If you refer to the chart below, it is time to look again at the stock market in terms of gold. This time it is the Dow since 1925 rather than the S+P.
As the market goes down, that means that the stock market is declining relative to Gold. The trend line is just below 5. The interesting question is ( if we get there and I believe we will ) does that mean 10.000 Dow and 2.000 Gold or perhaps 7.500 Dow and 1.500 Gold.
It’s possible that later in the decade, the trend-line is broken and the Dow falls (or gold goes ballistic) to very long-term support at 2.
Both the 1929-1932 and 1966-1982 bear markets were 86 pct in real terms.
The Great depression saw stocks fall by 89 pct but deflation reduced the real loss to 86 pct. The fall in the late 60s and 70s was only 50 pct but inflation added the real loss to 86 pct.
For perspective, if this bear market started in 2000 and we have seen the S+P fall by 28 pct with inflation of 30 pct, then the net real loss has only been 50 pct. (.7*.72)
In other words, for a comparable loss to the 1920s and 1970s , there needs to be a further 72 pct loss. (.72*.7*.28 = .14)
It is my opinion that the lessons of the 1930s are clear. Deflation is the worse outcome. Central Banks will try to reflate enough to keep the market at least steady ( although that might ultimately require 20-40 trillion of QE as total US Dollar debt alone is $58 Trillion).
Therefore if 72 pct of inflation can be engendered and the stock-market remains at around 10.000 ,the real price of Gold in comparison to the 1980 high of 873 will increase from 2.300 USD per ounce to 4.000 USD per ounce.
This strikes me as plausible, although such ideas rarely come true.