The world has never been more dangerous in my lifetime.
As the global economy continues to slow, politicians keep blaming other nations for their own problems.
The biggest risk, unfortunately, is that a leader will do something stupid.
History shows that politicians, when losing their grip on power, engage in the blame game. That is, blaming someone — anyone — else to distract their own people. That gets a country united behind a convenient foreign enemy. That generally happens following an economic catastrophe. The First and Second World Wars are great examples.
The world economy still hasn’t mended from the last financial crisis. That’s causing massive global tensions. And North Korea has become a major focal point. The country’s economy remains in turmoil. And it’s cut off from the outside world, with millions of people below the poverty line.
That’s a massive risk…
North Korean dictator Kim Jong-un is obviously struggling to control his people. Any sign of weakness could be the end of his regime and power…and possibly his life. For that reason, like many other dictators throughout history, Kim believes that an aggressive posture is the only way to stay in power.
Unfortunately, with a young ‘loose cannon’ in charge of a nuclear-armed country, that probably won’t end well for North Korea…or the rest of the world.
China and North Korea — the untold story
Kim Jong-un has warned multiple countries, including Australia, that he will destroy them. The supreme leader’s list of enemies is extensive. And, insanely, that list may include China soon.
Yonhap News Agency (South Korea’s largest mainstream news outlet) noted on 22 April (my emphasis added):
‘If [China] keeps applying economic sanctions on the DPRK [North Korea] while dancing to the tune of someone after misjudging the will of the DPRK, it may be applauded by the enemies of the DPRK, but it should get itself ready to face the catastrophic consequences in the relations with the DPRK.’
Kim is clearly paranoid and believes he must show external strength. But China, the world’s second largest economy, is North Korea’s main trading partner. Last year, North Korea exported US$2.6 billion dollars’ worth of products to China. That’s about 90% of the rogue nation’s total exports.
Trade sanctions on the country would be detrimental. And while Kim Jong-un’s luxurious lifestyle is unlikely to change, he should be worried.
Deutsche Welle reported on 13 April:
‘“Everything depends on China and, to a certain extent Russia, but I do believe we are seeing the start of a crisis for the North Korean state,” said Ken Kato, director of Human Rights in Asia, and a member of the International Coalition to Stop Crimes Against Humanity in North Korea.
‘“The defections tell me that there is a deep malaise in North Korean society that is only going to get worse as sanctions bite harder,” he said. “That, in turn, will encourage more to defect and, thanks to technology, stay in touch with their friends and relatives they left behind.”
‘Ultimately, a vicious cycle of less money for the state, less money and food for the public and a consequent rise in defections will be impossible to sustain, Kato believes.’
More sanctions could be the final straw for many starving families. This could trigger massive civil unrest and a possible coup.
And more sanctions are likely to hit the country, especially from China. The Chinese banned coal imports from North Korea on 26 February. The ban will last until the end of the year. That might not seem like much. But it banned imports of gold and rare earths in April last year. That ban remains in place today.
I don’t know what will happen next on the economic front. But China certainly doesn’t want a war in its neighbourhood, which is why it’s trying to keep the country in line. It warned that another nuclear-weapons test would push relations ‘beyond the point of no return’ last week.
Beijing also said it would attack North Korea’s facilities, which produce nuclear bombs, if the country crosses its ‘bottom line’.
That’s certainly some tough talk, in either case. Yet the Western media doesn’t report that. The politically anchored media stream touts that China is not doing enough.
But what else can China really do?
Kim is out of control. Like a little boy playing with matches, Kim Jong-un believes he’s invincible and can take on the world.
Yonhap News Agency reported on Sunday (my emphasis added):
‘After the United States deployed a nuclear-powered submarine and an aircraft carrier to South Korean waters amid high inter-Korean tensions, North Korea on Sunday threatened to sink the underwater vessel, accusing America of stepping up military intimidation.
‘“The moment the USS Michigan tries to budge even a little, it will be doomed to face the miserable fate of becoming a underwater ghost without being able to come to the surface,” the North’s propaganda website Uriminzokkiri said in a posting.
‘“The urgent fielding of the nuclear submarine in the waters off the Korean Peninsula, timed to coincide with the deployment of the super aircraft carrier strike group, is intended to further intensify military threats toward our republic,” the website claimed.’
The guided-missile submarine USS Michigan sailed into the South Korean port on 25 April. The US military is conducting exercises around South Korea, anticipating an imminent attack on the country.
Take a look at the USS Michigan:
[Click to enlarge]
The USS Michigan is a nuclear-powered submarine. It’s one of the US Navy’s most powerful toys, armed with 150 Tomahawk missiles suited for long-range strikes. And if the US has publicised the arrival of this sub, you have to wonder about the rest of its sub-surface striking range.
Kim Jong-un’s regime isn’t impressed with the US naval exercises. It told Yonhap News Agency, ‘…whether it’s a nuclear aircraft carrier or a nuclear submarine, they will be turned into a mass of scrap metal in front of our invincible military power cantered on the self-defence nuclear deterrence.’
It’s crazy talk. Literally.
Kim Jong-un actually believes he can destroy the US. That is, the country with the most powerful military on the planet.
Unfortunately, with a loose cannon in control of a nation, all that firepower may not be enough of a deterrence.
Kim Jong-un could do something extraordinarily stupid at any moment. Alarmingly, only one mistake is needed to spark global military conflict. That could be a missile attack on a military exercise or in the wrong direction.
I hope that he doesn’t engage the world in war. But, if the worst case scenario plays out, you’ll want to prepare for it.
Remember, war isn’t good for much — except commodity prices. Throughout centuries, resources are needed to build militaries. That’s why commodity prices tend to rocket during wartime. For that reason, I recommend buying the best resource stocks in the right sectors. That’s a big focus of my investment advisory service, Resource Speculator.
To find out more, click here.
Editor, Markets & Money