(Interviewed by Louis James, Editor, International Speculator)
L: Doug, I just saw that Obama is threatening the regime in Syria with military force if they use chemical weapons in their fight to retain power. Unlike most of the pundits filling the airwaves with comments, you've actually been there. What do you make of what's going on?
Doug: I've been there twice, actually. On one of those, I was basically there over the Christmas holiday season. I rented a car in Damascus, drove around, and saw a lot of the country. I, of course, did the tourist things, like visiting the great mosque in Damascus and the Krak des Chevaliers – which is one of the best-preserved medieval castles anywhere – and the Roman city of Palmyra. But I also got down off my horse, as it were, and walked the souqs. I even checked out local beachfront real estate. They don't have much, but there's about 50 miles of beachfront, so I went to see if there were any bargains. I'll buy almost anything, anywhere, if the price is low enough, especially cheap beach land. I didn't see anything appealing – being the only foreigner on the whole strip didn't seem likely to work out too well, and not much fun in a culture that frowns on alcohol and bikinis.
Overall, I have to say that the country seemed reasonably calm and busy – in the "business" sense – without a great presence of police. I understood there was a significant secret police presence – it was definitely not a place to voice political opinions – but I didn't see signs of widespread public fear. The people did not seem particularly ground down with poverty or repression.
L: So, do you doubt the uprising now is a genuine rebellion by the oppressed masses – perhaps it's just a power struggle between different factions, some claiming to speak for the oppressed?
Doug: Well, you really have to live somewhere to get to know the place, and I didn't. I'm just saying that my impression of Syria, for all its evil reputation in the West – a veritable Mordor in the eyes of TV watchers – was not so bad. It was definitely less repressive than the USSR or Eastern Europe before 1990. Of course, the government was and is run by criminals – but that's true almost everywhere. I don't know who the good guys are in the current conflict or even that there are any.
L: So it looked fairly normal to you? But normal in that part of the world has hardly been a shining beacon of liberty and prosperity for all.
Doug: No, it hasn't. Since the USSR collapsed, the Mid-East, Central Asia, and Africa have competed for having the most repressive regimes and backward economies. One interesting thing to me was that the country seemed to be in a time warp – it was like going to other places as they were 40 years ago. There was almost no new building going on – I remember the big fuss at the time was that the Kuwaitis were building a Four Seasons hotel. That was going to be by far the classiest joint in Damascus, when done. At the time I was there, the best place was a rather down-at-the-heels Sofitel.
Another thing that you never hear on the news is that the country has exchange controls. Reporters seem to consider that part of the natural landscape. They're insulated from the effects of FX controls by their corporate expense accounts, and they don't understand those effects. This is one reason most reporting is so pedestrian and vapid – but I digress. Repressive governments always have exchange controls, because they make it very inconvenient for the locals to pick up and leave; as we've discussed in the past, the US is moving in that direction. Locals have to exchange their basically worthless currency for that of some neighboring country; otherwise, they have no way to spend when they get there.
I can also say that there wasn't an obvious military presence in Syria that I could see, but it makes sense that a huge portion of the GDP went to buying Soviet-era military hardware – tanks and jet fighters. In today's world, that stuff amounts to junk. And that's entirely apart from the fact that most Third-World armies are worthless for fighting real wars; their main purpose is to build a power base for the regime and suppress the people. Also, it's well known – thanks to Julian Assange and WikiLeaks, among other sources – that Syria is one of the places the CIA used to ship… um… dissidents, for lack of a better word, to be tortured. These things are not usually signs of a happy, peaceful population.
And there are deep-rooted reasons for tension. Syria – like almost all of the countries in Africa, the Middle East, and Asia – is an artificial construct put together, completely arbitrarily, by politicians in the boardrooms of Europe. In the case of Syria, it was assembled from some of the remnants of the Ottoman Empire by the Europeans after World War I. As in neighboring Lebanon and Iraq, it's got at least a dozen major religious/tribal/ethnic groups that are loyal mainly to themselves. The idea of a Syrian nation is a fantasy. It was inevitable that eventually Syria would fall apart – just as it was and is inevitable for most of the other artificially constructed countries to fall apart. This applies to the EU now as well, for similar reasons.
L: I didn't know that – about the dozen different religions. I would have expected the lines on the map to be artificial, since the people in the area were historically nomadic, but I would have thought they shared more in common, culturally. I suppose it only seems that way because I'm on the outside and have not looked closely.
Doug: Yes. Just to begin with, there's the Shia and Sunni Muslims, but there are many subdivisions within these and other schools of thought. There are also a number of different sects of Christians still there, and Jews as well. Some people worship Jesus, some worship Yahweh, some worship Allah. Nobody seems to agree on what these various gods really say or what they tell you to do or not do, but most everybody seems to take it pretty seriously – and in the Middle East, much more than almost anywhere else. Religious wars seem to be a specialty of the various children of Abraham; the Hindus, Jains, Buddhists, Zoroastrians, pagans, atheists, and what-have-you, are historically much, much more live and let live.
L: So, presuming that the majority of those who control the government in Syria are of one religious/ethnic/cultural group, as is often the case, do you think they'd have any qualms against using chemical weapons against the rebels? It could seem like "us vs. them" to them.
Doug: I wouldn't doubt that at all – although chemical weapons are messy, and hugely overrated. But all this fuss and bother about Syria's chemical weapons is distorted and misguided – just as was the case with the nonexistent weapons the Iraqis were said to have.
In the first place, if one believes that governments should exist at all and that the need for a military is one of the justifications for the state, then one can't argue that such states should not have weapons. The details of the weapons are irrelevant once you grant the basic premise. And it certainly makes no sense to argue that some governments should have certain weapons, and some should not. The US has huge arsenals of chemical weapons, and no one is calling for military force to take them away. Why does the US have them? Who might they use them against?
L: Well, some governments are thought to be more responsible, or less evil, than others…
Doug: Doesn't matter. The people running any given government, and their intentions, can change very quickly. You can't accept the idea of sovereign nations and argue that some should be able to have weapons that others cannot. And if you did try to impose different weapons rights on good-guy countries and bad-guy countries, you'd have to have some sort of super-country to make it stick, and that would be very dangerous indeed. Who decides who is a good guy? The fact is that the Germans during World War II actually thought they were the good guys.
L: Many people think the UN should be in charge and make that determination.
Doug: Those people are deluding themselves and are woefully ignorant of history if they think bigger government is better government... and dangerously and pathetically naïve if they think one super-state with the power to rule them all would be impervious to corruption. If the UN became the mightiest force on earth, then no one could stop them, and very bad things would happen. The UN having real power would be about the worst possible outcome. Thankfully, right now it's nothing more than an incredibly corrupt and dysfunctional homeowners' association for governments. If it got real power, it would become a much more serious magnet for sociopaths than it currently is.
L: One ring to rule them all and in the darkness bind them.
Doug: Exactly. It's the fact that the nations of the world are not united that has saved us from global mismanagement and despotism. It's too bad that there are only about 200 sovereign states; ideally we would have seven billion.
L: Power corrupts; absolute power corrupts absolutely. The antidote is decentralizing power as much as possible.
Doug: Yes. Just look at what the US is already doing, because it sees itself as top dog. The US has increasingly been taking on the role of global "RoboCop," using its military power to impose its notions of what should be on other countries and peoples around the world. The results are almost invariably destructive and counterproductive on the ground where US force is projected. Just look at the happy outcomes in Iraq, Afghanistan, and Libya, for just three current, quick examples. Furthermore, it's unethical to force US taxpayers to bankroll foreign interventions many of them – perhaps even most of them – do not approve of.
L: And it forces US troops who just want to defend their loved ones to go off and die in foreign lands for purposes that have nothing to do with why they signed up.
Doug: True enough – although the military has always attracted a certain type of young male who wants to visit exotic foreign lands, meet interesting people, and kill them. Even if it were true that Syria has chemical weapons, and even if it were true that the government forces in Syria plan to use them against their opposition – and in today's world chemical weapons are mainly useful against civilian populations in cities – that does not create a moral obligation on the US to go off and try to stop it. It would be quite blackly comedic if the US decided to use its own huge stock of chemical weapons to prevent the Syrians from using theirs…
Whenever I think of the US military, I'm forced to think of Dr. Strangelove, actually.
L: So just leave those poor, innocent people in Syria to die?
Doug: Well, those poor people tolerated their local despotism for years – and many of them surely participated in it or collaborated with it in various ways over the years, so it's arguable how innocent they all are. But no, that's not the only option. Those who find the actions of the Syrian state reprehensible and want to do something about it should be free to do so. The US government used to allow this with letters of marque and reprisal. Now of course, it's quite illegal for an American to even contemplate.
In my ideal world, people everywhere would be perfectly free to arm themselves and hop on a plane to wherever tyranny flared up, and help put an end to it.
Anyone who really believes that bad guys around the world should be stopped ought to stop trying to coerce others to take action via the state, and should volunteer themselves. If they are not willing to do that, it's just hypocrisy and cowardice to force others – taxpayers and soldiers – to do their bidding for them. If you want to talk the talk, then you should be willing to walk the walk.
L: But we don't live in your ideal world…
Doug: More's the pity. In any event, what the US is trying to do is completely insane. The Russians are very friendly with the Syrians, and even have a naval base in Syria. Direct US action against the government of Syria could provoke the Iranians as well. Becoming declared enemies of the Assad regime could have many negative consequences beyond what may happen in Syria – and will certainly hasten the insolvency of the US government.
Besides, taking out the Assad regime may only make matters worse – who's to say that whoever seizes power after Assad is gone will be any better? Perhaps the result will be a full-blown civil war that lasts for years, laying most of the country to waste in the process. Just look at what's going on in Egypt and Libya – did the people there become suddenly better off? Libya, by the way, is another country that's on the ragged edge of splitting up into several smaller countries or tribes, fighting over Libya's resources.
Things like this are terrible, but they've been going on since the dawn of history – it's arrogant and foolish in the extreme to imagine that outsiders can create lasting peace in places full of people who hate each other. There are dozens of places around the world that have imminent potential for genocide: Mali, Sudan, Congo, Nigeria, Uzbekistan, Tajikistan, and many others, not just Syria. At the end of the day, there's no way outsiders can make any of these places better. Outside volunteers might participate in the process, but the people in these places need to sort things out themselves, find solutions that work for them. One can only hope they're not typical political solutions.
L: So you're not advocating turning a blind eye to the woes of the world, just keeping the state out of it and leaving it to individual conscience?
Doug: Yes. But the question now is: which will be the next of these Arab despotisms to fall apart? Maybe Algeria? It could just as easily be Morocco or Mauritania.
L: What about the big one: Saudi Arabia? The guys on top there don't seem like the sort to inspire great love among the people.
Doug: Agreed. I don't know when, but I'd say Saudi is a slam-dunk candidate for blowing up. Something like half the population is under 25, and unemployment is huge. All the money is sucked off by the royal family; it's rather ridiculous that the country is named after the family that took it over after World War I. The place is a gigantic accident waiting to happen.
So of course, the US will stick its nose into that mess as well, at great cost. Saudi being the sacred homeland of The Prophet – "peace be upon him," as they like to say – putting US troops there to keep the oil flowing would lead to all sorts of trouble. The long war between believers in Jesus and believers in Allah has been going on since the 7th century and shows signs of seriously heating up.
L: So, in this world full of nation-states, what should be done?
Doug: I hate to put myself in the place of Thomas Friedman, busybody to the world, but if you ask me, I'd say the US should withdraw its troops from all foreign bases, cut military spending on the order of 90%, abolish the CIA, and stop intervening in foreign countries. That would be a good start, anyway.
L: Some people would say that's acknowledging defeat – admitting to the world that the US doesn't have the power to boss everyone around – and that could invite attack.
Doug: I would argue to the contrary: cutting our losses now will slow the US descent into insolvency, which is the absolute worst thing for "national security" – although that's a dangerous and grossly overrated concept. It might even give the US time to rebuild its economic and social strength, which is the real power that defeated the US's opponents in WW II. Most important of all, instead of meddling and making enemies, the US could again become the shining example it should be, the beacon of hope to people all around the world that the Statue of Liberty is supposed to represent.
L: I note that it's a statue of liberty, not a statue of some thug with a sword or club, like those that adorn gates and castles all around Europe. Right, not might, was the symbol of the America that Was.
But okay – investment implications? The trend towards more disintegration in North Africa and the Middle East can't be good for oil production…
Doug: No, chaos isn't good for oil production – but it's bullish for energy prices. Fighting over control of oil fields is never good for output. But not only can we avoid being hurt by higher prices, we can profit mightily from them. I'll leave it to your bro, Marin, to lay out the best ways to play investing in energy trends in the Casey Energy Report.
However, rising energy costs are not good for industry as a whole. That has implications for the whole global economy, which will have to absorb the higher costs.
On the most fundamental level, this trend – in Syria and the rest of that part of the world – is not good for either the global economy or world stock markets. That's because stock markets gain – or should gain – over the long term, based on growth in capital, and war destroys capital.
L: I was taught in school that WW II ended the Great Depression.
Doug: Any economist who looks at the data knows that's not true. But most of those who masquerade as economists today are really just political apologists, like Paul Krugman. War is an ill wind that blows no good. It is a purely destructive force that can only create a net loss for the world as a whole. I don't see any good at all that could come from US meddling in Syria or other such countries. It's not just asking for trouble – it's begging for a catastrophe.
L: But it's going to happen – so bet on higher energy prices… What else?
Doug: I may sound like a broken record, but I'd be remiss if I didn't remind people to diversify against political instability in the world by internationalizing their assets and lives, and to buy gold. I suspect very, very few have done so, however.
L: That brings up a question we've had from readers: could gold have peaked already? If you look at a long-term chart, say, a ten-year chart for gold, you'll see that the steady upward march has been broken. The top of the curve has definitely turned downwards, since last year. But you're as bullish as ever?
Doug: Yes. For starters, unlike what happened back in 1980, when gold last peaked, interest rates are extremely low, kept there artificially by the Fed. Back in 1980, interest rates had risen to extremely high levels, which encouraged people to switch to saving in dollars. In the 1970s – the period that led to the last peak – governments were afraid of inflation and were working to reduce inflation of the currencies. Now, governments are racing to debase their currencies at truly phenomenal rates. Even as we speak gold is heading up again. I'd say the chances of gold having peaked for this cycle are slim to none.
L: And Slim's out of town?
Doug: [Chuckles] Yes, exactly. But we'll be discussing how to survive and profit in a politicized economy at our upcoming Carlsbad seminar. I invite our current readers to join us there, although the number of attendees is quite limited, as always. It's going to be a worthwhile and enjoyable event.
L: All right then – thanks for another interesting conversation.
Doug: My pleasure, as always.