Tuesday, March 15, 2011
"#14 Japan's national debt was already well over 200 percent of GDP even before this tragedy. How much farther into the danger zone can they possibly go?"
The following are 14 reasons why the economic collapse of Japan has now begun....
#1 The Bank of Japan has announced that they have decided to flood the Japanese economy with 15 trillion yen. That is the equivalent of roughly $183 billion dollars. This is going to provide needed liquidity in the short-term, but it is also going to set Japan on a highly inflationary course.
#2 Japan’s Nikkei 225 stock average declined by more than 6 percent on Monday. As the full extent of the damage becomes apparent more declines are likely.
#3 Oil refineries all over Japan have been severely damaged or destroyed. For example, six refineries that combine to process 31 percent of the oil for Japan have been totally shut down at least for now.
#4 The damage to roads, bridges, ports and rail systems is estimated to be in the billions of dollars. The damage done to power lines and water systems is almost unimaginable. It is going to take many years to rebuild the infrastructure of Japan.
#5 Right now the flow of goods and services in many areas of northern Japan has been reduced to a crawl, and this is likely to remain the case for quite some time.
#6 Many cities and towns along the east coast of Japan have essentially been completely destroyed.
#7 Japan's nuclear industry is essentially dead in the water at this point. Even if there is not a full-blown nuclear meltdown, the events that have transpired already have frightened people enough to cause a massive public outcry against nuclear power in Japan.
#8 Japan is going to need even more oil and natural gas in the long run to replace lost nuclear energy production. Prior to this crisis, Japan derived 29 percent of its electricity from nuclear power.
#9 Japan is the second largest foreign holder of U.S. government debt, but that is about to change. Japan currently has about $882 billion in U.S. Treasury bonds and they are going to have to liquidate much of that in order to fund the rebuilding of their nation.
#10 Many factories in Japan are closing down at least temporarily. For example, Nissan has shut down four factories and Sony has shut down six factories.
#11 Toyota has shut down all production at its factories in Japan until at least March 16th.
#12 A substantial number of Japanese financial institutions and insurance companies are absolutely going to be devastated by this nightmare.
#13 Japan's budget deficit was already 9 percent of GDP even before this tragedy. Now they are going to have to borrow lots more money to fund the rebuilding effort.
#14 Japan's national debt was already well over 200 percent of GDP even before this tragedy. How much farther into the danger zone can they possibly go?