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Richard Koo's "The World In Balance Sheet Recession" Revised, And The Japanese Electricity Shortfall Quandary

Tyler Durden's picture




 

Some version of the latest Richard Koo presentation has already circulated in some form or another. The only addition to the core section (which as usual can be summarized with two words: "spend more") is Koo's take on recent developments in Japan, one of which focuses on the historical trade balance in Japan, and the second, far more important one, looks at an issue few have discussed: the role of electricity supply in a post-earthquake Japan. As Koo says, "electricity supply is the bottleneck for Japan's GDP recovery." Indeed, we have yet to hear anyone from Wall Street's rainbow and unicorn drinking brigade come up with an explanation for how this will be circumvented, especially over the summer when the Japanese government predicts a nearly 20% shortfall in electrical supply. And if Japan were to go the alternative route, how long before the current supply/demand equilibrium point in oil and nattie moves materially higher? As for the broader economic impact from the earthquake which is a double whammy, as Koo points, Japanese industrial production has now fallen to the level of 1987. And Wall Street "economists" still believe 2011 global GDP will be unchanged?

Full presentation:

Koo_May11_2011

 

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Fri, 05/13/2011 - 17:23 | 1273047 Trying to Understand
Trying to Understand's picture

The world's consumers may believe all things Japanese will glow in the dark in the future, but if the packaging is pretty, the marketing is savy and price is right, they'll buy it anyway...

Fri, 05/13/2011 - 17:56 | 1273106 bbq on whitehou...
bbq on whitehouse lawn's picture

I disagree. The would consumers need priceing power or its no deal. Japan needs higher prices and a stronger currency to even make the products.

Fri, 05/13/2011 - 18:58 | 1273251 Votewithabullet
Votewithabullet's picture

I disagree. The worlds consumers need the ability to spell...Nigger pleze.

Mon, 05/16/2011 - 13:54 | 1279898 Weisbrot
Weisbrot's picture

so many disasters man made & others

so much turmoil all over the globe

conspiracy or happenstance it almost doesnt matter

I am convinced that the powers that be, believe something much worse will happen

various theories and reasons abound, based on strings or piles of truth

things will never be what they were

may what ever it is or the series of events that lead to it

be quick, be concise, and have the best possible outcome for the worse of all possible situations

 

until then enjoy all the side shows

and remember that everything is temporary

Fri, 05/13/2011 - 17:32 | 1273061 Caviar Emptor
Caviar Emptor's picture

Let them print more electricity! Let them eat plutonium, strontium and americium! 

Fri, 05/13/2011 - 17:37 | 1273069 XenoFrog
XenoFrog's picture

"Mommy, my teeth all fell out... "

Don't worry honey, that's just Spontaneous Dental Kinetic Fiscal Stimulus.

Fri, 05/13/2011 - 18:09 | 1273139 cossack55
cossack55's picture

Funny

+348

Sat, 05/14/2011 - 00:28 | 1273775 RafterManFMJ
RafterManFMJ's picture

Mommy? Fail, Japs don't have kids.

Fri, 05/13/2011 - 17:39 | 1273066 Miles Kendig
Miles Kendig's picture

Richard comes thru with a moment of clarity.  Damn.

Yes indeed.  If there is insufficient power to operate then decisions need to be made regarding which industries/capacities get off shored, when, where & how.  Look forward to reading that assessment from the Nomura Research Institute where the big question is will Japan Inc look to go with one major off shore destination or to a region centric operation flow as the answer invariably leads to a paradigm shift in the structure of Japan Inc, and most likely much more going forward.

Fri, 05/13/2011 - 17:40 | 1273081 citta vritti
citta vritti's picture

at $1 million+ per job, it doesn’t look like it will be Detroit MI. 

http://www.zerohedge.com/article/gm-spend-109-million-preserve-96-michig...

Sat, 05/14/2011 - 07:36 | 1273977 New_Meat
New_Meat's picture

citta:

"at $1 million+ per job,..."

Looks like the O admin has found the 22nd century's version of the $600 toilet seat and the $800 hammer.   Gotta' wonder where the money is really going.  Famous from WJR:

http://www.youtube.com/watch?v=fOZ-Etb0k0Q

- Ned

 

Fri, 05/13/2011 - 17:51 | 1273073 Muir
Muir's picture

"And if Japan were to go the alternative route, how long before the current supply/demand equilibrium point in oil and nattie moves materially higher? "

ergo

printing

ergo

inflation

ergo

BTFDs

-

It's always a good day to buy silver

-

Fri, 05/13/2011 - 17:42 | 1273077 goodrich4bk
goodrich4bk's picture

A client with substantial exposure to Honda, Toyota and Nissan dealerships gave me a different take on the "supply disruption" prediction.  He says the Japanese are very concerned that their competitors will run Geiger counters over cars shipped after the meltdown and that nobody will buy them.  So rather than make cars nobody will buy, they are claiming "supply disruptions" and now "electrcity shortages" to cover up the problem of market perception.

Fri, 05/13/2011 - 19:01 | 1273250 Blooter
Blooter's picture

They should be more concerned that the Koreans and even the Americans are offering better options if all you want is a cheap, dependable means to get from point A to point B.

Sat, 05/14/2011 - 06:57 | 1273961 EnglishMajor
EnglishMajor's picture

I don't disagree that Geiger counters are going to be a growth industry, but that is a shortcut to thinking. This is perhaps the single greatest ecological and human disaster the world has ever seen, the true affects of which we will never live to see.

It is ludicrous to believe that "supply disruptions" and "electricity shortages" are nothing more than a ruse to mask the radioactivity. Wake up, Japan is a vital organ in the body of the world economy, and we are bleeding profusely from the wound that has been inflicted.

You can get a kidney transplant, but it takes a little time. Do we have enough time before we bleed to death?

Sat, 05/14/2011 - 07:43 | 1273978 New_Meat
New_Meat's picture

EnglishMajor (sic):

"... the true affects of which we ..."

affects? lol

- Ned

 

Sat, 05/14/2011 - 11:22 | 1274216 EnglishMajor
EnglishMajor's picture

Hahaha! That is the true "effect" of a hangover.

Fri, 05/13/2011 - 17:45 | 1273084 CrashisOptimistic
CrashisOptimistic's picture

Think this through, people.  The top priority of Japan, post quake, was to get the roads fixed so people could go to work (read that "burn oil").

Now, somewhat behind others, it is becoming clear that with all these reactors offline, some permanently, that electricity has to come from somewhere.  It ain't gonna be solar or wind because they don't pass physics exams.  No, it's going to be the Middle East solution, that creates electricity from oil.  Some nat gas, too, but even if it's mostly nat gas, the point here is there IS GOING TO BE a new source of Japanese oil consumption.

And as a cherry on the soda top, lets tack on all those 0.5 miles/gallon bulldozers that are going to be running every day cleaning up debris.

Anyone still think Japanese oil consumption will fall?

Sat, 05/14/2011 - 05:45 | 1273931 css1971
css1971's picture

Anyone still think Japanese oil consumption will fall?

Yes.

Compare bulldozers and gensets against  thousands of cars sitting in traffic jams. Each and every car consuming 5kW just sitting there idle. 40kW when moving.

Oil consumption absolutely will fall.

Fri, 05/13/2011 - 17:43 | 1273086 eureka
eureka's picture

Toyota and Sony are just two of Japan's major corporate scam-artists making overprized and underperforming "goods".

Boycott lousy Japanese products. Help Japan hit bottom once again. It is a tradition.

 

Fri, 05/13/2011 - 18:57 | 1273246 Blooter
Blooter's picture

Too true. Sony and Toyota are no longer synonymous with quality and dependability, but try telling that to Japanese people.

Fri, 05/13/2011 - 21:43 | 1273551 earnyermoney
earnyermoney's picture

Well, I'll let you know about Toyota quality when I replacy my 14 year old Avalon and my 6 year old Prius. 6 more years on my Avalon till it trips 300K and the 15 more years till my Prius trips 300K.

 

What Government Motors, Fysler automobile has a prayer of reaching 20 years and 300K on the original engine, transmission and drive train?

Sat, 05/14/2011 - 03:44 | 1273892 J in Vegas
J in Vegas's picture

As I am going to drive my 8.5 year old Subaru tomorrow that still runs like a champ. Fail!

Fri, 05/13/2011 - 22:34 | 1273635 BigDuke6
BigDuke6's picture

Its dumb but i aint bought anything jap for about 10 years.

lots of stuff, almost 200G of cars and electrical

i've written twice to their embassy about their whaling and general yobbery on the high seas. they kill tuna, dolphin, everything with drag nets.

they dont care and thumb their noses up at us.

Shit on 'em.  

Fri, 05/13/2011 - 17:56 | 1273102 duo
duo's picture

If you haven't been to Tokyo in August, imagine Houston without a breeze.  When they had a bunch of plants down a few years ago, it was miserable sitting in meetings with the thermostat set to 30 deg C.

Fri, 05/13/2011 - 17:57 | 1273104 bbq on whitehou...
bbq on whitehouse lawn's picture

Japan is a tragic drama. I would look for half of electricity demand by 2013.

Japan is a sad case of sweeping problems under the rug until no one is left alive to to complain about it.

Sat, 05/14/2011 - 07:44 | 1273980 New_Meat
New_Meat's picture

1 oz. silk == 1 oz. gold, back when.

Fri, 05/13/2011 - 19:36 | 1273310 intric8
intric8's picture

High levels of radioactivity was recently in incinerator ash at a water facility. A wastewater treatment plant in Japan seems as hazardous to work at than damn Daiichi itself these days.

http://falloutphilippines.blogspot.com/

Fri, 05/13/2011 - 21:33 | 1273521 Mec-sick-o
Mec-sick-o's picture

Well, Japan may get plenty of these from giants like GE, Toshiba, Hitachi, Siemens:

http://www3.nhk.or.jp/daily/english/14_20.html

Each can generate up to 400MW.

Oh, yup, these run on gas.

Fri, 05/13/2011 - 22:28 | 1273624 beastie
beastie's picture

There is another little quirk for Japanese electricity. The Japanese electrical supply is run on two different voltages.

I haven't read the 40 page article because this sums up the problem succinctly.

http://screwtapefiles.blogspot.com/2011/03/weekend-roundup-focus-on-japa...

Fri, 05/13/2011 - 23:02 | 1273671 JW n FL
JW n FL's picture

the good news! with the windows open they will die a quick death instead of a slow death becuase the AC was running!

 

Sat, 05/14/2011 - 03:09 | 1273879 nah
nah's picture

asia is hot stuff these days... really makes you stick your finger in your butt

Sat, 05/14/2011 - 08:46 | 1274027 Urban Redneck
Urban Redneck's picture

GDP vs. GNP.

Wisdom requires not forgetting the basics while traveling the road to expertise.

Unfortunately for the Japanese, their recent resource allocation choices in the face of scarcity of certain supplies at Fukushima demonstrate a pattern of either poor opportunity cost analysis or poor leadership which would hamper the road to recovery through increased GNP despite restricted GDP growth.

 

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