US-China Cold War in Korea

The complete loss of bilateral trust in the peninsula is directly proportional to the expansionist interests of Beijing and Washington, DC. While the former patronises Pyongyang, the latter is an ally of Seoul

The Korean peninsula is again going through a rough time. North Korea’s nuclear test and South Korea’s close military co-operation with the US has lead the region and international community towards deep uncertainty. But this is not for the first time that there have been tensions in the Korean region. The two countries have been bitter rivals since the Korean War ended in 1953.

From North Korea’s standpoint, its aggression has been surfacing because of South Korea’s over-reliance on the US. Over the decades, South Korea’s easy access to nuclear capacity has created a sense of grave insecurity within the dictatorial regime of North Korea.

However, it is by manipulating this potential threat from a neighbour that the dynasty in North Korea has endured for long. And, the swiftness with which Mr Kim Jong-un succeeded his father as the Supreme Leader of North Korea confirms it. As for South Korea, it has moved with the times, keeping in mind its defence and trade-related requirements, under the shadow of the US.

North Korea, too, found in China, a patron to help it challenge the combined might of the US-South Korea alliance. Nevertheless, its reliance on China is not quite on the same level as the symbiotic relationship that South Korea shares with the US. But a liberal South Korea tried to bring about a rapprochement in the past with its ‘sunshine policy’ — this was a genuine initiative put forth by then President Kim Dae-jung in 1998.

The policy was a big step towards improved political and economic engagement with North Korea. Unfortunately, within a decade, it ceased to exist. This created ground for never-ending acrimony between these two countries. The present wave of hostilities in the Korean peninsula is possibly generated in response to the recent leadership change in South Korea and US President Barack Obama’s unprecedented aggression towards the ‘wrong part of world’.

For years, North Korea has routinely violated the Treaty on the Non-Proliferation of Nuclear Weapons. But the country’s third and latest nuclear test worried the American establishment to such an extent that North Korea is now considered by Washington, DC to be a serious threat — in fact, it seems to have been listed as the ‘foremost security threat in the region’.

North Korea’s young and immature Supreme Leader has only made the situation worse by behaving unmindfully. At the height of a crisis such as this, North Korea has made a terrible blunder by not pushing for serious negotiations.

North Korea may succeed in engaging the US, but it has no infrastructure to effectively challenge the world’s mightiest country. The US is formidable because it can fight relentlessly. Often, it even wages war without apparent reason. This is perhaps because it has no civilisational back-up that India enjoys, so it has little to consider regarding the moral degradation that comes with such aggression.

A few weeks ago, the North Korean Government stepped up the security-cover it provides to foreign diplomatic missions in Pyongyang. Before that, it had stopped the movement of South Korean workers employed in a giant business district run by both countries — this was an attack on business interests, and had more than just a symbolic impact on South Korea. It made Seoul more worried over its vulnerable location. South Korea’s capital is close to the demilitarised zone and could be demolished in case there is a military confrontation with the North.

The complete loss of bilateral trust in this region can be seen as directly proportional to the expansionist interests of both China and the US.

‘Multi-lateralism’ is an obsolete term today — the US has ensured as much with its remarkable follies in the past six decades. The Cold War has been over for more than two decades now, and there is no supposed threat from the Soviet Union which does not even exist. But given the manner in which the US is responding to any Chinese overture around the world, it seems like the the foreign and military policies of America are yet to move with the times.

As for China, it is not always what it appears. Sometimes, its actions help clear the fog around it; at other times its intentions are unclear. For example, in the Korean region and even in Nepal, China has played an awkward role. Remember North Korea was once sanctioned by China too under its opportunistic state policy. And Nepal will pay the price for cosying up to the Asian giant.

As for the Korean clashes, they will probably not end in the foreseeable future. But India can, meanwhile, learn a lesson from China which has undertaken a dangerous march in the neighbourhood, outside of its den. It needs to be careful
-Atul K Thakur
Email: summertickets@gmail.com
(Published in The Pioneer on May7,2013)

Lessons from Lehmen Brothers Failure

Lehmen Brothers is no more ….Alas, September2008 was truly a black month that grasped such iconic financial giant from scene, even more such financial crisis that only occurred in a generation finally amounts the toll of institutional banking failures up to sixty-nine until now.
Impact of current financial crisis could be judged in retrospect as the most financially devastating after the Second World War; no regulators (including IMF) could timely foresee the actuality of potential situation despite possessing the thousands of economists battalion. Crisis broke out with the continuing fall in U.S home prices that relentlessly faded the price of Mortgage Backed Securities (MBSs); it had also hit those who insured MBSs against default through Credit Default Swaps (CDSs).

Consequently unrealistic returns that equity investors have expected to earn by taking the additional risk simply failed to materialize. If we got back to the actual causes of such large-scale failure, it becomes essential to distinct it between practice related causes and the causes emerged through institutional tempering in some core regulation.
Like former Federal Reserve chief Alan Greenspan had kept interest rate too low for too long time which led to negative sentiments; in1999 the Glass-Steagall Act of1933, which had prevented commercial banks from tying up with risky bets on securities had been repealed, further it curtailed the checks from any irregular financial practices. Even more, Securities Exchange Commission in 2004 relaxed the limits on top investment banks to leverage; so policy makers grossly exhibit the oblivious attitudes towards mushrooming of complex derivatives.

In extreme sycophancy financial regulators couldn’t became able to assess risks and also the inherent interest of financial market participant towards multiple market transaction which finally leads to excess volatility and state of chaos in financial sector across the integrated economies.
During that period of volatility, some regulators resorted to a ban on short sales to alter the movement of market, at least for time being. Albeit, that idea could not succeed as subsequent events and studies shows us in later course.Unlike initial observation of 2008, our engagement with western market is quite deep, so it was unlikely that we would have been completely saved from a financial crisis of mammoth proportion.

Liquidity arises as major problems of Indian financial sector especially the Mutual funds industry that were handled efficiently by RBI and SEBI. So, matter siege to growing in worse direction, although the Indian financial sector particularly Mutual fund industry keep witnessing the sluggish response of its business until the bad developments are halted at Dalal Street.
Despite relieve from slowdown it’s imperative for us to keep eagle watch on the development in the crisis strife markets to assess its actual impact in Indian market; the second wish list could be to bring as many as viable product to exchange traded markets, so the regulations will have better say on unrestrained myopic financial roots of investment.

Those who cannot learn from history doomed to repeal it that shows their failure ness to rationalize the unduly persisting greed’s; U.S.A Banks in large fails to learn such exercise. U.S economy roughly account for quarter proportion of world economy when its population only accounts for five percent.
It would be worthwhile to note that despite having such superb statistics America remains the largest borrower even from developing countries like India that shows the rampant artificiality in U.S core strategy; so bubble had to burst, so it has burst.

Bubbles followed by crashes are actually a recurrent theme in financial history (Tulip mania 1634-37, South sea bubble1711-20, the long Depression1873-96, Great Depression& Stock Market crisis 1929-32, Asia/ Russia/ LTCM crisis 1996-98, Dotcom Burst2000-02 and current crisis 2007…?); the impact of the present crisis was exacerbated due to a vicious circle of defaults and liquidation…and indeed also through bandwagon mania.
Innovations is always desirable in financial domain only a distinction is must between innovations like technological up gradation and complex derivatives because the ability to use derivatives to speculate, create off balance sheet positions, increase leverage, arbitrage regulatory and tax rules… and manufacture exotic risk cocktails will continue to a major factor in derivative activity.
Tectonic shift that we need in financial market should come as meticulously crafted process instead through push-button methods that would require clarity on the goal of financial sector reform. For the time being, it is quite essential to reduce the unintended consequences of financial meltdown like spiraling inflation and increase in western government’s debt & budget deficits.
Escalation of top-notch officials in American financial circle is not a right step forward instead; a utility-based pay scheme should be approached in banks and other financial institutions that would lessen the hassles from exchequer. Keynes came back in fashion…so government should ensure employment first; like NREGS (India) was implemented much before the downturn of economies.

Now it would be quite blissful for nations to appropriate fine mix of socialism and capitalism as it was conceived by the India’s first Prime Minister J.L Nehru for India’s planned development.
Also essentially we should carry on the teaching of our grand mothers on practical financial behaviors, so we become able to avoid gaining $613 billion dollar debt on iconic bank like Lehmen Brothers( Whom we commemorate our adieu presently) as policy makers. Ultimately quotation of Charles Dickens, (Literary protagonist of Great depression era, from his magnum opus work” Great Expectations”); that “we have every thing before us and we have nothing before us “…it’s up to us how we visualized the things.

Atul Kumar Thakur
22nd September2009, New Delhi
atul_mdb@rediffmail.com