Michael Lewis' Prophetic 1989 Japan Disaster Piece

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.

(h/t Kottke.org)

Comments

[dwangelo]

12:31 PM on 03/18/2011

This article should be taken down. It's insensitive to people who have brains.

20 years ago a guy said Japan (then the world's 2nd largest economy, and known seismic hotspot) would experience an earthquake that would have financial repercussions.

and?

Miss Cleo's offered better insight.

[cambo]

12:06 PM on 03/18/2011

This is well worth the watch if you like prophecies -
http://www.youtube.com/watch?v=ugNsuYH987o

[cambo]

11:40 AM on 03/18/2011

This guy is talking about one event but what if there were a series of events world wide? What people don`t realise is that our entire socities/economies are very fragil. Humanity has evolved into an unnatural level depending on an unnatural system to survive. When the system comes down on a large scale ubiquitously, mankind will come crumbling to his knees.

[Tomblum]

10:16 AM on 03/18/2011

Michael also wrote a snarkish article about meeting the Emperor, which was tasteless and ungracious.

[bmwracer]

09:39 AM on 03/18/2011

Big deal.

Does the article say how Japan gets out of their current nuclear crisis?

This is all hindsight.

[lauram]

10:14 AM on 03/18/2011

Actually, since it was written in 1989 - it was foresight.

[planetjeffy]

01:34 AM on 03/18/2011

wrong, plants all over the world are having to close due to lack of parts

[zell]

01:27 AM on 03/18/2011

Mr. Lewis had a vision of what would happen. No one is discussing where the people of Japan will move to just in case Tokyo becomes uninhabitable..........

[pflickner]

02:30 AM on 03/18/2011

They won't move to anywhere. Tokyo will never be uninhabitable unless the ocean covers it. Or Godzilla moves in. The Japanese, like most people, are quite resilient. The guy said that there's a major earthquake in Japan every 70 years, so if it hasn't caused them to leave before now, I doubt anything will.

[jammer0079]

04:57 AM on 03/18/2011

Nothing, that is until it has radioactive waste attached to it. You do realize, that nuclear waste does not dissipate for thousands of years?

[Yaply]

01:06 AM on 03/18/2011

Yes but Sendai is not really it as far as the Japanese economy goes. The coastal towns which were destroyed by tsunami were not economically important. Japan's economy is very centralised on Tokyo. More a personal tragedy than an economic collapse.

[planetjeffy]

01:35 AM on 03/18/2011

see comment above

[MilesToGo]

09:34 AM on 03/18/2011

Good point. The area affected represents 8% of the Japanese economy. As with the Kobe earthquake, the forced reconstruction, while expensive, will ultimately boost the economy beyond this difficult moment.

[Radx28]

12:52 AM on 03/18/2011

"It's not nice to fool with Mother Nature"........prescient old butter vs margarine TV commercial. More tremors of Globalism and the butterfly effect.

We are one species with one destiny. Our differences are small compared to our need to explore, expand, and improve our environment, and to harness the natural forces that challenge our survival, including those that happen in geologic time, those that we would not even know about without recorded history.

Historically, as the challenges have mounted we have formed ever greater, more complex, and more sophisticated socio-economic structures to accommdate larger, more diverse populations and to meet new challenges; from families, to clans, to tribes, to city-states, to empires, to nations, all the while exploring new ways to interact, trade, and cooperate in the greater quest for exploration and survival.

Now, in a global world, we will once more be forced to adapt and standardize our understanding and our practices across an increasingly diverse spectrum of cultures in order to realize the new reality of a fully interconnected, geographically unbounded world; as we will in our natural inclination to venture out and explore our universe.

Given the 10,000 year life-cycle of nuclear fission by-products, and the catastrophic death threat of nuclear disaster, it would appear that nuclear standards and practices will either be on the agenda or will bring us to new levels of planet-wide despoilment and/or perhaps our own destruction in short order.

[contrario]

12:38 AM on 03/18/2011

I lived in Tokyo in the 90's (after the bubble burst) and Lewis was not the first, and not the foremost, to call attention to the global impact of a natural disaster knocking out Japan's financial center.

That danger still exists but Tokyo is not the financial powerhouse it was in the 80s.

However, the fault line that affects Tokyo is not the same fault that gave way off the coast of Sendai. Tokyo was "overdue" for a major seismic event when I lived there. It is now even more "overdue".

[memery]

11:25 PM on 03/17/2011

The real problem isn't tectonic; it's economic. So many financial systems (and the governments they serve) are so interconnected; if one sector begins to fail, it affects everything. Our current economic mess began in just this way, with the failure of the residential housing sector. That then served as a serious drag on world markets, making the Great Recession pandemic.

When a stockbroker in Hong Kong catches a cold, a commodities trader in New York sneezes. Until such time as that stops, no one government, including ours, has any real control over its economic destiny.

[the crustybastard]

02:35 AM on 03/18/2011

Excellent points, and well-said. Nicely done.

[lauram]

10:17 AM on 03/18/2011

Maybe this will push us back to locally-based economies.

[Happylib]

10:53 PM on 03/17/2011

Glenn Beck said "It's the End of the World." Now, that is a prophecy.

[MichaelMcKLA]

12:47 AM on 03/18/2011

I'm waiting for the end of Beck. :-/

[dn sf]

01:09 AM on 03/18/2011

Glenn Beck didn't invent the end of the world, the christian bible did.

[pflickner]

02:32 AM on 03/18/2011

Unless you look at the history, then it could be an angry man ranting at a king he despised, and all in code. And like I always say, "Never take advise from an unhappy person."

[the crustybastard]

02:44 AM on 03/18/2011

The Christian Bible didn't invent the end of the world either. The Hindu Vedas did.

(Somebody else probably invented it even earlier than the Hindus, but such evidence is, poetically, lost to time).

[TomCinIllinois]

10:27 PM on 03/17/2011

If the book was prophetic, then it prophesied events that have not yet taken place.

This was not a Tokyo earthquake. It struck well to the north, with minimal direct impact on Tokyo. The major area of damage is not nearly as densely populated as Tokyo, nor does it have the concentration of key industries.

If a 9.0 earthquake were to hit Tokyo, that would be another matter.

[the crustybastard]

02:48 AM on 03/18/2011

Indeed, and it's hardly "prophetic" to predict that there will be earthquakes in Japan.

It's like predicting tornados in Kansas.

[beekeeper]

10:22 PM on 03/17/2011

Not sure how 'prophetic' has to be to predict that we humans will eventually do ourselves in when we build in defiance of Mother Nature and natural laws.....obviously we settle where we do as humans over the long haul.... but eventually..... she is so much more awesome than we puny humans are.

[cdecisneros]

09:49 PM on 03/17/2011

Kind of like the editorial in New Orleans that predicted what would happen if that City got hit by a hurricane. He said eventually everyone would end up in the superdome.