Financial bubbles change behavior. In the mid-2000s, people started quitting their jobs in order to "flip" houses: they'd buy dilapidated or out-of-fashion homes, install marble countertops in the kitchen and flatscreen televisions on the walls of the den, and—presto!—they could resell them on an ever rising market and make bundles. In the '90s, I can remember people dropping out of college to become "day traders," which amounted to playing the frenzied NASDAQ like a video game.
When the bubbles burst, the heroes of the "new economy" had to go back to their old jobs.
Whenever I check out mainstream coverage of the precious metals market, I am informed again and again that gold and silver are in bubbles, or even that we've now reached the final "blow off" phase of an irrational rally. Many of the people who denied that there was a housing bubble as late as 2008, and ridiculed people like Peter Schiff who forecasted an imminent recession, are now sure that gold and silver are obsessions and phantasms.
But bubbles occur when Joe Bag of Donuts enters the market—and opens an eTrade account or starts watching those home-improvement reality shows that were all over cable circa 2005-2008. From estimates I've read from professional gold-watchers like Chris Waltzek, less than one percent of investors own precious metals; Marc Faber has related that when he asked 200 mainstream investment advisors whether they allocated at least five percent of their portfolios to gold, NONE raised a hand.
With gold between $1400-1500, and silver between $40-50 (though sharply down today), Joe Bag of Donuts could hardly ignore the bull market. However, he is taking part in the rally in a very disconcerting way—he's selling his wife's jewelry and family's heirlooms.
The gold and silver bubble will be in effect when Joe Bag of Donots is buying precious metals willy-nilly, and mainstream pundits are claiming that gold "can never go down" and making Gold 36,0000-like predictions. The sucker phase of the rally will occur when Joe Bag of Donuts is divesting himself and his family of precious metals.
Gold was nationalized, and trading in it and owning it was made illegal, by FDR in 1933 (though truth be told, the government was not exactly hunting down gold bugs and seizing their property.) I seriously doubt anything like this will happen in the foreseeable future.
The American middle class will be impoverished by other means.