Wall Street only represents part of the American economy--it registers the skittishness of investors in large corporations, not what is happening in mom and pop stores on Main Street. The market crash of 2007 was all about skittishness about investment in mortgage backed securities that had been sliced and diced into vehicles with increasing levels of risk. The net result was that credit stopped flowing, as banks and other large corporations started hoarding cash instead of investing it into the economy.

Just when we thought that the markets were stabilizing and the recession was over, along comes an earthquake and tsunami in Japan to make all those investors jittery again. Reuters is reporting today that Wall Street is ready to “tumble.” General Electric, the designer of both the Japanese nuclear power plants and of many of those in the US, saw its stock tumble 5% yesterday. Insurance companies saw similar declines in stock prices. Texas Instruments is worried because they lost two semiconductor plants in Japan.

Like it or not the economies of the U.S. and Japan are intricately entwined. They have been for a very long time. We buy automobiles from Japanese auto manufacturers, as just one glaring example. Japan is one of the largest investors in U.S. Treasury bills and notes. Japan has invested in large real estate projects in the U.S.

And that begs the question, where will Japan be investing in the future? One has to expect that investment dollars that might have come to the U.S. will now be redirected toward rebuilding devastated northern Japan. As it should be. But there are consequences for the U.S. when that happens. Our Treasury offerings may now need to pay higher interest rates in order to replace the Japanese money that will be redirected. To increase investment jitters,  we are about to hit a debt ceiling that the GOP insists they will not raise.  

In my opinion, we are looking at another economic tsunami that will continue to hamper both recovery and jobs creation.

P.S. If you really want to understand what is happening with Japanese nuclear power plants, watch the Rachel Maddow show on MSNBC. She has been inviting nuclear experts to explain in mother goose language what is happening at these power plants.

Homework

Wall Street Set to Tumble

Japan Stocks Down

Everything You Ever Wanted to Know About Treasuries

Fox News Report About GOP's Attitude Regarding Debt Ceiling

Rachel Maddow Show

Horrified would describe my reaction to the videos coming out of Japan yesterday. Watching whole cities be washed away reminds us of how vulnerable we, as humans, really are. There are world-wide implications to the devastation in Japan that are beyond the tragic loss of human life and development in that country.

With the unrest in Libya, an oil producing member of OPEC, oil prices had been rising even though Libya is a relatively small player in the world-wide production of oil. The rise in oil prices triggered a rise in all products dependent upon oil to get to market, including food. Japan, on the other hand, is a major manufacturing nation, which uses lots of imported oil to fuel its economy. So, after yesterday’s quake, oil prices fell below $100 for the first time in a week. A major user is crippled, demand goes down; prices go down; Supply and Demand.

But what really got me thinking was the potential melt-down at some Japanese nuclear plants. Since Japan is not a resource rich nation, they have had to find alternative energy sources to power their economy. They invested a lot in nuclear power, and now they are reaping nuclear fallout. That was probably a bad pun, but steam being released into the atmosphere at one nuclear facility originally caused a 10-killometer radius to be evacuated. The radius was quickly doubled, with the potential of an ever increasing evacuation radius if operators cannot gain control of the cooling systems. And that’s not the only plant causing problems.

Given that nuclear energy is one of the alternative fuels being considered by America, these developments should provide new information about what can go wrong. The new information can be used to develop even safer plants, assuming we decide to continue down this path. With the recent approval of a new uranium mill in Colorado, we are on the front lines of the nuclear industry. We should be paying attention to all the lessons Mother Nature is shoving at us at the speed of a tsunami.

Homework

Oil Slips Below $100

Nuclear Problems In Japan

EPA Report on Uravan Superfund Site Cleanup

New Uranium Mill Approved for Colorado