How Japan Fukushima nuclear incidents affect the world’s financial markets
The initial reactions to earthquakes and damages by earthquakes have always been some percentage drops in the country stock market and does not really affect economy and financial markets of other countries. 29 April 2011 mark the 25th anniversary of the Chernobyl nuclear disaster. 25 years after the worse disastrous nuclear accident in history, humanity has yet to devise a permanent solution to the energy crisis. The Japanese Fukushima nuclear incident holds many lessons from social, economic, financial to environmental for us.
Economic and Financial Lessons
Earthquakes happening within a geographic region of a country seldom have significant effects on the economy and financial markets of the world at large. We can see this in most recent Earthquakes in Christchurch, New Zealand in February this year, three years ago in Sichuan, China during year 2008 and six years ago during year 2004 in Indian Ocean that caused tsunamis in Southeast Asia regions. Notice the increasing short time frame between each successive major Earthquake – a signal of coming of end of the world according to the biblical book of revelations?
Let us rewind back to 1923, when a major Earthquake occur in Tokyo, Japan, which destructs almost all of the then Japanese capital. Other than, causing an economic downturn in Japan, it hardly creates any scratches on the financial markets in other parts of the world. However, the world’s currency, capital and other financial instruments markets are now more interlinked and integrated than ever before. With that, there will be turbulence in other countries as far away as United States. How a Fukushima nuclear incident in Japan can affect the world’s financial markets can be easily understand by how Japanese money flow in and out, the basic concept of supply and demand affecting prices of securities and last but not least how recession occurs from changes in supply and demand of capital.
Savings from ordinary Japanese went into banks and insurance companies, who then invest this savings into various securities around the world. These securities include but not limited to, treasuries bonds, corporate bonds and stocks of blue chips around the world. It turns out that these savings amount to trillions of dollars, of which a substantial percentage of it is now required to repatriate back to Japan. Insurance money for Earthquakes in Japan will have to invest overseas based on common sense since cash out from investments will be needed if an Earthquake is to occur and if Earthquake were to occur, Japanese will need the cash instead of spending them to buy stocks and bonds in Japanese financial markets. Thus if Earthquake were to occur, Japan stock markets will usually tanked.
Due to large amount invested in US treasuries, and the need to generate the cash for insurance pay-outs for the Earthquakes, selling off of US Treasuries began almost immediately shortly after the incident, causing bond prices to fall and interest rates to increase. The problem with repatriating cash invested overseas back to Japan also means that the cash in US currency will also need to exchange back to yen, thus causing yen to strengthen against US dollar.
In summary, bonds of US Treasuries and corporate companies would have to be sold in order for savings to be withdraw and meeting insurance claims – for damages to houses and other properties, life insurance and for rebuilding efforts. Bond prices will fall and interest rate rises, overseas currencies would need to exchange back to yen, causing yen to rise.
Social Lessons
The annual labour of every nation is the fund which supplies it with all the necessaries and conveniences of life, and which consist always either in the immediate produce of its labour, or in what is purchased with that produce from other nations.
Wealth of Nations, Adam Smith
The solution to energy crisis or a cure to cancer will not disappear by itself. They can only disappear if the world’s brightest minds put their brains to work on the solution and the cure instead of devising Lehman Brothers Minibonds and other complicated subprime investments. For years, people have asked, what the fuck did investment bankers do to deserve exorbitant salaries, and maybe some political leaders as well, not only do they bring down the world’s economy, but most importantly, the obscene salary cause a brain drain away from work that will create the real wealth, thus creating even less wealth. Not having a cap on the earnings of lucrative banking and finance sector destroys the wealth of humanity as a whole since the best and brightest is not figuring out the solutions to energy crisis or figuring out a cure for cancer.
Critical Thinking Lessons
Humans will only make reasonable sacrifices to meet ethical obligations. Sometimes the reasonable sacrifices by all of us resulted in a smart for one but dumb for all scenario. People will always say and do things that are in line with their best self-interests, and when there is an ethical obligation, they will only make reasonable sacrifices to meet that obligation.
The question is – has humanity been engaging in a false dilemma all along regarding the energy crisis. So far, the dilemma regarding generation of energy has been between either stay at using fossil fuel or going nuclear, because so far wind, hydro and solar energy have not been able to gain significant inroads. It isn’t a false dilemma in this case, we have a third option – using nuclear power with Thorium based fuel cycle.
The fact is that if President Obama were to spearhead another Manhattan Project with a nuclear dash for Thorium would potentially killed fossil fuel overnight. Solving the energy crisis would have affect the interest groups of many – from people of oil producing countries starving themselves to death and potential billions dollars of oil and gas industries evaporated. As such, we can easily see that it is beyond reasonable sacrifices of many people. One may argue that rich and powerful interests groups from oil and gas industries are able to influence politics and prevent policies from developing permanent solutions to energy crisis, but they cannot stop Facebook from connecting liked minded people, just as Facebook can overthrow an authoritarian government, it can also let the whole world knows that a permanent solution to energy crisis is in sight.
If we go back to history, unfortunately, at the dawn of the atomic age, the USA and USSR is at cold war and both were completing to stockpile nuclear weapons. Thorium based fuel cycle was abandoned in favour of the Uranium fueled Reactor because the latter could produce lots of weapons grade nuclear material, while Thorium could not. This is despite the fact that Thorium fueled rector was clearly superior in every aspect, efficiency, safety to the extent that it is safe to fail and Chernobyl/Fukushima accidents are highly unlikely, low waste production, size and cost of operation.
The importance of Freedom of Information Act
As such, we can see that without democracy, there will be no freedom of information. If there is no freedom of information, all of us will still be in a false dilemma that either we depend on fossil fuels or nuclear power with uranium fuel cycle. The fact that it is not, there is relatively safe nuclear power based on Thorium fuel cycle which produces far less radiation, waste, more efficient and superior in almost every aspect.
Democracy cannot solve every problem does not mean that democracy cannot solve any problem. However, in order for democracy to function effectively, its citizens need to be well educated. Well educated means able to think critically, the fact that books on critical thinking can disappear from public libraries of a place and the design of its education system most probably means that the government would not wished its citizens to detect fallacy in arguments and reasoning.
Environmental Lessons
Back to the fallacy of a false dilemma, the moral of the Fukushima nuclear incident is not really we should donate more money if we can afford if similar disaster happen again. The real lesson is to once and for all remove the energy crisis. Instead of donating money to Japan, thinking that it is the only way to do good, why not spread the words around to support and to fund research into nuclear power based on Thorium fuel cycle so that no Chernobyl and Fukushima nuclear accident will ever happen again. I likened it to donating money to a hospital operating entirely on charity funds, only to see its rent hiked by the government an amount equivalent to its surplus, that one may as well change the government first, if not, all donations are fruitless.
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