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Generational Dynamics Web Log for 20-Apr-2010
20-Apr-10 News -- South Korea may retaliate over sinking of warship

Web Log - April, 2010

20-Apr-10 News -- South Korea may retaliate over sinking of warship

Greece hurtles toward financial default.

Korea's president promises 'resolute and unwavering' action over warship sinking

The issue of the sinking of South Korea's warship three weeks ago took a sharp turn on Monday.

To recap: Three weeks ago, the Cheonan, a South Korean navy warship, exploded and sank near North Korean waters. Only 58 people were rescued out of 104 crew members, and the other 46 drowned. The evidence has increasingly pointed to a North Korean attack, but the South Koreans have carefully avoided saying so, since a direct accusation of that type would inevitably lead to war.

All along I've said that my expectation is that the South Korean government would keep stalling, and would find a way to say that the evidence of a North Korean attack could not be substantiated.

However, Monday's developments have now put that expectation into doubt.

In a rare live televised speech on Monday, South Korea's President Lee Myung-bak made an emotional promise to find the those responsible for the sinking, and to take appropriate action, according to the Korea Times.

South Korean President Lee Myung-bak wipes away tears during television address.

South Korean President Lee Myung-bak wipes away tears during television address.

President Lee tearfully read out the names of the 46 sailors who had been killed, and said the following:

"As the president, I will ascertain the cause of the Cheonan's sinking to the last detail. I will deal resolutely with the results and make sure such an incident does not recur. I will make our military stronger.

If (the two Koreas) are reunited and genuine peace and prosperity comes to this land, the people will remember your sacrifice again. Your fatherland, which you loved, will not forget you, ever. ...

"A strong military is made not only by powerful weapons but also by strong spirit. What we need now is strong spirit above all," he said. "We need to reflect on ourselves now. We have to find out and fully address what it is that we lack, what the problem is."

My guess is that Lee would have preferred to continue not saying anything, but was forced to make this speech because of the huge and growing fury building up in the South Korean population. This dramatic speech changes everything, since it commits the South Korean government to taking some kind of retaliatory action.

North and South Korea are technically still at war, since the 1950s Korea war ended in an "armistice" rather than a peace agreement. The two sides have been involved in numerous minor military skirmishes over the years, but this one has been growing into the most significant.

It's possible that this situation will spiral into full-scale warfare, but I would imagine that the Americans and the Chinese are already talking to one another about how to bring the two sides under control.

According to Yonhap, the United States State Dept. supports bringing the sinking incident before the United Nations Security Council, if North Korea's involvement is confirmed. Since that would provide an almost ironclad guarantee that nothing would be done, we'll have to see if the South Korean people people are satisfied with that solution.

Cost of insuring Greece's debt surges to new record

Financial inspectors from the European Union and the International Monetary Fund (IMF) were supposed to go to Athens on Monday to discuss the terms of a bailout, but the meeting was called off because of the volcanic ash crisis that has shut down much of Europe's aviation industry. The meeting has now been postponed until Wednesday.

In the meantime, the prices of credit default swaps (CDSs) that insure Greece's debt rose to historic highs, according to Bloomberg.

This means that investors increasingly believe that Greece is going to default, which means that they increasingly believe that there will be NO aid or bailout package. This should be no surprise to regular readers of this web site, which has repeatedly pointed out that each supposed aid plan for Greece has been a farce and a delusion.

Commentators are beginning to catch on that there's no solution to the Greek financial crisis.

The commentary from Frankfurter Allgemeine notes mournfully that Germany will have to pay the largest share of the 45 billion euro bailout, costing each German citizen 100 euros. "But what's the use?" This bailout is just enough to make the current month's payment, and "the debt is still there." The commentary (translated) adds:

"With every escalation of the crisis in Greece, the German government provides a new explanation of its own role as helper. The first [explanation was that] absolutely no money should be given. Next, it was said that we'll provide money, but the money won't actually be claimed by Greece, but [the offer] would calm the capital markets.

The current motto is: We have the money ready as a last resort, but it will cost the public nothing. But even this statement is likely to last only a short period of time.

And the fundamentals justify the distrust. The truth comes closes to the sentence: We will provide the money and we don't know if it's enough, and whether we'll ever see it again."

Because of the great distrust and opposition by the German people and because of the inevitable challenges in Germany's Verfassungsgericht (constitutional court), it's hard for me to believe that Germany will ever provide any bailout money.

The attitude is growing that if Greece is going to default sooner or later, then it might as well default sooner, and save everybody else some money.

This brings us to the commentary by Wolfgang Münchau in Financial Times.

You may recall that last week I quoted Münchau as saying that Greece would not default this year, but would default next year.

Now he says,

"The European Union finally agrees a bail-out, and the much-predicted rally of Greek bonds turns into a rout. A week later, spreads on Greek bonds had reached their highest levels since the outbreak of the crisis. The financial markets have recognised that, bail-out or no bail-out, Greece is in effect broke."

Once again, Münchau makes that case that there's no point in bailing out Greece, because Greece is going to default anyway.

What would it take to save Greece from default? Greece would have to implement very severe additional austerity measures, such as raising taxes, cutting pensions, cutting spending and wages, and increasing the retirement age. In fact, that's what the IMF and EU officials will tell the Greeks during their meeting on Wednesday.

However, Greece has already raised taxes and cut spending. According to Bloomberg, Greece’s biggest unions threatened new strikes and a “social storm” if the government cuts pension benefits. Civil servants already plan their third 24-hour strike of the year for Thursday, to protest the austerity measures.

Additional Links

Remember how the SEC ignored one warning after another about Bernie Madoff's Ponzi scheme? Well, apparently the SEC also ignored warnings about another Ponzi scheme, the one operated by R. Allen Stanford. USA Today

A European Union commissioner has declared that vacations are a "human right," and that anyone too poor to afford vacations should have them subsidized by the taxpayer. Times Online

For techies: How Google's Chinese hackers infiltrated the software developers' computers, and gained access to Google's top secret source code. NY Times

China's real estate bubble has led to the construction of millions of shoddy buildings. China Daily

Cuba's Roman Catholic cardinal says that the country is in its worst political crisis, as people are demanding that changes be made immediately. NY Times It sounds like Cuba is close to having its Awakening era climax crisis.

A new suicide bombing in Peshawar, Pakistan, kills 23. BBC

Kenya is being very hard hit by grounded European airplanes, as 1,000 tons of Kenyan produce and flowers per day cannot be shipped to Europe. VOA

(Comments: For reader comments, questions and discussion, see the 20-Apr-10 News -- South Korea may retaliate over sinking of warship thread of the Generational Dynamics forum. Comments may be posted anonymously.) (20-Apr-2010) Permanent Link
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Generational Dynamics Web Log for 20-Apr-2010 20-Apr-10 News -- South Korea may retaliate over sinking of warship

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Generational Dynamics Web Log for 20-Apr-2010
20-Apr-10 News -- South Korea may retaliate over sinking of warship