The Dow:Gold ratio shows stocks are down 33% since 2023 – and the next crash will come by 2030 – Mises Institute

• The Dow:Gold ratio fell from 19 ounces in early 2024 to about 12 ounces by August 2024, representing a 33% decline in real purchasing power despite nominal stock market gains.
• Sapozhnikov criticizes CPI methodology changes since 1983, including the switch to rental equivalence for housing and hedonic adjustments, arguing these revisions consistently lower measured inflation to benefit government fiscal obligations.
• Historical Dow:Gold ratio lows occurred at 2 ounces (1932) and 1 ounce (1980), leading to a prediction of 0.5 ounces around 2030, with the theory falsifiable if the ratio exceeds the 1999 high of 40 ounces without first reaching single digits.

Summary

Economist Vasilii Sapozhnikov of the Mises Institute argues that the Dow-to-Gold ratio is a superior inflation measure compared to traditional CPI metrics. Despite the Dow Jones reaching near-record highs at 53,459.78 in August, when measured against gold at $4,400 per ounce, the stock market has declined approximately 33% since early 2024, when it cost 19 ounces of gold compared to just 12 ounces currently.

Key Historical Data Points:

• September 1929: Dow worth 18 ounces of gold
• July 1932: 2 ounces (Great Depression low)
• February 1966: 28 ounces
• January 1980: 1 ounce
• August 1999: 40+ ounces (all-time high)
• 2011: 6 ounces

Sapozhnikov criticizes CPI methodology, noting that the Bureau of Labor Statistics has made multiple adjustments since the 1980s that consistently lower measured inflation. These include the 1983 switch to rental equivalence for housing and 1996 adoption of geometric-mean formulas following the Boskin Commission's findings.

The analysis contends that gold provides an unmanipulated benchmark because "nobody owns the definition" and no institution can adjust its measurement methodology. The economist argues newly-created credit inflates financial assets before reaching consumer prices, making CPI a lagging indicator.

Market Prediction: Sapozhnikov projects the current cycle will bottom near 0.5 ounces of gold around 2030, following a historical pattern where lows halve approximately every 50 years. He states if the ratio exceeds the 1999 high of 40 without first reaching single digits, his thesis would be "finished—not weakened, finished."

This analysis suggests stock valuations are significantly weaker than dollar-denominated prices indicate when measured against hard assets.