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March 17, 2011

Das authored “Traders, Guns and Money:” Thus, guest writing at NC makes for some insight on sovereign risk/s, now compounded with significant uncertainty* viz a viz Japan’s disaster and destruction parameters of NOW times.

[* Some might recall Keynes’s distinction between uncertainty and risk — the former being or arising from unknowns, the latter more certain and knowledge-based.. I’ll finish this particular blog later with what appears an already likely global pre-occupation to highlight this relevance ]

Insightful then, Das writes:—

To the extent that savings are now redirected directly or indirectly (through the purchase of Japanese government bonds) towards reconstruction, these funds will not be available to finance foreign borrowers. This contracts the pool of global capital available and its cost.

Methinks ahead of the Ratings Agency curve/s, much of their talk recently relating to US muni – states, towns, etc – issue arising from Congress’ budget deadlock.. which is to say there is the much and more immediate plays at home to be concerned about.

Just as pointedly Das adds:— (my emphases)

Policies adopted to deal with crisis and reconstruction may destabilise currency markets. In a world of low growth, countries have used currency values as a means of gaining competitive advantage. To the extent that changes in capital flows affect currency values, attempts by individual nations to cheapen their currencies will increase volatility and affect growth.

Capital flows in and about Japan the third largest economy would add strength to this argument. We might also anticipate a cut in its world aid donor program not to mention its Japanese Co-op program, ADB, IMF, World Bank. Retrenchment will hurt recipients.

Deutsche Bank’s Dan Brebner was through today with the certainty of Fukushimas’ “write-off” without mention other likely global energy impedance outcomes. And what that would mean for power-inspired growth. Risk scenarios might therefore start from a low expectations baseline.

So.. to wrap this.. one huge ramification of utter disaster and destruction process will be the speed and direction of actual radiation plumes around and about the planet..

One very good reason for wishing the brave souls able and willing fight this menace at source every success in their endeavors to bring it under control..

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