First, let me clarify what i mean by "second" market crash....essentially, I am saying that this first sharp leg down in DOW equities will be followed by an even sharper leg down, assuming gold is once again serving as a deflation barometer. In only two consecutive days, gold has had one of its sharper percentage falls over the past two decades. It is signaling runaway deflation in categorical terms, just as it did in August.
If the economy cannot be reflated, in theory, here is what will transpire:
at the moment, everybody is piling into US Dollars, T-Bills, and T-Bonds, thus creating the largest financial bubble ever seen in USA history. How does one know it''s a bubble? Because irrational behavior is the impelling force behind this investment, just as irrational behavior is the fuel to ALL financial bubbles....specifically, the desire of masses of people, domestic and foreign, to pile into investments that offer ZERO yield, solely on the promise that their investment is "safe." But the only guarantee the US government makes with respect to T-Bills and T-bonds is that you will receive the dollars back that you put in, the government does NOT guarantee those dollars will have any real value.
Meanwhile, because of pandemic deflationary forces, small companies are going out of business right and left. It matters not if a big company (like Proctor/Gamble, General Mills, Coke, etc) has lots of cash to make products if smaller suppliers are going out of business. What happens to those big manufacturers if their small suppliers cannot provide the boxes, bottles, toothpaste tubes, etc. necessary to manufacture their products? Nor is it ultimately positive that the oil price is collapsing if the net result is that oil development is shutting down, e.g., current low oil price is about to close the entire Athabasca Tar Sands project in Alberta, Canada, so a vital source of future future oil production is about to disappear.
Assuming a US Dollar crash does not precede the culmination of the ongoing deflationary collapse, then once some stability is achieved within the economy, those citizens (and foreigners) holding their dollars in money markets, US T-Bills, US T-Bonds, etc. will withdraw their monies and turn a hefty portion into purchase claims upon products. BUT here's the problem....as per the explanation in the preceding paragraph, the deflation will create all variety of product shortages, and dollar claims for those products will far exceed supply. On the spin of a dime, the deflation will transmute into a hyperinflation, and the US Dollar will crash badly. Not only will cash not be king in such an environment, it will hardly even rise to the level of a peasant.
Cash cannot be king in a society that has digitized a massive increase in its aggregate supply overnight, thereby increasing the national debt to such a degree that meeting even the interest payments on the principal is now near impossible. Rather the value of cash is being sustained through artificial means, merely a delay in the day of reckoning. In other words, the current ostensible deflation is essentially "phony," because money supply has been sent through the roof, and ultimately that money supply (being herded into government instruments) will soon transmute into future claims for products that likely will go into shortfall. The net result can only be hyperinflation....and that is why gold/silver must ultimately soar in value, as they are not debt instruments (as are the US Dollar, T-Bills, T-bonds), but rather they are pure assets with no liability owed to third parties. When gold and silver finally explode upward in value, then the holders of paper gold and paper silver will demand their paper be converted to physical and that will expose the longstanding Ponzi scheme behind the paper (exemplified by the gold "leasing" scam perpetrated by the bullion banks in collusion with central banks), specifically excessive paper claims for a limited gold/silver inventory, and it is that revelation that will really ignite the fuse on the gold and silver rocket.
As I wrote many years ago, whilst suffering much ridicule at the time, America was about to enter the mother of all STAGFLATIONS, and that stagflation persists, although currently the market and government has its citizens focused upon the deflationary component, even though ultimately it is the inflationary component that will win in the end.
Finally, as per your erroneous notion that gold or silver are not "money," well, on a retail street level, that is true (for now). But gold and silver continue to be treated as de facto money between central banks and, in that respect, as central banks have never ceased intra-gold transfers for purposes of satisfying debts, then gold and silver remain the highest form of true value currency in the world. No surprise given that gold and silver can not be fabricated, printed, nor digitized out of thin air by any government, although that cannot be said about fiat currency, which can be produced without constraint by ALL governments.
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