Bleeding Stock Markets: A Canary in the Coal Mine Signaling “Buy Gold”

This article was submitted by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

Flashing red stock markets seem to have become something of a norm in this new post-rate-hike world.

Since Yellen made her big announcement in December, we’ve witnessed a general downward trend in stocks. At one point this week, the S&P had shed over 120 points. That’s well over 5%. The Yellen announcement aftermath has been particularly bad for US stocks. They were down almost 100 points early in the week. This drama has been punctuated and influenced greatly by the continued carnage in Chinese stocks.

But what else did you expect in this fiat currency-based economy? Did the Fed really believe that after more than seven years of zero interest rate policy, driving equities to record highs, it could suddenly take its foot off the gas, jam on the brakes, and the stock market party would just keep rolling?

Everywhere else in the world, central banks are acknowledging that their economies are weak and that they have to continue with loose monetary policies. They talk of more quantitative easing and continue to push interest rates down – below zero in some countries.

But America is somehow different, I guess.

We are surrounded by negative economic data. Manufacturing is down. The labor force participation rate is a few points away from its lowest point since the mid 1970’s. Retail stores like Macy’s are closing locations left and right. Commodities are being crushed—which is terrible news for oil companies. And with interests rates in a downward trend for over 30 years, profit margins all over are being squeezed.

The one thing Fed officials and government apologists had going for them – the proverbial lipstick on the pig that made things seem not so bad – was the fact that the stock market was hanging in there. Well now, in part thanks to raising of interest rates, it’s not. With no more lipstick, all we see is pig.

So with Yellen and the Fed brazenly insisting on this recent rate hike, is the Fed, as Peter suggested last month, actually playing chicken with the stock market?

It certainly seems so.

But as nerve-wracking as a falling stock market can be for many Americans, this will hopefully serve as a great wake-up call — a canary in the coal mine warning of an impending disaster.

In reality, our entire financial system is built on a house of cards. The cards are US dollars. In truth, dollars aren’t even money, only credit – glorified IOUs. Because the US does not have sound money, this system is inevitably bound to collapse.

It’s not a question of if, but when.

So why would you ever want to hold most of your savings in US dollars, entrusting your wealth to this so-called money? It can’t even extinguish a debt and can be swiped away by the government at the press of a button. (Think Cyprus.) Why keep risking your hard earned wealth by continuing to invest it in a stock market that could come crashing down at any moment? Remember, even the Fed couldn’t stop 2008 from happening.

Instead, put your wealth in the only trustworthy money in our planet’s history – money with zero counter-party risk – and buy physical gold and silver. It’s not because precious metals are “going to go up soon,” nor because “it’s a great time to buy with gold and silver near five year lows.” It’s more basic than that. Physical gold and silver are real money, and they will be the only money left standing when this whole thing comes crashing down.

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