good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for july twenty seventh two thousand and twelve for this friday the u.s. economy slowed in the second quarter g.d.p. rose at one point five percent on an annualized basis aborting to the commerce department the wall street journal points out this so-called current economic recovery through the last couple of years is the second weakest rebound post world war two but is it much worse than that even we'll talk to doug casey bestselling author also founder and publisher of casey research and get his answer to that speaking of getting worse let's look at europe spain has for the first time conceded it may need a full e.u. i.m.f. bailout supporting to reuters meanwhile spanish unemployment has hit the highest level since the country's transition to democracy out of dictatorship which was back in the late seventy's and early eighty's and that's just spain will take stock of the entire eurozone crisis with the man who wrote the book mind you my prices

investing finally our own dmitri copius will debrief us on the gore of the national innovate or die conference which is wrapping up today in vancouver dimitri will hopefully tell us how to avoid debt let's get to today's capital account. here it is friday and one piece of news making headlines today is the u.s. gross domestic product data from the commerce department showing the economy is slowing down it grew one point five percent in the second quarter on an annualized basis and this is down from two percent the prior quarter and four point one percent the quarter before that consumers are reportedly cutting back spending on

big ticket items businesses are holding off on investment so in light of this number in these this data q. speculation about the federal reserve taking more action or q talk of how government g.d.p. numbers aren't reliable in the first place also how this so-called recovery lags compared to others but when did things really start going downhill economically in the u.s. stepping back was it after a peak of good times for america in the late fifty's to mid sixty's with the one nine hundred fifty nine cadillac a relic of a bygone era not just of iconic tailfins but of a decent standard of living for americans that was not yet built on unsustainable debt to make up for stagnant wages or was this what sealed america's fate back in one thousand nine hundred eighty one. very good good good. good. i have directed secretary connally.

convertible with the dollar. forever severing the link between paper money and the precious metal nixon there close in the gold window devaluing the dollar essentially ending bretton woods those are a couple of the reference points the cadillac the gold window closing that my next guest has named before as turning points for the u.s. doug casey joins us from vancouver where he's there for a gore financial symposium he's founder and publisher of casey research and author of books including crisis investing opportunities and profits in the coming great depression and we're so lucky to have him thank you so much for being on the show were inspired pleasure and thank you for it's really my pleasure so i just set up a couple of reference points that i've heard you name in interviews that the late fifty's and sixty's with the one nine hundred fifty nine cadillac is symbolic nine hundred seventy one when nixon closed the gold window so on

a day like today when g.d.p. numbers come out and people are evaluating where the u.s. is in terms of an economic recovery where do you see it and when do you see a pivotal moment in the u.s. economy looking at kind of these markers that you've laid out. well there are a lot of places where you can start. but. the average standard of living. after taxes after inflation in real terms of the average american worker has actually been going down flat to going down since the early one nine hundred seventy s. insofar as it appears to have been getting better it's because he's been taking on huge amounts of debt but. bringing in more up to current time i believe that a real depression started in two thousand and seven two thousand and eight and as we speak right now we're just in the of the hurricane we've gone through the leading edge of the hurricane and two thousand and eight two thousand and nine

we're in the eye of the storm right now and we're going to come up the other room and it's going to be much more serious last much longer than what we saw and be different than what we saw in two thousand and eight. reason that we're in the eye of the storm is because these governments not just the united states government the governments all over the world created trillions of currency wars that have paper the sore but it's temporary. so as far as what you're what you're talking about and you've said we've entered something before it called the greater depression in your in your name in two thousand and seven kind of as this pivotal year two thousand and eight and nine as the years following that where where things are really bad now we're in the eye of the storm you say we're going to come out of it but it's going to be difficult so what does this look like do we see another two thousand and eight repeat. well i think the one thing that you can be you can actually plan on is financial and economic chaos now. from a monetary point of view does that mean that we're going to have

a catastrophic deflation in banks fail all the stock market collapses bonds default that's possible but the government's going to fight against that the only way that it can by creating more currency on us so the odds favor high levels of inflation maybe even much much higher levels in place and. economic it we're not facing is much worse than what we had back in the early eighty's when you may recall we had interest rates of fifteen eighteen percent even on treasury bills those high interest rates in those days. encourage people to stop borrowing stop consuming and start producing and start saving and that's why we heard strongly as we did here in europe but now the government is keeping these interest rates artificially low levels which is encouraging people to consume more to borrow more so it's going to be quite ugly i think ok i want to get

a little bit more into this because on the note of central banks printing if we do have another crisis another two thousand a type scenario would central banks be able to reinflate the economy do you think because we've seen a lot of money printing and we know that it doesn't necessarily get out there the central bank can't control where that money goes and yet we see central banks have record balance sheets but a lot of that money that they've pumped out into the economy or try to just end up right back at those central banks in the form of excess reserves so what you think the chances of are of a real inflation of the economy in a crisis scenario and you're quite correct because of the nature of fractional reserve banking the way the money supply really expands through loans give them to individuals and corporations by the banks but in this kind of an economy people don't really want to borrow they're too afraid to borrow and at the same time the banks are afraid to lend so that's why that's happening but a number less those dollars have been creator and they are going to go out into the

economy in addition to the fact that there are now about seven trillion us dollars outside of the u.s. held by foreigners and these people don't have to use dollars in trade from day to day they view them increasingly as hopped the pills and at some point i don't know what the catalyst will be they will start dumping them wholesale and start coming home and just as in the past we export of those dollars we printed paper in the nice germans gave us mercedes the japanese gave us so when he is coming in in the future it will most of the. has come back into the united states the bones of mill we the titles the land and the corporations are going to go out and the dollars come back again and that's going to result in a very serious decline in the average american standard of living much more than we've seen recently is there a silver lining in that in

a crisis scenario where the economy does bottom out and that we can take from from the lessons of other countries that have experienced a default such as argentina or russia or icelanders is there any good part of this where a look there's always a silver lining to everything the government creating these trillions of currency units and causing even more distortions with more and more as and regulations. these things cause tremendous distortions the misallocations of capital in the economy this is very bad the economy as a whole but for speculators are in speculator and somebody who capitalize on politically chorus distortions it's a good thing because there are going to be lots of bubbles created so people that are hip to the way the financial markets were should be able to make a lot more money well that's good news for them were should say for us but it's once again more bad news for the economy because as always happens when the state

takes control of the economy or when it's one of inflation of the rich get richer the poor get poorer and the middle class gets round between the millstones the taxes and inflation write bad news for for average folks good news for people they can capitalize it perhaps an audit perhaps in financial markets in light of that i'm just really curious because you wrote crisis investing in one nine hundred seventy nine and it was a bestseller how does crisis investing compare now to two to one you wrote that book originally in seventy nine. the economic principles are identical and anyone that read that book today the first three chapters are our economic principles. there are boring actually that are quite interesting i'm sure. well most people don't think of economics as being at all interesting because the way it's taught in high schools and colleges and it's boring irrelevant and mostly wrong. if i were to

rewrite that book today i would keep the first three chapters on economic principles the same but the world has evolved technologically literally militarily socially so i'd have to be right. once but basically that the principles are the same age it's just a different set of circumstances that's interesting and terms of bubbles that you mention end to end bull markets do often end in bubbles what would you look for in the future and order to determine whether or not we've reached this point with gold and other precious metals. well the key thing about gold is that it's only financial asset that's not simultaneously somebody else's liability it's not an embarrassment. because it doesn't produce anything just like pound dollar bills on the table those who produce anything it's an asset well the dollar bills aren't amassed up there are actually a liability of the u.s. government which is manifestly bankrupt but i expect that there will be in the

future of what will develop a new gold generated by both fear and greed as people try to get out of these disastrously depreciating currencies around the world and there's going to be they're going to pile into gold and there might be a super bubble sharers of stocks of miners which are traditionally highly leveraged where you went in with gold interesting so i want to talk more about gold miners and also about what would change about your calculus if gold was made into a monetary metal i want you to hold right there if you could we're going to go to break but we'll be back in a few minutes with doug casey founder and publisher of casey research and still ahead we'll catch up with dimitri who has been in vancouver all week for a glorified mantles innovate or die conference now that wraps up he will deep breathe that i now hopefully to innovate and not die but first our closing market numbers.

we just put a picture of me when i was like nine years old so if you tell the truth. i confess and i am a total get of friends that i was grabbing him and. he was kind. yesterday. i'm very proud of the without you she has played. you know sometimes you see a story and it seems so. you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything is ok you

don't know i'm sorry welcome to the big picture. what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made who can you trust no one who is you in view with a global missionary zeal where we had a state controlled capitalism is called sasha's when nobody dares to ask we do our t. question more. welcome back before the break our guest and myself we were getting into gold as an

investment i want to bring up something that he mentioned he was talking about gold and gold mining stocks and gold has far outperform gold mining stocks with returns of four hundred seventy one percent to two hundred thirty three percent as you can see and that chart on your screen so let's talk a little bit more about why this is i want to bring back in doug casey our guest today to get his opinion on this because he is an expert in this area now mr casey i know this is an often asked question a common question but i do want to ask why do you feel that gold miners have so underperformed the physical metal during this bull market. because mining is basically a crappy business. i mean really i've been going around mining business for most of my life and up the price of the commodity is. fluctuates radically. or reserves you have in the ground are

unpredictable when you're looking for more resources it's an extremely hard to find them and unpredictable if you find them you have no idea if they're going to be economic this is why you. benjamin graham for that matter warren buffet wouldn't dream of investing in a mining stock it should inherently speculative it's not a predictable growth business and mining is becoming much much harder and much less profitable in recent years primarily because of regulations. and also because as with oil all of the easy to find deposits low hanging fruit all over the world has been found so really places where you can go or politically dangerous and unstable countries war or exotic deposits that are deep or very low grade it's a tough tough business that's the problem partly it will and partly just technical geologically and the other thing is is we shouldn't refer to the gold as an

investment it's an asset and investment is theoretically something that produces new wealth and. in the climate of fear that we have in a world where people don't want to take risks they want to have an asset and not simultaneously somebody else's liability and that means go right right along those lines though you do predict a bubble i'm curious how it would factor into your analysis if gold was made into a monetary metal if laws changed and angola could be monetized would that make the bubble less severe when it burst with that with that change kind of the whole calculus surrounding gold. well gold is a monetary metal it is one of our for the actually this is the case since money was first developed aristotle in the. fourth century b.c. gave the fourth of the five things that you have to have for

a good money has to be durable the visible convenient consistent and of value in and of itself. so this is why it's not it's not witchcraft it's not barbarism why people use gold for money is simply common sense this is been on for centuries. all these currency that are floating around the world the little pieces of paper they're all going to disappear in the future and in the future the people that have the gold when gold is once again use them today the commerce as money not necessarily passing koreans are on the will be digital representing specific amounts of gold deposits are going to be the big winners so i urge people to have a significant portion of their assets in gold today ok interesting and when ben bernanke he catches up to aristotle then that cold will be worth something a little bit different than maybe it is right now i'm curious the ago our

conference our producer tells me that a lot of the the people there are u.s. ex-pats that have chosen to live outside of the u.s. are buying homes outside of the u.s. not because they're looking for a vacation but that because they're looking for some financial and individual safety i'm curious what that means to you in terms of. the potential that people see in the future of the u.s. both as physical but also human capital leave the country. well. i want to compliment you on having said the u.s. a lot of people say america but america was a concept an excellent concept a unique concept but i'm afraid of america is that now it's gone it's been replaced by the u.s. which is just another two hundred nation states covering the face of the globe what it's like a skin disease. there are a lot of americans that are leaving the u.s. today and the reason for that is they recognize that your biggest risk today is not

market risk although there's plenty of market risk your biggest risk is political risk and you have to be diversified politically so you don't have all your assets under the control of one government because any government will treat its subjects' like milk cows and if they think they have to go treat them like we've got was so long there's going to greasing trend on the part of americans to get their assets out of us while it's still possible because it's getting harder and harder to get your assets out of the u.s. and your critical of the government and wary of political rests you describe yourself as an anarchist i just think of the help of our viewers because some people may think of anarchists as as people in black there iraq their windows at starbucks at g. twenty protest but i've been and they have negative connotations before we go tell us why anarky is positive in your view and how you even define that you know it's one. america simply one that leaves. not look at anarchists

believes in society and anarchists believes in a quarter and i don't because simply doesn't believe anybody has the right to rule anybody else so there's no necessary violence or anything like that surely are violent down our office just like there are violent dentists are violent christians for that matter but it has nothing to do with the essence of the wasp americas it was actually the most peaceful and gentlest of swastikas and the watercourse way from a libertarian in arkansas which means that i believe in free minds and free markets and most of the people that you see running around in black throwing rocks these people are anarchists they're just violent goofballs that has nothing to do with an arkansas which is an justly be smirched. but it's a loss maybe we'll thank you for handing us the trade and thank you so much for

being on the show today we really appreciate all your analysis that's doug casey founder and publisher of katie research. all right let's wrap up with loose change a very special loose change because our producer dimitri co phoenix is in vancouver where it is the last day of a gore a financial symposium innovate or die symposium so after a week of this conference i'm dying to hear what dimitri has learned to avoid what i am hoping is a proverbial death so demitri first of all it's nice to feel. nice to hear you lauren o'brien is going well there in washington are you know we miss you but i have to say things are going smoothly i'm glad you though have been the eyes and

ears and producer on the ground there and i'm sure our audience is dying to know as i am and there is no pun intended there what you learned this week that perhaps we haven't heard from guests that have come on the show to kind of maybe what the main themes of this conference are or the main concerns of investors that i know you've been talking to all week are the main concerns of the other the same but these conferences are held that much sure business is a manual one but a girl holds conferences. often and the main concern amongst the conference goers is always pretty much how to get out of the way of this authoritarian increasingly to radical government and to how to avoid the black swans that are swimming about as a result of central banks and their central planners so i think that's kind of the central the central theme well when you say authoritarian governments and black

swans what would you say are the main things that people are concerned about are there specific examples or trends that a lot of people are are citing are talking about that really concern them. i mean there look you can you have a lot of people a lot of this stuff is is investment stuff like resources how to invest in resources commodities equities by biotech companies technology companies so there's a whole investment theme but as far as the macro concerns it's the same concerns that have grown since nine eleven and since two thousand and nine eleven i think was a watershed moment for individual freedom and. leaning on the individual side as far as long as you're concerned everyone in the two thousand and eight was really an eye opener for a lot of people within my so. as to the reach of the government and how far it's willing to go in terms of confiscating individual property m.f. global another example so these are people who see the landscape there as eric fry

said on our show on monday their financial first responders and they're responding to what they see and they are trying to get out of the way and you've got all sorts of people here i think i mentioned this when we did this two days ago the you've got you've got a delta airlines pilot. and you've got people who are on vineyard you got whatever you want is here it just it's like minded people you've got a lot of libertarians you've got some americans but in the good kind of nation you have people who are very skeptical of trade of government they're afraid of what they see and they want to get out of the way and they want to they can solve their families right and in terms of this imposing and the theme this year is innovate or die is there any kind of consensus that you feel is that answer to the innovate part of the question out innovate i mean i think. i said there are a lot of different presenters a lot of different things that. that people are talking about but the innovation aspect i think as a broader topic is more than just innovate as individual knew the best you can to

be ahead of the curve so i think that would be the answer that question and quickly i'm just curious you know a lot of headlines going on this week that we're covering one of the headlines or i kind of the topical news is that the most interest to the conference goers as well as the speakers. you know there's no real talk about the news cycle here but people are very excited to be at this conference and to get to absorb as much information as they can and then that information is really affected by the news cycle. so it's pretty much just really hardcore facts that you can find elsewhere a lot of really awesome presentations a lot of really cool boots a lot of different companies resource there's a miner's right here. there are companies that provide gold storage gold purchases their property companies. and there are all sorts of things i mean one of the coolest things i found actually is a is a company that has a place in argentina. they have

a stage there and people go and go timeshare much are exactly how it works but you have a lot of stuff like that and you have people here who a lot of them are retirees are still working but again it's a lot of entrepreneurs and so a lot of people that in our demographic and not everyone i guess if you've got you've got all sorts of people but they're very very independent mind right and from what i understand a lot of capital account viewers so dimitri thank you for at dating at on the conference giving us the lowdown the next time we think you'll be joining us from washington thanks dimitri. oh my dear major is really trying to tell us something there he'll be able to tell us on monday though he'll be back in studio because that's all we have time for thank you so much for watching and make sure to come back on monday and in the meantime you know you can follow me on twitter at lauren lyster give us feedback or catch any show you missed you tube dot com slash capital account watch is in h.d. on hulu ever met everyone here have a great night. download

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