Economic Consequences of the Fukushima Daiichi Accident

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Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Economic Consequences of the Fukushima Daiichi Accident

Several posters have suggested the creation of a new thread to facilitate discussion focused on the economic impact of the Fukushima Daiichi reactor accident.  Request that the detailed engineering and technical details be minimized so as not to detract from an extremely important and very much needed discussion.

Here it is......

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Economic consequences from Japan

I created I similar thread a week or so ago, but I think between creating it on the weekend and the updates from Chris it got lost in the shuffle.  Here's a revised version of it:

------------

To to sum up Chris' three areas of immediate future concern in his Alert blog article, we have 1) A potential banking crisis, 2) Critical shortages of who-knows-what, and 3) A sharp decline in GDP and business activity.  So looking at the near-term impacts at the most basic level, here are three of the biggest ones I see:

1) Impacts on overall financial mobility.  We're talking the potential for limited or no withdrawals or transactions with our bank accounts, limited or no access to financial vehicles and investments, and delays in normally regular and prompt payments of any type (paychecks, dividends, payments from customers, etc.). 

2) Impacts on availability of goods and services.  Anything from not being able to repair your car (ex: both our vehicles are Japanese models) and getting the latest Apple iGadget (oh no! anything but that! Tongue out), to shortages of petroleum products and manufactured parts critical to our infrastructure.  One aspect of this I also think worth mentioning is the potential shortages of manufactured components and goods for military use, which has big geopolitical implications and potential impacts on our nations' servicemembers.  Depending on how much inventory is available, in the coming months a wide host of nations may encounter shortages of certain replacement parts and manufactured goods for their militaries.  This becomes even more relevant considering the increased military activity expending and using up more goods and products than they would in peacetime.  And the more complex the military equipment (as is often the case in Western militaries), the more likely it is to suffer in some way from losses in Japanese manufacturing.

3) Impacts on our income.  If we're employed, perhaps we can expect our employers to (further?) cut our hours, pay, benefits, or even our positions as they struggle to adapt to reduced revenue.  If we are employers, perhaps we may find our own business revenue slashed dramatically for any number of reasons (you can't get a critical part to produce your goods, your costs double, or maybe just nobody's buying much anymore) and need to cut costs one way or another. 

 

I'm interested in seeing how others have already prepared or are planning to compensate for these difficulties.  Some of it is covered by our general preps (deep pantry, save some cash, cut expenses, etc), but with new developments like this there's always new things that need doing or need to get a second look.

- Nickbert

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Thanks Dogs...your the best!

Thanks Dogs...your the best!

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Credit goes to nickbert...
idoctor wrote:

Thanks Dogs...your the best!

idoc -

Credit where credit is due.  It was all nickbert's fault. 

I mean, idea.

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preps

I've already experienced delays in financial matters.  I wanted to transfer IRA money from one institution to another.  As I had done in the past, I sent the necessary paperwork to the receiving institution.  After 2 weeks of hearing nothing from anybody, I started calling and found out that the receiving company had forwarded the paperwork to sending company, and had heard nothing from them.  I called sending company who claimed they never received authorization to transfer money, so apparently did nothing.  It took more than another week to have the money sent to my bank account.  I wired part of that money to receiving institution with the intention of opening a PM IRA.  The next day I called PM dealer and ordered metals to be deposited in my account.  I expected silver to take a while as there was a delay posted.  That was on Mar. 9.  As of today, no metal has reached the depository.  So, we are at about 1 1/2 mo. to make what should have been a relatively simple transaction.  I believe at least part of the delay is intentional policies by financial institutions to hang on to money as long as possible in order to take as much as they can in fees and interest out of that money.

The lesson to me is, keep your money close at hand and easily accessible.  BTW, my job is fairly secure, but pay has been frozen for two years.

Doug

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I Certainly Hope

This topic gets some attention over the next coming days and weeks. Thanks for moving this to its own threat, a good discussion about the potential coming economic waves is appreciated. Although, as I write these words, I find myself echoing comments made by Chris...I hope he IS wrong.

I took Chris's "Alert" to heart, and have redoubled my purchases over the last week. He put it out on the 16th...I think...and here we are almost two weeks after that. CM predicted (give or take a couple of weeks) that we would start to see some major fall out from what is happening in Japan. Also speculated that the paper value of gold and silver would likely dip a bit, saying the pull back would not be insignificant.

Markets were down a bit yesterday...

Jason

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re inventory shortages

re inventory shortages etc...

 

 It's ironic that the JIT (just in time) concept was itself a Japanese idea....

  http://en.wikipedia.org/wiki/Just-in-time_%28business%29

 compare and contrast with -

 "Antifragility" (tm) -  a Taleb idea..

  http://www.fooledbyrandomness.com/

 "Harmony" vs "diversity" .. ?

 http://www.zerohedge.com/article/castration-hiv-scandal-and-japanese-bureaucracy-speech-masao-miyamoto-md

 

 Karl Denninger's take on the economic impact of the Tsunami.

  http://market-ticker.org/akcs-www?post=183130

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preparing for Japan's economic ripples

Just thought I'd throw out some of what I'm doing in response to what I think we might see.  I would love to hear what other people are expecting and what they are doing in response....

 

Financial Mobility

On the plus side most of my wealth is outside of the banking system.  On the negative side, in regards to the rest of my wealth it will be another month until I am allowed to cash out my 401k.  I have wanted to cash out for awhile now, but I can't touch it until my employment contract ends (and I'd already taken a loan out on it almost 2 years ago).

Shortly after the crisis in Japan and Chris' official alert, the first thing we did was withdrew most of our savings in the bank. This was apparently a larger withdrawal than that branch usually sees, and when asked about it I told them I might be buying a used car very soon (the key word being 'might' Wink... I hate being evasive but I think the real explanation would cause more difficulties).  Secondly, as soon as my credit card statement came out I paid the balance right away more than 3 weeks before the due date.  The rationale behind that was to avoid any headaches that delayed transactions and banking chaos might cause; in any payment or transaction snafu I fully expect the banks to stonewall us and make us jump through dozens of hoops to correct any mistakes.  As for my 401k, there's nothing for me to do but keep it in the stable value fund (mostly US bonds and treasuries) until May.  There's the real possibility that the financial system could melt down before then and freeze my access to that money, but there's nothing I can do about that aside from minimizing my exposure to extreme volatility in stocks. 

Availability of goods and services

I'm groping around in the dark like probably everyone else, but there are at least a few things I know are worth doing now in the expectation of imminent availability issues.  The first was to take inventory of our food and consumable products and making a couple shopping runs to stock up on anything we were light on, or that was on sale.  The second was calling to get a warranty replacement for my glitchy Android phone.  The third was ordering a handful of items from my long term shopping list on Amazon (including Chris' new book).  And the fourth is to take my car in for preventative maintenance the next weekend I have off of work; if anything's about to go on it I want to address it now instead of waiting and taking a gamble with parts shortages.

Other than that I'm not really sure what to do next.  I thought some about the military equipment shortage angle, and it seems most adaptation/mitigation strategies would be limited to those in the service or in government.  The one thing I saw most relevant to me involves goods that have dual civilian/military use, and how nations' militaries may end up getting priority over civilian demand.  Automotive and aircraft parts may be an area of note, as might be components and replacement parts for computer systems and electronics.

Impacts on income 

As circumstance would have it my employment contract ends in a month, so I've already reviewed my job/income loss plan.  The first item (already mentioned earlier) is cashing out my 401k.  The second item is ditching what's left of my digital TV service and keeping only phone & DSL.  The third is scaling back my car's insurance coverage to liability only, since I will no longer be doing the long commutes on the weekends.  And the fourth is minimizing credit card use to gas purchases and online purchases.  Thankfully my wife is employed now and her present pay more than covers our current expenses... most of the above is just compensating for the partial loss in our ability to increase our savings.

 

What we are not doing

- We aren't planning to buy any more gold & silver as things stand now.  Some of the money we took out of the bank represents "buying opportunity" money, and IF we see a substantial correction in prices that may change.  But that money is just as likely to go to something else that becomes suddenly cheap.

- We aren't making any firm commitment on plans for starting our own business yet.  Starting a business was the original plan for after my job ends, but I need to see how things develop.  At this point waiting 2-3 months seems more prudent than jumping in since it's highly likely something big is around the corner.  Who knows, I might find an even better opportunity than the one I have my sights on now.

 

(edited because I hit 'post' too dang early )

- Nickbert

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Re: shifting to PM IRA
Doug wrote:

The lesson to me is, keep your money close at hand and easily accessible. 

I wonder if they're having hiccups because it's the end of the month and there's some drama at the COMEX?  Do keep us posted on how this goes -- it's one of those Little Data Points That Could Mean A Lot.

Viva -- Sager

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Prepping for Ripples

It feels empowering to take control. Once our family got past all the morning the loss of what we thought the future was going to be - to what we now think - taking control is the only thing that feels right.

In seeing the traumatic events taking place - it takes me a few days to get my head back on straight and make the moves - but not out of panic but as part of what was the original plan - to get ourselves ready and if time/money allowed - to do it in a manner that would support our family, friends and neighbors if the need arose.

The Japanese events moved some of our purchases up the "do it now" list. The final list was a cross from other world events in the Middle East and climate change in general. Looking through the eyes of the Japanese, money has no value so we thought ramping the exchange to tangible goods made sense:

  • We are buying a small greenhouse for extended growing and covered from elements - any elements. We're trying to figure out the rain water filtration for it but I don't know what will filter all comtaminants effectively. It will have a duct to siphon warm air sunny spring and fall days into the house because our heat source could one day be disrupted.
  • The other thing we got is a potato plow since potatoes grow mainly underground and will be higher on the food chain here. Besides, I found out a way to grow them to my satisfaction.
  • Third, I bought the iphone I've been wanting since they came out.
  • Fourth, we bought a Ricksycle and an electric wheel for it. 

Financially, we plan on further cracking open the nest eggs and padding the nest with them. I think in an event like Japan is experiencing, food, water, shelter and the ability to get outta Dodge fast is worth more than anything else.  Should one survive such events, then having those little items (like food and water) and be able to share them, is worth a life's savings. .

EGP

 

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Nickbert It sounds like you

Nickbert

It sounds like you have your act together and your plans well laid.  I'm sure the increased daylight hours help too.  Wink

Travlin

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Current Preps

I took Chris's Alert to heart as well.  Pretty cashed strapped, so getting my income taxes back has really helped.  I would love to buy more silver, but I am wondering if it would be better for a substantial correction that could come in June or July....Just wondering when it will happening is really time consuming, especially watching silver go up about three dollars since I pulled my money out of the silver ETFs.

We have plenty of fuel...but winter in the North East is finally coming to an end.  Buying extra pellets for the stove.  Purchasing a generator.  Paying off about 1/10 of my over all debt.  Doing what I can.

 

Jason

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responding to CM alert

I read the alert and then showed it to my husband to read.  He doesn't follow the CM site or prep sites at all but relies on me do the reading and report back to him.  Then we discuss what we're doing and what more we might want to do.  We're getting 'up in years' as they say and don't have the physical ability to tackle full blown farming and homesteading like you younger folk (by the way, my moniker "homestead" comes from our ties to another time and place).  We presently live in a semi-rural area surrounded by abundant prosperous farms, many of them Amish.

In response to the alert, we're getting ready for likely economic and energy changes by taking care of things 'right now' that we otherwise might put off.  We're going to have 2 big trees taken down now and made into firewood.  We're changing our landscaping now so that we can better take care of it ourselves.   We're buying ahead on things that have to be periodically replaced, like filters.  We're giving our deep pantry a close look and filling in some areas that we've let slide a little bit (spices, canned meats).  We're canning more meat.  We're more buying tuna and canned salmon for long term storage because who knows what's going to happen to the Pacific fisheries in the next year.  We're buying more seeds for some serious kitchen gardening, like lettuce, peas, beans that we can grow ourselves.  We've restocked basic clothing that we'll need in the next 5 years (socks, underwear).  We've stocked up on some of our routine Rx medicines that keep us functioning and that we can't live without.

Meanwhile, we still have our 1 yr. supply of food and a 2 month emergency water supply.  The wildcard is how many of our kids and grandkids might show up if the world goes totally nuts.  They're so involved with their own busy lives that they can't be bothered with preparing for anything except the next vacation.  Sigh.  It's not that we haven't tried and tried to tell them that they need to prepare for a significantly rainy day; we've even told them we would pay for the supplies.  They smile and joke about it and do nothing.  From what I read on the blogs, that's a common problem for those of us who are 'early adapters'.  If our family needs help, we'll open the doors wide and let them have whatever they need.  That's what you do when you love someone.  We don't have any room, however, to store enough for all of them and for us too.  What will be, will be.

Best wishes,  grandma

 

 

 

 

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Estimate of GDP Impact & Possible Ramifications

So.  After reading "Spike Japan's" blog post on the impact of the quake/tsunami on the Japanese electrical system, I started thinking - how big will the hit to Japanese GDP be?

If 40% of the electrical generating capacity is offline for the next few months, and 20% of it off for the next (realistically) perhaps 3 or 4 years (if ever?), and the affected prefectures "house" 40% of Japan's GDP what impact does this have on the overall GDP of Japan? 

Is is a simple question of multiplication? (20% of power offline for 2-3 years & 40% electricity offline for 3-6 months) * 40% of Japanese economy = 8% (over the next 2-3 years) -16% (over the next 6-12 months) GDP hit? Or is the correlation b/w electricity consumption & economic output not 1:1?

I would imagine the overall impact has got to be at least a 5% "hit".  $300bn (est) in damages on a $5.391 trillion GDP in 2010 = ~5.5%.  

What does everyone think?  Is this a fair "back-of-the-envelope" method for calaculating the GDP implications of this tragic event?  Is it even possible to make simplistic estimates about such a complex dynamic? 

Additionally, what might be the broader global economic & financial market implications depending on the severity of the GDP decline? 

Cheers 

-a.j.m.

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Re: GDP estimate

As to whether electricity offline and lost GDP move in a 1-1 relationship I cannot say.  But we should also take into account that lost electricity could also have spillover effects into areas that are not strictly related to use of electricity.  If some economic activity does not per se rely on nuke energy (say, vegetables growing in Southern Japan get their energy from the sun) but cannot come to market without either nuke electricity or something that relies on same -- maybe there is a factory in the Fukushima Prefecture that produces parts for ag equipment, or fertilizers, or whatever.  So the economic activity in Fukushima is lost (ag equip, fertilizer) and the cultivation of kohlrabi in Matsue is thereby effected, with a further loss to Japanese GDP.

And let's not forget about US GDP.  How many automobile-related jobs in America are about to be lost or suffer layoffs/furloughs because they can't get parts from Japan?  

Quick goog search:  http://www.mofa.go.jp/region/n-america/us/economy/date/25.html

52,000 Americans employed in US by Japanese automakers.  A further 297,000 work in Japanese auto dealerships located in US.  

Perhaps this becomes offset somewhat by higher demand for other brands of cars -- but it would likely take quite some time before US auto companies (& dealers) ramped up their hiring (not least because US car dealer inventories are very high right now -- http://www.zerohedge.com/article/gm-continues-stuff-dealer-channels-will...).

Egad...

Viva -- Sager

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