Japan Tilts in the Global Economy Circus

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( ChrisMartenson.com) -- At the circus, you are sometimes treated to the spinning plate act where a performer tries to keep an improbable number of plates spinning at once, racing from one plate to the next as their wobbles indicate the need for another dose of momentum. Considering the number of spinning and wobbling plates that our central planners are managing, it's easy to be both amazed and anxious at the same time.

The difference between the spinning plate analogy and real-world economic and financial systems is that if a failure occurs out in the real world, it has a very high chance of spreading across and through the other elements of the system. Contagion is the fear, as if in finally toppling, one plate will crash into its neighbor and set off a chain reaction of falling plates.

To carry this metaphor, Japan is a wobbly plate.

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For those who are in a hurry today, the bottom line is that Japan is in serious trouble right now and is a top candidate to be the stage for the next Black Swan. Here are the elements of difficulty that concern me the most, each one serving to reduce Japan's economic and financial stability:
  • The total shutdown of all 54 nuclear plants, leading to an energy insufficiency
  • Japan's trade deficit in negative territory for the first time in decades, driven largely by energy imports
  • A budget deficit that is now 56% larger than revenue(!!)
  • Total debt standing at a whopping 235% of GDP
  • A recession shrinking Japan's economy at an annual rate of 2.3%
  • Renewed efforts under way to debase the yen

As I wrote a shortly after the earthquake in March 2011, Japan is facing an economic meltdown. If it is not careful, it may well face a currency meltdown, too. These things take time to play out, but now almost exactly a year after the devastating earthquake of 2011, the difficulties for Japan are mounting -- as expected.

Exacerbated by the earthquake and tsunami, Japan's current predicament has been developing over many years and represents the aftermath of a burst financial bubble (involving stocks and real estate), an inability to let failed institutions actually fail, and repeated and stubborn attempts to preserve what ultimately could not be sustained.