Thinking About Japan

by Fred Cederholm
The Japanese crises have escalated our own monetization (of debt) crisis. We, in the US, will indeed financially share in the tragedies. Will THIS aspect be covered in the News??? I doubt it....

I’ve been thinking about Japan. Actually I’ve been thinking about disasters, accidents, losses, character, nuclear storage, US Treasury Bills, and the News. The nation of Japan suffered a triple whammy a couple of weeks ago. First, there was the 9.0 earthquake. Then, there was the 20 plus foot tsunami that invaded the Land of the Rising Sun over six miles from the coast destroying every thing in its wake. Now, there is the potential melt down at four of the Japanese coastal nuclear powers reactors (and as you read this there are significant containment problems at two more reactors in the complex). It is very difficult to quantify the costs of this trifecta in Yen, or in Dollars. How do you put a price on death, or pain and suffering? The costs just keep rising. The pain, suffering, and dislocations are very difficult to fathom for us in North Central Illinois. My heart goes out to all the people of this island nation. I check daily for added developments and News and remain in total awe, but the News coverage is diminishing.

You see there are now estimates that 7,000 lives have been lost with 11,000 more people that are still unaccounted for and missing. The total casualties could easily be raised to 18,000 --- maybe many more. 400,000 people are presently homeless and have lost everything because of the quake and tsunami. When you consider the impact of the nuclear contamination, the number of homeless rises to just over 1,000,000. The nuclear crises are far from over. The levels of nuclear contamination have presently rendered roughly one 5th of Japanese productive farmland unusable and uninhabitable for at least a century. Radiation levels are presently at TEN times the regular levels in Tokyo, well over an hours travel from ground zero. The four (possibly six) reactors continue to spew their toxic venom.

Japan was already unique in that it was the only nation on planet earth to have experienced the use of nuclear weaponry against them in a time of war. The Japanese people are well aware of the long term impact of radiation via radiation sickness, and ground contamination in the years after Hiroshima and Nagasaki. Watching the events in the tens of square miles of devastation since that fateful date in February leaves one with a sense of awe. There has been no looting, no rioting, and no protests anywhere in Japan! This complete lack of such activity speaks volumes about the character of the Japanese people. Had a similar round of tragic events occurred anywhere in the US would the systemic order have prevailed? I TH*NK not!!!

Nuclear electric power generation was a fact of life in the last half of the 20th Century and will remain so in the 21st Century. The Obama Administration was just about to announce a surge in nuclear power plant construction when these disasters hit. Now the plans are on permanent hold. Germany has announced a plan to eliminate all their plants. Other nations will follow. Illinois has more functioning nuclear power plants than any other state --- ELEVEN out of the functioning 104 power plants. (This total, BTW, does NOT include reactors at research facilities nor does it reflect multiple reactors at one given power plant location.) Statistically US Nuke facilities are safe, but then so were those of the Japanese until two weeks ago. (I have no real concerns about the nearby Byron Nuclear Plant that is a scant 30 miles from my home.)

Still, the US shares another nuclear factoid with the Japanese. There is NO permanent remote storage facility, or nuclear waste depository, in either nation. Both nations store the bulk of the spent pellets and rods on site near the reactors. Much are conveniently stored ABOVE the reactors, in Japan this location anomaly figured significantly into their present travails. You see we always talk about blow “ups” when we have an explosion, not blow “downs.” The explosions in Japan damaged the cooling tanks for the spent fuel and created much of the heat and contamination problems. Some 30 years ago the US began construction of a national nuke storage facility at Yucca Mountain, Nevada. After 100s of BILLIONS of dollars in construction, it has yet to open! Now there is an effort to scrap this site and start all over! The US shares in similar risks with the Japanese, but we have far more in THOUSANDS of TONS of spent fuel and nuclear waste than they do. I fully expect ALL the nuclear waste East of the Mississippi to be shipped by railroad on a route that runs just two blocks from my home in little Creston --- when and if the Yucca Mountain facility were to open, that is.

The Japanese are easily looking at HUNDREDS of $BILLIONS in reconstruction costs. The Japanese appear to be well insured, but where will the Japanese underwriters get the money to pay out on these claims? A significant amount of their reserves are invested in US Treasury securities. These will by necessity be redeemed. The Japanese government is the world’s second largest holder (with roughly $800 BILLION) of US treasury securities. How much of these will by necessity be redeemed?

Under the terms of Quantitative Easing 2, the FED has picked up any shortfall in the weekly auction (and re-auction) of these “investments.” It is estimated that approximately 70% of the weekly debt being put on the market is being bought via the FED’s weekly printing of still more greenbacks. The $600 BILLION initially authorized by QE2 will shortly be used up. This is without any escalation in Japanese redemptions. What is Uncle $ugar to do? The Japanese crises have escalated our own monetization (of debt) crisis. We, in the US, will indeed financially share in the tragedies that have struck Japan in recent weeks. Will THIS aspect be covered in the News??? I doubt it....

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

Copyright 2010 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at

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This story was published on March 21, 2011.