Sunday, March 13, 2011
But because it is 2011, nuclear power is providing nearly 2/3rds of Japan's electrical needs. Cheap and efficient-- especially for a nation with few remaining natural resources-- nuclear energy was rightly embraced by Japan beginning in the 1960's. It's fueled their economic miracle. But building these plants in a nation with a history of violent earthquakes was always dangerous. The people of Japan were led to believe that even if a catastrophic earthquake occured, the safeguards built into these plants would prevent any real damage.
Then came last Friday afternoon and the 8.9 earthquake centered about 175 miles northeast of Tokyo in the ocean close to the northern port city of Sendai. Fukushima is about 50 miles inland from Sendai. The Fukushima nuclear plant has three reactors, providing power to much of that part of Japan.
There have been two nuclear plant disasters since these began to be built: the first was the relatively mild Three Mile Island plant near Harrisburg, PA in 1979, where there was a partial reactor core meltdown and some release into the air of radioactive materials, of which only the tiniest fraction of which was of the dangerous iodine 131. The "containment building" was not damaged. This accident (and the resulting legislation and rigorous regulation) essentially halted the building of nuclear power plants in the US. The second was far worse-- Chernobyl (the biblical Wormwood) in the Ukraine, where the reactor core melted and the containment building was blown apart, compounded by a faulty Soviet response to a nuclear plant built with a faulty design to begin with. Nearly everything within a 30 square mile radius was evacuated. Tens of thousands perished because of the effects of this. A utter catastrophe. Only now, some thirty years later, is the area beginning to recover.
At Fukushima, as of about half an hour ago, The IAEA said that one of the reactor cores has melted down and exploded, blowing up the containment building. The third reactor core is overheating as well; they are simply throwing sea water on it to try and cool it down after an earlier attempt failed. They're removing hydrogen from inside the containment building, which so far remains intact. The second reactor appears to be doing much better, with the original cooling apparatus working well enough to keep things under control. The area has been evacuated in a 25 sq km radius, some 200,000 people. They might yet save the third reactor core, but the IAEA report sounds rather bad and I fear it's only a matter of time before it too blows up. This is another Chernobyl.
All of this is going to kneecap any hope of a recovery in Japan. To begin with, the owner of the Fukushima plant is the Tokyo Electric Power Company, or TEPCO, which was in some trouble before Fukushima, with $90 billion on the books debt and quite possibly more. They had been downgraded two months ago by S&P to AA- out of concern about their debt levels. Then we get to the part where most of Japan's carmakers have halted production. One report I read said that the innovative Nissan Leaf and the Toyota Prius are partially built in or near the city of Sendai, which suffered tremendously from the tsunami. Prime Minister Naoto Kan and the Bank of Japan have this morning announced the injection of about $87 billion into money markets to try and calm the currency markets. The Nikkei plunged 5% on the opening, triggering circuit breakers to slow down the trading. For a terrific view of the likely effects on the Japanese economy, here's Gonzalo Lira's take: http://gonzalolira.blogspot.com/2011/03/likely-economic-effects-of-japanese.html#comment-form
As I'm writing this, NHK (the main Japanese news service) has reported that there was an explosion at that number three reactor at Fukushima-- in addition, there is another tsunami expected there as well, in the 5 meter range as well. So far, details are lacking, but this can't be good.
Oh wow-- and now this: Saudi forces are preparing to enter Bahrain. This is bad. Tonite is a truly surreal one, and I have no idea where all of this will lead us to. But one thing is for sure.. the markets will be in turmoil tomorrow. My first hunch is that the interest rate on US Treasuries will go down (flight to safety), even with the near certainty that Japan may have to cash some of them in to repair the damage done by this catastrophe. Gold and silver will probably rocket northwards. Batten down the hatches-- looks like a storm is a comin. Lets hope it does'nt get out of control.