LL: One of my sources who has spoken with the White House tells me the administration is not worried about the Japan crisis impacting the U.S. economy. Do you think the U.S. economy will be impacted?
MZ: No, the U.S. and global economies will not be materially impacted by the Japanese disaster, assuming of course that the nuclear crisis abates without any significant spillage of radioactive material.
The principal linkages between Japan and the U.S. global economies are trade, financial markets, and commodity markets. The U.S. trade balance with Japan will not be significantly impacted. U.S. exports to Japan will suffer somewhat, but mitigating the impact is that the U.S. exports things the Japanese will need more of including agricultural and food products and pharmaceuticals. Moreover, U.S. imports from Japan will also weaken as Japanese producers will shift some production of vehicles, semiconductors and computers to the U.S. where Japanese companies have excess capacity.
Interest rates will not be materially impacted as the Bank of Japan is upping its quantitative easing and the Federal Reserve is now much more likely to complete QE2. The Japanese disaster will take the edge off of oil and other commodity prices, at least temporarily, as Japanese demand for commodities will be weaker with the weaker economy.
LL: Do you think the US markets are overreacting?
MZ: No, financial markets are reasonably unsettled by the uncertainty created by the nuclear crisis. While odds are the nuclear crisis will be contained without serious radioactive spillage, it is not hard to construct much darker scenarios. Stock prices will be under pressure and Treasury bond prices will rise until this uncertainty abates. As soon as it does, stock prices and interest rates should bounce back.
LL: The yen has soared which now has the markets waiting to see if the Central banks will intervene to drive the yen down lower. Do you think they will? Should they?
MZ: A weaker yen would be desirable, and I think the BoJ will ease monetary policy aggressively in part for this purpose. It's not at all clear they will be very successful, however, at least not quickly. There are powerful countervailing forces supporting the yen including the home bias of Japanese institutions and investors which will only intensify in the wake of the disaster.
LL: QE3 has been talked about in light of this disaster. Is it too early to be talking about more quantative easing?
MZ: Much too early to talking about QE3. If I'm right that the fallout from the Japanese disaster on the U.S. and global economies will not be material then QE3 will not be necessary.
LL: Technology and energy are the two biggest industries being significantly impacted by this disaster. Both sectors are big employers. Can this disaster have an impact on jobs?
MZ: The disaster will only have an impact on jobs if in fact the nuclear crisis turns out to be more serious than anticipated. The only major longer-lasting impact of the disaster will be on the energy sector. Oil and natural gas prices will be higher as a result as Japan and the rest of the world turn away from nuclear power and fill the void with more oil and natural gas fired turbines.
LL: Fear is ruling the markets now. What fundamentals are you looking? What should investors be asking themselves?
MZ: The two most important immediate factors are the Japanese nuclear crisis and Middle East unrest. If these problems fade in the next few weeks as I would anticipated, then investors need to refocus on jobs. Businesses have been slowly ramping up their hiring, but job growth needs to accelerate further to ensure the U.S. economy is off and running.
LL: There are worries the US loan markets are showing signs of jitters as borrowing costs are rising. Do you think this pull back is a blip or could this be a downturn?
MZ: A blip. Interest rates are low and the big financial institutions are well-capitalized and profitable. I don't think lenders and other creditors will pull back unless the economy heads south again.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."