Global Economic Crisis

The Japanese economy never did recover from the implosion of its banking sector in the 1990s. Tokyo decided to artificially maintain its banks on life support, precipitating the country’s notorious L shaped recession. Now that the  global economic crisis has done its share of damage to Japan’s export machine, Japan looks to endure a second miserable decade of economic recession and stagnation.

The latest economic indicators out of Tokyo show manufacturing output having declined  nearly 2 percent in September, the 4th straight month of industrial decline. More worrisome, the figures also show the Japanese economy experiencing its 19th consecutive month of  declines in core consumer prices. As all economists are aware, deflation is a dragging on the consumer sector of the economy, inhibiting individual consumers from executing major purchases. This explains the weak domestic demand in Japan, and with a rising yen threatening exports, it is no surprise that the prognosis for the Japanese economy is very grim.

As the United States has largely replicated Japan’s strategy in the 1990s of propping up insolvent banks at all costs,  it may be that what the Japanese economy is enduring is also a harbinger of the long-term economic path for the United States.

The latest S&P/Case-Shiller U.S. National Home Price survey showed a much weaker than expected rate of price increase, a mere 1.7 percent in August. Furthermore, in the 20 major urban housing markets incorporated in the Case-Shiller index, prices declined by 0.2 percent from the previous month.

The past several months reveal that since the termination of the federal homebuyer tax credit program, which artificially propped up the American housing market, U.S. residential real estate has continued its trend of price contraction. In the past four years U.S. home prices have fallen by 28 percent. The consensus view is that the latest S&P/Case-Shiller report is gloomy in the extreme, pointing to further erosion in U.S. home values, with many more Americans falling under water with their mortgages as their home equity collapses. Not a hopeful sign that the global economic crisis will soon end.

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A century ago, when  it was said that the sun never set on the British Empire, it was the policy of London politicians that their country’s navy was at least as large as the next two biggest naval powers combined. Those days are long gone. Even during the Cold War, the Royal Navy was in perpetual decline. Whenever a financial crisis arose in Britain, it was the fleet that took the most savage cuts. Now, amid a catastrophic fiscal crisis, the Conservative UK prime minister, David Cameron, has announced an 8 percent cut in defense spending over the next four years. As with previous defense cuts, it is the Royal Navy that stands to be the biggest loser. This time, though, the cuts may actually destroy what is left of the UK’s naval power, leaving in its wake a small coastal protection and fisheries enforcement flotilla, more akin to a glorified Coast Guard.

The key element in the defense cuts is the scrapping of the flagship of the Royal Navy, the aircraft carrier HMS Ark Royal. This will leave only one carrier in Britain’s fleet. However, that carrier will be almost useless, as another key component of the defense cuts is the elimination of all combat jets currently serving in the Royal Navy’s Fleet Air Arm

David Cameron and his minions boast that this is only a temporary suspension in naval capability, as two new aircraft carriers are already under construction. However, under current plans, when these multi-billion dollar carriers are completed, they will become glorified helicopter carriers, as no new naval jets will be available until 2019.

In the last run of naval cuts under the previous Labour government, the Royal Navy lost about half of its destroyers and frigates, and several submarines. There was a grand bargain, however; the money saved from scrapping the escort vessels and submarines would be used to buy the new aircraft carriers and a complement of naval fighter-bombers. However, with no jets available to the Royal Navy until 2019 ( and that commitment is a tenuous one) it would not surprise anyone if the UK government ended up scrapping or selling at least one of the new aircraft carriers, and perhaps mothballing the remaining one indefinitely.

The ruling coalition government claims that even with the defense cuts, the UK will remain one of the most potent military powers in NATO. However, with so much waste at the Ministry of Defense in London remaining, it appears that the bulk of the cuts are directed at real defensive capability.

Ever since the defeat of the of the Spanish Armada in 1588 by Francis Drake, it has been the Royal Navy that has been the most reliable deterrent to aggression in the defense of Britain. It was the fleet that kept Napoleon at bay, and stood between Adolf Hitler and the conquest of the British Isles. Once the totality of Cameron’s naval cuts take effect, however, there will be little left of the Royal Navy save a glorious history.

For the first time ever, the monthly figure for bank repossession of residential properties in the United States topped 100,000. According to the market research company RealtyTrac, September witnessed 102,134 home foreclosures in America. The foreclosure rate at such high levels clearly demonstrates the continuing fragility of the U.S. residential property market, ground zero of the ongoing global financial and economic crisis.

The record rate of bank repossession of private homes comes amid a major controversy over sloppy paperwork by financial institutions connected with the massive wave of foreclosures. Many states across America have already announced their intention  of investigating banking practices connected with the high rate of foreclosures. There is even talk of a mandatory freeze on foreclosures being imposed on the banks. Should that happen, the already weak American housing market would suffer another major blow.

The whole world, including the DPRK’s sole foreign friend, China, knows that North Korea is an economic catastrophe, and has been for decades. Compared to its brethren in South Korea, the so-called DPRK has about a 20th  of the per capita GDP, and can only export Scud missiles and heroin (the latter through its misnamed “diplomatic” missions abroad). However, in the surreal scientific Marxist paradise that North Korea claims to be, the genes of the “Great Leader” Kim-il Sung  are the most perfect in the universe. Thus, the lifeless corpse of Kim-il Sung remains president of the DPRK forever, while his son Kim Jong-il now runs the country.

Now that Kim Jong-il is in bad health, a successor must be prepared. Once again, scientific Marxism has determined that the best qualified candidate is none other than a member of this same august family. He is Kim Jong-un, the 27 year old son of Kim Jong-il. He has no political experience and no military experience, yet  that has not prevented him from being appointed a four-star general in the North Korean Army, and given senior political responsibilities. Very soon, the propaganda campaign will begin, “proving” that Kim Jong-un is, like his father and grandfather before him, an unmatched genius, obviously the most qualified North Korean to run the dilapidated nation.

In the last few days in the DPRK’s capital, Pyongyang, Yang Hyong Sop, one of the top officials in the country’s ruling communist party, told the Associated Press that, “our people are honored to be led by the great president Kim Il-sung and the great general, Kim Jong-il. Now we also have the honor of being led by General Kim Jong-un.” A statement to the foreign press from a senior Party figure along those lines is the surest sign yet that Kim Jong-un is being set on the fast track to follow in his father’s and grandfather’s shoes as the unchallenged dictator of the impoverished but nuclear-armed rogue state.

As nation builders, the Kim dynasty is a train wreck. But as the managers of a very lucrative family business, they are obviously brilliant. Maybe there is something after all to their title, “Great Leader.”