Richard Russell has grown very vocally bearish in recent months. Earlier this year, Russell warned that the stock market was once again becoming grossly overvalued despite its relentless new highs.  He has maintained that the bear market never ended and that the world is far too indebted to exit the bear market.  He also believes the bear will not end until all fiat currencies have failed.  Although I disagree with him on many aspects of the micro I agree with his larger macro outlook.  This bear market is not over.  The secular bear market lives on.  Mr. Russell thinks we might be on the verge of a terrible collapse:

“We’re now in the process of building one of the largest tops in stock market history. The result, I think, will be the most disastrous bear market since the ‘30s, and maybe worse.

Question: “What could possibly be behind such a bear market?” you ask. “The stock market is stirring up optimism on a weekly, if not daily basis, by not falling apart.”

Answer: This is the “rest” or “dead zone” I was talking about. Bear markets don’t conclude in a day, a week or a month. Months will go by, often adding to the bulls’ optimism.

I think the key element behind this great bear market will be the complete destruction of all fiat currencies. This has been a long time coming. Fiat currencies are “wealth” created by man. They are created without sacrifice, without labor, without risk, and without sweat. Basically they are an immoral device, created by secretive bankers.

If you watch the figures carefully, you’ll note the subtle deterioration. For instance, the advance-decline ratio, although up slightly for the week, had a relatively weak performance with the Dow up several hundred points over the course of the week. And we broke the trendline in May (see the chart below showing the cumulative advance-decline line for NYSE Common Stock only, which is what we publish in our figures (courtesy of DecisionPoint — The vertical lines are Jan 2008, Jan 2009 and Jan 2010 as you move to the right on the chart.

My old friend, Bob Prechter, is talking about Dow 400. I used to think this was an absurd joke. I no longer think it’s a joke. The ultimate result will be a primary bear market shocking in duration and extent.

Gold: As for gold, its stellar performance goes on. This in the face of ominous warnings of various worried experts. On Friday, August gold rose to a new record high. The next step will be into the 1300s — point&figure upside objective is now 1310.

Gold shares are lagging bullion in this last move, not yet showing the break-out seen in the yellow metal.

The world (minus the US) is loading up with the yellow metal with banks running out of vault space. The great 10-year primary bull market is moving into its 11th year. The bull market in gold attests to the systematic decline in the value of the dollar compared with real money – gold.

One of the greatest modern traders, John Paulson, who made billions on the housing collapse, has, I understand, all his personal money in gold-related items. Many of my subscribers have now built gold profits beyond anything they have ever achieved before. I know at this point one could get itchy fingers thinking of the profits achievable by switching gold for fiat currency. I warn subscribers, stay on the yellow brick road. The big profits, the astounding profits, will accrue when gold finally bursts loose of its prejudices and freely expresses itself.

My advice now is to put as much of your money as you’re comfortable with in bullion coins. Remember the simple phrase that’s been around through years of history – “There’s no fever like gold fever.” Fiat money is doomed. Act on it.”

Source: Dow Theory Letters


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Greg Merrill

    Could not view pictures. Web page asked for login to dow theory letters. Might want to host pictures yourself.

  • Meg

    Fiat currency is only worth something because governments say it is…well guess what, gold is only worth something because people say it is. If you were stranded on an Island without food and water and had gold, it would be worthless.

  • MS

    There is too much optimism built into gold. I am going to build short position.

  • F. Beard

    “I think the key element behind this great bear market will be the complete destruction of all fiat currencies. This has been a long time coming. Fiat currencies are “wealth” created by man. They are created without sacrifice, without labor, without risk, and without sweat. Basically they are an immoral device, created by secretive bankers.” Richard Russell

    And gold as money is barbaric and the mining of it kills people and ruins the environment. Also, the banksters and PTB hold vast quantities of it. Shall we play their game or our own? The solution is not gold, silver or fiat (except in the case of government monies) but genuine liberty in money creation, usage and acceptance. So what if fiat fails? Is the only alternative precious metals? Are we Americans or future serfs?

    Let’s stick it to the barbarous, idolatrous, tyrannical PTB and allow alternative money solutions.

  • F. Beard

    So what if fiat fails? FB

    I’ve already explained via MV = PY why this is entirely preventable if reserve requirements were increased, preferably to 100%. So if fiat is destroyed, it will be a deliberate act (of treason?).

  • boatman

    i love it when the people in their safe government jobs, and those in banking(not singling u out personally IB, and i’m done trying to save you from the “heaters”) and those up some in the big corporations say “this is just alittle correction”, “we came back after the dotcom popped”.and they look at this bailedout,propped up,out of gas, 0% fed,stimulated DOW retrace of halfway back to the 14,400 high, and buy BP cause its down 50%.

    this isn’t kansas anymore………hellloooo

    buy your dow and short the gold, ignore russell and TPC,……and too many more to name……..hey just turn it over to bob doll at Blackrock, he can get you handled i promise.

    go ahead,jump…’re tieing up traffic on the bridge, and i’m trying to go fishing.

  • Tom from Michigan

    Gold and tulip bulbs… where can I get them?

  • F. Beard

    Hey boatman,

    Are you referring to me? Sure gold is in a bubble and I could probably make some money off it. But I refuse. Not because I believe in fiat but because I refuse to be an idiot and kill people in Africa and destroy the environment in the Amazon.

    At some point moral fundamentals matter. I say at every point.

  • boatman

    no not directly at you at all…just cause my comment ended up below yours…yours wasn’t even there when my one finger typing started….if the shoe fits i don’t know..

    i’ve read your stuff,i just don’t agree, and have refrianed from commenting directly to you on MANY places you go…… that ok with you?

    i’ve wasted enough time debating with people……i’m not interested in it….find someone else.

    just say your piece and leave me out of it as i do you.

  • F. Beard

    Well, at least the tulip bulbs are edible and tulips have a beauty that surpasses gold.

  • F. Beard

    i’ve read your stuff,i just don’t agree, and have refrianed from commenting directly to you on MANY places you go…… that ok with you? boatman

    Sure pal. I apologize for misinterpreting your comment. Truth be told, my conscience did warn me. I am truly sorry.

    As for commenting directly to me, I appreciate feedback. We are all hear to learn, aren’t we? I doubt you could insult me worse than Angry MBA has anyway. :)

    As for debating, well I do restrain myself somewhat according to:

    When there are many words, transgression is unavoidable,But he who restrains his lips is wise. Proverbs 10:19


  • gardena buddha

    I am definitely a buyer at Dow 400, but canned food and munitions might be in larger demand :)

  • boatman

    i forgive you F and it takes a real man to say he’s sorry.believe me i can jump to a conclusion too.

    i admire your morality and believe me i have mine.many years ago i went to jail more than once for it…..on some level i grew out of trying to save the world.

    at 61 i am not in a position financially to make alot of moral decisions when it comes to my finances.its my choice.

    for morality i repair real old poor peoples houses for free occasionaly.mostly the people that didn’t discipline their children and they have left them to fend for themselves.

    good day to you.

  • F. Beard

    Thanks and good day to you. You are a far better man than me.

  • Arsene Holmes

    Pardon my ignorance but what is or who are PTB

  • boatman

    gardena – i’m not much of a bunker guy, but i stumbled on this really good(no bisphenol A or MSG) canned food and have bought some for long boat trips….it tastes like my grandma made it:


  • Mark my words

    Dear Meg…your dollars would be worthless too dumbass!
    Gold has never been worth nothing, but plenty of fiat paper money has wound up that way.

  • F. Beard

    Pardon my ignorance but what is or who are PTB Arsene Holmes

    Powers That Be

    Generally I think these are people in power who have a vested interest in the money-for-debt paradigm. It could be the old money crowd, bankers, central bankers, hired intellectuals, etc. I don’t concern myself too much with them since I think we are engaged in a battle of ideas not persons. I should hope it stays that way.

  • David W. Young

    Since we will still need media of exchange when the currencies fail, we will likely have a new currency, U.S. and several global reserve, that are backed by a basket of tangible assets. Gold, silver, platinum, oil, uranium, who knows but as fiat bites the dust, as it has throughout history as governments print money with nothing behind it, there must be an underlying value to the specie of the realm or citizens will not take it in payment as this Greater Depression causes more and more economic pain. Interesting, but dangerous times we live in. Watch for those in power trying one last time to take your constitutional rights in the name of national security. THROW THE BUMS OUT FIRST, SO THIS POSSIBILITY DOESN’T HAPPEN. Sage of Wexford

  • Silver Dollar Coins

    Everything would be worthless except food and water when youre alone on an island! But that is NO reason not to buy gold and silver where you are at. Are you on a deserted island without food or water? NO! If you were, youd need a rescue (of which you could then use any gold to pay your rescuers). Since youre not, BUY GOLD and pre-1965 silver dollar coins.

  • F. Beard

    “Gold has never been worth nothing,…” mark my words

    ‘They will fling their silver into the streets and their gold will become an abhorrent thing; their silver and their gold will not be able to deliver them in the day of the wrath of the LORD. They cannot satisfy their appetite nor can they fill their stomachs, for their iniquity has become an occasion of stumbling. Ezekiel 7:19

    Apparently that was fulfilled when the Babylonians took Jerusalem. And BTW, Jerusalem was given to the Babylonians because the Jews first released their illegally held Hebrew (debt?) slaves only to reinslave them when they thought the danger of the Babylonians had passed. (Jeremiah 34:8-22)

    I am not pro-fiat just anti-gold as money. Still, it pays to hedge and barbaric times may be coming so some gold in possession would be wise, I suppose.

  • SMc

    An open letter to everyone on this blog post…

    So let me get this straight. You buy gold. You and maybe 1% of the world buy gold.

    Ok. Now disaster comes, currencies collapse. I have a garden and food… and a gun because that’s what I’ve always had.

    Now, you want some of my food to feed your family. You offer me gold… At THAT moment, which is more valuable the gold or the food?

    And let me ask you this: if gold is worth 2-3K per ounce do you really expect me to make change once you flash that gold coin? How can you prove your gold is real?

    Gold has a lot of problems in the day to day world. That’s why money as we know it was invented — It’s an agreement between civilized members of a society so you don’t have to barter for every item you need or want in life.

    THE best thing to own in an epic collapse of society is land, guns and ammo. Gold will be worthless to the majority of people if a collapse on the scale many of you suggest happens.

  • boatman

    i totally agree with you, in the armegeddon scenario (unlikly but not impossible) bullets would be better to trade than gold.

    i’m not interesterd in living the rest of my life guarding a garden in the dark,i’d just as soon be vaporized, but i am not young.

    its just an investment right now.because it’s price will go up for whatever reason there are many and yes some are stupid but it doesn’t mean they are not a reason.

    if you think all is well and we are coming out of this crisis right now, don’t buy AAPL.

  • F. Beard

    THE best thing to own in an epic collapse of society is land, guns and ammo. Gold will be worthless to the majority of people if a collapse on the scale many of you suggest happens. SMc

    OK, good. So that basically means that gold is useless as money except to allow central banks who own vast amounts of it to remain in control in case their fiat fails. I’ll have nothing to do with that. I’d rather buy copper-coated lead instead.

  • Mike Purling

    What you want to have if paper money collapses is lots of debt. Max out your credit cards to buy gold and silver coins and get bigger loans on your house. When the paper money collapses you can pay off your debt with cheap paper money. That is what the governments will do with their debt.

  • In Banking

    I stopped reading at “DOW 400″….does anyone really believe the market will lose 97% of its value???? Will all of a sudden everything society has accomplished become completely worthless without some catastrophic environmental event?? Will we stop driving cars and running power plants and fertilizing crops just because??

    If so, I’d say forget buying gold, guns, or land – instead go get a free library card and a paper bag, breathe deeply and slowly into the bag, then do some reading. Or just recall the most recent REAL disasters (9/11, Katrina, Thailand, Haiti, etc) and realize how people joined together in our times of greatest need.

  • F. Beard

    Max out your credit cards to buy gold and silver coins and get bigger loans on your house. When the paper money collapses you can pay off your debt with cheap paper money. Mike Purling

    I suspect you’ll be caught in a trap, friend. Central banks can deflate the money supply as well as they can inflate it. You’ll end up owing expensive debt and they’ll buy your gold and silver back too at bargain prices. The banks are expert at wealth extraction; they’ve been doing it for centuries.

    “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.” attributed to Thomas Jefferson.

  • baffled

    dow 400 would mean the end of civilised society and anarchy. What would be the point of owning gold under those circumstances? Its not as if you would be in a position to buy food/shelter from someone in lieu of gold, when might becomes right and its every person for themselves.

  • fireball

    how about possession of gold and silver, a few good guns, plenty of food, plenty of ammo, and some land while trading and investing and hoping for the best. or at least hoping for something less than armegeddon.
    with a total fiat collapse maybe consider computer/cyber credits. talk about control and no privacy. never waste a crises.

  • TPC

    I agree. Mr. Russell has gotten very extreme here. Could have meant Dow 4,000? Still extreme in my opinion. If we miraculously revisit 666 it would be a generational double bottom. Personally, I doubt we get there. More likely a slow grind lower (and at times higher) for a few years as we digest the excesses.

  • F. Beard

    … with a total fiat collapse maybe consider computer/cyber credits. talk about control and no privacy. never waste a crises. fireball

    Not necessarily; I am no encryption expert but there is at least one form of encryption(one time pad) that is in principle UNBREAKABLE. Still, it would be quite a challenge to design a cyber-money system that a determined and brutal government could not penetrate. But who is the government? Shouldn’t it be US and our elected representatives? May it be so.

  • Blobby

    Gold was debased as a currency when the Spanish flooded the market with South American gold.

    Gold is also a fiat currency IMO.

    Primary produce is where its at. Land, crops, transport, energy, etc.

    Mind you a shotgun can purchase many items at very low cost!

  • Arsene Holmes

    Thank you

  • cswake

    I definitely will agree with you on this one. Fiat currency is based upon trust, and they collapse due to the mismanagement of those who control it. Since there is only the law that prevents such misdeeds, it is only a matter of time for those in power to abuse the public power that is bestowed upon them.

  • In Banking

    Yea, I wondered if that was a typo. Either DOW 4000 or S&P 400 PERHAPS but still quite unlikely. I don’t see a reason why we need to make new lows more than 30% below the previous lows at this stage. I agree on the slow grind down there and a double bottom isn’t all that unlikely, but I also see it being just as likely that we oscillate between 9000 and 10,500 as we have been for the past few months.

    Its telling that he’s playing up physical bullion coins – probably the most expensive way to get gold exposure beyond buying jewelry. Moreover, if the DOW was overvalued at 9000, how severely undervalued would it be at 400??

    I’ve never seen a “good investment” that’s been peddled all over the place. If was such a great investment, wouldn’t you accumulate as much as possible and keep it a secret rather than potentially make it cost you even more?

  • fireball

    i was thinking of government run, issued, overseen every step of each transaction “currency”. you know how red-faced politicians get over taxes. the socialist leanings of today’s governments are outraged by privacy.
    it isn’t fair for business to run to places like panama for tax relief. many bitch and moan about “american jobs” leaving. they ignore taxation, regulation and union demands as part of the cause. last i checked business exists to turn a profit, period.
    if the expatriation numbers are true that have been running in articles lately the u.s. may run out of other peoples money sooner than expected.

    i like many americans today don’t feel very represented.
    often with great seriousness and conviction it is said more lives have been lost in conflicts over religion and so on. this is not true. more lives have been extinguished by governments consolidating or clinging to power than any other cause it appears to me.

    government seems benevolent until you find it decides you are on the wrong side of an issue. our government seems to be devolving from a constitutional republic into some sort of socialist democracy. mob rule from a nation of law. as more and more leave i can see government growing more determined and more brutal.

  • scharfy

    Fiat currencies are only a scorecard. They aren’t perfect. And they “print” an extra 2% or so a year. But they are easily tracked, leave a paper trail, can be transferred on the flip of a switch 15,000 miles. So the amount of increased productivity we get from using the dollar – which again is just a purchasing power clearinghouse – would probably be lost by going to a “sound money” system.

    Perfect? No.

    But if something had to be verified, stored, mined, or physically change hands in order for trade to occur, that would be a horribly inefficient system. If a gold-backed currency gave us the ability to print more currency, but only if we found more gold – then would our government allocate resources to mine gold, ostensibly to make us richer?. That makes no sense. What a horrible misallocation of resources. 1000 years ago people built armies to invade the other countries and get their gold. And productive people died. And cities were leveled. To become rich. That is asinine. What a way to lower the standard of living. The monetary base of a modern economy should in no way be determined by how much metal one owns. (that being said, we have to always be vigilant against abuses by our politicians) It should be determined by how many goods & services one produces. That is hallmark of wealth. Making stuff.

    Trust in the dollar allows us to continue doing what we do and making stuff. It hasn’t been abused bad enough to attempt to dismantle it. Fix it, yes. Dismantling would be bad idea.

    Here’s the good news, that productivity and wealth, cannot be destroyed by monetary shenanigans. That’s right, its here to stay. The technology in a Boeing 747, or an Ipod, or Google software, or a BMW – is a permanent fixture. Its called human progress. You can print 10 trillion dollars and we still can get per/acre yields relative to an hour of labor on crops like never before in history. Even the home we built that no one paid for is a real asset. Look at it, touch it. Only debt being destroyed remains. Who’s gonna take the loss in perceived purchasing power? But the world will not end over some bad mortgages. The technology, productivity and development is here and very real. And unless the Nazi’s start firebombing or a meteor hits the Earth, or we run out of oil suddenly (not gonna happen peak oil guys- we’ll have 50 years of lead-time) then expect progress to continue.

    Final point. A nation of spenders will always be more productive than a nation of savers. Think of the Japan, where people have literally tucked their money under a mattress for 30 years. Think of the compounding effect that has on an economy, where every year ,3-5% of the earned purchasing power is sucked out and put under a mattress. Business’s can’t open because demand ins’t there. Stable but unproductive.

    The flip side of that is America, where we save 0%, and often go broke, get levered up in debt, bailouts, massive booms, busts and chaos. Very unstable. But tons of productivity. Capitalism.

  • F. Beard

    The flip side of that is America, where we save 0%, and often go broke, get levered up in debt, bailouts, massive booms, busts and chaos. Very unstable. But tons of productivity. Capitalism. scharfy

    I think you’ve nailed it. But you left out theft of purchasing power via fractional reserve lending; a niggling detail to some since the system has created great wealth, as you say, but still bothersome given the current system’s instability and The Great Depression and WWII that it caused.

    Trust in the dollar allows us to continue doing what we do and making stuff. It hasn’t been abused bad enough to attempt to dismantle it. Fix it, yes. Dismantling would be bad idea. scharfy

    I don’t propose to dismantle it other than remove government privilege for it such as legal tender laws, the FDIC etc., so that genuine alternatives such as common stock as money might compete with it. I agree gold as money is barbaric and worse but it should be allowed in a free market too if for no other reason than to make an object lesson of the gold worshipers.

  • Bob Barker

    Not a typo. Prechter is calling for Dow 400. As bearish as I am, even that is a bit much in my opinion. Even with the credit hyperdeflation, there’s been enough inflation throughout the years that nominally it’s just not possible.

  • Angry MBA

    does anyone really believe the market will lose 97% of its value?

    Apparently so. It’s so irrational, it’s not even worth talking about.

    Unless the topic is Italian cars, references to “fiat” this and “fiat” that serve as a big yellow caution sign that reads “IRRATIONAL DISCUSSION AHEAD”. Tuning out is usually the best defense.

  • F. Beard

    Unless the topic is Italian cars, references to “fiat” this and “fiat” that serve as a big yellow caution sign that reads “IRRATIONAL DISCUSSION AHEAD”. Tuning out is usually the best defense. Angry MBA

    [fiat-on] I hate to agree with you Angry but you appear to be correct. [fiat-off]

  • scharfy

    But you left out theft of purchasing power via fractional reserve lending; F beard

    Yes. The current system taxes its citizenry with interest on money created. Stipulated. In our system, money comes into the system in the form of credit. Thus the federal reserve allows private banks to “determine” who gets a loan, and for what, and thusly “who creates money”. So, in a sense, private banking in our economy is subsidized industry. They get paid to determine who can afford a loan. They are the stewards of “new money” coming into the system.

    I’m granting you all this point. Banks are allowed to create money. In theory they have their finger on the pulse of private industry. Home, business, car, mortgage and revolving credit lines all originate at our banks.

    But, the very same system, flaws and all, has created a mechanism for trade and exchange that boggles the mind.

    To wit, I can apply for a credit card based on my FICO score, then order a pair of Ski’s from Germany, pay online with the credit card#, its converted to Euro’s at some bank at the Ski shop gets his Euro’s – all in 30 minutes, and cleared by a trusted 3rd party.

    I can vacation in Mexico, go to an ATM withdraw their local currency and have in subtracted from my account in dollars.

    We take these things for granted but its amazing compared to how trade was done even 50 years ago.

    I’m not disputing your point, just arguing that the “instability” and “unfairness” of the current system cannot be evaluated in an ideological vacuum. It must we weighed against the productivity of the system, which is exceedingly high in my view.

  • F. Beard

    “I’m not disputing your point, just arguing that the “instability” and “unfairness” of the current system cannot be evaluated in an ideological vacuum.” scharfy

    I did not say “unfair”, I said theft. Life may often be unfair with little to be done about it. But theft is another matter altogether. Moreover, theft from the poor is an abomination, I’d bet.

    It must we weighed against the productivity of the system, which is exceedingly high in my view. scharfy

    As I said, I do not wish to dismantle the system, merely allow private moneys to compete on a level playing field with it. Of course government money is a special case but it should only be legal tender for government debts not private ones.

    I think there is a solution that would allow a vast improvement in the way we do money. Seriously, it will kill a lot of US one day if we don’t. It already has.

  • dwestall

    There is (was) trust in the Dollar when it was worth something. The Federal Government has racked up over 100 Trillion in debt of which the talking heads only admit to 13 trillion. It is impossible to pay for that much debt even if the public is taxed at 100%. Then there is unfunded State pension funds and municipal debt to add onto the Federal mess. Yes we may still have our technology, but who will be able to continue producing it if there is nothing of value to pay for it. Say good by to productivity. Who can be productive if inflation is destroying their wages faster than they can earn them.

    The Dollars days are numbered, as are many nations currency. The only reason it is still afloat is because of its world reserve currency status. So, we are the safest of the worst currencies in existence. A new world reserve currency will be created within the next few years, at or around the time debtor Nations like us inflate their debts away. Of course that screws almost ever citizen except those that have something of value to exchange for the new currency. That will be gold, silver and other commodities that will not lose their value to inflation.

    Guns & ammo could become as valuable as gold and silver if the transition doesn’t find a way to keep the majority of citizens from becoming penniless.

  • Paul

    “As more and more leave…” What planet is this? Where would people go? China, that great constitutional republic. And where is this shift to “socialist democracy”?? Mob rule? Do you ever bother with facts or are you just watching Fox news all the time?

    Have you ever heard the expression “Chimerica”? Do you know what the US economy is actually about? Where do you shoes come from? It used to be a military-industrical complex back when we had the soviet union to be afraid of. Now’s it’s chimerica.

    In other words, this country has long been a state capitalist paradise. Wake up.

  • In Banking

    Its absurd. Look at the DOW components and tell me if you think companies like Exxon, McDonalds, Coca Cola, Johnson & Johnson, Catepillar, Kraft, Walmart, etc will lose 97% of their value!! So instead of buying gas, food, medicine, clothes, or a roof over your head – people will instead buy….GOLD COINS???? Are we all turning into the Pirates of the Caribbean or something???

    Blatant fear mongering is a horrible way to make a buck. “Investment” advice like this is like the lotto – a tax on the mathematically challenged.

  • scharfy

    We must be vigilant.

    However before anyone walks off the ledge, check out the following chart of REAL GDP growth in the US, over the last 200 years. Notable quote:

    Over these years we had violent financial crashes of various types, bank panics, piles of recessions and a huge depression, many foreign wars and one enormous domestic war, had a central bank and didn’t, were on the gold standard and weren’t, had governments topple in scandal and multiple leaders assassinated, and what did it all amount to in the medium to long run? In per-capita income terms: Nothing. The overall trend does not bend or shift. Every bad year was followed by a good year that returned us to trend. The US average growth rate of real per capita incomes over the last 190 years has been 1.8% a year, and the same rate over the last 10 years has been…. 1.8% a year. Stare at that graph: The Great Depression was traumatic in countless ways, but astonishingly, it’s not clear that we are any worse off today than we would be if the whole thing never occurred. Anyone who made such a claim in the 1930s would have been scoffed at, but that’s what happened.

  • scharfy

    meant REAL GDP per capita. big difference. Production per person

  • F. Beard

    Yeah, the system works on average. But WWIII will not spare the US like WWII did. Will that warning go unheeded? The boom-bust cycle has gotten too dangerous. All I ask is that alternatives be allowed. I’m pretty dang sure that common stock would be the ideal money form if it were allowed to compete on a level playing field with FRNs. But even if I’m wrong, the country has prospered without a government backed central bank before. Localized FRL would not be near as dangerous as centralized FRL is.

  • Juno

    @Scharfy, nice chart, but I recall my old physical chemistry prof saying to me about charts “log v log” is a lie. Your chart is half log, half lie too maybe? Your chart would look more like the painful side of a huge wave if it were linear. Without the crest. Lets hope it doesn’t roll over on itself and take us under! I like the biblical references mentioned elsewhere. They perhaps give an insight into the mindset of the average Joe in the US, — hopelessness in our ability to stop the inevitable, whatever that may be. As regards to Gold v. Food/guns? Well i’ll take the gold now, sell as it rises and buy land. My own personal hope is that the US currency is dropped as the reserve and a basket of currencies takes over. A little dose of humble pie and a bit of elbow grease won’t hurt the American public, in fact it will make them stronger and re-instill the “American Dream” ideals of long ago (hard work = prosperity). The current crop of young americans (and Western Countries) have the “I deserve” attitude, which really makes me sick. Ps: I am an X-gen-ner, already sound like my Dad, whoa…

  • TOM MI

    I lived through the gold medal winning Hungarian Hyper-Inflation in 1945-46. In July, 1946 I was a 12 years old multi-billionaire! 1 kilo bread cost 5billion 860million pengo, (the Hungarian monetary unit at the time). The DAILY inflation rate was 300%, so the above price was really a momentary snap-shot. A 12 years old boy easily could have, for pocket money, the price of 1 kilo of bread. — You could not get anything for money, generally commerce was barter; you just had to find the person who needed your offer in exchange of your purchase. As an example: my mother’s Boesendorfer baby grand piano was bartered for a dozen of socks, a dozen of underpants and a dozen of shirts; by the way Ludwig v. Beethoven played on Boesendorfer pianos. — Even a gun owning farmer has to buy supplies every once in a while and gold is certainly more welcome than toilet paper. Will he get the fair value for his gold? Well, he may get more or may get less. Prices will be more than ever the function of PERSONAL supply and demand.

  • scharfy


    Thanx for the reply.

    Yea – a chart is just a chart, but it does speak to a larger trend in my view. In linear format it would look like a giant exponential wave up that is bound to crash.. ha ha.

    Anyone, while I’m waxing philosophical instead of working – here’s a thought on “generational differences” Every generation is spoiled relative to the previous one. The more things change, the more they stay the same.

    Anyway, the spoiled millennials (gen y) (1980-2000) or so, will be the ones to save us. Heres why. They are efficiency experts. They were born into a world with too much shit. They know how to work smart, but not hard.

    We don’t need more stuff, we need the stuff we have distributed better, and smarter. We don’t need more info, we need better info. Not more Gov, better gov. We don’t need a bigger house, but a better one. They laugh at the Baby Boomers incessant desire to make more and more shit with no precision, and say no no no!! Just going to work 9 to 5 isn’t productivity! Productivity is productivity!!! Their coddled, spoiled asses will change the world without leaving their X-box. (exaggeration but ya get the point)


  • Juno

    Yes, the little buggers will (when the SHTF) probably be able to coax their broke parents into plowing the land for their crops while they sit and play the X-box :) . Peace back.

  • Anne

    @markmy words. You call someone a dumb ass but use a double negative. ‘Gold has never been worth nothing’ as you say means it is worth something. Watch whom you call dumb–it’s YOU.

  • Conrad

    When I traveled in Denmark last Fall everything cost 2 to 3 times as much (in dollars of course) as it does here. An ordinary good restaurant meal would cost $120 instead of $40. Admission to a small museum would cost $10 instead of $2 to $4 here. A dollar store (i.e., $1) watch would cost $5 to $10 at their equivalent junky store. A music CD would cost $25 or more.

    When I returned I felt rich because everything is much cheaper here. The discrepancy between here and Denmark makes no sense. It highlights the question: what IS a dollar?

    It is an idea of value and it is impalpable. Ideas change from place to place and time to time. Ideas become worthless for many different reasons. The fiat dollar is the idea of the US Government. How much is that worth?

    I know my neighbors somewhat believe in the ideas of the US Government. For the time being. How much longer can this go on? At least Dubya is gone.

    It is clear enough why the far right buys gold. They passionately hate the government and its ideas.

  • boatman

    if figured 400 was a typo-supposed to be 4000……geez not even me that bearish….i won’t go 5000 actually…… but almost.

  • ’33 St Gaudens

    So would fiat paper……………….

  • ’33 St Gaudens

    Cool, build a SHORT, as long as you have a LONG to offset your dowside.

  • fireball

    most expats i read about are heading to south or central america. some seem to like new zealand. however i do wonder if any destination is better. i guess each decides what trade-offs are acceptable.
    no i rarely have time for fox or any of the other “media”.
    depends on which shoes i’m wearing. the cheap ones came from china.
    my conclusions are from simple observation. it looks to me like the people have learned to vote for largess. pure democracy is majority rule. i did not say we are quite there yet, just that we are degenerating to it. if we sink that far it will be short term as something more totalitarian is formed. perhaps i should pay more attention to fox. any others you really dislike. i might get a kick out of them.
    no as the country shifts left i do not know what it is about anymore. when i was younger i thought i did. i guess it is distasteful to a liberal but i believed it was about work hard, save, pay your own way, mind your own business, enjoy your life, and help those you deem deserving if you can.
    hope that answers your questions.
    as boatman says debate on the internet is mostly futile. i gave it up awhile back. people forget the simple rules for civil debate. to much tough talk when in cyber space.
    thank you for your concern but i am awake.

  • ’33 St Gaudens

    “THE best thing to own in an epic collapse of society is land, guns and ammo. Gold will be worthless to the majority of people if a collapse on the scale many of you suggest happens.”

    In an Epic collapse,(most won’t make it anyway) you will not be keeping your land, the Dictatorship/Anarchists will take it, if they do not get it before then.(thru taxation,or outright confiscation).

    God,Family,Guns,Shelter,Physical Supplies,barterable items,Gold/Slvr.
    Squirreled away…… are responsible as the Head of your house to protect your family, and provide for it.

    It has been money since GOD put us here………..always has been always will be.
    It’s the only thing (Money), that is not another’s liability.
    And,it is the only TRUE Money………..along w/Slvr.

    It’s Biblical.
    Fiat is ok, if you have a stable Gv’t.We are SO far from reality it’s mostly not possible for 95% of people to see it.

    Since we do not, and others are looking more shady by the day……….prepare for self sustenance for yourself, family, others….who will not listen to wise council.
    Be the “Watchman on the Wall”.

    Cast your bread onto the waters into several portions that it may return unto you.

    As for the comment someone made about Gold, being in a bubble, it’s not……..
    It’s in a bubble when everyone you meet,know, is talking about it.

    Europeans have been thru this before, they are the one’s that will push the envelope first…………..and the bubble will hit there first.IMHO

  • ’33 St Gaudens

    Bob, that’s where it was during the Depression Era…………

  • ’33 St Gaudens


    The reason your rate of exchange was so high, was likely you had dollars at a low(point) in the USD Index.

    As far as Dubya, being gone?..Compared to what we have now, he IS A SAINT.
    And Dubya, was certainly not perfect, and did make some poor choices.

    What we have now is a Fascist regime in the making……..Nationalizing ,taking over private companies, and setting private sector salaries, destroying the Constitution, ignoring it NOT what the USA was founded on, nor about.

    We have a defacto Dictatorship in the works, as it is……………The United States must be destroyed as it is(the system),before the New World Order, and Global Gv’t takes place………….

    The Fiat Currency is FAR from a USA idea, it’s been in use for hundreds of years…………..AND, not ONE single country that used it,is still a leader, a country,or even around.

    ALL Fiat currencies ever used have failed.It’s the systems design.
    It bilks your wealth…………and gives you nothing in return of REAL value.

    As stated, it’s worth is based on CON-fidence,the CON is always used on you in the end.

    As far as your comment on the far right owning Gold, yes conservatives(and the far right) do own more than most liberals…….but, it’s due to ignorance, and too much formal education………and brainwashing.

    Most people who truly understand Gold use it for Insurance, not an Investment………for when the CON game is over, and their lifes savings are at risk of total debasement, and loss.

  • asha101

    If DOW is going to 4000, that means Dollar has more than doubled its value in term of stocks. If you have a “dead” dollar, DOW will be 400000 instead of 4000. People with half a brain should know that you can not have a “dead” dollar and 4000 DOW at the same time.

  • wally

    Senility can be an ugly thing.

  • Arch Crawford

    “Future serfs”???

    Check the details – we are already SERFS.

    Our overlords have already abrogated or negated our Constitution on several major counts, and there seems to be a great rush to finish the job under the present administration. Both parties are already ‘owned’ by the overlords and they give us the ‘illusion’ of freedom by giving us a ‘choice?’

    When both presidential candidates are members of the same fraternity at the same college, [Bush II and Kerry]there is a tremendous concentration of power that is unaccountable!!

    And so little is knowable about current POTUS, he could just as well be an alien, or a clone, or a brainwashed and controlled Manchurian Candidate!

  • John

    While DOW 4,000 might appear totally out of the realm as a realistic target, I must point out that in July of 1982 with a DOW in the 700’s, a DOW of 3686 also seemed to be a totally ridiculous target. Back then this was (I believe) Bob Prechters target for the upcoming bull market high. I also believe John Templeton was looking for DOW 3,000. Keep in mind that in those days we were stuck between the low 700’s and 1,000 for what seemed like an eternity. I remember those calls by Prechter and Templeton because I personally thought they were smoking something. I would have thought I died and went to heaven if we just could get to 1,100.
    Fact is, we (none of us) just don’t know. We can pull out our charts, statistics, analysis and financial statements but in the end we really have no clue. Who the hell would have thought, in September of 1929 with the DOW at 381.17, that we could fall to 41.22 in June of 1932? If by some chance someone did do you really believe anyone would have considered that person rational? Fact is, you just gota play this out and yea, right now we got some problems. So any price targets you guys and gals come up with are nothing more then guesses. Yo might as well throw darts at a numbers board.

    OK, I’m done venting!

  • Andrew P

    And if the issuer of a fiat currency fails, the currency is worthless. Much like Weimar Republic Marks, (Third) Reichmarks, Confederate Dollars, and Soviet Roubles. If the EU doesn’t get a proper central government soon, it will join the illustrious ranks of failed empires.

  • Andrew P

    If the Dow retraces the entire disinflation bull market period of 1982-2000 it will go back to about 1000. That would be a ~90% drop, comparable to the depths of the Great Depression in 1932 (actually 1400 would be a 90% drop peak to trough). Even though it could go lower (this bubble was bigger than the 1920s), I wouldn’t count on it. If the Dow ever got down as low as 1400, I would buy, buy, buy.

  • John

    My guess is, and I personally don’t think (just me) we’ll see DOW 1,400, If that happened, we’ll all be to scared to buy.

  • John

    Having said that, I do agree that this bubble is worse then what they had in the late 20’s

  • Anonymous

    Dear Anne: Gold has never been worth nothing DOES mean it is worth something. It should have been phrased, Gold has never been worth zero.

  • Juno

    I was staring at the DOW and S&P charts spanning from 1900 to today (linear). The biggest damn bubble of all time was staring me right in my face. The biggest con is actually the stock market system itself. Look at the huge rally in stocks since the middle of the 80’s? Just how far did stocks move from 1900-1980 in comparison? Dow at 1400 doesn’t look so unrealistic. Draw your best fit line, mean reversion always happens. Anyone care to rebuff with some, “This time its different” argument? (Heard that one in 2007, 1999, etc…). We’ll all know the truth within two years time…maybe sooner.

  • Marty

    All the talk about guns vs. gold… DOW 4000 (or 400)… etc. It seems that many of the comments start with the premise that the Fed will stand by and watch the market go down, down, down, and that the Administration and Congress would also stand by passively all the while. How likely is that?

    If the market were to drop to 10% of its high, would the consequences be acceptable to the elected officials or the Fed? Losses in pension plans that invest heavily in the market would need to be made up somehow, probably involving a shift of state and local government funds, making shaky public finances even shakier and making it more likely some states and municipalities will need a bailout. A new round of very large losses in 401-K and IRA accounts would make a lot of people feel poorer, leading to reduced consumption and probably less willingness to buy a home, driving the economy down hard when it is struggling to recover. And so on.

    Does Obama secretly hope he will be a one term President, are members of Congress just itching to get ejected from office, and will Bernanke jump at the chance to give Congress an excuse to reduce the Fed’s independence?

    It seems very probable to me that long before we see DOW 4000, or S&P at 400, Bennie & Co. will embark on Quantitative Easing: The Sequel. We saw how effective the previous round of liquidity injection was in pumping up the market for 14 months or so since the March 2009 low — the Fed knows it has tools to support the equities market, even if its capacity to get the larger economy moving is very limited. It seems people like Russel, Prechter and other similarly pessimistic prognosticators overlook that the current Fed is populated by people who are not especially afraid to print when the going gets tough, and that the demands for stimulative policies will be very strong if the market declines enough…

  • Anne

    @anon: I know but can’t leave this sit. Wish people could be decent on their comments with no nasty names. I see way too much of this and it just makes the comment loose it’s punch.

  • Juno

    Sure Marty, and would you buy America’s debt if all what you say actually happened? What would happen to the dollar? Like I stated before, no longer the reserve currency, default by self destruction, and you will still be poorer in the end. To explain your position differently, the US can no longer borrow anymore money, therefore it can only debase its currency by plowing more paper into the economy, but that cheapens it, and makes all imports expensive, and reduces the worlds faith in the dollar (faith in the dollar is the only reason countries use it as the reserve). Then what? —-You have to see the US as only one cog in the machine that is the world economy. Americans fail to see that the rest of the world (exists) does have options, and won’t tolerate mismanagement of the reserve.

  • In Banking

    I like this assessment!

    Just like to add (being a gen-x’er myself) – this group has the largest unemployment rate of any age group (at 25%+) and are facing a level of competition that hasn’t been experienced since perhaps post-WWII. I think they’re knee deep humble pie – at least the younger ones.

    One thing that annoys the crap out of me though is the baby boomers who immediately downplay one’s potential simply due to age. It’s an ego thing because I’ve found that even if you outperform, you’re not recognized for such unless you kiss ass or become indispensable or both

  • Tim Yla

    but you called him dumb too…
    Watch whom you call dumb–it’s YOU.

    VA:F [1.9.1_1087]

  • honestann

    I bet you’re just saying that. Fact is, a large percentage of “gold lovers” put their money where their mouth is… but almost all the “gold haters” who say they’re going to short gold — are just talkers.

    Gold haters “talk the talk”. Gold lovers “walk the walk”.

    And, all ye gold haters, gold has many amazing, valuable properties – it is an extremely valuable material, and its application to most potential purposes is only limited by its rarity. While it is true that gold has quite limited functional utility on a pre-industrial island, somehow, I don’t think that context is very relevant to anyone here.

  • Death to the Weird

    If they print USD like these old nutjobs fear – the Dow will be 100,000 not 400

    I will happily bid the USD price of Coke shares up with my Aussie (fiat) dollars backed by Asian demand for commodities. The DOW components do export you know…

    Do these nutjobs know about the big wide world that exists outside of the US and Europe?

    Who is going to buy their prescious gold coins? The Chinese who are trading up to an C-Class from a bicyle worried about the fiat value of the Yuan?

    This is fantasy for losers

  • Juno

    @Death. Sure DOW can go to 1000000 even, but even Zimbabwe has billion dollar notes, still can’t buy a loaf of bread with it. You are missing the point that gold will be a means to an end, a transition currency of sorts, but one that you don’t want to be dancing with when the music stops.

    Ps: All those Chinese love gold too, not just c-classes.

    Nutjob out.

  • Plan B Economics

    How to look the fool:

    Step 1: Open mouth

    Step 2: Put foot in mouth

    The recession is over, the depression has just started.

  • James

    In Germany in 1923 and again in 1948 when the currency collapsed, no one wanted gold, cigarettes and whiskey became the currency. Bullets and the means of delivering them were available, but they were not widely used, most people do not choose to resort to violence.

  • hungry4food

    The difference between the First Great Depression and the one we are entering into now is…….. before it was due to a lack of technology that could expand the capacity to harness available resources the earth had to expand the supply , creating an abundance that would give more people a greater quality of life , thus a greater freedom of prosperity , wage growth , and a sustainable expansion of the financial sector for expansion in its reserves yet to be tapped ,,,,,,,,,, but this time its and exact opposite thats developing right before our eyes ……….

  • hungry4food

    We are seeing a bubble forming in the earths ability to supply basic needs to a expanding population in the world like water . Unless we become very aggressive in programs that utilize the waters from oceans in the very near future we face a ecological struggle like we have never seen before . I believe that this is why we saw the M1 Finance fund guarantees leave the private markets starting in 2004-5 when the ARMS started and the Fed Reserve started too expanded their balance sheet , all of which signaled a top was forming but no one wanted to believe , and the fundamental that lead to this is now coming into focus , unsustainable population growth . How do you loan a 30 year mortgage and promote a expansion in such markets if that results in a point of which famine and the birth rate in the world collide ???
    Read these sites , they explain where we are in time line of the needs to alter mans course of population growth unless additional resources can be created .
    click on my name to see a website that explains earths carrying capacity and where we are at with trying to allow the continuation of free markets to drive a fundamental value in monetary terms , its not going to work because we are at earths ends of its ability to continue to infinitely supply a everlasting population growth , so there is no way to long term profit from an investment any more .

  • surfet

    Stranded on an Island????? By myself??????? No gold!!!!!!!!!Guess I’d have pan for some in my boreing moments after fishing and building a shelter.Since an Island is probably the top of some kind of millenia eruption I probably not find any depending on the size of the Island without diving quite deep. A pity! Doomed to die without my gold. Perhaps if you were there with me Gold would not be my obsession.

  • hungry4food

    The same people that drafted this NSSM 200 study in the 1970s are advising our president today so are we living through a change that was planned ????

  • surfet

    Seems that confusion is rather rampant here.There is no comparison possible with the 30s. There is no comparison possible with other fiat currancies who are tied to the dollar unless you live there and are an american educated in economics of some sort. Papaer money will exist in credit form in some way forever. As long as the digital revolution exists somewhere credit can be had.It may be worthless if not backed by something. But that something is subject to the whems of the consumers. Therefore the backing of any kind of currancy or loan debt is subject to fluctuations in worth. Only when it is forced to be a certain price as in the case of gold in the USA will there be a problem.

  • Reg


    The day will come when a bushel of wheat will be
    worth more than a bushel of gold – Brigham Young

    I lived during the depression of the thirties. We had a
    cow, pig, chickens, a large garden and my mother knew how
    to can food and cook. My grandmother had a small farm 40
    miles away. The winters were tough, no power, tv or computers.
    WE SURVIVED!!and we always helped others. I am a much stronger
    person now, and a veteran.


    It is obvious that there are a bunch of OBAMA dream bats in this comment column. Just remember, in Communism, the first to go are the supporters of the idiot.

  • Russ Smith

    Hi!, Ladies & Gentlemen:
    Reasons to purchase gold & silver can be seen in our study of Greshams Law which U can find either on the Net. or in your dictionary.
    Eastman Kodak has been a primary consumer of 999.99 Industrial Silver in silver haloids (forgive my spelling please) used in their production of colored film. Out of one troy oz. of Industiral Silver they can produce more than 5000 colored films for our home picture alblums etc.
    One troy oz. of Industrial Silver can be used in the Electronics Industry to produce a fine wire used in a multitude of electronics devices to carry electrical current that is 50 miles long.
    We all know of someone who has been to their dentist to have gold crowns fitted to help their teeth and who hasn’t at one time or another worn some gold based jewelery? Pluss some people are required by their optometrists to wear gold framed glasses.
    It seems unlikely to me that our world will soon loose out on finding useful applications for both these very precious metals without which our world wouldn’t be the same potentially wounderful place we are looking forward to claiming, after all the monetary dust etc. settles & life takes on a clearer view of our future enhancements of civilizations worldwide!
    Hang in there everyone & be kind to each other. We are each here for only a little while & it’s just as easy to do good as it is to do bad encluding the time it takes to accomplish either.
    RUSS, California

  • Eddie

    Nothing new under the sun, but it does continually transmute. For our entertainment. Gold is a store of value and is internationally recognized and accepted. Fiat currencies fail on one count or the other sooner or later, or always have throughout history. The greenback itself has lost 93% of it’s value against gold since Roosevelt’s time.
    On a different note we must consider this:
    Cooperation and compassion = prosperity and heaven on earth
    War and avarice and greed = hell. We are all authors and actors. Choose wisely,for there is no escape from the consequences.

  • surfet

    You Hope

  • surfet

    I like that Japan thing but it does not relate to the USA or any other country. Japan is the size of Montana with roughly 100+million people living on it and a few Islands something the USA would like to politically become.Over crowded regions destroy their resources whenever given the chance to do so. Part of human nature and possibly the physical environment as we understand it.After collapse the seeking of other lands to migrate to (witness Mexico) becomes a reality for the strong that survive the chaos. It is most understandable if you ask me. But you didn’t ask so I’ll just tell you that you should observe more and keep your worries to yourself. Your doomed anyway to report back here when you return from whense you came.