Doug’s reaction: “Perversely, he’s probably right. You can be a batshit crazy megalomaniac and be completely right.”

The Dementia Caucus

Kay Granger, Republican of Texas, died a few days ago at 83, having spent her final six months in assisted care, with dementia, while still holding her seat and a major committee chair.

She’s not an isolated case: McConnell, Feinstein before her, allegations now about Maxine Waters — and people say it about Biden and Trump too. Before the Soviet Union collapsed, Doug noted, turnover in Congress was lower than in the Supreme Soviet, where elections were openly rigged.

“It used to be that the Senate and the Assemblies of the People were important,” Doug said, “but after a while, all the power devolved to the emperor, and they were just showpieces.” Trump’s polls are at record lows for a second-term president, yet per Axios he’s indifferent to losing the midterms — he intends to govern by executive action and pardon rather than legislation. Everything built that way can be undone with a signature. And whoever comes after him will keep running the same direction — Athens under Pericles, France at Versailles: power pools until it collapses.

No One Dares Contradict Him

Jeanine Pirro — one of Trump’s most loyal boosters — investigated why the reflecting pool lining turned into a disaster. Her conclusion: not sabotage, not vandalism, not domestic terrorism. Shoddy workmanship, on a contract that went to one of Trump’s friends. For delivering that finding, she’s been excommunicated.

Meanwhile Scott Bessent — a Wall Street master-of-the-universe who ran money for Soros — talks about Trump in committee hearings like a courtier addressing the Sun King. That’s how you survive in that circle.

And the man they dare not correct sends out middle-of-the-night posts of world importance confusing “parameters” with “perimeters,” whole words capitalized, disjointed. Doug: “You can’t be the most powerful man in the world — and he’s right about that, for sure — and confuse the words that you’re using.”

The $250,000 Migrant

Camp East Montana, the new detention facility in Texas, cost $1.3 billion and holds 5,000 people. That’s about $250,000 per detainee — three or four times the average American’s annual income — before anyone is fed, guarded, or deported. Nobody in the press asks how long people stay, or how many of these facilities we now have.

Doug used to joke in speeches: “America’s never gonna have concentration camps. We’ll just call them something else.”

What interests me more: Trump bought stock in the company that built the camp shortly before it won a no-bid contract from the DoD — and sold the same month the award was announced. The tariff story rhymes: when the original tariffs were ruled unconstitutional, Apple collected a $2.2 billion refund — consumers who paid the higher prices got nothing — and Howard Lutnick’s Cantor Fitzgerald had set up a fund to buy the rights to tariff refunds. It paid out.

The trade war escalates regardless. Trump banned Chinese robots; China cut off the drone components American drone startups depend on. Argentina tried import bans to force domestic industry into existence and collapsed both the economy and the industries. “The more the government plans, the more it becomes impossible for the average person to plan.”

Real or Memorex

The story that unsettled me most: an Israeli firm co-founded by former prime minister Ehud Barak sells hacking tools — to governments and special agencies only — that can find, access, and manipulate footage from security and smart cameras. Not just erase footage. Insert it. With license-plate cameras on every corner, the video that “proves” your car drove past a shooting can be manufactured for a specific camera at a specific location.

Doug’s take: “You can say, ‘I didn’t do it,’ and they’ll show you the tape that shows yes, you did.”

The perverse conclusion: it now pays to surveil yourself. If I still lived in the US I’d run a dash cam recording every street interaction. Everybody gets to rat themselves out in addition to ratting out everyone else.

Same theme, lighter version: rapper-influencer Jerry Falad won a $2 million advance in a publisher bidding war for a crime novel. The manuscript comes in; the publisher says it’s AI-written; his agent drops him; he swears it isn’t. Doug’s advice: take 50 grand of the two million and pay an English professor to smooth it out.

“Is it real or is it Memorex?” Doug asked, resurrecting the old tape ads. Distrusting the press is healthy — as Greg Gutfeld put it, “It’s impossible to hate the mass media enough.” But a society that can’t trust even video evidence is a nihilist one. Low trust and short time horizons are the marks of the Third World, and we’re acquiring both.

Envy Rules the World

Missouri voters had the chance to abolish their state income tax. 88% voted to keep it.

Americans have no monopoly here. Uruguay, a country we both know well, voted in a national plebiscite to give itself an income tax. The driver in both cases is envy: the average voter assumes the tax lands only on the rich. Doug reached for Einstein: after hydrogen, stupidity is the most common thing in the universe.

Also filed under stupidity: the Pentagon is drafting a nuclear strategy built around tactical nukes for regional wars with Russia or China. “Tactical” sounds small until you remember Hiroshima was 15 kilotons — the same class of weapon. Doug thinks nukes are passé anyway: as Ceuta, the Spanish enclave on the Moroccan coast, just demonstrated, masses of young men on foot take territory more effectively than bombs. And unlike the barbarians who entered Rome wanting to become Roman, the new arrivals don’t seem interested in joining what they find.

The Bright Side

Doug likes to end on one, and today the market provided it. Gold was up about $100 as we recorded — 3 or 4 percent — and may have finally bottomed. The little gold stocks we specialize in have been beaten down since January and look like they’re coming back to life. Oil is at $75, which Doug considers a phony reading. He’s big on both.

What he’s not big on: SpaceX. The stock sits below its offering price, and tomorrow a major lock-up expires — 911 million shares held by employees and early investors become eligible to trade, more than doubling the shares in the market. Peter Diamandis says don’t bet against Musk and predicts a $10 trillion market cap. Maybe. But running with the mob into AI stocks while the gold juniors sit at bargain prices is exactly backwards.

“In order to insulate yourself from all this stupidity, it helps to have assets,” Doug said. “It’s not gonna solve the problems of the world, because we’re just little people. We can’t solve them, but we can insulate ourselves from them.”

We’re back Friday with questions from viewers. If you’ve got one for Doug, go to crisisinvesting.com, click “Ask Doug” at the top, and submit it there.

Trump looked at Exxon’s $14.5 billion quarter and Chevron’s $12.1 billion quarter and said oil companies are making too much profit. My skepticism of his comment runs deep.

Pump prices for gasoline and diesel are (as usual) based on the demand for those refined products compared to the supplies of those products coming out of the refineries. (Throw in transportation costs and government fees and taxes of course.) I will reiterate that it is supply of, and demand for, the refined products that matter. The crude price is relevant but not the big issue.

How A Barrel Actually Makes Money

Oil companies didn’t suddenly become greedier this quarter. What happened was that politicians temporarily changed the economics of the oil business.

An oil company earns two margins that move independently of each other.

The first is the upstream margin — the gap between what it costs to pull a barrel of crude out of the ground and what that barrel sells for.

The second is what we’ve all heard about so much lately: the crack spread. Sounds like a plumber’s butt. I won’t go into all the processes a refiner undertakes, but I’ll take a moment to define that bit of industry lingo in simple terms.

“Cracking” is one of the key downstream refinery processes, breaking long crude molecules into the shorter ones that help make the gasoline and diesel we put in our tanks. The crack spread is the refining margin—the difference between what the refinery pays for crude and what it receives for the fuels it sells. You’ll often hear about the “3-2-1 crack spread.” It’s a standard industry benchmark that assumes three barrels of crude are refined into products equivalent to two barrels of gasoline and one barrel of diesel.

Those two profit margins — upstream crude from wells, and downstream refining — can move in opposite directions, or the same direction for different reasons.

This quarter, the margins both moved up hard for different reasons. Crude ran from $68 to $104 a barrel because of the war. That provided increased upstream margin. Separately, margins of the still-operating refineries expanded because millions of barrels per day of Persian Gulf refining capacity sat offline while global gasoline demand didn’t fall. Supply of refined products declined. Prices rose.

Consistent with this, the bigger earning wins in Q2 were in the refining.

Marathon Petroleum reported just this morning. With no upstream (crude) business at all, its second-quarter net income more than quadrupled to $5.1 billion, from $1.2 billion a year ago — every dollar of that a crack-spread dollar.

Government Actions

Politicians started a war. Politicians in Tehran and politicians in Washington and Israel made choices that shut the Strait of Hormuz, moved the price of crude, and — most importantly — shut down a whole bunch of Persian Gulf refining capacity. Why they chose this year to do this, I simply don’t know. Perhaps it was WMDs: that old trope. Truth is the first casualty of war.

Politicians created SPR loans. The US Department of Energy has been lending crude (not selling it) to nine companies who owe it back later with a premium (roughly 20-28% more barrels than they borrowed — a sort of crude interest rate, you could say). Those SPR loans slightly helped keep global crude prices lower than they otherwise would be, given the war. And that kept the input cost to the downstream slightly lower: the refiners had to pay a bit less for the crude.

But because of the war’s effect to turn off Persian Gulf refineries, there has been insufficient refining capacity to crack that crude. The available refineries are working at max. Crude loaned from global SPRs didn’t build out refinery capacity. It didn’t produce any extra gasoline or diesel. So it didn’t fix the supply/demand dynamics for gas and diesel caused by the war, nor the high prices that result from those dynamics. The prices shot up as supply declined, and all the SPR loans did was to slightly decrease the production cost.

The politicians’ actions are the proximate cause of this quarter’s high reported profits — not the greed of suits in a boardroom at Exxon or Chevron.

Politicians propose a windfall profits tax. It wasn’t ExxonMobil or Chevron that started the war. And they didn’t release the SPRs. But there’s a bill in the Senate — introduced and sponsored by the regular gang of economically illiterate buffoons — that would steal 50% of the gap between this year’s crude price and last year’s. Exxon and Chevron and the others already owe the standard 21% federal corporate income tax, same as any company, plus state income tax, severance tax, and royalties on the crude itself before it ever reaches the income statement.

Nobody introduced a bill to send Exxon a check in 2025, when its second quarter was its worst in four years. And nobody should be taxing the temporary “windfall” profits of a cyclical business.

Trump seems to be aligned with Bernie Sanders in proclaiming that these companies’ profits are too high. By what standard? What profit margin is “too much,” and why do they get to decide?

The politicians don’t drill oil. They don’t refine oil. Politicians produce nothing. The tax and spend crowd use their power to steal money from producers. They are the last people who have any clue about what an acceptable profit should be.

The Dems are using these earnings reports to claim that Trump is filling the coffers of his Big Oil donors. And indeed the war and the SPR dump did that. Will Trump be able to walk back his statement about profits being too high? If he does, he risks giving the Dems more ammo.

The bills emerging from the economic ignorance of Senator Whitehouse and Sanders will likely be sidelined in Congress, as they usually and rightfully are. But Trump has a lot more oomph.

Oil companies didn’t create the conditions for these windfall profits. Government did. Let’s tax government.

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

Some of the masses want the billionaires gone. Round them up, drop the guillotines. The left wants to tax them into the sea, having appointed itself sole definer of the word fair — as in, pay their fair share. The right is sore that billionaires keep funding the campaigns of the people doing the taxing.

A billion dollars tells you how big the pile is. It tells you nothing about how the pile got there. For a moral person, how is the important question.

Two roads to ten figures

There are two legal ways to get profoundly rich.

Road one. You build a better mousetrap. You make it well, you make it efficiently, you make it affordable, you make it morally, and you sell a mountain of them. Every dollar you collect is one somebody handed you willingly, because the thing you sold him was worth more than the cash in his pocket. You got rich by being useful three hundred million times in a row. Or you support the inventors by putting your own money — earned, and at risk — behind the people building the mousetrap. Same road. You fund the useful thing, and you bleed if it fails.

Road two. You get your golf partner in the Senate—or your old classmate at the EPA—to ban the other guy’s mousetrap, subsidize your worse one, and fine anyone who won’t buy it. You back the truck to the government trough, drop the snout, and feed — on the taxpayer, and on the fresh fiat the Fed prints to cover the tab. If you fail, others bleed, never you.

Both roads end in billions. One man earned his by making the world richer. The other is a crony who took his by force. One deserves admiration. The other deserves prosecution.

It isn’t the number. It’s the method.

What makes the crony billionaire worth hating was never the billions. It’s the method — someone else’s stuff pried loose with force. This has an older and shorter name: robbery. Everyone across the spectrum knows robbery when they see it — most detest it. Run it through a government, though, and it gets stamped legal. Legal it may be, but people still smell the crime.

And once you can see the method, you notice it doesn’t stop at billionaires.

The crony billionaire and the crony CEO have lobbyists to work the levers of force. Big pharma, corn ethanol, health insurance, hospital associations. They are parasites in the same way the able-bodied, able-minded multi-generational dole recipient is a parasite: each chose to live on what was taken from someone else.

The crony billionaire is the worst parasite — not because he’s richer, but because he works to write the laws, regulations and rules he feeds on. The small parasite just scoops the coins that bounce out of the bag while the big thief speeds off in the Lamborghini. Both are robbers. The guy on the dole may have no clue what he’s doing. He’s just surviving and lazy. The crony trying to make his billions, or already with billions, knows exactly what he’s doing when he’s being crony.

Understand what I’m not saying. The man who can’t — the kid, the wrecked, the disabled, the robbed — is no parasite. The parasite is the one with options who chooses that path.

The loudest haters can’t see the line

The fiercest billionaire-haters are the democratic socialists. They think in terms of groups. Every person gets sorted into a class — for example oppressor or oppressed — and then judged as the class, because individual agency doesn’t have a place in their neurons. So every billionaire lands in the oppressor bin, and the whole bin gets the pitchfork.

Punishing a whole group for the acts of some of its members has a name in the laws of war: collective punishment. It’s considered a war crime.

Sorting them is my day job

At Crisis Investing, separating the creators from the cronies is built into the lens we hold up to every position. You can earn by being a producer of goods and services, or as the capital standing behind the producers — both good. Sometimes the sharp trade is to watch what the government breaks and put money where the wreckage clears; that’s speculation, and it helps the world mend from the government’s pillaging and incompetence. Or you can choose to climb into the trough yourself, fund the cronies, and take your cut of the stolen loot. Know which one you’re doing every time.

The moral man doesn’t cheer, encourage, or support the coercion of innocents. He speaks against it when he can. And he never hires lobbyists to cajole congressmen or bureaucrats to force strangers to do his bidding.

Celebrate the man who made your life better by moral means, not political ones—whether a billionaire or a local tradesman. Buy his stuff again — he earned it.

The cronies should earn one thing only: your disdain.

How does this fit into the realm of Crisis Investing? The democratic socialists used to be fringe loonies, calling each other comrade in their annual party meetings. Now they are on the rise—still loonies, but not so fringe. It’s not hard to understand why. The major parties in government have been horrendous—crony parasites feasting off the citizens—and the younger generations are sick of it. And it was the left—not the libertarians—who took over education, so the younger generations have been infused with leftist morality, which amounts to collectivist groupthink and the full acceptability of using force to accomplish leftist aims.

America isn’t Europe. Some people here won’t tolerate the ascendancy of the socialists, and won’t accept it quietly.

And if the socialists ascend in the US, they will use force to suppress the resistance, because force is their only tool. Taxation, threats, nationalization, imprisonment for speech. Government power will increase, wealth will be confiscated, poverty will expand, freedom lost.

Crisis from one side as the socialists grow in power, or crisis from the other as people push back against them. Or both. I sure hope crises don’t come. But hope isn’t a plan.

For a plan: I like the concept of working to gain wealth morally—by providing for the needs and wants of other people who voluntarily pay you. And protecting your wealth—to the extent possible—from the robbers. And pushing back against the immorality that the education system is foisting on the youth.

In our Crisis Investing work and recommendations, we try to help you with all of that. Join us by subscribing or upgrading to Premium. And please forward this letter to those you believe might benefit.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

A Note Before We Start

This month’s article (for paid/premium subscribers) presents the entire Crisis Investing Portfolio in a new table format containing all our active holdings and recommendations, along with expanded information compared to the tables we have published in the past.

We also provide a brief monthly update for each portfolio position.

But those monthly updates only help if you know the rest of the story. So, separately, we will be providing to the premium subscribers (on a different day) a narrative summary of every holding in the portfolio and, where applicable, a compact version of the 9Ps for each company. This has been part of my ongoing 360-degree examination of the portfolio. That darn thing is now more than 80 pages long.

I’m not going to choke you with that part today. Instead, I’ll present it in a more useful format soon. How soon? I don’t know. The content is ready now; it just isn’t presented in a way that I find pleasing.

The Crisis Investing Portfolio has done remarkably well, even in light of the 2026 precious-metals pullback. I’m fortunate to have joined in its success.

Now We Start

Usually, our newsletter provides a new stock recommendation each month. That process is of course one reason why there are so many positions in the Crisis Investing Portfolio. We’ve got a superb selection of companies already.

So, the new recommendation for this month is not for a new stock to cram into the portfolio.

It is instead a recommendation for how to increase your holdings of your favorite Crisis Investing Portfolio positions without adding any fresh capital to your brokerage account. No new funds sent to your brokerage; no wires from your bank.

What I will present is my modification of what is known as the options wheel. It’s a good time to start riding the options wheel.

Some of you trade options better than I do. This article is not written for you, and I apologize in advance for the passages where I stop and define a word you learned twenty years ago. For the options pros, skip down to the portfolio comments and the new table, and know that more information on each position will come to you soon.

Everyone else, we’ll start on the wheel: nothing here assumes you have ever placed an options trade. I will define every term the first time it appears, and then use it often enough that it sticks. Once the words stop sounding strange, the mechanics are easy.

I will repeat it here so we don’t forget the purpose. This strategy provides a way to increase the number of shares of stock in your Crisis Investing Portfolio, without wiring in funds to do it.

I. Start Where You Already Are

You likely already do two things that form the foundation of this strategy. You just do them for free.

The first sounds like this: “I would buy Hecla Mining at $15. Not at $18.” So you enter a limit order at 15 and wait.

The second sounds like this: “I would be content selling my Kinross at $30.” So you enter a limit order at 30, and wait.

You already decided what you would pay and what you would accept and that you were willing to wait. The options market will pay you cash, today, to make those decisions binding.

The promise to buy at $15 is known as selling (or writing) a put. The promise to sell at $30 is known as selling a call.

Some people like to buy options. I like to sell them. I have a few reasons for that.

1) Routinely writing (aka selling) options is more like being the house in Las Vegas. People pay you for the privilege of playing. As time passes, you earn money by being at the table. In contrast, routinely buying options is being the gambler at the table. As time passes, they statistically lose money. Casinos make their money from that guy. (Yes, the brokerage is the house too, also making bank on every transaction.)

2) Selling options results in buying stocks lowish and selling them highish. By which I mean that you won’t be buying a stock at the lowest, and you won’t sell at the highest. Buying lowish and selling highish is a strategy consistent with reality: few people know when the low and the high are going to hit. So we might as well earn some dough by accepting that we can’t time the stocks perfectly. Buy lowish, sell highish is a winning and reasonable strategy. Selling options provides the buying and selling discipline so you carry out in fact what had previously only been an intent.

3) Selling options comes with a payment for just … existing. This is called theta, and is discussed below. It’s nice to be paid for just chillin’.

4) For me, selling options is fun, interesting, educational, easy, quick, low stress, and it positions me so that I don’t care too much whether the market goes up or down in a given week. For me, it takes a few minutes of my time, a couple of times a week. That’s it.

5) As the optimist that I prefer to be, I see market downward moves as opportunities, and being on the writing side of options makes income from these opportunities.

6) Overall, selling options is a quick, conservative, and cautious way to either increase cash flow from a portfolio, or to expand a portfolio.

On the other side of your promise (a promise you make each time you sell an option) sits someone who wants certainty and will pay you for it. He may be hedging a position or covering a risk his mandate requires him to cover. Or he may know something you don’t know, speculating on a move (as Charles Knight did in Speculator—the first novel I wrote with Doug). More likely, he’s a gambler, convinced by a dude on the internet that he can get rich in the options game. His reasons are his own business. Regardless of his reason, he pays cash for your promise, and that cash is yours the moment the trade fills, whatever happens afterward.

I’ll use another metaphor. In this arrangement you are the insurance company. He is the policyholder. Insurance companies collect premiums up front and pay claims later. Insurance companies tend to be conservative and profitable.

II. The Words, One at a Time

Some terms. Then we are finished with definitions.

Option. A contract giving its buyer the right, but not the obligation, to buy or sell a stock at a set price by a set date. The seller of that contract carries the matching obligation.

Call and put. If you sell a call, you have given its buyer the right to buy shares from you at a set price on or before a set date. A put gives its buyer the right to sell shares to you. The owner of the call can call your shares away from you; the owner of a put can put his shares to you (sell them to you). To be clear, when you are an option writer (seller) who gets “put on your options” you have to buy the shares. When your shares are called, you have to sell them. The transactions are done automatically by your broker if and when the option buyer exercises his right to sell you shares (the put) or buy your shares (the call).

Contract. One option contract covers one hundred shares. Prices are quoted per share, so an option you sell that is quoted at fourteen cents pays you fourteen dollars. This trips up everyone. Once.

Strike price. The price set in the promise. The $15 in “I would buy Hecla at fifteen.”

Expiration. The date the promise ends. Weekly options expire every Friday. Monthly options expire the third Friday of the month. After expiration the contract is gone and so is your obligation.

Premium. What the buyer pays you for the promise. It arrives in your account the moment the trade fills, not at expiration. It’s cash paid to you in advance.

In the money and out of the money. A $15 put is in the money (ITM) when the stock is below $15. A $30 call is in the money when the stock is above $30. Out of the money (OTM) is the reverse: exercising an out of the money option would be pointless. Almost every option we sell starts out of the money, for reasons that will become clear.

Exercise and assignment. The buyer exercises an option. You are assigned on an option. Same option, same event, opposite ends. If you sell a $15 put and watch the stock close at $13 on expiration, the option will be assigned: one hundred shares arrive in your account and $1500 cash leaves your account. If you sell a $30 call and the stock closes at $33 on the day of expiration, you will be assigned the other direction—your stock will be called, and one hundred shares leave your account and $3000 arrives.

Cash-secured and covered. A put is cash-secured when the money to buy the shares is sitting in the account, untouched, waiting. A call is covered when you already own the hundred shares. Both words mean one thing: you can honor the promise without borrowing. Selling options without that backing is known as selling naked, which is both the technical term and an accurate description of the exposure. I’m modest. I prefer to not be naked.

The words will attach themselves to something real in the next two sections, and that is when they will stay.

This is where the free version of today’s newsletter ends. What follows for Premium subscribers includes:

1) My version of the options wheel: a way that is designed to increase your Crisis Investing holdings without needing you to add new currency, and while buying lowish, and selling highish.

2) Pitfalls to avoid; rules that I have learned by riding this wheel and that others have taught.

3) A list of companies in the CI Portfolio that have options chains amenable to running my style of the options wheel.

4) Updates on the Crisis Investing Portfolio companies including the new table format.

Please join the Crisis Investing Premium Subscribers by signing up here.

Premium subscribers, please read on.

Read more

Doug and I recorded Friday morning, and there was only one place to start: the day before, an estimated 49,000 Moroccans crossed into Ceuta, the small Spanish enclave on the North African coast. Not a caravan. Not a surge. An invasion — I don’t think there’s another word for it.

49,000 men, no shoes, no plan

The images tell you most of what you need to know. Young men, all of them. Half shirtless. Many without shoes. Nobody carrying so much as a blanket. Doug’s first question was the practical one: “If you’re shirtless and barefoot, where’s the next meal coming from? I guess they expect the conquered locals to provide it — voluntarily or not.”

Ceuta is seven square miles, about 80,000 residents, GDP per person around $20,000 — far better off than the Morocco surrounding it. Around 20,000 have reportedly gone back already; call it 25,000 who stayed. Against a population of 80,000, that’s not a migrant flow. That’s a demographic event that happened in an afternoon.

And there’s no obvious way to reverse it. Spain has three army regiments in Ceuta — roughly 6,000 men — and hasn’t deployed them. Under Spanish law, everyone who made it across can now claim asylum. Italy, Finland, and Norway are already moving to cut Spain out of Schengen, Europe’s passport-free zone, over it. Doug’s summary: “How can you stop an invasion of feet people? You don’t need an army. In fact, having an army to invade is totally counterproductive.”

Doug just started The Camp of the Saints, the 1973 Jean Raspail novel that was effectively banned for decades and is somehow back on Amazon. I read it last year. This is that book. They just wash over them.

There’s precedent, too. Doug collected stamps as a kid, which is how he knew there was once a place called Spanish Morocco — taken when Morocco organized an invasion of 200,000 civilians who simply walked in and claimed it. It worked then. Why wouldn’t it work now?

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Who organized it?

You don’t mobilize 50,000 people in a day spontaneously. There’s footage of trucks packed with migrants driving the highway to the crossing points, and of a Moroccan border guard unlocking a gate. Moroccan young men have been probing Ceuta in dribs and drabs for twenty years. This was different in kind, not degree.

Consider the timing. In recent months Spain called Gaza a genocide and — more to the point — denied the US use of Spanish airspace to prosecute the war in Iran. Trump made threats. So did Netanyahu. A few weeks later, Morocco’s border gates swing open. Maybe coincidence. But we watched the same playbook under Biden, and under Merkel in 2015 — organized migration logistics, NGOs running support, and not one of those organizations ever punished. Doug’s take: “There’s got to be some organization. That’s all there is to it. Who is behind it — and will we ever find out?”

The first Muslim member of Congress, Keith Ellison, was elected in 2006 from Minnesota — where the Somali arrivals were settled. Now there are half a dozen, plus Mamdani in New York doing his best to remake the city, government grocery stores and all. All popularly elected. Move the people, and the votes follow.

How many countries make a world war?

I put a question to Doug I’ve been chewing on: at what point do we call the Iran conflict what it is? Count the participants. Iran striking multiple countries. The Houthis and Saudi Arabia trading attacks, with Houthi cells in Iraq drawing US and Saudi strikes there. Ukraine hitting an Iranian ship in the Caspian. American LNG tankers hit by drones in Egypt. A Saudi-organized coalition of 14 countries trying to reopen the Bab el-Mandeb strait. Washington now working to seal Iran’s land borders, pulling in Turkmenistan, Pakistan, and Afghanistan. Depending on how you count: 29 countries — before Russia and China, who are involved whether counted or not.

Doug: “It’s very reminiscent of the lead-up to World War II. It started with the Japanese invading China, and then the civil war in Spain, which everybody got involved in — not officially, but indirectly, using it as a testing ground for weapons. The pot is getting close to boiling over.” The only de-escalation path he sees is US withdrawal, and the US is doubling down. His hope is it stays below the nuclear threshold — maybe settling for massive cyberattacks instead.

Two market observations. Doug is surprised oil is still hanging around the mid-80s with this much production and refining capacity under fire — he doesn’t think that lasts, and he’s happy being long oil producers outside the Middle East and Russia. And note the calendar: Ukraine’s campaign against Russian refineries began March 2nd; the Iran war began February 28th. If cheap oil were the goal, we’d have backed off in the Persian Gulf and stopped supporting the refinery strikes. We did neither. Whatever this is, it isn’t about keeping crude cheap.

Fauci walks

We both enjoyed watching Rand Paul take Fauci apart in the Senate this week — helped along by the discovery of Fauci’s diary sitting on a government server. And we both think it goes nowhere. Trump says he’ll honor Biden’s blanket pardon, presumably because he’ll want his own honored someday. Never mind that a pardon covering all acts over a span of years tells you, as Doug put it, that the person was committing crimes on a broad scale — or that it may have been autopen-signed while Biden was non compos mentis.

So the highest-paid official in government, a man who became a multi-multimillionaire on a public salary — royalties on drugs he had a hand in approving — showed up with six lawyers and a lifetime Secret Service detail, and will walk. “It’s just theater,” Doug said. “If nothing bad happens to Fauci, it’s kind of all over. Nothing bad will happen to any of these horrible people.”

Nolan’s Odyssey, and the DEI trick

Lighter fare: Doug finally saw The Odyssey. My theory, which Doug came around on: Nolan took the DEI constraints every $250 million production operates under and turned them on their head. Yes, he cast Elliot Page — but not as Achilles, as the internet feared. Page plays a fool, gets outwitted over the Trojan Horse, and dies pathetically by the second scene. Every DEI casting choice gets the same treatment: included, then portrayed badly. Nolan worked under the constraints and quietly subverted them.

Doug enjoyed it despite himself — Scylla and Charybdis, the sirens — and liked Nolan’s speculation that the returning Greek veterans became the Sea Peoples who wrecked the Bronze Age Mediterranean around 1200 BC. Not in Homer, but interesting. Verdict: worth seeing. My expectations were so low that I came out pleasantly surprised, which may be the whole trick.

The Fourth Amendment, in practice

A traveler at US customs was ordered to unlock his phone. He entered his distress code instead, wiping the device — and is now being charged for it. Doug’s read: “The Fourth Amendment, in practical force, doesn’t exist anymore. If they want something, they’ll get it.” Courts have stretched the border-search exception to within 100 miles of any border — which, practically, means the whole country. “Further proof that America really no longer exists. We’re just another nation state called the United States at this point.”

The best you can do

I asked Doug what can be done about any of this. His answer is the one that animates everything we do here: “Nothing we can do about it except try not to be too adversely affected personally.”

We’ll be back next week. For the specifics — the portfolio, the stock work, the questions we don’t cover on the free podcast — that’s what the paid side is for: https://crisisinvesting.com

— Matt

We’ve spent two letters establishing that monetary inflation and credit deflation can run at the same time, in different aggregates, hitting different balance sheets. Both processes have winners.

WHO WINS FROM MONETARY INFLATION

Start with debtors carrying long, fixed-rate debt on real assets. Inflation erodes the real value of what they owe while the nominal value of the collateral, and often the income servicing it, rises alongside the currency debasement. The homeowner who locked a 30-year mortgage at 3% in 2021 is repaying that loan in dollars worth less every year. Good for him. Inflation is paying down his mortgage.

That’s the mechanical transfer inflation performs, from the currency’s holders to the currency’s borrowers, as long as the borrower survives long enough to collect it.

The US government is the largest debtor in the history of the world, which makes it the largest winner of its own inflationary policy. Every unit of new currency created shrinks the real burden of the existing debt. This is not a side effect. For a government that will never balance a budget again in your lifetime or mine, it is the point.

Owners of hard, scarce, unencumbered assets win a bit too — gold, productive land, resource-in-ground. When the foreign capacitors of dollars discharge into the market, those dollars likely will come after these hard scarce assets.

Unencumbered is the operative word. It’s important that the asset isn’t itself carrying debt that can be called before the inflation shows up in its price. A gold bar in a vault has no counterparty who can force a sale. But a silver mine financed at 40% loan-to-value does.

And then there’s the group that gets the new currency first. Richard Cantillon worked this out three centuries ago — new currency doesn’t arrive to everyone simultaneously and proportionally. It arrives first to whoever is closest to the spigot: banks, primary dealers, large asset managers, the federal contractors who get paid before the general price level has caught up. By the time the new currency units reach a retail paycheck, most of the repricing has already happened. People close to the monetary spigot get to drink the most.

WHO WINS FROM CREDIT DEFLATION

Disciplined savers gave up yield during the good years and, if they act to buy up distressed assets, can get paid for it during the bad ones. Cash holders and buyers with dry powder are in a position to win, because credit deflation is a forced-selling event, and forced sellers can’t negotiate. Stocks, unproductive real estate, private credit paper, entire businesses — all of it gets marked down as leveraged owners scramble to meet calls they can’t otherwise satisfy. (Note, even those who hold their assets without debt will see the prices of those assets decline in dollar terms). Whoever shows up with actual liquidity in that window buys assets for cheap from people who have to sell.

The Federal government, unlike you and I, can print their way to paying their bills. And the pain only lands on us, not them. The government can use a credit deflation to justify a new inflation-funded spending spree, maybe even moving (alongside the Fed) into buying private assets outright for cheap—you know, to boost up stock prices or buy distressed property. They’ll come up with a reason. Japan did it. Statists gain more power during most any crisis, including rapid credit deflations.

I don’t like the fiat dollar. Of course I don’t. But in the acute phase specifically, dollars are the winning asset, ahead of gold, ahead of equities, ahead of anything else. Not because dollars are a store of value long-term. But because for the several weeks or months a credit crunch actually runs, dollars are the one thing every forced seller needs. Dollar holders can win.

WHO LOSES IN BOTH

The over-leveraged asset holder with variable-rate or callable debt loses on both processes at once. Credit deflation forces the sale before the monetary inflation jacks up the asset’s price. They don’t get to collect the inflation windfall the fixed-rate debtor collects, because they don’t survive to the reflation. The house, the stock, the business — sold at the bottom, to someone with cash.

The mirror-image mistake is holding cash too long. Cash wins during the credit-contraction window and loses after the Fed’s response arrives, because that response is, by definition, currency debasement. The saver who misses out on gains during booms in order to prepare for the bust, but then doesn’t deploy during the bust? He blows the opportunity he planned for.

HOW TO POSITION FOR BOTH AT ONCE

Barbell it.

On one end: hard, unencumbered real assets that capture price increases caused by monetary inflation without carrying debt that can get you force-sold — gold held outright, silver; selectively chosen resource equities with little debt; productive land free and clear; productive (cash-producing) businesses with no debt that provide goods and services that are needed in the tough times as well as good times.

On the other end of the bar: real liquidity, short-duration and boring, ready to buy the assets a credit crunch throws onto the market in a fire sale. Cash. Money Market. Short term treasuries (if you can morally tolerate loaning your wealth to the federal government).

How to get there.

We may not ever get optimally positioned. Timing may be lousy for us. We don’t want to miss out on some opportunities in AI, etc. etc. And that’s okay. We don’t need to be perfectly positioned for something we don’t know for sure will happen.

This credit unwind and monetary inflation that I expect is, of course, not the only potential future. My prediction could be wrong. It could be that the robotic revolution happens in time to create productivity augmentation that provides the wealth needed to clear the huge debts, while helping us maintain quality of life. That’s what I am rooting for.

But while we await the productivity miracles, we can move towards the barbell position.

If you carry debt, make it long-duration, fixed-rate, and serviceable from income rather than dependent on refinancing or asset appreciation to survive. That position benefits from inflation without exposing you to a margin call. 30-year mortgages at low interest rates are superb. But you have to be able to service it—even in the bad times. So your emergency fund needs always to be adequately stocked with liquid assets.

If you have assets that are higher in dollar value than makes any sense, consider selling them while you can. Examples include AI stocks that trade for 100x projected revenues, or other such inane numbers like that. If by doing so, you miss a future top of an over bubbled market, so be it. Selling highish is not as good as selling at the top, but much better than holding on while the AI/chip stocks fall to earth.

The cash you generate by selling assets that are overvalued by any normal thinking can serve dual purposes: first, it can fill your emergency fund, and second it can go into your dry powder to use at the bottom of the bust. That provides security and opportunity. It’s one end of the barbell.

Then concentrate your other assets toward the other side of the barbell. Bit by bit. The stuff that can come through the other side of a collapse intact.

Watch the sequence, because it’s not simultaneous in practice even when it’s simultaneous in mechanism. Credit deflation tends to hit first and quickly — it sure would be nice to be liquid and unleveraged going in. Monetary inflation follows as the policy response — be ready to convert that liquidity into hard assets as it arrives, not eighteen months later once everyone else already has.

Watch for capacitor stress too, not just domestic credit stress. Foreign central banks trimming Treasury holdings, Eurodollar funding spreads widening, large reserve holders buying gold instead of rolling into more Treasuries — these are the tells that a capacitor is releasing its charge before the CPI ever shows it.

Yeah, I know. It’s hard to do. It’s hard to time. It will be hard to take the leap to start buying when the markets seem still in free fall. And when the day to buy at the bottom actually arrives, we will only know in retrospect.

But close enough is pretty good.

I expect most of you believe that the economy is in a concerning position from decades of mismanagement by politicians, gaslighting by academia and media, and the incessant destruction caused by fiat currency. But you may or may not believe that the combination of credit deflation and responsive Fed monetary inflation is the likely path. Maybe there will be a timely robot-productivity explosion or a Milei-style leader with benign dictatorial powers. But if you think my logic is sound, then it seems wise to start moving at least a bit toward the barbell positioning.

Prepare for the storm. Invest in the sunrise. That’s what the barbell allows. It prepares us for the world I think we’re likely to face while holding the door open to a world I hope we’ll get—a world where robotics and AI unleash the greatest productivity boom and wealth creation in history. I’m looking forward to exploring that in a future issue.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

P.S. A reader made a good point that deserves addressing here. In Austrian School thinking, the term money should be reserved for whatever wins in a free market as the preferred medium of exchange. Because fiat currency and bank credit exist within a government-managed monetary system rather than a free market, the more accurate terms are currency or currency units rather than money. I'll still use the term monetary when referring to central-bank policy, because that terminology has—rightly or wrongly—become the accepted convention. But when referring to dollars themselves, I'll use currency rather than money.

We all know that the Fed can and does monetize government debt to expand the monetary base. Austrian School thinkers consider this inflation.

And most of us know that the so-called private banking sector—specifically those entities that accept demand deposits (colloquially, checking account deposits), while promising to pay those deposits back on demand, are loaning most of those deposits to someone else—and doing so repeatedly. In the past, that was known as fractional reserve banking—that fraction serving as the denominator in the so-called money-multiplier. But since 2020, it should be known as “no reserve banking,” because the reserve ratio has been zero since then. The textbook money multiplier became, for all practical purposes, infinite—and therefore irrelevant as a constraint on credit creation. Basel III became the new constraint ... sort of.

The private banks thus inject new money out into the system, but in the form of credit. The new money is out circulating, doing its thing. To an Austrian, that is inflating. Someday, that loan has to be paid back (which will remove that money from the system). Repayment of one of these bank loans reduces the money supply and is therefore, in Austrian terms, deflationary.

Government debt monetization by the Federal Reserve is a pure monetary-base event.

Private banking in a fiat system creates credit.

Both create money (inflation). They are mechanically distinct processes run by different actors on different balance sheets.

Now you have the key concepts to start parsing whether we are going to experience inflation or deflation as central to the next big financial crisis.

My expectation: it’ll be both.

The monetary side.

With the federal government spending always out of control and Medicare and Social Security upside down, it is unlikely that the Fed can or will reduce their balance sheet much. (Reducing the Fed’s balance sheet is reversing quantitative easing, aka burning money, aka reducing the money supply.)

The Fed will make a pretense and maybe they’ll have a few months here and there in which their balance sheet gets reduced (reducing the monetary base), but it cannot persistently decline without an American version of Milei’s chainsaw on steroids, hacking away the thick mass of constantly growing limbs off the three branches of government. Politicians in the US who have such tendencies are rare, and, sadly, they won’t win.

The baseline—in times of relative stability—will be continued monetary inflation.

And in times of stress? There is no rainy day fund for the next black swan, the next war, the next pandemic, natural disaster or financial shock. So when one occurs, the Federal government will conspire with the Federal Reserve to inflate the money supply, fast and furious.

The capacitor discharge.

A big part of the story isn’t under the Fed’s control, and although part of the monetary inflation, it deserves to be named as its own risk.

The dollars sitting in the capacitors— foreign reserves, offshore Eurodollar balances, inflated asset prices — don’t require the Fed to create a single additional dollar in order to show up in the CPI. They just require a trigger that makes their holders decide to dump them. A foreign central bank diversifying reserves out of Treasuries. An asset-price unwind that converts stock and real estate into cash looking for somewhere else to go. A loss of confidence in the offshore dollar system that sends balances chasing after dollar-denominated goods. A loss of confidence in the US dollar generally, or concern about the dollar being weaponized by US politicians.

This is a scenario the Fed cannot pre-empt, because it doesn’t control the decision to hold money. It only controls the decision to create money. The dollars may have been created long ago. Whether the world keeps them parked in capacitors or spends them on goods is a function of global confidence, not FOMC policy. And when trust slips in one place, a short can cascade through the whole circuit. A CPI that’s stayed tame for years because trillions were sitting quietly in assets and reserves can move hard in a single quarter once the reason to keep holding disappears.

The credit side.

We’ve looked at the monetary side. Now let’s switch to the credit side, where the crisis is most likely to begin.

It’s a giant swamp of complexities and derivatives and guarantees. The banking system is entirely fiat-based and no longer constrained by reserve requirements (although it has some of the Basel III capital requirements that provide a bit of containment against infinite zero-reserve lending).

Government-sponsored-entities (Fannie Mae etc.) encourage banks to loan money to people who aren’t worthy of credit, and do so by making promises they can only keep during times of stability. The repo market and re-hypothecation create a chain of multiple claims against the same asset. Collateralized debt obligations did not go away. The off-shore Eurodollar market—foreign banks making zero-reserve loans of dollars—is a system of paper promises that works until it doesn’t. All of these expand the part of the money supply (inflation) that is in the form of credit.

The system of expanded credit is built on the trust that each of a long series of counterparties in these structures will honor its obligation to the next party in line. Liquidity crunches occur when one party in the chain fails to do so, sending the impact through the chain. Credit deflation occurs when the failed liquidity leads to banks and financial entities throwing their hands up in the air, locking their doors and not answering their phones, a process that turns their promises into confetti. Then the next parties in the chain can’t keep their promises and in turn hide from their creditors. Etc. Etc.

Out of fear and necessity, creditors all start demanding repayment. Loan repayments reduce the credit component of the money supply.

When the borrower can’t pay from their income, they turn to selling their assets to raise the funds. Stocks, bonds, yachts, houses. The selling pressure pushes the asset prices down, resetting after years of asset price inflation caused by expanding money and credit.

As asset prices decline, the available collateral used to back debt is decreased. Where loans can be called back based on inadequate collateral, the loans get called. It also makes it hard to refinance old debt into new debt. Credit shrinks.

When the debtor or obligated party fails to satisfy the demand to pay, the loan gets written off. Although those write-offs don’t erase money already out there, they reduce the bank’s capacity and willingness to serve up more credit.

Slowly and then suddenly, the trust is lost. Before you know it, very few are considered credit worthy, because there is no trust. When no one is credit worthy, credit is reduced, not extended.

All this is credit deflation.

The last one who can help people pay off their debts is the Federal Reserve, because it owns the printing press. The lender of last resort. Or payer of last resort. And so we circle back to monetary inflation.

Panning out.

At some point, some malincentivized executive or trader will do something so wrong that it will cause a significant liquidity event in an entity in the supply chain of credit creation.

Into the illiquidity cascade that follows, the Fed will inject liquidity as it has done in the past. It will rapidly move past its overnight lending facilities, repo operations and discount window, and onto increasing monetary base via quantitative easing, inflating the money supply.

The Fed will demonize the credit deflation and come in as the hero, attempting to use new monetary base inflation to neutralize the credit deflation.

That’s like the Fed giving heroin to treat pain caused by a parasite. The problem, of course, is the fiat monetary system that allowed for the creation of the credit inflation in the first place. It’s foundationally corrupt.

Credit deflation gives the Fed a reason to create new money — that’s a policy response on their timetable. But remember that a capacitor discharge doesn’t need the Fed to do anything at all. The inflation is already created, already sitting on the world’s balance sheet, all charged up and ready to blow. And the Fed can’t stop it. And the Fed can’t target that capacitor discharge to where it thinks the liquidity is needed.

What we have is a system in which a single point of liquidity failure can get magnified into a broader liquidity crunch, triggering asset sales (and asset price reductions), lowering collateral values concurrent with a spiraling decrease in trust that people or entities will pay their debt or meet their obligations. This loss of trust may well expand to loss of trust in the monetary system, which can in turn lead to a flood of offshore pre-existing money pressing on the CPI at the same time that the Fed wants to inject trillions of liquidity to moderate the credit deflation.

Credit deflation. Monetary inflation.

Assets declining. CPI rising.

Less wealth. Higher expenses of daily living.

Lower quality of life.

Crap.

That’s the wind-down of the multi-year wind-up of a fiat money system serving as the reserve currency of the world.

In the next letter (letter 3 of this series), we’ll discuss some ways to position yourself to not get so totally screwed, and maybe even win a bit.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

My purpose in these next few letters is to understand what is being foisted upon us and what we can do about it.

If we are soon to have a collapse, will it be deflationary or inflationary? In order to understand this, you can’t think Keynesian, because doing so will leave you dazed and confused. But to try to predict what is going to happen, we need to be aware of how Keynesians think, because they run the show.

We’ll start with getting terms straight, because Washington and the financial press have spent decades blurring them on purpose or out of ignorance or both. If you already know this stuff, great. I discussed this a bit just last week. But it is worth repeating, as this is the foundational material necessary to peer through the fog of modern economics to understand if we should prepare for aggressive inflation or aggressive deflation, and what to do about it.

This is not just academic jargon. This is jargon that you hear all the time in the real world—generally wrongly—and in the financial fantasy world as well.

Definitions

Austrian School economics (the school of thought that I consider internally consistent and honest) defines inflation as an increase in the supply of money and credit. Please note that rising prices are not part of the definition. To the Austrian, rising prices could be a symptom of inflation, or a symptom of many other disturbances.

Deflation, in the Austrian School is the opposite: a contraction of the supply of money and credit. A reduction in prices is not part of the definition.

Of course, the government-and-media definitions are Keynesian. Inflation, to them, is a rise in the price levels as measured in the Consumer Price Index (CPI) or similar indices. Deflation is a fall in the CPI.

That’s ridiculous thinking of course. Rising prices are a symptom, not a diagnosis.

Dr. Keynes gives you Tylenol for a headache without bothering to consider the possibility you have a brain aneurysm. And pats himself on the back for doing so.

An Austrian School doctor would evaluate the symptoms, seek their cause and treat the aneurysm.

The Keynesian mainstream CPI definition of “inflation” comes with a toolkit that those in charge of the stats can use for hiding the evidence. Hedonic adjustments are made arbitrarily by math nerds employed by the Bureau of Labor Statistics and always slant one way—to reduce the reported CPI number. Owner’s equivalent rent stands in for actual home expenses. Substitution effects that presume you’ll eat more chicken once steak gets pricey. Using Core inflation sometimes, but not always.

These terms have no meaning to the casual listener, but they sure sound like the experts know what they’re doing. All are prone to manipulation.

Under the government Keynesian definition, inflation is whatever next month’s CPI says, and that depends on whatever the methodology allows it to say. The Keynesian toolkit allows the people at the top of the Fed and the Bureau of Labor Statistics to bend things a bit here and there. It verges on gaslighting.

Deploying tricks such as these, the BLS can report “only 2% inflation” while the financial system expands the money supply by trillions. And that so-called controlled inflation is even easier to report if enough of that new money flows not into the basket of goods the CPI pretends to track, but rather into assets — stocks, real estate, private credit—which aren’t reflected in the CPI at all.

Asset prices, foreign reserves, and offshore money are all capacitors for the inflated dollars. The dollars get stuffed into those capacitors until a trigger causes them to discharge. New money doesn’t have to chase the goods in the CPI basket the moment it’s created — it gets parked outside the CPI measure, not bidding up the price of milk or gasoline.

Mises figured out that whether new money shows up as a fall in purchasing power depends on whether it’s met by a rising demand to hold money. The capacitor is that demand to hold: Americans and the world choosing for now to hold the new dollars as assets and reserves instead of spend them into goods. It’s a charge sitting on a capacitor. We’ll get to what happens when the capacitors discharge.

Okay, we have those basic definitions from the Keynesian mainstream (gaslighting) school, and the fringe Austrian (honest) school. Let’s take the first step to answering the question in the title of this article.

Money supply and credit are two different but related aggregates. Separate tallies of separate things.

Monetary Base is what the Fed and Treasury create directly, often by monetizing Federal debt, but barely hesitating to get even more crazy.

Circulation credit (aka fiduciary media) — bank lending not backed by real prior savings — is a second layer built on top of it, expanded or contracted by banks and shadow banks.

These are the two major components, the expansion of either or both of which is inflation (by Austrian thinking).

The two usually move together. But this is important: they don’t have to.

Here’s the central point to consider of this first letter in a series of three: the monetary base can undergo inflation, while the credit undergoes deflation.

Both at the same time.

Credit is not controlled by one entity. Controlling aggregate credit in our fiat currency system is like pushing on a boiled noodle and expecting the end to move. Credit inflation happens slowly, but credit deflation can happen suddenly.

Monetary inflation is in the hands of a small gang of people at the Federal Reserve who decide whether to inflate or deflate. They rarely decide to deflate.

Please note that CPI increases (Keynesian inflation) can occur suddenly when the capacitors that have been holding the money—the asset bubbles, foreign reserves, offshore currency—discharge, and the previously inflated dollars that have not been chasing US goods and services start chasing. That’s the popping of the aneurysm that Dr. Keynes had treated with Tylenol.

The injuries that happen from monetary inflation, capacitor discharge, and credit deflation are different.

In the next letter (tomorrow) I’ll parse out what happens when credit deflates and monetary authorities inflate in response. And what happens if the uncontrollable capacitors discharge in the midst of this. And in the third letter, how to position for it.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

Noble Plains Uranium Presents to the Experts Roundtable

Here are the highlights.

A nation of shoplifters

30% of Americans admit to shoplifting. Admit. The real number is higher. Doug’s response was a story about an old acquaintance named George, a charming guy with plenty of native intelligence who lied, cheated, and stole his way through life:

“We were talking about morality one time, and George said, ‘I agree. It’s a good thing, but right now I can’t afford morality.’”

George figured he’d adopt honesty once he reached an economic level where he could afford it. He never got there. Conservatives accuse the woke of holding luxury beliefs. George thought morality itself was one. As society degrades, expect a lot more Georges.

Mamdani’s New York

Doug knew New York in the ‘70s, when an upper-middle-class psychiatrist he walked home with carried a revolver in his pocket and said, “I won’t leave home without it these days.” He expects the city to revert:

“I can’t wait to see New York City absolutely run into the ground. Much worse than it was in the ‘70s... Further sign of the collapse of civilization.”

Doug always looks at the bright side.

The Saudi nuke deal

Trump signed a nuclear agreement with the Saudis, then moved to break it when the Israelis objected. Doug’s question cuts to the center of it:

“Are the Saudis the most reliable people in the world that you’re gonna set them up with nuclear power? Why are they more reliable or nicer or more on our side than the Iranians are? They aren’t.”

His bigger point: nonproliferation is a fantasy. The technology is 80 years old. North Korea, maybe the poorest country outside of Africa, has multiple nukes and missiles. The cat’s out of the bag.

Section 219

The NDAA provision calling for a melding of US and Israeli military and intelligence operations passed the House this week. Doug called it criminal, and pointed at the machinery behind it:

“A foreign country is basically calling the shots, certainly in the White House and also in Congress. This is just not right. And meanwhile, the stupid average American has to pay for all this nonsense.”

My read: it’s a signal, for anyone who wasn’t paying attention, that the America we remember is gone. Doug put it in terms of definitions:

“America is an idea. It’s a concept. It was unique, totally unique in world history... America’s dead. All that’s left is the United States.”

The golden age

We played a clip of Trump in Georgia declaring “the golden age of America is upon us. This is the greatest we’ll ever be.” Doug found exactly one true statement in it:

“The one thing he said which wasn’t either incorrect or an overt lie was, ‘America’s the greatest it will ever be.’ And that’s probably true, ‘cause we’re slipping radically.”

It is a golden age for one family, though. Don Jr. went from a $10 million net worth to $500 million since his father took office. Easily the best capital allocator of all time. Or something else is happening.

Can they kick the can with digital assets?

A subscriber asked whether stablecoins and tokenized assets buy the system another five to ten years. Doug’s gut says we’re at the edge of the precipice now, but he’s watched them pull arrows out of the quiver before. Stablecoins and money market funds do serve a function: they absorb government deficits and keep that money out of the fractional-reserve banking system, which keeps retail inflation lower than it would otherwise be.

But run the numbers. Tether, the largest stablecoin by far, has a market cap of about $185 billion. That covers roughly the last two months of US deficit spending. It’s not close to big enough to matter. As Doug put it: “They could all blow up.”

Deflation is underrated

Another subscriber brought up an econophysics book arguing deflation is as likely as inflation. The conventional view, even among hard money types, is that any crisis just gets papered over with printed money and the number goes back up. I don’t think people put nearly enough thought into the severe deflationary scenario. Doug can see it:

“Maybe a daisy chain of big institutions, all of whom are highly leveraged, go bust. One can’t pay the other, pay the other, pay the other, and the Federal Reserve can’t bail them out quickly enough.”

The leverage is massive at every level of society, from the derivatives complex all the way down to consumers paying for their delivered dinner in installments. Doug could barely believe that last one is real. It’s real.

Doug remains a coal bull

The coal market is regional, not global. At $150 to $200 a ton, shipping costs dominate, so you want your coal local. But the deeper point is that oil, gas, and coal are all just carbon and hydrogen, and chemistry makes them roughly fungible. The Germans proved coal can be oil in World War II. China is doing it at scale right now.

“Coal is cheap because the greenies hate coal... So it’s all the more reason to like coal.”

Doug still holds his Yancoal position, and we recommended a couple of other coal names in Crisis Investing two months ago if you want current picks.

Also in this episode

Doug on Wagner and Gershwin, why he’s stuck in the golden age of sci-fi, and the Louis L’Amour book everybody should read (The Education of a Wandering Man). Plus The Diamond Age as the sci-fi that’s arriving on schedule, the movie Vigilante Citizen and Doug’s novel Assassin, and his blunt answer on Israel’s trajectory. He doesn’t give it ten years.

The world could look radically different by Monday. We’ll be back Wednesday either way.

[LISTEN TO THE EPISODE HERE]

Best, Matt Smith

Unpredictable leaders of warring countries create volatility and generalized fear. Bombs are falling near and on the Strait of Hormuz. Oil jumped 16% in five trading sessions.

And yet gold, the asset people want to have when the world is on fire—the asset that people squirrel away in their pockets as they flee the invading hordes—has fallen in dollar terms. 2.6% over that same week. And it broke below $4,000 an ounce for a moment.

Selling gold is now being called “risk off.”

Really?

Is this akin to when data show the economy is doing poorly, the stock market rises?

Pretty much.

We live in a topsy-turvy world.

The Keynesian reflex

We have to accept that Keynesians dominate the media, the central banks, academia, the government, and most economist positions at investment houses. That they are confused and wrong in no way diminishes the reality that they are controlling the whole show.

The Keynesians have obscured the dilution of the dollar for the last five decades by defining inflation based on the CPI (and other price level indices). We know that the CPI has been kept low (in the face of huge money printing) by the increased supply of goods and services via increased productivity, and via cheap products made out of Chinesium. The Keynesians see that too. But Keynesians believe that prices being kept low means “inflation” is under control and that they can get away with printing more dollars. Whereas we know that the effects of inflation (money printing) are just being temporarily obscured by low prices of cheap crap.

With the inexpensive imports from China and our improved productivity keeping the CPI seemingly under control, gold prices in dollar terms rose much less than they otherwise would have, because people believed the dollar wasn’t diluting much.

But the truth is hard to suppress forever. And gold shot up (in dollar terms) to almost $5600. (It wouldn’t be surprising that such sudden price momentum might overshoot. And maybe that is what happened last year. And some correction this year is not unreasonable.)

But now with concerns that oil shocks will push CPI higher, gold has experienced downward pressure in dollar terms because of expectations of Fed action.

Let’s parse this.

The Fed is Keynesian, and thoroughly so. Regardless of the cause—monetary inflation, a war, a tariff, a bad harvest—any price increase that shows up in the CPI or PPI can trigger a hike. The Fed is like a lousy doctor. It doesn’t diagnose the problem. It just sees a number outside of the desired range and tries to treat the number.

To the Keynesian brain, the war disrupts oil, oil disruption raises energy prices, Keynesians read rising energy prices as “inflation” — which raises Pavlovian expectations of a Fed rate hike, which (if it were to occur) would raise real dollar yields. Gold pays no yield, so higher dollar yields make holding gold have a higher opportunity cost. The response of a dog to a bell ringing is to salivate. The response of a Keynesian brain to oil disruption is to sell gold for dollars before the Fed hikes the interest rates.

If prices are rising because of true monetary inflation (expansion of money/credit—which is how Austrian economists define inflation), that’s exactly when you want to get rid of the bad money and hold onto the good money (in other words, dump dollars and buy gold).

But if prices (CPI) are rising because of supply disruptions (not from inflation), then gold might fall as some people need the cash to buy the more expensive goods. Or as they indeed figure that the Fed will raise interest rates.

Do we have more true inflation? Or do we just have a higher CPI? I expect both.

War leads to money printing/inflation. Supply disruptions lead to higher CPI.

Dollar inflation should lead to gold prices rising in dollar terms. Supply disruptions might lead to gold price declines because of the Fed interest rate response to a rising CPI.

Which wins?

The market recently seems to have decided that higher rates are worse for gold than the inflation itself.

Is it? Let’s do the math.

Money and credit are growing at 5.6% and 5.2% a year, respectively — call it 5.4% blended. That’s real inflation. It’s 5.4% dollar debasement, the real thing, not the CPI-type numbers the media and Fed present. Against this debasement, a good money market fund pays you roughly 3.5% to hold cash. At the end of a year in the money markets, you have 3.5% more dollars, but every one of those dollars is worth 5.4% less. That’s a net loss of 1.9%.

Sure, gold pays no interest. But gold isn’t diluted at 5.4% a year like the dollar is. New mine supply adds roughly 1.9% to the above-ground stock annually.

Two currencies. The dollar and gold. One currency involves gold mining and storing, and one involves dollar printing and interest. Each nets a 1.9% dilution in your individual account that holds that currency. At current baseline, the net real cost of holding gold in your safe vs. the cost of holding dollars in a money market account are the same.

The rate of gold production doesn’t increase year to year. But the dollar printing often does.

If the war leads to inflation (printing more dollars), which it will, then gold wins in the long term.

If a rise in CPI (not inflation) caused by supply/demand disturbance leads to the Fed raising rates, then the dollar money market wins in the short term. But only until the printing press—the real inflation—percolates through markets.

So, in a Keynesian world, in which Fed rates might increase before the printing press needed to fund the war is felt, it is not irrational in the short term to sell gold. And given that Keynesians dominate, gold prices have stayed low.

Our gold thesis remains sound

Bank of America trimmed its 2026 average gold price forecast on hawkish Fed positioning in early July — but kept its long-term $6,000 target intact. Central bank buying of gold hasn’t gone anywhere. Federal government expenses aren’t going to go down. Dollar debasement isn’t going to stop. The dollar will go down in value. So in the long term, the true dollar inflation will become fully evident.

An ounce of gold is ever and always worth an ounce of gold.

It is the Keynesians and their fiat dollar that are the hot messes.

Sincerely,

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

About 25 years ago, Doug invested $50,000 in a company raising geoduck clams in the Pacific Northwest. It turned into one of the best investments he ever made. For decades, the company paid him annual dividends equal to roughly half his original investment.

Then Trump’s trade war reached the clam business.

China imposed retaliatory tariffs on American shellfish. Sales collapsed. The company eliminated its dividend and fired half its employees.

This is what tariffs look like outside Washington.

They aren’t paid by foreign governments. They fall on businesses, employees, investors, and customers—usually people who had nothing to do with the political dispute in the first place.

Doug’s clam investment is a small example. Multiply it across thousands of companies and millions of transactions, and you begin to see the real price tag.

When Government Plans, Nobody Else Can

Trump treats tariffs as a universal cudgel.

Canada does something he doesn’t like? Tariffs.

Brazil develops a payment system that competes with Visa and Mastercard? Tariffs.

An American television network declines to broadcast his speech? Threaten its broadcast license.

The justifications change, but the underlying idea remains the same: economic and regulatory power should be used to reward friends, punish enemies, and force other countries and private companies to comply.

As Hayek observed, when the government plans, it makes it impossible for everyone else to plan.

A business can manage competition. It can manage changing consumer preferences. It can even manage a recession.

What it cannot reliably manage is a political system in which the rules change according to the mood of one man.

That uncertainty becomes a tax of its own.

Companies delay investment. Supply chains become less efficient. Trading partners retaliate. Consumers pay more. Foreigners start looking for ways to avoid doing business with Americans.

And they eventually find them.

Brazil’s Pix payment system is a good example. It is fast, cheap, convenient, and enormously popular. Brazilians aren’t using it because they hate America. They’re using it because it works.

Trying to punish Brazil for developing a better domestic payment system will not restore American competitiveness. It will encourage Brazil—and everyone watching—to reduce their dependence on American financial infrastructure.

That is how an empire slowly loses its advantages.

The American Albatross

Twenty years ago, the American passport was arguably the most valuable passport in the world.

Today, dozens of countries offer equal or better visa-free travel access. Meanwhile, American citizenship carries obligations that follow you almost anywhere on Earth.

Even if you leave permanently, the US government still demands tax returns, financial disclosures, and compliance with a growing pile of rules.

As Doug put it, the passport still guarantees you entry into the United States—which remains a very nice place to live. But it also comes with a $39 trillion albatross around your neck.

This decline is not happening because America lacks capital, talent, resources, or technology.

It is happening because the government increasingly treats every relationship as something to control.

Countries notice that. Investors notice it. Ordinary people notice it.

The consequences show up slowly, then all at once.

Everybody Is Betting on the Same Thing

The same dangerous concentration is now visible in the stock market.

Margin debt is at a record high. It has reportedly risen about 50% in the last year. Retail investors are borrowing money to chase AI stocks because they assume artificial intelligence has made the normal rules of valuation obsolete.

AI is real. It is important. It will probably change nearly everything.

That does not mean today’s AI stocks are good investments at today’s prices.

Those are two completely different questions.

Enormous amounts of capital are being poured into chips, models, data centers, and electrical infrastructure. The market assumes the companies spending this money will capture extraordinary profits for decades.

But Chinese developers are already releasing increasingly capable open models that users can run on their own hardware. If models continue becoming cheaper, better, and freely available, the economics supporting some of these multibillion-dollar valuations could deteriorate quickly.

The technology may win while many of the investors lose.

We saw something similar during the dot-com boom. The internet really did change the world. Most of the companies financed during the mania still went broke.

Doug believes we may now be watching a “super double bubble”: one in AI companies and another in the massive data-center buildout supporting them.

When everyone owns the same trade, believes the same story, and borrows money to buy more of it, the risk is no longer hidden.

It is sitting directly in front of you.

Buy What Nobody Wants

While capital floods into AI, many of the basic industries required to keep civilization running remain neglected.

Oil.

Natural gas.

Uranium.

Copper.

Gold.

Agriculture.

The raw materials of civilization.

These industries are capital intensive, politically unpopular, difficult to permit, and badly underowned. In many cases, years of underinvestment have left the world with limited new supply just as demand is beginning to rise.

That is the setup Doug finds interesting.

You’re not buying what everyone already agrees will change the world. You’re buying the things the world cannot function without—and that most investors currently want nothing to do with.

That does not make every resource stock a good investment. Most junior resource companies are garbage. Management matters. Geology matters. Financing matters. Price matters.

But the broad asymmetry is becoming hard to ignore.

The fashionable part of the market is priced for enormous success.

The unfashionable part is priced as if nobody will ever want it again.

Doug’s prediction is bold: selected resource stocks could return ten times your money while the broader stock market is collapsing.

He could be wrong. We both could.

But I would rather own scarce, necessary assets that have been starved of capital than borrow money to join the crowd chasing the most popular trade on Earth.

Especially when government policy is making almost everything else harder to plan.

Rome fell: the blacksmith kept working. Weimar collapsed: the bartender kept pouring. Argentina defaulted eight times: the pawnbroker kept brokering.

We know we want to be the guy who sells shovels during the gold rush, sure. But when the crash comes, money is made from buying the shovels back for cheap and selling them again for the funerals.

Blood in the Streets Isn’t Here Yet

Baron Rothschild and Doug Casey—two people philosophically miles apart—still agree that the time to buy is when there’s blood in the streets.

Our metals stocks are off their highs. Sure. That’s a pullback, not a massacre. Blood in the streets means good companies trading for multiples less than their cash on hand. It means margin calls cascading through the system. It means the guy who sold at the bottom telling you he’s never touching stocks again. War on our shores.

We are not there. In the broader markets, we’re still toward the opposite end from there, and in the AI realm, despite the decline, we are likely still above a top.

But this bubble — in equities, in sovereign debt, in the assumption that central banks can print their way out of anything — doesn’t have to pop gracefully.

When an avalanche occurs, everything gets buried. Bad companies, good companies, your favorite mining stock, the boring index fund your brother swears by. All of it. The instinct is to run and hide. Sell everything into cash. After all, there is a strong desire to survive. But for those who want to thrive, that is not the moment to run to cash. That moment came before the avalanche.

The avalanche is the moment cash was made for. Not just as a bunker, but as a weapon. One point of holding dry powder through the calm years is so you have it loaded when the bloody days sooner-or-later show up — when a company you’d have paid forty dollars a share for is trading at four bucks because the market has panicked. You don’t want to be raising cash in that moment. You want to already have it, sitting there, waiting. A crisis investor can’t invest in a crisis when he is illiquid.

When Companies Die

In boom times, people who produce nothing can feast at the trough or rise with the tide or find some other metaphorical way to get by. Unfortunately, a depression or a real bout of civil unrest doesn’t just discount stocks. It can kill the companies themselves. Supply chains break. Courts stop enforcing contracts. Currencies get repriced by decree. Companies get nationalized. The equity you bought at four bucks can go to zero if the underlying business can’t operate.

So a question to ask is not only what to buy when the market bleeds. It’s what to own or what to do that generates income when the market is dying.

If you are wealthy now, and are confident you can hold onto at least some of that wealth when the avalanche hits, good for you. If that’s not you, and it rarely is, then there is a bit more work to do.

The Forever Businesses

Crisis doesn’t kill demand for necessities.

Pawn shops thrive on desperation. So do repo services, debt collectors, and bankruptcy attorneys. All of it is recession-proof, because someone always owes someone money, and someone always needs cash faster than a bank will give it. Funeral homes never see a downturn.

Of these, perhaps only a pawn shop could be a fun business to be in. The rest, not so much. Pawn is the original crisis bank, collateralized lending with no committee and no bailouts. Pawn serves an essential purpose to keep an economy moving when the suits can no longer borrow and have no clue what to do other than print and spend.

Make alcohol. Winemaking, brewing, distilling are some of the most proven recession-proof and war-resistant businesses. Alcohol sales rise in recessions. Tobacco too. People don’t quit their habits when the market or the entire economy crashes — they lean into them harder. We have a vineyard, a farm winery and stills. Borderline businesses in normal times, they can serve as part of a crisis-tolerant portfolio.

Fix broken things or own the business that does. Small engine repair, appliance repair, auto mechanics, cobblers. 12-volt electronics for cars and boats. Fix circuit boards. In a boom, people dispose of broken stuff with new stuff. In a depression or war, people want it fixed. Skilled trades are desirable. Electricians, welders, plumbers. A diploma doesn’t fix a generator. Competence does, and competence is the one asset no government can inflate away or confiscate at the border. The repairman won’t lack customers.

Grow or raise food and sell it locally. A working farm, fishing, a market garden, a flock of laying hens — these produce something people need regardless of what currency they’re pricing it in. Barter survives when banking doesn’t. Inefficient and perhaps even a luxury during boom times, local food production is critical during crises. It doesn’t happen by magic.

Doctors and allied medical providers. About as monetizable a field as there can be in most any crisis.

Generic and off-patent medicine, and the pharmacists who dispense it. Antibiotics first and foremost, but also insulin and other critical meds. Cholesterol drugs? Not so much (or not at all). But beware, because government will come in and screw with this sector in times of crisis.

Water. Wells, filtration, delivery. Water is the first thing on the hierarchy of needs. Nothing shuts a household down faster than the tap running dry, and nothing commands a premium faster in a real disruption.

Security and armed protection and their essential tools. Make a profit renting out Guido and Luigi during normal times, and then during SHTF times, pull them home to protect your family and sources of income.

Serve the people who still have money. Wealth doesn’t just evaporate in a crisis — it also concentrates. Someone still owns the land, the gold, the working business. That someone needs (or wants) contractors, land managers, private security, concierge medicine, and people who can quietly maintain or move what they own. Find who knows how to keep their wealth, and make yourself indispensable to them.

Hard Money, Hard Land

Paper promises fail in a crisis. Physical things don’t. Gold and silver aren’t investments in the usual sense — they’re insurance policies against the people running the currency into the ground. Buy them, hold them, and don’t check the price every day.

In a crisis, land that produces something — food, timber, water — outperforms land that produces only a view and a property tax bill. A working farm, an orchard, a vineyard or a woodlot: tough businesses in current times, sure, but these will supply you and your neighbors when the supply chain seizes up, and they don’t care what the Fed does with the overnight rate.

Thriving

A bunker or a bug-out bag provides opportunities for survival, not for thriving. Thriving requires understanding that the concept of value doesn’t vanish in a crisis. It become honest, and it migrates. It moves from paper to hard assets, from financial gimmicks to production, from nice to necessary. Thriving requires having the cash ready for the day the streets run red.

The people who profit aren’t the ones who panic. They’re the ones who 1) can produce value themselves, and/or 2) have the liquid resources necessary to buy the distressed assets that go up for auction and to hire the most capable people.

We all hope the good times keep rolling. But hope is not a plan. Do you trust the people running this circus? I don’t.

Our newsletters aren’t focused on prepping, but rather on preparation. We aren’t focused on surviving, but on thriving. If you think this article will prove helpful to people you care about, please forward it on and suggest they join us.

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

The corn field bordering our vineyard did something odd this year. We were deep in drought—the kind that cracks the clay—10 weeks of no rain—and the corn came up anyway.

That’s modern agronomy working as designed. The farmer drilled his corn in the midst of drought at a density that would have caused a 1990s farmer to shake his head. A crop that shrugs off three dry months and still fills out the ear is something special.

It is GMO.

If you reflexively despise GMO, try to hang tight for a minute or two. It’s okay to acknowledge when something or someone bad does something good.

Genetically modified crops earn their keep.

Insect-resistant Bt corn has cut insecticide spraying across millions of acres — meaning less tractor use, less pesticide drift, and fewer dead pollinators. Drought and heat-tolerant varieties keep yields from collapsing in droughts that would have wiped out a farming family a generation ago. Golden Rice, engineered for beta-carotene, was built to address vitamin A deficiency in children in the developing world. When I was a pediatrician in West Africa, I saw how Vit A deficiency blinded and killed kids. And those people ate rice most every day. If only it had been Golden Rice. Greenpeace and others worked hard to block Golden Rice. I wonder how many kids could have been saved by the stuff. We may never know.

Thirty years of data on the genetic traits themselves—not the herbicides sometimes paired with them—have not produced convincing evidence of human health harm. Not yet at least.

Skepticism is warranted too

Some skeptics are spooked by science they don’t understand. They of course speak loudly and confidently. Some even believe that they are being genetically manipulated themselves when they consume meat from cows fed GMO corn. That’s hogwash.

But many have more valid reasons that often involve malincentives more than any inserted gene.

For context, it’s good to know that sweet corn (the yummy stuff we eat) is less than 1% of total US corn acreage and only a small fraction of that is genetically modified. In contrast, the corn that is almost entirely GMO is field corn—used for ethanol, feeding cows, and making oil and high fructose corn syrup. That stuff is over 90% biotech since the early 2010s.

About 37% of American corn is headed to the ethanol blender. The Renewable Fuel Standard and the crony farm bills turn a food crop into an inefficient and destructive fuel. I wonder if they can GMO up a few smarter congressmen who can finally stop this travesty.

Herbicide-tolerant GMO crops let a farmer blanket a field in glyphosate without killing the crop, and that has driven a large increase in glyphosate volume applied per acre over the past two decades. Glyphosate makes weed control easy. Very easy. I can tell you from personal experience that trying to deal with weeds on a lot of acreage, while avoiding glyphosate, costs a whole lot in terms of human labor. But I’m a glutton for punishment, so I don’t use the stuff. Yet.

Glyphosate use has led to glyphosate-resistant weeds — marestail and waterhemp among them — which pushed farmers toward heavier and more frequent applications of older, harsher chemistries like dicamba and 2,4-D. Those two compounds are notorious for drift; volatilized vapor can travel and injure sensitive crops days after application. It’s done exactly that to our vines in the past.

Then there’s the seed supply itself. A handful of companies control the genetics for most of the corn and soy planted in this country, which concentrates pricing power and narrows genetic diversity in ways that make the whole system more fragile to a single new pest or pathogen. That’s a legitimate concern about economic and agricultural resilience, but it has nothing to do with whether the DNA edit itself is safe to eat.

Sound and unsound

The GMO trait did its job. The technology worked. The crops themselves have not earned the level of fear commonly directed at them. Those who oppose GMOs rationally should focus their concerns on the herbicide regime riding along with the seed, the drift risk to neighbors who didn’t plant resistant crops, the weed resistance it’s generating, the consolidation of who controls the genetics in the first place, and the government interventions that lead to unexpected and troublesome outcomes.

The science behind the trait is sound, but the agricultural system built on top of it is unsound. Anyone who tells you it’s simply the herd being irrational hasn’t stood next to a vineyard downwind of a corn field in late August. Anyone who tells you that GMO is poisoned seeds of corporate conspiracy hasn’t looked at what that corn did in a summer with no rain.

As usual, the danger is in collectivizing

“GMO” is not one thing. It’s a label slapped across drought-tolerant maize, Bt cotton, Golden Rice, glyphosate-tolerant soybeans, and a dozen other traits that share a lab technique and nothing else. Treating them as a single category — good or bad, safe or poison — is not high-quality thinking.

That kind of collectivist thinking encourages us to judge categories rather than individuals, technologies, or facts. Once something is sorted into the “good” or “bad” pile, thinking stops.

That collectivist reflex isn’t unique to this argument, and it isn’t unique to one side of it. The grassroots organic-only church and the biotech-government GMO-abundance church are running the same operation. One manipulates with fears of GMO, another with fears of hunger. Categorical hate is easier to sell, easier to fundraise off of, and easier to organize tribal emotions around than a case-by-case judgment ever will be. That’s the point of it. Herding people by category serves the herder, not the herd — whichever pasture the sheep think they’re standing in.

There is a planned segue here: AI-brained robots are coming for most everything, including controlling weeds and bugs. And it’s gonna be a wicked fun ride. It’s time to start paying attention to how your life may be intersected by the pending Robot Revolution.

Not a stock recommendation, but you might want to know that John Deere (DE), AGCO (AGCO), and CNH Industrial (CNH) all have their own answers to the herbicide drift/overuse problem. Each has developed precision-spraying systems, to spray only the weed, not the whole field.

Then there are several private robotic agriculture companies that I keep my eye on.

● Greenfield Robotics -- Makes small autonomous robots (BOTONY) that mechanically cut weeds between crop rows instead of spraying them. Equity crowdfunded.

● Carbon Robotics — laser weeding robots (burns weeds, zero chemical). Seattle-based.

● FarmWise — row-crop mechanical weeders.

● Ecorobotix — Swiss; also spot-sprays only the weed itself rather than the whole row, with claims of up to 95% herbicide reduction.

● Naïo Technologies — French; their robots are purpose-built for vine rows, doing mechanical weeding between vines instead of herbicide.

And there are probably dozens more.

As I like to make things difficult for myself by avoiding herbicides on or near our grapevines, these robots are interesting to me.

We will soon have another good way to lose money in the vineyard business.

Subscribe to Doug Casey’s Crisis Investing to stay updated as any of these become interesting speculations or investments. They aren’t yet.

John Hunt, MD
Editor, Doug Casey’s Crisis Investing

College is dead. Young men need this instead.

Maxim and Matt Smith and Doug Casey. Learn about it here.

Same Movie, New Reel: From Lockdown to the Strait of Hormuz

Reflection from Matt Smith. Read here.

A $1 “gold” coin with the face of a sitting president on it. Except it isn’t gold. Doug called it exactly right on this week’s episode: a “pot metal coin” with “a sheen of a gold-like metal, probably bronze” on the face. His verdict: “It’s a phony bullshit coin, so that part’s appropriate anyway.”

Nobody will spend it. Nobody spent the last dollar coin either. I saw a few Sacagaweas in circulation years ago and then never again.

So it’s easy to laugh this off and scroll to the next headline. Don’t. The coin is telling you something, and Doug put his finger on exactly what.

“The Romans, before Augustus, minted coins with ideal images of a god or a virtue,” he said. “And it was only after it turned into an official empire that you put the face of a living person, an emperor, on the coins. And that’s what’s happening with us too.”

That’s Doug’s read, and it’s a sharp one. A republic stamps an idea on its money. An empire stamps a man.

The war you’re paying for

Doug and I spent most of the hour on Iran, because that’s where the money is going. And the numbers are obscene.

“Every Tomahawk missile costs $3 million for the missile alone,” Doug said, “not counting the ancillary costs of the ships or planes that deploy the things. That’s an expensive piece of hardware to blow up.”

Then the Patriots at roughly $4 million apiece. The JASSMs, the PrSMs, the HIMARS. The running estimate we kicked around was about $3 billion a day.

Let’s do the math you’re not supposed to do out loud.

$3 billion a day is $90 billion a month. On a war against a country that, as Doug put it, “presents no danger at all to us.” Against the backdrop of a government “literally running out of money.”

A government that has run out of money and needs $90 billion a month does not go find it. It prints it.

That is the part that reaches into your account. Not the missiles. The money made to pay for the missiles.

In a crisis like this, the response is always bigger than the event that triggered it. The war is loud and brief. The debasement that funds it is quiet and permanent.

The gold that may or may not be there

Which brings us to Fort Knox.

On the show I read Doug the quote from Treasury Secretary Bessent, word for word: “I’m happy to say all gold is present and accounted for. The US has the largest pile of gold in the world, over $1 trillion.”

Doug’s answer: “How does he know that? There hasn’t been an audit forever... He shouldn’t say things with certainty when there’s not been an audit. That’s why they have audits.”

He’s right. And it’s worse than a missing audit. What’s down there is largely coin melt from the 1930s, when Roosevelt confiscated Americans’ gold, melted the coins, and locked the bars away. The confiscation was the greatest theft in American history, and the pile it produced has been shrinking ever since. Bessent left that part out.

Use gold as the yardstick and the whole picture snaps into focus. The government tells you inflation is running around 3.8%. Then you look underneath the headline and find electricity prices up 23% year over year. One of those two numbers is measuring reality. It isn’t the official one.

That’s what Doug means by a “slow motion depression.” Not a 1929-style crash where everything falls off a cliff in a week. A grind. You stand still, and you lose 5 or 10% a year to the depreciation of the dollar. The price of your house, your car, your savings, your portfolio. Unless each is climbing faster than that, you’re going backward while the chart says you’re fine.

Credit where it’s due

I’ll say what I said on the show. Neither Doug nor I is a reflexive Trump hater. Doug still prefers him to the alternative, and so do I. And Trump has done real things, like suspending the Jones Act so the Gulf could keep California in diesel and gasoline. That should have happened decades ago.

The free market keeps quietly solving the problems the state creates. Tankers reroute. Supply finds a path. It never ceases to amaze me. But it’s solving those problems in spite of the money, not because of it.

What to do about it

So what do you actually do?

Doug’s answer was plain, and I don’t disagree with the direction. “I’m long both.” Oil and gas. Gold.

There are top-quality gold stocks yielding 5% or more, trading at eight or nine times earnings. The oil stocks are cheaper and, to my eye, better. That kind of value doesn’t sit around forever.

Own things that can’t be conjured on a keyboard. Keep a deliberate cash reserve, on purpose, so a crisis becomes your opportunity instead of your margin call. And don’t let the noise freeze you. I told Doug the markets feel as confusing as they’ve ever been. Oil that won’t behave, gold stocks that pulled back hard off the highs.

I could be wrong on the timing. Timing is always the hard part, and I hold my timing calls loosely. But the mechanism isn’t confusing at all. When a government is spending $90 billion a month it doesn’t have, on a war it can’t win, and putting the president’s face on a junk dollar while it does it, the yardstick tells you everything.

Read the coin. It’s pot metal. So is the promise behind it.

Have a great weekend, and go listen to the full conversation with Doug if you haven’t yet.

Best,

Matt Smith

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A housing bill.

It sounds like something Hollywood writes to make an actor playing a politician look like a good person. Michael Douglas is lauded for a bill cutting fossil fuel emissions twenty percent. Kevin Kline rewrites the federal budget at a kitchen table one night and then fights for a national job guarantee. Charlize Theron saves the seas, the bees and the trees with a 100-nation treaty.

Naïve foolish idiotic drivel that moviegoers are emotionally programmed to venerate.

Then the credits roll and you never see the second act, where the asinine economic fantasies of Hollywood meet arithmetic.

This brings us to the 21st Century ROAD to Housing Act, which runs twelve titles, sixty provisions, and 56,025 words, mashed together from sixty separate bills. Elizabeth Warren (D) and Tim Scott (R) stuck them all in a blender and made a slushie. The Senate voted 85-5. The House voted 358-32.

The three letters CON appear in this housing act 573 times. Yet the term Constitution appears zero times. Zero mentions. No thought given to whether this act might be among the enumerated powers of Congress.

The only parts of this act that work are the parts that stop government

A few provisions do good work.

The law kills the permanent chassis requirement Congress wrote in 1974—a rule that forced builders to weld a steel frame under a house that would never move again, so it could qualify as a trailer. Removing it cuts a bit of cost from producing that type of home. Also, HUD will write guidelines letting states permit six-story buildings with a single staircase, which Europe has done for ages without bodies stacking up. And environmental review gets carve-outs for infill lots.

Each one is government stopping something it should never have started. No appropriation, no metric, no program officer, no forms needed. Congress repealed bad rules. It’s like a tiny chainsaw, cutting some tiny sticks.

They also threw in a ban on Central Bank Digital Currencies, a rider that has nothing to do with housing but that makes the bill worthwhile, a bit. The ban sunsets December 31, 2030, so the Fed could build the diabolical thing now and wait. Conspiracists may circle January 1, 2031 as the day the Fed could take control over your entire economic life. But, for now, total economic control gets deferred for a few years. I’ll take that as a bit of a win.

Add up every good word in this law that stops government from doing something: 3,542. Out of 56,025 words total. Six percent.

The rest of the words expand government involvement. Of course.

Trump’s 350 house max

Title 10 bans institutional investors that own 350 or more single-family homes from buying any more. This is the headline, the part smarmy politicians can run on. Trump called for this cap back in January. Keep in mind the large institutions own less than 1% of these houses.

Manufactured homes are exempt from the arbitrary 350 cap. Congress cut the cost of a manufactured house in Title 3 and left it open to unlimited institutional buying in Title 10. Politicians are picking and choosing winners and losers again.

Investment capital doesn’t disappear because Congress outlaws one destination. It simply flows into the next most attractive legal alternative. Capital that cannot legally buy a 351st stick-built house instead buys manufactured homes, a fourplex, a condo, a tower—basically unlimited properties that shelter families from the weather while sheltering corporations from the whims of the lawmakers. There will be some effects of this on the composition of the housing market, although it may not change the American Dream.

And there is a grandfather clause. Existing institutional holders of single-family homes get to keep them. The law just forbids anyone else from joining them and propagandizes it as protection for families.

The ban repeals itself fifteen years after it takes effect. Maybe 350 will not be Trump’s special number by then?

The demand pump

The law expands FHA credit. Small-dollar mortgages under $100,000. Higher loan limits on multifamily and manufactured housing. Every one of those provisions raises what a buyer can bid. To the extent the loan-subsidized (and therefore higher) prices encourage new construction, then they get what they intend.

But where supply cannot respond (because zoning, land, and labor bind it), additional purchasing power from easy credit does not build additional houses. It becomes additional price. The buyers get more debt to pay off and a higher risk of foreclosure.

More slop added to the slushie

Section 107 abolishes the Regulatory Barriers Clearinghouse - a HUD office created in 1992 to collect and publish information on the regulatory barriers that make housing expensive. Section 107 then spends 1,275 words ordering the same HUD office that ran it to convene a task force of urban planners, architects, and “community engagement experts” to publish guidelines and best practices on the regulatory barriers that make housing expensive. Looks like the HUD office workers won’t lose their jobs, but maybe they’ll get a new name for their work.

Section 106 spends 1,108 words on a pilot program to install internet-connected temperature sensors in federally assisted apartments. These are to be accurate to a tenth of a degree. Big Brother will keep an eye on whether these folk are warm, and with precision too! The program sunsets after three years, which is about when HUD will finish defining the rules.

Legislated studies, reports, and mandatory testimony requirements run 5,925 words—more than the 3,542 words that are in this law that did anything good.

And there is a bunch of other hogwash among the pet bills that lobbyists have been trying to get Congress to pass. It’s all in Warren and Scott’s blended slushie.

Although the law authorizes $1 billion for an innovation fund and the slushie of 60 provisions involve added bureaucracy and reporting, the very end of the law says that “No additional funds are authorized to be appropriated to carry out the requirements of this Act or any amendment made by this Act.” Maybe they are relying on Modern Monetary Theory to conjure up the spare dough.

Unpredictably unpredictable

It’s kind of a fool’s game trying to predict how Congress pushing this button or that one is going to fall out in the housing markets or the stock markets. Throw in a dollop of President Trump and it’s all a quagmire of criss-crossing spaghetti noodles.

We already know that Congress is lousy. We already know that when Congress does something, it is, on net, harmful. They wield power unconstrained by the Constitution.

Few congressmen understand economics. Few think soundly. Few obey their oath of office.

Few Americans have the time—or the inclination—to read 56,025 words of federal legislation. So we don’t read it. We just take a feeling that was installed in the news, or in a theater, perhaps by Michael Douglas.

We are supposed to think: Housing Bill. Bipartisan. Bipartisan means Unity, America, Good. A good housing bill. Good politicians. Let’s re-elect them.

But I actually read the bill. It didn’t make me think that. It made me think of Idiocracy.

John Hunt, MD

Editor, Doug Casey’s Crisis Investing

Join us at Crisis Investing by clicking on this link.

A guest post today from Frank Giustra, CEO of the Fiore Group and a veteran mining financier. Among many other well known successes, Frank was the founder of Silver Wheaton, which became Wheaton Precious Metals, a flagship of the streaming model. Original post is here.

The Continental dollar, born in 1775, was meant to finance the colonies’ fight against Britain—the American Revolution. What it actually financed was a masterclass in how quickly a currency can evaporate when it has no anchor, no credible backing, and no one willing to stop the printing presses. Hundreds of millions of Continental notes were issued with nothing but the promise of future redemption in gold or silver—which the colonies did not possess in sufficient quantity.

As wartime expenses mounted and the conflict dragged on, the colonies’ solution was a time-honored tactic. Just dig yourself a deeper financial hole by printing more currency. When confidence in the Continental buck inevitably collapsed, merchants demanded ever-larger stacks of paper for the same goods.

By 1781, a barrel of flour that once cost a few Continental dollars cost hundreds or thousands. The exchange rate against silver reached the point where it took five hundred to a thousand Continentals to buy a single hard dollar (meaning a silver or metal coin). Some states saw the writing on the wall and simply stopped accepting the notes altogether.

The British, who had plenty of practice in meddling in colonial internal affairs, helped the debasement process along. They knew that counterfeiting Continentals on an industrial scale was cheaper than fighting military battles, and more effective. The result, as intended, was hyperinflation. When the dust settled, the phrase “not worth a Continental” had entered the language as shorthand for worthless.

The Founders, having lived through the destruction of the Continental dollar, carried a deep suspicion of unbacked paper money into the constitutional debates. That suspicion helped produce a document that at least tried to constrain monetary experimentation. George Washington famously said, “Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open a door to every species of fraud and injustice.”

That was not the only such inflationary episode before the colonies became a republic. During and after the American Revolution, individual states issued their own notes with similarly dismal results—sharp depreciation, hyperinflationary spikes in the 1780s, and the general chaos that made a stronger federal hand on currency seem necessary.

The War of 1812 brought another suspension of convertibility and the circulation of Treasury notes at discounts. The so-called Free Banking Era that followed (1837–63) is not unlike today’s cryptocurrency industry. It produced thousands of state-chartered banknotes, many of which traded at steep discounts or became worthless when the issuing (“wildcat”) banks, beset by fraud and panics, collapsed.

The Confederate currency of 1861–65 offers perhaps the cleanest parallel to the Continental story. Once again, massive overprinting to finance a war without adequate taxation was followed by hyperinflation so severe that prices rose thousands of percent before the notes became essentially worthless by the end of the Civil War.

In every case, the pattern resurfaces predictably. Governments (or would-be governments) facing extraordinary expenses turn to the printing press when taxation and borrowing prove inadequate or inconvenient. It’s as if politicians and policy makers either never read a history book or had their memories magically erased. Without a credible anchor in hard assets or ironclad fiscal discipline, public confidence erodes, money velocity rises, and the currency loses purchasing power—sometimes gradually, sometimes in a sudden rush.

The modern version of this story began in earnest with the end of dollar convertibility into gold. Domestically this occurred in 1933, when FDR confiscated privately held gold. Internationally, the break came in 1971, when Nixon closed the gold window.

Ever since, the dollar has functioned as a pure fiat currency. The cumulative effect on purchasing power has been substantial. What $1 bought in 1971 is what about 15 cents buys today. In other words, you need $6.50 to $7 to purchase what a single dollar bought in 1971. That’s a loss of roughly 85 percent of purchasing power over half a century—an outcome entirely consistent with the long-run behavior of unbacked paper currencies. It’s not hyperinflation in the dramatic sense we saw in 1920s Weimar Germany, or in 2000s Zimbabwe, but it’s a steady, grinding, quasi-invisible debasement that compounds across generations.

The usual excuses, “This time is different”, assume that American institutions are uniquely resilient or exceptional, that the dollar’s reserve status grants permanent immunity, and that the U.S. can abuse its currency without serious consequences. These sound like the rationalizations heard at the late stages of any long monetary experiment.

The historical record is not kind to such beliefs. Empires from the Spanish to the British to the French have discovered that the ability to print unlimited currency eventually encourages the very behaviors that undermine the currency. Countless wars have been financed by debt and debasement. Political fragmentation prevents corrective action, confidence bleeds away, and alternative stores of value gain traction. De-dollarization today, whether measured in central-bank gold purchases or shifting trade-settlement patterns, reflects a repeat of that loss of confidence.

The Founders understood something that today’s generation, lacking direct experience of currency collapse, finds easy to overlook. Paper money untethered from hard assets removes the shackles that keep politicians from doing what politicians would always rather do—abandon fiscal responsibility.

The Founders had seen the Continental experiment up close. They knew that once the printing press becomes the path of least resistance, the incentive structure for politicians and central bankers alike encourages more spending, more debt, and more monetary accommodation. The result, over time, is the gradual erosion of purchasing power we’ve seen since 1971, punctuated by sharper episodes when political or geopolitical pressures intensify.

None of this is to predict imminent hyperinflation or the sudden disappearance of the dollar as a medium of exchange. Fiat currencies can limp along for decades, sustained by network effects, institutional inertia, and the absence of a clearly superior alternative. But the long-run arithmetic is unforgiving and requires only elementary school math to foresee. Every historical example of sustained, unbacked issuance ends the same way. The currency loses most of its value, new arrangements eventually emerge, and those who held real assets, particularly gold, preserve wealth while others do not.

The lesson is not complicated, just inconvenient. When a great power abandons any credible link to hard money, the currency loses purchasing power over time, and the temptation to finance geopolitical ambitions through debt and debasement grows ever stronger.

The phrase “not worth a Continental” was once popular in the U.S. It wasn’t part of a Cadillac marketing campaign. It came about after the Continental Congress decided that printing its way out of a war was preferable to the messy and difficult business of collecting taxes.

As we’ve seen, the United States has lived through several episodes of this series. The only novelty today is the scale at which the experiment is being run and the amnesia with which it’s being conducted. Those who imagine the outcome will be any different this time around might usefully recall that the Continental Congress also believed its circumstances were unique—until the notes stopped buying anything at all.

Is it too far-fetched to imagine that our descendants will one day adopt the expression “Not worth a US dollar”?

Austrian economists begin from a very different premise than modern macroeconomists. Rather than treating the economy as something to be managed from above through models and statistical aggregates, Austrian school adherents view it as millions of individuals making voluntary decisions. Interest rates are prices, not policy tools. Money is supposed to measure value, not manufacture demand. Austrian economists argue that the boom-bust cycle is driven by central-bank credit expansion and the distortion of interest rates.

For today’s commentary, a key point is this: an Austrian thinker doesn’t define inflation as rising consumer prices. Rather, inflation is the expansion of the money supply. Rising prices are merely one of its consequences.

On July 9, new Fed chair Warsh named fifteen people to sit on five task forces looking at how the Fed talks to the public, how it manages its huge pile of bonds, how it uses data, how it thinks about jobs and productivity, and (most important in my view) how it defines inflation.

I went looking for even one Austrian economist among those fifteen. You know, Mises, Hayek, Rothbard types. I was looking for someone who thinks with economic integrity: skeptical of central planning, and with a morality that approaches Natural Law. I sought people who worry about how fiat money quietly wrecks a nation, as opposed to people excited about the opportunities fiat currency provides to concentrate wealth and power.

I didn’t find one.

What I found instead is a highly credentialed group of central planners who mostly agree on one thing: that a handful of chosen experts pushing on wet noodles can make the economy do whatever they’re sure it should do.

None of these task forces is asking whether a committee of economists should be setting the price of money in the first place. Every panel begins with the assumption that the Fed’s role is indispensable. The only question is how to perform that role more effectively.

Here’s who’s on each team and where they’re coming from. Mostly, I won’t bother mentioning their university credentials.

Communications — Peter Fisher, Arminio Fraga, and Mervyn King. All three spent their careers running central banks or working alongside them. They believe in the standard playbook: set a price level target (which they will call “inflation”), communicate clearly, adjust as needed. Solid, professional team players who will try to make the Fed — as a collective concept — look competent, honest, and unbiased.

Balance Sheet Policy — Karen Dynan, Jeremy Stein, and Raghuram Rajan. Dynan and Stein come from the New Keynesian school, the idea that the economy doesn’t fix itself quickly, so a few old dudes (and dudettes) at the Fed should actively step in and steer it with their brilliance by manipulating interest rates and bond purchases. Rajan leans a bit more market-friendly and earned some credit for warning about reckless bank lending before 2008, but his solutions involve regulation and more Fed involvement, not less.

Data — Raj Chetty, Kevin Murphy, and Doug McMillon. Chetty is known for digging through enormous piles of government data to study who moves up the income ladder and who doesn’t, leaning on the kind of big-data thinking Austrians distrust. Murphy comes from the Chicago school, so perhaps he has more free-market exposure than others on the list. But he still builds his case from data and models, not from the Austrian method of reasoning straight from first principles about human action. McMillon spent his career running Walmart, so he brings business acumen, but sadly not from an Austrian economics background (as near as I can tell). Together they will create more expansive data sets so they can better push and pull on the wet noodles.

Productivity and Jobs — Marc Andreessen, Charles Jones, and Asha Sharma. Jones is a growth economist who builds models to explain why some countries get richer over time and others stall out. Andreessen and Sharma are tech investors and executives rather than economists, but no Austrian lens to help them see straight. Why the Fed is in any way involved in productivity and jobs is beyond my Austrian brain.

Inflation Frameworks — I had some small hope that this task force might squeeze some Austrian thinking into the confused mess that is the Fed. But it ain’t gonna happen. Greg Mankiw, Thomas Sargent, and William White are the group that will shape how the Fed thinks about inflation and the dollar going forward.

Mankiw indeed wrote the New Keynesian textbook that most economics students have learned from for decades. His view: prices move slowly, so a few hand-picked people at the Fed should actively manage demand for the entire economy. Sargent’s big idea: people aren’t fooled for long. If the Fed tries to sneak in a boost to the economy, folks catch on fast and adjust, so the trick stops working. I suppose that means they have to be quicker and trickier. White is interesting. He spent years warning that cheap money and loose lending set up the 2008 crash, a conclusion an Austrian would agree with, even though he got there through his own central-banking path rather than through Mises or Hayek.

Mankiw is about as mainstream a New Keynesian as it gets, and putting him in charge of rethinking inflation isn’t going to produce a framework that does We the People any good.

Across all five teams, the pattern holds: smart people with resumes and one shared assumption that the Fed can and should manage the economy from the top down and use their fiat currency tricks as needed. What’s missing is anyone who thinks the better answer is to do less of that.

These people are competent practitioners of crappy economics.

So Trump’s pick to fix the Fed isn’t going to fix the Fed. The task forces will just make the Fed more competent at doing the things I wish it weren’t doing at all.

We should accept the fact that Austrian economic thinking, which would help humanity and the true general welfare, is not employed by those who pull the strings in this world. Lots of people are making oodles of money by doing the things that make sense within the Keynesian economy. They are the special interests, feasting at the trough and then malinvesting right and left as the Fed’s currency debasement increases asset prices in dollar terms. They will do well personally as the blood gets sucked from the rest. Those who populate the Fed world have strong incentives to keep milking that system.

The Fed’s intellectual direction hasn’t changed, which means the long-term trends we’ve discussed for years—currency debasement, asset inflation, and the importance of owning productive businesses and real stores of value like gold—will remain intact.

If the diagnosis hasn’t changed, neither should the prescription.

Sincerely,

John Hunt, MD