The situation continues to unfold in Japan with further bad news on the nuclear power plant problems this morning. As I have said in my two prior e-mails, I believe the Japanese earthquake and all the consequences that will result from it could prove to be a macro-economic game-changer, and am increasingly thinking this will prove to be the case. I have found the following articles written over the past 24 hours that I think worthwhile to bring to your attention:

· 'Don't Look for Fed to Flag Japan Worries Directly' - reading time 2 minutes. This article suggests that at its monetary-policy meeting today, the Fed may acknowledge the developing Japan story and the ongoing Middle East unrest, but is not likely to go beyond that for what in each case could be 'big negatives' to the U.S. It seems to me that if this is how the Fed meeting plays out, that is not entirely unreasonable in the case of what might be the outcome of the ongoing Japanese tragedy - given that story is still in its early days. The North Africa/Middle East story is old enough I would have thought the U.S. Government and the Fed both by now would have developed views as to possible scenarios as to how it might play out, to the point where the Fed might comment on that today;

· 'Japan's Lesson to U.S.: Get Your Fiscal House in Order' - reading time 2 minutes. This article basically says that it is in the best interest of the U.S. to 'get its fiscal house in order' in order to be able to withstand "the next dose of rotten luck". This seems to me to be obvious, and hardly 'deep thought' advice. As you know from reading these e-mails, I am concerned the U.S. Federal Congressmen and Senators viewed as a group (I am sure some individual members 'get it') seem to continue to think the U.S. is omnipotent and has all the time in the world to deal with its fiscal problems. I am now developing a further concern that U.S. Politicians at all levels are going to spend near-term time responding to concerns raised by the American populace already arising out of the Japanese nuclear plant issues that have arisen in the aftermath of Friday's earthquake. Last night the U.S. news channels were carrying stories centered on 'what should America do to ensure its approximate 37 existing active nuclear reactors (and perhaps some 17 that have been closed or are not actively producing electric power) are protected against the problems being experienced in Japan. I have no idea what expenditures such a program would entail. Intuitively I think those expenditures would be very large and if they come, are coming at a time when the U.S. Government can ill afford too spend time or resources on nuclear power plant remediation;

· 'Chaos erupts as rolling power outages begin' - reading time 1 minute. This article principally discusses the Japanese commuter problems that have arisen since 'rolling electricity blackouts' that began Monday evening. While this is no doubt adding to the turmoil being faced by those in Japan (for which one has to have empathy), it strikes me the 10,000 foot lesson to be taken from this is how dependent the population of any country is on its infrastructure, and how things can change from normal, to very abnormal, in the blink of an eye;

· 'Can Contagion Be Avoided Considering The Magnitude of Japan's Woes?' - reading time 5 minutes, longer if you watch some of the embedded videos. I suggest you read this article by Reggie Middleton (BoomBustBlog). It states emphatically the "The Potential for Spillover Effects Simply Cannot Be Ignored If You Look At This From An Empirical Perspective". I suggest you read Middleton's article and think carefully about what he says in the context of equity/money market investments, and indirect and direct precious metals holdings;

· '14 Reasons Why The Economic Collapse Of Japan Has Begun' - reading time 5 minutes. An auspicious title, but I think the article is nonetheless worth reading and thinking about. In particular, it raises the issue that Japan has been a continuing buyer of U.S. Treasuries, and will no longer be able to do that. Something that had not occurred to me, but does makes sense to me. I think this is but one example of multiple effects the Japanese earthquake will have on individual countries that comprise our now globalized economy.

To date I have seen very little written on how the ongoing events in Japan will impact, if they do, on the price of physical gold. I am surprised at this. I have set my views on this out in the commentary following this one.

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As I said in the previous commentary, to date I have seen very little written on how the ongoing events in Japan will impact, if they do, on the price of physical gold. This surprises me, but then too I am somewhat surprised that the price of physical gold has fallen dramatically (by about U.S.$40) this morning from about U.S.$1,419 (5:00 a.m. ET) to U.S.$1,389 (9:00 a.m. ET). Concurrently physical silver has fallen (by about U.S.$2.00) to U.S.$33.90. To the extent my consistently reiterated view that physical gold is a safe haven holding in uncertain times is unchanged (and it is), all things equal I would have thought that the price of physical gold ought to rising this morning, not falling. However, all things are seldom if ever are equal.

A Kitco article this morning generated at 8:03 a.m. is titled 'A.M. Kitco Metals Roundup: Comex Gold Sharply Lower as Markets Spooked, Investors Liquidating Assets for Cash' - reading time 2 minutes. That article says that the crisis in Japan has generated extreme uncertainty in most markets worldwide, and that investors are "moving out of perceived riskier assets and into cash and U.S. Treasuries". As I write this every index summarized in Bloomberg with the exception of the Mexican BOLSA exchange is showing red numbers. The Dow is down 270 points (about 2.25%) at its 9:30 a.m. ET opening.

While the author of the Kitco article may be right, I for one can't see how U.S. Treasuries are a better place to be than physical gold, unless one is fully invested in the markets and isn't holding any cash - cash being a better 'medium of exchange' than physical gold. That said, the gold price is clearly under pressure this morning (at least to 10:00 a.m. ET), perhaps because gold (and silver) can always find a market at a price - and may well go lower if the equity markets continue down and investors and traders have a need to liquidate holdings to raise cash. It will be interesting to see where the physical gold price goes in the next days and weeks.