What should you do if he’s right?
“I’m going to go out on a limb: Let’s consider the possibility that the 2020s could actually be worse than the 1970s.” — Niall Ferguson, historian and author
Financial bubbles are popping all around us. This “everything bubble” consists of a bubble in stocks, bonds, and real estate. It is much larger than prior bubbles, such as the dot-com bubble and the mortgage bubble.
It is reasonable to expect the combined damage will be much greater than either of those. That is why financial historian Niall Ferguson fears the world is sleepwalking into a period of economic upheaval like the 1970s – only worse!
If Ferguson is right, what should you do? The same thing you would do if you had to live the 1970s over.
We have written about the conditions of the 1970s many times, including here. With the stock market falling in half, inflation roaring, and the purchasing power of the dollar tumbling, you would be well rewarded for choosing to own gold and silver for wealth protection and profit.
We publish this chart from time to time because it is an important depiction of the declining purchasing power of the dollar and the rising price of gold over the decades since the U.S. left the stability of gold in 1971. Note particularly the steepness of the fall in the dollar’s purchasing power during the 1970s, something being repeated with today’s inflation.
Among the factors contributing to this decade’s crisis are the damage from the COVID pandemic, inflation, and war, says Ferguson.
“You start with a plague — or something we don’t see very often, a really large global pandemic — which kills millions of people and disrupts the economy in all kinds of ways,” he says. “Then you hit it with a big monetary and fiscal policy shock. And then you add the geopolitical shock. At least in the 1970s, you had détente between superpowers. I don’t see much détente between Washington and Beijing right now. In fact, I see the opposite.”
Ferguson also pointed to the absence of any détente with Russia. Comparing the Ukraine war to the 1973 Arab-Israeli war, Ferguson said, “This war is lasting much longer than the 1973 war, so the energy shock it is causing is actually going to be more sustained.”
With the Biden administration escalating arms shipments to Ukraine, Russia thought it necessary just last week to publicly reiterate its nuclear doctrine even as it continues weaponizing its energy exports. Legendary investor Jeremy Grantham would agree with Ferguson’s “sleepwalking” characterization. Grantham built his reputation and fortune by identifying financial bubbles. Just as Ferguson says we are sleepwalking into an upheaval worse than the 1970s, Grantham describes financial conditions as something much bigger than the ending of a bubble. Instead, he calls it a “superbubble.”
“The current superbubble features the most dangerous mix of these factors in modern times: all three major asset classes – housing, stocks, and bonds…I expect the Fed to be behind the curve,” says Grantham. “It doesn’t really have a clue about market bubbles and the damage they do when they break.”
Ferguson likewise says this is no evidence that a new crisis can be avoided. “The ingredients of the 1970s are already in place,” he says.
Today’s superbubble is much bigger than anything that has happened before. It is already beginning to deflate, a process that typically picks up speed. It will be very painful for many people and will be a period of severe economic dislocation. As Grantham says, “If history repeats, the play will once again be a tragedy.”
We encourage all our friends and clients to take steps to secure their retirement, their prosperity, and their families with gold and silver.
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The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment advice and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.