Godzilla in Pinstripes

The headlines appear obsessed with panic about radiaton. That danger has largely passed. Although, there is no such thing as “safe”. There is always risk. And Big Media plays into ignorance and panic.

First, the good news.  The second plant, containing four reactors about a dozen or so kilometers from the one that has been the subject of all the reporting, has reached cold shutdown on all four reactors.  The destroyed pump motors (from the tsunami) were replaced and the plant is stable.  That part of the story, barring some sort of new issue, is over.  Note that a couple of days ago this plant was on the verge of a full-scale disaster.

Reactors #1 and #3 have suffered core damage.  The containment, however, is intact at both.  Both buildings (outer building, intended to keep the environment out, not nuclear things in) have been damaged  The reactors in both cases are shut down and the problem is residual decay heat, which has to be managed.

Reactor #2 is a more troubling situation.  The core at #2 was apparently fully exposed for some period of time.  When they attempted to cool it with an emergency process using seawater, they ran into serious challenges including valves that refused to respond.  Unfortunately the most-serious of these challenges was a hydrogen explosion in the torus under the reactor, which serves as a place to condense steam.  This blast blew a decent amount of contaminated water out of the plant and into the immediate environment, spiking radiation levels.  The levels in the immediate area of #2 and #3 (where the blast occurred reached 400mSv, which is quite dangerous.  That amount of radiation, in an hour's time, can cause acute symptoms and if taken for more than a couple of hours can kill.  This is a serious situation but the radiation levels are now coming down substantially, indicating that whatever did occur it did not result in a persistent external containment breach.

Reactor #4 was the subject of much hype yesterday.  There was a fire coincident in its initiation with the explosion at Reactor #3.  Immediately every conspiracy site on the Internet assumed that the cause was an uncontrollable and catastrophic fuel pool fire.  There is no evidence consistent with this theory.

Temporary and slight elevations in radiation are trivial compared to the destruction of lives, housing and industrial capacity. It is almost as if we’re trying to forget there was a tsunami. Coping with despair by displacing it with fear is not a viable strategy.

Our internal atomic demons are taking attention away from the fact that a huge portion of the world economic output will be busy for quite a while dealing with the real natural disaster.

Given the weak financial postion of the Japanese government, and since the Japanese economy has been stagnant for a decade, the danger ahead is not nuclear, but financial:

The risk now in terms of financial markets turns to the fact that repatriation has to take place in order to fund rebuilding.  Remember that there's a huge tsunami that wiped out big swaths of infrastructure and killed a huge number of people.  If the death count isn't well north of 10,000 (and possibly a lot higher) I'm going to be astounded.  The tsunami, along with the quake, has left a lot of the nation's infrastructure in questionable condition. Anything buried (e.g. gas lines, etc) in the affected areas has to be considered compromised until it can be inspected and verified.  There is no current estimate on the total economic damage but clearly it is going to be extremely severe. In short, economically the nuclear issue is likely "small ball" yet it's receiving nearly all the attention.  This, I believe, is a serious error.

One must assume that the Japanese insurers are all insolvent.  One must also assume that many global reinsurance outfits may be impacted.  And since the BOJ's first act was to print, there is the possibility of a speculative attack by outside financial interests such as hedge funds aimed at either the equity markets or the bond market in Japan.

The mechanics of debt financing require that new loans be taken out regularly to pay off old loans. The amount of debt stays the same, but it is rolled forward into new contracts. That’s not necessarily a problem when the world is stable. New loans can be had for about the same terms as old loans.

But when one of the major lenders—Japan—will need to be calling in the loans it had made to rebuild, there is less left for everyone to borrow. The price of borrowing—interest rates—goes up. Borrowers already stretched at current low rates are more likely to default.

The U.S. is far from first in line. Portugal, Ireland and Greece were already dependent on special financing terms from the rest of Europe. Those governments might not have survived anyway. The earthquake in Japan may have tipped their dominoes toward default. And that’s the “doomsday” financial scenario that puts the world into economic depression.

Money managers and banksters know this. They can profit from it. And by doing so, they make the collapse more likely. Panic is their friend.

Godzilla is not coming to Tokyo. He’s putting on a suit and heading to Wall Street.