August had been a relatively quiet month up until a couple of days ago. As we move towards the end of the month, things are happening across the globe. In the space of the last thirty six hours or so, North Korea and the ROK have traded artillery fire and tensions are on the rise, Greek Prime Minister Alexis Tsipras has resigned and called for new elections, and China’s economic slowdown is beginning to have a negative effect on world markets. Judging by what we have seen this week, we could be in for a dangerous September.
For the third time since January, Greek voters are returning to the ballot box. Do not be fooled, Alexis Tsipras’s resignation and call for new elections were not made out of a sense of obligation or an admittance of defeat. They are components of a very shrewd political maneuver. When the third bailout was passed by the Greek parliament in mid-July, one-third the Syriza party’s representatives voted against the bill or abstained. Now, the Syriza party is in the midst of a rebellion and Tsipras needs to gain a new mandate. He is turning to the people to extract him from a very tenuous position and provide him with political cover. Tsipras is banking on the new elections neutralizing the radical left wing of his party. That wing has made his life complicated since July, opposing him almost constantly. Tsipras appears determined to move himself from the radical left to the center and he is using popular will as a political tool to help him get there.
Tension & Threats In Korea
The world has become desensitized to North Korean threats and claims. The regular stream of bold talk coming out of Pyongyang is bolder today, however. Following an exchange of artillery fire with South Korea and the resumption of US/South Korean military exercises, Pyongyang has announced that its forces along the DMZ are in a “quasi-state of war” and will prepare for battle. The North has, in fact, started preparations to test fire short and mid-range ballistic missiles but there have been no concrete signs of preparation for military action against the South.
The situation appears to be following the same line that others before it have. The North Koreans ramp up their rhetoric in an attempt to stoke military tensions on the Korean peninsula in a bid to show its populace that it is confronting the enemy to the south. Kim Jong Un has done this before and predictably will do it again in the future. The real danger here is the possibility that an accident or incident might lead to a military confrontation that neither side wants.
China’s Economic Woes Go Global
It was bound to happen sooner or later. Economists, market analysts, and financial experts around the world have been talking about the economic problems facing China. Last month’s successive devaluations of the yuan signaled that the problems were going to worsen before long. Data was released confirming that China’s manufacturing activity has slowed to its lowest levels since 2009. Global markets were thrown into panic mode almost immediately. Stock markets in Asia were the first to feel the hurt, followed by Europe and then Wall Street. The Dow plunged 531 points today, falling into correction territory. The two day sell off in New York has erased practically all of the 2015 gains for all three US indexes.
The ramifications of a weakened Chinese economy are continuing to play out. Investors are spooked for the moment, though, and it is fair to say that further bad economic news from China will continue to have negative consequences on Wall Street, in London, Tokyo and elsewhere. How these economic problems will translate into the geo-political arena also remains to be seen.
*Note- The third part of the Desert Shield series has been lost. I deleted it from my hard drive my mistake. I will rewrite and post it sometime before Labor Day. In the meantime, Sunday night I’ll post a look at the coming arms race in the Persian Gulf.*