Most interesting to me this morning are the financial implications of all these things and let’s start with Japan. Monumental doesn’t seem to describe the unholy mess there, just the sheer awfulness of all that mud, twisted steel, radioactive trash, and decomposing human bodies scattered amongst and within it. The cost of it seems beyond calculation, but the first questions might be how does a deeply-in-debt Japan raise some cash to begin digging out and (possibly) rebuilding (and I add that qualification because I don’t know that a lot of this lost stuff will be rebuilt at all). But it will be cleaned up and sorted out. The obvious answer to the funding question is that Japan sells foreign bonds, namely US and European.
That will not be a good thing for Euro-America. Japan was the quiet benefactor last time the European sick countries had to roll over their debt payments, and nobody wanted to buy their paper. Japan went in and hosed up their debt, allowing them to enjoy one last Christmas of seeming political normality. Now it’s rollover time again in the Euro-Zone and not only will kindly Uncle Japan not be present for the bond sales, they will be selling off the stuff they already hold, and it is hard to see how the European banks digest that ugly bolus of reality.
Similarly, in the US. Japan has accumulated about 800-billion in US debt paper. They have more-than-generously propped up our operations here for years by buying the stuff. Now they would seem to have little choice but to liquidate a bunch of it and cancel their seats at the upcoming auctions of new paper issues. That leaves Ben Bernanke alone in his office with a shit sandwich for lunch. What to do now, Ben? Who on this planet is going to buy more debt of a people who spend their lives in zombie-like thrall to the Kardashian sisters? No, Ben’s going to have to eat the sandwich himself, a least until the end of QE-2. Or watch interest go way way up to the point where the risks are acceptable to outside parties – but that would only destroy the US Economy and American government at all levels, since we can’t meet our obligations even at ZIRP levels – and, anyway, who would step forward now to buy this crap under any circumstances? (Echo answers….)