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Current Outlook

My notes on current economic outlook:

Snippets quoted from Doug Casey and/or interviewer. See The World According to Doug Casey. Posted 1/28/2013.

I have no trust in the unemployment figure. If it were still calculated as it was before 1980, unemployment would be between 13% and 19% today. I have no more confidence in the inflation figures issued by the U.S. government than I have in the inflation figures published by the Argentinean government. It is in the government's interest to keep those reported numbers as low as possible, in part because payments on things like Social Security are adjusted to inflation. In addition, people in government think the economy depends more on psychology than reality, and no one wants to set off a panic. I suggest people panic now, and beat the last minute rush.

As far as oil is concerned, I believe in the peak oil theory, which basically says that the cheap, easy light sweet crude has all been found. Crude is extremely hard to find. At the same time I believe technology will solve all energy problems—oil is a very simple compound made out of hydrogen and carbon, essentially. Technology allows us to create almost anything so there's no reason why we'd ever run out of oil. Fracking and horizontal drilling will make lots of hydrocarbons available. The question is at what price?

Accumulating wealth is an important social as well as personal good. The good to the individuals of accumulating wealth is obvious, but the social good often goes unrecognized. Put simply, progress requires capital. Major new undertakings, from hydropower dams to spaceships, require huge amounts of capital. You need the wealth to accumulate in private hands to pay for these things. If the world is going to improve, we need huge pools of capital, intelligently invested. The goal of government should be to provide police and to adjudicate disputes. But if world improvement requires huge amounts of capital, who is better placed to make those intelligent investments: self-serving wealthy individuals or self-serving governments?

Government is based on force and coercion. Essentially, the power of government comes out of the barrel of a gun, as Mao Zedong noted. I do not think that is the proper way for a civilized society to function. By its nature, government never has and never will be a producer. It is a consumer. It acquires income by theft. Most rich people, for example Warren Buffett today and Sam Walton a generation ago, are not interested in consumption. They are more interested in creating more capital. It is better to trust the people who are creating more capital than to trust those in government who do things for political, not economic reasons.

The government gets revenue three ways. The first is by confiscating the wealth of citizens through taxes. There are hundreds of different taxes and they all are quite high right now. The second way is by borrowing. Governments are incredibly overindebted and uncreditworthy now and those debts will never be repaid. The third way is by printing money. They will continue to print money because, number one, it is now the only way out. Number two, the politicians masquerading as economists actually think printing is a good way to stimulate the economy.