The ‘70s Are Back! (In Forex, Not Fashion)

By Kat Von Rohr

Sitting in a crowded theatre last weekend, I kept thinking we are just repeating the 70s, one financial stumbling block at a time.

I was seeing a local production of Neil Simon’s comedy, Prisoner on Second Avenue.

In case you’ve never seen it, it’s the story of a New York City couple who run into hard times, when the husband loses his job, gets robbed, and then has to watch his wife become the breadwinner.

Eventually the husband has a nervous breakdown, and needs $115,000 worth of treatment. (And yet, it’s still a comedy – thanks Neil Simon.)

Now, Prisoner on Second Avenue first debuted on Broadway in 1971. But honestly, it could have been written last year.

This play has the same tension, the same unemployment problems, the same lack of financial security that we’re seeing today.

In fact, the director told us before the production that he only changed one statistic in the script to make the play more “up-to-date.” He changed the unemployment rate from 7.9% to 9.7%. (Notice it’s just inverted.)

This isn’t the only similarity. 

The 70s were a wicked decade of uncertainty, that were plagued by a never-ending war effort, expanding social programs, deep political divisions, and a decade of flat stock returns. (Sound familiar?)

During that decade the dollar also experienced its first bear market, while gold surged over 1,500% (yes, that’s four digits) from 1970 to 1980.

…So pretty much what we’ve been seeing in the 21st century.

There’s only one major difference. The 1970s brought on a wicked era of stagflation – the absolute worst kind.

It’s that nasty inflation that drives up prices while the economy refuses to grow. So everyone is losing their jobs while everything costs more. So it’s essentially “jobless inflation.”

Up until now, the government-types have managed to avoid this scenario. While our unemployment rate keeps ticking higher, inflation is only inching back at 2.3%.

But here’s the interesting part. Stagflation is usually accompanied by periods of rampant government spending. In other words, it’s not a natural economic phenomenon. It’s the creation of panic, of desperation. It’s the mutated disease that forms from the vaccine we created to attack it in the first place.

And there’s never been more money pumped into the economy than there has been in the last three years. Below you can see how our monetary base has grown since 2008. It even puts the little blip in the ‘70s to shame…

So the question is: Could stagflation come next? Because nothing could spell disaster for the dollar faster.

The answer: Yes, more inflation is coming. Whether that jumps to stagflation remains to be seen.

But for now, the stage is already set for stagflation to hit our economy – rising unemployment, rampant government spending, our “jobless recovery.”

If that happens, the dollar will take yet another major hit, and assets like gold could shoot up like they did in the ‘70s. Make sure you’re in a good position to take advantage of this, just in case this ‘70s trend is here to stay.

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