The 1970s are coming back.
So says financial analyst John Rubino in an article that appears over at ZeroHedge.
Rubino makes a case suggesting there are “eerie and scary” similarities between the chronic economic and geopolitical upheaval of that decade, and that which is unfolding today. And that if you’re not prepared for the trouble, your portfolio could be in significant jeopardy.
For Rubino, the principal key common denominator is the Middle East. He reminds us the region was a centerpiece of global discord four decades ago, with the Soviet Union and the U.S. wrestling for control of oil; that Israel was an acute source of discontent to her neighbors; that the divide between Sunni and Shia Muslims was grave; and that government spending in the West (and notably in the U.S. under so-called “Nixonomics”) eventually led to massive inflation.
Present-Day Threats to Global Stability Are a Case of “History Rhyming”
According to Rubino, conditions today look awfully similar. Russia and the U.S. are facing off against each other through Syria; the Sunni-Shia rift is heightened again by way of the distinct rivalry between Iran (mostly Shia) and Saudi Arabia (mostly Sunni); and Israel is back to engaging in overt military conflict, this time with Iran. Israel recently whacked Iranian targets in Syria in retaliation for strikes by Iran against Israeli army positions along Syria’s Western Golan Heights.
Later, Rubino delivers the punchline:
Add it all up and history does appear to be rhyming. Which leads to the other reason why the 1970s were notable: Geopolitical instability begat monetary instability, which sent a tsunami of capital into safe haven assets.
In other words, because today is looking a lot like yesterday – or 40 years ago – gold is the place you should be.
Is he right about all of this?
The general similarities between the geopolitically volatile 1970s and today’s climate are intact. In fact, Aon, a global leader in risk consulting, recently issued its annual Political Risk Map report in which it said that “the likelihood of interstate conflict, even involving major powers, is at the highest point since the end of the Cold War.”
As for international discord leading to the bizarre domestic monetary policies of the 1970s, while that’s partly true, something else was also at the root of those movements: Namely, Nixon pressuring a newly-installed Fed Chairman, Arthur Burns, to keep interest rates artificially low in the run-up to the president’s 1972 reelection bid, an effort that eventually led to the obscenely high levels of inflation to come later that decade.
Still…we can broadly equate the monetary policies of the early 1970s – highlighted by Nixon’s institution of wage and price controls that ended up further exacerbating the inflation to come – to the stunning quantitative easing policies implemented by the Fed between 2008 and 2014.
So, all things considered, will gold behave now as it did in the 1970s?
It’s certainly not an imprudent notion. And how did gold do in the decade of the “Great Inflation”? Take a look:
Performance of Gold vs. DJIA, January 1970 to January 1980
(Chart courtesy of StockCharts.com)
Protect Your Savings from Turmoil with Physical Gold & Silver
To learn more about preparing your IRA or 401(k) for the kind of upheaval that characterized the ‘70s and which threatens to upset the present global political and economic dynamics, call Augusta Precious Metals at 855-976-5436. Our team members are ready to discuss how inflation-protected assets like physical gold and silver can defend your savings as chaotic conditions both inside and outside the U.S. continue to unfold.
You need not identify a like-for-like similarity between the 1970s and today to decide that both the domestic and global environments are becoming fertile ground for significantly higher precious metals prices. If you do no more than look at the rapidly deteriorating geopolitical condition, presently, along with the numerous economic rumblings threatening the stability of the existing financial structure, it should be apparent that now is the time to prepare for calamity.