Japanese super earthquakes to cause worldwide interest rate spikes



“This super destructiv­e Japan earthquake is going to cause American interest rates to jump a percent or two or three — possibly more. Indeed, the Japanese are the number one buyer of U.S. debt bonds. Can’t they cash a load of them in to redeem for reconstruction cash? If they try that the Americans will default on the bonds because they are effectively bankrupt. This earthquake could actually lead to a flash-collapse of the United States economy.”

Indeed, the following short few paragraphs are provided by major a media outlet, but the rest are purely original.

Japan considers emergency quake budget, BOJ meets

Japanese leaders pushed for an emergency budget to counter economic damage from a powerful earthquake and tsunami that killed hundreds and caused widespread destruction.

The Bank of Japan, which has struggled to return the country to growth, said it will cut short a two-day policy review scheduled for next week to one day Monday and promised to do its utmost to ensure financial market stability.

Auto plants, electronics factories and refineries shut, roads buckled and power to millions of homes and businesses was knocked out. Several airports, including Tokyo’s Narita, were closed and rail services halted. All ports were shut.

Japan’s biggest quake on record occurred as the world’s third-largest economy had been showing signs of reviving from an economic contraction in the final quarter of last year. Source: Reuters (1)

Japan holds enormous American government debt (US$882.3 billion of Treasuries at the year-end) and will want those hundreds of billions of dollars back, right now, to begin rebuilding its infrastruc­ture and industry; that means America will have to substantia­lly increase interest rates to get foreigners to buy enough treasuries to pay out the Japanese, or face the equivalent of foreclosur­e. When those interest rates jump, so will U.S. loan and mortgage rates — something tens of millions of Americans with mortgages, credit card debt and other bills cannot afford to pay.

world us debt holdings

This Japan earthquake will hit us with a financial tsunami that may cripple America for years and decades to come. If Japan does cash in it’s US treasuries then QE 3 is a real possibility in the fall & the US$ takes another step down.

Trying to understand why the yen is so strong this morning, I’ve been reading much about the Japanese “repatriating” their currency. If Japan needs to come up with, oh who knows, say half a trillion to a trillion dollars to deal with today’s catastrophe, wouldn’t one of their first moves be to sell US Treasuries? — Michael Davis

Next, the US dispatches lots of advisers and consultants to “help” Japan restructure its economy as well as sell them over-hyped real estate. The US media led a major campaign to deride the Japanese economic model and way of life, often laced with a racist undertone.

As long as the central banks keep interest rates low, governments will be able to inflate their way out of debt. By manipulating the method in which inflation is calculated, it will appear that there is no inflation when in fact is is significantly higher than reported and than we will ever be told.

This is Big Brother doing what it wants and hiding the truth from everyone. Governments everywhere are responsible for this action, from Greece hiding its debts to Spain protecting its banks to NA claiming deflation when inflation, as calculated using 1980’s rules, was 6% in early 2010 in the US.

The problem with Japan is that it cannot inflation itself fast enough to get rid of its debt and its manufacturing prowess is being challenged worldwide. This will happen across the western countries as other countries catch and we must either borrow to maintain our standard of living or reduce it.

Japan’s Devasting Quake Could Cause Higher U.S. Interest Rates: PBS (2)

TOM HUDSON: One place the Japanese earthquake may be felt by American consumers is higher interest rates here at home. And that may come up on top of high gasoline prices already. Jack Ablin is tonight`s “Market Monitor.” He`s the chief investment officer with Harris (NYSE: HRS) Private Bank. He joins us tonight from Chicago. Jack welcome to NBR. Nice to see you again.


HUDSON: So draw the thread (ph) for us, an earthquake damaging destruction in Japan may lead to upward pressure on U.S. interest rates. Why?

ABLIN: We have to keep in mind that we rely on the kindness of strangers to buy our Treasury notes and bonds. And up to now Japan has been the largest buyer behind China of our Treasuries, owning nearly a trillion dollars of our securities. Should expenses build up and Japan needs to kind of rebuild, they`re going to likely sell, not only sell their current Treasury holdings, but potentially really prevent them from buying more as they have some spending to do back home.

HUDSON: So that may lead to higher consumer interest rates here in the U.S. While we`re dealing with $3.50 per gallon gas or higher, what`s the price that it begins to impact consumers?

ABLIN: I think we`re at it, Tom, $3.50 is probably that magic number. Now what we do is look at the percentage of retail sales actually fueled by gas purchases, so to speak and when it gets to be above 10 percent, it tends to crowd out other spending. In other words, forcing consumers to make tough choices whether to drive less or perhaps cut some of their other discretionary spending like going out to dinner or buying apparel and that like (ph).

“This is certainly the worst thing that can happen in Japan at the worst time,” Roubini told Maryam Nemazee on Bloomberg Television’s “Countdown” in London today. “There will be fiscal stimulus to reconstruct but Japan already has a budget deficit of close to 10 percent of” gross domestic product and an aging population. Source

Watch the full episode. See more Nightly Business Report.


(1) Reuters

(2) PBS

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