By Les Dunaway

Have you ever had storm damage to your house? If so, your homeowners insurance probably covered most of it but some of it came out of your pocket (or your plastic 😉 What if the plastic was maxed-out? Wow! Maybe that blue tarp needs to stay on the roof for a while? Well, Japan just had some damage and their plastic is waaaaay maxed-out. What does their situation tell us about our situation?

In Beltway Confidential “After quakes, waves and radiation, Japan could now be crushed by its own government debt“, Don Federoso writes “…Japan built up a debt of over 200 percent of its GDP through decades of 7 percent annual deficit spending — coincidentally, our level of deficit spending for the last two years. The Japanese government’s attempts to stimulate its economy failed, which is bad enough. But now, Japan’s overextended borrowing power is being cut back. Its bond rating has been downgraded at just the moment it’s going to need to borrow hundreds of billions of dollars.”

What if the earthquake had hit California, instead of Japan? What if it was San Onofre melting down rather than Fukushima? What if the tsunami had hit Seal Beach? Look at a topographic map and you’ll see that I5 would be the beach!

One more what if: What if it happened after Moody’s downgrades US debt they way they have Japan, Spain, Portugal, …? Take another look at the map: What’s the economic value of the area west of I5? What would it cost to rebuild? What would it cost to have that area off-line? Japan has already lost production of over 50,000 vehicles that would have been exported – that about $1.25 billion in a few days.

For a more detailed look at Japan’s economic situation read “Japan’s Coming Debt Tsunami”

Our country WILL be hit by a  disaster in the next few years – a hurricane, an earthquake or a terrorist attack. Will our credit be maxed-out when we need to re-build? Re-read “Just The Numbers, Mam” Vol1.1 and focus on this paragraph “An important concept to grasp is the danger that a family or a country is in when they are just getting by – that is, carrying a heavy debt load but not increasing it while also not reducing it…”. Think about that family when a tree falls through their roof at 2am in a thunderstorm. Not a good picture. Now multiply that by the millions of families in our country. If you find that picture as scary as I do, I suggest you share your concern with your elected officials.