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Friday, March 11, 2011

Another natural disaster that will take some time to understand

Like you, I am watching the ongoing developments in Japan and across the Pacific Rim today, as the effects of a massive earthquake, tsunamis, and aftershocks unfold. Our thoughts and prayers are with the victims of this immense tragedy.

Even with our ability to watch what’s going on through real-time video, the enormity of the human loss, property destroyed and other long-term impact is impossible to comprehend… at least for now. The situation continues to evolve, as waves come ashore in Hawaii (with less damage than originally feared, so far), and more waves anticipated along the entire west coast of North America. Like many of you, I’ll be watching and absorbing what this might mean over the weekend and the next several days.

Implications: So early in this ongoing event, it is difficult to think about local implications to such a global tragedy. This is likely to evolve differently than the Sumatra quake and tsunami of 2005, even though some of the footage seems all too familiar.

First, commodity prices could fall dramatically, for a time. Japan is the world’s fourth largest economy by GDP, and the fourth largest consumer of oil (source: CIA world factbook; considers the European Union as a sovereign economy). For at least the short term, much of the country’s manufacturing, financial and other day-to-day activity will be suspended, and oil consumption is likely to fall… dramatically enough to influence world demand.

There will be other implications for this event, on global banks, stock markets and aid organizations, to name a few. On the North American west coast, waves have yet to arrive. We’re thinking about you…

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

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