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Well, it now turns out that many of my worst fears about Fukushima have been confirmed with the news that TEPCO has finally admitted that Reactor #1 has experienced a meltdown event that may have breached the primary containment vessel. Further, truly alarming levels of radiation are now being reported in and around Tokyo.

The prospects for containing the situation at Reactor #1 are now much dimmer than previously admitted. A melted core is far more difficult to cool because the geometry of the slag heap at the bottom is not nearly as favorable as long thin tubes around which water can be relatively easily circulated.

Worse, if the slag has either melted through the primary containment vessel or somehow leaked out through a fitting that has failed, then the ability to circulate water is even more compromised.

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The US budget process is entirely out of control. By extension, its fiscal future is rather bleak.

All one has to do is back up two steps, entirely ignoring the meaningless budget scuffles currently ongoing in DC, to see that the federal government's fiscal situation is in complete shambles. In fact, as things currently stand in terms of spending and revenues, the US government is insolvent - its liabilities vastly exceed its assets on a net-present-value basis.

Yes, Obama has just laid out a plan that calls for cutting some $4 trillion of new, incremental deficit additions over the next 12 years, but this merely obscures the fact that the deficit will still grow by a rather hefty amount nonetheless. Plans from both sides of the aisle call for adding more debt but at a slower pace. True, that's progress of a sort, but not the type of progress you want to bring home to meet your mother.

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This post and its related comments are dedicated to covering the ongoing situation in Japan, which we continue to believe is more serious than official reports portray. 

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Fantasy or comedy?  I couldn't decide which way to label the Obama budget, so I went with both.

The bottom line is that the Obama administration has brought forth the most unbelievable revenue increase that I have ever seen proposed in a budget, a whopping 65% increase in revenues in just four years, which will - miracle of miracles - drop the deficit as a percent of GDP from nearly 11% to just 3.2% over those same four years.

The only problem with this scenario is that it stands virtually no chance of actually happening. Revenue will be far lower than projected and the deficit correspondingly higher.

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For a very long time, I have been calling for, expecting, and otherwise anticipating the day that the Federal Reserve would begin openly monetizing government debt. Intellectually knew the day would come, but in my heart I hoped it wouldn't. But with the Fed's recent decision to directly monetize the next eight months of federal deficit spending, that day has finally arrived. I have to confess, while my prediction has proven accurate, I’m still stunned the Fed actually did it.

In this report I examine the risks that this new path presents, what match(es) may finally ignite the decades-old pile of dry fuel, what the outcomes are likely to be, and what we can and should be doing in preparation.

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With today's Fed announcement of $600 billion more in Quantitative Easing purchases, the United States has officially entered "Stage II" of the crisis.

This $600 billion is in addition to the purchases already underway using the proceeds from the maturation of their massive MBS portfolio.

Goodbye dollar; hello future.  

Here's the relevant wording from the statement: 

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities.

The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings.

In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.

The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

(Source)

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There were a number of quite interesting developments in the market today (Wednesday, August 11th), and I want to focus on those instead of my usual macro view.

The stock market sold off heavily today, presumably in response to the Fed’s recent statement, which admitted two things:  (1) US economic growth is weaker than previously thought (dollar negative), and (2) the Fed is going to renew its efforts at monetizing US government paper (dollar negative).

Anybody following today's nonsensical markets knows what happened next:  The dollar rallied.  A lot.

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I'm going to repost this article for any newcomers and any old-timers because it is worth reviewing from time to time.  It's the center of my thesis about how the world works and what's likely to come.

Once you've read this, if you have not done so it's time to either watch the 45 minute 'short version' of the Crash Course, or begin the Crash Course itself.

And if you happen to be brand new to the site and are wondering what it has to offer and how to navigate it, I would invite you to visit our Welcome Page.

Now, onto the article.....

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The End is Near, Inc.

This is the title of the recent full-spread article in Boston Magazine about me, my work, and our community. It’s due out in hard print on Sunday with the Boston Globe. It is already available online here.

Unfortunately, the article relies too much on sensationalistic stereotypes and includes some troubling distortions.  My chief concern is that the story, told through a very few limited, out-of-context, and edited quotes, paints a picture of Becca and me as doomsayers with a bunker mentality.  Nothing could be further from the truth.

We somewhat reluctantly agreed to have our whole family included in this very public article, opened our home for several days for the effort, and are now wrestling with the impacts that will stem from the fact that our best efforts have now been tagged as “The End is Near, Inc.” - an unfortunate mischaracterization that completely misses what we are really about while implying that we do this for the money. 

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The G20 meeting has revealed two important things that tell us something about our combined economic future.  First we learned that the US lost the battle to try to get everyone back on the Keynesian print-a-thon bandwagon.  This tells us something about US leadership in these troubled times.  Once upon a time, the US could dictate such things, but those days are apparently over (which deserves to be noted.)