The subtle debate as to whether Kim Jong Un is a mad man or a genius has been going on in many peoples’ minds. To the surprise of many, the argument that the young man is a genius appears to be winning. This little fat guy has managed to get his hands on of very potent nuclear firepower under the watch and noses of very big and powerful organizations and countries that apparently did ‘everything they could’ to make sure that he does not reach this critical milestone.
Kim Jong Un was very methodical about it. He first fired several missiles that demonstrated to everyone who was looking at his regime with an evil eye that they are within striking distance. He then dropped the big one. A 100 kilotons force hydrogen bomb six times bigger than what the U.S. dropped on Hiroshima. Combine those intercontinental ballistic missiles he has been randomly firing and this nuclear bomb whose might he has clearly demonstrated and what you get is the newest nuclear power of the world.
With the hydrogen bomb, Kim Jong Un effectively set in motion events that will fundamentally change this world. He has commenced a process that will eventually shift the balance of power in the world. The U.S. and allies now have to decide whether they will let North Korea remain a nuclear power or whether they will proceed to forcefully denuclearize North Korea. Either way, things look very grim for the U.S.
Kim Jong Un knew what he was doing all along. He played all the major powers in the world to his advantage. He had no choice. He had to do it to survive otherwise he would have sooner or later been Saddamed or Gaddafied. It was coming and he saw it. Luckily for him, he did not take the bait. Saddam and Gaddafi erred in their judgment when they succumbed to pressure from the U.S. and NATO to scale down their military capabilities after being characterized as ‘rouge’ leaders.
U.S. and NATO then moved in and took them out when they were at their weakest. We now know it was all about oil and nothing about weapons of mass destruction and atrocities. Maybe things would have turned out differently had Saddam and Gaddafi stuck to their guns and lived up to their reputations.
Kim Jong Un has played his cards really well in this simmering conflict. He has managed to exploit the bitter sweet relationship China has with the U.S. and also the hostile relationship Russia has with the U.S. This is what has preserved his regime to this date.
China is one of the largest trading partners of the U.S. and it has over the years benefited from huge trade surpluses that arose largely from trading with the U.S. It has been buying a lot of U.S. treasuries with its surplus money. This helped to maintain the value of the USD and also financed U.S. government spending. But this is where the good story between China and the U.S. ends.
The entire South and East Asian region is littered with potential conflicts. It seems every country in that region is in a potential conflict situation with the other. In the East China Sea region, Japan has disputes with China over sea territory and oil that was found by China. China also has issues with South Korea over some submerged rock in this region.
In the South China Sea region that is extremely rich in sea food and has the potential for significant commercial oil drilling, literally every country that has a South China Sea shoreline including Brunei, China, Indonesia, Malaysia, Philippines, Taiwan and Vietnam is in dispute with the other over sea territory. The biggest dispute however is the one each one of these countries has with China. The U.S. wadded into these potential conflicts and threw its weight on the opposing side of China.
To the annoyance of China, the U.S. has always undermined China’s influence, ambitions and interests in this region. This has been the U.S’s foreign policy in the South China Sea.
It is clear that China wants to control shipping and own natural resources that abound in the entire East and South China Seas but the U.S. has very menacingly stood in the way. Kim Jong Un correctly figured that China needed some fierce support in countering U.S’s. influence and activities in this region and he rose to the occasion.
China shrewdly agreed and voted for every U.N’s resolution and sanction that was intended to stop North Korea's nuclear program and even publicly condemned North Korea's aggressive behavior yet it knew all along that these were lame efforts and North Korea’s nuclear program will continue undeterred. China maintained all the vital trade ties that North Korea needed to accomplish its nuclear program.
You can almost hear Trump cry, “China must help us fix this North Korean problem….. China must do more to fix this problem in North Korea”. Well, the Chinese have laid claim to the East and South China Seas. If it is a fierce looking North Korea that can make the U.S. reconsider its activities and interests in the South and East Asian region, then so be it. China has advised that dialogue is the best way of solving the North Korean nuclear problem.
The other angle to this North Korean issue is Russia. Like China, Russia agreed and voted for every U.N’s resolution and sanction that was intended to stop North Korea’s nuclear program and even publicly condemned North Korea's aggressive behavior. In cold calculation, Russia advised against war and is also rooting for dialogue as the best way of solving this nuclear problem.
A successful war that ends with the toppling of Kim Jong Un’s regime can easily lead to reunification between North and South Korea. A complication arises from the fact that North Korea shares borders with both China and Russia and the U.S. has significant military presence in South Korea. Reunification will mean that both China and Russia will now share borders with a country that hosts hostile U.S. military bases. This is simply not acceptable to both China and Russia.
Kim Jong Un has clearly stated that North Korea’s nuclear program is not up for any kind of discussion. Both China and Russia have urged the U.S. and North Korea to embrace dialogue. The U.S. has threatened fire and fury like never seen before. Trump and Kim Jong Un are just being forthright and honest about their intentions but China and Russia are hiding behind their words.
If China and Russia were to be forthright about their official position on a nuclear armed North Korea, their short response will be a simple, “so what?” They don’t care. In fact they need a nuclear armed North Korea to keep intimidating the U.S. into making costly foreign policy mistakes that will end up being detrimental to its economy. The mighty empire, too broke to fund a war will then become easy pickings for its long standing rivals.
By insisting on dialogue, China and Russia are simply telling the U.S. to bite the humble pie and accept a nuclear armed North Korea. The essence of being a super power is to make rules so that everyone else follows. It is not being talked down the other way round. The president’s ego is also as tall as his skyscrapers. So, it is clear where all this is headed.
When war breaks out, China and Russia will weigh into the war in ways that will undermine the U.S. Russia too has some serious scores to settle with the U.S. At the moment, Russia is under heavy sanctions from the west for allegedly interfering with Ukraine’s sovereignty. Russia disagrees and has maintained that the sanctions have no basis.
In 2014, the U.S. orchestrated the ouster of Ukraine’s president Viktor Yunukovych for stopping an eastwards expansion of the E.U. and NATO. He suspended preparations for the implementation of an association agreement between the E.U. and Ukraine. This decision resulted in U.S. masterminded mass protests that led to his ouster. He then fled to Russia.
Following these events, an alarmed Russia moved swiftly and annexed Ukraine’s autonomous region of Crimea and sent mercenaries into eastern Ukraine to thwart attempts of ‘installing’ a pro E.U. and a pro NATO president by the U.S. Crimea is a strategic naval asset to Russia and loosing it to NATO was simply not an option for Putin. There was also no way he was going to let NATO come as close as the Ukraine - Russia border. He just did what he had to do.
The U.S, the E.U and other friendly countries then responded to Russia’s ‘attack’ on Ukraine’s sovereignty by imposing harsh sanctions on Russia. Putin has always maintained that the sanctions have no basis and are illegal. North Korea may just happen to be the opportunity he was waiting for to get even.
Make no mistake about it. Trump is also as shrewd. He knows the history of the U.S. He knows exactly when and where the U.S. went off the rails and he has his own plan of fixing the U.S. This is probably what sold him to the electorate.
He recently told NATO members to pay up their fair share of their membership, he has complained of a very strong USD, trade deficits, the wasteful democracy building business the U.S. has done around the world over the years and many other things.
It will take a major event to substantially weaken the USD, correct trade deficits and create a paradigm shift if in U.S. foreign policy. War is a major event and Kim Jong Un has just given Trump a very good reason to wage war. Trump has already secured an arms sale deal with South Korea on the back of this North Korean nuclear crisis.
Historically, war has proved to be very profitable to the U.S. In both the 1st and the 2nd world wars, European countries abandoned farming and viciously fought among themselves and destroyed each other’s infrastructure and industrial production capacities. The U.S. shrewdly supplied them with armaments and foodstuffs and made massive profits that helped propel it to super power status.
Significant arms sales to the South and East Asian region is one of the big wins Trump will get from this impending war. These sales will go a long way in keeping the U.S. military complex’s business and related jobs vibrant. Trump will also solve a personal problem. The Russian investigation and threats of impeachment will melt away. It is not practical to impeach a president during war.
The show stopper however will be the USD. I think collapse is the right word. It will collapse and give the U.S. significant export advantage over its trading partners. Major trading partners including the E.U, China, Japan, Mexico and Canada will have to devalue their respective currencies to maintain their edge in international trade. Then it will be a race to the bottom for all currencies.
Another win for Trump and this one is also a very big one will come from the USD 20 trillion debt the U.S. owes the public and other countries. Trump has considerable bankruptcy experience from his former life. The last time the U.S made any money from a trade surplus was in 1975. Yes, this is how badly the U.S. has been doing.
War is extremely expensive but Trump is really looking forward to this war. He will preside over a U.S. bankruptcy with zeal when expenses from the war make it impossible for the U.S. to service its debt. Such a bankruptcy will further depreciate the USD and severely short change U.S. debt holders.
China will be one of the biggest losers as it is one of the largest U.S. debt holders. The U.S. borrowed U.S. dollars from the public and other countries when the USD commanded a high value but it will pay back its debt with depreciated U.S. dollars. This will go a long way in helping to reign in the perverse debt problem and Trump will brag about this feat for many years to come.
This will also be a well deserved payback to China for its treachery in the North Korean nuclear problem. Trump will also use this war opportunity to scuttle, sabotage and even reverse the trade surplus that China has been enjoying from trading with the U.S. That China can win when trading with the U.S. is something that makes Trump really mad. Loss of U.S. manufacturing jobs to China just adds salt to the injury.
Fortunately or unfortunately, Kim Jong Un’s genius will be short lived. It is hard to see how he can survive the war. But he can live if he bails out early and flees to China. Trump is probably working on a war plan and a deal to appease both China and Russia so that they don’t completely undermine the U.S. when the war begins.
Striking a deal with Putin doesn’t look like a mountain. These two men seem to have been great buddies in another life but the histories and institutions in their respective countries seem to be keeping these two great buddies apart in this life. For China, any deal or understanding will just be treachery on top of treachery. China will bear the brunt of this war.
While all this is playing out, financial market investors should consider investing in asset classes that will survive or even thrive during this war. If currencies will race to the bottom, the values of many financial investments that have been perceived to be safe will reduce to just a fraction of their current values. Gold is one precious metal that glitters even brighter during such times of heightened intrigues and war. Owning some of it right now can easily prove to be your most rewarding investment decisions.