global agenda 88.
(photo credit: )
The implosion of Ireland, which was the theme of last week’s column, is
developing at a phenomenal pace. For a small country to dominate the headlines
for so long, without any blood actually being spilt, is highly unusual – but, in
this case at least, quite justified.
One day, the Irish government swears
that it does not want, nor will it accept, a rescue package from its partners in
the EU, the next day it is signing up for just that, and on the third day the
mob tries to storm the country’s parliament building.
The third of those
developments is the most extraordinary, because it is so out of place for the
Irish public to take such extreme and violent measures. But, as noted here last
week, the Irish middle- class is now in open revolt against a government and
ruling elite that it believes is corrupt to the core and that has, in cahoots
with the country’s bankers, destroyed their savings, wealth and pensions and
ruined the country.
Yet, if it was only an Irish problem and if only the
Irish people were enraged, the whole sorry tale would attract minor attention on
the inside pages. It is because of the growing realization that Ireland, like
Greece before it, is merely the tip of the European iceberg-meltdown, that it
remains center stage.
Meanwhile, entirely unsurprisingly, the Greek
situation is not improving but rather getting worse, in line with this column’s
general guideline that, especially with regard to Europe, It Keeps Getting
Worse. In this connection and just in passing, the growing intensity of the
student protests in London against the cuts in student fee funding being
introduced by the British government, is part of the same syndrome – only in a
major country, rather than a minor one.
But despite the speed and
intensity of its dramatic downward spiral, Ireland is facing tough competition
for the top slot on the global agenda. The new nutter in North Korea has been
flexing his muscles, although the old nutter, his dad, is still on the throne of
the world’s last Communist dictatorship.
Whether Korea’s House of Kim, or
whatever they call themselves, actually merits the epithet “nutter” is a matter
Many analysts suggest that the periodic aggression by this
most rogue-ish of rogue states is not irrational, but rather is driven by the
need to blackmail South Korea, Japan and the US, not to mess with North Korea,
but also to provide the regime with food for its starving people. On the other
hand, a leadership that can allow, let alone cause, millions of its citizens to
die of faminedriven hunger, is surely insane.
Be that as it may, the
latest act of overt and unprovoked aggression on the part of North Korea shook
global markets in mid-week. However, in a typical display of the way markets
think and behave, the threat of a “haircut” among Ireland’s creditors (meaning
that bondholders would be repaid less than the full value of their loans)
spurred a much more severe reaction than the threat of major hostilities on the
Korean peninsula, which might involve the US, China and Japan and possibly
include the use of nuclear weapons.
This is not – or at least not only –
due to warped values on the part of traders and analysts. It is a reflection of
two key features of the markets.
First, the Irish issue is perceived as
more urgent and more severe, whilst the North Korean is thought of as a very
slow-burning business, so that the more intense coverage of and reaction to the
Irish situation is justified. Second, a crisis relating to bank credit and bonds
is measurable, using the sophisticated mathematical tools available to market
participants – whereas a geo-political crisis is not measurable in any
meaningful way, and any attempt to ‘measure’ the prospective frequency and
severity of further North Korean attacks, let alone the degree to which they
might impact specific markets, is not only meaningless but
That doesn’t make Korea more or less serious than Ireland,
just that the financial markets prefer talking about Ireland. Ipso facto, a
crisis like the Korean one – or the one impending in Lebanon, for that matter –
is more dangerous.