Don't panic over North Korea
In the business world this usually manifests itself in a boardroom struggle and someone leaves. Clearly, in the global leader environment, these spats usually occur between the
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Hide Addemocratically elected leaders (the good) and the unelected leaders (the bad) and this is fed to us by the media in this way and sensationalised to get the scariest scenario. Whether democracy always delivers good leaders is a moot point, but what they can’t do is operate in a unilateral dictatorial way without opposition outrage and ridicule all over the media, as we have encountered with Donald Trump.
We all know about the ambitions of Kim Jong-un and how he obtained power at his tender age. It should come as no surprise that he has adopted the same controversial strategies of his father.
However, what we should gain solace from is that this appears to be a war of words; posturing and deliberate actions designed to humiliate the US and its allies. His strategy will be to raise the fear bar as high as possible and then engage in talks to extract the maximum economic concessions whilst complying with whatever controls the UN wants to implement on a nuclear capable North Korea.
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Hide AdThe mind-set being illustrated is a complete defiance of the assumed right that the US (and by default the UN) considers it has to determine what sovereign actions North Korea should be allowed to undertake. Any dictator by definition requires absolute control, usually through fear, and so when some external power comes along and decrees "Thou shalt not..." they are never going to accept it.
Kim Jong-un knows that Saddam Hussein played this game which ended in his WMD bluff being called. "Overwhelming shock and awe’" followed and we live with the aftermath today. He also knows that this will not be repeated and certainly not whilst China stands by its warranty to defend North Korea if a pre-emptive strike should occur. He is very unlikely to launch a nuclear missile anywhere, but he will create the impression as much as he can that he has the capability. And this is probably what he has just successfully done. Nobody knows exactly what his capability is, just like Saddam Hussein, but the latter’s removal created the mess we now have in the Middle East and spawned the creation of ISIS.
As there is no religious angle involved in North Korea, the main obstacle to military action is China and their objection to the expansion of the West on their doorstep, as well as US trepidation with China. This is what also drove the actions of Putin in Ukraine and Assad in Syria, again exploiting the perception that the US (and NATO) doesn’t have the stomach for another invasion or to antagonise Russia or China. So the war of words is likely to continue with the military might of the US looking impotent as another military dictator humiliates which ever US president has the privilege.
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Hide AdOf course what would be genuinely scary is if there was a radicalised religious motive behind the nuclear capability but thankfully, this is not today’s scenario.
So, in summary, whilst the situation is alarming, the markets are remaining calm, taking the view that no-one is actually likely to launch anything specifically with the intention to kill huge numbers of innocent people.
Of course, this also assumes Kim Jong-un isn’t a madman. Yet, his actions are very deliberately thought out and he is testing the red lines to the limit – hardly actions of an insane person.
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Hide AdThe best outcome would be that at some point, Russia or China can act as peace-broker, most likely Putin as that would polish his ego considerably having been quietly observing of late.
What we wouldn’t advocate is any form of panic into cash. Over the years, these threats have come and gone, the world moves on and companies continue to prosper – that is the important bottom line.