When Giants Fall

Seeing It Again

OK, I guess I'm a little frustrated.

It started with my 2007 book, when those who had failed to see Financial Armageddon coming or who were slow to grasp what was going on were suddenly being treated as knowledgeable "experts" who knew just what was happening and why.

And now we're seeing it again: mainstream analysts suddenly talking about the prospect of growing unrest and heightened instability around the world even though I (and some others) have been forecasting a souring of the social mood for quite some time (as some of you know, the third chapter of When Giants Fall, published in March 2009, is entitled "A Future of Violence.")

Here's one example:

"ANALYSIS-After the Crisis, a Worldwide Rise in Unrest?" (Reuters)

With the Middle East in turmoil, other authoritarian states jumpy and post-crisis economic pain prompting protest in western Europe and elsewhere, some suspect a systemic rise in worldwide unrest might just be beginning.

Instability in the already volatile oil-producing Middle East could produce a feedback loop where unrest pushes up energy prices, fuelling inflation and deepening discontent both in the region and around the world.

In most countries, the so-called "misery index" -- an aggregation of unemployment and inflation long seen as a warning of protest and instability -- is pushing higher.

"After an extended period of economic growth and political apathy across the developed and emerging worlds, we may have reached a new political cycle -- one where populations take out their grievances on their leaders and their associates," wrote Citi political analyst Tina Fordham. "This won't be limited to the emerging world."

In democracies, elections provide a release valve -- Ireland has seen some of the worst post-crisis economic pain but minimal unrest in part because voters knew they could oust the government they blame for the crisis in elections this weekend.

But Greece, Britain and others have seen anger expressed in the streets as their governments push through austerity, arguing they have little choice but to rein in unsustainable deficits even if it means cutting services, pay and benefits.

Most analysts agree North Africa's demographic "youth bulge", relatively high unemployment, long-serving leaders and recent Internet penetration made it particularly volatile. But strains are clearly visible elsewhere.

Almost without exception, authoritarian states around the world appear to have seen at least a modest uptick in protest following the ousting of presidents in Egypt and Tunisia.

Even China, whose breakneck growth has long been seen limiting discontent, has blocked terms such as "Egypt" on social networking sites and stepped-up arrests at small demonstrations.

"PERFECT STORM"

"Two crises are happening at the same time - which is unprecedented I think," said Joel Hirst, International affairs fellow at the US-based Council for Foreign Relations.

"An economic disaster and 'readjustment' of the developed world while the developing world fights for their freedoms. Add in there the oil/energy price, which could be seen as the link between the two, and it makes for a perfect storm."

Ah well, instead of getting worked up about it, maybe I just need a better PR agent.

No Need to Look Far

While all eyes are on the violence overseas, the following CBS News report reveals that there's no shortage of it in a locale that is nearer to our shores:

A War By Any Other Name

(Image: source.)

A rose by any other name would smell as sweet.
-- Romeo and Juliet, William Shakespeare

It's not a pleasant aroma, but it smells like something big is brewing near the Mexican border. In "Pinal Sheriff Expects Armed Conflict With Cartels Soon," The Arizona Republic reports on a development that may well mark the next phase of the so-far-undeclared war on our southern flank.

Pinal County Sheriff Paul Babeu is anticipating an armed conflict between his deputies and cartel members within the next 30 to 60 days.

Babeu made that prediction last week as he addressed an Ahwatukee Foothills Republican women's club, and reiterated it Tuesday on the heels of a speech by Homeland Security Secretary Janet Napolitano asserting that border communities are safer than ever.

A gunbattle is all but certain, Babeu told The Arizona Republic, because his deputies and members of a regional SWAT team are now routinely working to stop smugglers from pushing cargo through Pinal.

 "We have had enough," Babeu said. "That's why we're going into these areas and sending a very clear message to the cartels: We see you and we're not going to let you through."

An outspoken critic of U.S. immigration policy, Babeu said cartels have stepped up their tactics in Pinal County by reinforcing smuggling routes with armed guards to ward off potential bandits, in addition to stationing more lookouts on high points of the landscape. Some bandits are impersonating police, Babeu said, and he worries that smugglers won't know the difference.

"When we announce ourselves in Spanish, 'This is the sheriff, drop your weapons, this is an arrest,' I pray every time they will surrender," Babeu said. "In the event that any of them decide to point their weapons at our deputies . . . my directive is there had better be rounds going downrange to neutralize that threat."

Unraveling Fast

Uh-oh. Looks like things are unraveling fast in a country that many have viewed as a lynchpin to stability in the Middle East since it signed a peace treaty with Israel in 1979.

No Surprise Here

Given the troubles brewing in Tunisia, Lebanon, Yemen, Algeria, Jordan, Kuwait, Egypt, and maybe even Saudi Arabia, the following UPI report, "Mideast Arms Market to Grow by 14 Percent," probably shouldn't be a surprise to anyone:

Military procurement by Middle Eastern states, primarily Saudi Arabia, the United Arab Emirates, Iraq and Israel, is expected to grow by 14 percent over the next five years, a new industry analysis concludes.

Only One Way

Despite this week's talks between Iran and leading global powers (and other similar efforts), reports like the following from Russia Today, "'Iran Will Never Stop Its Nuclear Program,'" suggest that there is only one way the situation will be resolved (hint: there will be weapons involved).

A 'Dangerous' Situation

For a country which has at least as much at stake as others nearby in preserving regional peace, news that Saudi Arabia is exiting peacekeeping talks in Lebanon, as detailed by Reuters in "Saudi Ends Lebanon Mediation, Says Country at Risk," is anything but encouraging.

Saudi Arabia said on Wednesday it had abandoned mediation efforts in Lebanon between Shi'ite Hezbollah and Sunni leader Saad al-Hariri over the killing of his father and warned that the country's future was at stake.

Regional power Saudi Arabia and Syria had worked for months to resolve a dispute between Hezbollah and Hariri over indictments in the 2005 killing of former prime minister Rafik al-Hariri, which are widely expected to accuse Hezbollah members.

Saudi Foreign Minister Prince Saud al-Faisal said the kingdom had abandoned its efforts and that the situation in Lebanon was "dangerous."

"If the situation reaches separation or partition of Lebanon, this means the end of Lebanon as a state that has this model of peaceful cohabitation between religions and ethnicities and different groups," he told Al Arabiya television.

"It would be a loss for the whole Arab nation."

Despite the declared withdrawal by Saudi Arabia, a powerful regional player and close supporter of Hariri, other countries were continuing efforts to find compromise.

Analysts however say no compromise or breakthrough could happen without backing from Saudi Arabia, a close U.S. ally.

To be sure, the move by the world's largest oil producer may well represent posturing of sorts or an attempt to overcome a seemingly unbreakable impasse. But given other recent developments in and around the region, the risk that things might suddenly get out of hand must be fairly high.

'If There's a Ground War Anywhere, It's Going to Have Cyber Dimensions Associated With It'

If you want to know why cyberspace has been declared "the fifth domain of warfare" outside the traditional battlefields of land, sea, air and space, NBC News provides an interesting overview in "Breached: A Cyber Attack in America."

More Than Just a Serious Threat

In a Pajamas Media commentary, "Failed State Watch: How Much Longer for Mexico? (Part One)," Alberto de la Cruz talks about how the ugliness south of our border has moved beyond the drug wars on the streets to the hearts and minds of ordinary citizens.

Nothing illustrates the societal shift away from the rule of law that appears to be taking place south of the border better than the latest trend among Mexican children. Instead of emulating superheroes and sports stars during playtime, children are now emulating drug cartel assassins.

In another report from Blog del Narco, we learn that Mexican children have given up playing typical children’s games such as soccer, and have traded in their soccer balls for toy weapons in order to play “assassins”:

It may seem incredible to some that the children no longer play soccer on the streets as before. Now they pretend to be assassins. They form teams, just as before, but now they arm their mini commando units to engage in imaginary battles that perhaps in the future will be their reality.

The girls too form part of this game, leaving their dolls to the side to turn themselves into assassins. Some are even the commanders in these play groups of children.

The situation with the Mexican children has gotten so out of hand that parents have begun prohibiting their children from having plastic guns and weapons. Even the Mexican government’s consumer protection agency, PROFECO, launched a campaign during the Christmas season exhorting retailers to remove plastic guns, rifles, and machine guns from their toy shelves.

The drug war taking place in Mexico deserves the coverage it has received, but the corruption within the Mexican government and its inability to effectively combat the drug cartels merits as much or more of that coverage. It is a deadly combination that threatens to destabilize a nation with 112 million inhabitants to the point of anarchy. A nation bordering the U.S. with an out-of-control drug war is a serious threat. A nation bordering the U.S. in a state of anarchy, with the only authority being well-funded and well-armed drug kingpins, is a clear and present danger.

Pretty scary. Click here to read the rest.

Reason to Be Concerned

According to Britain's Telegraph, "China [Is] Preparing for Armed Conflict 'in Every Direction'":

China is preparing for conflict 'in every direction', the defence minister said on Wednesday in remarks that threaten to overshadow a visit to Beijing by his US counterpart next month.
 
"In the coming five years, our military will push forward preparations for military conflict in every strategic direction," said Liang Guanglie in an interview published by several state-backed newspapers in China. "We may be living in peaceful times, but we can never forget war, never send the horses south or put the bayonets and guns away," Mr Liang added.

China repeatedly says it is planning a "peaceful rise" but the recent pace and scale of its military modernisation has alarmed many of its neighbours in the Asia-Pacific, including Japan which described China's military build-up as a "global concern" this month.

So, do China's neighbors (and others, including the U.S.) have reason to be concerned? If these other recent reports are anything to go by, then the answer is "yes":

"China Seen Moving Closer to Deployment of 'Carrier Killer' Missile" (VOA News)

A senior U.S. commander has recently revealed that China's development of an anti-ship ballistic missile that is designed to target aircraft carriers is now operational.  Defense analysts say that while China has a way to go to perfect the weapon system, the development and deployment of the missile will have a major impact on security in Asia.

In a recent interview with Japan's Asahi Shimbun newspaper, Admiral Robert Willard, the commander of the U.S. Pacific Command, said that information China has released in the open press and continued testing show it has reached the equivalent of what the U.S. military calls initial operational capability for the weapons system.

"China's Stealthy Military Leap" (The Advertiser)

CHINA has crept up a rung on the world stage, with blurry pictures revealing its first stealth fighter.

The unofficial pictures appeared on Chinese internet forums over the Christmas weekend, before being pulled by censors.

If real, the large combat jet presents a new challenge to the power of the United States which has heavily cut the number of new generation stealth fighters it is planning to put into service.

Aviation Week magazine spotted the pictures, but stressed they may be fake.

But indications are they may be real - with a variety of pictures of the same aircraft appearing within days of each other.

Aviation experts speculate these are the first hard evidence of the Chengdu J-20, China's stealth-fighter prototype.

"China Ratcheting Up Pressure in the Air" (Asahi.com)

Japanese officials, already concerned about China's growing naval presence in the region, say Chinese military aircraft have started harassing Japanese Self-Defense Forces' aircraft over the East China Sea.

Ever since the September collision between a Chinese trawler and two Japan Coast Guard vessels near the Senkaku Islands in the East China Sea, Chinese military aircraft have started to approach SDF aircraft close enough to identify with the naked eye, sources said.

Along with this new behavior since October, China's air activities against Japan have been substantially stepped up since earlier this year. The number of scrambles that the Air SDF has launched against Chinese aircraft since the beginning of this fiscal year had already reached 44 as of Dec. 22, according to the Defense Ministry.

The figure is the highest in the past five years.

"Chinese Army Puts Up Post Near Border" (The Times of India)

AGARTALA: The new Sino-Indian partnership, premier Wen Jiabao said in India during his recent visit, is one of cooperation, not rivalry and competition. On the ground, though, Beijing's military build-up near India's borders continues.

China's mighty People's Liberation Army (PLA) is building a four-storeyed military facility at a Myanmar border town which is close to the Northeast, the Myanmarese media said on Monday.

The construction of the base, it added, has been on at breakneck speed since August and it won't be too long before it's completed. In its report, Burma News International quoted the Kachin News Group as saying that the facility will house ''several military officers on the border town of Menghai in China's southwest Yunnan province''.

Once completed, it will act as a command post for at least one PLA battalion. The report cited eyewitnesses and former Communist Party of Burma officials as its sources.

"Need to Contain China's Military Capabilities: McConnell" (Press Trust Of India)

A top Republican leader has appealed to the Obama Administration to initiate steps to contain the increasing military capabilities of China. "We must invest not only in the delivery systems and platforms that will preserve our nuclear delivery capability, such as the next generation bomber, nuclear submarines and a new Intercontinental ballistic missile, but also in the strike aircraft and naval forces required to control the Pacific Rim as economic growth and the military capabilities of China increase," Mitch McConnell, the Senate Minority Leader, said.

"The war on terror has required an expansion of our nation's ground forces, the Marine Corps, the Army, and our Special Operations Forces, and our near-term readiness.

"As we continue the effort to dismantle, defeat and disrupt al-Qaeda, we must also plan for the threats that our country will face in the coming decades," McConnell said in the Senate floor while announcing his opposition to the New START treaty

Hostility Into Hostilities?

It's long been understood that the Middle East's thirst for water and/or rising global energy demand could be the catalyst for war in the region. However, there are plenty of other factors that could light the spark that sets things ablaze. One of them includes long-running disputes between Israel and any one of its neighbors. Based on the following two reports, it's not hard to imagine that hostile rhetoric could soon be transformed into major hostilities:

"Israel Prepares Ground for Military Operation in Gaza: PLO Official" (Xinhua)

Israel has been preparing the ground for a new military operation in the Gaza Strip, a Palestinian official said Thursday, following Israeli fire injured two people in northern Gaza.

"Israel is preparing the internal and international opinion using the same scenario" as during the Operation Cast Lead nearly two years ago, said Ahmed Majdalani, a member of the Palestine Liberation Organization (PLO).

Israel claims that Gaza is a source of threat to its security, and tries to promote "these claims" locally and globally, he said, noting "this proves there is a planned intention to wage a wide aggression on Gaza."

Meanwhile, Palestinian militants recently fire more mortar shells from Gaza into Israel, despite attempts by the territory's Hamas rulers to enforce the shaky ceasefire.

"New Gaza War ‘Only a Question of Time’" (BBC News)

A senior Israeli army officer has told the BBC that as long as Hamas remains in control of the Gaza Strip, another war is "only a question of time".

He said the Palestinian Islamist group had re-armed so much since the Israeli offensive two years ago that it was now in a stronger position militarily.

There has been an increase in rocket fire coming from Gaza in the past week.

Earlier, Israeli defence officials said tanks fitted with a new missile defence system would be deployed near Gaza.

The announcement came after Palestinian militants for the first time used a Kornet tank-piercing missile.

On 6 December the Russian-made laser-guided missile - which carries 10kg (22lb) of high explosive - penetrated the tank's armour, but did not injure its crew.

The UN has condemned the firing of "indiscriminate" rocket and mortar attacks by militants in Gaza in recent weeks.

'We Just Can't Put Our People at Risk'

The Mexican stock market has been one of the best performers this year, bolstered by the mad rush of investors looking for the next big emerging market success story.

But like those Wall Street analysts who keep seeing a U.S. economic recovery that's not really there, those who are betting on a turnaround south of the border aren't paying attention to what is actually happening on the ground.

While things haven't quite gotten to the point where the man on the street is walking around in body armor, conditions have deteriorated enough that foreign businesses are reconsidering moves to set up shop in that country, as the Wall Street Journal reports in "Companies Shun Violent Mexico":

Unrest Deters Electrolux, Whirlpool, Others Who Have Considered New South-of-the-Border Plants.

MEXICO CITY—Growing numbers of companies are deciding to limit their investments in Mexico because of spiraling drug-related violence in one of the world's most important emerging markets.

The latest is Swedish appliance maker Electrolux AB, which said Thursday it had chosen Memphis, Tenn., over locations in Mexico for a $190 million appliance factory that will employ 1,200 people.

The decision involved a host of factors, including proximity to component suppliers, distribution centers and another Electrolux plant in Springfield, Tenn. But Mexico's deteriorating security also played a role, the company said.

Mexico continues to lure foreign investment with its low wages, location next to the U.S. and the advantages of the North American Free Trade Agreement.

One of the U.S.'s largest trade partners, Mexico attracted $14 billion in foreign direct investment in the year's first nine months, up 20% from a year ago, according to government figures. And some of Mexico's biggest investors, including Wal-Mart Stores Inc., are maintaining their investment plans.

But fights between rival drug cartels have claimed more than 31,000 lives in the past four years, including more than 11,000 this year. Other crimes like robbery, extortion and kidnapping also have climbed. For some companies, particularly those that don't yet have operations south of the border, the violence has become daunting.

"We won't put a factory in Mexico until some of this violence gets addressed," said Ron DeFeo, chief executive of Terex Corp., a Westport, Conn., maker of construction cranes and other heavy equipment. "We just can't put our people at risk."

Mr. DeFeo said Terex has looked closely at building plants in Mexico but decided to hold off for now.

Owens-Illinois Inc., a Perrysburg, Ohio, maker of glass food and beverage containers, is also wary.

"We have been monitoring the Mexican market for a few years now, looking for the right opportunity to directly enter that market," said spokeswoman Stephanie Johnston. "The escalating violence has led us to be more cautious. We take the safety and security of our employees very seriously."

Concerns about safety in Mexico were a factor in a decision by Whirlpool Corp. earlier this year to build an oven and cook-top factory in Cleveland, Tenn., rather than in Mexico, Alan Holaday, vice president of North American manufacturing and quality, said in a recent interview. Security was only one of several factors in the decision about the plant, which will employ more than 1,600 workers, he said.

Drug-related violence in Mexico probably cost the country some $4 billion in foreign direct investment this year, estimated Gabriel Casillas, J.P. Morgan's chief economist for Mexico.

Crime has also spooked foreign executives. Jim Davis, a managing director at Russell Reynolds Associates, an executive-recruitment firm, said he recently conducted a search for a pharmaceutical company seeking a top manager in Mexico City.

"A lot of the folks would say, 'My wife would not be in favor of us moving down there at this time,'" Mr. Davis said. "I think the fears are a little bit overblown but the reality is that's what people are reading in the newspapers and seeing on TV."

While foreign direct investment is expected to be slightly up in Mexico this year, the figures were boosted by the $5 billion takeover of the beer business of Fomento Economico Mexicano SAB by Dutch brewer Heineken NV. That deal won't include typical investment benefits like construction of factories and creation of jobs in Mexico.

Stripping out the Heineken-Femsa deal, Mexico's foreign investment numbers begin to look less healthy, said Mr. Casillas. Moreover, companies usually plan investments far enough ahead that this year's dramatic increase in violence will probably only show up in next year's numbers.

In Mexico's violent border regions and troubled interior states of Durango, Sinaloa and Michoacan, foreign investment has dropped to roughly $1.9 billion in 2010 from an average of about $5 billion a year from 2005 through 2008, excluding the Heineken-Femsa deal.

Concern about violence is leading to "a lot of caution around future growth plans," said David Speer, chief executive officer of Illinois Tool Works Inc., a big industrial conglomerate based in Glenview, Ill.

Mr. Speer said some companies that buy products from ITW units have delayed projects in Mexico due to security concerns, though he declined to name any projects.

Violence has spread to parts of the country formerly seen as "immune" from such problems, he said.

A Matter of Time?

If this is what we're hearing on one side of the border --

"Friday's Front Page Story: 'What To Do When The Shells Hit Seoul'" (Business Insider)

The Korean papers are filled Friday with talk of war, including this column in the Chosun Ilbo suggesting that war is a real possibility, and this full page feature in the Joong Ang Daily titled What To Do When The Shells Hit Seoul. Note the use of the word "when" not "if."

What does one do? Well, it seems that Seoul is pretty prepared:

According to the National Emergency Management Agency, there is enough space in Seoul’s underground facilities (subway stations, basements, etc.) for 2.7 times the city’s population. The agency came to the conclusion by calculating that each person would need 0.825 square meters (8.9 square feet).

“To prepare for war, the Park Chung Hee regime encouraged construction companies to build basements when putting up new buildings,” said Yoon Myung-o, professor in the University of Seoul’s Department of Architectural Engineering. “Since then, most buildings were made with basements. Now, Seoul has more underground space than any other city [in Korea].” --

and this is what we're hearing on the other side --

"DPRK Says Its Army and People Ready For All-Out War" (Xinhua)

The Democratic People's Republic of Korea (DPRK) said its army and people were ready for escalated conflicts and all-out war that would not be confined to the peninsula, the official news agency KCNA reported Saturday.

According to the KCNA, a spokesman for the National Peace Committee of Korea said in the statement released Saturday that the recent moves of the U.S. indicated that it was fully joining in South Korea's moves for a war of aggression against the DPRK after "throwing away the disguise of a hypocrite".

It was clear that if the South Korean army mobilized all flying corps, warships and missiles for a war against the DPRK and the U.S. joined them with the latest weapons, it would develop into an all-out war, not a local war, he said. --

doesn't it seem like it's only a matter of time before the stuff really hits the fan on the Korean peninsula?

Getting Ugly Down There

Hype?

Maybe not.

Getting ugly down there.

Time to Pay Serious Attention

There's chest-thumping and saber-rattling, and then there's the real thing. If a country as financially challenged as North Korea is decides that having emigrants return home is more important than maintaining the inflow of badly needed foreign remittances, as the following report, "Expats Recalled as North Korea Prepares for War," from Britain's Independent reveals, it's time to pay serious attention to events on the Korean Peninsula. 

A mass exodus of North Korean workers from the Far East of Russia is under way, according to reports coming out of the region. As the two Koreas edged towards the brink of war this week, it appears that the workers in Russia have been called back to aid potential military operations.

Vladnews agency, based in Vladivostok, reported that North Korean workers had left the town of Nakhodka en masse shortly after the escalation of tension on the Korean peninsula earlier this week. "Traders have left the kiosks and markets, workers have abandoned building sites, and North Korean secret service employees working in the region have joined them and left," the agency reported.

...

"North Korea's government sends thousands of its citizens to Russia to earn money, most of which is funnelled through government accounts," says Simon Ostrovsky, a journalist who discovered secret North Korean logging camps in the northern Siberian taiga. "Workers are often sent to remote locations for years at a time to work long hours and get as little as three days off per year." Now it appears that some kind of centralised order has been given for the workers to return home.