(Interviewed by Louis James, Editor, International Speculator)
Almost exactly three years before the 9/11 attacks, Doug Casey had one of his famous Guru Moments, writing in the September, 1998 edition of the International Speculator:
Terrorism is becoming a major force in the world, as evidenced by Clinton actually referring to the use of nuclear, biological, and chemical devices in the U.S. I've thought their use against U.S. targets was an inevitability for years. But with the U.S. government launching its own terror strikes against Third World targets, the inevitable is starting to look imminent. Let's put it this way: Living in Washington, New York or other population centers is not terribly prudent.
And again, the International Speculator that arrived in mailboxes mid-July, 2001 – rather good timing – had a feature article entitled "Waiting for World War III", which discussed, at great length, terrorism and Islam – and even mentioned Osama Bin Laden.
L: Tatich, we've touched on terrorism a number of times in our conversations, particularly when we discussed the military and in our conversation on the implications of the attack on the IRS building a few weeks ago. Let's stop beating around the bush and talk about terrorism.
Editor's Note: "Tatich" means "Big Chief" in the Mayan language.
Doug: Okay, but, as with most areas where there's a lot of sloppy thinking, we should first start with a definition. If words are used too loosely, or inaccurately, then it's really impossible to know what is actually under discussion. "Terrorism" is a concept that everybody talks about, but almost nobody bothers to define. According to Webster's New World Dictionary, terrorism is "the use of force or threats to intimidate, especially as a political policy." This implies that all governments engage in terrorism daily against their own citizens – which is actually true, as anyone who's been audited by the IRS can tell you. A somewhat narrower definition of terrorism is: "an act of wholesale violence, for political ends, that deliberately targets civilians."
As we discussed in our conversation on the IRS attack and unintended consequences, the government's definition of terrorism is "the unlawful use of force or violence against persons or property, meant to intimidate or coerce a government or the civilian population as a means for achieving political or social goals."
L: What a great self-serving definition.
Doug: [Laughs] It really is funny. And more than a little Orwellian in the way the meaning is twisted. By the government's definition, it's perfectly all right to do these things – as long as it's legal.
L: Not even that – hence the dodge of sending prisoners accused of no crime in any court of law to Guantanamo, to get around the illegality of indefinite detention. The message is that terrorism, even torture – "waterboarding" – is just peachy, as long as it's the "authorities" doing it. Did you hear Karl Rove defending torture of the Guantanamo prisoners? He said he was proud of it, and that the intelligence gathered was invaluable. Apparently rights, and even right itself, is of no concern.
Doug: Last year, I debated Rove in New Orleans – you'd never know what a moral cripple he is from the pleasant and personable exterior. We should discuss the banality of evil at some point.
L: I heard that debate and was proud of you for telling him to his face that he ought to be ashamed for Guantanamo and other crimes committed by the administration he was part of. But back to terrorism. Given your definition of "an act of wholesale violence, for political ends, that deliberately targets civilians," why is this important to us in particular – other than as something to be avoided?
Doug: Because terrorism is the future of warfare. Far from going away, it's going to become the most common form of military conflict.
L: You don't think America can win the War on Terror?
Doug: [Sighs deeply] No. Not only is that impossible, the very idea is meaningless. Terrorism is not an enemy – it's a tactic. You can't have a war on terrorism any more than you can have a war on artillery barrages, cavalry charges – or a war on war, for that matter. The first step in winning a conflict is to identify the actual enemy. And the fools in DC can't even do that.
But before we look at the future, it's worth noting that terrorism has long been a favored tool of those in power, going all the way back to ancient times.
L: Sure. As with your IRS example; that's why they periodically crucify ordinary Joes – it keeps the rest in fear, and hence quiescent. People don't pay taxes out of pure love for the homeland – it's plain terrorism that keeps them in line.
Doug: Of course. It's just not on the scale of Genghis Khan or Tamerlane, who used to stack skulls into pyramids. Or the Romans, who literally did crucify people to show what happens to those who go up against the state.
L: Agreed, but on a moral plane, it's equivalent; it's not about what's right, it's about enforcing submission.
Doug: Sure, you could say that "the state" is actually terrorism on a grand scale. It's bizarre how most people view the state as necessary, or even benign. It may offend some of our readers, who have been programmed into believing the military can do no wrong, and that the U.S. always has God on its side, but logically, the bombings of Hamburg, Dresden, and Tokyo are prime examples of state-sponsored terrorism. World War II, in effect, legitimized the concept of mass murder of civilians. As late as World War I, the concept of incinerating whole cities would have been totally beyond the pale; WWII turned the moral clock back to the middle ages, when the wholesale slaughter of civilians was considered acceptable. I suspect the "Long 19th Century," from about 1776-1914, will be looked back on as a golden age, a peak of civilization, when the individual was ascendant, the state was under control, free market capitalism was lauded, and progress seemed natural and inevitable. Technology has improved since then, but it's a mistake to conflate technological progress with moral progress.
L: I can't think of a clearer example than the bombing of Hiroshima and Nagasaki. It's said that using atomic bombs on Japan saved American lives – but the lives saved were those of combatant soldiers, and the lives taken were of non-combatants, including many thousands of women and children. The U.S. government vaporized Japanese babies with the sole object of forcing submission. I'm not saying the Japanese were saints. I'm just pointing out that this was not a traditional military victory, in the sense of the U.S. armed forces beating those of Japan; it was simply use of massive force on a civilian population for U.S. goals – terrorism.
Doug: Yes. Although Germany and Japan – both of whom were ruled by psychopathic criminals – originated the use of terror during WWII, it was the U.S. that perfected it, and brought it to an industrial scale. That was most unfortunate, in that it deprived the U.S. of the high moral ground. And, as Napoleon observed, I believe: in warfare the moral is to the physical as three is to one. That loss of moral high ground has really hurt the U.S. in its war against Islamic radicals – which is really what the so-called War on Terror is all about. After Bush started the renditions (basically kidnapping and "rendering" the victim to some amenable jurisdiction), institutionalized torture, and set up the Guantanamo prison, the U.S. became just another degraded country in the eyes of the world.
But the whole post WWII era has been amoral, as well as a strategic and tactical disaster for the U.S. Remember that the threat of societal annihilation against the Soviets was called the "balance of terror?"
L: Mutually Assured Destruction. I remember. When I was in college, the acronym seemed appropriate: it was MAD to assure everyone's destruction! But I have to admit that it seems to have worked. It kept the Soviets contained until they fell apart from their internal contradictions and stupid economics. (Stupid in your technical sense of the word: an unwitting tendency towards self-destruction.)
Doug: I remember that as well; people recognized the seemingly insane nature of the MAD policy at the time. "Dr. Strangelove" showed its comedic aspect. Be that as it may, MAD does seem to have worked. But it may have been wiser for the U.S. to have just let the Soviets expand, and not gotten into Korea, Vietnam, and numerous smaller wars. The U.S. would have become much wealthier without those huge expenses, and the Soviets would have bankrupted themselves much more quickly. One Afghanistan almost did them in; two, three, many Afghanistans would have done so, much, much sooner.
At any rate, the nature of warfare has changed forever, just as it did after WWI, and again after WWII. It's now once again mutating. Terrorism, as a method of warfare, is definitely the wave of the future. That's partly because "total war" enlists the country's civilians, through propaganda and mass media; they've almost become combatants without rifles. Whipping up "patriotic" fervor, and intimidating people with charges of "treason" and being an "enemy combatant" tends to make the whole country, at least psychologically, an armed camp. So striking out against civilians today actually makes some military sense – much more than in the past.
Terrorism is also extremely cost-effective – and anyone can use it, with or without training or experience. It's a bit like Forrest Gump described shrimp. You can fry it, boil it, stew it, fricassee it, sauté it, bake it, steam it, or just have it raw.
It's been called "open-source warfare," a phrase that seems right on target to me. One terrorist sees what another does, and learns from it. People can invent infinite variations and programs of attack. A failed act of terror, like that of the "shoe bomber" – which couldn't have brought down the plane even if he succeeded, or this recent Nigerian case, is almost as good as a successful one. The government response is, predictably, more destructive than the act itself. Further, terror is massively parallel. There is no "leader" to kill; there are hundreds of heads to the hydra.
Deadly devices, sometimes even with somewhat larger-scale destructive capability, like that backpack full of nails and explosives found during the Atlanta Olympics, can be made with cheap, off-the shelf supplies. And with every attack and attempt, the ideas of how to mount such attacks spread, just like open-source software.
L: The guy flying his plane into the IRS building sure seems to have been copying the 9/11 terrorists.
Doug: Maybe. And maybe he was just using the most effective means at his personal command. Terrorism is like jazz; it's all about improvisation and variation. That's why conventional forces are dead in the water against it; they're all "by the book," with top-down command and control. And as we discussed in our conversation on the military, standing armies are dead ducks, just like aircraft carriers. They have no chance against small groups of individuals carrying out deadly attacks against "soft targets," like small towns, pipelines, and so forth. As much as it may seem like a throwback, something like a militia is really the only form of organized force I can see having any chance of success in this environment. Better not to give the enemy a reason to fight at all…
L: You've given speeches before on "Making Terror Your Friend." Perhaps this is an opportune time to point out that you don't have any interest in blowing up people in their homes to achieve political ends, or any other ends. The point is that since it's a trend very firmly in motion, there are investment implications. Like it or not, terrorism is here to stay, and it's stupid to ignore it.
Doug: Quite so. In spite of the impression our conversation on alcohol, tobacco, and firearms may have made, I'm an extremely peaceable type. I don't want to be anywhere near any place where people are hunting and killing one another. It's just unpleasant, and the chances are excellent your number will come up. I'm speaking from what you might call an academic point of view.
That said, only an idiot fails to recognize that in an advanced technological economy an individual can have an immense, disproportionate, effect if he wants to do damage. It's not like in pre-industrial days, when a single person was limited to perhaps setting a fire, or maybe stabbing someone. Today, an individual terrorist can alter the direction of society. And there are hundreds of millions of candidates for that role.
In my view, the trend towards terrorism as the next evolution of warfare is about as certain as they come. It's not just the U.S.; all the big nation-states are on the ragged edge of bankruptcy. Their huge bureaucracies, oppressive tax systems, complicated regulatory regimes, subsidies, bailouts, fiat currencies, and welfare programs are – every one of them – near collapse. They were confidence schemes. It's not just standing armies, but the nation-state itself is a dead man walking at this point.
L: Because the lumbering dinosaur can't compete with the fleet little mammal?
Doug: That's a good analogy. These giant dinosaur-states are thrashing around in their death-throes, and they are extremely dangerous – at least while they can still pay the salaries of their minions in the police and the military. And that very fact is stirring up a lot of little creatures that are going to want to see them die sooner.
L: I can see that; the more villages and such they bomb, the more enemies they make, and those new enemies provoke even more thrashing about, which creates even more enemies, provoking leviathan to even more violent and oppressive responses. It's a vicious cycle that sure seems to be taking the current world order down the spiral towards oblivion.
Doug: Yes, I'm completely convinced that all of the world's major nation-states are going to become much more oppressive as they try to keep things together. But it won't work. They are perpetually behind the curve, always fighting the last war.
Today, they talk about Al Qaida being "our enemy." But, first off, Al Qaida isn't a country. You can't invade it, nor capture its capital. It's such a decentralized and amorphous entity, there's simply no military way to defeat it.
L. It's not even a military organization. There's no top general to assassinate. It's a disorganized movement of Islamic people pissed off at the West – it's an idea, more than anything else.
Doug: That's right, and now that the U.S. has whacked the hornets' nest, I believe there are now scores, maybe even hundreds, of Al Qaida look-alikes all around the world. They don't take orders from some Al Qaida chief – they watch each other and take ideas from those who pull off successful attacks.
Actually, it's a sign of how backward the thinking is on this subject that the U.S. apparently still sees Al Qaida as a hierarchical organization. At most, it has franchises and licensees. The best analogy is perhaps the drug business, where there are dozens of large organizations, unrelated to each other, but that share the same objective and similar methodologies.
They need not think alike, nor even like one another, but they have a common enemy, learn from each other, and improve their methods with each iteration. So, even if the U.S. were to somehow, miraculously, wipe out every living member of Al Qaida today, the idea would continue. New volunteers would pick up the banner, and the fight would continue. It would make absolutely no difference to the way the world is evolving.
L: And at an accelerating pace.
Doug: Yes. The War on Terror is being fought mainly in Muslim countries. It's not being called a War on Islam, but to the people living in those places, it's increasingly looking like a War on Islam, and the fact that most U.S. allies in the Islamic world are oppressive regimes doesn't help at all. Iraq, Afghanistan, Egypt, Saudi, and Pakistan, among others, are all run by quislings, puppets, or stooges of the U.S. The average citizen of those places despises his corrupt government, and recognizes that the U.S. is propping it up – which gives them good reason to hate the U.S. The demographics in these places are a time bomb – half the population is under 30, and they're mostly unemployed. Many would form terrorist groups out of boredom, except they have much better reasons. The U.S. doesn't have any real friends in those suppressive governments anyway; those people will change sides in a New York second. And it's getting worse.
What do the people in those countries perceive? Christian soldiers kicking in doors and shooting people – echoes of fighting that's gone on for over a thousand years.
The West may think they are fighting a War on Terror, but Muslims are going to see it increasingly as a War on Islam. And when they react accordingly, it will become so.
L: If they come to see the War on Terror as a War on Islam, a religious war against a more powerful oppressor, they will fight tooth-and-nail, to the last man, woman, and child. If that's the shape of WWIII, it'll be a bloodbath to eclipse all others, combined.
Doug: I'm sorry to say that I agree, and that's the way I see things headed. And what method of fighting will they use? Terrorism. And what will be the West's response? To escalate the fight, using the wrong strategies and tactics – still looking to decapitate a beast with no head – and using the wrong tools: all that expensive junk meant to fight a defunct USSR. You can't beat a popular guerrilla movement without widespread killing. Genocide, essentially.
If things continue down this path, Islam will win. Decentralized guerrilla terrorism is simply much more efficient and effective than national armed services could ever be. A $1000 RPG can take out a $5 million M-1 tank, or a $50 million helicopter. A $2 million cruise missile is expended to kill a few fighters, plus a bunch of innocents. Meanwhile there's a new crop of several million potential fighters being born every year.
L: That, I understand, is what brought the Soviets down in Afghanistan; the economics of the war were totally disastrous for them, losing entire choppers full of people and materiel to one fighter on a camel with a shoulder-fired missile.
Doug: It is an economic war. Osama Bin Laden has even said so; the U.S. will bankrupt itself. It won't just be Afghanistan and Iraq; it could spread to Pakistan, Somalia, and a dozen other places. It's going to be Che Guevara's dream – two, three, many Viet Nams.
L: And there's no way to stop it?
Doug: Do you think the West will suddenly pull an about-face in foreign policy?
Doug: And remember, there's no really effective way to defend against this. Remember that a couple dozen guys paralyzed the whole city of Mumbai, creating total havoc and inflicting a major blow on their enemy, with nothing more than small arms.
But that took some organization, which you don't even really need to create havoc and strike a blow. One lone wolf (no offense) can create widespread hysteria, as Ted Kasinski, the Unabomber, demonstrated. And the chances of an individual, acting on his or her own, being caught are extremely low, precisely because they are acting on their own. There's no one to rat on them.
L: Just look at the chaos caused by those two guys driving around Washington DC a couple years ago, one in the trunk with a rifle. That took neither great planning nor strategy; it was just a bit of reasonably effective camouflage and mobility – and it was dirt cheap. Even with people being shot in broad daylight, it took the machinery of the state weeks to catch the guys. Just two guys. What happens when there are hordes of individuals acting similarly? There's no way to stop it.
Doug: That's my point. That fool Bush said the U.S. was attacked because "they hate our freedom." I can't imagine a more ridiculous assessment. Especially when Bin Laden clearly spelled out why the 9/11 attack occurred – three reasons. One, foreign troops in Muslim countries. Two, the U.S. propping up puppet regimes in Muslim countries. Three, the U.S. supporting Israel, which they view as a usurper of Palestinian land. In point of fact, these are reasonable objections on his part.
What should be done about this insane War on Terror, before it gets totally out of control, and you get everything from the kind of attacks we've discussed above, all the way up to nuclear explosions going off in U.S. cities? While the U.S. is bankrupting itself? I suggest the manly and honorable thing to do is sincerely apologize for past aggressions. Combined with disinvolvement of the U.S. Government and military from the Mideast. If they don't do that, this thing will almost certainly escalate, and get out of hand.
When it comes to the next generation of warfare, terrorism, the only way to win is not to play.
L: Okay, so, I'm feeling pretty terrified. How is it we make this trend our friend?
Doug: Well, one obvious consequence of this trend is higher energy prices. However the War on Terror, or Islam, plays out, there's a good chance the Middle East will go completely up in flames before long. And even if the sands of Arabia do not end up getting turned to glass, the tensions alone make higher energy prices a foregone conclusion. I just don't see any way around that at this point.
L: And that's on top of Peak Oil, which we covered in one of our early conversations, on energy.
Doug: Just so. Iran seems like the obvious flashpoint. If the U.S. strikes Iran, oil will go to $200 a barrel. In the long run, that oil could be replaced, especially at the higher prices that make oil sands, shale oils, heavy oils and such more economic – but in the short run, the supply is extremely inelastic. You can't just throw a switch and get more oil from some other source. You combine that with the financial chaos that would ensue, and even decreased usage wouldn't make up for the crunch. Higher oil prices seem like a lock-synch at this point.
L: The caveat emptor there would be to caution our readers not to try to time this. Playing the energy field for short-term gains is extremely tricky. This trend is the kind anyone but an exceptionally tuned in and able expert should place long-term bets on. You buy and hold for a major transition in the world to unfold.
Doug: Yes. The key would be to buy the companies that have the goods, are well managed, and are actual businesses you would actually like to own a part of, to capitalize on the megatrend. That's the way to do it.
L: Would it make sense to focus on companies with North American assets?
Doug: Not necessarily – buying at the right price is much more important. You can't come at these things with a cookie cutter. It's like knowing 100 years ago that the auto industry was going to boom and grow – if you bet on any but one or two of the hundreds of car companies that sprang up, you'd have lost money. Same thing with the air travel and television businesses; most of the companies went bankrupt and most people in early lost money. The same thing will happen with energy. You've got to be extremely selective, or you'll be right about the trend but still end up with nothing but pretty stock certificates to use as insulation in your walls.
L: Well, it's a good thing we have a wunderkind leading our Casey energy division. Marin Katusa is something of a mathematical genius, and he can sort through an amazing amount of hard data, looking for the best values.
Doug: I hate to sound as though this conversation were a paid advertisement, but I really do think that when it comes to all aspects of the energy business – from how you find the stuff, to how you get it out of the ground, to assessing the corporate structures and the people leading them – there really is no one better than our Marin.
L: Can't argue with that. So, what else – how else do we make this trend our friend?
Doug: Plan to profit from the coming diaspora.
As I've said many times in these conversations, diversifying your assets – and your personal presence – across different political jurisdictions is one of the most important things you can do in our world today. That's simply prudent at this point.
But as the wealthy countries of the world continue spiraling down, they will become increasingly Orwellian, and that will send out droves of people with resources in search of friendlier climes. The next real – or imagined – terror incident in the U.S. could take things in a really ugly direction in very short order.
L: So…if you can predict where rich Americans, Brits, Europeans, and others will flee to, and buy real estate before they get there, you can profit? Sounds like another plug for Argentina coming…
Doug: No question, that's my favorite pick, but I have bets on New Zealand and Uruguay as well. But, as per our conversation on All Things Fun last week, you could do worse than to look for any place you like that's ATF-friendly. Perhaps a small country, even if corrupt, with a government too disorganized to cause you any serious inconvenience.
L: Okay. What else? If the police-state is coming, would you invest in companies that make shiny black boots? Prison companies? Surveillance cameras?
Doug: That's tricky, harder to spot clear winners. Private prison companies, for example, might have seemed like a good bet, especially given the ever-expanding War on Some Drugs. But they've pretty well filled the country with new prisons; I suspect, and hope, that party is over. And the prison population actually declined last year, for the first time in decades.
L: [Laughs] That's because cash-strapped governments have all the cops out giving people speeding tickets, fining people for J-walking, or chasing anything else that will bring in revenue. Actually investigating crimes, let alone catching criminals, putting them on trial, and then incarcerating them for life is an expense, not a revenue-generator. Besides, criminals shoot back – that's dangerous!
Doug: [Chuckles] Yes, that's actually the case; it's more economically beneficial to the state, in the short term, to let the criminals go free and focus on squeezing the law-abiding citizens for every penny they can get out of them. Although it must be said almost half of those in U.S. prisons are there for non-violent drug crimes; they should all be released tomorrow. But just about every fly-speck town in the U.S. has a heavily armed SWAT team these days, and they're becoming accustomed to using them for trivial matters. Other than that, police are best at giving out speeding tickets.
L: Wouldn't want to miss the doughnut sale. Got it. So, your mantra of "Liquidate, Consolidate, Create and Speculate" remains the way to play, with a focus on long-term energy bets being the speculative focus as a consequence of the terror trend.
Doug: That's right.
L: What about defense companies?
Doug: Well, I think it's a misnomer to call them defense companies, just as it was an Orwellian twist to rename the War Department, the Defense Department after WWII. But, apart from that, I suppose they'll keep getting fat contracts until the U.S. Government imposed the way the Romans did at the end of the 4th century (see our conversation on Rome).
L: Okay then. Thanks for another very informative, if not exactly cheerful, conversation.
Doug: Sure thing – talk to you next week, here in Argentina.
L: That's right! My flight from Lima to Buenos Aires is tomorrow morning – I look forward to seeing you in Cafayate.
Doug: Till then.
AS Doug and Louis said, energy is a great investment to catch tomorrow's trends early. But you have to find the right opportunities -- undervalued companies with sound fundamentals that give you a good entry price. Marin Katusa has been particularly proficient in finding those small-cap companies: Of his recent 19 stock picks, 19 were winners -- that's a 100% success rate. Learn more about Marin's picks and how you can profit by clicking here.
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