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Generational Dynamics Web Log for 7-Dec-2010
7-Dec-10 News -- US and Japan condemn North Korea

Web Log - December, 2010

7-Dec-10 News -- US and Japan condemn North Korea

Will China bail out Europe?

US and Japan condemn North Korea

South Korea, the U.S. and Japan are publicly stepping up their cooperation in confronting and condemning North Korea and, by implication, are criticizing China for not doing more to bring North Korea under control.

At a meeting in Washington on Monday with foreign ministers from Japan and South Korea, Secretary of State Hillary Clinton said the following:

"We all agree that North Korea’s provocative and belligerent behavior jeopardizes peace and stability in Asia. We are deeply concerned by its unprovoked attack on the island of Yeonpyeong, resulting in the loss of South Korean lives. On behalf of the American people, I would like to convey our sympathies to the victims and their families. Our thoughts and prayers are with you. We want the people of South Korea to know that we are standing shoulder-to-shoulder with you, and we are deeply committed to your defense.
The minister and I share the view that the attack by the North Koreans violates the Armistice Agreement of 1953; that North Korea’s provocative and belligerent behavior threatens us all, and that it will be met with solidarity from all three countries.
The attack is the latest in a series of North Korean provocations. It has disclosed a uranium enrichment program that violates UN Security Council Resolutions 1718 and 1874, as well as North Korea’s commitments under the September 2005 Joint Statement of the Six-Party Talks. And the sinking of the Cheonan, killing 46 South Korean sailors, deepened North Korea’s international isolation."

This is the strongest statement of mutual cooperation between the three countries made so far. Furthermore, it implies complete rejection of any claims by the North Koreans that they weren't responsible for the sinking of the South Korean warship Cheonan several months ago.

Clinton added:

"The U.S. treaty alliances with Japan and the Republic of Korea have been the foundation for peace and stability in Asia for decades, and the Japan-South Korea partnership helps form a triangle of stability and cooperation. The ministers and I reaffirmed our steadfast commitments under our respective defense treaties."

Reaffirming the commitments in these defense treaties means that the United States military will defend South Korea if North Korea attacks.

It was just a few weeks ago, in September, that Clinton reaffirmed America's commitments under a 1960 treaty with Japan to defend Japan if China attacks the disputed Senkaku Islands (called the Diaoyu Islands by the Chinese) that are currently administered by the Japanese.

The purpose of all of these post-WW II treaties was to prevent a new Asian war from breaking out. The theory has always been that Taiwan, South Korea and Japan will not be attacked by China (or Russia) if it is known in advance that the consequences of such an attack would be war with the United States.

However, as all of these countries enter generational Crisis eras, the things that used to work don't work any more. Nationalism and xenophobia are increasing in all of these countries, and North Korea is becoming more desperate because it can't feed its people.

North Korea has been making increasingly shrill war threats in the last few days. They haven't yet responded directly to Hillary Clinton's latest remarks, probably because they were asleep when she made them, but a sharp response should be coming soon.

Will China bail out Europe?

Harvard professor Niall Ferguson was interviewed on CNN on Sunday. He was saying that Europe is going to be facing major new crises in the weeks to come, and that the Germans are not going to want to "write checks" to the countries on the periphery of Europe (e.g., Greece, Ireland, Portugal). Here's part of what he said:

ZAKARIA: "No, no. I understand. But, I mean -- so play this out for me. You have these -- you have -- what is happening right now is this is becoming much more expensive for the Irish, for the Spaniards to borrow. What happens? If the Germans refuse to write these new checks, does the euro collapse?"
FERGUSON: "But it doesn't even need to be the Germans. Remember, you have to get collective agreement on -- on a bailout. We saw that in the case of Greece, and it's quite possible to imagine that more than one country would balk at the idea of another great big commitment. All these governments, after all, have rather large deficits to start with, so making it even larger is not very appealing.
So what's the alternative? If there isn't going to be another super large bailout, much larger than the Irish one, it eventually boils down to this -- does the European Central Bank turn on the printing press and engage in its own version of quantitative easing, too? In other words, does it go head to head with the Fed in trying to print its way out of the problem?
Now, if that can't happen and there can't be a kind of classic bailout by taxpayers, then there really is no other European solution in view. It therefore requires either the United States, once again, to step up as it did in the teeth of the crisis.
Or let's not forget our friends in Beijing because there's a wonderful opportunity here for China to diversify its vast international reserve at rather a good price. And I'm looking closely to see whether there's going to be a deus ex machine from China to try to bail out the Europeans when it becomes clear that the Europeans can't bail themselves out."

When I wrote about "The bubble that broke the world," I said that when the financial crisis really struck the United States at its worst, then China might bail out the United States to try to save itself, just as the U.S. bailed out Germany to try to save itself in 1932.

I guess I should have suggested not that China might try to bail out the U.S., but that China might try to bail out Europe.

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A weekend proposal to issue "euro bonds" -- bonds that would be guaranteed by all the countries of Europe -- has been shot down. The idea behind the proposal was that instead of having Greece, Ireland, Spain, Portugal, etc., issue its own bonds, there would be one bond issued by the entire EU. The proposal was heavily promoted by Jean-Claude Juncker, the head of the European group of finance ministers. But German Chancellor Angela Merkel rejected the idea, saying that the EU treaty does not allow for euro bonds. All of these Europe-wide financial proposals have one element in common: They all would require Germany, as the country with the largest economy, to "write checks" to bail out other countries, and so all of these proposals are being rejected by Germany. Deutsche-Welle

Many American states are worse off than European countries. States like Illinois, California, New Jersey and New York have been delaying payments to vendors, stopped making payments to workers' retirement accounts, and delayed tax refunds. Some states are releasing prisoners early to cut expenses. Layoffs of police and teachers are becoming more common. Federal stimulus money has prevented state bankruptcies so far, but that money will run out next summer, and things are expected to reach crisis levels next year. NY Times

China used to buy a lot of weapons systems from Russia, but now China clones Russian weapon systems and sells them to other countries. WSJ (Access)

The crisis in relations between Turkey and Israel may be nearing an end, as Israel is close to signing an agreement with Turkey where Israel apologizes for the Gaza flotilla incident of several months ago, and arranges to pay compensation for the people killed or injured. Haaretz

(Comments: For reader comments, questions and discussion, see the 7-Dec-10 News -- US and Japan condemn North Korea thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Dec-2010) Permanent Link
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Generational Dynamics Web Log for 7-Dec-2010 7-Dec-10 News -- US and Japan condemn North Korea

US and Japan condemn North Korea

Will China bail out Europe?

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Generational Dynamics Web Log for 7-Dec-2010
7-Dec-10 News -- US and Japan condemn North Korea