Most of us Americans are focused on news regarding current events: the Fed, stock bull or bubble, gold, Bitcoin, etc.
We look for potential surprises in areas that are most familiar to us. And when we do find them, we tend to respond in familiar ways--we normalize them. For instance, we are all aware of the geopolitical tensions brewing between the US and North Korea, yet we’ve grown accustomed to these tensions; as if the brink of crisis existed in a frozen state.
China sees things a bit differently.
According to the Global Times, the English-language equivalent to Beijing’s People Daily China, Lt. General Wang Hongguang--former Chinese army commander--warns that war in North Korea will break out before the end of March 2018:
"The war on the Korean Peninsula might break out anytime between now and March next year," Wang said, stressing that "China should be psychologically prepared for a potential Korean war, and the Northeast China regions should be mobilized for that."
"Such mobilization is not to launch a war, but for defensive purposes," he added.
"Defensive mobilization" focuses mainly on the military, a passive coping mechanism in the country's bordering regions which could be affected by nearby battles, Song Zhongping, a military expert and a TV commentator, told the Global Times on Sunday.
The military defense will be activated in the border area, deploying anti-missile weapons, while humanitarian aid should be prepared for potential North Korean war refugees, Song added.
Once war erupts in the peninsula, South Korea will be the most damaged, followed by China, and there will be a huge risk of being exposed to nuclear contamination and earthquakes, Wang said.
If China is prepared, it would limit the damage that such conflicts could create and protect its national security, Song said, noting that defensive action could lead to engagement if US action on the Korean Peninsula threatens China's core interests.
Song said China's People's Liberation Army is prepared for potential conflicts in the area, and the outside world should not underestimate China's defense capabilities.”
If (BIG IF) Wang’s calculations are right, there is a high probability that the US and North Korea will go to war in the next 12 weeks.
This is not a prediction, but a probability; one of great likelihood and even greater magnitude; less a probable event than a “possible world” (as such an event will change the world as we know it).
According to Jim Rickards, the CIA, in a private “think tank” meeting on October 20, 2017, estimated that it would realistically take North Korea five months to fully develop a nuclear-armed ICBM capable of striking the US (despite North Korea’s claims at the time that it already had developed that technology).
Following the CIA timeline projection, five months from October is March 2018. This timing coincides with Lt. Gen Wang’s prediction.
If we were to go to war, it would likely happen before the end of March. Such a timeline might create an element of surprise--just in time before Kim Jong Un can fully develop his nuclear ICBM capacities--but it appears that officials in Washington and Beijing have already prepared for this outcome.
Why a nuclear armed North Korea is not an option.
A nuclear armed North Korea poses significantly greater risks than those we faced with China and Russia during the Cold War. Why? Neither China nor the former Soviet Union directly threatened to attack the US (even though we came close to war with the Soviet Union during the Cuban Missile Crisis).
North Korea has threatened to destroy the US several times. Their statements express not a desire for deterrence, but rather, a willingness to attack.
And looking back at the past, history has shown us that the best way to deal with dictators, particularly seemingly “irrational” ones, is to take them by their word.
Take Adolf Hitler. He announced in the 1920s that he would conquer Europe and kill Jews. He did just that starting in the 1930s.
In 1998, Osama Bin Laden declared war on the US. We all know what happened in 2001.
So when Kim Jong Un says he’s going to attack the US with nuclear weapons, wouldn’t it be a bit reckless to dismiss his threats?
Also, if the US allows a nuclear-armed North Korea to exist, it may encourage other countries--including hostile as well as potentially hostile ones (those that can turn on a dime)--to acquire nuclear arms; countries like Iran, Saudi Arabia, Egypt, Turkey, etc.
This is just an additional reason why the US has to draw the line, and why the March 2018 timeline for war is quickly becoming more and more likely.
Is Kim Jong Un legitimately insane?
To think that Kim Jong Un is absolutely “nuts” is to underestimate him. The US intelligence community thinks he’s rational, yet misguided by his own limited world view.
Here’s what Kim Jong Un is probably thinking:
- Qaddafi gave up his nukes and then NATO invaded Libya.
- Saddam Hussein tried developing nukes in the 1980’s; Iraq was invaded and Saddam executed.
- After the Soviet Union dismantled, Ukraine got rid of its nuclear weapons; Russia subsequently invaded Ukraine, annexing Crimea.
To Kim, nuclear weapons are a basic necessity for sovereign survival. Based on that logic, continuing a nuclear program is 100% rational.
Doesn’t Kim Jong Un realize that a military conflict with the US is tantamount to regime suicide?
Chances are that he thinks the US is bluffing. After all, Obama’s “red line” with Syria’s use of chemical weapons didn’t amount to much. That incident, among others, may have given Kim the impression that the US is nothing more than a “paper tiger.”
Many Americans are wondering what China might do to help resolve the situation. China doesn’t want to destabilize North Korea for fears that a flood of refugees may head toward its borders. China also doesn’t want South Korea, assuming that a reunification takes place, at its backyard.
The range of destruction will be extensive; collateral damage to South Korea and Japan almost guaranteed. Both countries realize this, which is why they are working feverishly to resolve this threat.
But given the current circumstances, there’s almost a 0% chance that the US will let things slide; it won’t stand for a nuclear-armed North Korea. The probable outcomes will either be that Kim Jong Un stands down--slim chance of that happening--or that Kim is taken out of power and a regime change is initiated.
What will happen in the financial markets should war break out?
It’s obvious that the market has not priced in the probability of war. Contrary to what many might think, a war with North Korea might not trigger an overall market crash. Some sectors, such as defense, manufacturers, miners, etc., might ramp up production during wartime to meet demands.
But war typically ramps up inflation, as the Fed keeps nominal interest rates steady. The Fed may even attempt to delay inflation by initiating controls over prices and wages. Regardless, inflation eventually takes hold, as we’ve seen in 1919 (end of WWI), 1946 (end of WWII), and in the 1970’s (end of Vietnam War).
The biggest winners are those holding gold as a hedge against inflation. So although a war with North Korea might not immediately cause a stock market crash, chances are that it will cause a massive spike in gold prices.
The mainstream media is not warning you about this yet. The stock market doesn’t seem to be aware of it either.
But Washington and Beijing are preparing for it. And smart investors are also preparing for this seemingly unavoidable outcome. Now is your opportunity to join them.