Gold, Silver Dollar Values Prices Will Be Skyrocketing From Japanese Looming Financial Disasters

March 23, 2011 - PRLog -- Japan is going through two meltdowns in the wake of its devastating earthquake. The very first, and much more crucial, will be the meltdown at the Fukushima I Nuclear Plant, 150 miles north of Tokyo. Surely, this will be the higher near-term threat. But long-term, an additional threat looms, having to do with the Japanese government’s response to the former.

As the fourth biggest economy in the world, behind the EU, US, and China, any main setback in Japan likely will have extensive repercussions. Japan is also the third largest holder of US Treasuries, behind the United States and China. While it's too early even to assess the Japanese harm accurately - let alone to predict the full implications - it's possible to see the possible for a meltdown of the US Treasury market and worldwide monetary system. http://silver-dollar-values.com has all the details for a precious metals investing decision.

Present estimates hold that the Japanese disaster has already lowered world economic expansion by a full percentage point for the year.

Leaving aside massive international aid, a complete nuclear meltdown, or other escalations, Japan already will have to spend a massive quantity of cash to cope with the present disaster. This brings up the question: from where will this kind of an enormous amount of cash come? http://silver-dollar-values.net has all the details for a precious metals investing decision.

Japan could possibly borrow. Nevertheless, with a debt-to-GDP ratio of some 200 percent, or twice as bad as that of the United States, and with the main credit rating agencies exercising much more scrutiny than prior to the Credit Crunch, raising funds will be difficult at an economic rate of interest. Moreover, Japan will likely be spending a large chunk of its foreign exchange reserves to purchase oil to replace its lost nuclear power generating volume - diminishing its collateral in the eyes of creditors.

Japan could follow the US example and paper over its issues. But without the advantages of becoming the international reserve currency, the Japanese would immediately feel the effects of home-based inflation. The Bank of Japan has currently pumped out ¥8 trillion ($98 billion) within the wake of the earthquake, but it is unlikely to attempt to match the Fed's $600 billion printing spree this quarter.

Therefore, if Japan is limited in its ability to borrow or print cash, it may have to sell part of its huge holdings of US Treasuries. http://silver-dollar-values.com has all the details for a precious metals investing decision.

At the close of last month, the US Treasury possessed outstanding debt worth some $14.19 trillion. This represents 96.8 percent of the total $14.66 trillion value of business generated inside the United States for the whole year of 2010. It's just short of the $14.294 trillion debt limit set in 2010 by a profligate Democrat Congress. To put it in perspective, the US government now owes $91,400 for each and every working American. However, this represents merely some 22 percent of Washington's $62 trillion of unfunded requirements, which consist of Social Security, Medicare, housing, and other guarantees.

Japan is the third biggest holder of US Treasuries ($877 billion), right behind China ($896 billion) and the Fed ($1.108 trillion). Should Japan begin selling Treasuries in big amounts to pay for the repair of its overall economy, it could have a severe effect on US interest rates and the marketplace value of Treasuries all over the world. US bonds are extensively held by central banks, international banking institutions, and insurance companies, which already are concerned about their financing of loss claims arising from the damage in Japan.

Therefore, a Japanese sell off could trigger a liquidity catastrophe like the one following the collapse of Lehman Bros. and AIG. Large institutions might not be willing or able to tolerate US bonds through a large correction.

Western economies are on thin ice as it is, even without a shock in their presumed safe asset.

Stock markets in the EU and US are deteriorating, destroying big amounts of private wealth and possible consumer confidence.

Additionally, the EU is facing the reality that the financial rescue programs it organized to help save some of its members are not working. China and Japan offered to help. Now Japan may not be able to fulfill its promises. This could boost further speculative downwards pressure on the euro.

It appears that while we are all concerned regarding the effects of nuclear disaster on the residents of Japan, we ought to also be conscious that the fallout could propagate further within the financial markets than it does in the atmosphere. Just as Californians are stocking up on iodide tablets as a precautionary measure, investors should be stocking up on hard assets. After health, it's vital to guard your wealth - especially in emergency times like these. Time to buy precious metals like silver and gold now!

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