2008 has special significance for gold bugs, both because of the money they lost in August of year and the money they made in the half-decade that followed. Today’s world is beginning to feel eerily similar.

Let’s start with a little background. The mid-2000s economy boomed in part because artificially low-interest rates had ignited a housing mania which featured a huge increase in “subprime” mortgage lending. This – as all subprime lending binges eventually do – began to unravel in 2007. The consensus view was that subprime was “peripheral” and therefore unimportant. Here’s Fed Chair Ben Bernanke giving ever-credulous CNBC the benefit of his vast bubble experience.

The experts were catastrophically wrong, and in 2008 the periphery crisis spread to the core, threatening to kill the brand-name banks that had grown to dominate the US and Europe. The markets panicked, with even gold and silver (normally hedges against exactly this kind of financial crisis) plunging along with everything else. Gold lost about 20% of its market value in a single month:

Gold mining stocks – always more volatile than the underlying metal – lost about half their value.

Silver also fell harder than gold, taking the gold/silver ratio from around 50 to above 80 — meaning that it took 80 ounces of silver to buy an ounce of gold.

The world’s governments reacted to the crisis by cutting interest rates to record lows and flooding the financial system with credit. And precious metals and related mining stocks took off on an epic bull market. So it’s easy to see why the investors thus enriched look back on 2008 with nostalgia.

source: tradingeconomics.com

Is History Repeating?
Now fast forward to Autumn 2018. The global economy is booming because of artificially low-interest rates and massive lending to all kinds of subprime borrowers. One group of them – the emerging market countries – made the mistake of borrowing trillions of US dollars in the hope that the greenback would keep falling versus their national currencies, thus giving them a profitable carry trade.