Will the Korean War break out again?

The Korean War of the 1950s has never officially ended.  Now South Korea, after decades of restraint, is getting tough with its Stalinist neighbor to the North, responding to a deadly torpedo attack on one of its ships that killed 46 South Koreans:

South Korean President Lee Myung-bak said Monday that his country is stopping all trade and most investment with North Korea and closing its sea lanes to North Korean ships after the nation's deadly attack on a South Korean warship.

Lee also called for a change in the North’s Stalinist regime.

The tough measures, announced in an address to his nation, were bound to ratchet up pressure on the isolated Pyongyang government and add a new flash point in U.S. relations with China.

“Fellow citizens, we have always tolerated North Korea’s brutality, time and again. We did so because we have always had a genuine longing for peace on the Korean Peninsula,” he said. “But now things are different. North Korea will pay a price corresponding to its provocative acts.”

Lee then said that “no North Korean ship will be allowed to make passage through any of the shipping lanes in the waters under our control” and that “any inter-Korean trade or other cooperative activity is meaningless.”

via South Korea to halt all trade with North Korea over sinking of Cheonan warship.

In the meantime, American forces have announced a joint military exercise to put on a show of force designed to “deter North Korean aggression.” The big question is what China will do. The even bigger question, of course, is what North Korean dictator Kim Jong Il will do. He has threatened war over lesser confrontations and is utterly unstable and unpredictable. And he may have nuclear weapons.

How China will bury us

China is thinking way beyond making money by trade and overseas investment.  James McGregor tells about still-Communist China’s latest economic plans:

How do we overcome the fundamental disconnect between our system of scattered bureaucratic responsibilities and almost no national economic planning vs. China’s top-down, disciplined and aggressive national economic development planning machine?

At issue is an array of Chinese policies and initiatives aimed at building “national champion” companies through subsidies and preferential policies while using China’s market power to appropriate foreign technology, tweak it and create Chinese “indigenous innovations” that will come back at us globally.

China has long been a “pay-to-play” market for foreigners, with mandated joint ventures in key industries, local manufacturing requirements and forced technology transfers as the price of market admission. Its entry into the World Trade Organization in 2001 was supposed to do away with the bulk of those barriers — and many were eliminated on paper.

But long gone are the days of China acting as a supplicant to gain access to foreign markets or obtain foreign investment. China now funds the U.S. budget deficit. Its rapidly developing domestic markets are expected to lead global growth for decades. The quarterly earnings of the world’s biggest multinational companies increasingly depend on their China business.

Chinese leaders — shrewd students of political and economic leverage — are shifting their focus from global trade and investment principles to the creation of their own rules and a “China model” of economic development that is difficult to challenge in international courts. Chinese policymakers are masters of creative initiatives that slide through the loopholes of WTO and other international trade rules. Facing off against this are 30 lawyers in the U.S. trade representative’s office of general counsel — only one of whom can read Chinese. This small cadre handles all WTO cases and supports all our trade negotiations globally. Only a half-dozen people in the office focus on China.

As part of their “China model,” that country’s leaders have decided that key sectors of the economy will remain “state dominated,” including automotive, chemical, construction, electronic information, equipment manufacturing, iron and steel, non-ferrous metals, and science and technology. Others will stay “largely in state hands,” including aviation, coal, defense, electric power and grid, oil and petrochemicals, shipping and telecommunications. State-owned companies in these industries are thriving in their protected home market. They have buckets of cash and easy access to state bank loans to carry out government directives to pursue overseas acquisitions and “go global.”

Most worrisome is the Chinese government mandate to replace core foreign technology in critical infrastructure — such as chips, software and communications hardware — with Chinese technology within a decade. The tools to accomplish this include a foreign-focused anti-monopoly law, mandatory technology transfers, compulsory technology licensing, rigged Chinese standards and testing rules, local content requirements, mandates to reveal encryption codes, excessive disclosure for scientific permits and technology patents, discriminatory government procurement policies, and the continued failure to adequately protect intellectual property rights. The poster child is the evolving “indigenous innovation” policy, which appears aimed at using China’s market power to coerce foreign companies to transfer and license their latest technology for “co-innovation” and “re-innovation” by Chinese companies.

via James McGregor – Time to rethink U.S.-China trade relations.

Notice that this is NOT free market economics but state-run and state-directed economics that takes advantage of capitalist economies by means of state monopolies, coercive government power, and economic clout.

Beware of Greeks receiving gifts

More from George Will on the debacle in Greece:

Greece, whose gross domestic product is below that of the Dallas-Fort Worth metropolitan area, is “too big to fail,” meaning too inconveniently connected to too many big banks. Bailing out Greece really rescues European banks that improvidently bought Greek bonds. Visit http://tinyurl.com/2dzaul2 for a useful New York Times graphic illustrating how European nations borrow from one another. For example, Italy owes France French banks $511 billion, a sum nearly equal to 20 percent of France’s GDP. About one-third of Portugal's debt is held by Spain, which has $238 billion of its debt held by Germany and $220 billion by France. Russell Roberts of George Mason University notes that this “discourages prudence and wariness” because when “everyone has financed everyone else, you can justify bailing everyone out.”

At the Parthenon last week, the Greek Communist Party, which got 8 percent of the vote in the last national election, draped banners emblazoned with the hammer and sickle: “Peoples of Europe Rise Up.” Of course. “Arise ye prisoners of starvation” exhorts “The Internationale,” the left’s ancient anthem. But who is to arise against whom?

Time was, the European left said it spoke for horny-handed sons of toil oppressed in dark Satanic mills. But Athens’ “anti-government mobs” have been composed mostly of government employees going berserk about threats to their entitlements. Even Greek air force pilots went on strike. The government, unable to say how many employees it has, promises to count them. It cannot fire many of them because Article 103, Paragraph 4 of the Greek constitution says: “Civil servants holding posts provided by law shall be permanent so long as these posts exist.”

America’s projected $9.7 trillion in budget deficits in this decade will drive the nation’s debt to 90 percent of GDP Greece’s is 124 percent. So some people say that to avoid a Greek-style crisis, America should adopt a value-added tax VAT. But Europe’s most troubled nations — the PIIGS: Portugal, Ireland, Italy, Greece and Spain — have VATs of 20 percent, 21 percent, 20 percent, 21 percent and 16 percent, respectively. As part of its austerity penance, the Greek government is going to give itself more money by raising its VAT to 23 percent. . . .

Greece now knows the terrific strength of weakness. Beware of Greeks — or any other people — receiving gifts.

via George F. Will – Greece and GM: Too weak to fail.

Bailing out Europe

The American share of the bailout of Europe, due to our involvement in the International Monetary Fund, may be as much as $54 billion.  This will be in the form of loans that might get paid back, but still. . . .

See US Exposure to EU Bailout Is Big But Risk Is Limited – CNBC.

Europe abandoning what America is embracing

From  Europe rewrites its rule book in creating fund to contain financial crisis:

The massive emergency fund assembled to defend the value of the euro is backed by a political gamble with an uncertain outcome: that European governments will rewrite a post-World War II social contract that has been generous to workers and retirees but has become increasingly unaffordable for an aging population.

So Europe is drawing back from the social democratic welfare state JUST AS the United States is adopting the social democratic welfare state.

Conservatives take over in Britain

David Cameron is Britain’s new prime minister.  This was the result of a coalition between the Conservative party and the middle-of-the-road Liberal Democrats.  The Labour party is out of power for the first time in 13 years.  This is the first coalition government in Britain since Winston Churchill’s during World War II.

As we see the parliamentary system at work–in which the leader of the leading party in the legislature becomes Prime Minister–do you see some advantages over the American two-party system?


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