Doug Casey on Technology

(Interviewed by Louis James, Editor, International Speculator)

L: Doug, people have written in saying you’re a “doom-and-gloomer” and a “permabear” – but I know you’re an optimist. Why do you suppose that’s so?

Doug: Perhaps it’s because I’ve long said that the Greater Depression is going to be even worse than I think it will be. But looking forward with a long view, I think the future is not only going to be better than I imagine, it’s going to be better than I can imagine.

The coming Greater Depression will be serious, but I don’t think it’s going to change the fundamental long-term trend of human history. I believe Jacob Bronowski was right: the Ascent of Man will continue. Mankind started out grubbing for roots and berries in the mud, but our descendants – not so far in the future – will be colonizing the stars.

L: That was the guy who wrote the 1973 BBC series called The Ascent of Man? I didn’t remember his name, but I remember watching the series… even though I was only eight. So, when you talk about the long term, you’re not talking years, decades, or even centuries, but the grand sweep of human history, and beyond.

Doug: Yes, exactly. An interesting thing about investing, and life in general, is that there are long-term trends, medium-term trends, and short-term trends. You have to figure out which ones are important, and then if and how to capitalize on any of them. And it seems to me that one of the longest-term human trends in existence is the 5,000-year-long bear market in commodities.

In real terms, metals were extremely expensive and rare in Neolithic times.

L: Iron was so rare, it didn’t exist. And I’d guess that, say, a polished copper mirror would have taken the equivalent of many human lives to make.

Doug: Right. What metals there were came from what people could find in the metal’s native form. That meant primarily gold, for the reasons we talked about in our conversation on gold. There would have been some copper and some silver, but that would have been about it. And even the equivalent of kings back then would have had very little of it.

Then civilization developed in what is now the Middle East and we entered the Bronze Age, which gave way to the Iron Age – and now we’re in the Silicon Age. Each one of these things is progressively less rare. Silicon makes up the computer chips that drive modern life, but it’s basically just sand. On a scale of millennia, commodities have collapsed in price. Eventually, they’ll go to near zero in cost. Commodities will drop to no more than the royalties on the software that runs the nanotechnology that extracts them.

L: Let’s come back to nanotechnology in a moment. The overall trend you’re describing doesn’t depend on it. Even without nanotech, cheap and abundant energy would drop the prices of most commodities to near zero. Sea water is full of dissolved metals, for example; you could have all you wanted if you just had the energy to process all that water. Cheap enough energy makes the lowest-grade concentration of anything economical.

Doug: Yes, and even now we know how to extract those metals or make artificial oil; it’s strictly a matter of having enough energy to drive the engineering. And, of course, the economics. This is why I find it so frustrating when people talk about running out of natural resources. There’s no danger whatsoever of that. Not only are the resources of the world adequate, they are essentially infinite. It’s a question of technology – know-how – and capital, enough wealth to implement the know-how, that is, to build the machines.

Look, every material thing in the universe is constructed out of the 92 elements in the periodic table of the elements. Having anything we want, from a slice of bread, to an ounce of gold, to a new car, is simply a matter of rearranging atoms into the correct combinations at an acceptable cost.

L: My friend Jim Von Ehr, CEO of Zyvex, a nanotech instrument company, once told me that some of the most valuable land in the future would be the sites of old landfills, because they are basically mountains of purified materials. Once you can reduce matter into its component atoms and make new things with it, such places, packed with high concentrations of useful atoms, will command a premium. In the future, there will be no such thing as trash. So, this bearish trend on commodities you speak of isn’t really a bearish trend at all; it’s a bullish trend in technology.

Doug: And that includes nuclear waste. Greens, who generally have little background in science, are completely unaware that spent reactor fuel is a potentially valuable future resource – in addition to being a trivial storage problem in the interim. Technology – it’s the most bullish thing possible for the standard of living of the average human being. Many people living below the poverty line in the U.S. have televisions, refrigerators, medicines, and luxuries that even kings and queens of only a hundred years ago couldn’t have dreamed of. That trend is going to continue – and accelerate. It’d be hard for me to overstate how favorable this is.

Notwithstanding that being the megatrend, I think commodity prices are going to go higher over the next few years. They’re in a multi-decade bull cycle. That said, there are countertrends to most trends, and the Greater Depression could cause commodity prices to drop in the near term, in spite of the broad-based, secular bull market in commodities I think we’re in.

L: If the commodities bull that started in 2001 lasts as long as the 21-year commodities bear that started in 1980, we’d be just under halfway through it.

Doug: Yes, and there are good reasons for being bullish. Number one is the development of the Third World, primarily India and China. You know – Mrs. Wu wants a stainless steel wok to replace her cheap old aluminum wok, she wants a nice new refrigerator to keep her food in, and she – and everyone like her across China – wants a new car to go buy her food in. And Mrs. Singh in India is not far behind. All of these things add to the demand for commodities, especially metals.

On the other hand, a possible near-term negative countertrend is that there has been a lot of stockpiling of raw materials over the last year. With the trillions and trillions of dollars circulating outside the U.S., a lot of governments, corporations, and other entities are stockpiling commodities. They want to convert their paper dollars into something of real value that they might soon need – or, frankly, just about anything that isn’t crumbling dollars.