Global Agenda: Boiling over

It is because of the growing realization that Ireland is merely the tip of the European iceberg-meltdown, that it remains center stage.

By PINCHAS LANDAU
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 of debate.
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 fraudulent.
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.