Editor's Note: Next week we're planning a special edition of this missive in which Doug will answer questions from readers. If there's anything you would like to ask him - about investing, the economy, where we're headed, his personal philosophy, or anything at all - send us an email to feedback@caseyresearch.com. We can't guarantee your particular question will be answered, but we will present them to Doug. The deadline for questions is Sunday, March 6. We look forward to seeing what nuggets you come up with.

L: Doug, last week we talked about turmoil arising from the clash between labor unions clinging to wages from the fat years and bankrupt governments facing lean-year budgets. You saw that as a sign of more imminent chaos - a warning worth giving - but we didn't really get into the subject of labor unions themselves. Knowing your philosophical bent, I'd bet your views on them might surprise many people...

Doug: My take is that there's nothing inherently wrong with unions, as long as they are voluntary associations of people - they're just associations working in certain trades or in certain places. It's natural. Sure, why not?

But there are problems with the way unions exist in reality today, particularly when membership is made mandatory. That's a violation of the human right to work. When you can't work unless you join the union, and union membership is limited - often to people with political connections, or family relations with union officials - it's clear that the union is not a defender of the little guy, but a kind of protection racket. It's a fraud.

That doesn't just harm the individual worker who may wish to enter a unionized field; it has broad economic consequences. When only union members can work, the union can set wages at whatever level they want. That makes the product or service in question more expensive for everyone in society. In other words, unions don't help the average working man - they only help those  who can get into the unions. They hurt everybody else: non-union workers, employers, and consumers at large. And it gives union bosses extraordinary power.

L: Always a dangerous thing. As a matter of principle, whenever unions get politicians to write their wishes into law, what they do ceases to be collective bargaining and becomes naked coercion. And of course the politicians pander to the big unions; unions are big blocks of voters. How could it be otherwise?

But Doug, you're the capitalist's capitalist, the world's most unabashed defender of wealth accumulation - aren't you supposed to hate labor unions? Don't you risk being kicked out of the cigar club for The Evil Exploiters of the Masses?

Doug: First off, there's no way I'm giving up my cigars - especially those from Cuba. But how could I object to voluntary associations of people? If unions were more like the Lions Club or Rotary Club - both of which simply encourage people to get together and act in unison - I'd have no beef with any of them. But the fact of the matter is that labor unions, guilds, and so forth are not truly voluntary associations. And that's entirely apart from the corruption that the union movement is riddled with - not just in the U.S., but everywhere in the world.

The good news, however, is that coercive unions are on the way out. They're anachronisms. They're leftovers from the time when people were like interchangeable parts in the giant factories they worked in. People were so replaceable that one person was little better or worse than another - because they were basically biological robots. In the early industrial era, labor was in over-supply, society was poor, and conditions were harsh everywhere. It's understandable why workers felt they had to band together for self-protection. But the industrial era is gone. The assembly line with thousands of workers is totally outmoded. In the global information age, trying to extort high wages for manual labor is pointless. Soon robots will be doing almost everything, then nanomachines will replace the robots. People will only be doing work that requires thought, judgment, and individuality. Those aren't things that can be unionized.

L: I've long thought that Big Labor was a rational market response to Big Business, a lot of which relied on rote behaviors back then. If you were just one little guy on the assembly line and your supervisor didn't like you, what chance did you stand without the backing and solidarity of your fellow laborers? Unfortunately, huge industrial concerns were highly vulnerable to sabotage - it's hard, for example, to police thousands of miles of railroad tracks. I believe that weakness in the soft underbelly of tight-fisted business owners proved too tempting a target for many workers. And that sort of thuggery prompted management to hire thugs as well, to intimidate workers. I can't really say who started it, but tit for tat brutalized the whole dialogue - and both sides scrambled to secure politicians in a sort of labor-relations arms race. "Labor" and "management" have been at odds - sometimes violent odds - ever since. It's no surprise to me that Marx and Engels, products of the early industrial era, saw everything in terms of class conflict.

Absent government coercion to be used as a weapon by one side or the other, organized labor and management would have worked out their differences in a very different way. If one union bargained collectively for a high wage for their members, another union could bargain for a lower wage for their members and get the jobs. Or the company could decide to hire non-union employees and take on the extra burden of dealing with each employee individually. It would be a normal market process that would discover the right price for reliable labor at any given time and place.

As with so many things, it's the state and its coercive power that's the problem, not the unions. Nor management.

Doug: Exactly. It was also a time in history when society was changing from an agricultural base to an industrial one, so of course there was turmoil. Just like today.

Suppose some Mexicans or Salvadorans living in Detroit got together today and formed a union for Hispanic people and offered to build cars for half the wages the current unions are getting. They could even allow non-Hispanics to join the union - to try to defuse the inevitable accusation of racism - but the deal would be that you join to get steady work in exchange for willingness to work cheap. Would the mouthpieces of Big Labor stand up to defend them? I doubt it.

And as for Big Business, the fact is that a lot of it got that way through collusion with the state. They get special favors, such as regulatory barriers that impede the competition. This has allowed businesses to become unnaturally large. In a true free-market society you could only get big by making a product the consumers love. In a fascist society you get big through political favors.

Everyone is constantly trying to improve their lot in life - which is wonderful. The problem is when you add institutionalized coercion - the state - to the picture. Coercion leads to conflict, and conflict raises costs and destroys wealth. But even if the economic effect of coercion was neutral, it would still be unethical. And unnecessary. That's the bottom line. Big Business and Big Labor are both unnatural. And they're both corrupt, because they're creatures of the state.

L: Agreed: Big Business is no more pure than Big Labor. I remember researching some early industrialists back in college, after reading Ayn Rand's books, hoping to find heroic captains of industry in history. Instead, I found that no sooner had Robert Fulton invented the steamboat than he applied to the government for a steamboat monopoly. And the first transcontinental railroad in America was not built by a Nat Taggart, but by a bunch of political hacks who went bankrupt within three years. (But the guy who was the historical model for Nat Taggart did exist: his name was James Jerome Hill, and he and his Great Northern Railroad overcame stiff political opposition to become the second transcontinental railroad - and this time, at a profit.)

Doug: Too bad no one pointed you at Robert Fulsom's The Myth of the Robber Barons then. But the takeaway point for this conversation is that labor unions are dead men walking. They're dinosaurs.

The figures show that in spite of the millions of jobs that have been exported from the U.S. to China over the last few decades - which was largely caused by the success of U.S. labor unions at artificially raising wages and benefits - U.S. production has stayed about level. You go to most car factories these days, and they're not full of workers; they are full of machines. Labor itself is disappearing, as computer-controlled machines grow more and more capable of doing physical work better and cheaper than humans can. Work, in the future, will be something you do with your mind. People are going to have to adapt to that, or suffer the consequences. Labor unions are absolutely on their way out.

But, if it's any consolation to those who love labor unions, Big Business is on its way out too. With the technologies we already see developing, most manufacturing will be done on the individual level. You can already order cargo containers with everything you need to set up almost any sort of factory you want; you don't need giant factories anymore. And as nanotechnology advances, manufacturing will simply be a function of telling your software assistant what you want made and feeding your machines the raw materials. In the near future, "3D fax" machines will enable you to build almost any physical object, layer by layer, right in your own garage. It will be a bit as described in A.E. Van Vogt's sci-fi classic, The Weapon Shops of Isher. You won't have to hope Walmart has something you need; your 3D fax will make exactly what you want, right now.

More broadly, small, swift, new competitors are going to devour the big old dinosaurs, like a school of piranhas - and any new business that gets too big and bureaucratic, as well. The whole world is in the early stages of downsizing.

L: I've thought about that - about the evolution of labor and business in the information age. Isn't it possible that just as businesses are forced to become smaller, leaner, and faster, labor unions could evolve to provide value to intellectual workers? "Programmers of the world, unite!"

Doug: No, I don't think that makes any sense, any more than the laughable old Soviet idea of writers' and artists' unions. You can't regiment and standardize creativity. And there is no such thing as "job security," which was always a stupid and parasitic notion. Your job is secure as long as you're productive and creative - and your company is profitable. Unique products provide job security to those creative enough to make them - great art, for example, can't be produced by a piecework assembler on an assembly line.

L: But there are writers' and artists' unions. It seems to me that the Hollywood TV writers' union delayed the fall TV season a while back, by going on strike.

Doug: That's true, although I don't know how they would fairly compensate a Shakespeare and a hack if they were both union members with the same seniority... On the other hand, big broadcast TV is disappearing too, for the same reasons we've been discussing. When some kid with a webcam in Egypt, Libya, or even Belarus, can produce a live documentary that's more riveting and costs nothing compared to professional TV news coverage, you know that the business model of major news networks is on its way out. Anyway, kids today don't watch TV, where you just absorb what you're fed. They watch a million channels on YouTube, and get what they individually want and need on millions of websites. Broadcast, network, TV - with its arrogant executives, and feather-bedding union workers - is on its way out.

It's funny how perception always lags reality. Even as people were moaning and wringing their hands about children wasting endless hours in front of the TV, it turns out that kids today spend vastly more time interacting on their computers.

The world is changing. Trying to use the coercive power of the state to maintain the status quo is a doomed effort. It's like trying to carry water in your hands for an entire marathon.

L: I heard that during the last Super Bowl, the Doritos commercial made for a pittance by some guy tied for first place as the most popular ad.

Doug: Yes, there are a lot of rice bowls that are going to be broken over the next decade. The good news is that the post-industrial world will be one of true marvels. Bringing production down to the individual level, at very low cost, will create the most prosperous society the world has ever seen. The same forces are advancing medicine, and that will make our descendants the healthiest and most long-lived people the world has ever seen. And the individual nature of value creation should make it the freest culture the world has ever seen. That's why I'm an optimist; I'm looking forward to a true renaissance, a golden age. The Greater Depression is just going to be a period of readjustment on the way up.

L: Not coincidentally, that golden age should see the return of a gold standard, as well... But first we'll have to go through a bloodbath.

Doug: I'm afraid so. The old world order will have to be washed away, and it won't want to go quietly. But it will go, one way or another. As the tyrants in the Middle East are showing, you can only resist history for so long. Incidentally, I believe everything there will be for the best, as long as the U.S. government doesn't invade yet another Muslim country.

L: Investment implications?

Doug: I can't emphasize enough the sort of things I've been saying all along, and that we mentioned again last week: rig for stormy weather. But, more specifically, these changes are why we created Casey's Extraordinary Technology. Granted, it's in my interest to drum up subscriptions, but I still think it's the best source of ideas in this area. As the trends develop, CET is where we'll be going in to detail on how best to profit from them.

L: Fair enough. Thanks for the thoughts, Doug... I'll have to take some more time to think about them.

Doug: My pleasure. Until next week.

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L: Doug, a couple weeks ago we talked about mass riots spreading beyond the Middle East, and you were right. Yemen, Bahrain, and Libya - hundreds reported dead in Tripoli. But I see on Google News that some very brave individuals have organized protests in Moscow and Beijing. And now we have tens of thousands protesting in Madison, Wisconsin, citing the successful uprising in Egypt. There are counter-protesters in Wisconsin, fears of violence... talk of the governor calling up the National Guard. Is the spirit of revolution in the air?

Doug: On a deep level, there is a common thread running through these events. But, in bankrupt Wisconsin, the pro-union forces trying to hold on to artificially high wages and benefits have nothing in common with the hungry, oppressed, miserable people who took to the streets of Egypt. It's fashionable for all sorts of people with a grievance to call those Egyptians "freedom fighters" and identify themselves with them. I'm a freedom-fighter, you're a rebel, he's a terrorist. The semantics are used to muddy the distinctions, not to clarify.

To a fair degree the Egyptians really are freedom fighters - they actually did oust a tyrant - but they are just going to replace the old boss with a new boss. It's not been a radical revolution - at least not so far. The odds are that the new boss will be every bit as bad as, or worse, than the old boss, regardless of whatever window dressings of reform he uses to gain international acceptance for his regime.

Back in Wisconsin, it's completely disingenuous - actually ridiculous and shameful - for unionized state employees to label themselves freedom fighters. These are the people who most directly slop at the trough at the public's expense. They're minions of the ruling class. They're not trying to overthrow an unjust situation, they're rioting to maintain it.

L: So, what's the deeper, connecting thread?

Doug: Economic hardship. It seems to me that the driving factor behind these protests spreading in the Arab world - and what pushed them from inevitable to imminent - was rising commodity prices, especially food prices. Food prices are also rising rapidly in the U.S. Many fruits and vegetables have doubled, and bread is up 50% over the last year. Cotton has tripled over the last two years. That's going to make clothing more expensive. The difference is that most Americans don't live hand to mouth, not the way most Arabs do. But nonetheless they don't like to see their standard of living drop, and they'll strike out as well. As we just discussed in January, it would be most prudent to prepare for chaotic times ahead.

L: Oppressed Middle Easterners take to the streets out of hunger. Wisconsin union members take to the streets because their entitlements are threatened. Both relate to the rising costs of real things resulting from the global currency crisis, which is part of the larger train-wreck of the old economic world order.

Doug: Yes, and with modern communications, widespread public sentiment can be mobilized with speed never seen before. But you know, it's a bit similar to what happened back in the '60s - although for different reasons. We had simultaneous riots in Europe - mostly in France, but also in Germany and Italy. In Paris, they were tearing up the cobblestone streets to throw rocks at the cops. You had the race riots in Detroit, LA, and Washington, DC, among other U.S. cities, and later, anti-war protests. At exactly the same time, you had the Red Guard and a huge conflagration in China. Three major centers of world civilization erupted in civil unrest at once. But those riots were strictly political. Today's riots are economic, and that's much more serious. Political riots are generally for sport. Economic riots are the real thing.

I've no doubt that with the economic, social, and political forces at work in the world today, we'll see more unrest, lots more. But it's going to be much more violent, and much more dangerous than it was in the '60s, because the world is much less stable.

L: And more countries have nuclear weapons. If more U.S. puppets fall in the Middle East, that's going to be really bad for Israel, which is surrounded and outnumbered by foes who have no interest whatsoever in reaching a peaceful accommodation. If pressed hard enough, Israel could go nuclear, the threat of which has not stopped individuals from shooting rockets into their midst. I know you don't like making predictions, but does your guru-sense tell you that's likely to actually happen soon?

Doug: Nobody knows, of course, but the odds favor new leaders in most of the Arab countries - and most of the Muslim world. Israel is opposed to any change, because they have an accommodation with the old governments. The same is true with the U.S. Israel and the U.S. are like a nasty dog and his bad-tempered master - although I'm not sure which is which. Sometimes the master kicks the dog, sometimes the dog bites the master, but they still work together.

Anyway, now both the U.S. and Israel are going to have to cut new deals with new governments. I suspect the new governments will be less inclined to be U.S. stooges, and more likely to be actively anti-Israel.

Meanwhile, bankrupt state governments in the U.S. could precipitate chaos there, before the balloon goes up elsewhere. We are in uncharted waters, in which anything can happen - and probably will. The key is that most people in the world live on less than $3 a day, most of it goes to food, and food prices are exploding upwards. As is fuel.

L: I remember the terrible events in New Orleans when civil order broke down just a couple years ago. Most Americans seem to be ignoring that embarrassing event, and have long forgotten the Watts riots and Kent State. How do you get such people to consider the facts without sounding like Chicken Little?

Doug: Good question. When the going gets rough, it often turns out that civilization is really just a pretty veneer that lies on top of a fetid cesspool. The fact of the matter is that many - actually most - people suffer from serious psychological aberrations that rise to the surface if you push the right hot buttons. Losing what they have, and going hungry - especially when they see thieves like most politicians and their pals making billions - won't sit well with the masses. It's going to push a lot of hot buttons.

I don't like thinking about rioting and martial law and all of that unpleasantness either; people get hurt, property is destroyed, and so forth. But at this point, a good dose of that looks almost inevitable. What we've seen in Tunisia, Egypt, now Bahrain, and Libya - it's not just a flash in the pan. It's the start of something big.

L: It's a pity to see so much human energy being unleashed, creating powerful forces for change, at a time when it's unlikely that that power will be used for good. So few people have any grasp of basic economics - they have no idea where prosperity comes from. So few people understand that human rights are individual rights and that entitlements are not rights... These people are going to ask for Big Brother to take them in hand, and Big Brother is going to give them what they ask for, good and hard.

Doug: You're quite correct. The logical next step, as we mentioned before, is a new Robespierre - or a whole slew of them. But you know I always try to look at the bright side, and the good news is that a lot of despotic states are going to be overthrown. Others that are not overthrown will be discredited - also very good. This comes at a time when many of these states are on the ragged edge of collapse anyway - their days are numbered, even without this force precipitating their collapse.

Perhaps technology has advanced to the level that people will begin to see they can conduct their lives without the dead hand of the state trying to tell them what to do, and taking most of what they produce for the privilege.

L: Perhaps. The time may not be far off when the very idea of the nation-state itself will be discredited, and human society will evolve to a - hopefully - better form of organization.

Doug: I'd love to think so. I think that as technology continues to advance and liberate the individual, the disappearance of the state is inevitable, even if it's not imminent. But whether things get better after the crash or not, I'm increasingly convinced that what has long been inevitable for the whole world is now becoming imminent. We are in the early stages of a major upheaval. In other words, distortions in the way the world works have been built up to a level where the old order could easily collapse. I'm quite serious when I refer to the coming Greater Depression.

L: Just as we all knew the Soviet Union had to collapse from its internal problems - tyranny and economic stupidity - but weren't sure when. Now, decades of economic mismanagement and bad decision-making in the global arena must eventually be liquidated. But how do you know the bill is coming due?

Doug: Well, timing is always the problem. If you wait long enough, absolutely everything that is possible will happen. I suppose that's why we have time itself - to keep everything from happening at once [chuckles]. But we have to think about what's likely in the course of a single lifetime, so we can benefit from foresight - or be punished for guessing wrongly.

Consider that several other U.S. states are looking at "union-busting" legislation such as Wisconsin's. Unions can no longer pretend to be vehicles to protect the workers; they are really nothing but cartels that reward their members at the expense of everybody else. And, unlike the federal government, the states can't just print money. They have to tax people directly to pay for things. Now they have two choices: raise taxes or default on past promises.

Raising taxes is very hard to do during a depression. People who feel their standard of living is slipping just won't stand for it. Taxes were a major cause of the French Revolution and the American Revolution.

The riots in the '60s weren't about this type of thing - entitlements and taxes - but remember, in the '60s, few states had sales taxes, and where there was one, it was usually only one percent, or two, max. Now, sales taxes regularly run six, seven, eight, even ten percent. In addition, real estate taxes have gone up tremendously, as have state income taxes, of which there were also fewer back then. So these governments are already straining their ability to tax, and they know that if they raise taxes again, it will destroy much of what's left of their economies.

L: But they can't really default either - that would get the politicians thrown out of office just as quickly.

Doug: Default would hurt bondholders - generally older people who are very active voters. Also, pension funds, insurance companies, and banks would see a large chunk of their assets wiped out, which would be another body blow to struggling state economies. Not being able to print money, they won't be able to keep paying their debts, so they'll be forced to lay off more and more government employees. State and local governments are truly between a rock and a hard place, just like the U.S. government. But the U.S. has the option of destroying the currency to put off the hour of reckoning, and that's what they'll do.

L: Well, if the governments have to fire a bunch of employees, that's a good thing. But it will add to the unemployment burden, unless they scrap unemployment benefits too, which would also get the politicians tossed out of office.

Doug: Well, most government employees just push paper, and stop things from happening. It would be cheaper and better to pay them not to work, so they won't do actual damage - or give them unemployment compensation. Unfortunately, though, they'll just fire a few employees, or cut their wages and benefits a bit. What they need to do is totally abolish whole departments - each state has hundreds of them, making the lives of businessmen miserable and expensive. They won't do that, so the bureaucracy will just grow back if there is any recovery. Rather, the reduced number of employees will slow down approvals even more, slowing business even more. And that will further open the door to corruption.

Actually, it would be therapeutic to see some of them end up like Mussolini. It's certainly a good thing to see action toward recovering the money Mubarak stole. The same should be true in the U.S. Everybody in high office emerges very wealthy from a small salary - it's all stolen money.

But at this point, there is just no way out. It's like jumping off the top of a 100-story building - it's an exhilarating ride until you get to the bottom. That's exactly where, not just the U.S., but the whole global economy is.

L: I guess so... You could spread your arms and try to slow the fall, or if you were an experienced sky-diver, you could try to angle your descent toward one side or the other, but it's not going to change what happens when you hit the street.

Doug: That's exactly right. In the real world, actions have consequences. Economic causes have effects, and the piper can only be put off from payment for so long. I don't think he can be put off any longer.

L: When, exactly, do you think the bill - and its ever-accumulating interest - will come due?

Doug: I'm not going to put a date on it, but it's starting. The next ten years are going to be the most interesting decade in centuries. The events that are now under way - economic, financial, social, technological, political, and military - have the promise of being the biggest thing in a very, very long time.

L: Okay, but, with all due respect, you were full of doom and gloom back in 1980 - said we were going to tip over the edge, but we didn't.

Doug: I was, and I did say that - and we could indeed have gone over the edge back then. It was a very close thing. Fortunately - or unfortunately, if you consider the much, much larger bill now coming due - they papered it over. And things actually got better, due to two things: one, many individuals produced more than they consumed, and saved the difference; and, two, we got many improvements in technology. But financial and economic affairs are much worse now than they were then.

L: You don't believe it's possible to paper it over this time? Doesn't it make you uncomfortable to say, "It really is different this time!" - at least a bit?

Doug: Sure it does. Famous last words. But, in fact, it really is different this time, as anyone who searches the news for phrases such as "unprecedented," "record deficit," "record bank failures," etc., can see. It's a judgment call, obviously. But we have to make judgments if we're going to succeed, or even survive. Sometimes you have to call for a change in a major trend - which is risky. But not nearly as risky as getting trampled by the mob after it actually changes. I'm not afraid to leave the mainstream. In fact, I far prefer it, whether I'm right or wrong.

L: How can you be so sure there's no possible way to paper this over again? Mugabe trashed his currency and is still in power. Life goes on in Zimbabwe. Couldn't multi-trillion-dollar deficits become the new normal in the U.S.?

Doug: No, that's not possible. It would destroy the currency. It's bad enough when you do that in a nothing/nowhere country like Zimbabwe, where subsistence farmers can keep on scratching a living out of the dirt with sticks and stones, if they have to. But it wipes out most of the economy above the subsistence level, as just about everyone has their savings in the destroyed currency. If you do that to the Canadian dollar, say, it would be a disaster - but mainly for people who live in Canada. And plenty of Canadians have assets in other countries. But if you do it to the U.S. dollar, it wouldn't just be a disaster in the U.S. The U.S. dollar is the world reserve currency. Few Americans have assets outside of the U.S. Foreigners hold, maybe, eight trillion U.S. dollars. All the central banks of the world have mostly dollars. People all over the world have dollars in their pockets and bank accounts. When Bernanke destroys the dollar it will be a worldwide catastrophe. And that will happen all the faster if the feds bail out the states - which is a possibility with someone like Obama in charge.

Let me re-emphasize this. Almost everyone with net worth around the world tries to keep much of it in dollars. There are trillions of dollars outside the U.S. - far more than inside, and the people holding them are going to be impoverished. They won't be able to invest or to spend. A collapse of the dollar would lower the standard of living of a lot of people around the world, basically overnight.

This is really, really serious, and there's no way out. We are going to go through the meat grinder.

If we were to somehow stumble through this one - I would be fascinated to see how - and manage to move ahead in some semblance of the way things were pre-2008, I very much doubt it would last long. And I'm very sure it will just make the ultimate reckoning day that much more catastrophic.

I hate to say it, because I know the human cost will be enormous, but I think the odds greatly favor this being "it." I only hope to not be very adversely affected by it - and to have the right to say "I told you so"... although it will be unwise to draw that to anyone's attention after it happens. [Chuckles]

L: Hm. Well, even if there was some way to gain a reprieve for a few more years, it's still going to be ugly. The 70,000 people protesting in Wisconsin show that the so-called jobless recovery is a lie. Improving the bottom line by laying people off is not the same as increasing the top line, and increased government spending is not real GDP growth. Even if we manage to struggle on this way, the minimum payments now due the piper are going to keep things dicey. That means that the risk of social/political collapse remains, even if we avoid economic collapse.

Snow Crash could be starting right now.

Investment implications?

Doug: Nothing we haven't said before: we're headed out of the eye of the storm, so you better rig for stormy weather - the worst you've ever seen.

L: Specifically...

Doug: Buy gold - lots of gold, even though it's no longer cheap. To capitalize on the likely next bubble, buy gold stocks. Given the trouble in the Middle East, the right energy stocks are also good to invest in. Short anything that won't do well in economic hard times, including the whole financial sector - and the retail, consumer, and construction sectors. Use those investments to build your cash position so you're ready to take advantage of the spectacular investment opportunities all of this turmoil is going to cause.

And do not - do not - forget to diversify yourself out of your country of residence. If you have the means, and have not done so yet, buy a "vacation" home. Make it in some nice remote place where you'd enjoy spending time in any event, but where the people live close to the earth and don't depend on the modern global economy. Also, make it in a place where hungry masses from unsustainable cities are unlikely to show up on your doorstep.

L: And if the sky is not falling?

Doug: Then you still make a bundle on the volatility ahead and end up with a nice vacation home you can sell if you decide you no longer need it for insurance.

But remember, nothing lasts forever. Few governments last as long as that of the U.S. has - and it's showing clear signs of terminal decay. Don't kid yourself, thinking, "It could never happen here." Europeans have an advantage over Americans; they remember fighting each other much more recently, and know full well it certainly can happen there.

L: Okay, Tatich. I guess I'll add the gun shop to my stops when I head down to my local coin shop to buy gold - time to load up on ammo again.

Doug: Sure, why not? You can always sell it later if you don't use it. Cigarettes too, even though I know you don't smoke. And alcohol, even though I know you don't drink.

L: I'll feel like a Y2K fanatic, but I guess there's room in the attic.

Doug: Sounds trite, but it's better safe than sorry, and it won't hurt to prepare for the worst and hope for the best.

L: Sometimes old wisdom is the truest wisdom.

Doug: Indeed. We'll talk more next week. This business with the labor unions in Wisconsin is interesting - we should talk about labor unions.

L: Good topic. I look forward to our conversation.

Doug: 'Til next week then.

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Editor's Note: When we last saw our heroes, they were hanging on a cliff of corruption, thinking about a world in which Egyptians stage a now-successful revolution, apparently more in response to government corruption than anything else. Mubarak the thief was more intolerable than Mubarak the dictator - especially when people got hungry.

L: Okay, now that we've looked at what the beast [corruption] is, let's talk about making it our friend. Seems like the last thing anyone would want to do...

Doug: It's hard to find a good analogy, but almost everything has a bright side. Let's say corruption is like an African buffalo - stinking, unpredictable, bad-tempered, and powerful - but it can also be a great source of meat and leather. Before we talk about making leather, we should point out that, while these ideas we've been discussing about corruption may seem abstract to some, there's a vast amount of historical evidence in support of what we're saying. Like all serious problems, you must confront it. Trying to tiptoe around it, or pretend it doesn't exist, is only a formula for disaster.

In point of fact, corruption is going to be the biggest of growth industries in the years to come. Why? Because the governments of the world are in growth mode, and history shows that absolutely guarantees a massive growth in all kinds of corruption.

L: The clearest and most powerful example for Americans probably was Prohibition.

Doug: A sorry example of what blue-nosed puritans people can be. The Volstead Act and the 18th Amendment were not repealed in 1933 because Americans suddenly remembered that human rights are individual rights; the light of philosophy rarely penetrates very deeply into the dark recesses of collective psychology. It was not because Boobus americanus thought the busybodies' efforts to stop people from drinking alcohol were unethical and un-American. The measures were repealed out of practicality, because people saw that they were stupid and inconvenient.

Prohibition turned a large segment of the law-abiding population into criminals and created an illegal free market, which is to say a "black market." The result of that huge new black market was wholesale corruption of the police and government officials tasked with shutting it down, and a gigantic growth of the mafia in the U.S. Widespread corruption of the so-called pillars of society - plus the undeniable failure of Prohibition to stop the flow of alcohol - was what turned the tide against the temperance movement and made alcohol legal again. The crime wave also prompted the creation and growth of the FBI, which amounts to a national plainclothes police force - not a good thing. The FBI has since expanded into yet another plodding and increasingly corrupt bureaucracy.

L: I wonder why people responded to that failure rationally back then, by discontinuing a counterproductive prohibition, while today we have an equally abject failure and source of corruption in the War on Drugs. But declaring a ceasefire is unthinkable...

Doug: That's a good question; the two prohibitions - alcohol in the '20s and drugs today - are exactly equivalent and are having exactly the same results. Well, same in kind, but the drug prohibition is actually worse in magnitude and consequences. The state has become much larger, much more powerful, and much more draconian this time around.

A few weeks ago Hillary Clinton said they can't legalize drugs because "there's too much money in it" - an extremely odd statement. Too much money being spent fighting drugs by a bankrupt government? Too much money dealing in them by the narcotraficantes, who use a lot of it to pay off the police, the DEA, and other government types? If the stories from the days when Bill was governor of Arkansas - the goings-on in Mena and such - are true, she knows a lot more about the drug business than I do, and from hands-on experience.

The only reason drugs are so profitable, of course, is because they're illegal. If they were legalized, there would be about as much profit in them as any other chemical or agricultural business - maybe less, since marijuana can be grown in useful quantities in a one-bedroom flat. And of course, the more draconian the drug laws, the higher the price drugs command - which draws in more entrepreneurs.

The drug business is problematical - like so many activities - in a number of ways. But it certainly offers giant-sized entrepreneurial profits precisely because it's currently illegal. A drug lord must necessarily make corruption his friend.

By the way, I'm working on a sextet of novels to reform the reputations of six unjustly besmirched occupations, one of which is that of drug lord.

L: I'm sure that will be a riot - perhaps literally. But still, it's depressing that the grandchildren of the very same people who rebelled against the stupidity, futility, lethality and corrupting influence of the War on Alcohol are completely acquiescent to this new and more virulent war. Why do you suppose that is?

Doug: It is strange, in that during the '60s and '70s everybody was toking and snorting. One might have thought the Boomers would have ended the War on Drugs. But, after generations of government-sponsored irresponsibility and government-run schools that spread an entitlement mentality instead of a work ethic, maybe the clock is just winding down. Perhaps Americans have become a nation of whipped dogs, who just do what they're told.

America is an empire in decline, getting old and tired. What makes this particularly dangerous is that it's not only becoming corrupt, like Eastern Europe, Latin America, Africa, the Orient, the Mideast - almost all of the world - but, worse, it's got this huge and fairly efficient enforcement mechanism few of the other countries have. The Nazis would have loved the situation in the U.S.  It's become the worst of both worlds: Nordic efficiency and American neo-puritanism. A deadly combination. Only an increasing measure of corruption can keep things going until the whole mess collapses on top of itself.

L: Made all the worse because a dumbed-down and quiescent population cheers it on and, without acknowledging it, accepts that corruption is normal and nothing can be done about it. Back in the Prohibition era, America had a moral culture that rejected corruption vehemently. Not so now.

Doug: Yes, well, political corruption is certainly a double-edged sword. And you can see that in the counterproductive solutions people propose. They say we should pay our legislators and judges and police more, so they are less tempted by bribes. But that's complete nonsense; today, the average government employee already earns between 50% and 100% more than the average citizen does. These people are already fleecing the taxpayers they supposedly serve. Adding to that will only make the brown envelopes fatter, because they'll feel they need even more. It just adds insult to injury. Would doubling Mubarak's salary have made him less corrupt? I think not.

The solution is not to pay government thugs and stooges more. Remember Tacitus. Nothing has changed in 2,000 years. The only answer now - and the only thing that has ever worked throughout history - is to abolish these laws that force people to work around them.

L: That would mean repealing 99% of all laws.

Doug: Ultimately, it would mean repealing them all. In the end, there are only two laws that are necessary, and, not coincidentally, only two laws that work, because they are the two fundamental laws of human ethics: Do all that you say you'll do, and don't aggress against other people or their property.

We don't need any other laws - and we don't need no stinking badges either.

L: That'll never happen - not voluntarily. The politicians would never derail their own gravy train, and even if they did suddenly develop some moral fiber, fearful people who believe they are entitled to a life of luxury will never allow it. Still, that fits what we've been saying: if you repeal the laws, particularly those that impede industry, you remove the incentive of businessmen to bribe regulators. If you take away the power of vice squads to try to control people's private choices of recreation, you bring those markets into the white and eliminate the incentive to corrupt the police. And so forth...

Doug: How true. I don't know where this is going to end, but it's going to end badly. All of these people who write about how the government should increase its efforts to combat corruption are looking in exactly the wrong place for answers. They think the answers are: more pay for government employees; pass more laws; impose stricter penalties - all the very things that result in more corruption. If stricter penalties worked, there'd be no corruption in China, where corruption is a capital crime - and yet, it's as corrupt as it gets. As always, it's not just the wrong thing, but the exact opposite of the right thing...

L: I can hear it coming - go ahead and say it, Doug...

Doug: [Laughs] Yes, it's... perverse.

L: [Laughs]

Doug: [Laughs harder] Totally perverse. This is why I'm increasingly convinced that I've been put on this planet as a punishment for something really bad I must have done in some past life. I must have been quite naughty. But not as naughty as most of those here on this prison planet, judging by the fact that half the people still live on less than $3 a day. At least I'm like a trustee this time - it's not like I'm in the hole, in solitary confinement.

L: [Chuckles] Okay, so, getting back to making corruption your friend. I presume you're not talking about practicing the art of passing along envelopes full of cash, but about observing the trends created by the distortion corruption makes in economies, and then investing accordingly.

Doug: Yes, just so. As you know, I always try to look on the bright side of things. The more corruption there is in a society, the more distortions that will create in the market, and therefore, the more opportunities for a speculator, especially when those distortions liquidate. It's as though governments are stretching rubber bands that must eventually break, and when they do, that's when you can make life-altering investments, buying all sorts of things for pennies on the dollar.

You know, I would prefer to live in a world where corruption didn't exist and wasn't necessary, but the only world where that could be the case would be one in which the only laws were the two I mentioned. Since we do live in a world awash in laws and corruption - soon to drown in both - we ought to take advantage of it.

It may seem like taking advantage of misfortune, and perhaps it is - but if someone is going to buy distressed assets, why not you? The people selling them need the cash, and if you've been smart, consuming less than you produce, you'll have the cash they need. If you make a bundle once the market bottoms, you deserve it for taking the risk you did when no one else would.

In my own life, I make the rules. But in the broader world, I don't make the rules, I just play the game.

L: It's worth emphasizing that this is not a quick trading strategy, but a long-term plan.

Doug: Absolutely. These huge market liquidations make and break fortunes - or more accurately, move them from weak hands to strong - but major fluctuations take years to play out.

It's quite interesting, actually, how the culture of corruption has overcome the whole world. All these governments all around the world are growing like cancers, passing more and more laws as the alleged cure for the very problems they are creating. That means there will be opportunities to take advantage of all over the world. That's going to be the theme of the first novel I'm writing, Speculator.

People have learned absolutely nothing. Like in Egypt. It's wonderful they've gotten rid of Mubarak. But that stooge and his family are going to get away with many billions, stolen from the Egyptian economy. And the poor fools in Tahrir Square think they've won a victory! They've only opened a space at the top for some general - most of them are already multi-millionaires, but that's chicken feed when you're running a government - to become a multi-billionaire. Along with his cronies. And they'll protect Mubarak from prosecution to keep him from implicating them in past crimes. Meanwhile, the stupid, bankrupt Americans keep sending them at least $1.5 billion a year.

But back to making corruption your friend. On a personal level, one prudent thing I would advise readers to do is to move to a country where people already know how to deal with corruption. The U.S. is going to get increasingly unpleasant as it passes ever more draconian laws that will be strictly enforced. Latin America is much more pleasant, because nobody takes their stupid laws seriously, and corruption takes the sting out of those that actually are enforced - reducing them to the level of a nuisance.

From a speculator's point of view - or even an entrepreneur's point of view - I have to say that, as much as I've bashed Africa as being a hopeless basket case, I can see the day coming when there will be a lot of opportunities there. There's no question that Africa is, by far, the most corrupt place on the planet - and that's going to create huge opportunities.

L: Hm. I can see it being, therefore, closer to the bottom, but will the place ever really head back up again?

Doug: I would like to see Africa, with all its abundant resources and struggling people, become the shining city on the hill, an example of health and wealth for all the world to see. In one of the novels I'm working on, to be called Warlord, I will show how that could happen.

L: Hm. I'm not going to hold my breath. But the untapped potential is certainly there. Any investment implications specific to America?

Doug: Well, a lot of this money the governments are now creating is flowing into the stock market, and it's creating a new equities bubble. A lot is also creating a commodities bubble. I think it's probable, therefore, that the biggest bubble of all will occur in junior resource stocks. They're not even micro-caps; they're nano-caps - the kind of speculations you specialize in researching and recommending in the International Speculator. So returns of 100:1, which have been seen many, many times in the past in these types of stocks, are not out of the question in that space, going forward.

That bubble will be caused by paper money. But paper money represents a very profound type of corruption; while it may pump up the stock market in the short run, it will destroy the underlying corporations at some point. Unbacked paper money is already responsible for much of the corporate corruption so evident today. Directors and high corporate officers are quite susceptible to betraying trust for personal gain - especially if they're not the entrepreneurs who started the company, but are just hired help. Most executives at big companies are good mainly at back-slapping and back-stabbing. In today's highly politicized economy, they have to spend a lot of time dealing with their opposite numbers in government agencies. They're not really businessmen, they're political hacks. And they're like magnets for bad habits and attitudes.

We've seen some of that already in corporate executives who pay themselves huge salaries, bonuses and option grants, while treating the shareholders as suckers. They themselves rarely pay for a share.

Mainstream stocks are increasingly becoming a speculative vehicle, rather than an investment vehicle. Where we're headed, investing based on Graham-Dodd fundamentals will become less and less valid.

You know I'm a hardcore capitalist; I think you should charge whatever the market will bear. But  these huge multi-million-dollar bonuses are in truth not only unwarranted, they're criminal. They amount to theft from the shareholders. As many problems as I think Warren Buffett has, I must say that I do respect the fact that he only pays himself something like $150,000 per year, making his real money on the same capital gains he's supposed to be creating for investors. Though, for the reasons I just gave, I think his method of investing is going to become less and less effective in the years to come, and we'll be left with just his goofy political views.

L: It occurs to me that as corruption accelerates, it's not just equities that are in jeopardy, but all business is in trouble. Any good business can be ruined by a competitor who pays a bribe to an official to give him an advantage. You can't make any sound business decisions when the arbitrary power of the state can upset all your plans with the stroke of a pen.

Doug: That's true. And that will only accelerate the collapse of the old world order. That's the good news: a collapse will wipe many tables clear and allow people who learn from history to start again, on sounder foundations - like, hopefully, limiting laws to the two I mentioned. Until corruption sets in again. So, even though things often have to get worse before they can get better, I'm optimistic that things will get better.

L: Another grim foretelling, Sir Guru. I don't know whether to hope you're right or you're wrong.

Doug: You know I just call 'em like I see 'em. 'Til next week, Sir Wolf.

L: Okay Boss, thanks for your insight.

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[For most investors, the bubble Doug foresees in junior resource stocks is not even a blip on their radar. But if you get in early, you could make a fortune when the herd finally catches on. Case in point: The best of the best junior mining companies are already generating amazing gains for the subscribers of Casey's International Speculator. Learn more here.]

L: Doug, one of the complaints the Egyptians have of the rulers they are showing to the door is corruption. It's the same in Tunisia. It seems that more than the lack of freedom or even the secret police, it's government corruption that bothers citizens the most. This fits with your concern that ousting the old bosses will just lead to new bosses who will be every bit as bad; these people don't want to get rid of their governments, they want those governments to work. And yet, I've heard you speak of making corruption your friend. Can you tell us what you mean by that?

Doug: Sure. As always, the place to start is with a definition. This is critical, because people use terms like corruption in nebulous ways that enable sloppy thinking. Unless you can define precisely what a word means, you literally can't know what you're talking about. That's one reason why listening to commentators like Hannity, Beck, and O'Reilly is such a frustrating waste of time. These people are constantly conflating concepts - like the idea of America with the reality of the U.S., or confusing capitalism with fascism, or war with defense - because precise definitions often get in the way of emotive rhetoric.

L: My Webster's says corruption is:

A: Impairment of integrity, virtue, or moral principle. Depravity.

B: Decay, decomposition.

C: Inducement to wrong by improper or unlawful means (bribery).

D: A departure from the original or from what is pure or correct.

Doug: Yes, I looked it up too, and those definitions are accurate as far as they go. But they don't get to the heart of corruption, its essence, and why people hate it - even while it is often a necessary thing. A more meaningful definition - certainly when it comes to political corruption - is: a betrayal of a trust for personal gain.

L: Hmmm... Yes, that makes sense to me. Corruption is not just bribery of officials, though that's the context we started with. It's a bigger idea, and the "personal gain" angle is important.

Doug: Sure. One can find corruption within corporations, as when directors betray their duty to the shareholders for personal gain. Or churches, as when priests, for pleasure, betray the trust of the young people under their guidance. Even a parent can be corrupt, if he fritters away on high living money intended to be left to his kid. But those types of corruption stem from personal weakness and personal vices. They're horrible - but corruption in government is much worse.

Only government can impose its will on you by law, and back it up with a gun. And with other sources of corruption you can - theoretically at least - go to the government for redress. But when the government is corrupt, it's hard to get the state's right hand to cut off its left. Not only that, but government - partly because its essence is force - concentrates corruption, and incubates it. If a company or church is corrupt, one can quit them. But citizens are stuck with their government - and they'll probably keep paying taxes to it regardless of their feelings toward it. A discussion about corruption is necessarily a discussion about government as an institution.

L: Because government officials have power that can make or break fortunes. And that creates incentives among those on the receiving end of state power to try to sway it to their advantage.

Doug: As Tacitus said in the second century A.D., "The more corrupt the state, the more numerous the laws." It's absolutely predictable that as all these governments around the world - and I mean all of them - respond to the ongoing crisis with an ever-accelerating onslaught of new laws, there will be more and more corruption - and frustration with that corruption.

Tacitus was right. But he could just as accurately have said, "The more numerous the laws, the more corrupt the state," because lots of laws engender lots of corruption. In other words, corruption isn't the problem. The state and its laws are the problem, to which corruption is an unsavory and unaesthetic - but necessary - solution. Laws create corruption, and corruption engenders laws.

Every time a legislature convenes, they pass more and more laws. That's all they do, all day long. So the body of laws and the accompanying volumes of administrative regulations and procedures to implement them is constantly growing - the whole world over. Legislatures are horrible and dangerous things that bring out the absolute worst in the people who inhabit them.

Laws and regulations are like barnacles on a ship. They keep growing and growing, weighing the ship down, slowing it down. If they aren't scraped off from time to time, they will threaten the ship's structural integrity.

L: Tacitus also said: "The desire for safety stands against every great and noble enterprise." No matter how many times I see it, it always astounds me how the more things change, the more they remain the same. That's really just another way to say that there is such a thing as human nature.

At any rate, the reason corruption results from the proliferation of laws may not be clear to all our readers. Consider the Internet: it interprets censorship as damage and automatically routes around. The market interprets government regulation as a hindrance, and seeks ways around it. (Private regulation, in contrast, is a selling point, as when electronics have the UL - Underwriters Laboratories - seal of approval.) The proliferation of laws increases the incentive to circumvent the law, and circumventing the law, in this context, is corruption.

Doug: My thoughts exactly. A law is passed because it seems like a good idea at the time, at least for some group of people who approves of it - anti-pornography laws, for example. But they don't seem like a good idea to people who like pornography, or even most normal people these days, who don't think human sexuality is inherently evil. Meanwhile, the people whose preferred choices just got made illegal aren't going to change their views because the government passed a law. So they find ways to work around the law.

Consumers then become small-time outlaws, and providers become "organized crime." What does organized crime do? Generally, they try to bribe the people at the cutting edge of applying the law: the police, prosecutors, judges, inspectors, politicians, etc. It's one reason why vice cops, along with drug cops, are notoriously the most corrupt among police.

L: What about anti-corruption laws?

Doug: Stupid - in the literal sense of the word, meaning unwittingly self-destructive. Those laws necessarily have the opposite effect of what's intended. By raising the stakes, they just raise the level of bribery required, resulting in even more severe corruption. Like everything governments do, it' not just the wrong thing to do, but the exact opposite of the right thing to do.

L: Which is... to reduce the number of laws and regulations.

Doug: Exactly. The only way to fight official corruption is to reduce the amount of legal control of officials, particularly their regulatory power over the economy. If there were no government regulators, inspectors, assessors, auditors, and so forth ad nauseam, there'd be no reason for businesses and consumers to bribe them to get the hell out of the way.

L: I can hear some people now, crying in horror, "But that would be anarchy!" I know your answer to that is: "Good!" But to keep this conversation a little more constructive, let's remind people that government regulation is not the only kind of regulation there is; and, of all forces interacting in the marketplace, it is almost certainly the least efficient and most likely to produce unintended consequences.

Doug: Yes. There are many market forces that regulate business activity - and more broadly, cultural forces that regulate interactions between people. In the marketplace, reputation is a very powerful force. So is competition. And so is liability - it's a powerful negative incentive. More broadly, culture is a very powerful regulatory force, which is to say, peer pressure, moral opprobrium, and social approbation restrain people from being naughty far more than fear of police does. And there are also private institutions that have powerful regulatory influences, such as churches, Rotary, Lions Clubs, and the like.

L: Not to mention private companies that sell regulatory services, like Underwriters Laboratories for electronics; various rating agencies, like Consumer Reports; or the numerous magazines, news columns, and blogs that comment on every product, practice, and notion under the sun. But people who trust UL to certify that their toaster won't electrocute them can't seem to see a similar agency doing the same thing for meat inspection. And they gasp at the very notion of a private agency regulating, say, pollution.

Doug: I've never heard of an instance of corruption with UL or Consumer Reports. But government agencies are rife with it - plus incompetence as a bonus. People somehow imagine that because government regulations are backed with the iron fist of the law, they work better, especially when the matter is considered vital. This is simply incorrect. It shows an ignorance of both history and of the state of the world today. Regulation usually becomes so corrupt that it ends up doing the opposite of its intended effect. A business that pays officials to look the other way can do even worse things than they would do if there were no officials, because the official seal of approval falsely tells the people that all is well. That's why the SEC should be called the "Swindler's Encouragement Commission" - because it lulls investors, especially the novices, into feeling they're protected.

Even when that doesn't happen, government regulations' inefficiencies and unintended consequences still result in having the opposite of their intended effects - as when the Endangered Species Act prompts land owners to kill anything endangered they find on their property before anyone can see it, so they don't get their property seized.

It is precisely because some things are so critical that the government should never be trusted with them. Universally - in every country and in every culture - it invites corruption and makes things worse than they would be under private regulatory arrangements and a more vigilant populace.

Strict regulation leads naļve people to think, "Everything is under control." That has two important effects. One, it makes them irresponsible - a belief that they don't have to concern themselves. That general attitude then permeates the society. Two, regulation always creates distortions in the market. It's like a lid on a pressure cooker. Everything looks under control until the whole thing blows up.

That's what lies at the root of the concept of "black swan" type unexpected events. The black swan lands when the amount of corruption necessary to evade laws becomes as onerous as the laws themselves.

Egypt - and the whole Muslim world - are terminally corrupt. Their governments are scams that serve no purpose but to enrich officialdom. Those worthies, though they collect salaries, mainly take bribes for an income. But if there wasn't corruption to work around the laws, every one of those places would be totally impossible to live in. So it's actually a paradox. Corruption in government is a bad thing in that it unjustly enriches officials who are betraying a trust. But it's also a good and necessary thing, in that without it nothing would happen at all. It's a shaky arrangement that lasts only until the corruption becomes as bad as the laws themselves. It's like the mercury that was once used to treat syphilis - too much, and it will kill you as surely as the syphilis.

L: I think the point of government-sponsored irresponsibility is particularly important, and often overlooked. I've long thought that it was FDR's New Deal that really pushed America over the edge, not so much because of the economic cost, but because it made it very clear to people that they did not need to be responsible for themselves. Big Brother now takes care of them when they get old, or should they fall ill, or lose a job - no need to plan ahead or save... It's no wonder our culture has transformed from one of individualism and self-reliance to one of group-think and reliance on the state, populated by entitlement-minded couch potatoes.

But what do you say to people who point to places like Sweden - a highly government-regulated society that seems to work? Such a nice, clean place - with lots of government.

Doug: It's a good point. Sweden is at the low end of the corruption scale, but it's not because they have laws against corruption - everybody has those. It's because of the culture - the peer pressure, moral opprobrium, and social approbation I mentioned earlier. Sweden is a small country where word of misdeeds spreads quickly. It has a highly homogeneous culture based on deep-rooted traditions, and there's a high degree of consensus about how things should be. That makes Swedes cooperate with the large body of law that reflects that consensus, much more than would happen almost anywhere else - or is even possible anywhere else.

Out of a couple hundred countries in the world outside of Scandinavia, I can think of two other places that have a similarly powerful culture that makes a "big-government" approach to managing society seem to work: New Zealand and Uruguay. These places are small, relatively isolated, homogeneous, and with powerful cultural traditions that have - unfortunately - been codified into law. These countries, coincidentally, also have the three oldest socialist governments in the world, all dating back to the turn of the 20th century. Trying to bribe officials in these places - even Uruguay - is pretty much out of the question.

But these places are anomalous. Because of their rare characteristics, they can't be held up as role models for other places. Almost everywhere else - where there's more diversity of ethnicity, culture, much larger population, and so forth - Scandinavian socialism wouldn't even have the appearance of working. And, I'd argue, it won't work much longer in Scandinavia either; Sweden and these other places will ultimately collapse under the weight of their mass of laws and socialist intervention in their economies.

L: It's interesting: these countries where a high degree of legal regulation seems to work are also  highly homogeneous and have very powerful cultures - makes you wonder if the laws are really doing anything at all, or if they are just window dressing on more powerful social systems.

It makes me think of the many experimental societies tried out in the 19th century in the U.S., when there were still open frontiers to which one could escape with like-minded people and try to do things differently. Most were communes. And most were disasters. Some worked, and a few even still exist in vestigial form today, like the Amana colonies. Those that worked best were religious communes. Just goes to show that if you can go beyond homogeneity and get unanimity, you can create a society that seems to defy all experience to the contrary. When everyone buys in, amazing things can happen... at least for a while.

Doug: Almost anything can work for a while. Some monasteries approach an almost perfect state of communism. It's possible because everyone there chooses to be there and live according to those rules. Unanimous consent. But that's not possible in an entire country, and even the super-majority buy-in of highly homogeneous cultures like New Zealand and Scandinavia are not possible in 98% of the rest of the countries in the world. If you look at the rest of the world, the more socialistic and regulated the country, the more corrupt it tends to be. And the larger the country, the more disparate the population and divergent the mores, the less effective the government's regulation.

L: That would cover China, Russia... Brazil, Mexico.

Doug: And Argentina, where I am now. The customs inspectors down here, for example, all expect to retire as multi-millionaires. That's because they have so many laws on what you can export or import, how, when, why, it's almost impossible to comply with - or even know - all the laws. It's much cheaper and easier to get the inspector to look the other way with a well-placed envelope.

There's good news and bad news in this.

In itself, corruption is a bad thing - it shouldn't have to be necessary. As I touched on earlier, insofar as it's necessary, it's also a good thing. If we can't eliminate the laws that give rise to corruption, it's a good thing that it's possible to circumvent these laws. The worst of all situations is to have a mass of strict, stultifying, economically suicidal laws - and also have strict, effective enforcement of those laws. If a culture doesn't allow people to work around stupid laws, that culture's doom is further sealed with every stupid law passed - which is pretty much all of them.

L: Strict laws, strictly enforced, is a recipe for paralysis. I've often said that while Mexico is much less free than the U.S. on paper, it is much more free in fact. People in the U.S. fear their government, especially the IRS. In Mexico, people build what they want, eat what they want, sell what they want - tax-evasion is the national pastime.

Doug: Right. This is one of the reasons why, though I've lived in New Zealand quite a bit over the last ten years, I'm not really interested in hanging my spurs there any longer. Although it's gotten vastly better since the reforms of the mid-'80s, it's still a dull, insular place with a lot of ingrained socialist attitudes - but not much corruption to help you obviate them. And I wouldn't want to live in the Scandinavian countries either. They have all these incredibly stupid laws that sheep-like residents obey, enabling great tyranny - but it goes unrecognized because it has such popular support. It suits me much better to live in a place like Argentina, where there's an equal number of stupid laws, but nobody pays any attention to them. And when there is a problem, it can most often be handled - informally.

L: I won't ask you on the record if you've ever actually done that. Interesting comment about Scandinavia - I was just on Google News yesterday, and one of the top video news stories was a clip about some poor woman in Sweden who's had her twin daughters taken away by the child protection busybodies. The children were taken - without notice - from their school, and the woman didn't even know it was an official abduction until she got a letter a week later. The real horror of it is that there isn't actually any evidence of wrongdoing on the woman's part. The law is preemptive and protective - the bureaucrats are authorized to remove children from their families if there might be danger to them. No due process, and forget about "innocent until proven guilty." The breathtaking assumption is that it's better to rip children out of their families than to find out if there's a real problem first. This could only hold sway in a place where the culture is one of great confidence in the wisdom and benevolence of the state.

Doug: Scandinavia is on a slippery slope. I wouldn't be surprised if a very nasty "black swan" the size of a pterodactyl landed there. The U.S. isn't far behind. Big Brother is coming out of the cellar, where he's been chained up, in the U.S. And I'm afraid he's so strong and nasty that few people will be able to pay him enough to leave them alone.

There have long been local pockets of notorious corruption in the U.S., of course: building inspectors, people like that. On a national level, the DEA became very corrupt early on - a natural consequence of "regulating" an industry that runs on billions in cash.

Other federal agencies are more subtly corrupt. Generals are paid off by being hired by defense contractors after they're mustered out. FDA types are hired by the drug companies and large agribusinesses - and executives from those companies become high-level bureaucrats in the FDA. Politicians rarely take envelopes of cash any more. They wait until they're out of office to collect millions in directors fees', book deals, speaking tours, stock deals, and the like. Bill Clinton is a perfect example of someone who went from near penniless to a net worth of $50 million-plus overnight. The Clintons have made a huge leap from the days when Hillary had to take a $100,000 payoff in the guise of her totally transparent cattle trading scheme.

The problem now, though, is that there are giant police bureaucracies like the TSA and the FBI that have no direct way of getting paid off. So they enforce the idiotic laws like robots. Other bureaucracies like NSA do their damage remotely, too far from the victim to be negotiated with. This is a real source of danger.

L: I'm afraid it does look that way. Okay, now that we've looked at what the beast is, let's talk about making it our friend. Seems like the last thing anyone would want to do...

Editor's Note: Due to the length of this interview, it will be concluded in next week's edition.

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[In today's highly politicized economies, political unrest, government corruption, and strict new regulations can very much tilt the odds of successful speculation against you. That's why every month, Doug and the other editors of The Casey Report analyze the global big-picture trends, to inform subscribers where the best profit opportunities lie and which investments you shouldn't touch with a ten-foot pole.

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L: Doug, there are flames going up in the Middle East, something you've long said was in the cards, but it's not between Israel and its neighbors (click here to read Doug's last article on Egypt, in which he predicted social unrest). The revolutionary spirit sparked in Tunisia seems to have spread to Egypt, the largest Arab nation and a major U.S. ally, greatly destabilizing an already shaky region. The whole world suddenly seems in greater peril. What do you make of this?

Doug: Well, I think it's about time - in fact, way past time. Revolution in the Middle East is long overdue.

L: [Chokes on tea, starts mopping keyboard with napkin.] Care to elaborate?

Doug: I'm not saying I favor the unpleasantness and inconvenience for so many people that comes with such events, but this upheaval is long overdue. These Arab countries have long been the most repressive places in the world, with the possible exception of the despotisms in Africa, to their south. It's very good to see these regimes being overthrown. And the revolution - hopefully that's what it is - is internally generated. It's not the product of an invasion by foreign troops from an alien culture, which is what happened in Iraq and Afghanistan. Regime change in that whole part of the world is inevitable, necessary, and salubrious. The problematic question is: what are the old regimes going to be replaced with?

L: Fair enough. Let's take this one piece at a time... I think I know what you'll say, but do you think this is a fire that's going to spread, or were Tunisia and Egypt just particularly rickety?

Doug: I think it is going to spread, and I'll tell you why.

First, these regimes are not the only highly repressive ones. Every regime in the Arab world - in fact every regime in the Muslim world - is corrupt, backward, and repressive.

Second, with the communications and travel revolutions of the last few decades, the people in these places know they've been getting a raw deal and suffering a lower standard of living than much of the rest of the world. It was one thing, in the old days, to live from hand to mouth and get beaten by the police if you stepped out of line. People thought that was the natural order. But now they can see people in the west live vastly better, and they aren't going to take it any more.

Third, with Facebook, Twitter, cell phones, text messaging, and so forth, people can actually organize action on a massive scale far easier than ever before.

So a broad revolution in the Muslim world has been inevitable for a couple of decades. I suspect it's now imminent.

L: I remember reading that a major factor in the Soviets losing control was the fax machine, which enabled a primitive form of what you're talking about. It's interesting that the Egyptian authorities tried to prevent losing control by shutting down Twitter and other social networks. It didn't work. I just heard a news story saying that some two billion people across the planet are now on the Internet in one form or another. I don't think one third of the planet's population has even been literate at any past point in history, let alone actively participating in a language-driven system of information exchange. We've said before that the Internet is the most revolutionary thing to come along since the printing press - now we're seeing that this is literally true.

Doug: Yes - you can download the "Flash-Mobs for Dummies" app right now. And there's no way to stuff the genie back in the bottle. Technology is everywhere the friend of the common man, starting with fire and the wheel. But political and religious elites - the Atillas and the witch doctors of the world - always try to keep the genie in the bottle. The printing press, gunpowder, the automobile, the computer - the elites have always hated these things, and don't want the common man to have them. Radical new technologies always work to overturn the status quo.

L: So, where do you think the next place will be where the people decide they've had enough?

Doug: Could be anywhere. Of course we can't be sure this revolution will succeed - maybe it will be a false start, like the aborted insurrections in Europe in 1848. But I think it's more likely to catch fire, like the wars of liberation in South America in the 1820s.

The trouble is that there are all kinds of revolutions - as different as the Russian revolution of 1917 was from the one of 1989. I think this one is likely to be more like the latter: pro-freedom. We're watching chaos theory in action. It could appear in Pakistan, a perennial candidate, partly because it isn't even a real country - just a hodge-podge put together by an imperial power. Algeria and Libya are two more highly repressive regimes that deserve to go. Saudi Arabia is probably the biggest risk. This is not a Middle Eastern problem, but could quickly become a worldwide conflagration, especially if a keystone like Saudi Arabia falls.

L: I could see Saudi Arabia going next - it's hardly a bastion of freedom and respect for human rights.

Doug: Far from it; it's a medieval theocracy/kleptocracy. And yet, the "talking heads" on TV are not praising the people for throwing off their chains. The reason is that most of these horrible, repressive governments are all U.S. puppets. They are stooges, getting anywhere from tens of millions of dollars to billions of dollars per year, in the case of Egypt, in direct support from the U.S.

L: Rape and pillage all you want, we'll support you as long as you're a good ally.

Doug: Right. But aside from being grossly unethical, this is a short-sighted policy. In the minds of millions of people all around the world, it associates the U.S. with repression, rather than freedom, which is what the U.S. should - and once did stand for - back when it was America. And unfortunately, people conflate America with the U.S. government, even though they're totally different things - antithetical things, actually. I remember years ago walking down the street in Cairo, and a kid of about 15 yells at me "Damned American." I'd never done anything to him. But the U.S. government had obviously done something to make him feel that way. If I'd thought of it, I would have said, "Hey kid, I've got nothing to do with your secret police - I'm on your side." But it wasn't the place for a philosophical discussion.

L: It's Orwellian; the "land of the free and the home of the brave" is the supporter of tin-plated despots around the world.

Doug: I know - it's totally perverse. We supply their arms. When a protestor picks up a can of teargas, its label reads: "Made in USA." They see U.S. military equipment being used against them. The U.S. government is supporting all these disgusting despots, making enemies of billions of people, turning the U.S. into a police state, and bankrupting the American economy. They're truly multi-talented. But, the average American sees the government as a friend and protector. It's funny - the average Arab may actually be much more politically hip and realistic, and desirous of liberty, than the average American. Maybe some day they'll send their CIA and military over here to bring us freedom.

L: "Underprivileged dictators of the world - apply here for financial aid!"

Doug: [Chuckles] That's what it amounts to. And it's all free. The Federal Reserve can create as many trillions of dollars as anyone needs.

L: The amazing thing is that all these Bright Boys in Washington never seem to get a clue. They supported murderous dictators in Latin America until they got thrown out. They supported the Shah of Iran until he got thrown out. They supported Saddam Hussein, and then ended up turning on him themselves. And they still support some of the most brutal regimes in the world today, sowing the seeds of even more suspicion and hatred - how can they be so blind?

Doug: They never learn at all. And the worst part of it is that there's no need to - nor benefit in - having any involvement whatsoever in any of these places. It's both unnecessary and counterproductive to American interests; it only benefits the people who live within the D.C. beltway, and those who slop at the same trough. You can't impose a new social order on a people from the outside. And even if you could - whoever you put in office, there's going to be some group or another that's going to object, dig in, and hate you for it to boot. You create more future conflict and enemies for yourself. All these idiots blathering on about what "we" should do should just mind their own business.

L: If only the would-be "nation builders" would remember Jefferson's mandate: "Peace, commerce and honest friendship with all nations; entangling alliances with none."

Doug: Better watch out - quoting Jefferson can get you on the terrorist watch list these days. But you know I'm an optimist, and the good news is that all of this is coming to an end. Whatever happens is going to happen, and there won't be much the U.S. can do about it, because all this nation-building nonsense is horrifically expensive and the U.S. is already tapped out trying to rebuild Iraq and Afghanistan - not to mention Detroit and New Orleans. It's "game over" for Mubarak, and close to "game over" for the U.S. empire.

The U.S. government is bankrupt, and will be increasingly immobilized. In a few years, they'll be completely unable to meddle anywhere, because there simply won't be any money to pay for it. The Fed's own projections say the entire budget will be consumed by Social Security, Medicare, Medicaid, and interest on the debt, with no money even for the military, unless something is done soon. There is no politically feasible way to cut spending on those programs. Does that mean the U.S. Navy will wind up rotting at the dock, like the Soviet Navy? It will be interesting to see. Either the roughly $1.5 trillion for "defense" goes, or the $1.5 trillion for Social Security, Medicare, and such goes, or interest on the national debt goes, or the scores of federal agencies go...

At this point, the U.S. budget is like Wile E. Coyote after he's run off the edge of a cliff. His legs are still windmilling in the air, but he doesn't realize it yet.

Sometimes things need to get worse before they can get better. It almost certainly means that in the not-too-distant future, U.S. foreign interventions are going to be scaled way back, or stop entirely, because they simply won't be possible anymore. That will be a good thing for backward countries all over the world.

L: Okay, back to the Middle East, which is looking more and more like the Muddled East, do you think there's any chance this could blow over and die down?

Doug: These things are chaotic over the short run, but I'd say no. I think the cat's out of the bag, for the reasons we discussed earlier. I have not been spending much time there lately, so all I know is all anyone knows - if you can say they know anything at all from watching TV and reading the papers. One interesting thing about Egypt, in particular, is that no one really knows that much about the "Muslim Brotherhood" - what they actually believe, how powerful they are, and what they'd actually do if they take over.

I think back to the French Revolution. It was, initially, an excellent thing; they got rid of a tyrant and the entire old regime - a big plus. But what replaced it? First they got Robespierre and his Committee of Public Safety, the Jacobins and La Terreur - then they got Napoleon, who was another kind of disaster. The same thing could happen in the Middle East.

Nobody appreciates a busybody. Especially one who's consistently backed repressive criminals for decades. The best thing the U.S. could do at this point would be to butt out completely.

L: I'm not going to hold my breath for that.

Doug: I'm glad, because good analysts are hard to find. I've said for years that the way to defuse and start unwinding the war with Islam is to listen to what Bin Laden said was upsetting those people so much. We should get our troops out of their holy land, stop setting up brutal puppet regimes, and stop supporting Israel. If we did that, and sincerely apologized for our destructive actions and the criminal actions our tax dollars have paid for, a lot of those people would cool off and go back to herding goats, looking for oil, making shish kebabs, or some other pursuit of happiness.

L: We should not have to say this - and I know you won't try to justify your remarks - but some people are so touchy on this subject, so let me stress that you are not singling Israel out for harsh treatment. You would have the U.S. government stop supporting all government overseas, including Israel's Arab neighbors, as well as Israel itself. The point is not to take the Arab world's side against Israel, but to let the Israelis and the Arabs work out their own problems.

Doug: Of course. Israel and all countries should be treated the same - free trade and no military involvement, as you and Mr. Jefferson said. It's really that simple. I went into a lot of detail on Israel in the April, 2002 issue of International Speculator. And I wrote an analysis of Islam in the July, 2001 issue of IS. Never let it be said that I shy from controversy.

L: Perish the thought. Hm. You're saying there's no reason for this fire to be contained in the Middle East - I wonder if there's any reason for this fire to be contained by religion or culture. I'm remembering the mass protests I got caught up in Belarus, just a few weeks ago, which is about as far from the Muslim world as you can get. I have to wonder if Lukashenko, the Belarusian dictator, is watching what's happening in Tunisia and Egypt and wondering how close he came to being forced to flee the country - if the military had switched sides on December 19, as they appear to have just done in Cairo, he'd be toast. I have to wonder if people suffering under other highly repressive regimes around the world are watching and wondering if their time has come to reach for freedom. Could it be that we're seeing another "shot heard ‘round the world" today?

Doug: I think the chances are excellent. Whatever happens, I'm convinced that the next five years are going to be among the most interesting in history, from about every point of view. At some point it should get interesting enough for me to jump in to the Egyptian, Tunisian, Pakistani, and Iraqi stock markets with both feet.

L: Interesting in the Chinese sense of the word.

Doug: Yes. Particularly interesting is the risk of 21st century Robespierres. The problem is that all these people still think in terms of government by nation-state. In that regard, unfortunately, what's happening is not really revolutionary - changing one ruler for another doesn't get to the root problem of the rule of some people by others.

Egypt is a perfect example. The government there serves absolutely no useful purpose whatsoever. It has done nothing but repress the people, act as a vehicle for theft by those in power, and hold the place back for decades. It's likely that whoever replaces Mubarak is just going to have his own goofy ideas of what the government should do, instead of just getting the government out of the way.

You know how it is: it's the most cunning, ruthless, and polished liars - the ones who can persuade the most people to support them by promising to take from others - who get elected. Dictatorship is no answer, but absolutely neither is democracy.

Over the long term - the entire span of history - humanity has gone from a state of 100% plunder by rulers to now only about 50% plunder. The long-term trend is, therefore, good - but I don't see any reason why we should take a cosmic leap forward just now, as nice as that would be.

L: Sounds like you've been listening to that song by The Who, Won't Get Fooled Again: "There's nothing in the street, looks any different to me, and the slogans are replaced, by-the-bye... Meet the new boss, same as the old boss."

Doug: Does seem appropriate. Behind the scenes, the U.S. is certainly going to be agitating for another repressive stooge, such as it always picks. Since World War II - or really, since the days of Teddy Roosevelt - when has the U.S. not picked the most repressive toady? And while the U.S. won't have much power around the world in a few years, because of the economic problems it's going to have, it's pretty powerful now, and it will be pushing in that direction.

L: Well, instead of a freer world, would you say this new revolutionary fervor is going to end up a big step backwards, setting the stage for worse repression and more war?

Doug: It's entirely possible, but I'm not going to make that prediction. Remember the French Revolution. Remember Rome: they assassinated Caligula, but then got Claudius; they killed him and ended up with Nero. And after Nero, they had a bloody civil war, in the Year of Four Emperors.

L: Well, Nero, I've read, at least had the grace to kill himself. Okay - investment implications seem pretty clear; oil just shot up over $100/bbl.

Doug: Yes indeed. I think the commodity bull market is likely to stay intact, and this instability is bullish for energy prices - good news for companies not operating in the Middle East or other areas at high risk. Sustained higher oil prices are also very bullish for alternative energies, especially alternatives to light sweet crude, including heavy oil, oil sands, and shale oil. All of these are abundant in the Americas, and some even in Europe. These are the kinds of opportunities we specialize in, in our energy newsletters.

On the other hand, this is very bearish for the economies directly affected. The top revenue industry in Egypt, for example, is tourism, and tourism there has dropped to zero. That's going to be devastating and make it all the harder for the place to get better.

L: So, bearish on the region, but bullish on commodities.

Doug: Yes, but looking ahead for the bright side, once places like Egypt bottom out, there could be some real bargains to be had there. There could be fantastic deals on prime real estate in Cairo and Tunis, and the local stock exchanges could become a gold mine, for those daring enough to buy when no one else will. Too early now, but the time could be coming.

L: One more question. A lot of people are probably wondering what you think of the changing odds for open warfare in the Middle East? If pro-Israel stooges get replaced by people whose sentiments more closely reflect those of the Arab masses - who are no fans of Israel - doesn't that bring the area that much closer to a shooting match?

Doug: Well, it's anyone's bet, but these people have been having wars with each other for the last 5000 years - I see no reason for them to stop now. And as close to the edge as the poor people in these repressive Arabic countries live, and with the economic outlook looking so grim, anything could happen. Even with Israel's nuclear deterrent, anything could happen.

L: That's a very sobering thought. If the oil fields of the Middle East turn into large glass bowls, that will have obvious and dramatic consequences for energy prices - but what if this all blows over instead of blowing up? Could oil prices retreat, hurting those who buy in now?

Doug: I think oil prices will go up anyway. There are new technologies on the horizon that could all but eliminate the use of oil as an energy source, but that's years away. Based on the fundamentals that underlie the commodity, I expect steadily rising prices for years to come, with fluctuations along the way, of course. Everything we see says that trend is very solid, so on top of that, political turmoil is just a bonus.

L: Okay then. Not exactly pleasant thoughts, but important ones. Thanks for your insight.

Doug: You're welcome. I feel insulated from the turmoil, here in Argentina. But only a plane ride away if I want to smell tear gas in the morning. ‘Til next week.

L: Hasta la proxima.

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[A crisis in the Middle East could not only make oil go up, but also alternative energies that benefit from high oil prices. There's one "green" energy in particular that, though little known, is more efficient than solar and wind - and heavily subsidized by the Obama administration. To learn more about this energy source that the smart money has already taken big positions in, click here.]

L: Doug, a lot of our readers have asked about getting a second passport. I realize this is a large and complex issue - several issues, actually - but would you care to go over the basics of where to go and what to do? And for those not already thinking about this, why?

Doug: Sure. We've talked quite a bit about the increasing urgency of getting some of your assets out of your home country, especially if it's the United States. We've talked about having stores of precious metals in safe places abroad, and setting up bank and brokerage accounts abroad as well. I've said that safest way to store wealth abroad is to buy property, which can't be seized by your home country without an act of war. The purchase of real estate solves several issues all at once.

But that's all about protecting assets; to protect yourself, getting a second passport is unfortunately very important.

L: Why unfortunately?

Doug: Because you shouldn't have to need government papers to live as you please. It used to be that a passport was a document that a ruler of one country would give to a traveler to ask the rulers of other countries to assist him in his travels. Now, instead of a convenience, it's become a required permit for travel. It's degrading and actually runs counter to the whole idea of the thing. The original purpose of a passport has been turned upside down.

L: Passports are becoming a world ID card - and they will be, once the governments all link up their databases.

Doug: That's exactly what they are, and I'm sure it's going to get worse. It's funny the way people treat these things like some sort of holy relic, or magical object - they are nothing but another government ID. But since they are necessary in today's world, you ought to have several of them, for your own convenience. If nothing else, it prevents any one government from basically placing you under house arrest by taking your passport away from you.

L: Do you really think of it mostly in terms of convenience? Or do you sometimes think about the potential for physical danger, should you find yourself in an Achille Lauro-type situation in which violent people who hate Americans select U.S. passport holders for abuse?

Doug: That's definitely a good reason for Americans to have a second passport, and increasingly for others, now that the war with Islam is under way. If you ever get caught in harm's way, it helps that nobody starts by shooting all the people from countries they've never heard of.

L: Round up all the Uruguayans!

Doug: Right - that just doesn't happen. Another reason - certainly if you're an American - is that nobody any where in the world wants to open a bank account or a brokerage account for you. It ranges from impossible to hard and inconvenient. It's a subtle and indirect form of exchange control that the U.S. has already imposed. I have no doubt controls will become much more formal and serious in the near future.

L: Are you saying that if I go to Switzerland, and I look and sound like an American, but have a Mexican passport, they'll open a bank account for me?

Doug: It depends. Here in Uruguay, where I'm still hanging out on the beach, I went with a friend from South Africa to open a bank account, using her South African passport. I didn't say a word, so I could have been a South African too, for all they knew. Still, the bank officer asked her: "Are you also a U.S. citizen?" and "Are you resident in the U.S.?"

L: The long arm of Uncle Sam keeps getting longer.

Doug: It really is getting harder and harder. Banks really don't want the aggravations that come with dealing with "U.S. persons" and their bullying government. Of course, it's all going to eventually backfire on the U.S., but in the meantime it's going to get worse.

L: So, how have you dealt with this problem?

Doug: Well, when I first started on this, I got a travel document from the World Service Authority in Washington D.C. That organization was started by a guy named Gary Davis, who was a bomber pilot for the U.S. during World War II. He got so fed up with war and governments that he renounced his U.S. citizenship while in Paris after the war. That was a big deal, because he was also the son of Myer Davis, who was a famous band leader during the war.

Anyway, after he renounced his citizenship, he found he couldn't leave France, because he had no passport. So he created the World Service Authority and printed up a very nice-looking passport that looked a great deal like the UN passport. It was the same color, has a globe on the front (though a bit different from the UN's globe), was printed in some five languages, and quotations from the appropriate parts of the UN charter.

I have one that I got directly from Gary, himself, back in the ‘70s, and have had some very interesting adventures with it. I've used mine successfully in Iceland, French Polynesia, Honduras, Costa Rica and Peru. It worked in some other places as well, but I'd have to look at the stamps to list them all.

L: Are those still available?

Doug: Yes, they are, but with all these governments linking up and sharing data - prompted mainly by the U.S. government - it doesn't work nearly as well as in the past. Unfamiliarity used to be your friend. Now, if you go to a country and the immigration officer doesn't recognize your passport, he'll look it up on a list. But even in the old days, it didn't always work. A Swiss border guard got very affronted with me over it. When I used it in Rhodesia, during the war, I got sent to the back of the line and got a big lecture. When I used it in Egypt, it meant an hour in the back office, because someone had used one the week before when he assassinated their ambassador to Malta. In Senegal, 30 years ago - a place so backward you'd think they wouldn't even know - but they laughed good naturedly and said it was out of the question.

The most interesting adventure was in Morocco, where the officer immediately called for a supervisor, and the supervisor had me taken to a back office - something worth being a little nervous about back then - and maybe even more nervous about now. At the time, my French was still pretty competent, and I was feeling my oats that day, so I was hanging tough and arguing with the guy in French. In the end, I said to him: "Okay, so what am I supposed to do?" He replied with an absolutely perfect Gallic shrug. He could have been an actor in a movie. So, I took out my U.S. passport and he took me back to the front of the line.

L: [Laughs] David's right. You must be missing the gene for fear. Most people wouldn't even have tried such a thing back then, and most who did, probably gave up after wetting their pants in the first encounter you call an adventure.

[Ed. Note: The "David" reference is to David Galland, Casey Research Managing Partner.]

Doug: Perhaps so, and now the point may be moot. But even with all these governments linking together, it's still worth getting a World Service Authority travel document, because in some countries you have to turn in your passport at hotels and other places.


L: Yes - I don't like it when they ask for my passport at hotels, and I hate it when they say they have to keep it.

Doug: As well you should, for all kinds of reasons. You never know how good the security at the hotel is, and the inconvenience of a lost or stolen passport is substantial. I'd say a second one is a good thing to have, just on principle. An alternative would be to get documents from some of those people trying to set up new countries, like Sealand, the WWII gun platform off the coast of England taken over by Roy Bates and recognized by three countries. I spent an afternoon with him once, but foolishly never signed up as a citizen. Oh well... Other outfits sell reproduction passports of defunct or renamed countries like Rhodesia and British Honduras.

L: I shudder to think of what "inconvenience" means to a man who finds it amusing to argue with immigration officials in back rooms in flyspeck countries... But at any rate, mentioning purveyors of passports from defunct countries underscores the importance of telling our readers that there are a lot of scams out there, and that it pays to be very skeptical of web sites that claim to be able to set you up with documents, corporations, and bank accounts overseas. There are free-lance thieves to worry about, and worse - governments trying to entrap so-called tax evaders and money launderers. There's no need to take such risks when you can go to any of the many countries that encourage immigration and permanent residency, and acquire government-issued documents legally.

Doug: Yes, these are indeed shark-infested waters. You really have to do things in a totally correct and proper way. For instance, there always seem to be people running around who have passports stolen from the issuing agency, and some fools buy them, not realizing they'll not only lose their money, but might wind up in jail besides. But, even among perfectly legitimate documents, not all passports are created equal.

L: Why would that be?

Doug: The defining characteristic of a "good" passport is how much visa-free travel it allows. And by that I really mean visas that have to be applied for, and approved, before the trip begins, as opposed to those issued at the border. Avoiding those is the real key value.

In spite of its reputation, a U.S. passport is by no means the best one to have. First, if you have one, you're a U.S. taxpayer, which is very inconvenient, but it also means you need visas for a lot more countries than you would with some other passport. Argentina, Chile, and Brazil, for instance, all charge Americans about $150 to issue a visa. It's a perverse form of reciprocity, as that's what the U.S. Government charges their citizens. It ‘s the same kind of thinking that starts trade wars, and I expect more of it in the years to come - but that's another subject.

Speaking of South America, two passports that are relatively quick and easy to get are those from Uruguay and Paraguay. Both countries are members of the Mercosur group of South American countries, which offers some additional advantages to their nationals.

One of the best, I'm given to understand - and this is constantly changing - is a Singapore passport. I also understand that Singapore has a number of ways to become a citizen in a relatively short period of time.

L: What are some of the shortcuts to second citizenship?

Doug: One of the best is if you have parents or grandparents from a country that will give you citizenship on that basis. Ireland and Italy are known for this. It's true, under some circumstances, for the UK as well. Saint Kitts is a relatively easy place to get a passport quite quickly, but it involves a significant investment that adds up to a couple hundred thousand dollars. Selling IDs is a significant source of income for the island.

And of course, in a number of countries you can obtain citizenship, and hence documents, relatively easily by marrying a national. Brazil is one, and a Brazilian passport is not a bad one to have.

There's information on this out there, but there have been scam reports done on this subject and many other sources that are simply unreliable, so watch out. I don't think there's ever been a truly definitive study done on all the ways, in all the 200 or so countries in the world. I believe my book The International Man was the first to really explore the ground - but it's long out of date. Even if there were a current book, it would have to be updated monthly to be of real value - governments are always changing their rules. And when it comes down to the particulars of a given situation, you'll want to hire a tax attorney and maybe an immigration one as well, to make sure everything is done correctly. That said, our team did put together a special report for people considering expatriation, called Going Global (click here for details).

It's generally better not to try for short cuts, but to move to a place you like living in, at least part of the year. Operating through the established, legally recognized channels, you can get a passport in two to five years.

L: Okay. And, to be clear, the U.S. allows second citizenships?

Doug: Yes. Many countries don't, and are strict about it. Others don't, but look the other way. You may feel you want to keep your U.S. documents for various practical reasons, but remember that keeping your U.S. citizenship means remaining a U.S. taxpayer, which is most undesirable.

L: I read that if your income is less than $100,000 per year and you live abroad, it's not taxed, so maybe the tax issue is less important to people who earn less than you?

Doug: That's true, but that exemption only applies only on income earned outside the U.S. You still pay capital gains taxes, and taxes on U.S.-sourced income. I also understand that under current law, until 2013, there's a $5 million exemption on appreciated expatriated assets. That means there's a window closing soon on some of the benefits of getting rid of your U.S. citizenship.

[Ed. Note: Readers should consult with a tax attorney before acting on anything mentioned regarding taxes in this interview.]

L: Any reasons other than taxes you'd want to get rid of your U.S. citizenship? If I was young enough, I'd worry about conscription, for example.

Doug: That's a very good reason. More generally, as long as you're a citizen of a country, that country's government is going to treat you like its property. So, if you are going to be a citizen of any place, which is unfortunately necessary, it's better to be a citizen of a small and backward country, or one that just doesn't have the ability or interest to monitor all of its citizens like prison inmates, as the U.S. does.

L: I hear that. It's such a pity that America the beautiful has turned into the United State and is rapidly marching down the road to serfdom... I really loved America.

Doug: Nothing lasts forever, Lobo. It's suicidal to let sentimentality blind you to reality. But, eternal optimist that I am, it's always good to look at one of the major bright sides of the ongoing financial and economic collapse. Namely that the governments of most advanced nation-states are bankrupt. There's a chance that some of them will be forced to cut back on their most noisome activities. There's even a chance that one or two will be completely hollowed out and will exist mostly in theory, like Rome in the late 5th century.

It's very hard to predict what will happen, so it's best to have a Plan B. And a Plan C. Unfortunately, most people have a medieval serf mentality - although they don't know it, and probably wouldn't admit it even if they did - and have no plan at all, because they think everything is fine.

L: I agree. And you know I'm diversifying out of the U.S. as well. Any other essential points?

Doug: Yes, remember that getting a second passport is just part of a larger "permanent traveler" strategy. The ideal is to live in one place, have your citizenship in another, your banks and brokers in other jurisdictions, and your business dealings in yet others. That makes it very inconvenient for any one government to control you. You don't want all your eggs in one basket - that just makes it easier for them to grab them all. I understand it may not be easy for most people to structure their affairs that way. That's exactly why most serfs stayed serfs; it was hard and scary to think of anything other than what they were told they should do.

L: Understood. Thanks for the guidance.

Doug: You're welcome. Maybe we should talk about Obama's state of the Union address next week, but that means I'd have to actually listen to the thing, and that would be painful.

L: Ugh. Maybe Mr. Market will provide us with something more entertaining to talk about. Well, we'll see. Buenas noches, Tatich.

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[Doug has much more to say about internationalizing your wealth (and yourself) in his article "Making the Chicken Run," in the current edition of The Casey Report. Try it today - with 3-month full money-back guarantee. More here.]

L: [Continuing previous conversation] Why is it a mistake to commission art?

Doug: Because you never really know what you're going to get, or if what you're hoping the artist is going to deliver is what's actually on his or her mind. These things shape themselves as they come into being - at least if you're dealing with a competent artist, and not just a craftsman. Unless you're a Medici dealing with a Michelangelo, and the sky's the limit, you just don't know if the result is going to appeal to you. I've been lucky with the pieces I've commissioned, like the two bronzes Barry Johnson made for me - but it's been pure dumb luck.

L: Perhaps so, and I don't have anywhere near the level of experience you do, but I have commissioned several works of art, including a jewelry box I had made for a lady once. The size and shape of the piece totally surprised me, but it was gorgeous... worked with stones, shells, and etched images that represented the two of us... It wasn't what I'd asked for; it was better. I've also commissioned paintings with similar results.

Doug: You were lucky too, then.

L: Is that really so? If you ask an artist whose work you love to do something on a theme that moves you, aren't you stacking the odds heavily in your favor?

Doug: Now that you mention it, I commissioned another sculpture I'm very pleased with. I once had 1,000 ounces of silver lying around, which I'd bought at about the $4-level, and I had a friend in Aspen - Charles Savione - who's a very competent sculptor and very into Buddhism as well, partly due to his martial arts background. So I asked him to turn my 1,000 ounces of silver into a Buddha. Which he did - and he gold-plated it as well. I really like it. He also made a series of bronze statues of the goddess Eris, mementos of the Eris Society.

So I suppose you're right; if you pick the right horse and jockey, you shouldn't be too surprised to do well in the race. But you never know - you just can't control the process once you initiate it. I know many people who've been very disappointed commissioning works of art. Maybe I'm just easy to please. It's safer just to buy completed works that you know you like. And there's such a vast amount of art out there, you don't really need to commission any.

L: Hm. Is there a difference in cost? As in, if an artist has a bunch of stuff gathering dust in his attic, she may sell it cheaper than if you ask her to make something - then she knows you really want it.

Doug: That's true. The price is set by supply and demand - Paul Gauguin and Vincent van Gogh were starving artists. An art speculator could have made millions buying their stuff when they needed some food or drink. Apart from that, there are norms in the business. For sculpture, unlike painting, material costs are significant, and the artist usually charges a fee equal to the foundry costs. In the case of my Buddha, a very nice piece of work, I've got about $15,000 in it. What could I sell it for? Who knows? What would someone pay for a large gold-plated, solid silver Buddha, if that's what he really wants?

L: Not to digress too far, but why the heck would you gold-plate something made of solid silver? Doesn't that sort of defeat the point of it being solid silver? Might as well gold-plate a Styrofoam Buddha - it would look the same.

Doug: Well, remember that silver tarnishes...

L: Ah - of course!

Doug: That was why we did it, but in retrospect, it was a mistake. For technical reasons, it's actually very hard to gold-plate silver. You have to lay down a layer of nickel first. More important, if some criminal saw that Buddha, it might just look and feel enough like solid gold that he might want to kill me for it. If he knew it was just silver, the cost-benefit ratio of committing a capital crime might not be as appealing - cost/benefit, risk/reward. It's a good thing most criminals are so stupid that the TV and the stereo would be higher on their "must steal" list.

L: So, you generally don't commission, you buy... what's in galleries? Don't they charge more?

Doug: Galleries usually mark up the art they are selling by a factor of about two or three. So, if you negotiate with the gallery, you can usually get about a third knocked off. That's especially so if you establish yourself as someone who knows his or her way around the art world. If a gallery doesn't want to negotiate, a good gambit is to go to a friend who owns a gallery, and have him buy it. Galleries will typically offer a 30% discount to each other as a professional courtesy.

L: Is it a buyer's market now with the global economy in the dumps? Nobody has to buy art, so it would seem that demand must be dropping well below supply these days...

Doug: It depends what and where. This, however, is an advantage of buying "name-brand" artists - there's a reasonably liquid market for well-known, expensive artists. But like I said, it's a very dangerous game to try to invest in art; you should treat art as a consumer good, and assume that once you buy it, you'll never be able to sell it.

That said, try not to buy, ever, when and where there's an economic boom going on. When money really starts flowing, a lot of it flows into the hands of artists, and when it stops, artists starve - that's the time to buy. I bought Chinese art 20 years ago - I wouldn't touch it now. Here in South America, where I am at the moment, high soybean , sugar, cotton, even cattle prices, are producing a wave of increased prosperity, and people are buying art. Brazil in particular is a terrible place to buy art at the moment, and Argentina and Uruguay aren't much better.

L: Where would you go to buy art today?

Doug: Zimbabwe is still in the dumps; I'd go there if I needed more Shona sculpture - which I don't. But places like that. I have one friend, a WWII vet, who bought hundreds of pieces of old - 17th-19th century - Spanish furniture during the Franco years. At the time it was considered unusable junk and cluttered barns. Jean-Pierre Hallet describes in his book, Congo Kitabu, how he bought literally tons of Congolese sculpture during the '50s, when nobody cared about the stuff. The problem is that the world has become much wealthier and more sophisticated over the past few decades. Russia had spectacular bargains after the fall of the Soviet Union. There are now few stones left unturned. If you want to speculate, I suggest waiting until the Greater Depression bottoms. That will be some time from now...

L: Where to look today... Maybe Detroit?

Doug: [Chuckles] Maybe - but it's hardly an epicenter of artistic activity, unless you want to count spray-painted walls on abandoned buildings. One place that isn't overly inflated is Cuba, where I've bought a number of paintings that are decorative, although nothing cosmic.

I'll tell you what the best single - very recent - place in the world for great, cheap art used to be, though I suspect it may be doing too well for that to be the case now: Vietnam, especially the north. It's certainly among the most art-oriented places on earth, in my experience - and excellent quality. You can go there and get extremely competent student artists to replicate great works - Raphael, Monet, Van Gogh, El Greco, you name it. They'll turn out a technically excellent copy on a price-per-square-inch basis.

This leads to an interesting philosophical question: Is it true that a difference that makes no difference is no difference? In other words, I'd love to own Van Gogh's Irises, but even if I had $100 million to buy it, how could I possibly display it? Why not have a Vietnamese duplicate it for $1,000? It would be almost as pleasant to look at, which is really why I'd want it. I'm sure some fool will accuse me of being a philistine for even having the thought, though... so perish the thought.

But that gets us into the area of art forgery, which is a real problem with expensive works, especially of recent vintage. It's often actually impossible to tell the real thing from a forgery. In that case, you're actually paying for the provenance, not the work itself. The whole area has become not only esoteric, but corrupt. It impresses me as ridiculous. The point of owning art is to be reminded of what life is about, and to be surrounded by beauty - not to have to be assured of reality by some expert's opinion.

L: As a matter of technical achievement, have you seen artists breaking new ground in the 21st century in a way you think has merit?

Doug: There may be some good new stuff out there, but nothing I find interesting, frankly.  Performance art, for instance, is only entertainment. I knew a guy in Aspen - a very famous art collector. He showed me his collection, which included among his favorite pieces something very expensive... and hard to describe. It was like a big plastic cushion. You plugged it in and it blew up, and then it deflated again. That was it.

It reminded me of that movie, The In-Laws, with Alan Arkin and Peter Falk. In the movie, they visit a Central American dictator, and the guy is showing them his art collection. The dictator proudly tells them he paid $50,000 for one piece that was one of those black velvet things you buy at a gas station.

L: [Laughs] Jesus or Elvis?

Doug: [Laughs] Just like that - it was very, very funny. Frankly, most unconventional artwork is a scam. I'd definitely put Jackson Pollock, Andy Warhol, and Willem de Kooning in that class. But then again, I'm rather amused by Fernando Botero's stuff; it doesn't fit my philosophical definition of art very well, but everyone has idiosyncrasies. I definitely would have bought his stuff if I'd found it before it became so beastly expensive.

L: So, you only buy it if you really want to look at it.

Doug: True enough. And while it doesn't necessarily take a lot of money to buy good stuff, it does cost money, and it takes experience and some technical education to be able to identify really good art. I mentioned taking lessons, which I've done in Hong Kong and several places in the U.S., Canada, and Spain, in part because I wanted some reality on the technical skill involved. If you're going to get into art, I think you owe it to yourself to educate yourself in such a way first.

L: So, when you said that studying art was a waste of time, you meant theoretical study, in a classroom - not technique, which you do recommend studying to those who want to become connoisseurs...

Doug: Yes. It's the difference between seeing and doing. Instruction is very helpful when it comes to learning how to do things, though I'd say that you could discover most techniques on your own, if you were patient and diligent enough. But why try to reinvent the wheel?

L: My two sons who are artists would agree. I offered to send them to art school and they didn't want to go - they wanted to develop their own styles, not be taught to mimic others'. They wouldn't even consider classes on basic technique. That seemed like reinventing the wheel to me, as you say, but they wanted to do their own thing, and they did. As a result, both have developed powerful styles of their own and have made commissions.

Doug: I've seen some of the younger one's work, and I'd say he proves the point - although it's helpful to stand on the shoulders of giants.

L: Okay. Hm. Pulling back to the larger world we live in, it seems that your art-buying has been a contra-cyclical thing. Do you ever use art prices as a contrary investment indicator?

Doug: I've never made a study of that, but I've no doubt that there's a correlation. And if I'm right about the Greater Depression being even worse than I expect it to be, you're going to be able to find lots of quality art going for less than cost of materials. I'm sure there are many thousands of people like myself who have so much art in storage, they can't even remember everything they have - a lot of that could hit the market at fire sale prices at some point.

This is absolutely true of museums too, by the way. People donate their collections to museums, and most museums have large storerooms - warehouses - packed with the stuff. There's a gigantic inventory overhanging the market. So I would not buy art as an investment on any basis now. I don't care if we're talking old masters, or modern fads, any of it. Quality art has been a good investment in the past, but I can't see it being a good investment for years to come.

Everything has become a piece of collectible art - cars, for instance. People are inventorying the things. I love cars, but the time will come when you will be able to buy exotica that's been sitting in a barn, with a dead battery and flat tires, on the cheap. In the '40s that was how some people found Duesenbergs, Packards, and Cords.

Modern coins are another thing I don't think make sense; they're really just mass-produced government tokens. I used to collect ancient Roman coins. Each is an individual piece of art, and very historically instructive. And there's no popular interest in them, which makes them an excellent value.

L: It'd take some guts and vision to start buying art, if you live in one of the world's leading economies when they really start falling apart.

Doug: That's what separates the real speculators from the day-trader wannabes. As we've discussed, especially in our talk on technology, the longest trend in history - and beyond - is the ascent of man. That's likely to continue. That said, I'm firmly convinced that the Greater Depression is going to irrevocably alter the global economy, the lines on the maps, and entire ways of living for millions of people. But when the dust settles and this era is well and truly behind us, the world will be a better place. There will be a tomorrow, so when things crash, you've got to see it as an opportunity to Buy Low.

L: Understood. One more question. Speaking of masters, who would you say are your favorites? Given what you've said, not da Vinci - you wouldn't want the Mona Lisa on your wall, even if it was given to you. And you've bought a lot of unknowns. But are there any famous artists you like our readers might recognize?

Doug: Well, I wouldn't go that far about the Mona Lisa, even though it's just a small portrait. My favorite painters among people who are well known definitely include Salvador Dali, Hieronymus Bosch, Albrecht Dürer, William Blake, and Pieter Bruegel the Elder. But they're unaffordable - unless you have a Vietnamese knock-off commissioned.

L: My oldest artist offspring is a huge fan of Dali. I like him, but am more partial to the Russian painter Mikhail Vrubel.

At any rate, summing up your view, then: forget about investing in art for the foreseeable future, but if you like it, watch for buying opportunities to come. Art itself is best seen as an expense that enhances quality of life.

Doug: I would say that's just about it.

L: Thanks Doug. 'Til next week.

Doug: My aesthetic pleasure.

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[Doug himself has turned rational speculation into an art form - which includes thorough analysis of big-picture trends and finding the best opportunities to profit... minimizing risk and maximizing the upside. Read his thoughts on the economy, and why you should move your assets (and yourself) abroad NOW, in the current edition of The Casey Report. Details here.]

Editor's Note: Skype rings, I answer; it's Doug, calling from Punta del Este.

L: Doug, how are you? And how were the holidays? Was Punta hopping?

Doug: Actually, yes. Especially Christmas. I went to Christmas dinner at the house of a Jewish friend down here. At midnight, even though dessert hadn't been served, we went out to his back yard, where he set off a professional quality fireworks display - skyrockets, explosives, the same stuff you see at stadiums in the U.S. Then one of his next door neighbors started, then another, then another. Everyone was in competition for the best display.

L: What? In their backyards?

Doug: I love the smell of gunpowder on Christmas; it's the smell of a free country. I like a place where everyone is expected to have stuff that they'd call in a SWAT team for in the U.S. But that's just some local color; everybody from Buenos Aires comes over to go to the beach this time of year. But, actually, I called to talk about art. Partly because Punta has scores of art galleries.

L: Well, last week I said we should talk about something more positive, but why art?

Doug: Perhaps because art is one of the most positive things about life itself. It's really about aesthetics, a very important part of human existence. We talk a lot about philosophy here, and that's important. Aesthetics is actually a division of philosophy, and art can make philosophy...concrete. If one picture is worth a thousand words, then art can visually describe the way you see the world. The kind of art you like can describe the way you think the world is, or should be. A good sense of aesthetics is as important as having a well-developed intellect, in my opinion.

L: Or it should be. Okay, let's start with a definition. My Webster's says aesthetics is the branch of philosophy that deals with the nature of beauty, art, and taste, and with the creation and appreciation of beauty. Why is this so important now, with the world in a deepening crisis of historic proportions?

Doug: Humans have always placed a high value on aesthetics, even in the worst of times. There's plenty of evidence the hunter-gatherers of prehistory took time out of their fight for survival to create art, and that has continued throughout history and continues today. This pursuit of beauty is a defining characteristic of what it means to be human. One of the main purposes of being wealthy is to be able to live in an aesthetic environment. The reason notorious misers like Hetty Greene are considered so shameful and bent is that they didn't have a clue what to do with their money; they confuse the means - money - with the end: an aesthetic life. Warren Buffet is almost in that class; he's an idiot savant generally, but he certainly appears to have no sense of aesthetics. On the other hand, some of the poorest people in the world strive to be as beautiful as they can, and to own what small pieces of beauty they can; this alone makes them worthy of respect. A brute with no sense of beauty, nor appreciation for it, can barely be called human.

Really good art distills an intense experience or emotion. The ongoing crisis will create many intense experiences for many artists, and may result in some very powerful works of art - although that's just conjecture on my part. I'm not sure what correlation actually exists between various world crises and great art. A sure bet, though, is that the Greater Depression will probably put all sorts of art on sale, as belt-tightening cuts non-essentials from people budgets. Maslow's hierarchy will become much more apparent than has been the case in recent years.

Food and shelter are essential, of course, but art is also essential - if you don't have any beauty in your life, what's the point?

L: I'm with you there. Life without beauty would be a torture. Death would seem like a reprieve, in comparison. So, do you consider yourself an artist? Or just a connoisseur?

Doug: The latter. I've always been interested in art, though I don't have any real skill at producing it. I wish I did! I've taken art lessons - painting - from several teachers both in the West and the Orient, but I'm not at all satisfied with my technical ability. A man's got to know his limitations...

L: So, what makes one a connoisseur? Isn't it a bit presumptuous to say what's "good art" and what is not? In speaking about movies, books and especially music, we've said that art is a highly individualized experience. Doesn't it rub your anarchistic soul the wrong way to have some snooty expert from the Louvre or the Royal Museum tell you what's good art? Some of those clowns pay huge sums of money for blank canvases - or ones literally smeared with shit.

Doug: There's a lot of genuine garbage out there masquerading as art - but that tells you right there that there is such a thing as "good art." Going to school to study art or art history is a complete and total waste of time and money; these are things that you can, and should, be able to teach yourself, through reading and observing. As we observed in our discussion on education, there are very few Aristotles teaching in colleges today. So-called "higher education" is a veritable magnet for second-raters and actively destructive parasites bent on promoting unsound ideas to the inexperienced and gullible. They concentrate in areas like social studies, literature, and art - where opinion reigns supreme. And I find their opinions almost universally appalling.

I would never tell you what you must see as good art. De gustibus non disputandum est. Although I'd bet you and I would agree on most of it, simply because we share a very similar view of life, and what's important. It bears repeating that aesthetics is a division of philosophy, so what a person finds appealing usually offers a window into their soul. That means something. Every educated person should cultivate a practical education - familiarity, background, understanding, judgment - in various types of art. We've spoken about the value of literature, film and music, and this includes visual arts, like painting and sculpture.

L: I remember looking at Picasso's Cubist paintings of women, as a child, and thinking they were ugly and Picasso was overrated. I liked da Vinci more, and romantic 19th century painters even better. My dad is a real art-lover, and for some time, we used to go to art galleries almost every weekend - this resulted in my teachers' great astonishment in high school, when I could identify a Picasso, a Miro, or a Giacometti on sight. Anyway, I later saw some of Picasso's early drawings, done in simple pencil, but with photo-realistic detail and perspective. Could have knocked me over with a feather - the man really did have talent; he just chose to use it to express something that was over my head, when I was a child.

Doug: He had immense talent and versatility. That said I'd never pay the premium to own a Picasso; like everything else in the material world, it's a matter of value, and cost/benefit ratios. The point is that if you know enough about art, you can start separating the poseurs from the real artists. After that, it gets pretty subjective.

L: So, what do you like?

Doug: I'm very particular about the art I buy. I personally like things that have a message of some significance, that tell me something about the way the world works. I've great respect for high technical ability as well; if the artist doesn't have excellent technical skill, he doesn't make the first cut. But technical skill alone is not enough. There are draftsmen, graphic designers, and commercial artists with excellent technical skills - but they're not actually artists worth buying, because they don't make a philosophical statement, they're not really trying to tell you how the world works, or ought to work. They're not taking a metaphysical position.

What this means, in practical terms, is that I tend not to buy landscapes, or simple portraits - things that could be done better by a skilled photographer. Which is not to say that a photographer can't also be an artist, but he has to capture reality, as opposed to create it from whole cloth.

There's no limit to the amount of art you can buy, other than your pocketbook and your storage space. So you usually wind up specializing. I've always been drawn to, and specialize in, surreal art, with a smattering of other approaches.

I've accumulated so much of this stuff over the years, I have a trailer full of it headed to Argentina right now. I've got lots of tall walls in all my places down here, so I've finally got room to display my art. I'm really looking forward to opening the container - it's going to be like discovering the art and buying all over again. Although I'm sure some will turn out to be disappointing, since I've become more discriminating over the years, and I no longer have to really look at the right side of the menu. Although, it must be emphasized, there's only a limited, even accidental, correlation between quality and price.

L: You get the excitement twice. Did you have this in mind, as you bought or built homes - you need lots of hallways or extra walls, just to have room to hang art?

Doug: I'm not big on hallways, but all my places have 12- to 14-foot ceilings, and wide open walls. Most of the paintings I have tend to be large. They probably average three by four feet, or larger. I hate little kitschy things...

L: Bathroom art?

Doug: Yeah. Small stuff tends to be non-dynamic and... kind of cheap-looking. Clutter. I like to go big or go home, generally, and in art too. I prefer things that I can look at from a distance, rather than be forced to scrutinize like a postage stamp.

L: Let's take an example. In the living room of your flat in Buenos Aires, you have a painting we've referenced before, the war painting. What's the story there?

Doug: I bought that in BA, a few years ago, just after the height of Argentina's financial crisis. I don't know the artist, and don't really care who he or she is. Although the price was absolutely right, that wasn't a factor, as I didn't buy it for an investment. And certainly not because I'm a fan of war. I do tend to like things that are intense, even disturbing. You'll never find one of those mass produced paintings of a house with a chimney in a forest vale - Thomas Kinkade - in my collection. The guy gets like $25,000 for them. Not because they're any good - I suspect even I could replicate them - but because he's a great marketer. Selling art isn't nearly so much about quality as it is about marketing. The same is true about investment advice, or almost anything.

Doug's "War" painting

L: I don't think anyone could look at that image in think it was pro-war. But that's interesting about art and marketing.

Doug: An observation I want to make about buying art is that the price of art is totally arbitrary. The cost of production of something like that war painting, which is about five by five feet - including the canvas, wood, paints, might be a couple hundred bucks - simply not significant compared to what you pay for it. But when you sell it, it's all about how badly the buyer wants it. You can sell a piece like that for anywhere from less than the cost of materials to over a million dollars.

L: So, why pay millions for a Picasso, when you can buy something by an unknown for a thousand bucks that makes you feel just as strong a response?

Doug: Exactly. Especially for me, in that I really don't give a damn what the public in general, or art critics in particular, do or don't think. I, therefore, generally don't buy established artists. People who buy recognized artists impress me as the same kind of people who buy Ralph Lauren shirts, just to show they can afford Ralph Lauren shirts. Or, Goddess forbid, buy Tommy Hilfiger crap, where he displays his name boldly, because they somehow think it shows they have good taste - which, in my opinion, is just the opposite of the case.

L: Do you ever buy art as an investment?

Doug: No. Art prices are, much more than the prices of almost anything else, arbitrary and subject to fashion, promotion, and chimerical opinion. I don't buy art to make money on it; that's a real long shot. I buy from unknown artists whose work I just like. I'll never, ever be able to resell the stuff unless lightning strikes, and the artist becomes popular - which usually happens because some clever gallery decides to promote him or her. It's a lot like buying real estate, but much worse. Even though it has speculative potential, I really only buy stuff I like myself. You can never be sure of a sale, so you better take pleasure just in owning it.

That actually applies to almost anything, even stocks. Don't buy something because you hope a greater fool will materialize. You must already know exactly who the fool is, in advance. It's like a poker game: If you can't pick out the fool at the table in five minutes, then you're the fool. It's very dangerous to buy on the "greater fool" theory; it's almost always much easier to buy just about anything than to sell it.

The last large purchase of art I made was in Zimbabwe, a couple years ago. I bought about 30 Shona stone sculptures, a small shipping container full of them. The Shona are renowned for their tradition of stone sculpture. Not marble, more like soapstone, but harder, and these are large pieces, typically a several hundred pounds. I paid about $30,000 for those 30 pieces, including shipping. That's a great price - I got 'em dead flat at the bottom when Zimbabwe's currency collapsed. What could I sell them for? Who knows? I could ask anything - put on a show, tell the story of the artists, if they caught on, they could easily go for $15,000 each. I could turn my $30,000 invested in Zim into a few hundred thousand dollars. But I'm not going to do that, because I actually like them. And I don't want to get into the business of hawking art, if only because I hate dealing with the public. Although, I have to admit that I don't have enough room to put 30 large sculptures.

L: Maybe you could add a sculpture garden to your new house in Cafayate?

Doug: [Chuckles] Maybe. In fact, definitely. And some will make extraordinary gifts for certain friends. Another thing I did - which is usually a very bad idea - was to commission a work of art from my friend Barry Johnson in Washington D.C. He's a very competent classical sculptor, and some years ago, I had him sculpt a three-foot image of Lilith, and one of Icarus rising, gripped by a female figure who represents Mother Earth. Both in bronze, really beautiful. I paid about $1000 for one, and $3000 for the other, which was a lot more money then than it is today. Now, today, just casting costs would be several times as much, never mind his fee.

I remember buying a couple of paintings by a well-known Brazilian artist about 15 years ago, when Brazil was in one of its cyclical lows, back when you could also buy a nice apartment on Ipanema for $50,000. Brazil is in a boom now, incidentally, and I wouldn't touch it - it's unlikely to stay up where it is for long - but that's a discussion for a different day. I bought two large paintings, about four by four, for a thousand dollars each, including shipping to Colorado. I really love those. And they were a tremendous bargain, almost as good as one of those Ipanema apartments. You can find great art cheap, if you go look for it. It's best to go to a country in economic crisis.

These people who sit in New York and bid hundreds of thousands of dollars against each other, sometimes for total crap, are just not right in the head. They're unsophisticated buyers with no taste, but too much money, too recently acquired.

L: But it's trendy crap.

Doug: Very trendy crap. And a lot of it that doesn't end up in a landfill, should. Actually it will. And I don't say that just because eventually everything gets folded into the mantle. And that's before the planet itself is subsumed into the sun. It's simply good to keep these things in perspective. [Chuckles]

L: Okay, but these are unrealized gains. Have you ever actually sold any of the art you've bought?

Doug: No, even though I have enough to open a gallery. But I've never actually tried, if only because it would likely be futile for the reasons we've just discussed. I thought about it, however, and not as just a small scale hobby, but as a substantial business. Many years ago, the early '70s, before the government totally destroyed Haiti - which happened well before the earthquake destroyed the government - Haiti was a famous source of great, cheap art. Most of it was crap, of course - Pareto's Law is always with us - but also good stuff, and the good stuff was very good. My idea was to use this supply as a source for restaurants that wanted real art in their decor. That would provide distribution on a scale to make a business that mattered. Now it's commonly done...

One other thing from a business point of view, is that when I go to a city for the first time and need to get to know it and the key players in town, I check out the art galleries. I'm interested in art anyway, and knowledgeable, so I'd go to the galleries, meet the local people, and it was a very good way to get introduced to the local culture - and the local movers and shakers in society. But this only works if you have a sincere interest in art.

This was part of my standard MO when I didn't know anyone in a city - which isn't true for many cities of any size or significance anymore. The other things we've talked about before, include making appointments with lawyers, who were always happy to talk to foreign investors, real estate brokers, and, of course, I'd always go to the polo club. That pretty much covered all the bases. After a couple days, I knew all the people I'd need to know to move to any of those places and live comfortably, if I'd wanted to.

L: Makes sense. But let's back up a bit; why is it a mistake to commission art?

Doug: Because you never really know what you're going to get, or if what you're hoping the artist is going to deliver is what's actually on his or her mind...

Editor's Note: Due to the length of this interview, the remainder, including material on the relevance of art markets to larger markets and trends in today's world, will be published in next week's installment of Conversations With Casey.

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[In The Casey Report, every month you can read Doug's candid thoughts on the economy and markets - in the current edition, he talks about "Making the Chicken Run" and why investors need to act NOW to internationalize their wealth. Try it now for 3 months with full money-back guarantee... details here.]

L: Tatich, I'm in Minsk, where I just recorded/participated in an illegal march through the city. Opposition supporters rallied... there has been some violence... I hear they've broken into a government building, but I have not been able to confirm that yet.

Editor's Note: For new readers, "tatich" is Mayan for "big chief."

Doug: Sounds like fun. Maybe some appropriate music should accompany the festivities. The Marseillaise worked for the French in the 1790s... let me think... you should play them Street Fighting Man on your iPhone.

L: I should have stayed longer. The crowd seemed to be breaking up, so I came back to my flat, and now I'm seeing reports that the "special police" have turned violent. I left friends there...

Estimates vary between 10,000 and 50,000 people who took to the streets of Minsk, in spite of ice and snow, to protest election fraud in Belarus.

Doug: Big group. It's always an interesting question what it takes to get people out in the streets, and then what controls their mood.

L: I've got a bunch more pictures like that. Too bad they don't have V masks, as in the film, V for Vendetta.

Doug: I'm a huge fan of Guy Fawkes, who is said to be the only man who ever entered Parliament with honest intentions. But even more so of V, his near-future alter ego. We should get them some V masks for next time. Everyone, everywhere, should have a V mask hanging in the closet, awaiting the signal to put it on.

L: My friend is back - thank goodness! She says she was on the front line, as the police formed up and pushed people off the square. She says she shouted at them, "What are you doing? We're your brothers and sisters!" and that they were ashamed - but they followed their orders...

Doug: I'm glad she's okay. That's the only problem with these things, they're inherently volatile, unpredictable, and can be very dangerous. Sometimes it goes the way of Tiananmen Square in 1989.

L: The TV news here is saying that it's a smaller number of angry drunk people. It's a lie - I was there, and the crowd was absolutely positive - almost giddy - with people laughing and helping each other. Some strangers helped me climb up on a frozen fountain so I could take pictures. They used the same lies as last time, in 2006; the authorities said the tent city that had sprung up on the main square was just some drug users and advised people to stay away for their own safety. They showed pictures of syringes they claimed to have found in raids, over and over again on TV. This time, they are showing footage of some people breaking the glass door of a government building - my friend says it was KGB agents who provoked the action, that you could see them using hidden radios at times. I saw a guy in plain clothes smash a camera out of a woman's hands, so I'm pretty sure the authorities do have agents in the crowd.

But they're not going to get away with it, this time. There were too many people there - this is a small country, and if 20,000 people who were there each tell 10 others the truth, that'd be about a fifth of the population. People are going to know what happened, this time.

Editor's Note: Two weeks later, Doug and Louis continue the conversation. Meanwhile, thanks to the Internet, powerful images of the violence of December 19 have made the truth available to all.

Doug: About Belarus... It's disgusting how not just lazy but completely stupid and dishonest the media generally are. The reporters appear to be chosen for how credulous and psychologically pliable they are, although factors like how well their hair blow dries and how many producers they sleep with must also be important. They basically just parrot what they are fed from the local media, which, certainly in the case of Belarus, is all controlled by the state - and composed of people just like themselves. Then running dogs of the establishment, editorialists like Thomas Friedman - who's never had one thought in his whole life that was both original and correct - will spin it one way for their crowd, while rabid dogs like Sean Hannity - who's rarely right, but never in doubt - will spin it another way. None of them actually have a clue. I believe 90% of everything in the news is bullshit. I watch it and read it purely for entertainment. And to have an idea what other people are supposed to believe.

But sorry to go off on a tangent. How are your friends in Belarus doing?

L: Only one of my former students was arrested, but many friends of friends were in jail. Most did 5 to 15 days' time and are out now.

Doug: So, what are the implications? Belarus is famous for being Eastern Europe's last communist dictatorship - is there another "Orange Revolution" in the making?

L: Not right away. The dictator, Lukashenko, actually does have a lot of support, particularly among pensioners and other dependents of the state, who know their apple carts will be upset when real economic reform hits the country. But the regime's brutality has been well and fully exposed. Even the pensioners will have to admit, if only to themselves, that they are living off a despotic system.

I do think, however, that Lukashenko may have just made a big mistake. Before, the opposition was very splintered, centered on a variety of leaders with very different views on which way the country should go. The opposition leaders remain as before, but now a large portion of the population sees the dictatorship for what it is, and they are joining hands, at least in spirit, to oppose it.

When I went to one of the jails in Minsk with my friend, to take a toothbrush, a change of underwear, etc., to a friend of hers, I found that people there were giving approved food and water to those who brought care packages for other prisoners and may not have known the rules. Some others were arrested for singing Christmas carols outside of another prison. I feel a sense of solidarity forming among these people. Differences remain, but an opposition community is forming, and that could become a powerful force.

But it will take time to grow. People are afraid. They don't want to get blacklisted and lose their jobs. The police are still raiding and searching homes of suspected troublemakers.

Doug: I looked it up, and after the U.S., Belarus has the highest percentage of its population in prison. A bit surprising, in a way, because the poorer the government, the fewer people it can afford to imprison - but perhaps they make up for their lack of means with extra desire. Unfortunately, the U.S. has lots of both.

Did it ever come close to the edge? Might the people in the square have decided to fight back if things had gone a little differently?

L: I doubt it. Not this time. The police were outnumbered, and you can see in some of the video footage that they look scared at times. But they had the armor, and I'm told the army was there, behind them. The people were not looking for a fight; they were doing the Belarusian equivalent of holding hands and singing Kumbaya - until the police started beating them with their night-sticks, at which point they fled.

But next time... it could get really ugly. And if the crowd gets big enough, the military could even switch sides, as has happened in other peaceful revolutions.

Like many so-called turning points in history, nothing changed that night. Most people went back to work, to school, to the stores, as usual the next morning. It's more like an inflection point; I believe people will look back on that night and see it as a shift in the tides that will eventually lead to great changes. Historic days don't exist on their own: months and years of building social pressures lead to them - they are just the exclamation points at the ends of long sentences, or even paragraphs and pages of history.

What about you, Doug? You've traveled in active war zones - did you ever see history being made?

Doug: I've been most fortunate wandering through the valley of the shadow of death. Statistically, though, even in the worst places, when hundreds of people get killed - which is a considered a big deal anywhere - the odds of dying are thousands to one against. As a matter of fact, for discretionary travel, my first choice is always some place on the U.S. State Department's "stay away" list. I hate crowds, and due to the hysteria, the hotels, restaurants, attractions, and taxis are empty. So they appreciate your business, and prices are low. And, if you're actually concerned about that stuff, security is usually much improved after an "event." So I was in Israel during the last intifada. I went to all the hot spots in Rhodesia during the war... Guatemala and Colombia when the guerrillas were active. There are lots of others...

In point of fact, though, I generally feel more at risk at a traffic stop in the U.S. these days. It seems that U.S. cops have been brainwashed into thinking that any contact with the public may actually be with a terrorist, or rampaging militia member, or a heavily armed religious cultist. Things have definitely changed in the last ten years, and these guys all seem to be on a hair trigger. I really don't like getting near droopy-eyed teenage soldiers in the Congo, but I now consider U.S. cops almost as dangerous.

All those soldiers and police in Belarus were essentially average people - although I'm sure, like police everywhere, more than a few have extra Y chromosomes. The key is that when they put on uniforms, they do as they're told. They're no different from their U.S. counterparts. Always remember with cops and soldiers: their first loyalty is to each other. Their next loyalty is to their employer. They aren't there to "protect and serve" the people in the street. People are all potential criminals and rioters. The people are the last priority, contrary to the fairy tales.

L: Hm. You know, things didn't go over the edge that night I was on the streets in Minsk, but I was thinking about how quickly things can change. The blood the police shed, beating peaceful, unarmed people, including women, reminds me of the amazing speed with which the "thin veneer of civilization" can be stripped away. The former Yugoslavia comes to mind: a relatively wealthy European country turned into a bloody chaos of multiple warring factions, war crimes, and mass graves, all in a matter of weeks.

Doug: And as you point out in this month's edition of the International Speculator, no matter where you live, even in the United States, it's dangerous wishful thinking to tell yourself, "It can't happen here."

L: Maybe especially in the United States. I used the links you sent me of the videos showing the police joining the looting in New Orleans, and National Guardsmen confiscating guns from people who wanted to be able to defend themselves from looters, in the wake of Hurricane Katrina.

The big question is not, "Can it happen here?" but, "Will it?" Or maybe, simply, "When?"

Doug: You know I've been saying for years that the coming crash is going to be even worse than I think it's going to be. The correction in 2008 was very scary, but minor by comparison. A warmup. Minor trembling in the ground, just before Krakatoa blows.

That the world financial system will have to face a reckoning day has been pretty much a given since the U.S. took the dollar, the world's reserve currency, off the gold standard. Since then, decades of profligacy, not just in the U.S., but all around the world, have distorted the global economy to the breaking point. It's only lasted as long as it has because of the great increases to productivity the computer and other wealth-creating technologies have created, and the fact that many individuals still produce more than they consume and save the difference - even as governments have stepped up their efforts at wealth confiscation.

I thought things might go over the edge in 1980, but I was early. I underestimated how much wealth there was left in the world for the politicians to plunder. But now, while there is more physical wealth in the world, in the form of factories, homes, powerful technologies, etc., there is also massively more debt. Governments - first-world governments, not just banana republics - are sliding towards default, and in the West most individuals have little or no savings. In the East, many have savings tied up in a deflating gargantuan real estate bubble.

For all the reasons we've discussed in many different ways, the Greater Depression we're sliding into is going to be catastrophic for the old world order.

Uneconomic patterns of production and consumption are going to be liquidated - they have to be - and that's going to smash a lot of people's rice bowls. In today's richest societies, people won't be able to move back to the family farm the way they did in the 1930s; there's no farm left in most families. There's not even that much family left in many families - instead of extended families that care for their elders, who educate the young while the able-bodied adults work, we send our elderly to fade away in institutions and our young to be indoctrinated in other institutions, and we barely know what our brothers and sisters are doing, let alone our other relatives. What happens to the huge masses of such people when unemployment benefits can no longer be extended?

Yes, "It can happen here," and it's going to. Maybe not this year, maybe not for several, but when the real crash gets underway, it'll be unstoppable, and it will destroy the status quo with a speed that will leave most people still waking up to the danger after the harm has already been done.

L: Sounds like a sci-fi horror film...

Doug: I know, and it's unsettling to sound the alarm. People dismiss you for being a Chicken Little. But the plain truth is that we've already gone beyond the point of no return. There is simply no way the U.S. government can pay all its obligations without defaulting or destroying the dollar - which is just a different kind of default. The same goes for a lot of other governments. There is no way out that does not force a lot of people to make painful adjustments.

L: Are you talking blood in the streets or something more like a chapter 13 bankruptcy, where everything gets sold off to satisfy creditors? Do you see the world of Mad Max ahead, or are we all going to work for the Chinese?

Doug: Both could happen, but I'm leaning toward the latter. I think most of the world's wealth will still exist, but it will change hands. Better start learning Mandarin. You'll need it to do business in the new world after the crash - or to get a job as a houseboy, working for those who do learn to do business in the world after the crash.

L: How else do we prepare, besides learning Mandarin?

Doug: You know my mantra: liquidate, consolidate, speculate, and create. To which I add and must emphasize again: diversify your political risk. I truly believe that increasingly desperate states will be the greatest risk to your wealth, going forward. The swelling masses of have-nots are going to turn their increasingly hungry eyes on the haves, and the politicians are going to pander to them - and these days, if you have any net worth at all, you're a have. When the food riots start in New York, LA, London, Paris, etc., I want to be good and far away.

L: But isn't that true all around the world? Is there any point in trying to escape a global crisis when it's global?

Doug: Well, in places where people live closer to the land, where farmers can shrug and go back to growing food, the people are less likely to turn cannibalistic - metaphorically, or literally. Countries with economies still largely focused on agriculture, or the production of raw materials, and, frankly, where the people are used to poverty and inequality, should see less social unrest, even as the world's former leading economies go off the deep end. Countries that have already had tough times have some advantages, such as having no debt. That's one reason I've been investing so heavily in Argentina.

L: I had that thought about Paraguay, too, when I visited a couple weeks ago - and they have no personal income tax in Paraguay.
Doug: A sound thought. I'm looking into land there as well, although, unlike Argentina, Paraguay is quite isolated and rather backward. Just in case the world fails to make it through chapter 13 in a reasonably orderly manner - if we are looking at apocalyptic Mad Max-type scenarios - I'm setting things up in Argentina so that we are growing our own food. If nothing happens, we'll have the benefit of great organic produce, finely prepared and served. For what it's worth, I'm increasingly averse to "industrial" food, full of steroids, antibiotics, and pesticides. Stuff that's packaged in a factory and frozen for months, or shipped thousands of miles before you eat it. I understand the necessity of all that for the world at large, but I prefer something better. And more secure.

L: That's why I've placed some chips on your La Estancia de Cafayate project myself. Shameless plug to our good readers: you should check it out. It's hard to imagine a nicer place to weather the storm if things get really bad.

Doug: Not if. When. But even if I'm wrong about the Big Picture over the next few years - after all, there's always a possibility that friendly aliens will land on the roof of the White House and present Obama with a magic technology that cures all the world's ills - I'll still have excellent diversification, and an utterly fantastic place to hang out, play polo, and perfect my nonexistent golf game...

L: Do you think we'll have much warning for when it's really time to get out of Dodge?

Doug: The warning bells are ringing loudly now. The time to prepare is now, before currency controls get any worse. Once they do put America and Europe on financial lockdown, that's when it'll be time to treat those countries as places you visit, rather than live. I write about these trends in The Casey Report, and I'll do my best to give readers as much warning as possible. While also looking for the lowest-risk and highest-reward investment opportunities in the world. I'd like to think that some day we'll be able to buy Belarusian property, when 10:1 gains seem plausible.

L: Me too. It's precisely because Belarus has been held back while the rest of Eastern Europe has surged ahead that I like it so much as a contrarian play. But what if the world manages to avert financial Armageddon?

Doug: Then we change our strategies. But right now, the train is absolutely barreling down a track that ends in the air over the edge of a cliff. And you got a feel in Belarus, for yourself, just how quickly things can turn when you skate too close to the edge.

L: Indeed I did. By the way, if any readers want to help the victims of the brutal regime in Belarus, my friends at the International Society for Individual Liberty have agreed to accept charitable contributions for that purpose. People can call to make arrangements: (707) 746-8796. I'm a director of ISIL, so I can make sure the funds go to people who were jailed, fined, or blacklisted (lost their jobs, etc.) as a result of their participation in the protest of December 19 or other opposition to the Lukashenko regime.

Doug: I don't generally believe in charities, as you know, but there are exceptions...

L: Okay then - but let's try to find something more positive to discuss next week.

Doug: Sure, but I think this was an important topic. It's important for people to realize that it can happen here - wherever "here" is for them. They should realize and prepare.

L: Prepare for the worst, hope for the best. We'll do all we can to help.

Doug: Right. Until next week then.

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[In today's interlinked global economy, it's more important than ever to not only look at market gyrations - politics has become inseparable from the economy in most countries. Every month, Doug and his fellow editors of The Casey Report discover and analyze critical big-picture trends - to determine which way the economic, political, and social winds blow and how investors can profit from it.

Try The Casey Report for 3 months, risk-free, with full money-back guarantee. More here.]

Editor's Note: Doug and I are working on an interview with a third party - a highly successful investor in our favorite market sector. It's taking some time, and that's exacerbated by the holidays. We're planning to take a break next week, but didn't want to leave you empty-handed this week. So below are some of Doug Casey's all-time favorite quotes - always words of wisdom, and usually wisdom informed by political incorrectness and a grasp of the absurdity of the human condition. Doug has appended some observations on most. Happy holidays, and see you in 2011. - L

Doug: When I first got into the habit of ending every edition of The International Speculator (and later The Casey Report) with a quote - starting in the 1990s - I almost always referred to at least one of my four favorite modern philosophers-Mikhail Bakunin, Peter Kropotkin, Edward Gibbon, and H.L. Mencken. These are some of the quotes that I used from them (there are many more in the archives) so long ago now that many current subscribers either haven't seen them, or have let them fade into the further reaches of their consciousness. I believe they belong in the very front of your consciousness. Take a few of the quotes you like best, and tape them on your computer or your fridge. They'll provide a continuing measure of solace and amusement to current events.

Let's set the tone with Einstein. I don't quote him often enough, but two of my all-time favorite observations are courtesy of him:

"Two things are infinite - the universe and human stupidity. And I'm not sure about the former."

"After hydrogen, the most common thing in the universe is stupidity."

At the opposite end of the fame spectrum from Einstein is Mikhail Bakunin, the Russian anarchist. Bakunin, like Kropotkin, was a genuine revolutionary. And both were popular rabble-rousers. Unfortunately, neither had any understanding of economics - but they had a fantastic grip on the nature of the state, and a great sense of life. And at its best, their rhetoric absolutely sings - it's the verbal equivalent of the 4th movement of Beethoven's 9th symphony, or Wagner's Ride of the Valkyries.

Here Bakunin deflates the concept of patriotism, which is really just a nice word for nationalism or jingoism - I'm a patriot, you're a nationalist, he's a jingoist. Patriotism boils down to the belief that your country is the best in the world, because you were born there:

"Natural patriotism may be defined as follows: an automatic and wholly uncritical, instinctive attachment for hereditary or traditional ways of life which are collectively accepted, and an equally automatic and instinctive hostility toward any other way of living. It is love for one's own, and a hatred for everything foreign....

"[T]he patriotism that is extolled to us as an ideal and sublime virtue by the poets, by politicians of every school, by governments, and by every privileged class, is rooted not in man's humanity, but his animality."

- Open Letter to Swiss Comrades, 1869

Bakunin shares Acton's view on the corrupting nature of power - Bakunin was an officer in the czar's army in his youth.

"Nothing is more dangerous for man's private morality than the habit of command. The best man, the most intelligent, disinterested, generous, pure, will infallibly and always be spoiled at this trade. Two sentiments inherent in power never fail to produce this demoralization; they are: contempt for the masses and the overestimation of one's own merits."

- Power Corrupts the Best, 1867

Here Bakunin addresses the nature of the state. Of course, American readers (the same as British, Chinese, Russian, Canadian, and every other nationality represented in our readership) will reflexively think their state is different and better:

"The supreme law of the State is self-preservation at any cost. All States, ever since they came to exist upon the earth, have been condemned to perpetual struggle - a struggle against their own populations, whom they oppress and ruin. A struggle against all foreign States, every one of which can be strong only if the others are weak. And since the States cannot hold their own in this struggle unless they constantly keep on augmenting their power against their own subjects as well as against other States, it follows that the supreme law of the State is the augmentation of its power to the detriment of internal liberty and external justice."

-The Immorality of the State, 1870

No truer words than these have ever been spoken. And I promise you will never hear them, or any like them, spoken on the evening news, or written in the New York Times. That's especially true when a war is being fomented, and it's time to be patriotic:

"Lying. Diplomacy has no other mission. Every time a State wants to declare war upon another State, it starts off by launching a manifesto addressed not only to its own subjects but to the whole world. In this manifesto it declares that right and justice are on its side, and it endeavors to prove that it is actuated only by love of peace and humanity and that, imbued with generous and peaceful sentiments, it suffered for a long time in silence until the mounting iniquity of its enemy forced it to bare its sword. At the same time it vows that, disdainful of all material conquest and not seeking any increase in territory, it will put an end to this war as soon as justice is reestablished. And its antagonist answers with a similar manifesto, in which naturally right, justice, humanity, and all the generous sentiments are to be found respectively on its side.

"Those mutually opposed manifestos are written with the same eloquence, they breathe the same virtuous indignation, and one is just as sincere as the other; that is to say both of them are equally brazen in their lies, and it is only fools who are deceived by them. Sensible persons, all those who have had some political experience, do not even take the trouble of reading such manifestos."

- Ibid.

Remember this from Bakunin when someone starts blathering about the government being necessary, having good intentions, doing good, blah blah blah...:

"From its very beginnings it (the State) has been - and still remains - the divine sanction of brutal force and triumphant iniquity. Even in the most democratic countries, like the United States and Switzerland, it is simply the consecration of the privileges of some minority and the actual enslavement of the vast majority...

"This explains to us why ever since history began, that is, ever since States came into existence, the political world has always been and continues to be the stage for high knavery and brigandage - brigandage and knavery which are held in high honor, since they are ordained by patriotism, transcendent morality, and by the supreme interest of the State. This explains to us why all the history of ancient and modern States is nothing more than a series of revolting crimes; why present and past kings and ministers of all times and all countries - statesmen, diplomats, bureaucrats, and warriors - if judged from the point of view of simple morality and human justice, deserve a thousand times the gallows of penal servitude.

"For there is no terror, cruelty, sacrilege, perjury, imposture, infamous transaction, cynical theft, brazen robbery, or foul treason which has not been committed and all are still being committed daily by representatives of the State, with no other excuse than this elastic, at times so convenient and terrible phrase Reason of State."

- Ibid.

Ayn Rand may have first gotten her image of Attila and the witch doctor - as the archetypes of mankind's greatest enemies - from Peter Kropotkin:

"The priest and the warrior. The charlatan who makes a profit out of superstition and, after freeing himself from the fear of the devil, cultivates it in others. And the bully, who procures the invasion and pillage of his neighbors, that he may return laden with booty and followed by slaves. These two, hand in hand, have succeeded in imposing upon primitive society customs advantageous to both, while tending to perpetuate their domination of the masses. Profiting by the indolence, the fears, and the inertia of the crowd, and thanks to the continual repetition of the same acts, they have permanently established customs which have become a solid basis for their own domination."

- Law and Authority, 1886, Peter Kropotkin

Here Kropotkin echoes Tacitus, when he says, "The more corrupt the State, the more numerous the laws."

"When ignorance reigns in society and disorder in the minds of men, laws are multiplied, legislation is expected to do everything, and each fresh law being a miscalculation, men are continually led to demand from it what can only proceed from themselves, from their own education and their own morality."

- French jurist M. Dalloy, quoted by Kropotkin, Law and Authority, 1886, p. 1

Edward Gibbon was technically a historian, not a philosopher. But a decent historian must actually be a philosopher, or else he's just someone who regurgitates boring and irrelevant facts. Gibbon was both. It wasn't just what Gibbon observed about the collapse of Rome - it was the language he used to describe it. Decline and Fall overflows with observations like this:

"The most worthless of mankind are not afraid to condemn in others the same disorders which they allow in themselves; and can readily discover some nice difference of age, character, or station, to justify the partial distinction."

- Decline and Fall of the Roman Empire, 1776, p. 128

Here's one that should resonate with American conservatives - but doesn't, because they're as degraded as Gibbon's Romans. Empires: You've seen one, you've seen them all...:.

"The minds of the Romans were very differently prepared for slavery. Oppressed beneath the weight of their own corruption and of military violence, they for a long while preserved the sentiments, or at least the ideas, of their free-born ancestors."

- Ibid., p. 72

Here Gibbon is speaking of the Crusades. His subtle turn of phrase leaves a smile on the reader's face at the end of every page:

"[Pope Urban II] proclaimed a plenary indulgence to those who should enlist under the banner of the cross; the absolution of all their sins, and a full receipt for all that might be due to canonical penance. The cold philosophy of modern times is incapable of feeling the impression that was made on a sinful and fanatic world. At the voice of their pastor, the robber, the incendiary, the homicide, arose by thousands to redeem their souls by repeating on the infidels the same deeds which they had exercised against their Christian brethren; and the terms of atonement were eagerly embraced by offenders of every rank and denomination."

- Ibid., Book 3, p. 426

Here it sounds like he might be talking about Bush, Clinton and, perhaps Carter, in an anachronistic deją vu...:

[On conquest of Britain] "After a war of about forty years, undertaken by the most stupid, maintained by the most dissolute, and terminated by the most timid of all the emperors, the far greater part of the island submitted to the Roman yoke."

- Ibid., Ch. 1, p. 3

I doubt he would have been a fan of Bush, Palin, or most popular TV shows:

"[T]he use of letters is the principal circumstance that distinguishes a civilized people from a herd of savages incapable of knowledge or reflection."

- Ibid., Ch. 9

This is pretty much - no, exactly - what has happened with the U.S. military:

"In the purer ages of the commonwealth, the use of arms was reserved for those ranks of citizens who had a country to love, a property to defend, and some share in enacting those laws, which it was their interest, as well as duty, to maintain. But in proportion as the public freedom was lost in extent of conquest, war was gradually improved into an art, and degraded into a trade."

-Ibid., Ch. 1, p. 9

Scores of thousands - even hundreds of thousands - of Americans are now getting out of Dodge annually for exactly the same reasons Romans once did:

"The Roman government appeared every day less formidable to its enemies, more odious and oppressive to its subjects. The severe inquisition, which confiscated their goods and tortured their persons, compelled the subjects of Valentinian (425-455) to prefer the simple tyranny of the barbarians, to fly to the woods or the mountains, or to embrace the vile and abject condition of mercenary servants. They abjured and abhorred the name of Roman citizens, which had formerly excited the ambition of all mankind. If all the barbarian conquerors had been annihilated in the same hour, their total destruction would not have restored the empire of the West: and if Rome still survived, she survived the loss of freedom, of virtue, and of honour."

- Ibid., Ch. 3

The sage of Baltimore, H. L. Mencken was without question the soundest and most literate writer and thinker to have ever graced the pages of an American paper. Mencken coined the term Boobus americanus, a phrase that often occurs in TCR these days. This will give you a flavor of his thought:

"The average man doesn't want to be free. He wants to be safe."

- Notes on Democracy, 1926, Part III, p. 148

Why, you might ask, have there been so few righteous assassinations in all of history? The only ones that immediately come to mind are those of Caesar and Lincoln. But why didn't anyone take out Stalin, Hitler, Mao, Idi Amin, or a thousand other criminals? Mencken addresses the reason:

"The great masses of men, though theoretically free, are seen to submit supinely to oppression and exploitation of a hundred abhorrent sorts. Have they no means of resistance? Obviously they have. The worst tyrant, even under democratic plutocracy, has but one throat to slit. The moment the majority decided to overthrow him he would be overthrown. But the majority lacks the resolution; it cannot imagine taking the risks."

- Ibid., p. 50

How true this is. Look at the shameful recent examples of the shameless Rudy Giuliani and Elliot Spitzer. Crusading prosecutors are almost invariably swine.

"The surest way to get on in politics in America is to play the leading part in a prosecution which attracts public notice."

- The American Credo:A Contribution toward the Interpretation of the National Mind, by George Jean Nathan and H.L. Mencken, preface

In a way, it's a good thing Mencken didn't live to see Vietnam, Grenada, Panama, Bosnia, Iraq, and Afghanistan, among other military entanglements:

"All [of the Americans'] foreign wars have been fought with foes either too weak to resist them or too heavily engaged elsewhere to make more than a half-hearted attempt. The combats with Mexico and Spain were not wars; they were simply lynchings."

- On Being an American, p. 43

His thoughts on education are, of course, even more true now than they were then. Back then, a college degree was at least somewhat rare - and it didn't cost the equivalent of $50,000 a year.

"The average American college fails... to achieve its ostensible ends. One failure... of the colleges lies in their apparent incompetence to select and train a sufficient body of intelligent teachers. Their choice is commonly limited to second-raters, for a man who really knows a subject is seldom content to spend his lifetime teaching it: he wants to function in a more active and satisfying way, as all other living organisms want to function. There are, of course, occasional exceptions to this rule, but they are very rare, and none of them are to be found in the average college. The pedagogues there incarcerated are all inferior men who really know very little about the things they pretend to teach, and are too stupid or too indolent to acquire more.... Being taught by them is roughly like being dosed in illness by third-year medical students."

- Minority Report, 1956, p. 51

Mencken was actually as much of an anarchist - but of the free market capitalist variety - as Bakunin. He never used the "A word" to describe himself, though, for fear it would make the hoi polloi catatonic with fear. Like most anarchists, Mencken believed neither in capital punishment nor war:

"The argument that capital punishment degrades the state is moonshine, for if that were true then it would degrade the state to send men to war... The state, in truth, is degraded in its very nature: a few butcheries cannot do it any further damage."

- The American Mercury

Hey, is he allowed to say this?

"The average soldier... found in the Army a vastly more spacious life, with many of the privileges of a chartered libertine.... If he did a little stealing it was one of his privileges as a savior of humanity. If he was rough and brutal, it was a sign of his fighting spirit. Moreover, he could look forward to distinction and respect for the rest of his life, with a long list of special privileges. In every community in America, however small, there are local notables whose notability rests wholly on the fact that they were once drafted into some war or other.... Their general intelligence is shown by the kind of ideas they advocate. They are, in the main, bitter enemies of the liberty of the individual, and are responsible for some of the worst corruptions of politics. The most grasping of all politicians is the war veteran."

- A Mencken Chrestomathy, 1949, p. 90

In conclusion, let me wish all our readers a joyous winter solstice!

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