The economic recovery is precarious indeed, says Albert Edwards, global strategist at Societe Generale. In fact, we're just one recession away from a Japanese-style deflation, warns the renowned bear.

In recent research note, Edwards writes that most investors don't see that the West is repeating Japan's history from the 1990s.

"But the latest inflation data out of both the U.S. and eurozone should ram home the fact that we are now only one short recession away from Japanese-style outright deflation," he states, according to Business Insider. "Similarly, investors refuse to believe that equities can fall in an environment of rampant QE [quantitative easing]. They are wrong."

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

Policymakers' efforts to manage economic cycles have actually made the markets more volatile, according to Edwards. "Their repeated interventions have, much to their surprise, blown up in their faces a few years later. The current round of QE will be no different."

Hyperinflation will result from the Federal Reserve's money printing, but only after a "Japanese-style loss of confidence," he predicts.

Falling prices of copper — known as "Dr. Copper" because of its ability to predict recessions — indicate a recession is on the way, Edwards writes in the note.

The Standard & Poor's 500 will drop to 450 and gold will rise to $10,000, he writes, predicting a "discernible slowdown" in the economic recovery in six to nine months. "Gold corrected 47 percent from 1974 to 1976, before rising more than eight times to $887 in 1980. A steep correction is normal before the parabolic move."

Holding gold is a bet against the competency of central banks, he says. "Given their track record, that is certainly a bet I would be happy to still take."

If Edwards is right, investors will have a fantastic opportunity, writes investment commentator John Nyaradi in an article for MarketWatch, noting that the forecasts entail an S&P 500 drop of more than 70 percent and a gold gain of over 500 percent.

"Surely those kinds of potential profits should get everyone’s attention, as every kind of market presents both dangers and opportunities," writes Nyaradi, an expert in exchange-traded funds (ETFs).

Investors who think Edwards might be right, he advises, should consider ETFs that short the stock markets, such as ProShares Short S&P and ProShares Short Dow30, and gold ETFs like SPDR Gold Trust, the world's largest gold ETF that tracks the price of gold bullion.

"With the recent steady drum beat of poor economic news and distinctly slowing global economy," Nyaradi states, "Albert Edwards and his forecast gain more credence every day as central bankers around the world try to foster economic growth that just doesn't seem to be forthcoming."

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.