Perspectiva económica: Doug Casey

You've heard the axiom "History repeats itself." It does, but never in exactly the same way. To apply the lessons of the past, we must understand the differences of the present.

During the American Revolution, the British came prepared to fight a successful war—but against a European army. Their formations, which gave them devastating firepower, and their red coats, which emphasized their numbers, proved the exact opposite of the tactics needed to fight a guerrilla war.

Before World War I, generals still saw the cavalry as the flower of their armies. Of course, the horse soldiers proved worse than useless in the trenches.

Before World War II, in anticipation of a German attack, the French built the "impenetrable" Maginot Line. History repeated itself, and the attack came, but not in the way they expected. Their preparations were useless because the Germans didn't attempt to penetrate it; they simply went around it, and France was defeated.

The generals don't prepare for the last war out of perversity or stupidity, but rather because past experience is all they have to go by. Most of them simply don't know how to interpret that experience. They are correct in preparing for another war but wrong in relying upon what worked in the last one. Investors, unfortunately, seem to make the same mistakes in marshaling their resources as do the generals.

Silver has just pushed to new record highs — and we believe this move is only getting started.

• We’re not interested in silver as money.
• We’re not focused on its industrial uses either.
• We’re focused on one thing: silver’s explosive upside during periods of monetary stress.

Silver is a small, thin market. When a crisis hits, capital floods in fast — and prices can spike violently. That’s the setup we’re seeing right now.

The smartest way to capitalize isn’t through bullion, but through select silver stocks — especially rare, pure-play producers where higher silver prices can drive outsized gains.

In fact, one South American silver company in the Financial Underground: SPECULATOR portfolio is already up more than 550%, and we believe there’s still meaningful upside ahead.

What does the Fed recent interest rate cut signal about the current state of the US economy?

Let me introduce the subject with a joke.

Einstein dies and goes to heaven. St. Peter greets him effusively and says, "Unfortunately, Mr. Einstein, because we're a centrally planned economy —for obvious reasons— we have a temporary housing shortage, and have to put you up with three roommates for a while."

Einstein goes to his new apartment, and the first guy comes up to him and says, "Mr. Einstein, I have an IQ of 130, and I'd love to get to know you better." Einstein says, "Great. After lunch, let's bounce around a few concepts of astrophysics that have been on my mind."

The second guy comes up and says, "Mr. Einstein, I'm not as smart as that first guy. I've only got an IQ of 100, but I still want to get to know you better." Einstein says, "Great. Let me put away my grip, and let's play a game of chess."

The third guy comes up and says, "Mr. Einstein, I'm not as smart as those other guys. I've only got an IQ of 70, but I still want to get to know you." Einstein says, "So, where do you think interest rates are headed?"

That says a lot about guessing the direction of interest rates, but they're actually the most important single indicator in an economy. Rates are the price of capital, the lifeblood of an economy. Interest rates are analogous to blood pressure and pulse readings for a human. When a central bank lowers rates, it's equivalent to giving a human amphetamines; when they raise them, it's like a dose of barbiturates. Central bankers are like a quack doctor, poisoning the economy by distorting economic signals.

I understand why Trump wants lower interest rates. They encourage people to buy things, consume, and borrow money. That increases consumption, business earnings, and employment.

Recently, we've seen the "Yellow Peril"  escalate across media and politics. There's always been a fear of China, perhaps starting with the immigration of laborers to California in the 1860s, then Sax Rohmer's Fu Manchu novels. It's logical enough. China has always seemed alien to Americans—their language, their script, their clothing style, and their congregating together in Chinatowns. They were painted as inscrutable and devious. Mao's Communist ideology and the Korean War, which was really a war between the U.S. and China, certainly didn't help.

Now China's newfound prosperity is seen as a threat. China, however, isn't the problem; it's the U.S. government's attitude towards China, combined with visible U.S. decline, while China is advancing rapidly on every front. So, the U.S. Government is trying to suppress China and throw up roadblocks to its progress with sanctions and tariffs, while denying it imports and trying to pen it up militarily. As with Russia, the U.S. is provoking them on many fronts.

However, the current U.S. policy is not only doomed to failure, but is actively counterproductive.

Is China truly an existential threat to the U.S., economically, militarily, or ideologically, or is it just a manufactured enemy?