Japan - The Fall Out And Cost For Americans

As Socialist President Obama went golfing and worried about his NCAA Basketball picks, Japan experienced a massive earthquake, tsunami and nuclear crisis. Since we live in a global economy, it is impossible for Americans not to be impacted by this disaster. In many ways, Japan, though a rich country, is ill-prepared to deal with this disaster because for more than ten years, the government of Japan has practiced Keynesian economics using deficit spending trying to grow their economy. It has failed miserably and now the Japan has debt that is equal to two times their Gross Domestic Product (GDP). As a comparison, the US National Debt, which is bad enough, is equal to about one times our GDP.

The difference is that the Japanese pretty much owe themselves this money since their National Debt has been financed by Japanese savings. The US National Debt is primarily owed to foreign countries like China. In fact, China holds about one trillion dollars of our $14 trillion National Debt. In any case, since Japan is already a financial mess, recovery from the current national disaster means that they will need to borrow billions more to rebuild their country. As such, this disaster is going to impact the United States in many ways.

First, American insurance companies are exposed since many of them sell insurance in Japan. They will have to pay out billions, which ultimately could lead to higher premiums in the US as they seek to cover these losses. Second, since Japan is pulling down some of their nuclear plants, they will need to buy more oil to fuel their economy, which will drive up the cost of energy in the US. Third, the price of various commodities will go up as Japan must import most of the materials needed to rebuild their country. But perhaps, most important, the Japanese will cease buying US treasuries, which ultimately will mean higher interest rates and inflation in the US because the US Federal Reserve will have to print money to fund our National Debt unless deficit spending is finally ended, which seems doubtful as long as No Drama Obama is the President.

And, many that have always opposed nuclear energy, will draw the wrong conclusions from the nuclear crisis in Japan and attempt to curtail the development of nuclear energy in the United States. Far more people have died for car and airplane crashes, as well as, oil drilling and coal mining accidents than have died from accidents at nuclear facilities. In fact, nuclear energy, properly managed, is very safe. There are lessons that can be learned from the catastrophe in Japan; but a 9.0 earthquake and the resultant tsunami that damaged a nuclear plant is no reason to stop the development of nuclear energy in the United States. Nuclear energy must be a component of our drive to become energy independent in the next 50 years.

So while Socialist President Obama dithered as usual, big things are happening in the world. There will be fall out from the disaster in Japan and it is going to cost the American people big money. We just need to draw the right conclusion from this terrible disaster and react intelligently.