The War on the Dollar

RICHARD MAYBURY: Thanks, Pat, I appreciate you inviting me, it's great to be back. No, I'm not clairvoyant, at least I don't think so. I just do a lot of research, and use good models to help sift the data. It's the models that count. Good models yield insight, and a bad ones yield confusion. My new book, Personal, Career and Financial Security explains this.

PAT: Let's get right to bottom line. How long will this war last and is it turning into another Vietnam?

RICHARD MAYBURY: Another Vietnam? We should be so lucky. Vietnam only lasted 14 years.

PAT: Fourteen years, the longest war in U.S. history.

RICHARD MAYBURY: Right. And it only killed 58,000 Americans, and only brought a double-digit inflation that drove gold to only $850 and silver to only $50. [As we go to press, gold is $403.10, platinum is $936.00, and silver $7.21.]

PAT: You seem to be using the word "only" a lot.

RICHARD MAYBURY: That's because I believe 30 years from now, in comparison to this new war, Vietnam will look like a minor inconvenience. This is a world war, and I think it will be the longest and most expensive war in U.S. history. The inflation it brings will make precious metals go wild. By the end of the decade, I expect gold over $3,000, silver over $100 and platinum over $3,000.

PAT: A world war?

RICHARD MAYBURY: Don't take my word for it. On November 16, 2002, former CIA director R. James Woolsey said this is a world war. A few days earlier, the secretary-general of Interpol, said, and I quote, "The field of battle now stretches to all countries." Judging the length of this new world war, Woolsey said - and this is a word-for-word quote - "I rather imagine it's going to be measured, I'm afraid, in decades." Just a few weeks ago, in the Wall Street Journal, Ronald Reagan's former secretary of state George Schultz was quoted as saying, "If we put this in terms of World War II, we are now sometime around 1937."

PAT: 1937, that's chilling. In 1937, World War II was a minor tiff compared to what it would be two years later. Schultz is saying the bloody chaos we've experienced in Afghanistan and Iraq has been nothing compared to what's coming.

RICHARD MAYBURY: He's probably right. The book I wrote in 1999, warning about this war, is called The Thousand Year War. The title refers to the fact that the Islamic world and the West have been at war continually since 970 AD, when emperors Nicephorus Phocas and John Zimisces attacked Muslims in Turkey. European rulers thought Phocas and Zimisces had a great idea, and they took it and ran with it. European attacks on the Muslims escalated until they became the Crusades. The Crusades evolved into the Inquisition, which set the stage for the European colonial conquests.

PAT: A thousand years of war between Europe and the Islamic world, and now America is fully involved in it.

RICHARD MAYBURY: That's right, it's all explained in THE THOUSAND YEAR WAR.

PAT: Before the war, you gave us an interesting fact that said a lot about why the West is so hated in the Islamic world.

RICHARD MAYBURY: Yes. Since the year 1500, there has hardly been any five-year period in which European troops have not been under arms on Muslim soil. Here's more. The US got into this war 200 years ago in the Barbary Wars. Remember the line in the Marine Corps Hymn, "to the shores of Tripoli;" that refers to the US entry into the war with Muslims, along the north African coast, on the side of the Europeans.

PAT: On the side of the Europeans. Few Americans realize the U.S. government was never neutral, it was on the side of the Europeans right from the start.

RICHARD MAYBURY: Yes, This has been the longest war in world history, and I do not expect it to end in my lifetime, I'm 57.

PAT: So, it's the U.S. alliance with the Europeans that has gotten us into it. Clearly, this war is a lot more complex than the simple good guys against bad guys model the government preaches. You've said the war runs in cycles.

RICHARD MAYBURY: Cycles, yes. The Thousand Year War blows hot and cold. I mark 1968 as the beginning of this new hot stage. That was the year a Palestinian named Sirhan Sirhan killed Robert Kennedy. Kennedy had promised fifty F-4 Phantom jet fighters to Israel. I think his death was the announcement, okay, have it your way, now you Americans are in the Thousand Year War up to your necks.

PAT: You've also blamed Clinton for getting us into the war. He certainly did drop a lot of bombs on people who had not attacked the United States.

RICHARD MAYBURY: Clinton did more than anyone else to provoke 9-11. In April 1999, Defense News reported that Clinton had used up five years production of Tomahawk cruise missiles in just three months. He bombed Serbs, Somalis, Albanians, Afghans, Iraqis and Sudanese. I think it was naive in the extreme to think the U.S. government could go around killing people and no one would get revenge.

PAT: How many innocent people do you think we killed during Clinton's reign?

RICHARD MAYBURY: Hard to say, but we can be sure it was a lot more than the 3,076 killed on 9-11. By the way, please be careful with the word, we. You and I did not do it, Clinton did. If you want to share in the government's guilt, that's your choice, but please don't drag me into it. This claim that the government represents us is what got those 3,076 people killed. Being represented by the U.S. government is high risk.

PAT: If it is a world war, it's likely to be monstrously expensive.

RICHARD MAYBURY: Certainly. Aside from all the weapons, ammunition and equipment that will be used up, and the wages that will be paid to the troops, the expense of transporting all that materiel to the other side of the world will be unimaginable.

PAT: And the effect on the economy?

RICHARD MAYBURY: War is the most expensive thing humans do. The federal deficit - the difference between the government's spending and its income - is completely out of control. Our readers might remember, in the mid-1990s, the possibility of a $400 billion annual deficit was considered catastrophic. Books were written about it. The financial industry was transfixed by it. Well, the deficit for March alone this year came in at $72.7 billion, which works out to an annual deficit of $872 billion. This means pressure to increase taxes to reduce the deficit is becoming intense. But, Americans are already suffering under a crushing tax load, so politicians will take, and already are taking, the alternate route.

PAT: Printing money.

RICHARD MAYBURY: Right. Since the war began on 9-11, the MZM measure of money supply has risen 19%, and on foreign exchange markets the dollar has fallen 18%. The war began with the Federal Reserve printing mountains of money to stop the recession, and they have simply continued, to pay for the war.
MONEY SUPPLY Chart shown here is an extract from Chart on page 2, MAY 2004 EWR. See May Issue for complete chart.

PAT: And how does this affect us?

RICHARD MAYBURY: Money responds to the law of supply and demand just as everything else does. When the number of dollars goes up, the value of each individual dollar falls, and prices rise to compensate. That's inflation. As Howard Ruff says, inflation is not rising prices, it's falling money.

Clearly the war is not going to end any time soon, because Washington's enemies have no detectable desire for peace, nor does Washington. After more than two years of bloodshed, I have seen no evidence whatsoever that anyone in the US is trying to find a way to end it. So, they need to pay for it, which means they are likely to continue printing money like a mob of drunken counterfeiters.

When the dollar is falling, people move into non-dollar assets, bidding up these prices. For thousands of years, the number one haven during inflationary times has been precious metals.

PAT: That's how you were able to advise our readers before the war to get into precious metals.

RICHARD MAYBURY: Correct. If you understood the coming war, you understood how expensive it would be, so you knew which investments would likely pay off - precious metals. This is not just a war on so-called terrorism, it's also a war on the dollar.

PAT: How can you be so certain this war will last decades?

RICHARD MAYBURY: When it come to human behavior, I'm not certain of anything. I could be 100% wrong about all of this. But, if you look at the history of the Mideast, and why those people feel the way they do, a long, long, expensive war is the way to bet. After all, the Israeli government has been fighting Muslims for 56 years, and Washington is the Israeli government's closest ally. It seems to me another 56 years would be a very conservative estimate; you might call it the optimistic case.

PAT: Doug Casey calls it the Forever War.

RICHARD MAYBURY (laughing): I hate to say this, Doug is a good friend, but that's an outrageous exaggeration, he's being alarmist. I wrote the book on this war, and I say it won't last more than another thousand years; maybe two thousand, tops. Doug shouldn't be such a pessimist.

PAT: Decades of inflation. It takes the breath away.

RICHARD MAYBURY: Since the year 3600 BC there have been more than 14,000 wars, and I have never heard of one that brought deflation. I have been advising my subscribers to beware of dollar-denominated assets such as CDs and bonds, and move part of their money to non-dollar assets, such as gold and silver. I explained a five-part plan in the February 2003 and March 2003 Early Warning Reports.

PAT: In this newsletter, we've been breaking down gold and silver investments into three categories: 1. Insurance. 2. Insurance with a profit kicker, meaning, for instance, circulated gold coins that have low numismatic premiums. And 3. Speculation; for instance, high premium numismatics such as Saint Gaudens double-eagles in MS 65 and 66. What do you think of this three-category way of classifying precious metals?

RICHARD MAYBURY: I like it. Before the war began, I was saying I thought numismatics would be great speculations. For very risk-averse people who do not want to speculate, all their gold and silver money should be in number 1, meaning bullion coins with no numismatic premiums. For those who'd like to do a bit of speculation, number 1 and 2. For more speculation, add some in number 3. Makes sense to me.

PAT: We do an annual interview with you. Last year you recommended MS 65 double-eagles. At that time they were $995. Recently they hit $1,610, and now they are back down to $______. Do you still like these coins?

RICHARD MAYBURY: As speculations, for category 3, I think they are great. Essentially, precious metals have always been insurance against government bungling. During times of political and economic stability, they don't do much, but during times of great turmoil, they skyrocket. So, if you are in precious metals, you have all the insanity of all the world's governments working to generate profits for you. In the realm of human affairs, that's as close to a sure thing as we are ever likely to get. This does not mean any investment will go straight up, however. I expect a rising sawtooth pattern - dips along the way.

PAT: Where should investors buy these coins?

RICHARD MAYBURY (laughing again): Now, Pat - I knew you'd work this into the interview somehow. As you know full well, I have recommended Resource Consultants since the day the firm was founded ten years ago, and none of my thousands of subscribers has ever complained. If they're happy, I'm happy. But I would like to offer a word of caution about buying precious metals.

PAT: What's that?

RICHARD MAYBURY: Always buy coins, not large bars, or ingots. These large forms are more convenient, but they are risky. Coins are very difficult to fake, but the larger the lump of metal, the easier it is to drill out and fill with lead. During times when demand for precious metals is slack, frauds and counterfeits are not much of a problem, but when the feeding frenzy begins, and millions of novices stampede into the markets, the crooks come out of the woodwork, and experienced buyers know it. Selling bars can be difficult.

PAT: What if a person already has bars?

RICHARD MAYBURY: My advice is to convert them to coins now, while it is still comparatively easy. I also have a warning about numismatics.

PAT: Numismatics, meaning collector coins.

RICHARD MAYBURY: Yes. Unless you are a very experienced collector who can spot differences in numismatic grading, buy only coins in the sealed cases certified by PCGS or NGC.

PAT: You seem especially bullish about numismatics.

RICHARD MAYBURY: Right. Wars, and the inflations they bring, generally cause a flight to precious metals. Numismatics are the rarest form of precious metals, so I think the flight from the dollar will cause numismatics to become to this decade what the dot-coms were to the 1990s. I think the length and the cost of this war, and the inflation resulting from it, will be so bad, I would not be surprised to see, for instance, an MS-65 double-eagle go up twenty or thirty times from present prices.

PAT: You said that last year, too. It's crazy, these coins cannot possibly be worth that much.

RICHARD MAYBURY: Yep, crazy is the right word. Remember the dot-coms. I have a lot of faith in mob psychology, and I think greed-crazed speculators will eventually do with numismatics what they did with the dot-coms. Again, I could be wrong, but I think it's a good bet.

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PAT: You've written many revealing Early Warning Report articles during the past year, things the mainstream press won't talk about, especially the impossibility of imposing democracy, a western concept, on an Islamic society. How can our readers subscribe to EWR, and how can they get back issues to bring them up to date on what the war is really all about?

RICHARD MAYBURY: We are presently running a special offer on our web site, www.chaostan.com, that includes a considerable discount off the normal subscription price, and off the back issues, too.

PAT: Yes, it is quite a discount. I've been getting EWR for 13 years, and never hesitate to recommend it, there is no other newsletter like it, especially in regard to the investment effects of the war. Thanks again for taking the time to meet with us.

RICHARD MAYBURY: Thank you, Pat, and you are right, everyone should learn all they can about this war, it will dominate the economy and the investment markets, probably for the rest of our lives. Get interested in precious metals, too. Europeans have been in this war a thousand years, and they know what happens. This is a big part of the reason they have a long tradition of continually accumulating gold, silver and platinum coins. A wise American will do the same.