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Archive for the ‘Japan’ Category

Bank of Japan US Fed Down Easy Money Trail

Posted by Steve Markowitz on September 19, 2012

The Wall Street Journal today reported that the Bank of Japan (BOJ) has aggressively moved to expand the money supply in Japan.  In making the announcement the Journal stated that the BOJ took this step “after its analysis suggested that any economic recovery is at least six months away amid a global slowdown”.  This statement is comical given that Japan has been in an economic slump for over two decades!

The DOJ has joined the United States’ Fed and other central banks worldwide in an ongoing program of expanding money supplies.  Although similar efforts have failed in Japan for over two decades, sooner or later the central bankers will be successful in spite of themselves.  Unfortunately, their success will bring with it significant inflation.  While central bankers would like to use controlled inflation as a Trojan-Horse tax to pay off the huge debt overhanging many economies, the unintended consequence of this reckless behavior will be significant.


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Quantitative Easing Expanded in Japan

Posted by Steve Markowitz on April 27, 2012

Japan has been the poster child for economic malaise and the failure of government policies over the past three decades.  While the economic meltdown hit the United States and Europe in 2007, Japan’s meltdown occurred over 23 years ago when in 1989 the Japanese Nikkei stock market hit its peak of nearly 39,000.  Today that index is just over 9,500, less than 25% of its peak value.

Economist have had time to study the Japanese economic problems, its causes and the government’s failures. Japan’s problems started with the popping of the real estate bubble.  It is generally agreed that continuation of the long-term downturn was caused by the government allowing “zombie banks” to continue functioning rather than having them write off their bad debt since that action would have caused many banks to go out of business.  Similar to the United States and Western Europe, the Japanese government deemed these banks too big to fail.

As evidence of Japan’s ongoing economic problems, once again the Bank of Japan “BOJ” today announced it would purchase Japanese government bonds.  This is similar to the Federal Reserve’s actions the United States in recent years called Quantitative Easing.  The BOJ announced it would purchase an additional ¥10 trillion ($124 billion) of the bonds bringing the total purchases to almost $1.25 trillion.

This latest announcement by the Bank of Japan is merely more the same failed policies.  It is evident that the United States and Europe learned little from Japan’s experiences.  Japan has taken the same basic course of massive government borrowing and spending, as well as purchasing its own debt without success, in the failed effort to spur economic growth.  Since 2007 meltdown, the United States and many European countries have taken the same failed approach.  Either the policymakers have turned a blind eye to Japan’s reality or they are merely repeating the failed policies because they have no other suggestions.

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Standard & Poor’s Lowers Japan’s Debt Rating

Posted by Steve Markowitz on April 27, 2011

Last week Standard & Poor’s (S&P) downgraded its view of America’s debt from “stable” to “negative”.  Today it was Japan’s turn as S&P downgraded its debt rating from “stable” to “negative”.

While S&P indicated that last month’s earthquake and it consequences were major drivers for the rating change, it had already lowered Japan’s double-A rating to double-A-minus on January 27, before the earthquake hit.  Clearly Japan’s financial problems are deeper than those caused by the earthquake.

While Japan is a very different country with a different culture than that of the United States, there is one thing in common behind both countries’ debt problems: over-reaching governments.  When governments are given the ability to spend money other peoples’ money they do will do so with abandon.  The results are never positive.  The worldwide problem of sovereign debt is the best indicator of the need for a balanced budget amendment to the Constitution in the United States.

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Japanese Earthquake Creates Potential Nuclear Crisis

Posted by Steve Markowitz on March 12, 2011

The following report is reprinted with permission from STRATFOR (http://www.stratfor.com).  The coming hours and days will determine how serious this problem becomes and it will likely have serous economic and political ramifications.  But for now, our thoughts and prayers are with the people of Japan as they navigate through this difficult time.

Red Alert: Nuclear Meltdown at Quake-Damaged Japanese Plant, 12 2011 – 02:27

A March 12 explosion at the earthquake-damaged Fukushima Daiichi nuclear power plant in Okuma, Japan, appears to have caused a reactor meltdown.

The key piece of technology in a nuclear reactor is the control rods. Nuclear fuel generates neutrons; controlling the flow and production rate of these neutrons is what generates heat, and from the heat, electricity. Control rods absorb neutrons — the rods slide in and out of the fuel mass to regulate neutron emission, and with it, heat and electricity generation.

A meltdown occurs when the control rods fail to contain the neutron emission and the heat levels inside the reactor thus rise to a point that the fuel itself melts, generally temperatures in excess of 1,000 degrees Fahrenheit, causing uncontrolled radiation-generating reactions and making approaching the reactor incredibly hazardous. A meltdown does not necessarily mean a nuclear disaster. As long as the reactor core, which is specifically designed to contain high levels of heat, pressure and radiation, remains intact, the melted fuel can be dealt with. If the core breaches but the containment facility built around the core remains intact, the melted fuel can still be dealt with — typically entombed within specialized concrete — but the cost and difficulty of such containment increases exponentially.

However, the earthquake in Japan, in addition to damaging the ability of the control rods to regulate the fuel — and the reactor’s coolant system — appears to have damaged the containment facility, and the explosion almost certainly did. There have been reports of “white smoke,” perhaps burning concrete, coming from the scene of the explosion, indicating a containment breach and the almost certain escape of significant amounts of radiation.

At this point, events in Japan bear many similarities to the 1986 Chernobyl disaster. Reports indicate that up to 1.5 meters (4.9 feet) of the reactor fuel was exposed. The reactor fuel appears to have at least partially melted, and the subsequent explosion has shattered the walls and roof of the containment vessel — and likely the remaining useful parts of the control and coolant systems.

And so now the question is simple: Did the floor of the containment vessel crack? If not, the situation can still be salvaged by somehow re-containing the nuclear core. But if the floor has cracked, it is highly likely that the melting fuel will burn through the floor of the containment system and enter the ground. This has never happened before but has always been the nightmare scenario for a nuclear power event — in this scenario, containment goes from being merely dangerous, time consuming and expensive to nearly impossible.

Radiation exposure for the average individual is 620 millirems per year, split about evenly between manmade and natural sources. The firefighters who served at the Chernobyl plant were exposed to between 80,000 and 1.6 million millirems. The Nuclear Regulatory Commission estimates that exposure to 375,000 to 500,000 millirems would be sufficient to cause death within three months for half of those exposed. A 30-kilometer-radius (19 miles) no-go zone remains at Chernobyl to this day. Japan’s troubled reactor site is about 300 kilometers from Tokyo.

The latest report from the damaged power plant indicated that exposure rates outside the plant were at about 620 millirems per hour, though it is not clear whether that report came before or after the reactor’s containment structure exploded.


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Japan Debt Ratings Cut by S&P

Posted by Steve Markowitz on January 28, 2011

Standard & Poor’s, one of the major debt rating agencies, on Thursday lowered Japan’s debt rating from AA to AA-.  In making this downgrade, S & P said:

“The downgrade reflects our appraisal that Japan’s government debt ratios – already among the highest for rated sovereigns – will continue to rise further than we envisaged before the global economic recession hit the country and will peak only in the mid-2020s.”

“In our opinion, the Democratic Party of Japan-led government lacks a coherent strategy to address these negative aspects of the country’s debt dynamics.”

Japan’s government debt is currently 200% of annual gross domestic product, even higher than the United States’ debt ratio.  However, S & P’s Japan comments about could well have been directed towards the United States.

S & P’s downgrade of Japan’s debt quality is a warning to the United States.  Should we not soon have a “coherent strategy to address these negative aspects of the country’s debt dynamics”, the United States’ debt rating will also be lowered.  That will lead to a substantial increase in America’s cost of borrowing, which will create a cycle of every increasing U.S. deficits with any additional goods or services supplied to the People..


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