"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Tuesday, March 15, 2011

Market Meltdown Tuesday

I often write that the world we live in today is an extremely hyper-complex system that relies on energy and capital to move long distances around the world to give us the lifestyle we have today.  But such hyper-complex systems also have a degree of fragility.  That is, to increase efficiency and productivity, robustness is sacrificed.  This is no surprise; robustness costs money, it is expensive.

So when a black swan of a disaster hits, the world's complex system can easily go into a tailspin.  We are witnessing such an episode right now on the macro level these past few years.  But occasionally, we have one-off events that really throw us for a loop.  The 2008 Wall Street meltdown was one such event.  Now we have the Earthquake and Tsunami in Japan to contend with.  It is no longer a natural disaster, as it has now affected Japan's nuclear industry - it is now an environmental disaster involving radiation.

And now as Japan is losing control at the Fukushima plant, things are getting worse fast. I am in Greece right now, and it is approaching 9 am.  It is 3am in the US right now.  Markets in Aisa are plummeting.  The Japanese Nikkei is down over 10%, the Hang Seng, over 3%.  It is no longer a human catastrophe for the Japanese people living near the reactor and near the tsunami's path.  It is a chain reaction that is being felt outside of Japan around the globe.

4 comments:

boatman said...

like faber just said on CNBC--meltdown would mean ALL BETS ARE OFF.

this god forbid would be THE thing that brings down this house of cards...

in related info---$700 tril to reduce world's temp one degree:

http://www.wnd.com/index.php?fa=PAGE.view&pageId=275109

boatman said...

realtime gieger counter in japan(per greg merrill):

http://park18.wakwak.com/~weather/geiger_index.html

boatman said...

this mornings $/gold---glad to see we're not in the mania phase yet, cause i'm not all in yet...

this will be telling--how fast AU/AG goes back to positive...u know we will be in mania phase when AU/AG is THE safe haven rather than $.

sisters AG stops sold automatically.

wish there was a different catalyst than japan.

Misthos said...

Yeah, looks like everything across the board is getting hit hard. I sold some of my position in silver not too long ago, and am looking to re-enter soon.

It's a crazy market that is beyond fundamentals. And the middle east troubles as well as Euro debt issues are far from resolved.

It's interesting to note that gold was the last to be hit hard. Hedge fund redemptions to cover other losses?