Tuesday, October 21, 2008

Gold Tsunami III: James Kunstler's Use of the Analogy

21 October 2008

James Howard Kunstler also uses the tsunami analogy to describe our current situation.

In his view, the tsunami will be monetary inflation (the consequence of massive government spending and liquidity-generation in response to the current crisis):

"...let's say that we are witnessing the two stages of a tsunami. The current disappearance of wealth in the form of debts repudiated, bets welshed on, contracts cancelled, and Lehman Brothers-style sob stories played out is like the withdrawal of the sea. The poor curious...stand on the beach transfixed by the strangeness of the event as the water recedes and the sea floor is exposed and all kinds of exotic creatures are seen thrashing in the mud, while the skeletons of historic wrecks are exposed to view, and a great stench of organic decay wafts toward the strand.

"Then comes the second stage, the tidal wave itself -- which in this case will be horrific monetary inflation -- roaring back over the mud flats toward the land mass, crashing over the beach, and ripping apart all the hotels and houses and infrastructure there while it drowns the poor curious...who were too enthralled by the weird spectacle to make for higher ground....and the survivors are left keening amidst the wreckage as the sea once again returns to normal in its eternal cradle."

Mr. Kunstler's take on the coming tsunami emphasizes the complexity of our human emotional responses - particularly our tendency to be emotionally unprepared - for atypical events which depart from our normal experience.

Mr. Kunstler sees humans as passive observers who stand and watch as the sea level sinks, and are then left unprepared as it surges. Let us take this as a warning. The abnormal freeze in liquidity which we are now experiencing is likely very soon to submit to a gush in liquidity as the trillions of dollars poured by governments into the global financial ocean will inevitable make for some very big future waves (read massive upwards and downwards price adjustments, with attendant further financial dislocations)!

My advice? Ride the gold wave for safety and security in the upcoming inflationary upheaval.

My gold tsunami posts are as follows:

My gold tsunami posts are as follows:

There Is a Tsunami Coming in Gold

Gold Tsunami II: Anthropomorphizing Gold

Gold: Safe Haven in the Approaching Perfect Storm

Gold Tsunami III: James Kunstler's Use of the Analogy

Bond Prices: The Seismic Shift That Triggers the Gold Tsunami (IV)

Gold Tsunami V: The $23 Trillion Bailout... and Counting

Gold Tsunami VI: Looking for Patterns in Gold Price Advances

Gold Tsunami VII: This Is It

Gold Tsunami VIII: Gold Mining Stocks Now Participating

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