Months before publishing 1989's Liar's Poker, the canonical account of life inside 1980s Wall Street, Michael Lewis, author of The Big Short, wrote an article on the prospect of Japan being rocked by a large-scale earthquake -- and what it would mean for the global economy.
Now, less than a week after a record 8.9 magnitude earthquake left thousands dead, half a million homeless, and economists scrambling to decipher the consequences, Lewis' hunch appears disturbingly prophetic.
The article, entitled "How a Tokyo Earthquake Could Devastate Wall Street and the World Economy" and appearing in now-defunct Manhattan Inc., contended not only that a large-scale Japanese earthquake was inevitable -- "A big quake has hit Tokyo roughly every 70 years for four centuries," he wrote -- but that the Japanese government wasn't taking adequate precautions against such a prospect. This decision, he believed, would have disastrous global consequences.
Lewis depicted the Japanese government's decision to quietly relax "formerly-strict building codes" as a mistake. "Everyone in Tokyo knows there's going to be a big earthquake," Lewis wrote at the time. "It's only a matter of when."
He then discusses the effect a Japanese earthquake could have abroad, looking closely at a report by Tokai Bank on the economic consequences of a substantial earthquake. "The narrow message," Lewis said, "is that the financial consequences of a Tokyo earthquake will be felt primarily outside Japan."
Contrary to Lewis' prediction twenty years ago, U.S. policymakers have assured the public that the disaster will not slow America's recovery in any meaningful way. A volatile stock market indicates the sentiment isn't unanimous.
Lewis' article ends on this chilling note:
Today, when foreign journalists stumble into MITI and demand to know what will be done about Japan's trade surpluses, they sometimes get this strange answer: 'When the earthquake comes, the trade surplus will go away.' The good news from Oda is that it's probably true. The bad new is that we'll wish it wasn't.
You can read the entire article here.
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