graduated from Georgetown University in 1968.

Doug literally wrote the book on profiting from periods of economic turmoil: his book, Crisis Investing, spent multiple weeks as #1 on the New York Times bestseller list and became the best-selling financial book of 1980 with 438,640 copies sold; surpassing big-caliber names, like Free to Choose by Milton Friedman, The Real War by Richard Nixon, and Cosmos by Carl Sagan.

Then Doug broke the record with his next book, Strategic Investing, by receiving the largest advance ever paid for a financial book at the time. Interestingly enough, Doug’s book, The International Man, was the most sold book in the history of Rhodesia.

He has been a featured guest on hundreds of radio and TV shows, including David Letterman, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin, Maury Povich, NBC News and CNN; and has been the topic of numerous features in periodicals such as Time, Forbes, People, and the Washington Post.

Doug, who divides his time between homes in Aspen, Colorado; Auckland, New Zealand; and Salta, Argentina, has written newsletters and alert services for sophisticated investors for over 28 years. Doug has lived in 10 countries and visited over 175.

In addition to having served as a trustee on the Board of Governors of Washington College and Northwoods University, Doug has been a director and advisor to nine different financial corporations.

Doug is widely respected as one of the preeminent authorities on “rational speculation,” especially in the high-potential natural resource sector.

www.internationalman.com