The Global Fiat Monetary System Is Topping Out and Rolling Over

IDWThe fiat-money-driven global economy appears to me to be topping out and rolling over. As I noted in my monthly letter, the only thing that is keeping my IDW elevated at all has been a phony, fiat-money propaganda-driven stock market. The real economy and real wages of average people in America continue to decline. And the Keynesian-driven economies from around the world including China are becoming ever more vulnerable to collapse, thanks to debt loads that continue to rise much faster than GDP, even faster than the phony GDP numbers that are overstated due to politically falsely low inflation numbers. What I’m seeing with my IDW is not only a failure to rise above the 2011 highs but a clear decline now below the three-year moving average.

The magnitude of our vulnerability needs to be put in the context of the chart on your left from Robert Prechter’s Elliott Wave Theorist. Whereas my IDW measures economic expansion and contraction of major global markets since January 2005, the chart on your left puts our enormously overvalued stock market in perspective since just after the Civil war. This chart, which dates back to 1870, reveals a third triple extreme top in the last 150 years. Moreover, it is also the biggest top. This jibes very well with fellow Elliott Wave expert Dr. Robert McHugh, who looks at the current situation as the most massive Jaws of Death stock market formation since the American Revolution in 1776. Not surprisingly with the Fed printing money every time the stock market begins to decline, we are also seeing record levels of complacency among both professionals and retail investors. This I would suggest is a very dangerous period of time for investors.

The Stock Market Measured in Gold

forecastIn that same June 2015 issue of the Elliott Wave Theorist, Robert Prechter displayed a chart showing the real value of the Dow Jones Industrial average, relative to an ounce of gold from 1789 when the dollar was as good as gold, because it was defined by 1/20.67 oz. of gold. The chart on your left shows what the Dow would look like now if the U.S. had obeyed the U.S. Constitution and had kept gold as money.

Based on Elliott Wave counts, Prechter suggests that the Dow/gold ratio could conceivably rise into the 20 to 25 range from its current 15.30 level. However, given the stock market’s long-term technical vulnerability and gold’s near-term oversold condition, it seems impossible that Dow/gold will make it to this higher range right away.

On August 22, 2011, at Elliott Wave point a, the Dow/gold ratio fell to 5.72. That is when the bear market in gold shares began. In August the bear market will be five years old but Robert Prechter, who is not known to be a gold bull for a long time, is suggesting that a reversal in the fortunes of gold holders relative to stocks is close at hand. In that regard, his views on gold are in sync with other analysts I follow closely, including Dr. Robert McHugh and J. Michael Oliver.

This week I am recommending purchase of BitGold Inc., which is now merging with GoldMoney. The long-term rise in the price of gold is revealed in Prechter’s chart above and it is one reason to own gold and why people may want to use BitGold as well. But BitGold is a gold payment platform and, from all that I can see, it is far superior in many ways to PayPal. As such, I am recommending BitGold as a technology recommendation in this letter. I purchased some over the Canadian Exchange on Friday via my TD Ameritrade account. Very soon, perhaps as soon as this week, you can buy BitGold as an ADR in the U.S.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.