Dow/Gold… A 98% Fall Next

The comments below are an edited and abridged synopsis of an article by Egon von Greyerz

The next phase in the world economy will include asset value destruction, implosion of debts and breakdown of the fabric of society. The world is facing an inevitable breakdown of the biggest debt and asset bubble in history.

Von Greyerz discusses how everyone will lose, but it is important to lose less; stocks vs. gold—a vicious fall is coming; the four Dow/gold crashes since 1837; and a 98% crash is in the offing.

He discusses the Dow:gold ratio; he will be surprised if it doesn’t go well below the 1 level it reached in 1980. More likely is 1 Dow to 1/2 an ounce of gold, or lower.

A fall of that magnitude will involve a stock crash of 98% against gold. For the few who anticipate this fall, it will lead to fortune. But for the 99.5% of investors who will not, it will mean misery and the biggest wealth destruction in history.

Seldom has an investment decision been simpler, but most people cannot see the problem. They see a long-term uptrend of stocks that they think will go on forever. Little do they understand that the gyrations in the Dow:gold ratio will continue until the megaphone pattern is completed on the downside. Whether the ratio reaches 1-to-1 or less is irrelevant. What is important is that governments and central banks have created a bubble of such proportion that when it pops, it will lead to a wealth destruction and a wealth transfer never before seen in history.

The next crash will be a global phenomenon, and no market will escape.

When the panic starts, those who have physical gold and silver will be more secure than those who are in stocks or other bubble markets.

One hundred years of financial mismanagement has not finished the 5,000-year track record of gold as the only money that has survived in history. The next 4 to 8 years will prove that again.