Editor's note: Today, we're sharing part two of a recent interview with Casey Research founder Doug Casey and Crisis Investing editor Nick Giambruno. If you missed the first part of this fascinating discussion, click here.
Below, the guys continue their talk on the U.S. military. As usual, Doug doesn't hold anything back as he gets to the root of America's problems…and what he would do to fix them if he were in charge…
Nick Giambruno: The Democrats are perceived to be less warmongers than the Republicans, but is that really the case?
Doug Casey: Well, it’s said that the Democrats are the Welfare Party and the Republicans are the Warfare Party. But the only real difference between them is the rhetoric. LBJ was a Democrat, and he promoted a “guns-and-butter” policy—domestic welfare and a war in Vietnam. More recently, Reagan, the Bushes, Clinton, and Obama have all had active wars abroad and plenty of welfare spending at home… It no longer matters which party is elected because they’re both just arms of the Deep State. Which has a life of its own.
Hillary has surrounded herself with the same people who advised Baby Bush into the disastrous wars in Iraq and Afghanistan. She’s already hinted that she would increase meddling in Iran’s politics—which is really kicking a hornet’s nest. Despite her marginal health and advanced years, the woman seems charged with more testosterone than an angry chimpanzee.
There’s zero indication that Hillary would make any wise changes to Obama’s disastrous policies. Trump, too, says he wants to spend even more on the military—although he appears less interventionist. But who can tell? Woodrow Wilson, Franklin Roosevelt, Lyndon Johnson, and the Baby Bush all talked a peaceful line before the election then proceeded to get the U.S. involved in major wars. Words are cheap, and politicians are chronic and enthusiastic liars.
In any event, military spending is a juggernaut. It’s both impossible, and meaningless, to try to trim 5 or 10% of fat. You can neither control nor rationalize it. Why not? The whole underlying philosophy of the so-called Defense Department—its pre-1947 name, the War Department, was so much more honest—is flawed, totally counterproductive, and so entrenched that it’s incapable of reform. It’s like a 100-story skyscraper. Sure, you can paint it a different color or change a few lighting fixtures. But if you try to change its basic structure, you’ll collapse it.
But, unfortunately, the problem goes much deeper even than that. It’s actually a crisis in civilization itself. By that, I mean there are only two ways for people to interact. Either voluntarily—that is, by persuading people to do something because it’s in their best interest…
Or else by force: You’ll do what I say, because I have a gun and you don’t. America was unique and special because it was conceived in individual liberty, and the State was strictly limited. But now, the U.S. is no different from any other country, and its people are more like the Romans of the third century than their forefathers of the Republic. Force has replaced liberty as a value.
Of course, the military is a blatant example of the use of force. In fact, the military doesn’t act to make the U.S. safe—it’s actively creating enemies around the world. Do you really think that people in Iraq, Afghanistan, and dozens of other countries have a good feeling when they see armed and aggressive American teenagers patrolling their streets, and breaking down their doors at midnight? They like it about as much as we’d like uniformed Muslim teenagers doing the same thing here.
All these ridiculous claims of “nation building” are a fraud and a catastrophe. The U.S. installs some quisling puppet who proceeds to make himself and his cronies into billionaires. And then tries to replace the local culture with our own.
What set Western Civilization—and America, in particular—apart was the elevation of persuasion over force… That’s why we became the wealthiest society in history. But our bloated military, and all of our foreign adventures, are going to bankrupt us while making millions of enemies who want revenge.
Nick Giambruno: History hasn’t been kind to civilizations that overextend themselves militarily…
Doug Casey: No. One obvious example is the Romans. The size of their army quintupled between the reign of Augustus (around the birth of Jesus) and that of Diocletian, circa 300 A.D. (For a more detailed look at Rome, see this.) And by that time—thanks to the inflation necessary to pay for it all—soldiers were often paid in food and other commodities rather than Roman coinage. In fact, the only soldiers who were paid in gold were the barbarian mercenaries from the north—who couldn’t be forced to accept debased Roman coins. The U.S. has only been able to sustain its military because, since Nixon, our major export has been dollars—not aircraft, wheat, or computers as in the past. Well, maybe we still export some social media and dating apps…
Since 1971, our main export has been, and is, dollars. But as confidence in the dollar evaporates—which is happening rapidly—the U.S. will be unable to finance this extravagance.
And, of course, there’s the example of the Soviets, even though they were doomed from the beginning. Their entire society was based on coercion. Their military spending, if Gorbachev’s figures are to be believed, ate up as much as $200 billion a year at a time when people were standing in line for bread. The USSR, like Nazi Germany, shows that while force can get you prominence for a while, the end result is always disaster.
Nick Giambruno: Some would argue that this military spending would be better spent on education, medical care, infrastructure, and the like…
Doug Casey: While it’s true this money would be marginally more productive if it was spent on infrastructure—better roads, faster trains, and the like—these arguments all miss the point. The government shouldn’t be doing any of those things—but that’s a big subject, for discussion another time.
The problem isn’t so much that military spending “crowds out” other programs. The real damage comes from the fact that it drains capital from individuals and businesses, many of whom would use it to create more capital, making society richer. Capital is destroyed by flying million-dollar drones around the Middle East to blow up mud huts.
It’s unethical because the people in those benighted countries pose very little threat to the U.S. It’s counterproductive because for every actual enemy we kill, we create 10 more. And it will wind up bankrupting the U.S., even if it doesn’t start World War 3.
It goes back to the fundamental differences we talked about earlier—persuasion and trade versus force. People everywhere in the world used to love and admire the U.S. We used to represent California girls, rock music, convertible cars, and general peace and prosperity. Now, we’re hated and despised. The world now associates us with drones, air strikes, regime change, invasion. And financial crises, a la 2007–2010.
Nick Giambruno: The U.S. military has a presence in more than 130 countries. It’s in nearly every country on Earth…
Doug Casey: Yes, military spending has a life of its own. It’s like a cancer at this point. It devours more than half (54%) of the federal budget’s “discretionary spending” each year. That’s to say the money that’s left over after Medicare, Social Security, Medicaid, and interest on the national debt. And, of course, it’s all borrowed. It used to be the Chinese lent us the money, but they want out. Now, the government has to sell the debt to the Federal Reserve—which will result in the dollar losing the rest of its value. The global RoboCop trying to police the affairs of the entire world is going to self-destruct.
The U.S. military is the world’s biggest consumer of capital and resources. Do we really want the world’s biggest consumer to be a gigantic killing machine that roams the world looking for trouble?
The military is already the world’s largest consumer of oil. And the number one buyer of Jack Daniels whiskey, of all things… A consequence of the fact so many veterans have PTSD? Very possibly.
That’s good for Jack Daniels shareholders, of course. But money means nothing to the Pentagon. It’s not just about $500 hammers and $640 toilet seats. Waste is endemic in trillion-dollar weapons systems, like the B-2, the F-35, the Littoral Combat Ship, Ford-class carriers, and numerous other systems. It’s too bad these weapons systems are analogous to cavalry before WW1 and battleships before WW2.
These weapons are obsolescent at best. They’re not assets, but liabilities. Carriers are sitting ducks to both ballistic missiles and Mach 5 sea-skimming cruise missiles, which are cheap enough to launch in swarms. Smaller-surface ships—which all cost a billion or more apiece—are extremely vulnerable to fast, very cheap patrol boats if they get anywhere near the shore. The Iranians recently demonstrated that.
Multibillion-dollar weapons systems are worse than useless against distributed warfare, guerrilla warfare, open-architecture warfare—the type of thing that so-called terrorists engage in. They’re of marginal value against conventional nation-states like China or Russia. The next war will likely emphasize cyberweapons, bioweapons, infrastructure attacks, robots, and cheap missiles and drones in massive, overwhelming quantities.
All our high-tech hardware will be exposed as obsolete junk. It’s of no real value, and it’s bankrupting the country—along with other stupid government programs.
Military spending is one more nail—a huge one—in the coffin of the American economy. If you’re bankrupt, you can forget about winning a war. The winner is always the economic powerhouse.
Nick Giambruno: So what should be done about all this? What would you do if you were in charge?
Doug Casey: The U.S. should withdraw its troops from all foreign bases. If you want to “support the troops,” that’s the biggest single thing to do. Stop intervening in foreign countries; it never works, and always creates new enemies. Change the whole thrust of foreign policy from alliances and aggression to free trade and strictly domestic defense. This would allow us to cut military spending, and the size of the military establishment, on the order of 90%. Most of the Pentagon, which houses a self-serving bureaucracy, should be boarded up and mothballed.
Abolish the CIA, whose record at predicting even major events—including the Korean War, the Cuban missile crisis, the Vietnamese Tet Offensive, the Iranian Revolution, the Soviet invasion of Afghanistan, the collapse of the USSR, and many, many others—is unblemished by success. Worse, the CIA, like the NSA, has become a costly and extremely dangerous Praetorian Guard.
Of course, before any of that could ever happen, a group of four-star generals would have a “sit-down” with me, and let me know how things are going to be. I suspect things have evolved far beyond easy political solutions.
Actually, because the public has such a love affair with the military, I wouldn’t doubt that, if we have a serious disaster in the U.S., the military might try to take over. I’m only surprised that both parties didn’t put up generals in the current election. Maybe next time…
If so, remember what Gibbon said: “The army is the only order of men sufficiently united to concur in the same sentiments, and powerful enough to impose them on the rest of their fellow-citizens; but the temper of soldiers, habituated at once to violence and to slavery, renders them very unfit guardians of a legal, or even a civil constitution.”
Nick Giambruno: Ok, so we are up the river, no matter who gets elected. Any recommendations?
Doug Casey: Well, there’s no denying the big defense companies have had a great run. If you own them, I think it would be prudent to cash in your chips at this point—before the next crisis gets underway. Once the government gravy train ends, these stocks could get cut in half. At this point, they’re the equivalent of buggy-whip makers.
Nick Giambruno: Thank you, Doug.
Doug Casey: My pleasure.
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