Short and Sweet
Defending capital during a stagflation
Gold rose 1820% during the 1970s, silver 1699%, stocks 11.5%

Alan Greenspan was among the first to warn that the economy could be headed for a round of stagflation like the 1970s, and that was back in late 2018. Now, not a day goes by that some analyst or economist somewhere warns of its return. Stagflation is the combination of high inflation and high unemployment, i.e., what Ronald Reagan called the Misery Index. At its height in 1980, the Misery Index reached 22%. As of the most recent government reports, it now stands at 12.1% and climbing, driven chiefly by inflation’s rapid rise.

As our second chart shows, gold and silver were top performers during the stagflationary 1970s. Gold rose 1820%. Silver rose 1699%. The Dow Jones Industrial Average rose 11.5%. Warnings about a stock market capitulation dominate the flow of financial opinion as Wall Street boards up the windows in advance of what JP Morgan’s Jamie Dimon called an approaching “economic hurricane.” Since that early June warning, stocks and bonds have tracked steadily to the south.

Sprott analyst John Hathaway says we have gotten to a place where “the Fed doesn’t have a dial. It’s an either on or off switch. They’re either switching off the economy and crashing financial assets and the economy, or their crying uncle and caving in, which will likely open the door to more inflation. I think either outcome is positive for gold.… Year to date, it’s up a little bit while the S&P is down 12% or 13% (6/15/2022). It’s shown that it can be uncorrelated and help defend capital during difficult times in the markets. If the Fed cries uncle and pivots, my guess is before the end of the summer, we’re off to the races, and I think we’ll see new highs in the gold price, which would be around $2,200.”

overlay line chart showing gold and the misery index during the 1970s
Sources: St. Louis Federal Reserve [FRED], Bureau of Labor Statistics, ICE Benchmark Administration

overlay line chart showing gold, silver and stocks 1970-1979
Chart courtesy of


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