James Howard Kunstler: The Long Road Ahead -- Are You Ready for the Worst the Economy Has to Offer?

[marmar]

via AlterNet:



The Long Road Ahead -- Are You Ready for the Worst the Economy Has to Offer?

By James Howard Kunstler, Kunstler.com. Posted October 25, 2008.

Are we headed for a deflationary period followed by a tidal wave of inflation?



It's fascinating to read the commentators in mainstream journals like The Financial Times and The Wall Street Journal all strenuously pretending that "the worst is over" (maybe… we hope… fingers crossed… hail Mary full of grace… et cetera). The cluelessness would be funny if it didn't involve a world-changing catastrophe. All nations that have reached the fork-and-spoon level of civilization are now engineering a vast network of cyber-cables that lead directly from their central bank computers to the Death Star that is hovering above world financial affairs like a giant cosmic vacuum cleaner, sucking up dollars, euros, zlotys, forints, krona, what-have-you. As fast as the keystrokes create currency-pixels, the little electron-denominated units of exchange are sucked out of the terrestrial economies into the black hole of money death. That's what the $700-billion bail-out (excuse me, "rescue plan") and all its associated ventures are about.

To switch metaphors, 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 little monkey-humans 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 monkey-humans who were too enthralled by the weird spectacle to make for higher ground. The killer tidal wave washes away all the things they have labored to build for decades, all their poignant little effects and chattels, and the survivors are left keening amidst the wreckage as the sea once again returns to normal in its eternal cradle.

So, that's what I think we will get: an interval of deflationary depression followed by a destructive wave of inflation that will wipe out both constructed debt and constructed savings, scraping the financial landscape clean. There's no question that stage one is underway. But we can be sure the giant wave of money recklessly loaned into existence in just a few weeks time will wash back through the global economy leaving a swath of destruction. ......(more)

The complete piece is at: http://www.alternet.org/workplace/104059/the_long_road_ahead_--_are_you_ready_for_the_worst_the_economy_has_to_offer/

[Rydz777]

1. Kondratieff Winter

Thanks for posting, a good read. I have thought for some time that we are at a crossroad between hyper-inflation and a deflationary depression. Kunstler logically connects the two.

For anyone interested in Kondratieff wave theory consider a conclusion by Koos van der Merwe ("Technical Analysis of Stocks and Commodities," November 2008): The K-wave forecasts 'that the recession will last into 2012...." I personally think that the wreckage will be on the order that Kunstler suggests with extraordinary consequences. We seem to have a whole flock of "Black Swans" flying in.

[lonestarnot]

2. And three months of wallowing and waiting should let it settle pretty good.