Recent World Events to Impact Economy?
March 19, 2011, Submitted by: Lauren (Mrs. MSB) Tweet
The events taking place in the world right now have lots of folks anxious, nervous, and some are getting the feeling that we are a lot closer to a possible economic collapse since 2008.
Japan
Japan, the world’s third largest economy has just suffered a tremendous blow, the total fallout of which is yet to be determined. The 9.0 earthquake has destroyed or damaged much of the infrastructure in parts of the country. The tsunami has devastated entire regions, while we have all watched in horror. The Fukushima nuclear power plant disaster is still unfolding and may leave that entire part of the country uninhabitable due to radiation entering the environment, soil, and water supply.
Japan will pay many hundreds of billions of dollars (10′s of Trillions of yen), if not much more, to rebuild. They may have to sell some of their U.S. Treasuries, and limit or eliminate new purchases of U.S. Treasuries.
Libya and the Middle East
The situation in Libya, although hopeful for democracy, is adding more uncertainty to the entire Middle East region following the recent uprising in Egypt and the prospect of trouble in Saudi Arabia. With oil at 100 dollars a barrel, every increase of a single dollar has a major impact on the costs of nearly everything that we consume, as the increases are passed down to the consumer and are magnified over layers of manufacture and distribution.
U.S. Federal Reserve
The Fed continues to print money and to fund the U.S. government with their monthly 100 to 200 billion dollar deficit spending. The U.S. dollar is looking worse and worse as an investment, and other countries are working their way around the dollar and eliminating it from their transactions. For example, China now imports a huge amount of oil from Russia, and they do not exchange in dollars. Buying U.S. debt (Treasuries) is becoming less and less attractive for investors.
Banks
The derivatives time-bomb still exists (hundreds of Trillions of dollars), and is as bad or worse than before 2008, according to many. The too-big-to-fail institutions have received free money from the Fed, even internationally, and continue to make bad bets. The U.S. government has now absorbed, or taken upon their books with guarantees, much of the ‘bad assets’ from the too-big-to-fail institutions.
Stock Market
Lots of opinion out there suggests that the run-up in the stock market since 2008 is directly due to the Fed’s injection of money into the system, and not much of anything to do with personal investment money from you and I. Given the apparent fragility of this house-of-cards, some believe that a stock market crash is inevitable.
The Risk
The point is, it feels like things are quite shaky and definitely uncertain in the world right now. Given the speed at which information moves today, and the speed at which financial systems transact these days, it may not take much to tip things over right now.
The Plan
It is a good idea for many reasons, to be prepared and take preemptive action with your finances and overall preparedness plans when you think that things aren’t going well out there. It certainly can’t hurt. A good thing may be to hold some cash as reserve (and not all of it in a bank). Have a look at your own preparedness plans. Stock up some more with food, and get those supplies you’ve been putting off.
After all, you depend upon you.
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Japan has spent half a trillion dollars in the last week propping up their economy – the first fallout from the disaster.
Tokyo has lost 40% of it’s electric power supply – just one plant. Other plants have shut down – as yet no news about nuclear fuel issues bu their are probably other problems.
Rolling three hour blackouts for the foreseeable future in Tokyo will cause all sorts of business logistical problems.
Backup power is generated using fossil fuel – which must be imported and paid for. If the Yen is high this makes the burden less however a hifgh Yen is bad for Japanese product export.
Who will buy Japans stock of U.S. Bonds? China doesn’t want any. The U.S. is broke – I’m sure that the Japanese government wouldn’t be keen on the U.S. Fed printing dollar bills to pay for them.
Japan has had very poor growth, low interest rates and an under performing economy for twenty years. Japans public debt to GDP ratio (196%) is the second worst in the entire world – only Zimbabwe is worse.
We have seen the Japanese authorities being very reticent in broadcasting the true picture of the continuing disaster.
Will this end up being a black egret event with dramatic consequences for the ROW financial system?
@Beano
Tokyo will eventually get backup power from the national grid. I’m sure they’re studying the possibilities of that. I’m sure that for the intermediate term Japanese businesses will take a huge hit.
As for the long term effects, non-agriculture businesses will likely not be very affected. I loathe to think about what happened to the farming and fishing around Miyako, Fukushima, and Ibaraki though. I suspect the top 10 cm of top soil will have to be removed due to Cesium contamination. Japan, who already couldn’t produce enough rice to feed its own people, will have to import more. Compounding this is Japan’s agriculture businesses are the epitome of government subsidies and inefficiency. Too many small mom and pop farms to effectively feed Japan’s huge population (120 million on an island nation with poor soil and limited real estate).
So, Japan will likely be a net importer of food for a while.
But, one thing is for sure – Japan will likely rebound in the long term in terms of construction and potentially a baby boom in the north. I have a Japanese wife and she explains that the Japanese have a strong sense of community collectively. People who stay in small (by Japanese standards) towns typically are very strong willed and do not want to leave. Ones who go are typically bright ones who cannot get a job in their field locally. Many others can stay.
But I dunno. One worrying thing is now the data from SPEEDI indicates the data from Ishikawa is now “under survey” aka censored. That is the home of the Shika nuclear power station. That reactor was shut down in the past by a Japanese court for numerous safety violations. I suspect something is going on there but the government is not telling what.
Recent events will of course impact all economies, but the real problem is with the United States and other countries that desperately need credit counselling. The U.S. economy reminds me of someone that has declared bankruptcy and has no good credit and habits of not seeing what they buy and spend money that they do not have. So they borrow first from family memebers, then friends, then maybe credit unions, then they go to the shady individuals like these advanced pay day loan places, and finally to the loan shark mafia type. The United States would right now be at the point between the advanced pay day loan places and the loan shark, with China being the unscrpulous holder of the United States’ bonds. China holds the United States hostage like a loan shark will hold someone’s health and well being in their hands. The United States in the meantime tries to do what Germany attempted to do in the 1920′s and 1930′s, print themselves out of depression. If and when the United States economy falls the other countries will go down one by one, quickly.
Do not buy what you cannot afford, and see what you are buying. This is one reason why depression has hit so many countries, because people and governments spend money that they do not see. Back 50 or more years ago people used to pay for their purchases with cash and when a disaster came up they knew what they had to work with to handle it. The governments of the world that are simply the same people that no longer see the money that they have to work with, cannot deal with these disasters because they have spent themselves into debt.
Another issue that affects the world governemnts to deal with and more easily recover with these sudden calamities is overpopulation. People have greatly depleated the resources of this planet and it is truly coming back to haunt everyone. A country that is not overpopulated and does not have a drain on their resources recovers much quicker from a natural or manmade disaster because they have the means to do so, a buffer. Haiti is a perfect example of disaster striking and not being able to recover because of overpopulation. The poor people used up all the resources of the island and had to build terribly constructed houses for lack of quality materials, had no vegetation on hillsides because of all the wood being used up to prevent slides, and thus a 7.0 earthquake was an epic catastrophe and the flooding from hurricanes has done damage that should never have been as bad. Easter island is said to be a similar situation of all resources being used up by the people there.
The country that really cannot take a true disaster right now is INDIA. If you really want to be concerned about one spot in the world that could lead to world wide problems with the economy is if something happened there. India employs hundreds of millions throughout many sectors, especially the financial sectors and a large mega earthquake there and or some war with Pakistan or even China would hurt the markets of the world more than all these other disasters combined. India is vastly overpopulated and the suffering in that country is solely because of rampant overpopulation. India could not begin to handle something serious like a 9+ earthquake, which has occurred before.
The true problem with the economies of the world is that governments spend and use up everything they have rather than saving for later. Many European countries have population declines, but this is mainly because they are already overcrowded and there is not enough to go around. Unfortunately human behaviour is still too much like if you lock up 5 female rats and 5 male rats in a filled up grain silo with plenty of water and enough air. Come back in one year and you will find nothing but hundreds if not thousands of rat skeletons and excrement and no grain left at all. MOST human beings function mostly in the same way, breed as much as possible and use up as much of what is around you as much as possible. Another example of this is how people go right back to using high gas guzzling vechiles after the price of fuel goes down. Most people do not learn and this mentality is what is going to destroy the world economies and global fighting for the last resources, World War 3. I am not really religious but one of the seven deadly sins certainly does apply to the demise of the world economies, and it is called gluttony.
@Be?i; ( re:05/20/11-Recent/Events/Economy ) I hear what you say and some might read negativity, I’m reading facts. One personal footnote, ( I’ll find the compendium my library holds for the reference,it may take time. ) looking over stats regarding safety+survivalism= location, a 20 year project.( I left behind in 1986 ) Early on, someone, a towering intellect told me where and why; and that I should follow. His research bested my own by fifteen years prior. He produced a volume which had over lay maps of all reactor sites, military test grounds past and present, all U.S. missile silo locations, waste storage, mines, refineries, etc… All nuclear locations and then the weather patterns, rivers, atmospheric,flood plain,military industrial complexes, (color coded re:known contaminant/chemical pollutant or suspected, ( Right! ) any and all typographical data ) all of which could be compiled for over view. ( That is the short run on the data within, say 25% ) The one thing that I never hear spoken of in survival school is that a country with nuke capability isn’t just going to target the military, the political centers, the cities, their infrastructure, they’re going to try to detonate your reactors. Have you seen the projections for the yields? One of the equations unfolding in the fukushima reality and that was nature? Like Chernobyl they have human drones in Japan. Hot war= no power to cool, add E.M.P., lack of labor, here’s another bomb ( “Ready Made” that’s “DaDa” ) with 25 years of change ( Same old school reactors with high test fuels spread all over the planet ) ) and aging compounding flaws. The gist is this, it’s 12 days since your post. The world is dropping the dollar as reserve currency, Pakistan has joined China in the basket currency treaties Russia, Japan ( OOPS! ). Now Brazil has made this claim, Saudi oil keeps going up, and China is looking at stopping export of rare earths vital to the current cyber sphere. All of your thoughts are clean and clear, in accord with now. I postulate hot war as a non-debatable principle worthy of dropping from survivalism. Even if it’s a couple of third world nations that start it, the scenario is a Fukushima verse B.P. oil spill trump multiplied by extinction event no win game. It’s time as a factor has pasted and now I’ll stop this inane drivel. Facts not negative projection which oppose my purpose. Survive-All…