BioTime Makes History with Announcement of First Stem Cell Spinal Cord Therapy Results

John Mauldin


As my regular readers know, I am heavily focused on the massive monetary policy errors that are being foisted on the world by central bankers. This is not going to end well. My letter this weekend will probably be one of the most controversial that I have ever written, and I will probably lose a few longtime readers from the Federal Reserve. (Yes, some of them actually read me, probably more for the humor than the instruction, and for talking about me around the water cooler).
 
For this week’s Outside the Box, I was actually planning to send along a piece by someone else who noted the outrageousness of Stanley Fischer’s interview last week and whose thoughts on it were similar to mine.

I may send that piece to you later, but today something more important was brought to my attention, and I decided that we could all use a little great news. But this is not just a feel-good story; it’s something that I and my friend Patrick Cox have been talking about and predicting for years. We are in the midst of the most marvelous medical transformations in the history of the world. Take every medical advance we have seen in the last 250 years and add all of them together, and they do not equal what we will see in the next 20 years. In 2036 we are going to look back at our lives today and realize that we were still living in the Stone Age as far as medicine is concerned. I am fully serious when I say that, and I comprehend the radical nature of such a statement, but I believe it with every fiber of my being.

So, for today’s Outside the Box, I have for you Patrick Cox’s latest weekly letter, telling his subscribers about some fantastic results from one of the researchers he has followed for almost 20 years, Dr. Mike West of BioTime (BTX).

For the first time ever, neuroscientists have treated a total quadriplegic (a 21-year-old young man) with stem cells, and he has substantially recovered the functions of his upper body only two months into the process. The patient himself thinks there is reason to believe (or he is at least hopeful) that there will be further positive developments. What this means is that, using pluripotent stem cells, the scientists have been able to not only help this patient’s severed nerves repair themselves, but they have also demonstrated the potential to accomplish the same sort of regenerative healing in every organ in our bodies. This result was not due to the skills of the surgeons; it was due to the power of this stem cell process that has been around for quite a few years but is just now getting around to being used.  (This is where I could launch into a five-page rant on the FDA, but I will forbear.)

Yes, I know this sounds like science fiction, but it is not only the Federal Reserve that is turning the world upside down.

I remember the first time I met Dr. Mike West. Our one-hour meeting lasted almost nine hours as we realized that we were essentially brothers in so many ways. It was Patrick Cox who introduced us. For those of you who are not aware, Patrick is one of my longtime best friends and is the author of the Transformational Technology Alert newsletter from Mauldin Economics. He focuses primarily on biotechnology but looks at all sorts of interesting companies and technologies that are going to transform our world. He and I spend a lot of time on the phone and in person talking about the changes that are coming.

Patrick is an old-fashioned polymath. The depth of his understanding of multiple disciplines sometimes staggers me. He has major scientists calling him, sharing their results, and asking him questions, hoping that he will point them to other research they haven’t come across so that they can improve what they are doing. I kid you not. This guy is at the center of a nexus of anti-aging researchers and biotechnologists that has few parallels. I hang around him for two reasons: he is a fascinating guy, and we really do like each other and have so much in common; and (selfishly) he is the guy who is getting me access to the researchers and programs and studies that are going to allow me to live longer. I will admit to being a guinea pig on a few projects that are noticeably making a difference in my life and the way I feel. I cannot publicly talk about those projects (at least, not for a long time) for the obvious reasons. But I can tell you that you need to plan to live longer than you expected.

You are welcome to write Patrick and me off as just two more crazy, overly optimistic guys who think that somehow or other we are going to be able to push back the hands of time. I will readily admit that there is a correlation between the age of a person who looks at anti-aging techniques and the power of his belief in them. The older we get, the more we want to try to live a little longer and healthier. And maybe I am just one of those guys, but I don’t think so. I am just as skeptical as anyone else about most of the “anti-aging” techniques and drugs and pills that are foisted on the public but that are a total waste of time and money. But every now and then, there are some real nuggets of true biomedical gold, backed up by gold-plated research.

Patrick writes a free weekly letter called the Tech Digest that some of you get but all of you should. You can subscribe to it for free by clicking on this link. In his most recent issue, he talks about an anti-aging therapy being studied at the Buck Institute, the world’s leading anti-aging scientific research center based in Marin County, California (just north of San Francisco). I have written about the Buck Institute before and have been out to visit with them and met the heads of their teams. They are doing some truly remarkable work.

They are using a molecule called rapamycin that was discovered on Easter Island. It has been used to target cancer and some other things, but the researchers have found that it also seems to slow down the aging process. Scientists treated a mouse that was about the human equivalent of 60 years old, which allowed it to live to the human equivalent of 140 years. Now, this was with a version of the drug that you would not put into humans except under dire circumstances. But as Patrick and I were shown last year when we visited Buck, you can take an analog of rapamycin (called a rapalog in their terminology) and get the positive effects of rapamycin without the unpleasant negative effects. It just involves moving a few atoms here and there to create the new rapalog. The potential for some of these rapalogs to cure a wide range of other diseases is very interesting, and these drugs are going to be available to you in the not-too-distant (as in, les s than 10 years) future. I will be begging to be part of the clinical studies.

Coincidentally, Dr. Mike West and Patrick Cox will both be at my home Sunday afternoon and into the evening and then for some meetings the next morning. Patrick and I both feel that Mike West may be the single most important human being on Planet Earth, because he sees a clear path to true regenerative medicine that has staggering implications for lifespans and health spans. This is not your random visionary. Mike has the credentials and the research to back up the developments he is talking about. And he does not talk about them nearly as much in public as we would like him to. What he and his colleagues are doing in their labs all over the world is truly marvelous.

I really urge you to subscribe to Patrick's free letter to at least familiarize yourself with what is happening on the technology front. And for those of you looking to diversify your portfolios into transformational biotechnological and other cutting-edge companies, you should subscribe to Patrick’s primary newsletter, Transformational Technology Alert.

As I have said many times before, the world is in a race between the dire results of mismanagement by governments, which is destroying wealth, and the efforts of humanity to create wealth and well-being. There are going to be unbelievable fortunes made in the next 20 years from the plethora of new technologies and companies being created. As investors and fiduciaries, we have to try to make sure that we and our clients get as much of our wealth as possible to the other side of the debacle that governments and central banks are creating so that we can enjoy what I believe is going to be the greatest bull market in the history of mankind.

And with that, I will hit the send button, turn you over to Patrick, and let him tell us about one of the most remarkable developments of our time.

Your not planning to go gently into that good night analyst,


John Mauldin, Editor
Outside the Box



BioTime Makes History with Announcement of First Stem Cell Spinal Cord Therapy Results


By Patrick Cox

This is an early edition of my weekly alert. USC neuroscientists just announced truly historic news about  BioTime’s (BTX) (*see disclosure below) stem cell platform. For the first time, a quadriplegic patient with complete injury to the spinal cord has substantially recovered.

I’ve told you this was coming, but I wanted to get more information to you today as news of this long-awaited breakthrough in neurobiology spreads through the media. In fact, the news is even better than the information released by the Keck Medical Center of USC would indicate… and you should understand why.

A press release of this nature must follow strict conventions enforced by the SEC and FDA as well as traditional scientific guidelines. For example, the news release describes this spinal cord treatment, an injection of stem cells into the area of spinal cord injury, as “a procedure that may improve neurological function.” Watch the following video, however, and the only reasonable conclusion you can make is that the procedure has already done that.

Watch the entire B-roll video that USC has made available to the media. B-roll video isn’t edited as a story, of course. Rather, it’s meant to supply short video snippets for reporters. Nevertheless, most of this material is worth watching as it provides more information than is available in the extremely reserved press release, which is available here.


Note that Charles Liu, MD, PhD, says that this procedure should change the way that scientists and doctors think about spinal cord injury, making it possible to aim for full functional recovery for the first time.

The part of the B-roll that really gets me is seeing Kris Boesen, the 21-year-old man who received the treatment, wipe tears from his eyes while expressing his gratitude toward the scientists who made it possible. Prior to receiving BioTime’s stem cell therapy, Boesen was completely paralyzed from the neck down and couldn’t even lift his hands to his face.

Note also that Boesen mentions that his recovery is ongoing—from the top of the spine downward. We don’t yet know if he will regain use of his lower body, but he reports positive indications.

The critical part of this story that is entirely left out of the press release, however, is that the patient would have made a far better recovery if he had been treated promptly. Boesen was injured on March 6 but could only communicate his desire to participate in the clinical trial through head movements. He had to undergo assisted breathing therapy before he could give verbal consent.

That means that about a month of serious scarification took place before 10 million AST-OPC1 cells were injected into Boesen’s cervical spine. Scarring is the enemy of nerve reattachment and the reason that this procedure is only being administered to patients who have recently suffered spinal cord injuries.

Nevertheless, those stem cells managed to sort out and self-assemble, connecting severed nerves correctly from the upper and lower sides of the injury. This is the true power of regenerative medicine. It doesn’t rely on the surgeon’s skill. It’s the patient’s genome and the biological wisdom inherent in pluripotent stem cells that affect the cure.

None of the scientists will publicly say this, but I’m positive that the results would have been much better and more rapid if Boesen had been given the injection immediately following his injury. Additionally, Boesen started his treatment in the middle of a dose-escalating study, so he was only given half of the full therapeutic dose. (A full therapeutic dose will probably be 20 million neural stem cells.) So by no means should we view his dramatic and life-changing results as typical of what would happen to a patient given optimal dosage promptly after injury.
 
What This Means for Investors

Essentially, Boesen’s ability to lift light weight overhead after a catastrophic spinal cord injury is proof that Dr. Michael West, co-CEO of BioTime, was right when he launched this project at Geron, which he founded in 1990. I first met Mike, by the way, shortly thereafter.

West did not run the company he founded but acted as Chief Scientific Officer so he could concentrate on the science and technology. West made many of the most critical and ground-breaking discoveries regarding stem cells. Though at the time his theories and predictions were much maligned by the medical mainstream, his pioneering work has revealed the potential of stem cell medicine and made Boesen’s restored functionality possible.

West’s decision to hand Geron’s management over to others may have not been the best decision though. Despite extremely promising data regarding the spinal cord therapy as well as the cancer vaccine, the company seemed to lose its way. This actually worked to benefit current BioTime investors, however, as they are the majority owner of subsidiary Asterias (AST).

Moreover, Geron’s most important intellectual property was acquired for a fraction of the cost spent to develop its massive library of patents as well as several important technologies now in or near human trials. For example, Asterias also has a cancer vaccine headed for clinical trials in the UK. I consider it superior to those now being developed by cancer companies that have ten times the capitalization of parent company, BioTime.

Stock traders are just not that clever as a group, so the capitalization of Asterias has rivaled BioTime’s, creating interesting arbitrage opportunities. This doesn’t make sense, of course, but success in the Asterias spinal cord trial should help smart investors begin to understand that the same scientific biotechnologies implemented by Keck Medical Center of USC are also operative in other BioTime therapies.

BioTime subsidiary CellCure NeuroSciences is developing retinal pigmented epithelial (RPE) stem cells for the treatment of eye disease with the support of the Israeli government. CellCure has been given permission to start the second patient cohort in a human trial of RPEs for age-related macular degeneration, for which there is currently no cure. I believe that spinal cord injury is actually a more difficult target than blindness, so I’m extremely optimistic that CellCure’s therapies will work for various diseases of the eye.

The spinal cord results should also focus attention on my favorite BioTime subsidiary, ReCyte. It controls some of the company’s most revolutionary stem cell technologies. Among them is endothelial precursor stem cell therapy, which has been shown to rejuvenate the cardiovascular system in animals. ReCyte also has brown fat cell precursors, which have the potential to fix most of the world’s obesity problems, end most type-2 diabetes, and prevent or repair cholesterol-related disorders. 

This is a good day. I’ve been telling people about the potential of regenerative medicine for decades, but until today, we’ve had no proof that it works in humans.
 
It’s a good time to be alive and investing.
 

(*Disclosure: The editors or principals of Mauldin Economics have a position in this security. They have no plans to sell their position at this time. There is an ethics policy in place that specifies subscribers must receive advance notice should the editors or principals intend to sell.)


Central Banks and Markets: Mind the Confidence Gap

The persistence of unconventional policy doesn’t seem to be boosting confidence among investors, even as it enriches them

By Richard Barley

EU flags outside the headquarters of the European Central Bank in Frankfurt at half-mast in July to commemorate the victims of the Bastille Day attack in Nice. Photo: Reuters


The usual relationship between central bankers and investors is that the former worry about the latter showing signs of “irrational exuberance.” Right now, though, it is investors who appear to be more worried than policy makers.

Repeatedly since the global financial crisis, central banks have mobilized in response to events that threatened to derail economies. The Federal Reserve has engaged in three rounds of quantitative easing; the European Central Bank has steadily ramped up its efforts to buoy the eurozone; the Bank of England is back in easing mode thanks to Brexit. Central bank balance sheets are only getting larger, and the spillover effects are being felt around the world.

Each individual response is understandable, but the cumulative effect is causing worry rather than exuberance. That is even as central-bank buying powers some markets to produce strong returns.

Take the European investment-grade corporate bond market as an example. At the end of 2015, return expectations were lackluster given the low level of yields. Citigroup C 0.32 % strategists forecast total returns of 1.8% for 2016; J.P. Morgan JPM 0.42 % analysts thought they would actually be negative.

The ECB’s corporate-bond purchase program has changed all that. It has driven yields to new historic lows, and in the process reduced funding costs to minimal levels. As a result, European corporate bonds have returned 6% year-to-date, according to Bank of America Merrill Lynch indexes.

Investors don’t appear terribly happy, however. Some complain about the way fundamental valuation is being subverted by the wall of central-bank cash; others fear the effects on liquidity. Deutsche Bank DB 1.43 % strategists say investors are being faced with a balancing act between an aging economic and financial cycle, particularly in the U.S., and “overwhelming” technical forces including central-bank buying. Citigroup strategists Monday put their concerns front-and-center in a presentation headlined “Please don’t buy so many bonds, Mr. Central Banker”.

This isn't to excuse all complaints from investors. They have no right to steady returns, nor to have investment decisions made easy for them. If investors feel aggrieved about central banks because their own funds are underperforming, that isn’t a good reason for criticizing policy makers.

But there are more valid worries. One is that while central bank efforts are proving enough to keep the economic show on the road, they aren’t doing more than that; the persistent downgrading of growth expectations and the constant refrain from policy makers themselves for politicians to take measures to boost growth sustainably are testament to that.

But, meanwhile, they are producing asset-price inflation. The fear is that the gap between asset prices and reality will close sharply as markets correct. It isn’t clear what might cause that or when: markets are still dancing to the tunes being played by central banks.

Unconventional policy in the immediate wake of the financial crisis undoubtedly helped to boost confidence in markets. But the longer unconventional policy persists, the less confidence it inspires.


Stockmarket returns in America

The long arm of the Fed

The central bank may exert a strange sway over stockmarket returns
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SPECULATORS have always sought ways to anticipate shifts in share prices. Once they scrutinised rail-carriage movements to get a jump on business trends. A recent paper* concludes that since 1994, a shrewd approach would have been to focus on the Federal Reserve.
It is no surprise that meetings of the Federal Open Market Committee (FOMC), in which Fed governors and regional Fed presidents set interest-rate policy, can trigger rises and falls in the stockmarket. But the study analyses a remarkable correlation. Usually every fortnight between FOMC meetings, fresh information is discussed in a gathering of Fed governors. It finds that all the gains in the stockmarket have occurred, on average, in the weeks of the FOMC meetings and the ones that involve the governors alone. A dollar invested only during those weeks would have grown more than 12-fold over the period. A dollar invested during other weeks would have lost half its value (see chart).

To check their results, the authors explored potential correlations such as company earnings and economic data. They found none that were as statistically significant. They speculate that there is a causal connection, selective disclosure, which they say is unfair. Those who attend the meetings have informal contact with the media, consultancies and financial firms, and eventually the content of those meetings makes its way to the stockmarket. Some of that is potentially valuable. The governors receive reports on the economy, banks and the financial markets, and often begin formulating what may be announced by the FOMC.
 
In 2012 an alleged leak from within the Fed to a publication, Medley Global Advisors, prompted an investigation by the Justice Department and Congress, which has yet to be concluded. The paper cites several non-nefarious reasons for those informal contacts: to extract information from market participants; to explain the Fed’s decision-making process; and to air competing views within the central bank. (Often board members also make their views known through speeches and interviews.)
 
There are questions about the significance of the correlation. Why did it not start before 1994?
 
Why does it not also apply to the bond market, which should be at least as sensitive to Fed policy? Why does the stockmarket always rise during the weeks in question, when Fed deliberations may cause a stockmarket sell-off? Whatever the answers, it shows what intriguing patterns data-crunching reveals.
 
It will also add to calls for more scrutiny of the Fed.
 
 
* “Stock Returns over the FOMC Cycle”, by Anna Cieslak, Duke University; Adair Morse, University of California, Berkeley, and National Bureau of Economic Research (NBER); and Annette Vissing-Jorgensen, University of California, Berkeley, NBER and the Centre for Economic and Policy Research

A Life of Meaning (Reason Not Required)

Robert A. Burton
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Credit Emily Berl for The New York Times                    

Few would disagree with two age-old truisms: We should strive to shape our lives with reason, and a central prerequisite for the good life is a personal sense of meaning. Ideally, the two should go hand in hand. We study the lessons of history, read philosophy, and seek out wise men with the hope of learning what matters. But this acquired knowledge is not the same as the felt sense that one’s life is meaningful.
 
Though impossible to accurately describe, we readily recognize meaning by its absence. Anyone who has experienced a bout of spontaneous depression knows the despair of feeling that nothing in life is worth pursuing and that no argument, no matter how inspired, can fill the void. Similarly, we are all familiar with the countless narratives of religious figures “losing their way” despite retaining their formal beliefs.
 
Any philosophical approach to values and purpose must acknowledge this fundamental neurological reality: a visceral sense of meaning in one’s life is an involuntary mental state that, like joy or disgust, is independent from and resistant to the best of arguments. If philosophy is to guide us to a better life, it must somehow bridge this gap between feeling and thought.
 
As neuroscience attempts to pound away at the idea of pure rationality and underscore the primacy of subliminal mental activity, I am increasingly drawn to the metaphor of idiosyncratic mental taste buds. From genetic factors (a single gene determines whether we find brussels sprouts bitter or sweet), to the cultural — considering fried grasshoppers and grilled monkey brains as delicacies — taste isn’t a matter of the best set of arguments. Anyone who’s tried to get his child to eat something she doesn’t like understands the limits of the most cunning of inducements. If thoughts, like foods, come in a dazzling variety of flavors, and personal taste trumps reason, philosophy — which relies most heavily on reason, and aims to foster the acquisition of objective knowledge — is in a bind.
 
Though we don’t know how thoughts are produced by the brain, it is hard to imagine having a thought unaccompanied by some associated mental state. We experience a thought as pleasing, revolting, correct, incorrect, obvious, stupid, brilliant, etc. Though integral to our thoughts, these qualifiers arise out of different brain mechanisms from those that produce the raw thought. As examples, feelings of disgust, empathy and knowing arise from different areas of brain and can be provoked de novo in volunteer subjects via electrical stimulation even when the subjects are unaware of having any concomitant thought at all. This chicken-and-egg relationship between feelings and thought can readily be seen in how we make moral judgments.
 
The psychologist Jonathan Haidt and others have shown that our moral stances strongly correlate with the degree of activation of those brain areas that generate a sense of disgust and revulsion.
 
According to Haidt, reason provides an after-the-fact explanation for moral decisions that are preceded by inherently reflexive positive or negative feelings. Think about your stance on pedophilia or denying a kidney transplant to a serial killer. Long before you have a moral position in place, each scenario will have already generated some degree of disgust or empathy.
 
Nowhere is this overpowering effect of biology on how we think more evident than in the paradox-plagued field of philosophy of mind. Even those cognitive scientists who have been most instrumental in uncovering our myriad innate biases continue to believe in the primacy of reason.
 
Consider the argument by the Yale psychology professor Paul Bloom that we do not have free will, but since we are capable of conscious rational deliberation, so are responsible for our actions.
 
Though deeply sympathetic to his conclusion, I am puzzled by his argument. The evidence most supportive of Bloom’s contention that we do not have free will also is compelling evidence against the notion of conscious rational deliberation. In the 1980s the neurophysiologist Ben Libet of the University of California, San Francisco, showed that the brain generates action-specific electrical activity nearly half a second before the subject consciously “decides” to initiate the action. Though interpretations of the results are the subject of considerable controversy, a number of subsequent studies have confirmed that the conscious sense of willing an action is preceded by subliminal brain activity likely to indicate that the brain is preparing to initiate the action.
 
An everyday example of this temporal illusion is seen in high-speed sports such as baseball and tennis. Though batters sense that they withhold deciding whether to swing until they see the ball near the plate, their swing actually begins shortly after the ball leaves the pitcher’s hand.

The same applies to tennis players returning a serve coming at them at 140 miles an hour. Initiation of the action precedes full conscious perception of seeing the approaching ball.
 
It is unlikely that there is any fundamental difference in how the brain initiates thought and action.
 
We learn the process of thinking incrementally, acquiring knowledge of language, logic, the external world and cultural norms and expectations just as we learn physical actions like talking, walking or playing the piano. If we conceptualize thought as a mental motor skill subject to the same temporal reorganization as high-speed sports, it’s hard to avoid the conclusion that the experience of free will (agency) and conscious rational deliberation are both biologically generated illusions.
 
What then are we to do with the concept of rationality? It would be a shame to get rid of a term useful in characterizing the clarity of a line of reasoning. Everyone understands that “being rational” implies trying to strip away biases and innate subjectivity in order to make the best possible decision. But what if the word rational leads us to scientifically unsound conclusions?
 
We describe the decision to jam on the brakes at the sight of a child running into the road as being rational, even when we understand that it is reflexive. However, few of us would say that a self-driving car performing the same maneuver was acting rationally. It’s pretty obvious that the difference in how we assign rationality isn’t dependent upon how decisions are made, but how we wish to see ourselves in relationship to the rest of the animal kingdom, and indeed even to plants and intelligent machines.
 
It is hard to imagine what would happen to modern thought if we abandoned the notion of rationality.
 
Scientific method might partly fill the void. With quantum physics, scientists have been able to validate counterintuitive theories. But empirical methods can’t help us with abstract, non-measurable, linguistically ambiguous concepts such as purpose and meaning. It’s no wonder that pre-eminent scientists like Stephen Hawking have gleefully declared, “Philosophy is dead.”
 
Going forward, the greatest challenge for philosophy will be to remain relevant while conceding that, like the rest of the animal kingdom, we are decision-making organisms rather than rational agents, and that our most logical conclusions about moral and ethical values can’t be scientifically verified nor guaranteed to pass the test of time. (The history of science should serve as a cautionary tale for anyone tempted to believe in the persistent truth of untestable ideas).

Weekend Edition: Doug Casey on Why the U.S. Global RoboCop Is Going to Self-Destruct


Editor's note: Today, we're sharing part two of a recent interview with Casey Research founder Doug Casey and Crisis Investing editor Nick Giambruno. If you missed the first part of this fascinating discussion, click here.

Below, the guys continue their talk on the U.S. military. As usual, Doug doesn't hold anything back as he gets to the root of America's problems…and what he would do to fix them if he were in charge…
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Nick Giambruno: The Democrats are perceived to be less warmongers than the Republicans, but is that really the case?

Doug Casey: Well, it’s said that the Democrats are the Welfare Party and the Republicans are the Warfare Party. But the only real difference between them is the rhetoric. LBJ was a Democrat, and he promoted a “guns-and-butter” policy—domestic welfare and a war in Vietnam. More recently, Reagan, the Bushes, Clinton, and Obama have all had active wars abroad and plenty of welfare spending at home… It no longer matters which party is elected because they’re both just arms of the Deep State. Which has a life of its own.

Hillary has surrounded herself with the same people who advised Baby Bush into the disastrous wars in Iraq and Afghanistan. She’s already hinted that she would increase meddling in Iran’s politics—which is really kicking a hornet’s nest. Despite her marginal health and advanced years, the woman seems charged with more testosterone than an angry chimpanzee.

There’s zero indication that Hillary would make any wise changes to Obama’s disastrous policies.

Trump, too, says he wants to spend even more on the military—although he appears less interventionist. But who can tell? Woodrow Wilson, Franklin Roosevelt, Lyndon Johnson, and the Baby Bush all talked a peaceful line before the election then proceeded to get the U.S. involved in major wars. Words are cheap, and politicians are chronic and enthusiastic liars.

In any event, military spending is a juggernaut. It’s both impossible, and meaningless, to try to trim 5 or 10% of fat. You can neither control nor rationalize it. Why not? The whole underlying philosophy of the so-called Defense Department—its pre-1947 name, the War Department, was so much more honest—is flawed, totally counterproductive, and so entrenched that it’s incapable of reform. It’s like a 100-story skyscraper. Sure, you can paint it a different color or change a few lighting fixtures. But if you try to change its basic structure, you’ll collapse it.

But, unfortunately, the problem goes much deeper even than that. It’s actually a crisis in civilization itself. By that, I mean there are only two ways for people to interact. Either voluntarily—that is, by persuading people to do something because it’s in their best interest…

Or else by force: You’ll do what I say, because I have a gun and you don’t. America was unique and special because it was conceived in individual liberty, and the State was strictly limited. But now, the U.S. is no different from any other country, and its people are more like the Romans of the third century than their forefathers of the Republic. Force has replaced liberty as a value.

Of course, the military is a blatant example of the use of force. In fact, the military doesn’t act to make the U.S. safe—it’s actively creating enemies around the world. Do you really think that people in Iraq, Afghanistan, and dozens of other countries have a good feeling when they see armed and aggressive American teenagers patrolling their streets, and breaking down their doors at midnight?

They like it about as much as we’d like uniformed Muslim teenagers doing the same thing here.

All these ridiculous claims of “nation building” are a fraud and a catastrophe. The U.S. installs some quisling puppet who proceeds to make himself and his cronies into billionaires. And then tries to replace the local culture with our own.

What set Western Civilization—and America, in particular—apart was the elevation of persuasion over force… That’s why we became the wealthiest society in history. But our bloated military, and all of our foreign adventures, are going to bankrupt us while making millions of enemies who want revenge.

Nick Giambruno: History hasn’t been kind to civilizations that overextend themselves militarily…

Doug Casey: No. One obvious example is the Romans. The size of their army quintupled between the reign of Augustus (around the birth of Jesus) and that of Diocletian, circa 300 A.D. (For a more detailed look at Rome, see this.) And by that time—thanks to the inflation necessary to pay for it all—soldiers were often paid in food and other commodities rather than Roman coinage. In fact, the only soldiers who were paid in gold were the barbarian mercenaries from the north—who couldn’t be forced to accept debased Roman coins. The U.S. has only been able to sustain its military because, since Nixon, our major export has been dollars—not aircraft, wheat, or computers as in the past.

Well, maybe we still export some social media and dating apps…

Since 1971, our main export has been, and is, dollars. But as confidence in the dollar evaporates—which is happening rapidly—the U.S. will be unable to finance this extravagance.

And, of course, there’s the example of the Soviets, even though they were doomed from the beginning. Their entire society was based on coercion. Their military spending, if Gorbachev’s figures are to be believed, ate up as much as $200 billion a year at a time when people were standing in line for bread. The USSR, like Nazi Germany, shows that while force can get you prominence for a while, the end result is always disaster.

Nick Giambruno: Some would argue that this military spending would be better spent on education, medical care, infrastructure, and the like…

Doug Casey: While it’s true this money would be marginally more productive if it was spent on infrastructure—better roads, faster trains, and the like—these arguments all miss the point. The government shouldn’t be doing any of those things—but that’s a big subject, for discussion another time.

The problem isn’t so much that military spending “crowds out” other programs. The real damage comes from the fact that it drains capital from individuals and businesses, many of whom would use it to create more capital, making society richer. Capital is destroyed by flying million-dollar drones around the Middle East to blow up mud huts.

It’s unethical because the people in those benighted countries pose very little threat to the U.S. It’s counterproductive because for every actual enemy we kill, we create 10 more. And it will wind up bankrupting the U.S., even if it doesn’t start World War 3.

It goes back to the fundamental differences we talked about earlier—persuasion and trade versus force. People everywhere in the world used to love and admire the U.S. We used to represent California girls, rock music, convertible cars, and general peace and prosperity. Now, we’re hated and despised. The world now associates us with drones, air strikes, regime change, invasion. And financial crises, a la 2007–2010.


Nick Giambruno: The U.S. military has a presence in more than 130 countries. It’s in nearly every country on Earth…

Doug Casey: Yes, military spending has a life of its own. It’s like a cancer at this point. It devours more than half (54%) of the federal budget’s “discretionary spending” each year. That’s to say the money that’s left over after Medicare, Social Security, Medicaid, and interest on the national debt.

And, of course, it’s all borrowed. It used to be the Chinese lent us the money, but they want out.

Now, the government has to sell the debt to the Federal Reserve—which will result in the dollar losing the rest of its value. The global RoboCop trying to police the affairs of the entire world is going to self-destruct.

The U.S. military is the world’s biggest consumer of capital and resources. Do we really want the world’s biggest consumer to be a gigantic killing machine that roams the world looking for trouble?

The military is already the world’s largest consumer of oil. And the number one buyer of Jack Daniels whiskey, of all things… A consequence of the fact so many veterans have PTSD? Very possibly.

That’s good for Jack Daniels shareholders, of course. But money means nothing to the Pentagon. It’s not just about $500 hammers and $640 toilet seats. Waste is endemic in trillion-dollar weapons systems, like the B-2, the F-35, the Littoral Combat Ship, Ford-class carriers, and numerous other systems. It’s too bad these weapons systems are analogous to cavalry before WW1 and battleships before WW2.

These weapons are obsolescent at best. They’re not assets, but liabilities. Carriers are sitting ducks to both ballistic missiles and Mach 5 sea-skimming cruise missiles, which are cheap enough to launch in swarms. Smaller-surface ships—which all cost a billion or more apiece—are extremely vulnerable to fast, very cheap patrol boats if they get anywhere near the shore. The Iranians recently demonstrated that.

Multibillion-dollar weapons systems are worse than useless against distributed warfare, guerrilla warfare, open-architecture warfare—the type of thing that so-called terrorists engage in. They’re of marginal value against conventional nation-states like China or Russia. The next war will likely emphasize cyberweapons, bioweapons, infrastructure attacks, robots, and cheap missiles and drones in massive, overwhelming quantities.

All our high-tech hardware will be exposed as obsolete junk. It’s of no real value, and it’s bankrupting the country—along with other stupid government programs.

Military spending is one more nail—a huge one—in the coffin of the American economy. If you’re bankrupt, you can forget about winning a war. The winner is always the economic powerhouse.

Nick Giambruno: So what should be done about all this? What would you do if you were in charge?

Doug Casey: The U.S. should withdraw its troops from all foreign bases. If you want to “support the troops,” that’s the biggest single thing to do. Stop intervening in foreign countries; it never works, and always creates new enemies. Change the whole thrust of foreign policy from alliances and aggression to free trade and strictly domestic defense. This would allow us to cut military spending, and the size of the military establishment, on the order of 90%. Most of the Pentagon, which houses a self-serving bureaucracy, should be boarded up and mothballed.

Abolish the CIA, whose record at predicting even major events—including the Korean War, the Cuban missile crisis, the Vietnamese Tet Offensive, the Iranian Revolution, the Soviet invasion of Afghanistan, the collapse of the USSR, and many, many others—is unblemished by success. Worse, the CIA, like the NSA, has become a costly and extremely dangerous Praetorian Guard.

Of course, before any of that could ever happen, a group of four-star generals would have a “sit-down” with me, and let me know how things are going to be. I suspect things have evolved far beyond easy political solutions.

Actually, because the public has such a love affair with the military, I wouldn’t doubt that, if we have a serious disaster in the U.S., the military might try to take over. I’m only surprised that both parties didn’t put up generals in the current election. Maybe next time…

If so, remember what Gibbon said: “The army is the only order of men sufficiently united to concur in the same sentiments, and powerful enough to impose them on the rest of their fellow-citizens; but the temper of soldiers, habituated at once to violence and to slavery, renders them very unfit guardians of a legal, or even a civil constitution.”

Nick Giambruno: Ok, so we are up the river, no matter who gets elected. Any recommendations?

Doug Casey: Well, there’s no denying the big defense companies have had a great run. If you own them, I think it would be prudent to cash in your chips at this point—before the next crisis gets underway. Once the government gravy train ends, these stocks could get cut in half. At this point, they’re the equivalent of buggy-whip makers.

Nick Giambruno: Thank you, Doug.

Doug Casey: My pleasure.


For a Long Life, Retire to Manhattan

By WILLARD SPIEGELMAN
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Credit Todd Heisler/The New York Times                    

 
In his famous essay about New York, E. B. White distinguished among three cities and three types of New Yorkers. The first two — the city belonging to people born here, and that of commuters who work here by day and leave by night — were, he said, less compelling than the third, “the city of final destination” for those who come here in hope and nervousness.
 
Much has changed since 1948, when White’s essay, “Here Is New York,” appeared. More has remained the same. The sidewalks have retained their beauty and ugliness. The city still draws its influx of eager young people fresh from the farm, the small town and the university, in search of excitement, employment or love.
 
But it is not only young people who see Manhattan, as Nick Carraway did, as the symbol “in its first wild promise of all the mystery and the beauty in the world.” It can also be the final destination (“final” in two ways) for people at the other end of the age spectrum. Since moving here part time in 2012 at age 67, I count myself among the senior eccentrics.
 
Most Americans with the urge to retire elsewhere go where children and grandchildren live. They flee from the North to the South or West in search of warmth, less expensive housing, lower taxes. They get rid of their snow shovels. They’ll never sand their driveways again.
 
Some of us do the opposite. Some of us suffer from reverse seasonal-affective disorder. We hate heat and welcome winter. If one can afford it (a big if), and tolerate serious downsizing, what could be more hospitable to an ambulatory senior citizen than Gotham?
Four years ago I bought a modest studio apartment, a combination hotel room and storage closet.
 
When I move here full time, next year, if luck is on my side, I may even get a real one-bedroom.
 
For the past 45 years I have lived in Dallas: in other words, Automobile America, Real America.
 
When I leave, I’ll give up my car. Here’s an unmanly, un-American confession: I’m looking forward to it. Driving closes the mind to everything except driving. Walking opens it. New York, especially Manhattan, leads all American cities in its population of carless drivers. I’ll use my feet, or take the subway, happily.
 
Retiring to Manhattan is an act of bravery. It also prepares you for the end. The anonymity of metropolitan life gets you ready for the anonymity of the grave. I find this comforting rather than macabre.
 
According to New York City’s Department for the Aging, the population of people over 60 in the city increased by more than 12 percent between 2000 and 2010, and is projected to grow by more than 35 percent by 2030, to 1.84 million people. We can attribute much of the growth to longevity, and some to people’s reluctance to give up on old ways, habits and locales. Certain Manhattan neighborhoods (I live in one on the Upper West Side) have already achieved NORC (“naturally occurring retirement community”) status.
 
But I imagine some of the increase is because of people like me, who have come here belatedly, enthusiastically.
 
When I was a student, I would drive in to New York to go to museums, restaurants, concerts. I took to Manhattan not only for what White called “the gift of loneliness and the gift of privacy” but also for their opposites, the gifts of public life, of crowds, the paradox of anonymous company, and the serendipity of street conversations with strangers.
 
The city remains completely indifferent to me, as it is to everyone. But without doing anything or talking to anyone, a walker on the street participates in the general excitement. Sitting at a diner and looking out, you see life itself on the other side of the window. Whatever your opinion of humanity, you have people to bewilder or console you. Manhattan reminds you of your utter irrelevance to the greater scheme of the universe.
 
Aging means giving up, de-accessioning, and knowing that wealth and worldly achievement count for little. Like urban life, it makes you feel a nobody. Paradoxically, it also makes you feel alive.
Conventional wisdom holds that New Yorkers, like Parisians, are snooty, too busy to be approachable. Walking with speed and determination, they cannot be stopped. I have never found the stereotypes accurate. Manhattan is a series of small villages. It replicates itself every five blocks or so. The shoemaker, neighborhood market, barber shop, dry cleaners, liquor store all become part of one’s daily drill. You make friends in the shops.
 
There’s an urban fable, the kind of thing you see written up in The New Yorker’s “Talk of the Town.” At the redoubtable Fairway Market on Broadway at 74th Street, the reporter overhears a woman examining string beans, entranced by their quality: “Such beans, I’ve never seen such gorgeous beans.” She then turns to him: “Have you ever seen such beans? You can’t get green beans like these where I live.”
 
Thinking that perhaps she has come from the Bronx, New Jersey or even farther way, he politely asks: “Where are you from, Madam?”
 
“I’m from 85th Street.”
 
Chance encounters brighten the day. They’re like little love affairs without consequences. They keep you alert. This is what any senior citizen needs. To paraphrase Samuel Johnson, when a man is tired of Manhattan, he is tired of life.