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Will The Stock Market Crash Soon?

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Street sign with bankruptcy on it

Is the America, together with the world, heading for a bankruptcy?

There is a lot of talk in the news today that we might see another stock market crash real soon. Lots of people are saying yes and a lot of people are saying no. So which one is it? Will the stock market crash soon?

With this post I want to try and answer that question.

I think a good way to look at stock market crashes is to look at historical data. To try and predict exactly what minute a stock market crash will happen is more for the day traders. Here we will look at what history has to say about it. Because history usually repeats itself.

No, this is not a conspiracy theory.

Often when you say that there will be a crash in the economy soon people like to discredit your arguments saying that your a conspiracy theorist. That you’re a tinfoil hat or a doom and gloomer.

So first lets have a look at some recent headlines in the news to see that people are actually concerned that there will be a stock market crash soon. To show you that this is not just something that I’m talking about.

Debt, defaults, and devaluations: why this market crash is like nothing we’ve seen before

Sell everything ahead of stock market crash, say RBS economists

Okey, so we know that the fear of a stock market crash soon is a valid concern. Lets have a look at some arguments for why I think that the question is not if there will be a stock market crash. It’s more of when we will have a crash. In my mind it’s inevitable.

Wilshire 5000 long term chart

Okey Marcus. This heading doesn’t make any sense, might be what you’re thinking right now. And fair enough, not yet but stay with me and I will explain exactly what it means and how it can help us understand if there is going to be a stock market crash or not.

First, lets have a look at the definition for what Wilshire 5000 is

Wilshire 5000 is a market-capitalization-weighted index of the market value of all stocks actively traded in the United States.

This sounds more complicated than it is. Basically Wilshire 5000 is a index created by Wilshire & Associates that track the value of all the stocks in the United States. When the index is high that means that the stock market is high, because the value of all the stocks are high, and vice versa.

Have a look at the chart below that’s from 1970 until today. Look how the value of the stocks are rising in the late 1990s just to come crashing down in the early 2000s. This became known as the dot-com stock market crash.

After the dot-com bubble burst you can see that a new bubble was started and rose all the way up until 2008 just to come crashing down again. This became known as the great recession that was caused by a housing market bubble in the United States.

You do not have to be an expert to see the pattern in the chart. Again the stock market has been blown up and it will crash just like all the other ones have done. The biggest question is what we’re going to call the crash this time. Do you have a suggestion?

wilshire 5000 chart from 1970 until 2016

It’s not rocket science to see the pattern in this chart. The stock market is overvalued right now and will have to come down just like all the other times before.

From this chart I hope that you see that the stock market today is overvalued.  Every time the stock market is overvalued it will come back down to normal levels. That always happens in the form of a stock market crash, just like it did for the dot-com bubble and the great recession.

I mean we can flip the question. If there is not going to be a stock market crash that means that this index will have to keep on rising indefinitely. I can’t see that happen and neither can history.

Hang on, there is a bigger economic storm coming

The chart above should definitely make you concerned about being invested in the stock market today. If you don’t know exactly what you’re doing you can be waking up one morning just to see that your entire portfolio has been wiped out.

Just like it did for millions of people during the dot-com and great recession crashes. You should read my article about why gold is a safe investment where I talk about how gold will save you from the coming economic problems.

This time around I do not think that we will see a crash and then a new bubble form just like we did after the dot-com bubble and the great recession. This time around I think we will see a currency crisis in the US dollar which is a lot more painful than a stock market crash.

Why would there be a currency crisis?

It all starts with our current monetary policy. All the way up until 1971 every US dollar was backed up my physical gold held in the treasury. This meant that you could walk into any bank and put down your paper currency (dollar) and get physical gold in return.

Have a look at this old $20 currency note. As you can see it says “20 dollars in gold coins payable to the bearer on demand“.

old 20 dollar note showing gold standard

All the way up until 1971 the US dollar was backed up by physical gold.

As you can see the dollar was just a certificate for the gold in the treasury. The real money is not the paper dollars that you have in your wallet. The real money was the gold and we invented paper money as a certificate just so we didn’t have to carry around the gold with us.

Then in 1971 President Richard Nixon took the US off the gold standard. Now you could no longer redeem your paper for gold.  This meant that there was nothing backing up the dollar anymore. The only difference between the dollar and monopoly money is that the people have confidence in the dollar.

You know that you can take this dollar into a store and purchase goods and services for it. But other than that they are both just a piece of paper.

A piece of paper that is backed up by nothing is called a fiat currency.

Before people had confidence in the dollar because they knew that the paper dollars was backed up by physical hard metals stored at the vaults in Fort Knox. If the government wanted to print more money they first had to buy gold and put in the vaults. This meant that the government could not print a bunch of money to pay for their bills.

Like I said, the only reason today why the dollar has any value is because we as people believe that the dollar has value. As soon as that confidence goes away the dollar is not worth more than the paper it’s printed on. I mean, do you think the paper in a $100 bill is worth $100? Obviously not.

The confidence in the US dollar is getting worse and worse for every day. People are starting to realize that the US is bankrupt. The US federal debt at the time of writing is 19.2 TRILLION dollars (let that sink in) and every year they go deeper and deeper into debt. This is hurting the confidence and people are starting to wake up to the ponzi scheme.

Have a look at this link where you can see how much debt the US is currently at, and how fast it is increasing. Do you think that is sustainable for the long term?

US dollar as a burning paper plane

The US dollar paper plane is coming crashing down. Make sure you position yourself to not go down with the plane.

No Fiat currency has ever survived

I know that this might have been a lot of information at the same time. Please leave comments below if there is something that is unclear or if you just don’t agree at all with what I’m saying. I would love to hear from you either way.

The most important thing to take away is that throughout history there has been thousands of fiat currencies, paper that is not backed up my some hard asset like gold, silver or oil.

They all have one thing in common: Every single one has gone to ZERO. 

Because the government can print an infinite amount of these rectangular papers with numbers on them people loose confidence in the value of the paper. When the confidence is gone, the dollar will be worth as much as the paper it is printed on.

Just like it did in Weimar Republic (old Germany) in the early 1920s. Where you needed a wheel barrel to carry all your paper notes to go buy a piece of bread.

Man carrying a wheel barrel of paper currency

When there is no roof of how much money the government can print they will print until you need a wheel barrel of cash when you’re going to go grocery shopping.

So what should you do?

If you agree with me that the current money system that we are on is not sustainable you need to start putting your money away from the current money system.

We can’t keep on printing more and more money to pay for our bills and go deeper and deeper into debt indefinitely. If we keep going down that path you will need a wheel barrel carrying you cash when you go grocery shopping.

If you read monetary history you will see that the best type of investment that you can do in this environment is hard assets. With hard assets I mean things that the government can’t print. Things like land, real estate, gold, silver, art and so on. These things are a very good hedge against inflation and will keep their value even though the paper is coming off the printing presses at record speeds.

The easiest way to protect yourself from the coming economic storm is to invest in precious metals like gold and silver. Every time in history that a fiat currency has collapsed gold and silver has gained tremendous amounts in value. The reason why is because it’s seen as true money and the government can’t print gold.

I hope I have answered some of the questions you had when you searched for: will the stock market crash soon. Maybe I have been able to open up your mind to the bigger problem that’s ahead of us. Make sure you have a look at my top 3 reasons to invest in physical gold to protect yourself from the coming economic collapse.

My top 3 reasons for why you should invest in physical gold today.

Why Should You Invest In Gold?


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12 Comments

  1. Marcus,

    Intriguing (though disturbing!) history of the stock market crashes AND the paper money we all take for granted (even when it is in electronic / credit card form!).

    Interestingly, I barely handle actual money these days, rather my paycheck is electronically deposited into my bank account, then electronically withdrawn to pay off debts that are all electronic!

    But none-the-less, the IDEA is the paper currency.

    Though I did know we had left the gold standard, but I did not know the resulting currency is called “fiat” currency. And that all fiat currencies have failed!

    So what countries now use a gold or silver (or oil?) standard? Are their currencies a good investment (since they are backed by something)?

    Or is it preferable to simply invest in the precious metals or land? And what about oil?

    You raise some issues that require some careful consideration!

    Thanks for the warnings!

    Roger

    • Hi Roger.

      Yeah I know that most people don’t carry around cash today but it just makes the examples so much more real. It is exactly the same thing that happens but instead of paper dollars we now have electronic digits. Can you imagine being a bank or the government where you are allowed to create these digital “money” out of thin air? It’s like a video game, if they need more money they just punch in some cheat code and create another billion dollars. From nothing!

      Today we do not have any currency that is on the gold standard. After WWII the world came up with a new monetary system that every currency should be pegged to the dollar and the the dollar should be backed by gold. So indirectly every currency in the world was backed by gold.

      But when the US took the dollar off the gold standard they basically took the whole world off the gold standard. I know that there are currencies out there that are a way better investment than dollars but it still suffers from the same fate. No fiat currency every survives. It’s just a matter of time before it becomes worthless.

      I do think that we’ve seen the bottom in oil because as the dollar declines the price of oil will go up (because it’s priced in dollars). But I’m not an expert in that area. To me the smartest thing you can do is move around 20% of your portfolio into physical gold as a hedge against inflation and the coming economic collapse.

      Thanks for reading
      Marcus

  2. This is a very informative post to an uninformed reader. I’ve personally read about this in the past and believe it’s definitely a valid concern we should all have. If you haven’t done so already, you should look into fractional reserve banking as well. Cheers!

    • Hi Jason.
      Yeah I agree that this is definitely something that people should be aware of. Because even if you like it or not it will affect everybody.

      Yes I have looked into fractional reserve banking and that is one of the biggest reasons to our problems today. The banks can create so much extra liquidity into the world and that will be counted towards the inflation.

      Thanks a lot for the read
      Marcus

  3. Hello Marcus,
    another great article about the inflation. I agree, there will be a big(?) correction in the next time but it is also true, that the bull market may last longer, than we expect. Furthermore, they will try everything to avoid the next crash. Therefore they will increase the financial repression, as low interest rates, preference of public debt to private debt and so on. To buy some gold and silver will be a good choice.

    • Hi Bernd.

      Thanks a lot. I agree with you that they will continue to try and keep this current system of debt going for as long as they can. But there is just no way that it can go on for ever. Will they do another round of Quantitative Easing? Maybe negative interest rates?

      Anything is possible and especially in an election year. Barack Obama is traveling around the world talking about how great of a job he did with the economy. Disregarding all the facts that the US economy is in terrible shape and lots of his policies is to blame. Having a recession right now would make him look like a bigger fool than he already is.

      Thanks for the comment
      Marcus

  4. Wow-that was a lot to take in. It was certainly presented in a way that was easy to comprehend- unlike the chapter on the gold standard in my high school history book that was easily the most boring chapter in the book. As a history enthusiast I know how history backs up much of what you’ve said- definitely be looking more into gold in the future.

    • Hi Amy
      Thanks a lot for the comment. Yeah I was a little bit worried that it might be a lot to take in for one blog post. I’m trying to put it as simple as possible. Glad you think it was easier than you school history book :).

      These things doesn’t have to be so complicated as they like to put it in school. I have a feeling that the school system really doesn’t want us to know the true way of our monetary system. Because if we did I think a lot more people would call out the bs and tell our “leaders” that the path we are on is not sustainable in the long run.

      Marcus

  5. There is something behind the world economy, something that will disrupt the balance of the global financial flow. I am trying to understand the situation where powerful countries well lose its economic power. I believe that kind of situation will definitely produce a ripple-effect

    • Hi Aulliver, thanks for the comment. Yeah there is something that is going on in the global financial system. Mostly people and countries are trying to get rid of the US dollar. The smart countries are starting to realize that US is bankrupt and that it can’t pay back any of the money that it has borrowed without just printing more money.

      That’s why you see countries like Brazil, Russia, India, China and South America and lots more trying to not use the US dollar anymore in global trade. It sure will create a ripple-effect. We saw what happened in 2008. It was “just” a housing bubble in the US but because the world is so intertwined today in the financial system the whole world felt the 2008 financial crash.

      Get some of your hard earned money out from the financial system. Into assets that can’t be printed away or become worthless over night. Things like gold and silver.

      Marcus

  6. Wow Marcus, this is very intriguing yet scaring at the same time. I’ve always hoped we would never have another stock market crash and never really thought about it. This is really starting to get my wheels spinning. Great article Marcus.

    • Hi Matt
      Thanks for the comment. Yeah it’s definitely not something that people want to think about. But if we look at historical data it’s just a matter of time before we have another stock market crash. The thing that I’m most worried about is that the western world is bankrupt right now. A stock market crash like 2008 would kill the whole financial system.

      Make sure that your placing some of you hard earned money outside of the financial system. To save money in a bank account makes zero sense. Lots of risk and the interest on savings are ridiculous.

      Marcus

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