Could Japan’s Disasters Collapse The Dollar?

March 15, 2011

by Russell D. Longcore

After an 8.9 earthquake, a tsunami, a nuclear meltdown and a volcanic eruption…all in one week…the Japanese people might wonder if God just doesn’t like Japan anymore.

The second largest economy in the world has ground to a standstill. There is no way that Japan’s natural disasters will not affect the world economy, and specifically cause a negative effect on the world reserve currency, the US dollar.

Here are some of the most obvious consequences of last week’s disasters:

Massive shortages: Japan is an island. They import a lot and export a lot. But today’s world economy likes small inventories, which means that store shelves all over Japan are bare only one week after the earthquake. Japan will be forced to import food and other goods to keep its citizens alive.

Japanese manufacturer delays: The USA is Japan’s number one market. Quake damage, rolling brown-outs, blackouts, destroyed ports, destroyed rail lines, destroyed highways will all slow or stop manufacturers from bringing their goods to market. This negatively affects the cash flow of Japanese companies, and could cause some companies to fail. So, at least in the short term, Japanese goods, like autos and electronics, could be in short supply here in America.

Japanese agriculture: The tsunami inundated the coastal areas with sea water, which destroys arable land for years to come. There may have been crops lost already, but it is certain that no food will be grown in those seawater-soaked fields any time soon. And that says nothing about the sewage, chemicals and other toxins picked up by the tsunami and dumped everywhere inland.

Japanese bond holdings: Japan presently holds almost $900 Billion in US bonds, second only to China. Japan will not be buying US Treasuries any time soon, and likely not ever again. After the Kobe earthquake in 1995, the Japanese government, investment funds and insurance companies dumped foreign securities to raise cash. To suggest that Japan will not sell off US treasury securities is whistling past the graveyard. The question is whether they will use market timing to maximize their yield, or whether they will dump Treasuries on the market to get what they can. And the final question about bonds is…who’s going to buy US treasuries from Japan’s holdings? Just because Japan WANTS to sell doesn’t mean there will be a willing buyer. Remember that PIMCO, the world’s largest bond fund, announced last week that they had divested themselves of 100% of their US bond holdings. Anybody think that lesser investors might take that as a trend? Of course, Japan could simply present the bonds at the US Treasury window and demand payment. And that would mean that Ben Bernanke would just fire up the printing presses and print more worth-less fiat currency to satisfy Japan’s demands.

Japanese debt: Japan is the second largest debtor nation on the planet, second only to the USA. Who is going to loan money to the Japanese government to rebuild their nation when their present debt load is already 2.5 times Japan’s Gross Domestic Product?

Nuclear damages at multiple power plants: No one knows yet how severe the damage is, nor what the fallout will be.

Insurance claims: The claims for property losses, including business interruption losses, will be staggering. Total economic losses, including insured and uninsured property and flood damages could easily reach $1 Trillion. Hurricane Katrina’s losses hit $200 Billion, and that storm was only 150 miles wide. This will bankrupt some insurers, and insurers worldwide will be take horrendous losses.

Volcanic eruption: The Shinmoedake volcano erupted on the Kyushu island on Sunday. The city of Nagasaki, population about half a million, is on Kyushu. The earthquake was the likely trigger of the eruption, since the volcano was dormant before the earthquake. The eruption sent rock and ash two miles up into the atmosphere. If you remember what happened in Iceland, air travel was halted in Europe because of the ash cloud. The same thing could happen if winds aloft carry the ash cloud northeast toward the main island where the major Japanese cities line the southern coast.

Dear readers, I have been telling you for almost two years now that there are A LOT of events outside the United States that could cause the collapse of the dollar. Any one of the things that happened in Japan last week could destroy the dollar. But taken as a group of events happening in one week, the natural disasters in Japan are as likely a trigger for the American economic collapse as anything that could happen here in the USA.

Wouldn’t it be great if we could observe the political leaders of some American state…LIKE TEXAS…actually taking their heads out of their arses and preparing for the inevitable, unavoidable economic collapse heading our way? Do the politicians fear Washington more than they fear reality? Are they incapable of planning for a worst case scenario? Are they blind to the obvious benefits of secession? You decide.

Secession is the Hope For Mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.