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There was Japan, standing quietly offstage
all these years, minding its own business, more or less - though unwinding
financially and socially at some very deep level for two decades, debt rising
around everybody's ankles like a silent, insidious tsunami, population dying
back, young people demoralized by the "salary-man" culture with its
meager consolation of nightly drinking sprees ending in micro-hotels with
rooms like funerary vaults - Japan, who had been horrifically chastened after
its mad military-industrial outburst of the last century, who shook all that
off to become the world's most dependably, civilized nation.
And now, the sorrows of Job.
The world was very busy watching the ME/NA
countries go batshit in history's center ring, but the spectacle of wreckage
in Japan, unfolds now like the slow-motion blossoming of some gigantic evil
chrysanthemum and you get the ominous idea that this is only the start of a
story that will grind on and on as more bodies are discovered and the nuclear
fiasco burns deeper and Japan's finances enter a death spiral. How could you
watch those videos of the sickening wall of black water that slammed through
Sendai without wondering how many doomed people it carried unseen beneath the
rafts of cars, and the sideways ships, and the eerily floating houses?
I tried to follow the story on American
cable TV Sunday night but with the exception of stolid, dogged CNN, all the
other news channels were playing one sordid and titanically stupid program
after another: meth freaks, show-biz narcissists, and sex chatter without
sex. What a nation of morons we are. Over six hundred cable TV stations and
only one that even tries to tell you what is going on in the world. How many
citizens of this republic were watching a dessert chef undergo staged
humiliation for the failure of a cupcake batch while two nuclear reactors
melted down across the Pacific? We deserve what just happened to Japan three
times over. And we might just get the equivalent at least in social and
political trouble as our money follies unwind and normal living here becomes
untenable on the old terms.
So many things are shaking loose now in this
world-wrapped-too-tight that it is hard to track where they all overlap, but
I will try today.
ME/NA has gone critical overnight. Saudi
Arabia wants to occupy tiny-but-strategic Bahrain, and Bahrain says that
would be an act of war - though it hard to conceive how they would wage one
against KSA, which is up to its eyeballs in US supplied state-of-the art
aircraft and all sorts of other dangerous swag. The Shia population wants to
blow the little Kingdom wide open; they'll be lucky if the Saudis don't
inadvertently turn it into an ashtray, just to see if their equipment
works-as-advertised. That might be exactly what Iran wants - poised, as it is
across the Persian Gulf and wishing deeply to evict the US Navy from its
deep-water port in Bahrain. It would be unlikely if Iran was not
helping to provoke the Shia uprising that is ongoing in many of the states on
the west side of the Gulf. I only wonder why Iran has not given a green light
to Nasrullah of Hezbollah in Lebanon to start a rumble there with Israel. It
can't be anything akin to a sense of political responsibility. More likely
just fear of what the Israeli air force might answer with this time, with
events moving so quickly and the world's head spinning so fast, it can barely
focus on one particular place. Anyway, stay tuned in the Persian
Gulf.
Meanwhile, the dithering Euro-American
alliance finally takes its green light from the Saudi-dominated Arab League
for a NATO no-fly zone in Libya - or the eastern provinces of Libya for now -
in hope of putting the shnitz on Mr. Gadhafi's shenanigans. I don't know what
the political idea is behind this - perhaps little more than the notion that
there must be some other colonel in the Libyan military who is less mad and
more tractable than proven maniac Gadhafi. It would be nice for Euro-America
(and China, too, actually) if the Libyan oil industry could survive all this
intact but as Michael Klare pointed out on the Web last week, it is generally
the case that oil production goes way down permanently in all nations that
endure political uproars. Anyway, a no-fly zone involves a lot more than just
shooting down Gadhafi's aircraft when it dares to take off. It starts with
destroying the planes and helicopters on the ground, and moves forward
quickly to the question of boots-on-the-ground.
At the moment, the oil markets don't know
what to do. Some loose talk says that Japan will not need oil for a while,
due to a wrecked economy. I dunno about that, with the reactors melting and
twelve million people without electric power there. Let's remember, they are
not the only people in the world who buy oil. In fact, everbody but a few
savages in some tiny backwaters of the rain forest use oil - and even the
savages do indirectly since they trade for things that come up the Amazon
(and the rivers of Borneo) in boats with motors. (Not to put too fine a point
on it.)
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....)
The most beguiling financial idea of
the week comes from Jim Rickards of Omnis on Eric King's interview website who says that the shear
load of stuff in the Fed's vaults is now so enormous that further QE is quite
unnecessary to continue monetizing America's debt. All they have to do over
at the Fed is rollover the maturing securities they hold and take the money
and buy more securities! In other words we now have at our disposal a
perpetual motion money-generating engine. And, by the way, if I do sound a
tad facetious its not because I disbelieve what Mr. Rickards is telling us. I
do, however demur when it comes to the question of consequences. Despite the
elegance of that operation, it still remains a fixed law of the universe that
you can' get something for nothing. What Mr. Rickards describes is a trick
for buying just a little more time using the residues of wealth that already
exists. But then the time comes when you have even burned through the
residues of your wealth, and then what?
James Howard Kunstler
James Howard
Kunstler’s new novel of the post-oil future, World
Made By Hand,
is available at all booksellers.
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