Surviving All Those Perfect Storm Clichés with Precious Metals

The perfect storm this. The perfect storm that.

Seems like the cliché is getting tossed around as much as those old-time favorites, “right on the money,” “you can run but you can’t hide,” “an uphill struggle,” “at the end of the day” and “there’s a quarterback controversy on this team.”

Even so, feel free to drag the cliché out one more time, shine it up and reapply it to the economy. Everybody else is. The title of Sebastian Junger’s bestselling book is how an awful lot of people are describing what we now face.

Hit by One Perfect Storm (or Another)

In his book, The Perfect Storm, Junger writes of a hurricane crashing into a Canadian low pressure center which then does a head-on with a cold front hanging off the New England coast. The result is a hundred year storm generating 120 mile-an-hour winds, 100-foot waves and several fatalities.

That said, there seems to be a bit of confusion over exactly what constitutes a perfect economic storm.

“The combination of soaring demand from 3 billion new players on the world stage, record-high oil prices and a plunging U.S. dollar has never happened before and is more than throwing kerosene on a fire: It's like setting off a nuclear bomb on top of another nuclear bomb,” wrote analyst Larry Edelson.

That’s one perfect storm. Martin Weiss of the Money and Markets newsletter sees another. In his scenario, “close encounters with a Wall Street meltdown” collide with a severe U.S. recession which smashes into surging inflation.

Like a Disaster Movie Marathon

We’re not finished yet. This is the perfect storm—a literal storm like in the book actually—that Larry Elliot of The Guardian envisions:

“In October 2008, George Bush finally loses patience with Tehran and, in the last big decision of his presidency, launches air strikes against Iran's nuclear capability. On the same day, just as the citizens of Louisiana, Mississippi and Texas think they have seen the last of one of the stormiest summers on record, a category-five hurricane sweeps across the Gulf of Mexico and shuts down half of America's oil-refining capacity. The combination of military action in the Middle East and natural disaster sends the price of oil shooting up to $150 a barrel, pushing up inflation in all western economies. Central banks, fearful of another 1970s-style surge in the cost of living, raise interest rates, intensifying the effects of the economic downturn. Financial markets suffer a spasm of selling. Banks stop lending and, as businesses fail in droves, [there’s] a meltdown in the housing market.”

On and on it goes. Julie Chen of the CBS “Early Show” likes her perfect storm to come with higher gas prices, a crisis in the housing market and “the devastating floods in the Midwest.” Glenn Beck, who’s fond of saying that he has the number three talk radio show in all of the U.S., may use the cliché more than any other living soul in the world. Then there’s the Website, marketoracle.co.uk. It refers to this mess as a “perfect hyper-stagflationary storm,” not nearly as slick a term.

Meanwhile, standing like a cheerleader in a bomb crater, the Paris-based Organisation for Economic Cooperation and Development advises us that, much to our relief, we’ve survived a “near-perfect storm” in the financial markets remarkably well and, come next year, we’ll all be on the road to recovery and, presumably, live happily ever after.

Still haven’t gotten enough perfect storm analogies? No worries. There are over 3 million more “perfect storm” pages on Google.

The Golden Cliché You Can Turn To

It’s at least apparent that a large number of folks believe something of significance— something of negative significance unfortunately—is about to happen in our economic lives. Whatever form it actually takes, be it recession, depression or “hyper-stagflation,” the common themes seem to be soaring oil prices, runaway inflation, surging world demand for commodities, a sinking dollar, the credit crunch and a global recession.

Interestingly, it’s beginning to be a cliché to say that gold is a solution to all of the above.

But that’s only because gold continues to prove that it actually is a solution to all of the above. Since the start of 2007, gold is up an impressive 46 percent in anticipation of all this perfect storm business. Predictions of gold actually thriving in this environment and reaching $1,500, $2,000 and higher abound. Marketoracle.com believes gold will “start its run north to the $1,500 -- $2,000 range before the year is up.”

Not surprisingly, commodities are always king when inflation—and uncertainty—is out of control. They were in 1980, and they are today. People prefer things they can hold in their hands when their paper money, their storehouse of value, is losing money almost by the week. Which is one reason why the forecast for gold is so bright.

So the next time you wince at a perfect storm cliché, use it as motivation to acquire more gold. Not only will you help safeguard your finances during these extraordinary times, you’ll be putting the cliché to good use.