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Japan and Libya in Crisis – How it affects our economy



Major catastrophes can have enormous consequences on our global economy. There is no greater example of this than the most recent 9.0 Richter scale earthquake, devastating tsunami and nuclear power plant disaster that have occurred in Japan. As the world’s third-largest economy, as the Japanese go – so goes the rest of the world. For the last several days, as the Japanese markets have been faltering, stock markets around the world have been wavering with concerns over the devastating effects of this disaster.

In addition to the sad situation facing the Japanese people, the country of Libya is now facing the real threat of going to war against the world. Muammar Gaddafi has been defiant in complying with demands from the United Nations to stop attacking his own people, causing the UN to authorize airstrikes on the country of Libya.

What effects can we see as a result of these two major events? With Japan, we see the example of a major world economy having to divert limited financial resources to rebuild cities and fix the nuclear power plants that are near meltdown. Japan’s economy has been struggling for the last ten years, which means that their government will need to take drastic measures to generate capital. What country has one of the largest holdings of United States Treasury Bills behind China? You guessed it, Japan. These Treasury Bills will need to be sold off in order to pay for this disaster, which could ultimately have a huge effect on the already-abysmal American economy.

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The Libyan conflict has more of an immediate effect on the global economy, simply because most of the world is dependent on oil from the Middle East. The Europeans have been able to build mass transit systems to avoid the absolute necessity of having to drive everywhere, whereas in the United States, very few cities are so advanced.

In just the last few weeks, as tensions have increased throughout the Middle East, with uprisings in Tunisia, Egypt, Saudi Arabia, and now Libya, the world has seen petroleum prices skyrocket. In the United States, gas prices were high for years when they were reaching towards $2.00 per gallon. As of today, March 18th, 2011 – gas prices are over $4.00 per gallon in California, and in between $3.50-$4.00 a gallon throughout the rest of the country. This represents a major expense for families, not only in the United States – but around the world. As petroleum prices rise, so do the cost of goods and services. The cost of sending food from one place to another rises, as do the prices for raw materials, imports and exports.

The disaster in Japan and the political crisis in Libya have raised numerous questions for the rest of the developed world to consider. Is the world’s dependence on the Middle East too great? Is it feasible to develop alternative forms of energy in order to rid the dependence on the Middle East’s oil? The Japanese strife has raised numerous questions about nuclear power, as well. Is nuclear power safe? Can nuclear power plants be built in a way to withstand catastrophes such as a major tsunami? Are current nuclear power plants around the world safe? Politicians around the world are calling for an immediate halt to the building of nuclear power plants until their safety is assured. Are they overreacting?



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