japan quake

JAPAN QUAKE


I don’t always jump on the bandwagon, rushing to comment on current events. The way I have it figured, if you’ve been paying attention and listening to my paranoia and fear mongering you are pretty insulated to all but the biggest events. That said, current events are getting more and more unsettling, bigger and bigger, and even turning Black Swans into the norm. All that follows is, again, my looking at the worse case scenario. I’m not guaranteeing it will happen, but it very well could. I’m not just throwing out thoughts here, doing my normal “what if?”. I’m saying that this looks like A Big Event ( not the biggest, but big enough ). I could be overreacting. I could be right. It is up to you to decide.

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When an earthquake hits Chile or Haiti, we can pretty much shrug our shoulders, go on about our business and if we feel nice throw a buck or two into one of those counter collection tubs, “helping a brother out in this weeks third world crap hole disaster”. In the great scheme of things, nothing has changed. Now, I’m not trying to minimize the tragedy of people dying, but the hard reality is that people die everyday. Just as I don’t celebrate every birth, I’m also not going to mourn every death. I don’t know these people, they aren’t part of my tribe, and if I’m not affected frankly I don’t give a crap. If you want a commentator to get all weepy over the disaster de jure, go over to PBS. They lap that stuff up like ice cream. However, when a major disaster hits a major country, watch out. You are more than likely going to get a bite taken out of your ass. We have a couple of potential problems coming to us shortly. I won’t include the possibility of a coming quake here, just because the increasing likelihood isn’t guaranteed. Just because quakes are getting bigger and happening in unlikely places recently doesn’t guarantee that New Madrid or a major hit at San Andres or even Yellowstone will see a blow. I think the odds are dramatically increased, but a lot of global weather change/sun spot activity speculation is involved. What we do have to worry about fallout, both radioactive and financial. And just to make it interesting it is all happening as the middle east picks up the pace of meltdown.

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Several nuclear power plants were shut down after the quake. We can pat each other on the back and wipe our brow and do the happy dance. The plants safety features worked as planned. Except in one, where there was a coolant failure. Of course, a flunky quickly grabbed a mike and proclaimed all is well and there was no need to panic. No radioactive contamination to see here, move along. Personally, I don’t trust those squinty eye little bastards ( okay, I don’t trust any round eyes either, I just wanted to be racially insensitive as the opportunity arose ). Whenever someone tells me all is well, I automatically distrust them. It isn’t that I have any inside information, just that I’m paranoid. I’m not saying we should all head for our bomb shelters, just that you might want to be cautious about drinking any fresh milk for a little while. Just in case they lie to us to keep the herd from panicking.

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Far more damaging will be the financial meltdown. Twenty years ago, it was forecast by others that if a quake hit Tokyo it would melt down the world economy. Japan has been in a economic funk the entire time since then. So they aren’t as influential as they were. And it isn’t like we have to worry about them NOT buying our debt like they used to. Both China and Japan have had little reason to buy our toxic debt for years now. It is lucky for us that they haven’t cashed in what they have, but they certainly don’t keep us afloat like they used to. No, the problem is that this could be the straw that breaks the camels back in financial markets because of insurance payments. When a craphole country has a disaster, a bunch of mud huts get flattened. That sucks if you are living in one, but financially it doesn’t mean anything. But when an advanced economy sees a disaster, their very expensive infrastructure is insured for a lot of money because they can afford both to build expensively and to have good insurance on it. This isn’t about a third world city in the US seeing its slums flooded, nor is it about a few expensive homes in Florida being damaged by a hurricane ( both events really hurt our insurance industry ). This is very expensive cities and industry being destroyed. My guess is that this will grab the global insurers by the testicles and squeeze them dry. Game over, bankruptcy. Best case scenario, more inflation as governments bail out the insurance guys. Worse case, this impacts the derivatives markets too badly for a bailout. Remember those one point two-five QUADRILLION bucks worth of derivatives hanging by a thread over our heads? A small percentage of that goes under and the global economy takes a big flush.

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You could at least be consoled by the fact that since Japan will be needing a lot less energy right now ( three refineries damaged ) the price of oil will drop. I can’t see that. Middle east turmoil is increasing. Even Egypt is seeing fresh conflict. Any demand drop from Japan most likely will be met with production problems from the middle east. As I checked the Interweb Friday noon Pacific time, there were rumors of Saudi riots/demonstrators being beat down. And Saudi is the Big Kahoona as far as civil unrest and oil. Yes, there were rumors of mass demonstrations days before, but would you like to bet they won’t take advantage of the financial crap storm brewing and step up their plans? Have fun with this one folks.

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