The massive 9.0 earthquake and subsequent tsunami in northern Japan will be a game-changer. Both negatively and positively, the reverberations will be felt across all continents.
Japan has been in a recession for twenty years. Some commentators have called them the Lost Decades. Patrick Buchanan addressed this issue last week in TM. The proximate cause was a real-estate bubble in the 1980s. Sound familiar? It is probable that the US is headed for its own Lost Decades featuring artificially low interest rates and no growth. Since the 1980s ended, China and other parts of East Asia have rushed to the forefront economically. But in terms of technology, Japan still remains a very important and unique asset to humanity. Ergo, it is a good bet that planet Earth is going to be dramatically impacted by Japan’s tragedy.
My guess is that this means an uptick in worldwide inflation, especially in the US. Technological items will cost more: computers, automobiles, and especially cameras. The yen’s value is making a curiously counterintuitive surge. Although a significant area of Japan has been almost obliterated, Japan’s currency is on the rise. According to a March 16 report in Financial Times, Japan will need “to sell foreign assets and bring money home for reconstruction efforts following its earthquake and tsunami.”
The major international insurance and reinsurance companies will need to purchase yen to pay for local labor and materials to rebuild what has been destroyed. With the yen becoming more valuable and the production of high-quality goods interrupted due to power shortages, aftershocks, and still undetermined levels of radiation, Japanese export prices will trend higher. Perhaps more production will shift to China in the long run. China could be a major beneficiary—especially if Japan comes to be viewed as a radioactive earthquake zone.
Chancellor Angela Merkel has temporarily shut down seven of Germany’s 17 nuclear reactors in a knee-jerk response to the Japanese emergency. A decade ago Germany decided to go nuclear-free by 2020, based upon the apparent fact that German reactors are not quake-proof. The US long ago turned its back on nuclear energy. No nuclear power plants have opened in the US since 1996.
That leaves us with fossil fuels. The race will be on full-throttle for petroleum, natural gas, coal, and oil shale. In the US, that means Alaska, offshore California, and the Gulf of Mexico. Russia and central Asia will be prime beneficiaries, along with the Arabs and Iran. The geopolitical, environmental, and economic ramifications will be momentous.
Japan’s nuclear emergency could possibly provide Tehran’s leadership with a convenient escape hatch to abandon its nuclear “ambitions.” I’m not referring to Iran’s nuclear-weapons program, because I don’t believe such a program exists. I’m talking about Iran’s goal to create nuclear-power facilities to generate electricity. That undertaking is entirely normal in view of what France, England, America, Germany, and Japan have done.
Depending on how bad the Japanese situation gets in the weeks ahead, the mullahs might conclude that nuclear energy is overrated and too risky. Iran has its own history of major earthquakes. Saudi Arabia’s semi-official press has already expressed alarm with the state of affairs at the Bushehr nuclear energy plant, alleging that the Iranian reactor is situated in an earthquake zone and that the “technology employed is a mishmash of the new and the old.” Bushehr was originally a German project started in 1975 under the Shah. Then the Russians were asked for help to finish it in 1995. Thanks largely to the US sanctions on Iran, the project is still not operational.
Should Tehran decide to abandon its quest for nuclear energy, it would ask that economic sanctions against Iran be lifted, since whatever alleged nuclear threat Iran posed has been removed. Washington might not agree, but the idea of attacking Iran will appear more bizarre than it already is. A lessening of tensions and an upside for world peace and sanity in the region would result.
Then there are the all-important iPhone and iPad. Although they were conceived in Cupertino, they are assembled in China with some very critical components sourced from Japan. These components are not manufactured anywhere else in the world and in some cases are proprietary. Get the picture? It’s a potential nightmare if the supply chain is short-circuited. Globalization is a great thing for the consumer except when it’s not. Aside from Taki and a handful of incorruptibles, we are all hooked on the digital age’s wonders. Cupertino may need to scale back and slow down, along with the rest of us. Welcome to the post-tsunami world.
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