2017/08/09 Commentary: North Korean Crisis? Or What?
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Commentary: Wednesday, August 9, 2017
North Korean Crisis? Or What?
There is nothing like the image of your friendly neighborhood unstable dictator waving happily along with pictures of his newly confirmed intercontinental ballistic missiles (ICBMs) and a mushroom cloud to give the markets pause. And of course we say ‘neighborhood’ in the sense that media genius Marshall McLuhan noted back in the 1960’s that the new high speed video communications had turned the entire planet into a ‘global village’. And in addition to the awareness of what was going on in the whole rest of the world via communications, the extensive nuclear weapons and ICBMs built up by the major powers since the 1950’s meant that what was going on elsewhere in the world was also critical to everyone’s views, and even survival.
Yet even as bad as things were in the bipolar USA-Russia rolling confrontation during the Cold War out of the 1950’s until the 1991 fall of the Soviet Union, there was a sense of security from the geopolitical principle of ‘Mutually Assured Destruction’ (with the appropriate acronym MAD.) That was based on the war games theory that each side’s nuclear weapons arsenal was so massive as to assure the annihilation of both sides (and end of the civilized world) if either should ever launch a ‘first strike’ attack.
As such, it was reasonable to assume that both of the terrifyingly evenly matched sides had a vested interest in avoiding a nuclear war. Yet the confirmation that much smaller North Korean has achieved some real success with its long range missile program is more of an ‘asymmetric’ situation. That is even more the case as the US Defense Intelligence Agency has just reported it is likely that North Korea has also been able to miniaturize a nuclear warhead to fit on and ICBM; and that is two years ahead of previous estimates. Along with the ICBMs it is the key to being a real threat to the US.
Yet at least so far markets have taken this latest shock in stride, especially equities that might have otherwise been expected to react in horror to the prospect of anything with the potential to cripple the political and economic foundations of the West. Why?
Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. The Market Observations remain the same as last weekend’s update (lower section) of last Wednesday’s Commentary: Summer? Must Be Kool-Aid Time! post, and there is no Extended Trend Assessment in this post.
2017/08/13 WEEKEND: NOKO Crisis Redux
2017/08/13 WEEKEND: NOKO Crisis Redux
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Extended Trend Assessments reserved for Gold and Platinum Subscribers
WEEKEND: August 13, 2017
NOKO Crisis Redux
This fits right in with the Fed’s recent more sanguine federal funds rate increase language, with a shift to concentrating on reduction of its Brobdingnagian balance sheet as the right way to ease back on accommodation. [For much more see our July 27th Commentary: Balance Sheet Chicanery post.) That lack of any imminent Fed rate hike weighs on the US dollar, underpins equities and allows govvies to continue a month-long rally.
Yet before we return to that and the still open wound that is the Greek Debt bailout funding conundrum next week, any orderly continuation of the projected market trends requires a less than belligerent end to the NOKO confrontation. On current form, hostile statements of both Kim Jong-un and President Trump seem to leave that a marginal possibility. [More background in last Wednesday’s North Korean Crisis? Or What? post.]
Yet there is cause for hope if the US (a super power facing a much smaller and otherwise defective North Korea) can mute its rhetoric, and rely on quietly confident statements that reflect a steady, strong stance. The fly in that particular ointment is the degree to which the US President would need to tone down provocative statements on potential future US actions. A geopolitically savvy friend said last week that maybe we can hope for a miracle, where Mr. Kim comes to his senses. I responded by saying that might not be necessary if President Trump can revert to limited, more subtle communications that merely reconfirm America’s commitment to act. And my friend’s visceral response? “Well, that isn’t going to happen.” And yet, under geopolitical ‘war games’ alternatives…
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