The situation continues to
unfold in Japan with further bad news on the nuclear power plant problems this
morning. As I have said in my two
prior e-mails, I believe the Japanese earthquake and all the consequences that
will result from it could prove to be a macro-economic game-changer, and am increasingly
thinking this will prove to be the case.
I have found the following articles written over the past 24 hours that
I think worthwhile to bring to your attention:
·
‘Don’t Look
for Fed to Flag Japan Worries Directly’ – reading time 2 minutes. This article suggests that at its
monetary-policy meeting today, the Fed may acknowledge the developing Japan
story and the ongoing Middle East unrest, but is not likely to go beyond that
for what in each case could be ‘big negatives’ to the U.S. It seems to me that if this is how the
Fed meeting plays out, that is not entirely unreasonable in the case of what
might be the outcome of the ongoing Japanese tragedy – given that story is
still in its early days. The North
Africa/Middle East story is old enough I would have thought the U.S. Government
and the Fed both by now would have developed views as to possible scenarios as
to how it might play out, to the point where the Fed might comment on that
today;
·
‘Japan’s
Lesson to U.S.: Get Your Fiscal House in Order’ – reading time 2 minutes. This article basically says that it is
in the best interest of the U.S. to ‘get its fiscal house in order’ in order to
be able to withstand “the next dose of rotten luck”. This seems to me to be obvious, and hardly ‘deep thought’
advice. As you know from reading
these e-mails, I am concerned the U.S. Federal Congressmen and Senators viewed
as a group (I am sure some individual members ‘get it’) seem to continue to
think the U.S. is omnipotent and has all the time in the world to deal with its
fiscal problems. I am now
developing a further concern that U.S. Politicians at all levels are going to spend
near-term time responding to concerns raised by the American populace already
arising out of the Japanese nuclear plant issues that have arisen in the
aftermath of Friday’s earthquake.
Last night the U.S. news channels were carrying stories centered on
‘what should America do to ensure its approximate 37 existing active nuclear
reactors (and perhaps some 17 that have been closed or are not actively
producing electric power) are protected against the problems being experienced
in Japan. I have no idea what
expenditures such a program would entail.
Intuitively I think those expenditures would be very large and if they
come, are coming at a time when the U.S. Government can ill afford too spend
time or resources on nuclear power plant remediation;
·
‘Chaos erupts
as rolling power outages begin’ – reading time 1 minute. This article principally discusses the Japanese
commuter problems that have arisen since ‘rolling electricity blackouts’ that
began Monday evening. While this
is no doubt adding to the turmoil being faced by those in Japan (for which one
has to have empathy), it strikes me the 10,000 foot lesson to be taken from
this is how dependent the population of any country is on its infrastructure,
and how things can change from normal, to very abnormal, in the blink of an
eye;
·
‘Can Contagion
Be Avoided Considering The Magnitude of Japan’s Woes?’ – reading time 5
minutes, longer if you watch some of the embedded videos. I suggest you read this article by
Reggie Middleton (BoomBustBlog).
It states emphatically the “The Potential for Spillover Effects Simply
Cannot Be Ignored If You Look At This From An Empirical Perspective”. I suggest you read Middleton’s article
and think carefully about what he says in the context of equity/money market
investments, and indirect and direct precious metals holdings;
·
‘14 Reasons
Why The Economic Collapse Of Japan Has Begun’ – reading time 5 minutes. An auspicious title, but I think the
article is nonetheless worth reading and thinking about. In particular, it raises the issue that
Japan has been a continuing buyer of U.S. Treasuries, and will no longer be
able to do that. Something that
had not occurred to me, but does makes sense to me. I think this is but one example of multiple effects the
Japanese earthquake will have on individual countries that comprise our now
globalized economy.
To date I have seen very little written on how the ongoing events in
Japan will impact, if they do, on the price of physical gold. I am surprised at this. I have set my views on this out in the
commentary following this one.