The conditions have now aligned for a repeat of the major stock market crashes that have occurred since the founding of the US Federal Reserve Bank (Fed) in 1913. Considering their vast experience and resources, the Fed has to know that their plan to control inflation by raising interest rates rapidly and significantly since 2022, and also tightening credit this year, will likely result in another major crash. Although the Fed has issued vague warnings about the impending pain on the stock market and economy, they have not explained how and why they will again wipe out trillions of dollars of wealth of unsuspecting investors.
As Marty Zweig, a successful Wall Street investment adviser known for data studies, warned, “Don’t fight the Fed,” because the central bank largely controls the direction of the stock markets. Generally, the major stock market booms start with the Fed stimulating slow economic growth by lowering interest rates, often while the government increases deficit spending. As Austrian business cycle theory predicts, this results in asset price inflation (e.g., stocks, houses, etc.), and sometimes also consumer price inflation. The major busts result when the Fed seeks to control the inflation by raising interest rates significantly, while the government reduces deficit spending.
The following graphs demonstrate the strong inverse relationship between the Dow stock market index and interest rates largely set by the Fed (i.e., stocks values inflate when interest rates are lower and deflate when higher). The top graph from Macrotrends shows the Dow Jones stock market index on a logarithmic scale and adjusted for today’s dollars over time. The bottom graph from the Fed shows interest rates over the same time. These graphs can be used to locate the major stock market cycles and analyze the effects of interest rates along with deficit spending in causing booms and busts.
Figure 1: S&P 500 versus federal funds rate
The Dow Jones stock market can be considered to be in its sixth major boom and bust cycle. The first cycle had a 1913–15 boom and 1915–20 bust. The second cycle had a 1920–29 boom and 1929–32 bust. Then, there was a 1932–50 period that was effectively absent of major booms that could go bust. The third cycle had a 1950–65 boom and 1965–82 bust. The fourth cycle had a 1982–2000 boom and 2000–2002 bust. The fifth cycle had a 2002–7 boom and 2007–9 bust. The sixth cycle had a 2009–22 boom and a bust starting in 2022. The five major stock market crashes can be considered to have started in 1915, 1929, 1965, 2000, and 2007, with another likely in 2022.
1915—As the Fed started cutting interest rates in 1913, the Dow stock market climbed and peaked in 1915. That year, the Fed started raising rates and the stock market dropped in 1916. During 1917 and 1918, deficit spending for World War I, while interest rates were flat, caused rampant inflation and a spike in stock prices. After the war, the Fed rapidly raised interest rates in 1920 to cause a stock market crash and the depression of 1920–21.
1929—After the Fed cut interest rates from 1921 to 1925, the so-called roaring ’20s brought a booming Dow stock market from 1921 to 1929. After the Fed started raising interest rates in 1927, the stock market crashed in 1929 and the economy tanked. During the 1930s, the Fed cut interest rates, but President Franklin D. Roosevelt resisted deficit spending after 1932. The Fed even raised, before lowering, interest rates in 1935 to cause stock market losses and the recession of 1937–38. These policies prolonged the Great Depression until World War II, if not longer.
1965—Deficit spending during World War II, along with low interest rates during and after the war, helped bring a postwar boom with economic recovery, consumer price inflation, and stock market gains. During the late 1960s and 1970s, the government accommodated inflation by raising interest rates slowly over a relatively long time period. This caused a long, flat stock market with sharply declining real values (due to inflation) from 1965 to 1982. Finally, the Fed raised interest rates rapidly and high around 1978 to cause a severe recession in the early 1980s.
2000—After 1981, the Fed started cutting interest rates and the government increased deficit spending, especially on defense. The stock market boomed. The Fed raised interest rates starting in 1993 and even higher in 1999 to stop what was claimed to be the “irrational exuberance” of the booming stock market, while the US government ran budget surpluses from 1997 to 2001. The stock market, especially tech, crashed in 2000, and the economy receded during the recession of 2001.
2007—In 2001, the Fed started cutting interest rates and loosening credit on home loans while the government increased deficit spending. The stock market boomed back to its prior peak (in 2000) and home prices inflated. From 2005 to 2008, the Fed raised interest rates and the government decreased deficit spending. In 2007, the stock market and home prices crashed. The economy suffered through the Great Recession until 2009.
2022—Since the start of the Great Recession in 2007 and until 2022, the Fed has lowered interest rates to near zero while the government increased deficit spending. This has accommodated asset and consumer price inflation. Since March of 2022, the Fed has quickly raised interest rates by about five percentage points.
Today, the Fed is clearly still concerned about the inflation. However, higher interest rates have already led to a financial crisis among the banks. Experiences with past markets indicate that, if the Fed continues to fight inflation, the stock markets will likely crash, like they did twice in both the early 1900s and early 2000s. If the Fed gives up their inflation fight, the stock market will likely gradually fall in value over many years if not decades, like they did after 1965.
There have been some other large, but less significant, stock market declines. The crashes in 1917, 1941, and 2020 were caused by fears of wars and a pandemic but were soon reversed by lower interest rates and massive deficit spending used to meet the aggression. The crashes of 1937 and 1946 and subsequent recessions were preceded by rising interest rates and limited deficit spending, but 1937 was part of the recovery from the Great Depression while 1946 was soon reversed by the exceptional postwar boom. The crashes in 1968 and 1972 were preceded by rising interest rates and limited deficit spending but occurred within a major crash. The crash of 1987 was preceded by rising interest rates and reduced deficit spending but was a brief and steep up-and-down blip within a major boom.
The graphs indicate the major stock market crashes have always resulted when, and only when, the Fed has responded to inflation by raising interest rates by three percentage points or more, while the government reduces, or at least doesn’t significantly increase, deficit spending. There has never been a so-called soft landing, and the graphs indicate a so-called Fed pivot, which has usually arrived after the crash. The graphs also indicate the 1915, 1929, 1965, 2000, and 2007 crashes caused Dow stock market index losses of 59, 85, 71, 35, and 49 percent. The losses were not recovered until eleven, thirty, twenty-nine, eight, and six years after the start of the crashes, respectively.
The government has responded to the major stock market crashes, with the exception of 1929, by lowering interest rates and increasing deficit spending to gradually pump stock prices back up and eventually even higher than before. There is no guarantee that this will happen again, especially with the political far right threatening to repeat the policies that prolonged the Great Depression by restricting deficit spending.
Stock markets are unfair to uninformed and amateur investors since they are rigged by the Fed and government without transparency. Informed stock traders and insiders can earn far greater returns by selling stocks high before the stock market crashes. They can also profit by buying low later if they are assured that the government will bail out the market with low interest rates and deficit spending. Moreover, the stock markets will be unsustainable as soon as most investors realize that they are rigged.
Monetary and fiscal manipulations, currently needed to stimulate stock markets and pull economies out of recessions, should be replaced by something else, like effective deregulation of free markets.
About the Author
Mike Holly received Master degrees in Business Administration and Chemical Engineering from the University of Minnesota in 1980 and 1983, respectively. His health care article published on Mises Wire is an updated and condensed version of his MBA thesis. He did his internship at the Minnesota Department of Health where he invented an ambulance allocation model. After receiving his chemical engineering degree, he worked as an Alternative Energy Engineer and Business Analyst with the Minnesota Department of Energy and Economic Development from 1984-5. In 1985, he co-founded Sorgo Fuels and Chemicals, Inc. to develop technology for the production of various products from an agricultural crop, but was blocked by preferential government policies favoring monopolies and also production from other resources. In 2016, he founded Americans Against Monopolies to catalog the preferential government policies favoring monopolies in virtually every major U.S. market.
Article cross-posted from Mises.
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Why Bullion Beats Numismatics and Collectible for Your Safe or IRA
Precious metals continue to attract Americans seeking reliable ways to protect their wealth amid inflation, geopolitical risks, and stock market swings. Whether stored in a home safe or held inside a self-directed IRA, physical gold and silver deliver tangible value that paper or digital assets often lack. Yet investors must choose carefully between bullion—pure bars and coins valued mainly for their metal content—and numismatics or collectibles, where rarity, history, and collector demand heavily influence pricing.
Advisor Bullion serves as a dependable source for straightforward, high-quality bullion. The company specializes in physical gold, silver, platinum, and palladium, emphasizing transparent pricing and products that deliver maximum metal content for every dollar spent. This approach makes it ideal for both personal holdings and retirement accounts.
Bullion consists of refined precious metals in standard forms like one-ounce coins (American Gold Eagles, Silver Eagles, Canadian Maple Leafs) or bars. Their value tracks closely to the current spot price of the metal. A typical gold bullion coin trades near the live gold spot price plus a small premium. This structure keeps costs clear and predictable.
Numismatic coins and collectibles add substantial value from factors such as age, rarity, minting errors, or historical significance. A pre-1933 U.S. gold coin or graded proof piece can carry premiums of 30%, 50%, or even 200% above melt value. While this appeals to hobbyists, it creates complexity. Pricing depends on subjective grading, collector trends, and auction results instead of daily spot prices.
For investors focused on wealth preservation and retirement security rather than building a collection, bullion often delivers better results.
Lower Costs and Better Liquidity for Home Storage
When keeping metals in a home safe or private vault, liquidity and efficiency count. Bullion offers clear benefits:
- You acquire more actual gold or silver per dollar invested. Numismatics divert a large share of your money into rarity premiums and massive sales commission, reducing your metal exposure.
- Selling bullion involves tight bid-ask spreads, so you recover nearly full spot value with minimal fees. Collectibles require finding the right buyer and may sell at a discount if demand for that specific item weakens.
- Bullion prices remain transparent and update with global spot markets. You can track gold near current levels or silver accordingly and know exactly where your holdings stand. Numismatic values are priced by the Gold IRA companies with hefty margins applied.
- Standardized coins and bars store efficiently and divide easily for partial sales. Rare coins often need protective slabs and controlled conditions, adding hassle and expense.
- Bullion enjoys worldwide acceptance. A 1-oz Gold Maple Leaf or Silver Eagle sells quickly to dealers anywhere. Niche numismatic pieces may appeal only to limited buyers, slowing liquidation when speed matters.
In times when quick access to value becomes important, bullion’s simplicity stands out.
Stronger Fit for Precious Metals IRAs
Precious metals IRAs continue gaining traction as investors diversify retirement portfolios beyond stocks and bonds. IRS rules permit certain bullion products in self-directed IRAs if they meet purity standards (.995 fine for gold, .999 for silver) and are held by an approved custodian. Eligible items include American Gold and Silver Eagles plus many generic bars and rounds from recognized mints.
Numismatic and most collectible coins generally face heavy scrutiny from custodians due to valuation disputes and elevated markups. These higher premiums mean less actual metal ends up working inside the account.
Bullion avoids these issues. Its value links directly to verifiable spot prices, which simplifies reporting and lowers the risk of regulatory challenges. More of your IRA contribution purchases real metal instead of dealer profits or speculative upside. Over time, owning additional ounces that appreciate with the metal itself can create meaningful outperformance compared with high-premium alternatives that deliver fewer ounces.
Regulatory guidance from the CFTC and state securities offices repeatedly cautions against aggressive sales of expensive numismatics or “semi-numismatic” coins for IRAs. For retirement planning, transparent bullion from established providers reduces risk and aligns better with long-term goals.
How to Get Started with Bullion
Begin by clarifying your goals. Are you protecting savings in a safe, or moving part of a retirement account into a precious metals IRA? Focus on the number of ounces you can acquire at current prices rather than chasing marked-up collectibles.
Diversify sensibly: use gold for core preservation and silver for its blend of industrial and monetary qualities. Mix coins for easier divisibility with bars for lower per-ounce costs on larger buys. Arrange secure storage—whether at home with proper insurance or through professional facilities.
As economic uncertainties linger and faith in conventional assets erodes, bullion continues proving its worth as a dependable store of value. Its direct approach avoids the hype that sometimes surrounds collectible markets and keeps the focus on the metal itself.
For investors prepared to strengthen their portfolios, Advisor Bullion supplies the expertise and selection needed to acquire high-quality bullion efficiently. Whether building personal holdings or integrating metals into an IRA, their emphasis on transparent, investment-grade products helps secure more ounces today that support greater financial security tomorrow. In a complicated financial landscape, bullion’s clarity and reliability make it the smarter foundation for protecting what matters most.