Doug Casey About The G20 Meeting: Talk vs Reality | Gold Silver ...

Recent economic data have disappointed. At the same time our leaders pretend that the prospects of the economy are good to great. A confusing situation with mixed signals ? what and who to believe? In this article we provide the latest economic data from a variety of sources. We continue with a Q&A with Doug Casey in which he shares his view on the announcements from the latest G20 meeting, with a particular focus on the currency war announcements.

A first set of economic data are provided by?Eric Sprott via his daily news updates on?Sprott.com. The data show the economic growth in the last quarter of 2012, almost unanymously a?decline in the major Western economies.

As reported by Eurostat, German GDP shrank 0.6% in Q4 while France contracted 0.3%. Italy?s economy shrank 0.9%, which was more than expected and represented a sixth straight fall. Japan has experienced three consecutive quarterly declines in GDP. In the United States, the fourth quarter growth rate unexpectedly suffered its first drop since the 2007-09 recession, falling at a 0.1% annual rate after growing at a 3.1% clip in the third quarter. According to The Office for National Statistics, the UK economy shrank by 0.3%. Poor numbers across the board. If we tally up the results of the G8 countries, we?re left with six out of eight economies that are experiencing negative GDP growth.

Furthermore,?David Levenstein from?Lakeshore Trading?reported in his latest update the latest unemployment figures in the US and Europe.

Despite the trillions in bail outs and stimulus programmes, the U.S. economy still appears stagnant and the unemployment rate remains close to 8%. In Spain, the commission said it expected unemployment to hit 26.9% up from 25% last year. In Greece, the forecast was for unemployment to leap to 27 % from 24.7% a year earlier. Even in Germany, which is expected to grow this year by 0.5%, unemployment was seen nudging up slightly this year, to 5.7% from 5.5% in 2012.

Also,?John Williams from?Shadowstats?released today his calculation on the 2012 deficits in the US. He wrote the following:

Federal Budget Deficit Hit Record $6.6 Trillion in 2012.?With U.S. Facing Mortal, Long-Range Solvency Issues, Hyperinflation Remains a Virtual Certainty.

The context is clear: the economic data are not good, period. Now the echoes on the G20 meeting tried to picture a totally different situation. Being an honest researcher, we rely on Doug Casey his view on the latest economic top (source).

Question:?You?ve been saying for some time now that we are on the verge of exiting the eye of the [economic] storm. I look at the data, I look at the logic, and I can?t disagree with you, but this has lasted several years now? Why should anyone think it?s going to happen now?

Doug Casey: I could point out that the recent negative GDP numbers from Germany ? and all of Europe ? are extremely bearish: the endgame for the EU can?t be too far off. A number of large US retailers are closing scores, even hundreds, of stores. The earnings of fast-food outlets are falling as people find they can?t afford to eat out. But still, even if the natives are restless, they?re still not out in the streets with their torches and pitchforks. Perhaps this summer?

But really, this is an almost philosophic question. The economy consists of the values and actions of seven billion people, all doing different things for a million different reasons. It?s hard enough to make any prediction about such a complex system; it?s extremely difficult to get both the prediction and the timing of the events right. That said, I admit to sometimes conflating the imminent with the inevitable.

Question: It?s like a sort of Heisenberg?s uncertainty principle for economics.

Doug Casey: That?s a good analogy. People may be growing tired of hearing me predict the same gloomy near-term economic outcome, but that doesn?t make me wrong. Here at Casey Research, we have an economic model of the way the world works. It?s not our model exclusively (people who would like to know more should do a search for ?Austrian economics?). This model has been shown to be correct and to have excellent predictive power time and time again over the last century. It?s been shown to be totally correct in the recent past as well. But knowing you?re right doesn?t necessarily give you the power to know when you will be proven right. It?s just not possible to be absolutely certain when something inevitable like this has in fact become imminent. We?re talking about predictions that are far m ore complicated than predicting at 11 o?clock that the hands on the clock will point at the number 12 in an hour.

Despite the difficulty, it?s very important to have a model that has predictive power; seeing where things are going is extremely valuable, even if you can?t be sure exactly when things will happen.

Question: Regarding the G20: as ridiculous as their denial of the currency war currently under way is, the conclusion they drew is no laughing matter. Just as you said, despite their denials, they claim the situation requires new currency controls. The noose tightens.

Doug Casey: Yes. Despite what they say, these people clearly feel an urgent need to gain control of the situation. They?ve caused immense chaos, and at some level they probably know it. Of course, they would never dream of accepting responsibility and rolling back any of their economically suicidal policies. Their only response ? always and ever ? has to be new rules and regulations. They are clamping the lid on the pressure cooker even tighter. These people are truly stupid, in the clinical sense of that word. No matter how badly their meddling backfires, their answer is always more meddling. I?m sorry I can?t tell you the day and the hour this thing will blow, but I?m absolutely certain it will.

Question: How can they be so blind?

Doug Casey: Bastiat explained it 200 years ago. They see only the immediate and direct consequences of their actions and pay no attention to ? or deny ? the delayed and indirect consequences of their actions. If the United States, say, devalues its currency by 20%, an immediate effect inside the United States is that everything is 20% cheaper for foreigners. Labor and products are cheaper for foreigners, so exports may increase and make it seem like the economy is getting a great boost.

But this is typical fallacious economic thinking. There are extremely important delayed and indirect effects that are ignored in such a case. Among them is that people don?t want to save a weak currency. If people don?t save, you can?t build capital, and without capital it?s impossible to have investment, and progress is diminished. Another ignored consequence is that domestic businesses face increased import costs. Politicians may shrug that off, saying people can buy American cars instead of German or Japanese cars, but many businesses rely on equipment, technologies, and raw materials from abroad. Moreover, all businesses, families, and individuals consume energy, much of which is imported from abroad. Further, if the currency is devalued 20%, it means Americans can buy that much less of foreign businesses, and foreigners can buy that much more of US businesses. Frankly, I couldn?t care less what the nationality of buyers and sellers might be. But Americans will be hurt by a weak US dollar as surely as Zimbabweans were hurt by a weak Zim dollar.

People forget that in 1971, when Nixon devalued the dollar, the Swiss franc was $0.23, and the German mark was $0.25; today they?re $1.08 and $1.31, respectively. The Japanese yen was 300 to the dollar; today it?s about 90. The success of these countries was partly because of strong currencies. A strong currency helped them become rich and prosperous. Of course, most governments are now deeply in debt, and that?s a powerful incentive to destroy their currencies.

Question: The very currency war the G20 is denying.

Doug Casey: Yes, and the result is that you don?t just get one currency devaluing, but all currencies devaluing against real assets, commodities, goods, and services. I do believe that within the foreseeable future all these paper currencies are going to be devalued to zero ? in other words, they will reach their actual intrinsic values.

This is extremely serious, because the productive people of the world ? the ones who actually consume less than they produce and save the difference, which is what all economic growth and progress depends upon ? will be wiped out. When their savings vanish, it?s going to create a social and political earthquake right off the Richter scale.

Question: Okay, but I?m not going to let you off the hook here. Tune in to your guru sense please, and tell us: Do you still see 2013 as the year when the global economic house of cards starts visibly falling apart?

Doug Casey: Well, never say never. Almost anything is possible. I don?t think it will happen, but I can?t say it?s impossible that government efforts around the world to paper over the crisis won?t succeed for a while longer. But even if that were to happen, it would only make the ultimate crisis that much worse.

Here?s what it boils down to: if you see a tidal wave coming at you and you?re not exactly sure when it will hit, it doesn?t actually matter. You?ve got to get out of its way. You?ve got to get to high ground. Period. This is the bottom line for me. Stating this as loudly and clearly as possible is my role in today?s economic discourse.

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Source: http://goldsilverworlds.com/gold-silver-general/doug-casey-about-the-g20-meeting-talks-vs-reality/

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