The latest financial bubble was caused by the government, something that had never happened before, says financial author and economic forecaster Harry Dent.  

“It will hit so hard most people will then panic and sell and say, ‘what were we thinking that living off printed money made sense?’”, he told MINING.COM host Devan Murugan on the latest Top of Mine episode.  

Dent argues that another round of government stimulus may prove less effective because investors have already seen policymakers respond to previous crises by injecting money into the economy. 

“It’s going to be harder when the government steps in and says, ‘Okay, we’ll print another couple trillion, whatever.’ People are going to say, ‘No, we’ve seen this story before. You printed our way out of the last one, and now you’re saying you’re going to just do it with more of this,’” he said.  

“I think people aren’t going to buy it, so it’s going to be harder to stop this crash as well.” 

The gold of it all 

Dent also views gold’s sharp advance as part of the broader asset bubble, arguing that its rapid rise has pushed the metal well beyond its longer-term trend. 

“It got up to 5600, in three years by the way, from 1600 to 5600. What does more than three times advance in three years sound like to you? A bubble. It’s the fastest, most extreme bubble in history,” he said.  

Dent said markets that move far beyond their normal trends tend to overshoot in the opposite direction during corrections, amplifying both booms and busts. .  

He expects gold to fall alongside other assets if a sufficiently severe deflationary downturn takes hold, although he sees the metal declining less than commodities and equities. “Gold has already proven that if we get enough of a deflationary leaning crash, it’s going to go down with the commodities and the stocks and everything else, just not as much,” Dent added. 

Watch the full episode here: