Japanese Emergency: Global Financial Implications and What We Should Be Talking About(Please read)

Since the 9.0 earthquake, subsequent Tsunami, and nuclear meltdown much attention has been paid to the suffering, the dying, and the dead. Much of the international media coverage has been focused on the physical damage and the developing situation at the Fukushima nuclear power complex.

I've been doing some research lately about Japan's debt loads and how this relates to the current crisis in the nation. While much of Japan's debt is contained within the nation, meaning they owe it to themselves, their debt to GDP ratio is roughly 223% of GDP(or so it will be by the end of the year). They cannot take from their own people any further, and the BOJ cannot continuously print money to inject into capital markets that have been suffering as a result of this emergency. Their plan as of late is to continue to pump liquidity into the system in a bid to inflate away their debts, but this new emergency may require that they get cash elsewhere....

The Japanese hold roughly $885 billion of our treasury bonds and since our government is in the hole 100% of GDP as of couple of weeks ago, the prospect of having to pay down immediate calls from Japan to pay for the disaster relief is daunting for the US bond market. The old Japanese plan of devaluing the yen to pay down debt may not work this time around, and it may be that they will throw the US sovereign debt market under the bus in a bid of self preservation.

What does this mean to you? If this happens(and I PERSONALLY FEEL that there is a near certainty of this), it means that the US will have drive themselves much deeper into debt in order to satisfy the debt. After PIMCO's recent dump of all US bonds the market is a little jittery about the value of US debt, this move by Japan could signal a giant bond dump around the world forcing our currency, our government, and our overall markets into a tailspin. It would be wholesale financial destruction.

I believe this WILL happen, and it will happen soon. The Japanese are going to have many jittery customers world wide who may fear radiologically contaminated products, stagnant or entirely non-existent industrial growth, and massive debt-loads on top of having to deal with this incredibly MASSIVE crisis.

The Japanese economy has been in crisis for some time now and their markets have been shakily supporting massive debt loads since the 1990s. This can no longer continue. Doing so would certainly spell the destruction of all Japanese wealth. What will follow will be a move based entirely on self-preservation, the US be damned. If we were in their position we'd do the same thing.

I think it is time for anyone who reads this and sees what I see to get out there and prepare. Buy food LOTS of food, buy ammo, and med supplies. buy extra clothing and camping gear if need be.

If I am wrong, no harm done, if I'm right...you'll at least be a little more prepared than 90% of the people out there.

Here's hoping for the best.

reply to post by projectvxn


Wouldn't most of the re payment of the bonds come from such things as disaster relief aid? I know we have ships in the area and we were helping with evacuations. That's gotta count for something. I know that ships from Okinawa have been coming and going from the mainland for some time also.

As if things aren't bad enough... we have to deal with an economic meltdown.

I heard that projections for the Japanese national debt was shown to grow to over 250% of GDP... Before their recent disasters.

Can things possibly get worse?

reply to post by projectvxn


I've really been downplaying this whole incident but since i've heard there's nobody at the plant i think I might have ****ed myself a little bit. You're right it can't hurt to be prepared.

reply to post by jackflap


Those bonds are promissory notes of payment at a later date. Much of that has rolled over a few times. Those debts are separate from voluntary US aid. It really comes down to one thing, CASH. A positive cash flow has to come from somewhere OTHER THAN their tapped out people. Especially now since much of that is in limbo due to these disasters.

Personally i just hope that all everyone gets out of this is new camping gear for weekend outings and some ammo for plinking.

I like being comfortable folks. Make no mistake I don't take these things lightly.

reply to post by projectvxn


Let me preface what I am about to suggest with: I agree with you. Now, Devil's Advocate time.

If the Japanese government was to call on these bonds from the United States government, what if the U.S. gov't refused at this time knowing the consequences on our own economy? Do you think the Japanese gov't would reconsider asking the U.S. to pay out (being aware of the U.S. economic situation as well) out of fear that we would retract aid? The nuclear situation is getting worse, and if the worst-case scenario happens then as much aid as possible will be needed for evacuation - and the U.S. already has Navy vessels there.

Then there is the question: Would the U.S. pull out evacuation aid if the Japanese gov't called for their bonds to be cashed out?

Again, I think you may be right, but these are the questions I immediately asked myself.

This alarming thread is simply that..just alarming. The fraction of Japan that is affected by the 9.0 earthquake and tsunami is very, very small. Some coastal villages were damaged. A small percentage of the nuclear power plants are damaged. Screaming the financial destruction of Japan is nonsense.

reply to post by projectvxn


Japan will have no financial troubles, they will simply default on all debts and say, "Give us a friggin break we just had a half dozen meltdowns"!!!
Or if debtors insist on payment, Japan will give them a stretch of land, ....say on the Mid Eastern coast of Japan.
Have fun with your new land deal!
The world will cut them slack as they have a real reason to be financially skrood, us in the US are a different story however.

Here is a pretty good article, though not as ominous and dramatic, still supports your OP. Worth a read. MIght have a look around to see what else might be appearing.

Japan Crisis -- The Economic Consequences of Disaster

www.foxnews.com...

It's time for Japan to cash in their chips. They need the money, they bought into it and they deserve it.
If the fed has a problem with that, then they should call upon the American productivity to create things that can help them re-build. The fed pays the US producers / factories, stimulating the local economies and people are put to work and Japan gets what they need.

reply to post by g146541


It's not about what the world wants, it's about what Japan NEEDS to do in order to survive. Japan comparatively(if you read more than just the title) does not owe the res of the world much. They owe their people money. They don't have it anywhere but in US treasuries.

I recommend some rudimentary research on how bonds and debt affect economies.

Start with Zimbabwe, who are the only ones in more debt than Japan.

reply to post by projectvxn


I see what your saying. I did a little looking around and investors are comparing what happened in the 95 Kobe quake to this. They did not see a large sell off of U.S. bonds at that time. They did see it later. Whether it was caused by that they are not sure. I found this as well

Geithner not worried about Japan selling US bonds

(Reuters) - U.S. Treasury Secretary Timothy Geithner said on Tuesday he was not worried about Japan selling U.S. Treasury bonds in order to finance reconstruction following a devastating earthquake and tsunami. When asked at a Senate Banking Committee hearing whether he saw a risk that Japan would sell Treasuries, driving up interest rates, Geithner replied, "I do not."

www.reuters.com...

reply to post by Jim Scott


With respect I think you're wrong, i hope you're right but facts are starting to add up. Japan was in a bad financial position before these string of disasters and now there is a fair possibilty of multiple reactor melt downs then as of an hour ago things are looking bad indeed. I may just be getting caught up in the hysteria but so far, in my mind, i've been down playing this disaster and hoping for the best.

Brilliant post - it highlights all the more the reasons Humanity should take off in a whole new direction. If we sit around waiting, we WILL be hit. If we call for the end of entropy and join a planetary movement, we can change things, eliminating nuclear energy and have abundance for all.

For more information visit the two threads linked in my sig.

reply to post by Amaterasu


No offense, but this is no time for pseudo-academic discussions on theoretical BS.

It's time to deal with reality.

Originally posted by starshift
It's time for Japan to cash in their chips. They need the money, they bought into it and they deserve it.
If the fed has a problem with that, then they should call upon the American productivity to create things that can help them re-build. The fed pays the US producers / factories, stimulating the local economies and people are put to work and Japan gets what they need.

Exactly, according to all the economic experts in the US, Bernanke included, the US economy is booming! The US has gobs and gobs of spare money to throw about due to its stimulus packages and commensurate private investment.

Oh, hold on, I think Greenspan has a different view......


Greenspan Says Obama Admin is Too "Active" in Economy

politics.blogs.foxnews.com...

reply to post by projectvxn


Correct, but before this whole debacle is over they will be very in debt.
Just looking to the future for Japan.
Looking to the now for the US as we cannot fill the orders we need to.
Yeah i read ya right.

reply to post by jackflap


Geithner is an effing idiot.

And the Kobe quake is a rattle compared to what is being seen in Japan today. The destruction is MUCH, MUCH bigger. It is also coupled with a bad nuclear disaster, many Japanese military assets have been damaged and destroyed. Sendai, a city of 1 million has been literally wiped off the map..The scale of economic destruction here far surpasses the Kobe sell off.