The Greater Depression Is Upon Us
By David Galland, Managing Director, Casey Research
Thursday, 14 July 2011
The phrase “Greater Depression” was coined by Doug Casey a decade or so back as a way of describing the economic crisis he foresaw as inevitable, and which is now materializing.
Because I think it is important for every organization to constantly challenge its own assumptions, I’ve long acted as something of a devil’s advocate here at Casey Research. By constantly pushing our analysts to revisit their assumptions and calculations, it is my firm intention for us to spot the fork in the road that indicates it is time to shift strategies away from investments designed to do well in the face of a currency debasement and to something else.
Being attentive to that fork in the road is hugely important, because even though we urge our subscribers not to overdo their exposure to inflation hedges, we recognize that many do. Many a good person had their clocks cleaned in the early 1980s solely because they had become overly enamored of their precious metals – so much so that they stopped thinking of them as an asset class and began thinking of them more in the terms one might associate with an amorous dinner date. Thus these investors were utterly unprepared when said date stood up and broke a dinner plate over their heads.
With that brief setup, I want to make our views clear: While we correctly anticipated the recent correction in precious metals, this correction is but a blip in a secular bull market that is very much intact.
Doug Casey has often said that the unfolding crisis is going to be even worse than he expects (which is saying something), and the longer the rest of us at Casey Research study the tea leaves, it is hard to disagree that the Greater Depression is still ahead.
The eurozone is growing increasingly desperate. Watching the heads of Europe dither and debate over further bailouts to the unhappy Greeks and other troubled PIIGS – before ultimately reaching back into the pockets of the equally unhappy citizens in Germany and the decreasing number of still-functioning economies in the eurozone – reminds me of a down-on-his-luck blackjack player. He’s mortgaged his home to play the game but is now down to his last chips. He doesn’t want to risk his remaining resources but has no choice, because to walk away now will mean taking up residence in a cardboard box. And so, reluctantly, he shoves across another pile. The problem is that the game is rigged – and not in his favor. As the PIIGS start to default and either leave the eurozone entirely or are shunted off into some sort of sidecar organization, there will be great volatility in the euro and in the European markets.