The Real Reason the Deep State Hates Russia… And What it Means for Gold

The Real Reason the Deep State Hates Russia… And What it Means for Gold

For years, the Deep State in the US—the permanently entrenched bureaucracy that runs the show no matter which party is in power—has labelled Russia “public enemy number one.”

To help us better understand the situation we’re turning to Doug Casey’s friend, Mark Gould.

Mark is an executive for a company in the oil industry, also working on several media projects. He also has 30 years of experience in Russian telecommunications as co-founder of CTC Media (previously NASDAQ:CTCM); and afterwards pioneering digital compression for TV (the core technology for video streaming) on the Soviet Satellite system, Moscow Global. Mark currently lives in Moscow.

International Man: Naturally, Americans have a lot of misconceptions about Russia. And that’s what we want to help clear up today. The importance of Russia to world affairs is simply too important to ignore or to not understand properly.

Also, this perception gap about Russia could be key to finding interesting investment opportunities—particularly in the natural resources space—that are off the radar of the mainstream financial media.

John McCain used to call Russia a gas station masquerading as a country. This is a childish and overly simplistic characterization. Others in the US media and government have made similar comments. What does the mainstream image of Russia get wrong?

Mark Gould: The US perspective is stuck in the 1960s and even earlier, going back to the 19th century.

Russia is a unique society. It’s a normal place, operating under its own rules and customs. Viewing it through the prism of the Soviet past is not concurrent with present realities. Russia is an independent state that has its own concerns, people, leaders, and problems just like America does. And the people are patriotic and so is the president.

Russia is charting its own path. It doesn’t want to be under the thumb of the IMF or the World Bank.

Americans think that Russians are warlike or devious, because they’re mixed Eurasian. But what they really are is descended from the Viking Rus that swept down from northern Europe all the way to Kiev and then founded Moscow in the 9th century.

So, it’s a group-oriented society, as the Vikings were. Despite the image of Vikings as warlike and terrible, they really weren’t. They were traders. Everybody pillaged, raped, and stole, but there’s also a lot of trading going on—despite what TV shows want to say it was all about.

It’s a real modern, upwardly mobile society. This whole image of oligarchs and kleptocrats, that really is a thing of the past. The overall ambiance would be shocking to most Americans. There are fancier and better restaurants, better fashions, beautiful women, less out-of-shape people, and so forth.

International Man: What makes the Deep State in the US so hostile to Russia?

Mark Gould: Conceptually and politically, sanctions don’t work as a political solution or a diplomatic solution.

It’s an international insult to suspend a fellow member of the G8 for an internal matter in what Russia considers its near-abroad the same way the US considers Cuba or Nicaragua its near-abroad. I’m referring to the situation with Crimea.

Whenever you screw around with another country’s access to the sea, it means war. Always. Not 99% of the time, not 98% of the time, but 100% of the time.

In 1965, Khrushchev gave back Crimea to Ukraine when he was drunk and likely because he had governed Ukraine under Stalin. In 2010 Ukraine extended Russia’s lease until 2042 for its Black Sea Fleet centered in the port city of Sevastopol in Crimea, which gives Russia access from the Black Sea to the Mediterranean and thus to the Atlantic.

Leaving Crimea in the hands of a hostile power is like a knife to Russia’s throat. And Russia responded accordingly.

NATO was looking for a reason to justify its continued existence after the end of World War II and after the end of the Cold War. And if you think there weren’t CIA operatives and State Department operatives fomenting for Ukraine to join NATO, you’re naïve.

International Man: Is there any hope for better relations, or are relations likely to get worse? And what are the consequences of that?

Mark Gould: I don’t think it’s going to get better fast. I think neoliberals and neoconservatives are the bane of existence of mankind, especially with the two-party system in America. So, I’m not sanguine about it at all.

I do not see it getting better unless some enlightened individual gets into office in the US and actually does the bold things that need to be done, and that is: End the sanctions, get back in communication, recognize that Russia has a human face, and let it rejoin the G8.

And don’t be afraid of the rise of Russia. It’s a normal thing.

I’m saying all that in the face of the fact that the entrenched military-industrial complex wants war, and I think a series of wars. In my entire life as an American, I think there’s maybe been eight years that there haven’t been wars. And that’s absurd.

Frankly, if you want to talk about the only adult in the room… Vladimir Putin is the only adult in the room.

A lot has been made about his being part of the KGB.

But the same people who complain about that don’t make a peep about George H.W. Bush, who was head of the CIA.

International Man: The Central Bank of Russia has been the world’s largest buyer of gold in recent years. What do they see coming, and what are they preparing for?

Mark Gould: Russia is hedging its bets. That’s my simple answer.

If you go back in history a little bit, you can get the Russian perspective on gold.

The Russian ruble has always been backed by gold. It’s not a new idea. And Russia has more reserves in gold that backs the currency than almost any other country.

Russia is also the world’s largest producer of oil; it’s the second largest producer of natural gas; it’s number two in sunflower oil.

Kicking Russia out of SWIFT or doing anything like that would be basically cutting off your nose to spite your own face. The US government would be complete idiots to do that.

Money is an idea backed by confidence, and gold has held that for many years for many people and for many countries.

Russia is hedging its bets. It’s building its own trade alliances. For example, recently Russia signed a deal with Huawei, the Chinese company that’s been banned from American markets.

International Man: Russia has been building alternatives to Western-dominated systems. This includes measures to protect itself from sanctions involving the US financial system, an alternative to the SWIFT system, alternative trade deals with other BRICS countries, the Eurasian Economic Union, and integration with China’s New Silk Road program. Where do you see this trend going?

Mark Gould: Well I think it’s going to continue.

Russia is building alliances; who doesn’t? To expect Russia not to look after its own economic self-interest is absurd. It’s the same thing the US or the UK or France or Indonesia do.

Russia’s building alliances with those countries—especially BRICS countries—that have a similar perspective.

I think the trend is going to continue. I don’t think it’s a hostile thing toward the US. Russia is just doing what it considers necessary to survive.

And US perspective is, “You don’t have any right to do that, because we are the arbiters of what is fair and correct in national self-interest for the world.” And that’s a pretty arrogant perspective.

So, I don’t see Russia disappearing or growing smaller. The US sanctions are actually encouraging the development of the agricultural, high-tech, and other aspects of the Russian economy.

International Man: By many valuation metrics, Russia is one of the cheapest markets in the world. What investment opportunities do you see in Russia?

Mark Gould: Mark Feldman is a friend and one of the partners in the Standard Capital Group in Moscow.

I asked him the other day, “What is your number-one recommendation to invest in?”

He said, “That’s an easy one. Russian government bonds.”

And then afterward he said, “Commodity-producing assets.”

Russian gold companies can be bought for four to five times EBITDA.

Or real estate, or retailers. You can still buy those at four to five times EBITDA also.

There’s only one public real estate company in Russia, called PIK; they build apartment buildings.

And there is Petropavlovsk, a publicly traded Russian gold company. All of these companies are good buys in this market.

International Man: Is there anything else you would like to add in regard to investing in Russia.

Mark Gould: The time to invest is when it’s still a mystery, and Russia has been a mystery way before Churchill came up with his, “Russia’s a riddle wrapped in a mystery inside an enigma.”

Going back to Voltaire, it was still a mystery. And Communism just made it even more confusing.

But the bottom line is that the right time to invest is while it’s still a mystery. If you come here, it’s like riding on a bus. You get on the bus, you get off the bus, and your eyes are opened. You go, “Oh my god, who knew you would find superstores bigger than any IKEA or Costco you’ve ever seen in America? Or that they run for blocks and blocks and blocks?”

The time is now. It’s not tomorrow, it’s now.

Reprinted with permission from International Man.

International Man