Monetary Meltdown!!!

Posted: March 21, 2011 in Commentary, Economics, Politics
Tags: , , , , ,

As Japan is suffering through a nuclear disaster their government is doing what governments always do when their protection racket is exposed for the gigantic fraud that it is.  They are downplaying the size and scope of the disaster, denying any responsibility for design flaws and lack of preparedness, and publicly posturing to hide their complicity and inability to resolve the problem. The Japanese people are stoically dealing with their individual tragedies without complaint, without violence, and without theft – a stark contrast to political institutions that heap more woe on their constituents by trying to tax and spend their way out of calamity, just as we do in the US.    

The impact of the series of Japanese disasters on the world economy is ominous.  First, a rise in the price of oil is likely in the short term as Japan supplements its energy needs for replacing the nuclear power that was being generated.  Uranium markets will be harmed as governments around the world take so-called precautionary action to prevent meltdowns in their own countries by shutting down reactors, slowing construction, and delaying permitting.

Construction materials will become more costly as rebuilding begins in the affected areas.  Pacific seafood will become more expensive as nuclear contamination and the extended fear of it drives prices higher.  The yen will fluctuate wildly against other nations currencies as the Finance Ministry borrows and the central bank prints money to feed the bureaucratic “restoration” spending.  Worldwide shortages of Japanese components in finished goods will restrain production of consumer goods and lead to higher prices.  GM is already altering its spending as it tries to assess the impact of supply chain disruptions.

In addition, bond prices in the US are likely to fall as Japanese investors and the government repatriate assets so that they have yen to buy what they need to spend for reconstruction.  The effect will be higher interest costs for the government and a greater need for the Federal Reserve to continue printing money, AKA quantitative easing, for longer than planned.  Look for the Fed to allow the program to expire, or perhaps even end QE2 early,  and then adapt to conditions by renaming and resuming the same ineffective self-defeating policy.

The Japanese stock market has already taken an enormous shock as it dropped nearly 22 percent in the wake of the disasters.  It has rebounded to recover about 8 percent since the bottom, but expect volatility to continue as the global investment community decided whether it will be safe to be in Japanese equities while the currency continues to be debased to keep the export economy alive and well  Look for China, Korea, Singapore, Indonesia, and India to have job gains as they benefit from Japanese suppliers not being able to meet delivery commitments.

Here in America, we see the government behaving much the same as Japan’s, except that here we are experiencing a financial disaster.  The entire economy is drowning in a sea of government debt and non-productive stimulus spending.  Our leaders are downplaying the scope of the problems even as housing remains in a tailspin, producer and consumer prices continue to rise, foreign buyers dwindle for US government debt, energy becomes more expensive because of regulatory restrictions, and unemployment continues to remain at levels comparable to the Great Depression.

Washington is denying responsibility for creating the problem with credit pumping from the Fed and increasing deficit spending for the last forty years. They publicly posture with snake oil solutions that continue to rob the American consumer and line the pockets of the banksters and the war profiteers.  They deny all culpability for the pain and suffering that they perpetuate as they kick the can down the road for the next generation to dig itself out from under the manure.

As the situations become more desperate, governments do more and more desperate things to look like they are doing something to avert a cataclysm all the while pushing us closer and closer to it.  Whenever the government says it will help you, say “Go away!”

Otherwise you might be trying to buy drinking water in the aftermath of a hurricane while the government refuses to let WalMart bring what you need to where you are. Or you might end up wondering why the hundred thousand dollars that you had in the bank will suddenly only buy what a thousand dollars used to buy.  Don’t let the central banks and governments continue to melt down your money.  They will unless you stop them.


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