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We’re back after a couple of weeks off. Doug called in from his apartment in Buenos Aires, after the New Orleans Investment Conference and Nomad Capitalist in Cancun. The first thing on the table was the midterms.
Doug: “I’m willing to make a bet that the greater depression finally blossoms in the next two years. Republicans are blamed for it, in many ways justifiably, and the Democrats are cemented in office, and that’s the end of America, basically.”
That’s the title. He said it twice, in so many words. So did I.
The midterm rout
I read this election as a resounding vote against Trump’s policies more than a vote for the Democrats. Doug has been offering a bet for months that Trump will not finish his term, and he sees this loss as underlining that call. The country is split down the middle. Doug’s description of the two sides is “actively destructive and contemptible and stupid and non-workable ideas” on the Democratic side, and “things that are not much better, but at least they talk better” on the Republican side.
My view is that the idea that daddy government is the answer has spread through the right as well. That doesn’t bode well no matter who wins. People who can’t make ends meet want the government to do something. Doug thinks secession might be the way out, if it can happen without a civil war. I don’t know how that works in the US without violence either. And when the Republicans had the House, the Senate and the presidency, they didn’t alter the course of events anyway.
Still on the track to war
There’s a lot of talk that Trump took the midterm loss as a repudiation of the Iran war and is looking for a way out. In the 60 Minutes interview he accepted that the war was unpopular, but he didn’t apologize for it. The US says it’s in negotiations again. The Iranians deny any talks are happening. Meanwhile a third aircraft carrier is days away from the region, along with another couple thousand Marines, and the blockade now covers land borders too. That does not look like a stand-down to me.
Doug: “I think we’re still on the track to war, because what possible reason would there be for not only having two aircraft carrier battle groups, but now a third one in the area?”
If he pulls those ships out without the Iranians rolling over, which they won’t, he has to use them. Doug’s phrase for it: he punched the tar baby, and he’s digging his fist in further. West Texas Intermediate was around $88 while we were talking, high relative to where this started, but off its peak. I think the market is pricing in a deal. Doug doesn’t think a deal gets him out without losing face, which he won’t do.
That’s the end of America
They had the House and the Senate for two years. The signature achievement was the big, beautiful bill, which blew the budget out further. DOGE, which got the base excited early on, mostly disappeared. I think they may have written about 2% of it into law. The budget is bigger than ever.
Doug has been saying a truly massive depression has been inevitable for years. If it starts on Trump’s watch, he’ll be blamed for it, in part deservedly, a redux of Herbert Hoover. Then the Democrats get cemented in office. That’s the end of America, as he put it.
Something wicked this way comes
Since we last talked, at least 35 countries have warned their citizens to keep 72 hours of food, water, a flashlight and a radio on hand. The US didn’t warn civilians. It announced a plan to make military bases self-sufficient in food, water and energy, specifically because the grid can’t be relied on. If those scenarios happen, that’s millions of people. Seven well-placed substations could do it, by some counts.
Recent hacks have already hit exchanges, banks, grocery chains and military-base freezers. A co-chair of a Japanese bank cybersecurity group said the worst case is taking down their systems, including the Tokyo Stock Exchange and probably the banks, for up to 30 days to patch and relaunch.
Doug: “As Ray Bradbury said, ‘Something wicked this way comes.’”
He published a piece today at International Man on Western civilization reaching a tipping point, and wondered if he went too far. I don’t think he did. I think it might be that bad. What scares me about the prep warnings is how much they look like COVID: key nations in lockstep, the same message, at the same time.
The AI bubble and 40 companies
Is the AI bubble starting to crack? Doug is a fan of AI in the long run. In the here and now, trillions have gone into data centers at once, and that kind of rush means huge misallocations. The value in the stock market, and the real capital underneath it, could vanish. I added that this is about the only thing keeping GDP positive.
US pension funds, by the figure I cited, now have $578 billion of retirement money in AI stocks. Doug thinks the government will prop up companies that are too big to fail.
Doug: “Trump was a classical fascist using the definition of fascism, a melding of corporate and government interests. That’s what Mussolini, who coined the word and founded fascism, defined it as quite correctly. He’s already taken government stakes in over 40 companies.”
If the market collapses, he thinks the government buys more shares with printed money. Runaway inflation, and an economy that is actively socialized. That’s when I said it again: the end of America.
Doug: “In the past, no matter how crazy things got elsewhere in the world, America was a beacon of capitalism and stability and individual liberty. That’s all going to be washed away, I’m afraid.”
He’s not saying people don’t recover. He is saying it’s going to be a really tough time, with wars and an economic collapse. He’d rather be wrong. So would I.
Also in this episode
The new mayors of New York and Los Angeles, immigration and what kind of deal Trump thinks he can make with Democrats, why Doug has more respect for Democrats than Republicans, the Houthis and Saudi Arabia, and a 22-year-old from our VIP call who has been in the French protests.
On Friday Dave Collum is joining us. Be sure to tune in!
If you want to know what we’re actually buying while this plays out, join Crisis Investing. Got a question for Doug? Head to crisisinvesting.com, click “Ask Doug” at the top, and post it.
This post is from Doug Casey’s Crisis Investing. Hear Doug on our podcast, Doug Casey’s Take.
