June 3, 2015; An Overseas Conversation With Don McAlvany

Weekly Commentary • Jun 05 2015
June 3, 2015; An Overseas Conversation With Don McAlvany
David McAlvany Posted on June 5, 2015

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

“The way you and I would have analyzed stocks, the way I did analyze stocks 30-40 years ago, you could tell when a stock should go up based on value, and so forth, and the truth of the matter is, today that doesn’t exist. Today, there are no free markets. The powers that be manipulate all of the markets. So, investing in traditional ways by traditional thinking absolutely won’t work today.”

– Don McAlvany

Kevin: Today we join David and Don McAlvany as a father and son team, sort of as a fly on the wall as we get to listen to their conversation. I can say, knowing the McAlvany family for the last 30 years, there is a richness of relationship and a depth of wisdom in the McAlvany family, and to get to sit and listen in on their conversations together is always a great value for the time spent. Let’s join in and listen.

*     *     *

David: This week’s commentary is unique. Sometimes we record a commentary from someplace in the world we happen to be traveling to for business reasons. In this case, it’s for personal reasons. Dad, you and I are sitting here with our family in Kona, Hawaii. There is wind and waves, some pretty substantial waves, in fact, just off the back porch. And the reason we are here is multi-faceted. We enjoy time together, we enjoy touching base, and there is an occasional conversation about business and the world, but a lot of it is just family time, and what we consider to be a priceless investment of time between three generations.

So, we wanted to take the opportunity to, as we did a number of years ago, record from Hawaii some of our thoughts, and just as an overview, look at things that you observe, now being outside of the United States. Living outside of the United States full time gives you a unique perspective, looking back into the United States from the vantage point of social and political changes.

So, we want to talk about that, we want to talk a little bit about the markets, we want to talk a little bit about the credit bubble, not only as it pertains to the U.S., but globally. We want to talk about May and June, your newsletters dealing with the cashless society, which overlap with the Commentary we did a number of weeks ago, as well, when we were talking about Ken Rogoff’s paper and the idea that we have moved to an entirely debit and credit system.

And last, but not least, we want to talk about the idea of managing your greatest assets, and what are those greatest assets, and what is a healthy approach for viewing them and managing them? So, without further ado, here we are in the McAlvany Weekly Commentary from Kona.

Don: Well, it’s always great to be with you, David, and especially when we are looking at big, gigantic waves that are rolling over the rocks in Kona. We live in an era where there are going to be a lot of waves, and the waves are getting bigger and bigger in the financial markets, and the political system. We see them in the Middle East with ISIS, and certainly the upheaval that we see throughout the Middle East that is spreading into Europe, and that is political terrorist upheaval, if you will. But we see waves in the financial system, we see waves in our culture. So, just as we see these gigantic waves breaking out here, and not all of them are friendly waves, some of these waves that we see happening around the world may not be so friendly to many of us over the next year or two.

David: So, you’re in the Philippines year-round, and there are the occasions when we will meet hither and yon, looking back into the United States, what are the areas where you see significant social change? What are the areas where you see significant political change?

Don: Social change is the breakdown of the family in America, and you see this from abroad, although it is truly spreading all over the world, so it is not just in America. We see a push in the Philippines for gay marriage, same sex marriage, but the pressure for that whole change in their system is actually coming from the American government, from the Obama administration.

David: Surprisingly, one of the things that you and Mom have mentioned to me on numerous occasions is sort of the absentee father and/or mother, and you are involved with a children’s home there in the Philippines, and the number of kids whose parents are still connected to them in some way, but have chosen to leave the Philippines and go work in another part of the world in order to “care for the family” and yet, have no real relationship with their kids as a consequence of choosing monetary support as opposed to emotional, spiritual, and intellectual support.

Don: It happens in different ways in different parts of the world, but the same thing is essentially happening. In the Philippines you have 20-25 million Filipinos, out of about 100 million, who are working abroad, because wages are so low, because you can’t really earn a decent living or find a good job in the Philippines. That, of course, leaves moms to raise the kids, or grandmoms to raise the kids, and then you have the problem of just kids where nobody ever knew who the father was, he was there for a night and gone. It’s a huge problem.

It’s a huge problem, as it is in the United States. I would say over 50% of the children being raised in the Philippines today are being raised by single moms, but in America, 40% of the children are born out of wedlock now. Gosh, how many would it be if they weren’t aborting about a million to a million-and-a-half a year? And then how many are from broken families? So, the breakdown of the family is a global thing. It certainly is in the Philippines. We know how bad it is in America. It is getting worse and worse in America, too. And now, what happens when this whole movement for same sex marriage catches on? Will we have even less people getting married and having normal traditional families? I don’t know.

David: There are a couple of issues that I cover in the book Intentional Families, which obviously has not been released yet. It hasn’t been finished yet. I still have a chapter or two and a little bit of polishing before we go to press.

Don: It looks like a very good book.

David: Well, thanks. You have seen a couple of the chapters, and I hope you are able to write the postscript and be involved in that way, as well. But you know, looking at the birth dearth, that is something that is universal in nature. The United States isn’t the worst, but it is clearly not the best, in terms of hitting a replacement ratio. If you are not having at least two kids in a family, eventually, what you end up with from a fiscal standpoint, is too many obligations to pay, and not enough income to cover the obligations promised. And that is of growing concern in the United States, but still an issue on the horizon.

It is a real issue in Japan, obviously, with more people in diapers over the age of 65, maybe over the age of 75 or 80, than under the age of two. And it is a growing issue in Europe, as well. China is not without exception because of their one child policy. There are not enough workers coming up to support what would be a social safety net, allowing for parents in their 60s, 70s, and 80s to “retire” or because of health issues no longer work. So, there is the issue of birth dearth.

There is also the issue of marriage imploding. Look at the town that we come from – Durango. It is optional. It is so optional. I remember when Mary-Catherine and I were going to prenatal yoga nine years ago with our firstborn – and that was a sight to behold, you know, I can’t even hardly touch my toes, that’s how inflexible I am – but nevertheless, we were one out of 11 couples. I think there was one other couple that was married. Everyone else, you met partner so-and-so, and partner so-and-so, and it was just fascinating to me to see the norm being cohabitation.

And it ties into this book of mine, Intentional Families, because I want to know what the legacies are that people are leaving, and you’re going to leave a legacy, good or bad. But what do you create when, it is not as if relationships are permanent, they are entirely optional, and from one day to the next, they may dissolve? That’s whether it is gay or straight, it is just optional.

We are sitting here as a family with three generations, enjoying time together, shared meals, shared conversation, adventures in the water and waves. And it is very significant, not only for me as your son, but for my children, your grandchildren, because it forms a part of their identity. And what does a culture look like, what does society look like, when identity is not fully formed because relationships and marriages are entirely contingent and new-fangled or avant-garde, in terms of their experimentation?

Don: David, we live and work at an orphanage in the Philippines with 53 children. Virtually none of them have fathers, fathers that are anywhere in sight or that were ever even known. And I think this is the growing problem you have all over the world. You have children growing up in America, Europe, the Philippines, wherever, without fathers. The father is the one that gives the child their identity, and so you have a whole generation, maybe a second generation now, of people growing up all over the world without fathers, searching for an identity, and it is going to lead, I believe, over the next 10, 15, 20 years, to a lot of social, cultural turmoil.

And of course, then you add to it the fact that nobody wants to get married anymore. It is easier to live with someone. And of course, in that circumstance you try not to have children. Culturally, the West is collapsing, I would say, faster than the East, just as the East is, and we can come back to this later, economically, is more on the rise, while the West is economically on the decline. I would say that culturally, the decline is faster, more rapid, in the West than it is in Asia, but many of these things are certainly global trends and there is no end in sight.

David: From the standpoint of political change, you and I have often talked about there being very little difference between Republicans and Democrats. That was sort of a family mantra, the red shirts and the blue shirts, so to say, it doesn’t really matter, somebody is going to be on the field, and the policies aren’t much different. If you look from a fiscal standpoint, there is virtually no difference at all. In fact, we end up spending a lot more money during Republican administrations than democratic administrations. But from a political standpoint, what do you see developing, devolving, etc., in these last two years of the Obama administration?

Don: I believe they will accelerate their moves toward socialism, toward people control, toward stirring the pot in the Middle East. The Obama administration, to me, is very troubling, I think, with their Arab Spring and overthrow of many of the more stable moderate governments in the Middle East. They have created tremendous havoc in that part of the world. I think that, even though there are people who would argue that Republicans are the war party and the Democrats are the party of great peace, after all, Obama within 90 days of taking office got the Nobel Peace Prize, we certainly have had a number of wars under the Democrats.

David: For what, has always been the question? What monumental piece of work did he do – on community organizing, perhaps?

Don: With the wars that we have sponsored, and that we are involved in – Afghanistan, Syria, Iraq, and then the instability that we have created in Libya and Yemen, throughout the Middle East, I think he probably ought to give back his Nobel Peace Prize, but I don’t know if anybody would dare suggest that to him. The Republicans, on the other hand, are calling for more war. “Let’s send in more troops into Iraq and get them more involved.” So, politically, the Middle East is a can of worms, and both parties are war parties. Both parties don’t seem to have any solutions except more and more involvement. I think that, basically, behind government policies is the idea that if the financial system breaks down badly, and it is going to, we need war.

David: They have already sown the seeds for the next great war.

Don: Yes. War is very, very helpful. We learned how helpful war was when it helped end the Great Depression, when we got involved in 1941 against Germany, Japan, and so forth. And I think that the seeds are being sown for war in the Middle East with the sharp stick we keep pushing into Putin’s eye, if you will, and agitating him on the Ukraine, and so forth. It would seem that there are people in the American establishment that would like war, and I would guess that is in anticipation of a gigantic financial collapse or implosion that could take place in the next year or two. So, you can’t separate our foreign policy, which is a total, unmitigated disaster. It was a disaster under Bush, Jr. It’s a bigger disaster under Obama. And whether it is Jeb Bush or Hillary Clinton, or some other establishment choice – the establishment will pick whoever the next president is, Republican or Democrat, you can see that there is going to be more push for war, more instability. The more it changes, the more it stays the same. There will be no difference whether Republicans or Democrats are leading, it’s all going to be a big mess.

David: You have to hand it to George Orwell for looking out into the future and really catching the character of corrupt leadership. And maybe it was just that he read Machiavelli. Anyone who wants to read The Prince will see the use of deceit and the manipulation with language and the conceit, if you will, by those in power. But it is almost as if modern politics and Machiavelli walk hand in hand.

I guess what brings that to mind is, just this last week we had the Patriot Act expire, and of course, following 9/11 it was perhaps excusable to describe it as the Patriot Act. We, as a country, needed to pull together and fight an unnamed enemy.

Don: But David, I want to remind you that the Patriot Act was written two years earlier under Bill Clinton and sat on the shelf, for just the right crisis. And they pulled it out, nobody read it, but they could have read it two years earlier if they wanted. And so, they were looking for the right crisis for that, so it was actually not written under Bush, it was written under Clinton.

David: So, here we are with the Freedom Act, which is supposed to be the replacement of the Patriot Act, the modernized, souped-up, more politically correct version, where the NSA, actually, was to some degree shackled, no longer listening to all of our phone calls, no longer retaining all of our phone records, roving wiretaps, etc. And the things that we found out, in contradiction to what would be constitutional protections, the NSA was operating in a manner which, quite frankly, was illegal, and will be to some degree curtailed. At least, that is the claim as it is being sold again. But the question is, who has read it, what does it fully contain, what are the implications over the next three, five, seven years, as we see the Freedom Act take the place of the Patriot Act?

Don: If the past is any prologue for the future, we will have to say we are going to have much more of the same. It is kind of like in George Orwell’s day, in his book, 1984, where all words meant the opposite. Freedom equaled slavery.

David: Perpetual peace was actually perpetual war.

Don: Yes, and so, we have this total surveillance society. It is not going to diminish, we all know it is going to increase. It almost sounds like Revelation 13. But we are all under total surveillance, it will grow and grow and grow.

David: I mentioned this to you and I don’t think you took me up on it, but I am going to give this to you as an assignment and to all of our listeners, too. For anyone who likes the acting of Benedict Cumberbatch, he played in a British mini-series called The Last Enemy. Did you see it?

Don: No, I didn’t, but he is good.

David: Okay, you have to see it. The Last Enemy. It is basically British social commentary and critique on the National ID Card, public surveillance systems. And it is really well done. It is really well done, in terms of a thoughtful look at the benefits and drawbacks of social control. In the end, there is a conclusion drawn, and you will have to watch it to see what the conclusion is. But it is great acting, and it is great commentary, working you through all the things that are happening, from a top-down basis, for “our protection and our good, the greater good of the people.” Anyway, just a tie-in to an Orwellian theme. Again, the mini-series is called, The Last Enemy.

Don: I will try to get it. I would just say, with each of these new bills, no matter what the label is that you see on the bill, the results will be exactly the opposite of the label. When they talk about Internet neutrality, that means more control over the Internet, not neutrality. So, every time they put out one of these things, just remember, as Orwell taught us, if we listen to his book, everything they say will be the opposite of what they label it and the opposite of what they say they are going to do. And the bottom line, and it is really a sad bottom line, is that we are losing our freedom very, very rapidly.

And David, I want to make one point that I think a lot of Americans don’t understand, and there is some advantage of living outside of the United States. The West is in decline, financially and economically. I think anybody who is a thinking person can see that happening. I think that you are probably going to see out of the chaos that becomes a financial chaos in the next couple of years, I think you will see Asia rise much more rapidly and recover, and I think the economic wave of the future is actually Asia. But I also see something else, and that is that the West is becoming über-socialist. We are adopting the socialist models of the former Soviet Union and the socialist-communist countries of Europe, and so forth, and Asia is becoming more free market oriented, more capitalistic in the old sense of capitalism, not the new sense, not the fascist sense where government and big business are in bed together.

Asia is actually moving toward more free market economics, toward the things that made us great over the last 100 years, but now we are abandoning under our socialist leadership and going into socialism. They are going in the opposite direction. So, I would say, and this is based on my observation living in Asia, that if you want to take a look forward, maybe beyond when many of us are going to even be alive, over the next 50 years I think you will see more freedom and economic prosperity in Asia, and I think the West you will see drowning in socialism.

David: It is interesting, three years ago my friend Russell Napier from Edinburgh, Scotland, said on our commentary that if we wanted to learn how to operate best we needed to interview more people from Eastern Europe, and learn from those who have existed inside a command economy. And at the time he said what we have today is a command economy with the characteristics of capitalism already in the United States, and as those characteristics of capitalism begin to fade, then it represents new challenges, perhaps new opportunities, but new challenges for us. And it is interesting, at the time he was writing from the perspective of an Asian equity analyst, he was no longer working for CLSA in Asia, but his sense of things was certainly that there was more capitalism alive and well in Asia than there was – with all its foibles and dangers; capitalism is not a clean beast – but it is more alive and well there than in the command economy of Western Europe, and of America.

Don: David, let me insert one idea here, and that is, Obama is not calling the shots, we know there are much more powerful people calling the shots above Obama, and they will be there after Obama is gone and Hillary is in, or Jeb Bush, or whoever comes in next. I think we need to get our terms straight, just like we know the old terms, Liberal and Conservative, don’t mean exactly what we thought they meant 20 years ago. We have to be careful, because they don’t really accurately define things today. I think simply to call these people Liberals, Left-Wing, etc. – what is emerging in America is fascist. It is basically a marriage between big government and big corporations. You saw this in fascism in Italy, you saw it in Nazi Germany, and so forth, and I think, yes, the people behind this are global socialists who certainly are hell-bent on world government, on global government, and so many of the things behind the scenes are pushing us in that direction.

But basically, American free enterprise is being choked to death by a fascist system, and in my opinion, if you want to understand where America is going today, get out about 15 books and study Nazi Germany. Study Nazi Germany, get William Shirer’s The Rise and Fall of the Third Reich, and there are many, many books on the subject. Study it, because I think the parallels between where America is headed today and Nazi Germany in the 1930s and early 1940s, I think that is where you will find your parallels, and instruction for how things may go.

David: Bill Bonner recently was looking at a study by the Sunlight Foundation and he commented that, after examining 14 million records, including data on campaign contributions, lobbying expenditures, federal budget allocations, and spending, they found an average of every dollar spent influencing politics that the nation’s most politically active corporations received back from government 760 dollars. That seems like a good return on investment, a dollar spent to lobby, and again, this is to the point of big business carving out a permanent monopoly, if you will, in each of their individual spaces. So, the nation’s politically active corporations received 760 dollars from government for every one dollar put into campaign contributions, lobbying expenditures, federal budget allocations, and spending. I just thought that was fascinating.

Don: Can you do that with your company? It sounds like a good deal. We should all be trying that. I don’t think we have the connections for it, unfortunately.

David: I think there is an issue of morality, insofar as we exist in a world where the market is still a determining factor. And I like that. And I would like to think that if we make poor decisions as a company that there are real life consequences for that, and if we make good decisions as a company, that there are real life consequences for that. And basically, what we are talking about is a world in which it doesn’t matter what your business plan is, it does matter who you are essentially in bed with, where your connections lie, who is in your Rolodex.

And you can see this in Washington today, and at the Fed, too, where basically, you spend a certain amount of time in public office and then convert to the private world to create a fortune. So you basically use those connections to create a personal fortune. I think this is going to be one of the big problems for Hillary as she deals with leaving the governor’s mansion with zero in terms of net worth, essentially, but then by 2008, the time frame when Hilary was running against Obama for the presidency, and was forced to disclose net worth figures, those net worth figures are well over 100 million. What has happened between 2008 and the present in the context of asset price inflation? She is clearly not one of the most disenfranchised, lower middle class candidates, which she is trying to convey – “I’m just like you.”

Don: David, I live in a very corrupt part of the world. In spite of the free market aspects I was talking about in Asia, there is a lot of corruption, in the Indonesian government, the Philippine government, etc. But the corruption in the American government, I believe, is off the charts. I do believe that the major corporations own the Congress, and that they can basically have any legislation they want by virtue of all the money they dole out to the Congressmen. And so we live in a very, very corrupt political system, and in my opinion, even though it is more smooth and more sophisticated in many parts of the world, I think the American government may be one of the most corrupt in the whole world.

I want to go back to something you said a little bit earlier, David, about the markets, and so forth. In my opinion, there are no such things as free markets in the world today. I believe all the markets are massively manipulated by the powers on Wall Street, the Fed, and the government. They are all together, they are one big, happy family joined at the hip. You look at the stock market, you look at the precious metals markets over the last couple of years, and I think they will lose control. There is no doubt they have been manipulating heavily there. There is just almost no such thing as free markets today. So, the way you and I would have analyzed stocks, the way I did analyze stocks 30-40 years ago – I went to Wall Street many years ago, and yes, things were based on value – you could tell when a stock should go up based on value, and so forth, and the truth of the matter is that today that doesn’t exist. Today there are no free markets. The powers that be manipulate all of the markets. So investing in traditional ways by traditional thinking absolutely won’t work today.

David: That issue of the markets becoming one-dimensional in nature, where the central banks – not only ours, but every central bank around the world – really predominate, that is the issue. And there is a growing consensus amongst investment professionals that it is a workable strategy, and it is one that you just need to continuing playing. The challenge I have with that particular conclusion is, we have seen government intervention in the markets before, we have seen price controls before, we have seen fascism before, and this is where I don’t think we have a disagreement, it is just a question of sequence. We may have fewer free markets today, but the more you restrain them, the more they come back with a vengeance, and mete out great consequence to those who are trusting in the rigged game. And this is true of virtually every fixed price on the planet. It works until it doesn’t work. And the day it doesn’t work is the day you have radical shifts in value, and a major move as the market takes back its control, if you will, from those who try to force or push through their own particular will.

Don: It is spelled with four letters – P-A-I-N – pain. A great deal of pain coming from many people who have no clue as to what is coming, and when this implosion – which we all know is coming, we just don’t know exactly when – when it finally happens and everything resets, oh my gosh, the pain, the loss of wealth among the middle class. The very, very wealthy, they will be positioned where they will survive. But amongst so many people out in mid America, they are going to be bankrupt, they are going to be wiped out, and they are going to know pain like they never knew.

David: Marc Faber quotes Walter Bagehot from the 1870s, and he says, “Much has been written about panics and manias, but one thing is certain, that at particular times, a great deal of stupid people have a great deal of stupid money, at intervals. The blind capital of the country is particularly large and craving. It seeks someone to devour it, and there is a plethora. It finds someone, and there is speculation. It is devoured, and there is panic.” That actually is a quote by Walter Bahehot from Manias, Panics and Crashes, an old Charles Kindleberger classic.

The more things change, the more they stay the same. And this is one of the reasons why I do have confidence, ultimately, in the markets, because we have seen, not only manic behavior, we have seen price controls, we have seen many of these things already. Perhaps one of the differences, moving on to another topic for us today, is the universal nature of credit expansion. It is not just the Fed, it is the Bank of England, it is the Bank of Japan, it is the Bank of India, the Bank of China. Their best and brightest have studied at Oxford, Cambridge, Harvard, Princeton, and Yale.

Don: The Keynesian’s have done well, haven’t they?

David: And they have the Keynesian mantra down. They know exactly what to do. When things begin to falter, what do you do? Print, print, print. Create credit out of nothing. And this is the new era of Keynesianism, in the sense that it is universal in nature. It is not sort of, “We’re doing it and they’re not.” Everyone is doing it. And where you see the price of gold performing the best is where these monetary experiments are absolutely going bonkers. Gold in Japanese yen is just a few percentage points off of its all-time record high. In euros, it is actually doing quite well. In U.S. dollars it is still on its butt and going nowhere. And it is not because we are not printing, it just happens to be that there is more money printing at this point in time in Europe and Japan. In the proverbial race to the bottom, they are winning this leg of the race (laughs).

Don: Yes, I totally agree with that, David. Another thing to remember when we talk about gold in Asia, and Asian demand, and so forth, if you have been listening to this program long, or reading my newsletter, you will know that there is explosive demand for physical metals in Asia. It has been going on for a number of years. Nobody knows how much physical gold China has, but when the numbers finally come out, I think it is going to blow the market into the sky because people are going to realize they probably have more gold than we do.

But the point is, in Asia, people are accumulating physical gold, whether it is governments or whether it is people. In America, an awful lot of people have been accumulating the paper gold, and of course, we know this is where the Fed and Wall Street, and so forth, have been manipulating the gold market and the paper gold market by shorting futures, etc. This is all going to change. I don’t know when, I can’t say exactly when, but I believe in the next year or so you are going to see the physical market begin to dominate the paper market.

There is not much gold left in the West, there is not much gold left in the United States. It has been sucked out of the United States, it has been sucked out of Europe, out of the central banks, out of the vaults, out of the COMEX, etc. It has been going to Asia. The physical market will rule, and I agree with you that there are reasons why they want to buy gold.

David: It is just interesting to me that it is we in the West who don’t have much of a history, who also don’t have a sensitivity to the things which last. We don’t have enough historical reference point as a people, particularly in America, to be able to say, “We can play our games in the futures market and be just fine. There are cultures and countries which have seen their currency systems completely disappear, not once in a generation, but ten times in a generation. And the idea that a paper universe can simply go away is not something that we are very familiar with here in the United States, or are very sensitive to. But it is interesting just to listen to you, it seems there is this obvious contrast between, “We’re comfortable with being able to navigate any storms,” perhaps with too great a confidence, and in another culture, the Asian culture, they would say, “The storms that lie ahead, we would prefer to have the asset which is enduring, and cannot be destroyed.”

Don: Another reason why America and the West don’t believe in gold, and do believe in paper, is they have been educated and dumbed down that way in the universities since I was at the University of Texas in the 1960s. Good grief, my Marxist economics professor, Professor Mywatchka [spelling uncertain], who happened to be Japanese, was preaching a Keynesian Marxist economics message, how absolutely ridiculous gold was, a barbaric relic of the past, which is, of course, what the Keynesians have always told us.

And so we have had 50 years of education putting gold down and advocating the printing presses and the Fed’s ability to create money, and so forth. The American people are so stupid, they don’t have any idea how this works, and therefore, that is why most Americans don’t buy gold – 99% of Americans don’t own gold because they have been told gold is stupid. That hasn’t happened in Asia. In Asia there hasn’t been a long-term educational program advocating paper and putting down gold, so that is one of your differences.

David: It brings us to the next topic, which is a cashless society. You have written about it extensively, and it seems to feature prominently in the agenda of the New Keynesians. I say the New Keynesians because we live in a new era, and we have new technologies, and new means of implementing a top-down approach to economic management which Keynes could only have dreamed of, and of course, he didn’t have access to. So, looking at the cashless society, looking at the problems created by a zero interest rate policy, and then the convenient solutions of an entirely credit and debit-based system, maybe you can walk us through the trend toward the cashless society.

Don: It is clearly being pushed from the West. It is not going to be adopted in most third world countries, I would say, in the next 20 years, but in Western countries, led by America, of course, and England, and the European Union, and so forth, it really resounds well with socialists. There are many reasons why they want a cashless society. First of all, if you are a global socialist and you want world government, the essence of world government is people control. You have to control the people.

How do you control the people? Well, there are five ways that I write about in my newsletter. You can control with the food supplies, you can control with the medical system – think Obamacare – you can control people movement. But by controlling the financial system, the ultimate control is to force everybody into a cashless society. You can control them because you can see everything they do. There is no free market, some people would call it the black market, out there when everybody is forced into the computerized banking system.

And of course, the government would argue, “We’re going to get all the tax cheats, etc.” So, it is an attack on the free market. Most importantly, it is people control. “We can watch and control every dime you spend, and make sure we get more than our fair share of taxes if you are in the computerized banking and financial system. If you are in a cash system, we can’t control you, we can’t watch you, we can’t tax everything.” And so, these are some of the reasons. There are strong philosophical reasons for it.

There is also a strong financial reason. The powers that be know that there is a financial crisis coming. What you see happening in Greece and some of the European countries is coming to a neighborhood close to all of us. And they know that at that point there are going to be tremendous bank runs. And there are going to be people pulling money out hand over fist, and the lines are going to be as long as anything we saw during the onset of the Great Depression. How do you stop bank runs? How do you stop people from pulling all of their cash out of the banks, which will sink a very fragile, bankrupt banking system? You do that by restricting how much cash they can hold. So, there are a number of reasons – philosophical, political, and practical financial – they are terrified of a bank run.

David: One of the books that I am reading right now is a 512-page book by Juan Zarate titled Treasury’s War. He was in the Bush administration, a former U.S. Treasury and White House counter-terrorism official. He recounts, in detail, how the Treasury is on a par with the Pentagon in terms of implementing our foreign policy. You might think, “Well, the Treasury, shouldn’t they be just about our business here domestically, on a fiscal basis, helping to not only collect taxes, but issue debt and things of that nature?”

Zarate goes into great detail about how the new approach to controlling the “enemy,” and the enemy today is the terrorist, the drug runner, the money launderer, but the enemy, quite frankly, if you put any particular administration in, and we don’t know who the next administration is or the administration that we have to deal with 20 years from now – you give them the machinery, who is the enemy? Is the enemy the opposition party? Because that is the way the rest of the world works, in many parts of the world I should say. If you are the opposition party, you are not just someone to be beat in an election, but you are someone to be beat down, forcibly.

It is a very interesting read. Juan has been invited onto the Commentary and his schedule is backed up, should we say, at this point. I think we will have him on later in the year. But, a fascinating read about the Treasury’s role and its techniques in undermining foreign powers. Think about that power. Because we are interconnected in the financial system, they have the means necessary to fight and win this war because they control the conduits of flow of capital from one country to the next.

This is why the Chinese and the Russians are so set on creating an alternative to the SWIFT wire settlement system, something outside the purview of the Treasury. Why? Because, in the end, they know what they fighting today – the war of tomorrow, and the war of today is no longer tanks, bombs and guns. It is information, it is technology, it is capital flows. It is economic, and it is directed by the treasuries of individual countries around the world, not by the “War Department.”

Don: And the classic example today, David, is America’s financial war against Russia. Now, I am not saying Putin and the Russians are the good guys, but they have been in the target sights of the U.S. Treasury and the U.S. government and establishment for some time. That is why you have these sanctions. The sanctions are falling apart now because the sanctions are hurting Europeans more than they are hurting the Russians, I think. It is not the only example, but it is a classic example of America’s financial war – control and manipulation efforts – against another country, using the financial system to do it.

They are losing control, and this is something I think is very important. The financial powers that be, the establishment, if you will, in America is losing control. They have had control since Bretton Woods in 1944. They have controlled the financial system of the world. And through that control, that was where a tremendous amount of wealth was built. The rest of the world is very much onto this now, and so this is why new structures are being formed, as you alluded to, by the Russians, by the Chinese, by the BRICS, etc.

This is why the world is going to move away from the dollar. It is going to be six months, two years, three years – within the next five years, I believe, there will have been a major readjustment, and I think the world will have moved away from the U.S. dollar. The euro-dollar is crumbling now. We are beginning to see the Middle-Eastern oil powers doing business and trade in other currencies, in renminbi and Russian rubles, and so forth.

David: Let me play the devil’s advocate on this point. Let’s say that we have a global financial crisis, part two, that 2008 was a foreshadowing of something equal to, or greater than, what lies ahead, that the central bank patchwork job doesn’t hold together, and we end up with massive carnage in the financial markets. If we learned anything from the 2008-2009 period, it was that the depth of the capital markets does matter, and almost in order of depth, the United States stock market fared the best. We only lost 30-40%, whereas the London markets, the European markets, the Japanese market, were more like 40%, 50% or 60%. And the emerging markets, the BRICS and those who were less developed, saw as much as 60-90% losses.

And could it be – and this is my devil’s advocate question – could it be that the next global financial crisis isn’t, in fact, a useful tool toward re-establishing dollar dominance in a world that is rapidly shifting away from the dollar, as people do funny things when put under pressure? We may be a wicked taskmaster to those who don’t like the petrodollar, or who don’t like the trade dollar in Asia, but when push becomes shove, and we move to a world of tooth and claw, the treasury market is the deepest capital market in the world, still considered to be the safest. That is arguable, of course, but still you are dealing with ingrained beliefs and knee-jerk reactions in the context of crisis. People go back to what they know, not necessarily something that is new and holds promise.

Don: Arguing for that premise is the current strength in the dollar, which surprised an awful lot of people, including myself. Two years ago if you had told me and a lot of analysts that the dollar would be as strong internationally as we see it in Asia, as it has been, I think that would have come as a bit of a surprise to us. I think when the financial system really begins to implode, it is going to be a global financial panic, and if you look at the derivatives position of the six largest banks in America – J.P. Morgan Chase, City Bank, Bank of America, and so forth – they are in the 100s, and I had this in my last newsletter, I can’t remember the number – in the 100s of trillions of dollar – if that whole pyramid actually does begin to crumble, the financial system – and I think this is why they want war, I think this is why the establishment is pushing for war, because I think they believe it is going to crumble. A lot of people think it is going to happen this fall. I don’t know if it will or not, but it could.

David: By definition, Dad, a risk and a surprise don’t have to be the same things. You can be at risk, but the things that surprise you are usually the things that you are least prepared for. So, if you think of all the changes that you see occurring around the world, in the United States, we know what the risks are, but what about the things that might surprise us?

Don: David, let me say this. There will be many false alarms that come along in the financial system because we have so many people predicting that we are going to drop off the edge of the world, and people who believe a lot like we do that have cried wolf many, many times. We call that a false alarm. And so, people tend to ignore those false alarms, and then when the real tsunami comes – wow. That’s when people get swept away.

David: It wasn’t that many years ago that in Hilo there was an alarm that went off. It was the first of April, and everyone in Hilo thought that it was a joke, and there were countless people killed because it was actually a real alarm, not just the test that they do on the first of the month. But with that confluence of the first of the month which everyone knows and discounts as the tsunami alarm, plus it being April Fool’s, no one did a thing, and Hilo was enveloped by a massive wave.

Don: And that is what is going to happen in our financial system. Even among many of our friends who see the world from the same lenses that we see it, they are going to become finally so complacent and say, “Well, we have been believing this stuff for so long, we are going to go back. We are going to go back to all those things that we know are great money-makers that Wall Street and the government tells us are good. Because look, they’ve been doing okay lately, they’ve been really doing good.” And just about that time it is going to be April Fool’s Day and the tsunami is going to hit.

So, I would say, not actually in answer to your question, that those of us out there who have prepared need to be patient. We need to understand that the financial convulsions that we believe are coming, are coming. We don’t know exactly when, and we have to be careful of falling for all the propaganda that says everything is wonderful, the big guys have got everything under control, because just about the time we begin to believe that, that April Fool’s tsunami will hit, and even people on our team are going to get hurt badly.

What are some of the crises that could be surprise crises? We all know there could be a country or two in Europe that suddenly go bankrupt, although the European Union is standing there to bail out everybody, so maybe or maybe not that will happen. I think there could be some surprises in the Middle East. One could be the Saudi Royal family falling, and a radical ISIS-type regime coming to power there, and that could certainly trigger some interesting things. I think major attacks in the Middle East against Israel, whether it is ISIS forces, or Iranian-backed Shi’ites, or whatever, could actually morph into a big war that would eventually draw Russia in, America in, and so forth. So, I think that could be a surprise.

I think, on the domestic front, one of the surprises could be that somebody gets elected president that looks like they are conservative. After all, didn’t we think that when we elected George Bush, Jr., that we had elected a conservative? He was not a conservative, but a lot of people thought, “Well, he is a Republican, and he says a lot of things we agree with.” And that could be a surprise. The establishment decides they are going to pull the rug a second time on Hillary. Hillary’s politics are almost identical to those of Barack Hussein Obama. I wonder about that name sometimes, it just doesn’t sound Irish to me. But in any case, maybe the big surprise is that the election makes it looks like somebody who is very moderate comes to power. Most of us would guess that it would be a Hillary or somebody that is still in the establishment’s pocket, and they will be, but they may look like they are not. That could be a bit of a surprise.

I guess maybe it is not a surprise to me, but the cultural collapse in America is accelerating. For anyone with eyes to see, they should be able to see just the total collapse in our culture, and now, if you believe the polls, which I basically don’t, but nevertheless the numbers are high that the majority of people in America are for same-sex marriage. To me that would indicate, even if those numbers are a little exaggerated, that the American people’s compass is way, way off.

David: What is not a surprise to me on that particular issue, is that values are not translated from one generation to the next very easily, and if it is going to happen at all, it is a long and arduous process, and the failure of the modern family is, to some degree, the failure to replicate our highest ideals and best values, as we spend time with family and make sure that the next generation thinks well and appreciates the family from which they come.

Don: I would say that the collapse of the family, which is very clear – good grief, we are talking about 55-60% divorce rates in America, high numbers even among conservative and Christian families, that collapse of the family I don’t think happened entirely spontaneously. I think the political left, basically, has had an agenda over the last 50-60 years, to undermine the culture, to undermine the family, to undermine virtually all traditional values. As Joseph Stalin said, “America is like a healthy body. Its resistance is three-fold – its patriotism, its morality, and its spiritual life. And if we can undermine those three things, it will collapse from within.”

David: That brings me to our last point, which is, managing your greatest assets. If you look at a complete balance sheet, and by complete, I mean comprehensive, not just land, not just stocks, not just precious metals, but looking at your intangible assets, as well – family, culture, not culture on a macro-scale, but on a micro-scale. How do you manage your greatest assets? Maybe you could just give us a couple of ideas of things that you think are important, easy decisions that should be taken and made by any family wanting to preserve those greatest of assets, in a context where value is certainly confused, and values have been upset, to a great degree.

Don: You speak all the time about preserving family wealth, family assets, through wise financial planning, etc., and so we are all in agreement with that. But the biggest battle is not the financial battle that looms, it is how do we save our families? How do we retain our families in a culture that is basically designed now to destroy the family? And all you have to do is look around if you have eyes to see, and you can see how it is being destroyed. You have to be intentional. As you say in your book, you have to fight. You have to fight for your family. Now, what does a fight for your family look like? I think you have to decide whether the most important priority in your life is your family, your job, your investments, or whatever.

David: Here is the irony. In your part of the world, in the Philippines, people will leave the Philippines to make better than $2-5 a day because they want more for their family. In the West, we will do the same thing, but we are not leaving for $2-5 a day, we may commute two hours, three hours a day, to make an above-average wage, but we are sacrificing the same thing. We are sacrificing breakfast and dinner and times where conversations come together, where time is spent and where relationship is made. And without relationship, there are so many things that begin to fall to pieces.

Don: It takes time, especially on the part of the father. The mother is usually there. A decent mother, and I think there are a lot of good mothers out there, will be there. But the father is being absent by working, or maybe, just whatever, and that is the case in so many families. Broken families – 40% of kids grow up without a mom, they grow up in a single mom home and the father was never around.

David: That describes the home that you grew up in.

Don: That’s right. My mother was wed, but I grew up in a single mom home. Without the fathers, we don’t have somebody to give us our identity. The father being in the family is essential. I think we have to fight for our families, and I think that is probably the biggest challenge all of us face. We have a culture that is totally bent on destroying the family, so how do we fight back? One is time. The other is a father that is dedicated to being there for his wife and children, and I mean being there physically, and mentally, and emotionally – being there to teach his children.

I have to say this, David, I think the most foolish thing a family can do if they want to keep their family together and preserve and protect their children, is put them in the public school system in America today. I think the public school system has been so undermined by the political left that it is basically there to lobotomize your children. And I say this to anybody who has children or grandchildren, and some of your listeners probably know that we are a home-school family, our children have been home-schooled.

David: So, if the public school is the only option for some families, whether it is economic circumstances or lack of other choices, it would seem that the task is that much greater for mother and father to band together in terms of the times that they spend with their kids. And again, it is education, but it is not just meeting intellectual needs in terms of education. It is also just being there, being present, being a stabilizing force in their lives.

Don: It is not enough, if the public schools have your children seven, eight, nine hours a day, and you, at best, have a couple of hours with your children at night. There is something wrong – and these are statistics, I think they have come out of Pew research, they have been quoted by James Dobson and others – there is something wrong, David, when 85% of the children from Christian traditional families, traditional values families, somewhere in high school or college, are lost to their faith, are lost to their values, their conservative, traditional values, and come out of high school or college liberal and rejecting almost everything their parents have taught them.

Now, what is wrong? It is clearly a school system that has been taken over by the political left and is designed to do just this, to neuter our children. We have talked about a number of things here, but I think one of the key things is, you have to protect your children’s minds from the public school system, and I include most of the big public universities in this country. We want education. They have to be highly educated. And I will cite your family as an example where you can pick a curriculum that teaches them in depth about everything – science, math, history, reading, you name it, and does it from a traditionalist point of view – yes, maybe a Christian point of view.

You are doing that, and about four million other children, or more, are being educated in that way. I think that is one of the keys to protecting your child’s mind. You can do everything else right, you can spend time with them, and still lose them in high school or college to a system that is more powerful than you are because they have the time with the children.

David: I am going to take the other side of the coin on that, and even though I do like the idea of home schooling, I think that it can be done terribly, and I have found in a lot of instances it is. The opportunity is there. But the vast majority of people having a radical shift in world view, either in high school or college, I think has to do with qualitative deficiencies within the home, where issues are not addressed, where candor is not welcome, where the intellectual life is so thin and banal that when a professor of economics, sociology, philosophy, religion, or science says something intelligent and rational, it’s the first time in a long time that that student has heard something that is, in fact, appealing.

I think that is a terrible travesty because, quite frankly, the world view that you and I adhere to as Christians, as believers, has some of the most robust responses to life’s challenging issues, and I think a life lived well is something that is very difficult for someone to argue against, even when a professor has something to say which may woo in a different direction in terms of worldview. I don’t see very much that is qualitatively attractive within the church today. I don’t see very much that is qualitatively attractive in very many families today. And I am not trying to be particularly hypercritical, it is just that I think there are too many things that distract us from making better choices – distractions of time, time that we spend watching television, time that we spend doing silly things versus substantive things.

That doesn’t mean that you dedicate yourself to a life of seriousness. What I am suggesting is that families fail for many, many reasons, and the failure of family is not, in every instance, a system dead set on the destruction of family. There is certainly a systematic redefinition which is occurring culturally, but it seems to me that when kids, of their own volition, choose to go a different way in life, much of that has to do with internal failures and dysfunction. I know that from our own family. And I also know that what we have experienced in terms of redemption and healing within our family, is vital to the rest of the story. It is very vital to the rest of the story.

And where that does not occur, hearts are lost, bitterness is engendered, and it is much easier to see someone shift away from a particular world view to any other. It is very easy to see where the charge of hypocrisy comes from when certain propositions are not supported by life choice, where people’s lives – and again, we are talking the qualitative elements of someone’s life, the felt texture of their soul being different as a consequence of the things that they believe – when that does not happen, when that is not evidenced, and all you have is propositional truth, what you end up with is, ultimately, a failure for those propositions to be accepted and carried forward by the next generation. And maybe they are just dealing with past evidence, not a system dead set against destruction of an ideal.

So, as we wrap up, Dad, one of the things that I appreciate is the effort that you and Mom have made to connect with us, here and there, wherever we can, several times a year. It is a good choice for the two of you to pursue your interests and a life in the Philippines. You know that we miss you, you know that we would love to see you even more, but we appreciate your being very deliberate about carving out a few weeks here and a few weeks there to pour into the lives of our kids, and for us to spend time together. And I feel as though this is an effort on your part to manage one of the greatest assets that we have a family, which is non-monetary. It is relational time, it is dinnertime, it is conversation time, it is time to look at the tide pools and discuss other things than are in the tide pools, perhaps, but still enjoy life and be filled with a sense of wonder and worship together. So, we appreciate you doing that, being deliberate about that, and look forward to the next time we see you here, or in another part of the world.

Don: Thank you, David. Let me just close with this thought. The Bible says, “What does it profit a man if he gains the whole world and loses his soul?” I would actually rephrase that a little a bit, if I could, and say, “What does it matter if you gain the whole world and lose your family?” And this is happening to people on our team, conservative Christian people, hard-money people, and so forth, they are losing their families.

And so, I think the message that you have got in your book about the intentional family, and intentionally focusing, not just on making lots of money, we all want to do that. Okay, that’s great, not just on being successful in life, but on focusing on building and strengthening your family, strengthening your children. If millions of us don’t start doing this, in my opinion, there is no future that we want to think about for America. So, I think you speak a lot of financial wisdom every week, and I try to, in my newsletters, and so forth, but I think the most important thing we can do is not fight just for our finances, but to fight for our families, intentionally.

David: There are many macro-issues, and not very many macro-solutions. But the micro-solutions – that is well within our control.

Don: Indeed.

David: And thanks, again, for sponsoring the trip (laughs).

Don: Thank you.

David: And spending some time for the Commentary today.

Don: Thank you.


Stay Ahead of the Market
Receive posts right to your in box.
Gold Is Stupidity Insurance
Wimpy FED “I’ll Gladly Pay You On Tuesday”
What Will Happen When China Devalues?
Long Term Gold Bull Takes A Short Breath
Executive (Insiders) Unloading Their Own Stocks
The Fourth Turning Is Here: Neil Howe
Gold Rises, Dollar Rises, What That Means
Powell On Inflation: “Dismissive”
Double your ounces without investing another dollar!