Obtuse Observer

September 18, 2012

Why (Knowing) History Matters… updated

Filed under: China,Debt — Obtuse Observer @ 6:41 pm

From a recent Telegraph article:

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A senior advisor to the Chinese government has called for an attack on the Japanese bond market to precipitate a funding crisis and bring the country to its knees, unless Tokyo reverses its decision to nationalise the disputed Senkaku/Diaoyu islands in the East China Sea.

This is exactly what President Eisenhower did to the Brits when they seized the Suez Canal in 1956.  (see earlier blog Why (knowing) History Matters) He threatened to sell all American holdings of UK bonds which would collapse the Pound Sterling and destroy the ability of the UK to borrow.  Those who own our debt own a veto.  China holds over $1.1T of our debt.  Not a good thing.

January 31, 2012

Why (knowing) History Matters

In the busy year of 1956 Gen Gamal Abdel Nasser of Egypt seized the Suez Canal.  The French and British, who relied on the canal as a link between vital economic and geopolitical interests, were not pleased.  There was much political intrigue regarding regional events following WWII that lead to the seizure.  They are too numerous for the purposes of this blog but a short regional list includes:  the Algerian War, Soviet support for the FLN and Soviet Foreign Minister Vyacheslav Molotov‘s offer to French Foreign Minister Guy Mollet to withdraw same in exchange for French withdrawal from NATO, Soviet offers to finance the Aswan Dam, American opposition to the Anglo-French redrawing of the middle-eastern map after WWI which established two Hashemite Kingdoms, how to deal with the new State of Israel, and the Hungarian revolution.

Diplomacy failed.  The British and French allied with the Israelis, attacked Egypt and seized the Suez Canal.  The well planned and executed military operation was accompanied by a poorly planned and failed political operation.  The seizure was broadly condemned. 

The simplified and condensed factor resolving the conflict:  The Anglo-Franco Israeli coalition was made to collapse by a threat from President Eisenhower to sell the American holdings of UK Pound Sterling Bonds.  The threat if carried out would quickly and catastrophically collapse the British economy.  The threat was believed, the Canal returned and forces withdrawn.

Why is this important?  The United States used their economic leverage, massive amounts of UK war debt not fully paid off until 2006, to force to reverse a British policy the Eden government believed to be in their geopolitical best interests.

Why does this matter to the US today? 

Our 2010 estimated GDP was $14,660,000,000,000.00 ($14T)

As of today our outstanding debt is $15,236,231,788,440.22.   ($15.2T)

Debt held by China is $1,132,600,000,000.00 ($1.1T) or roughly 25% of our sovereign debt as of November 2011.  With a couple subsequent debt ceiling raises of $1,200,000,000,000.00 and Europe in economic crisis the cash total and debt ratio held by China is most wisely assumed to have increased.

Holding 25% of our debt which is the equivalent of 25+% of our GDP gives China a veto on American policy.  That is not a good thing.

 See also, Why Our Debt Crisis Matters

January 21, 2011

Oh Harry… Almost

Filed under: China,Harry Reid,Hu Jintao — Obtuse Observer @ 5:09 am

I read the headline with such hope.  Harry Reid called Hu Jintao a dictator Tuesday.  Why?  Because Hu Jintao is a dictator.  That moment of clarity didn’t last long and he corrected his gaffe saying:

Maybe  I shouldn’t have said “dictator.” But they have a different type of government than we have and that’s an understatement.

Yes, they do have a different type of government than we have.  It is an authoritarian one party regime that exercises pretty close to absolute control of its people.  It is the regime with mobile execution vehicles.  It is the regime that may well have used executed prisoners to create anatomical models for exhibit.  An  unconscionable exhibit made for gawkers worldwide  It is a regime that sells the organs of executed prisoners.  I was going to post up China’s ranking from Freedom House but I think those three examples make it a bit anti-climactic.  So, yeah, Harry.  They most definitely have a different for of government and while calling Hu Jintao a dictator may have been politically embarassing it was the right word.  Partial credit for having the decency to say it in the first place.


Execution Van

Science or Freak Show?

November 29, 2010

North Korea is Not a Friendly Neighbor

Filed under: China,North Korea,USS George Washington — Obtuse Observer @ 2:30 pm

North Korea is not a very friendly neighbor.  North Korea is still legally at war with South Korea.  North Korea is dirt poor and starvation is not uncommon.

USS George Washington CVN 73

North Korea has kidnapped Japanese citizens over a period of decades, continued its nuclear weapons program, tested a nuclear weapon, fired missiles over Japan, torpedoed and sank the South Korean corvette Cheonan (killing 46) and recently shelled the island of Yeonpyeong.  In response to this latest event the USS George Washington strike group left Yokosuka Sunday and is conducting joint exercises with the South Korean Navy.  Currently we have about 28,500 troops stationed in South Korea.

KJI has played the west for years, mostly to keep his nuclear programs alive and to find ways to get cash and luxury goods.  He seems to have stepped up his game recently.  One could speculate on the cause but the most likely explanation (or combination thereof) would seem to be amongst the following: KJI (who is old and in bad health) is positioning his son to succeed him through these provocative acts, he is again seeking to extort concessions from either the West or China (perhaps both) or he is probing defenses and responses in anticipation of war.

The last  option seems least likely.  If KJI invaded the South his 1,200,000 troops could quickly take Seoul and Inchon.  However, this would likely mean 28,500 US troops captured, injured or killed thus necessitating a swift American response.  Should intervention be demanded by NK aggression and given the overwhelming troop advantage of NK two strategies seem probable.  Attrition or a swift, massive and decisive response.  Either would be successful but one is much quicker.  The North will not be able to keep troops in the field without depleting a fatal level of their supplies in terms of food and fuel.  This would result in a degree of national suffering to the North that will be unacceptable to those fighting the North (an odd feature of modern war is that allegations of too successfully achieving one’s objective in driving out an invader may well be regarded as cruel – therefore this must be rejected).  This leaves a swift and overwhelming response.  Why not quickly and brutally dislodge the NK positions and send the Army into retreat and follow this with a decisive and lopsided battle to demonstrate the likely fate of the rest of the Army should they wish to continue rather than arrest KJI (and his son) and deliver them to the SK Army in a small steel cage for trial and execution.  KJI is old and maybe even crazy but I don’t think he’s that crazy.

North Korean Army

This leaves positioning and extortion.  This is KJI’s forte.  There’s little reason, given his well established history, to think he’s up to anything else.  What he wants and from whom may be the crux of the matter.

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