U.S. Markets closed

“Mortal Wound”: Japan Disaster Could Trigger Global Liquidity Crisis, Martenson Says

Aaron Task
Editor in Chief
Fin - Daily Ticker - US

The ripple effects from Japan's crisis worsened considerably Monday.

First and foremost, engineers at the crippled Fukushima Daiichi nuclear power plant struggled to contain leakage of radioactive water into the sea.

Second, Toyota announced it will shut down all of its North America factories due to parts shortages while AutoNation warned "production disruptions will significantly impact product availability from Japanese auto manufacturers in the second and third quarters of 2011."

These announcements follow GM's temporary shutdown of its Shreveport plant and reports Apple is facing a shortfall of batteries for its iPad 2 as a result of the disaster in Japan.

Chris Martenson, author of The Crash Course, expects more "product shortages and associated work stoppages" in the coming weeks, and warns Japan's natural and nuclear disaster could inflict a "mortal wound" on the global economy.

As the title of his book and video series implies, Martenson has a proclivity to see events unfolding in a worst-case manner. But there is typically logic to his thesis, as is the case here.

In a nutshell, he sees Japan's economic crisis leading to a global liquidity crisis, which could trigger a series of "financial accidents," similar to what occurred in 2008.

If Japan needs to sell Treasuries to fund its rebuilding — or merely stops buying — it could be the first peg in the U.S. "funding crisis" Martenson, and many others, have long warned was coming.

"If something comes along that makes liquidity pull out of the system, we could have the exact same dynamic as in 2008," he says, as discussed in more detail here and in the accompanying video.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com