A day ago the japanese stock market dropped by 6%. Last night, our time, it plunged by a further 10%. Today Europe’s markets are droping like stones. London at the time of writing (10 am) has fallen 3% just this morning, Paris 4%, Frankfurt 5%.
Unlike the fall out from their reactors which may stay in mostly in Japan, the financial fallout is already here. GE stock dropped 2% and will drop again (another 9% down in pre market) as will other companies who are closely tied to the building of nuclear reactors, like Westinghouse. The great hope which steadied stock markets here and in the US yesterday, was that there would be rich pickings from the misery as huge rebuilding contracts were given out.
Today that is being weighed against the thought that Japan has already squandered and wasted all the vast fortune it had made since the war, on propping up its insolvent banks. Before is tries to print or borrow a single Yen for rebuilding the devastation wrought by eathquake, tsunami and nuclear melt down, Japan already staggers under debts which are 200% of GDP. To that debt the Bank of Japan has just added another $245 billion more.
Who will lend Japan the money and at what price? Japan will no doubt chose to print in the hope that it will create a vast investment and stimulus for domestic rebuilding. They will hope that such a huge printing programme will have the added benefit of finally lowering the Yen’s value versus the dollar.
But the alternative scenario, now obvioulsy weighing on the minds of both the stock and bond markets is that perhaps Japan will not be able earn its way out from under the dead weight of its debts. The arteries of Japan’s once fit financial body, have been rotted and hardened by twenty years of a relentless diet of clogging debt consumption.
This is what happens when you listen to the bankers who insist that they are indespensible, that finance is no longer there to serve industry and the nation but the nation is there to serve and protect finance. And when the financial system so corrupts the political system that the political class turns its back on every other consideration, every loyalty and duty, and does nothing but save insolvent banks. When that is what happens to a nation then when you reach the moment of need, when a true disaster strikes, there is nothing left with which to fight it. The cupboard has been robbed blind by the rich and the poorer are left with nothing.
Had Japan stood up to its financial and political elite and forced it’s rotten, inept, corrupt and insolvent banks to suffer the losses of their bad debts TWENTY years ago, then today Japan would not be enfeebled by the highest debt to GDP in the world. Japan wasted it vitality and now faces disaster on its knees.
We are being bullied to repeat this disaster. What reserves of industry and wealth are we going to have with which to face climate change, food shortages, wars fought over water supplies, an aging population and spiraling energy costs, if we too squander our inheritance and indebted our children and our nation at the command and for the benefit of our insolvent banks and those few rich who benfit from them?
I wish more people/j6p's get this. The wall.st/finance-industry have set a new norm…a perception that they are indispensable. That they are the very foundation of an economy. They convinced us so much the politicians wont think twice to rescue them at any cost – even trillions of dollars.
With all the interlinked derivatives, banks, and all other financial processes with mass economy…they have taken hostage entire counties/populations. Modern day slavery…but invisible and smart(?).
In today's world, if you want to live off other people(want slaves) and make $1 million in total compensation in couple years & potentially 100s more…which industry or what would you do? why the wall.St!
Below quote is worth repeating from your article above.
"This is what happens when you listen to the bankers who insist that they are indespensible, that finance is no longer there to serve industry and the nation but the nation is there to serve and protect finance"
Excellent article, thank you – that last paragraph superb.
Not exactly on topic re: Japan, but this is worth watching, and we are going to need a lot more like it:
"America is Not Broke!": Michael Moore addresses thousands in Madison, Wisconsin
http://www.democracynow.org/blog/2011/3/7/michael_moore
As usual you are ahead of the mainstream press. It is going to be a major wake up all round. Many countries have been thinking that the uranium option was their get out of jail free card wrt energy.
I am also struck by the (likely) fact that Japan is a key supplier of advanced components for other industries and the catastrophe will create supply problems in other areas of economic activity.
It will be very interesting to see how nuclear industry is going to spin this one and what the response is to the spin.
Tough times – and my sympathy to the Japanese people.
"What reserves of industry and wealth are we going to have with which to face climate change, food shortages, wars fought over water supplies, an aging population and spiraling energy costs"
What reserves indeed. Where will they come from? Money cannot a wealthy nation make. It takes energy & resources to build up a nation, to fight wars, to provide food, and to fight entropic degradation.
The lesson from Georgescu-Roegen some 40 years ago was there for the economics profession to listen to, but they ignored him:
How long will neo-classical economists ignore Nicholas Georgescu-Roegen?
"It would seem that economists are allergic to physics and biology, and should be excused from any contact with such irritating and intimidating sciences!"
Georgescu had the potential to completely rout the charlatans of the time (Stiglitz & Solow), but they sheepishly avoided him. Perhaps because he painted an unpalatable home-truth; that the world cannot grow for ever, and the expansion of debt has no plausible foundation:
Energy and Economic myths
Japan will probably never be the same again. Indeed, as we face ever more difficult resource exploitation (whether water, oil, coal, gas, nuclear) the world itself will never be the same again.
Hawkeye,
you are an invaluable fund of wonderful recommendations of books to read and people to take note of. Thank you.
One of the many side effects of the Japanese disaster is that the international spotlight is being shined a little uncomfortably on their indebtedness(which David has highlighted in past posts) and serious stock is now being taken about the world's third largest economy.
(my sympathies to the japanese people – I cycled along the coastline north of Sendai (Hachinohe to Kesennuma) several years ago and even at the time I remember being struck by the ubiquitous signage warning and advising of the potential for tsunami. I used to chuckle to myself at my impossible situation on pushbike were that to actually happen. The people were always kind and friendly to me. It's devasting how swiftly mother nature can swallow lives.)
Golem,
Thanks! It is the serendipitous consequence of having to spend two and half hours a day commuting to London by train.
I took Taleb's advice and abandoned reading newspapers!
That's how I read Proust!
It is also worth noting that many of these economic themes were/are explored in many literary genres and philosophical ideas, not just technical literature.
I also loved the expression 'entropic degradation'.
I remember being introduced to the 2nd law of thermodynamics at school and it having a very sobering effect as comprehension slowly sunk in.
I can't believe economists are not aware of such ideas although I can believe they find them inconvenient.
The ideas of Georgescu-Roegen have directly inspired the play I'm writing at the moment (called 'Entropy', funnily enough.)
I'll let you lot know if it ever gets put on.
(Incidentally, I find that he unfortunately pops up in the arguments of many neo-Malthusians. It's important to remember the distinction between a closed system and an isolated system in thermodynamics and that the earth receives 1,000 times more energy from the sun each day than humans can produce in a year).
From AlJazeera:
"Angela Merkel, German chancellor says all seven of the country's nuclear power plants which began operating before 1980, will be shut down for checks.
She also confirmed that France and Germany have agreed to put nuclear safety on the G20 agenda.
And the European Union is calling for so-called "stress tests" on all 143 nuclear reactors across Europe, in response to what the EU energy chief describes as an "apocalypse" in Japan."
Stress tests? What a marvelous idea! I'm sure as long as there is investor confidence in nuclear power stations then there's no chance of them malfunctioning.
Survival of the Fattest Headed
Might also be of interest.
Sorry, that link again:
Survival of the Fattest Headed
Jamie,
Interesting to hear about your play, "Entropy". Good luck with that and I look forward to hearing the progress. I've been dabbling with something similar by the working title of "You can't milk a tractor, my friend". A bit surreal, and given my various other distractions it could be a while before it materialises.
I agree about the Neo-Malthusian co-opting of Georgescu. His main message for me was that we should equitably live within our means.
I do have a slight point of difference though:
"the earth receives 1,000 times more energy from the sun each day than humans can produce in a year"
This may be true, but only a small fraction of this is usuable. Most goes to heating up the air, land and sea, and so we can't directly extract that efficiently.
The secret is to understand the role played by photosynthesis. Georgescu states that this absorbs about 1.2Q per year. Not a lot given that a large proportion of the planet is covered in plant material. This amount is used to sustain all plant life, marine life & animals (feeding off plants & other animals). And I mean "sustainably" in the true ecological sense of the word.
Our rate of consumption of about 0.2-0.3Q is subsidised by fossil fuels (Georgescu estimates a dowry of about 200Q). Now, as "crude oil and natural gas are products of heating of ancient organic materials over geological time", we can do a quick estimate of the amount of solar Q absorbed by this material:
Approx 500,000,000Q (2Q x 250million years)
That’s a fantastic amount of energy, but to yield only a few hundred Q of fossil fuels means an efficiency ratio of 0.00004%. Rather than see this as nature’s failing, we should be completely humbled by that feat.
Think of the planet’s history as just one big fossil fuel factory operating for arguably billions of years. I could be way out on some of these figures, but the fact is that compact and efficient fossil fuel took unimaginable amounts of solar energy, heat, pressure and time to form.
No amount of technical innovation can bootleg that. Nature has a billion year head start on us.
A glimmer of hope for the future
http://www.jouleunlimited.com/
I can think of a dozen ways to use this tech. on all sorts of scales.
John,
Intriguing, but there are numerous problems / issues. See comments on it below:
http://forums.randi.org/showthread.php?t=198623
I still stand by the assertion that the amount of energy one can receive per year from the sun is still not a patch on what has been stored up over millions of years.
I have no problem with your assertion, Hawkeye. I didn't mean to imply that all the solar radiation the earth receives is usable. I just wanted to make the point that we use hardly any of it at the moment.
I also think we can do a hell of a lot better than nature in terms of efficiency. Not the process of photosynthesis itself but in getting the energy into a useful form. 0.00004% seems beatable.
But there's is no silver bullet, I guess. Becoming sustainable will require numerous technological solutions in combination with reducing demand.
Great title by the way – hope you manage to finish it.
Jamie,
Thanks for the reply. I'll keep you posted on the progress of the play.
I agree about reduced demand, but I'm concerned that in the future this will be distributed through money market mechanisms thereby exagerating the wealth gap.
Ever more advanced Technology is not always the answer though (as Fukushima is telling us).
I thoroughly recommend John Michael Greer's Ecotechnic future.
It gives a great overview of what sorts of technology we should focus on, and why and how certain aspects are just better left to nature.
Here's a review:
——
The underlying assumption of this book is that fossil fuels cannot be effectively replaced, neither cost-effectively nor in the gross amount of available energy. And once the fossil fuels are gone, they are gone forever, meaning that industrial civilization as we know it … will experience a slow decline into what Greer calls "The Ecotechnic Future." Along the way there will be "scarcity industrialism" and a "salvage society."
Thanks for the recommend – I'll try to check it out.
Hawkeye
Years ago on tomorrows world they grew some algae inside what looked liked twin walled polycarbonate roofing sheets, dried it and got a diesel engine to run on it. Yeasts exude alcohol which is highly calorific. So if these guys haven't done it certainly looks possible.
Judging by the algal blooms that extend out from europes rivers all algae needs is pollution sunlight and co2, pity no ones growing it in vats at sea, where with a little ingenuity it could operate as a biological battery for tide and wind energy, and a carbon sink.
I agree with your assertion.
Eventually we[humans] have to live on our current income, so to speak, and make the best of it.