While natural or man-made disasters rarely have a lasting impact on the global economy, Financial Times Deutschland columnist Thomas Fricke warns that there is a good chance that, as with the tremendous loss of confidence in the banking system in 2008, the tragedy in Japan could trigger an extremely damaging loss of confidence in the global energy supply – leading to yet another global recession.
For the Financial Times Deutschland, Thomas Fricke writes in part:
Experts are most in demand when they know the least. Certainly when no one, including physicists and economists, really knows what might happen next.
Direct damage, interrupted supply chains or fluctuations in economic mood are not enough to turn a natural disaster into a global crisis. This may be the difference between more-or-less inconsequential economic disasters and those that have serious consequences: For the latter, there must a fundamental disturbance to the system, as with the 2008-2009 crisis in bank financing, on which everyone had shown a blind reliance.
The good thing is this: It’s fairly implausible that Japan’s earth-atomic quake will lead to a renewed shortage of liquidity among banks – in contrast to the period after the Lehman Bank shock, when the banking sector was already in the midst of an acute crisis.
More threatening is the possibility that a systemic shock could take another form. With the nuclear disaster, what if, instead of a loss of essential trust in the money supply, we confronted a loss of confidence in the energy supply? As with the lack of liquidity, this would affect every home and business worldwide. This could lead to a similarly abrupt halt in spending, which would very likely trigger a global economic chain reaction.
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