The Economic Impact of a War Between Japan & China

This article came from a very good article titled the same, The Economic Impact of a War Between Japan and China, from On Line MBA and in a very clear manner explains the issues and impact of a possible conflict between China and Japan. Saying that any shooting war between these two Pacific powers would adversely affect the economic status and well being of U.S. is an understatement.

Global economists are keeping their eyes glued to the Asia-Pacific region, where a bitter feud is brewing between two of the world’s most powerful nations over a small collectivity of islands in the East China Sea. The Chinese government argues that a treaty signed during the first Sino-Japanese War (1894-95) conferred ownership of the islands to China. Japan has long disputed these claims, and today argues that the islands are integral to its national identity.

The argument came to a head last September, when a boycott of Japanese products led Chinese demonstrators to target fellow citizens who owned Japanese cars. Three months later, the situation escalated when when Japanese jets confronted a Chinese plane flying over the islands; no shots were fired, but the act of antagonism has set a troubling precedent between the military forces of both nations.

The conflict between China and Japan has put the United States in a precarious position: if a full-scale war were to erupt, the U.S. would be forced to choose between a long-time ally (Japan) and its largest economic lender (China). Last year, China’s holdings in U.S. securities reached $1.73 trillion and goods exported from the U.S. to China exceeded $100 billion. The two countries also share strong economic ties due to the large number of American companies that outsource jobs to China.

However, the U.S. government may be legally obligated to defend Japan. In November, the U.S. Senate added an amendment to the National Defense Authorization Act that officially recognizes Japan’s claims to the disputed islands; the U.S. and Japan are also committed to a mutual defense treaty that requires either country to step in and defend the other when international disputes occur. Not honoring this treaty could very easily tarnish America’s diplomatic image.

The countries of the Asia-Pacific region are collectively responsible for 55 percent of the global GDP and 44 percent of the world’s trade. A major conflict between the region’s two largest economies would not only impose a harsh dilemma on U.S. diplomats, but also have a significant impact on the entire global economy. It is in every nation’s best interest that the Chinese and Japanese settle their territorial dispute peacefully.

You can also go to the On Line MBA article and read or download the transcript from the video below.

The Horrifying Collapse of America Predicted

Chris Hedges saying "Brace yourself,...the American Empire is Over and the Descent is going to be Horrifying". Mr Hedges paints a terrible picture on the decline of America, why it is happening and how it is irreversible. While some of Hedges says I personally disagree with, it is really irreflutable that debt, corruption, over burdening and heavy handed government and simply incompetence has doomed this country.

Why Survivalist's Should Buy Silver

This is a good common sense and straight forward article on why you should have silver in your Survival "portfolio", along with foods, gear, firearms and ammunition, and of course, a PLAN. This is from GE Christenson, aka the Deviant Investor.  Preppers should consider bookmarking his site and refer back to it from time to time or subsribe to e-mail updates as I will.

Why Buy Silver?

•  Silver has no counter-party risk. It is not someone else’s liability. Silver Eagles or Canadian Silver Maple Leaf coins are recognized around the world and have intrinsic value everywhere. The same is NOT true for hundreds of paper currencies that have become worthless, usually because the government or central bank printed them to excess to pay the debts of governments that did not control spending.

•  The price of silver in US dollars since the year 2001 has been strongly correlated with the ever-increasing official national debt of the United States. Read $100 Silver! Yes, But When? I doubt that anyone believes the national debt will decrease or even remain constant over the next four years. We have every reason to believe that it will increase by well over $1,000,000,000,000 per year for many years. If the national debt is rapidly increasing and it correlates, on average, with the price of silver, then we can be reasonably certain that the HIGHLY VOLATILE price of silver will increase substantially over the next few years.

•  Silver has been used as money (medium of exchange and a store of value) for over 3,000 years. In most cultures, silver has been used for daily transactions far more often than gold. I have read that the word for “money” is the same as the word for “silver” in many languages.

•  In the United States silver was used as money – coins – until the 1960s when inflation in the paper money supply caused the price of silver to rise sufficiently that silver coins were removed from circulation. Do you remember silver dollars? They contained approximately 0.77 ounces of silver. Currently the US Mint produces silver eagles which contain 1.0 ounce of silver – and cost approximately $35.

•  Argentina has devalued their currency several times and has dropped eight zeros off their unbacked paper money in the past 30 years. The United States has not dropped any zeros from dollars, but it took approximately one-half of one dollar to buy an ounce of silver 100 years ago, while it takes over 30 in today’s reduced value dollars. It took about 20 dollars to buy an ounce of gold 100 years ago and it takes over 1,600 dollars to buy that same ounce of gold today. There are many more dollars (paper and electronic) in circulation today compared to 100 years ago. Hence the prices, measured in declining value dollars, for silver, gold, wheat, crude oil, bread, coffee, and ammunition is MUCH larger.

•  Throughout history the prices of gold and silver have increased and decreased together, usually with gold costing 10 to 20 times as much as silver. A historical ratio of 15 or 16 is often quoted and that places the current ratio, which is in excess of 50, as relatively high. Since Nixon “closed the gold window” on August 15, 1971 and allowed the dollar to become an unbacked paper currency that could be created in nearly unlimited quantities, the gold to silver ratio has ranged from a high of approximately 100 to a low of approximately 17. There is room for silver prices to explode higher, narrowing the ratio to perhaps 20 to 1. When gold reaches $3,500 (Jim Sinclair) and subsequently much higher in the next few years, and assuming the ratio drops to approximately 20 to 1, the price of silver could approach $200 per ounce, on its way to a much higher number, depending on the extent of the QE-Infinity “money printing,” panic, hyperinflation, and investor demand.

•  If you think a silver price of $200 per ounce is outrageous, I suspect you would find near universal agreement among most Americans. But is a national debt in excess of $16,000,000,000,000 less outrageous? If unfunded liabilities are included the “fiscal gap” is, depending on who is calculating it, approximately $100,000,000,000,000 to $220,000,000,000,000. For perspective, that places the unfunded liabilities of the US government at approximately $700,000 per person in the United States. Is $700,000 unfunded liability (debt) per man, woman, and child more believable than a price for silver of $200?

It seems likely that the populace will eventually realize that:

•  Government spending is out of control and will not be voluntarily reduced.

•  “Printing money” or debt monetization (QE) is necessary and inevitable in order to continue funding the excess spending of the US government. More money in circulation means a declining purchasing power for the dollar. The decline is likely to accelerate at some time in the future.

•  The real value of our savings and retirement diminishes as the dollar declines in value.

•  People will panic and shift into real assets to preserve their purchasing power. (There is no fever like gold fever!)

•  That panic will cause gold, silver, and many other real assets to drastically increase in price, as measured in devalued dollars.

•  It is better to be early than late if a panic-moment is about to arrive.

•  Silver is less expensive per ounce than gold and more available for purchase than gold, particularly for middle-class westerners. An investment into silver is likely to appreciate more than a similar investment in gold.

What Do You Believe?

•  Do you believe that excessive spending and debt will be reduced?

•  Do you believe that the decline in purchasing power of the dollar over the last 100 years will suddenly reverse?

•  Do you believe that congressional promises for Social Security, Medicare, Medicaid, and government pensions will be broken?

•  Do you believe the Federal Reserve will continue to print the money to pay for those promises?

•  Do you believe your savings and retirement are totally safe in paper investments denominated in dollars?

•  Do you believe, as history indicates, that paper money eventually devalues to zero while gold and silver retain their value?

•  Do you believe that the world will suddenly stop using silver, instead of finding new uses for it every year?

Would you rather trust silver coins in a safe place or paper money and political promises?  Most people will do nothing to protect their financial future.

SHTF and Chaos Just A Little Bit Closer

This week is no different that the last 52 finding the world in turmoil, perhaps just a bit more as the U.S. Economy continues to degrade and all of us are just a little closer to a Economic Collapse than ever before.

Greater chances of a multi-nation war in the Middle East closing off as much as 25% of our oil imports. Israel crossed in Syrian air space to attack Syrian troops. Syrian rebels, backed in part by Al Qaida, took the side of th Syrian government who has been massacring them. When, not if, but when the Syrian rebels succeed in driving Assad from power, Israel will have a much more hateful enemy on their northern border.

Prior to the attack Iran stated that any attack on Assad and Syria is an attack on Iran. It doesn't matter that Iran did nothing yet in retaliation for the Israeli strike, this makes Iran much more likely to plunge the Middle East and some of our oil imports into chaos with terrorist and/or nuclear strikes on Israel. Add in the Syrian chemical weapons threat and the situation is dire.

North Korea and Kim "Baby Face" Jong-un are planning another nuclear test. China is bashing about Japan and threatening conflict over a series of islands in the South China Sea. A shooting war here, even short lived, could be a global economic collapse trigger.

Then you have the situation in the United States,.......

2012 4th Quarter Gross Domestic Product data showed that the economy slowed or contracted to 0.1% growth. Furthermore, the previous 3rd Quarter growth was adjusted to 1.5%. It is very troublesome that multiple sessions of money printing, called Quantitative easing, has failed to stimulate any growth. Exports and consumer confidence are way down as well. Discretionary spending cuts of over $1 Trillion due to the "sequestration" and the large tax burden being placed on the people courtesy of obamacare with a 10%+ health insurance premium hikes all spend doom and gloom for the future. Not the far off future, "let's kick the can down the road aways" future, but the very near future.

This past years drought, adding to the recent agricultural woes combined with the predictions of continued drought and poor harvests add to the concerns over very high food prices and diminished availability. Many are expecting food riots, especially if Federal entitlement cuts reduce food stamp and welfare output.

And then the threat of internal turmoil, to what extent nobody really can even guess. But on the smaller scope, the factors of (probable) sociology-ethnic trouble over the Supreme Court soon reviewing Obama's birth certificate and social security card for authenticity makes upheaval in major cities,....Chicago, Detroit, Los Angeles, St Louis and others seem like a distinct possibility. The socialist bent threats or plans to enact some sort of weapons ban or even confiscation bring a dire future into focus.

Lastly, if Congress doesn't pass a budget, the Pentagon will have to absorb $46 Billion in spending restrictions for this fiscal year.  Overall, the military will furlough 800,000 civilian workers for up to 22 days each throughout the rest of the FY, and, lay off 46,000 temporary and contract employees.  Secretary of Defense Panetta said, "These steps would seriously damage the fragile American economy,......".  Imagine what the sequestration will do if the Military has to reduce forces putting tens of thousands of service members out on the street?