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.
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