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Generational Dynamics Web Log for 4-Jun-2010
4-Jun-10 News -- North Korea: 'War may break out at any moment'

Web Log - June, 2010

4-Jun-10 News -- North Korea: 'War may break out at any moment'

Europe's sovereign debt crisis is as bad as ever

Tensions continue to grow between North and South Korea

A dangerous situation continues to develop on the Korean peninsula, two weeks after South Korea's May 20 report blaming North Korea for the torpedo that sank the warship Cheonan on March 26, killing 46 people.

South Korea's president Lee Myung-bak originally promised retaliation for the attack, but Lee was forced to back off some of his plans, for fear of triggering a wider war. And on Wednesday, Lee's party suffered substantial losses in regional elections, apparently rebuffing him for his initial firm response to North Korea.

On Thursday, Ri Jang-Gon, a North Korean diplomat speaking in Geneva said: "The present situation of the Korean peninsula is so grave that a war may break out at any moment." According to AFP, he blamed the "grave situation" on South Korea and the United States.

Ri warned that the North Korean people were "ready to promptly react to ... various forms of tough measures including an all out war."

Indeed, in the last couple of weeks, we've reported several ways that North and South Korea could go to war fairly quickly, on either the Yellow Sea or the DMZ (demilitarized zone) separating the countries. Either country may make a misstep or miscalculation and the other may then respond militarily, as both countries have now adopted "shoot first and talk later" policies.

An increasingly tense point of contention is the industrial complex in Kaesong, just across the border to North Korea. This was a joint project by the two Koreas to develop closer relations. The businesses are owned by South Koreans, and there are about 1,000 South Korean employees working there, in addition to 40,000 North Korean employees.

Both North and South Korea have threatened to close Kaesong, but so far, neither side has done so. According to Bloomberg, the reason is that both sides have so much to lose monetarily. The South Koreans fear that they'll lose their investments in Kaesong, and the North Koreans fear that they'll lose the salaries that the South Koreans pay for the North Korean workers. (The workers don't actually get the money; it goes into Pyongyang's coffers.)

Still, workers from both sides are increasingly nervous about the situation. No one talks about the Cheonan incident, according to the article, and business has been slowing down for fear that a sudden shutdown will cause loss of investments. There's also the implied threat that the North Koreans may take the South Korean workers hostage.

It's widely believed that time is not on the side of peace, according to an opinion peace in the Korea Times.

"If we make it through the coming weeks without any fighting, we are faced with another challenge. North Korea is a poor country and its government maintains control through extreme force. Kim Jong-il may face problems when poverty further represses his people, and when budget cuts begin hitting the government harder and harder.

An irrational government is a very dangerous thing. At the end of the Cold War, the United States was paying the bills for its enemy. It was better to have a stable enemy than an unstable one. The same is absolutely true now. It's why we worry about Kim's health and the debate over his heir. When vying factors in a government fight for control, chaos frequently ensues. It could be devastating for the region if Kim lost control of his government.

Yet this is inevitable. When he dies, or tries to hand over control, we will know even less about an already mysterious government. We will see potential leaders attempt to demonstrate their strength, and try to test the limits of their newfound power. There may well be hardliners in the government who seek to demonstrate North Korea's military might."

More on the generational divide in South Korea

I actually had three different web site readers ask me essentially the same question about my article yesterday on the South Korean election:

#1: "Reading today's article about Korea, are you not surprised to see 1950's veterans being more belligerent than the younger generation? Surely, Generational Theory should forecast the opposite?"

#2: "What is it with the youngsters in South Korea wanting peace while the old timers want war (June 3)? I thought the elderly, remembering the war, would want peace and the ones born since the war would want confrontation. What am I not understanding?"

#3: "What are the implications here for generational dynamics? If the last crisis war was WWII (or, perhaps more accurately, the Korean War), then, under generational dynamics, that generation should be driven away from war. The current young generation should be driven toward war. However, these polls and election results seem to indicate the exact opposite."

Those are astute questions. I'm glad that everyone has been paying attention.

In 2007, I wrote a generational history of South Korea since World War II, in the article, "South Korean politicians are 'euphoric' over North Korea nuclear deal."

As I pointed out in that article, the 1950s Korean War was NOT a generational crisis war for Korea. World War II was a crisis war for Korea. The 1950s war was devastating, but in many ways it was a proxy war between the U.S. and China, being fought on Korean soil. There are many ways to see this, but the most obvious one is that the Korean War never ended. A generational crisis war always becomes increasingly violent until it reaches a genocidal climax, but the 1950s war was stopped by an armistice, not a climax. Theoretically, North and South Korea are still at war today.

So the older generation that I was referencing yesterday were actually the "April 19" generation, in the generational Prophet archetype like our Boomers, and the younger generation were the "Kwangju generation" or "386 generation," in the Nomad archetype like our Generation-X.

The older generation, the April 19 generation, are not survivors of the last crisis war, WW II; if they were, they'd be treating North Korea in a much more compromising and conciliatory fashion -- and the North Koreans would be much more comprising and conciliatory as well.

Instead, like our Boomers, the April 19 generation is much more confrontational, and more willing to demand revenge for the Cheonan sinking. But they're also much more oblivious to the danger. Most of them undoubtedly believe that a war won't happen, or that it can't happen because it would be bad for business. So it's not correct that the older generation wants war; they're simply oblivious to the danger of war.

Thus, a recent VOA article quotes an elderly woman as saying, "We have to be stronger. The measures taken by our government are too soft. We have to kill all the North Korean aggressors. That is why I attended today's rally." Another man said, "We should use all possible sanctions and keep looking for ways to get North Korea to change through international collaboration. But there should not be war."

The younger generation, the 386ers, are like our Gen-Xers, the nihilistic generation. However, nihilism means different things in different places, and apparently to the 386ers in South Korea, it means total appeasement of the North Koreans.

According to a recent NY Times article, up until the late 1980s, governments led by the April 19 generation "resorted to North Korea scares so often that many people now refuse to believe any stories about the regime, no matter how overwhelming the evidence." Thus, there's sympathy for Pyongyang, and the Cheonan sinking is sometimes referred to as an "accident."

In the North, the government is led by Kim Jong-il, born in 1942, and likely to be much more conciliatory then either of the younger generations that we've discussed. Little is known about the ministers and officials who report to Kim, but it's likely that they're considerably younger, and considerably more confrontational.

That's why so many people are concerned about a succession crisis in North Korea, as Kim Jong-il becomes increasingly frail. Such a crisis will cause people the North's version of Generation-X to be fighting one another for power, and that can't be good for anyone.

The euro crisis is not over

According to an analysis by Jean Quatremer in Libération (French), summarized by EuroIntelligence, the sovereign debt crisis is not over.

In fact, all indications are that things are as bad now as they were a few days prior to the recent $1 trillion rescue of May 10. The following graphic tells the story, as it shows the CDS prices for the debt issued by the eurozone countries:

CDS prices for eurozone countries' debt <font size=-2>(Source: Libération)</font>

CDS prices for eurozone countries' debt (Source: Libération)

Recall that a credit default swap (CDS) is a kind of insurance policy on debt that pays off when the underlying debt defaults. When CDS prices rise, it means that investors are increasingly afraid that the underlying debts will default.

In the above graphic, you can see that the CDS price for Norway's debt is shown as 22.4, meaning that it costs $22,400 to insure $10 million of Norway's debt for five years; that was a typical CDS price for any country, prior to the financial crisis that began in 2007. For Greece, on the other hand, the price is $721,200, which is astronomical, and indicates a very high probability of default.

The CDS prices for the 5 PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) are shown on the graph for the past year. Their peak occurred just before the $1 trillion rescue on May 10, and then they fell dramatically for a few days. It feels like that rescue happened years ago, but it was just three short weeks ago, and in that time, CDS prices have continued to increase in price, as if the rescue had no effect at all.

According to Quatremer:

"However, the reactions of the markets are at the least very curious. Thus, they do not want to see that the situation in the United Kingdom is much worse than that of Greece or Spain: CDS prices for Britain are just 84.6, even though Britain's public deficit is much larger than that of Athens, and its debt is exploding and will pass that of Greece by 2015 ... Exactly the same thing is true for the United States. Because the question of sovereign debt touches not only Ireland and the Southern euro zone, but also all developed countries that have been absorbing the effects of the banking and economic crises."

Thus, the airheads at CNBC and the Wall Street Journal who say that the worst is over are going to be very surprised.

Additional links

Iran has lost a lot of money as a result of its politically-motivated move a couple of years ago to sell its oil in euros rather than dollars. But now Iran is going to exchange 45 billion euros for dollars, and will substantially decrease its oil sales in euros. Bloomberg

BP stands for British Petroleum, and with all the "BP-bashing" going on in the United States, thanks to the oil spill, British pensions are in jeopardy. Telegraph

The Defense Department has been ignoring basic research for years, according to a report sponsored by DoD. Many technically literate program officers, scientists and engineers who shaped DoD research within the agency or as contractors have moved on, and the new generation lacks the appropriate training to continue the research mission. Fierce IT

Ottawa children's soccer league has adopted a new rule that says that any team that wins a game by more than five points will lose by default. This is supposed to "protect" self-esteem, but one child's father called the rule ludicrous. "I couldn’t find anywhere in the world, even in a communist country, where that rule is enforced." National Post.

In the Korean language, South and North Korea have different names, Hankook and Joseon, respectively. Some South Koreans are arguing that their country's name should be changed to Hankook in English as well. Supposedly, this would reduce tensions. Korea Times

In a very surprising admission, Pakistan's interior minister Rehman Malik said that extremist Taliban groups were firmly entrenched in the southern portion of Punjab province, the nation's most populous province. This follows the killing of more than 80 people in two mosques last week in Lahore. NY Times

Following the recent riots and demonstrations in downtown Bangkok, Thailand, Prime Minister Abhisit Vejjajiva narrowly survived a no-confidence vote in Parliament. Reuters

The riots and demonstrations in downtown Bangkok also shut down the thriving multi-million dollar sex tourism industry in the "Land of Smiles." Slate

(Comments: For reader comments, questions and discussion, see the 4-Jun-10 News -- North Korea: 'War may break out at any moment' thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Jun-2010) Permanent Link
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