Value Investing

Doug Casey on the Paris Riots

Justin’s note: Paris is in flames.

If you don’t know what I’m talking about, turn on the television. You’re bound to see images of burning cars and vandalized property on every news channel.

The protestors behind this call themselves the “yellow vests.” They took to the streets to protest a recent petroleum tax. But it’s clear that they’re upset about a lot more than just that.

To find out what’s really fanning the flames in Paris, I got Doug Casey on the phone. Below, Doug tells me why the petroleum tax was merely the “spark”… and why similar protests could flare up across Western Europe and even the United States.

We hope you enjoy.


Justin: Doug, what’s going on in Paris? Is a recent petroleum tax really behind the protests? Or is something else fueling this social unrest?

Doug: The gasoline tax is just the spark. Tinder has been building up for a long time.

In France, the state takes about 45% of all revenue in taxes. It’s got about the highest taxes in the world. The average Frenchman’s tax load is twice as high as the average American’s. Worse, the taxes are used to support massive and onerous bureaucracies in both Paris and Brussels.

The gas tax especially hurts what’s left of the middle class, who have to commute to work. It could be the straw that breaks the camel’s back. But it’s only the proximate cause, not the ultimate cause, of what may turn into a real social upheaval. The ultimate causes are the governments in Paris and Brussels.

France is home to many stupid pseudo-philosophies, almost all of them statist and collectivist in nature. As a result, the average Frenchman is much more of a whipped dog than the average American – which is saying something. I’d like to imagine that Americans would have gone to the barricades long ago.

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I suspect that most “gilets jaunes” are just decent middle-class people who are tired of being treated as milk cows, while they see the rich getting richer. Which is why – stupidly and perversely – they appear to want a high wealth tax. But they don’t realize that the rich getting richer is only an effect, not a cause. Their government – the institution – is the problem. Not just Macron, who’s a nobody.

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The rich naturally control governments. They can afford to bribe the politicians to pass the laws they want. They can hire the accountants to limit their tax liabilities.

But the big thing is that central banks are printing up new currency units by the truckload in an effort to keep the economy afloat. The rich are in position to stand close to the fire hydrant of new money. So, of course they’ve been getting richer since the 2008 crisis.

That’s created a lot of resentment. It’s similar in some ways to what happened in France in 1789, or Russia in 1917.

Sometimes it only takes a little spark to crystalize the discontent of the masses.

Justin: Do you think what’s happing in France will fizzle or blow up into something serious?

Doug: That’s the question, right.

It’s been 50 years since we’ve had serious riots in Europe, back in the late ’60s, when they were really quite something. Much more serious and violent than today’s. My guess? Whether it blows up now is an open question. But when the economy crashes, which is in the process of happening, people will lose their jobs, their businesses, their savings. That’s when it will get serious. It’s not going away.

Macron, a non-entity Eurocrat, has backed off on the gas tax and is throwing some alms to the masses. But that will just make the underlying problem worse.

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Justin: Copycat protests have already spread to Belgium and the Netherlands. Should we expect that to continue? If so, what does that say about the state of Europe?

Doug: One of the accelerants here has been the huge influx of migrants into Europe. These people are bringing alien religions, alien cultures, and alien languages with them. There are enough of them to rend the social fabric. Europeans see not just their standard of living, but their culture threatened.

And with welfare benefits as ridiculously high as they are, middle-class Europeans resent paying half of their income in taxes, only to see freeloading migrants live off their produce.

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There’s an excellent chance this will spread throughout Western Europe. But it won’t go into eastern Europe because they don’t have the same problems as Western Europe. Things are getting better in eastern Europe. In addition, their average tax regime is much lower. Most people don’t realize that the highest income tax bracket in Russia, for instance, is only 11%.

So this will spread, and become more violent, later, but will remain a western European phenomenon. Western Europe is the home of the welfare state and a host of other bad ideas. The fact that these people have cars, widescreen TVs, and plenty to eat won’t neutralize the discontent. They feel they’re losing ground even now. And when the next phase of the Greater Depression starts to bite, they’ll go wild.

Justin: What are the chances of protests like this flaring up in the United States? It seems likely, given where politics are headed in this country.

Doug: Yes. I’ve never seen the kind of antagonism, hatred actually, we have today. The riots of the late ’60s and early ’70s were really a fringe phenomenon. A lot of leftists wanted to start a civil war, but they were still a tiny minority. Now the country is truly divided on cultural and ideological grounds. And the economic underpinnings are much shakier than they were back then.

Student riots, bombings, and social unrest were equally great in the U.S. and in Europe. But I might point out that was also the time of the Great Cultural Revolution in China. The whole world was subject to what’s called the 100th monkey theory even then. It’s much more the case today. It’s monkey see, monkey do.

All over the world we have the same phenomenon of the rich getting ostentatiously richer, which cultivates envy among the capita censi – the “head count,” as the Romans called them. National and local governments are all deeply in debt and on the edge of bankruptcy. Taxes and regulations keep going up, killing entrepreneurial activity, even while the business cycle is about to head down.

Meanwhile, although everything looks rosy in China, they have cranked immense distortions into their economy. I suspect most of their banks are insolvent, and scores of millions of Mrs. Wongs and Mrs. Mas will be quite unhappy if they can’t get their savings at the very time their husbands lose their jobs. My friend and colleague David Stockman has pointed out that China could be described as the Red Ponzi Scheme, despite the huge economic progress that they’ve made.

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So, this could get legs and spread worldwide. The chances are good that what we see in Europe is just a straw in the wind.

Justin: What will social unrest look like when it appears in the United States? Will it resemble what we’re seeing in Paris?

Doug: It’s going to be different. And the reason is that Europeans aren’t divided ideologically. Socialism is so deeply engrained, so thoroughly insinuated, in European society that it’s not an ideological war there. It’s more a purely economic phenomenon. What we’re seeing there is primarily people protesting the rich getting richer while feeling they’re losing ground themselves. But these protestors all share the same basic ideology.

It’s different in the U.S. Here it’s the statist collectivists, Social Justice Warriors, and politically correct types against the traditionalists and Middle Americans. It’s a real cultural divide, not just an economic divide. Culture trumps everything.

I gave a speech about this at Jayant Bhandari’s Capitalism & Morality 2018 Conference in Vancouver last summer. People can listen to the whole speech here if they’d like the whole story. It’s entitled “How Political Correctness Is Destroying Western Civilization.” I’ll also point out that all the speeches at that day-long conference were superb.

And, interestingly, almost all the speeches at that conference centered around the possibility that a revolution is coming to the United States. But different from what might happen in Europe and China for various reasons.

Things are shaping up like a much, much more serious version of the late 1960s and early 1970s.

Justin: Thanks for taking the time to speak with me today, Doug.

Doug: You’re welcome.


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This “new gold” investment has delivered gains of 169%, 264%, and 9,001% over the past year… And there’s still massive upside ahead. It’s a revolutionary way to make big money from gold – even if the spot price falls.

This is required viewing for every Dispatch subscriber. Go here to watch this presentation now.


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