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Generational Dynamics Web Log for 24-Nov-2010
24-Nov-10 News -- South Korean civilians shelled by North Koreans

Web Log - November, 2010

24-Nov-10 News -- South Korean civilians shelled by North Koreans

Euro in crisis as countries seem to be falling like dominoes

South Korean civilians shelled by North Koreans

North Korea fired around 100 artillery shells into Yeonpyeong Island off the west coast, killing two South Korean marines and wounding 19 people, and the South Korean Navy returned fire, according to JoongAng Daily. Some of the wounded were civilians.

S. Koreans watch smoke rise from Yeonpyeong Island, the target of N. Korean artillery shells (JoongAng)

S. Koreans watch smoke rise from Yeonpyeong Island, the target of N. Korean artillery shells (JoongAng)

Yeonpyeong is below the NLL (Northern Limit Line), the sea border that divides North and South Korea (Korea Times)

Yeonpyeong is below the NLL (Northern Limit Line), the sea border that divides North and South Korea (Korea Times)

The Korea Times quotes S. Korean Lt. General Lee Hong-ki as saying, "This is a brutal provocation aimed at defenseless civilian areas. Our military will try its best to deter any further provocation by the North and not to aggravate the situation. But if the North makes additional provocation, we’ll sternly deal with it to protect our territory and the Northern Limit Line (NLL)."

Well, that's what the South Koreans said last spring after the North Koreans sank a South Korean warship Cheonan with a missile. They said that any new provocation would be met with retaliation. Now there's a new provocation, and the military will "try not to aggravate the situation."

The news reports that I read and heard indicate that this new attack by the North Koreans has been deeply shocking to the South Koreans. Many of them fear that something "very dark" is going on in the north. Many of them wonder when they'll have no choice but to strike back militarily. Some people are already demanding military retaliation, while others believe that any military retaliation would provoke full-scale war.

From the point of view of Generational Dynamics, we can only speculate what's going on in the north, based on the fact that both North and South Korea are well into a generational Crisis era.

The characteristics of a Crisis era, as we've already seen many times in the financial arena, is that things always turn out to be substantially worse than expected. This isn't magic - there's a good reason for it. For decades, the survivors of the previous crisis war (WW II in this case) take care of everything and adopt all the compromises necessary to make sure that nothing like that war occurs again. The main characteristic of a generational Crisis era is that the war survivors are all gone, and postwar generations (like America's Boomers and Generation-Xers) are in charge, and these people have no skills at compromise or even governing.

Over the years, the North Koreans have learned that provocations such as the sinking of the Cheonan are met with bluster and ineffectual sanctions. Thus, they feel that they can keep making such provocations, and they expect not to have to pay a price. At some point, they will be surprised to discover that there will be a very big price to pay.

The other characteristic of a generational Crisis era is self-delusion. I talk about this all the time in the financial arena, but it's equally true in the geopological arena.

One example that jumps to my mind is the American civil war. The story goes that in the first couple of battles, the ladies of Washington D.C. went out in their carriages to watch the goings on as a kind of sport. That Pollyannaish attitude was dispelled by the brutal, bloody Battle of Bull Run. The point is that when the South fired on Fort Sumter, they expected simply to capture Fort Sumter without paying any price for their action. What they got instead was an extremely bloody war that nobody had expected.

I've felt for a long time that the North Koreans believe that they have nothing to lose by a war with the South. They know that the 1950s Korean War ended in an armistice, and they know that they've paid no price for subsequent provocations. I have little doubt that in some file cabinet in Pyongyang there's plan that says they can capture Seoul overnight by sending a few hundred thousand N. Korean troops south across the border. They may even believe that once they've done that, the Americans will simply leave and let the Koreans work things out by themselves -- with the North Koreans running the show.

The South Koreans are also guilty of wishful thinking. JoongAng quotes one twitterer as saying, "I think North Korea can’t break out into a war at this moment because it is now getting ready for a power succession. A series of recent incidents - the sinking of the Cheonan, the revelation that it has uranium enriching centrifuges, and the sudden bombing on Yeonpyeong Island - are being done on behalf of the heir-apparent, Kim Jong-un, who has little achievements to boast of yet."

From the point of view of Generational Dynamics, North and South Korea are headed for a major new war of reunification. Like any crisis war, it will be extremely bloody on all sides, and in this crisis war, nuclear weapons will be used.

Euro in crisis as countries seem to be falling like dominoes

As we've written many times, there IS no solution to the global financial crisis. Each month there's less money in the world than there was the previous month, as hundreds of trillions of dollars of synthetic securities are dissolved, and the weakest entities are the first to go, as they start falling like dominoes.

On Tuesday, German Chancellor Angela Merkel said, "We are facing an exceptionally serious situation as far as the euro's situation is concerned," according to EU Observer.

She's concerned that, once again, Germany is going to have to bear the major cost of any bailout, and she sees more bailouts coming.

The financial tv pundits that discussed this issue on Tuesday were discussing the possibility that the entire euro currency might be dissolved. One person suggested that the euro would not be dissolved, but that some countries would leave the eurozone and return to their former national currencies. It wasn't clear what countries he had in mind.

There's good reason to be concerned. Greece was bailed out last May. Everybody knew, and I said many times, that the bailout would not work, and that Greece would have to default anyway. However, the bailout did calm the markets, and seemed to restore order.

The next domino was Ireland. The bailout negotiations are not completed, and there's some doubt that they will be completed. As one financial pundit said, now that they've been promised a bailout, why should they agree to ANY austerity program?

One thing's for sure: The promise of a bailout did nothing to calm the markets on Tuesday, according to Bloomberg. Yields (interest rates) on Ireland's bonds went up further into crisis levels, and yields on Spain's bonds jumped to a euro-era record. Yields on Portugal's bonds also surged to higher crisis levels.

One analyst is quoted as saying, "The markets currently have virtually zero confidence that the bailout in Ireland will solve the European crisis. With markets effectively in a position to dictate policy, the risk is that the credibility crisis shifts to more sizeable European Union countries and thereby poses a greater risk to the system as a whole."

I will admit, as I've admitted before, that these bailout and stimulus programs have postponed a real crisis far longer than I ever expected them to. But the dominoes keep falling, and I haven't heard a single analyst point to a reason to believe that there's any relief in sight. Things can only get worse, until a major panic brings forth a REAL crisis.

Additional links

The cholera epidemic in Haiti is spreading twice as fast as had been estimated and is likely to result in hundreds of thousands of cases in the coming months, the UN says. BBC

Portugal's two biggest public sector labor unions will be holding a general strike on Wednesday, bringing the country to a virtual halt, to protest austerity measures that the government is imposing in the hope of avoiding the need for a bailout. Reuters

Many retirees are splurging on credit card debt, assuming that they're going to die soon anyway, and won't have to pay it off. CNBC

(Comments: For reader comments, questions and discussion, see the 24-Nov-10 News -- South Korean civilians shelled by North Koreans thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Nov-2010) Permanent Link
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Generational Dynamics Web Log for 24-Nov-2010 24-Nov-10 News -- South Korean civilians shelled by North Koreans

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Euro in crisis as countries seem to be falling like dominoes

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Generational Dynamics Web Log for 24-Nov-2010
24-Nov-10 News -- South Korean civilians shelled by North Koreans