1 May 2010
Must Read No. 1: Nicholas Eberstadt on the importance of striving for unification.
North Korea’s present leadership will surely wish to ratchet up its threat to America and the Western alliance in the years ahead. It is entirely reasonable to anticipate Pyongyang’s eventual sale of nukes to hostile powers or international terror networks. The regime has already marketed abroad practically everything in its nuclear warehouse short of user-ready bombs. Even worse, there are troubling signs–repeated nuclear tests, continuing missile tests, and attempts at cyberwarfare probing American and South Korean defenses–that the regime is methodically preparing to fight, bizarre as it sounds, a limited nuclear engagement against the U.S.
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Must Read No. 2: Christian Whiton on the sinking of the Cheonan.
Despite these serious threats, turning the other cheek to a likely North Korean act of war poses an even greater long-term risk. Nothing else could be seen as a stronger signal to Pyongyang and other undemocratic capitals throughout the region that free nations are on the run. Kim would feel vindicated in pushing the envelope around him further out, which he has attempted to do with a nuclear program, ballistic missile tests, and now likely conventional naval warfare. Beijing would logically be tempted to broaden its strategic goals further. Other bad actors would follow.
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China? A sanctions cheat? Say it aint so!
Scott Snyder, a senior associate of the Asia Foundation, claimed that Beijing’s decision to invest in the North is likely to be aimed more at helping Kim Jong-il maintain power by financing new sources for hard cash at a time when the nation is going through economic difficulties.
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GI Korea has put up some great pictures from his most recent visit to the ROK. It seems he really got around; there are pictures of Chunchon, Seokcho, Jindo, and Chinhae.
I’m going to miss Vitit Muntarbhorn when his mandate runs out next month:
“We must advocate,” he said, “fair treatment of all,” meaning North Korean citizens inside and defectors outside the country alike. He added that North Korea is “one big prison” which must be exposed to the world.
“It is incumbent upon the UN to act,” he concluded, “to heal, to support, to help” the world in the fight against North Korean human rights abuses.
The U.N. will be a far poorer (and quite possibly bankrupt) place without him.
In retrospect, Robert Mugabe’s invitation to the North Korean soccer team has worked out rather badly for him, but not as badly as his invitation of North Korean military advisors ended for the Zimbabwean people:
Plans to host the North Korean football squad have been condemned as a symbolic insult by opposition politicians and activists because of North Korea’s role in the mass killings of Zimbabweans in the 1980s.
Campaigners are threatening to target the visitors’ hotel and training camp and disrupt their preparations for the tournament, which kicks off in neighbouring South Africa on 11 June.
At least 20,000 people were slaughtered by an army brigade trained by North Korean instructors in western Zimbabwe’s Matabeleland province during a five-year uprising from 1982. The operation was known as Gukurahundi, meaning “the rain that washes away the chaff before the spring rains”.
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In the suit filed with the Seoul Administrative Court, the plaintiffs — a group of 200 residents of Pyeongtaek who live near Osan Air Base — accused the Korean government of approving the U.S. air base’s runway expansion project without conducting an environmental impact assessment or consulting the local municipal authority or residents.
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You can tell the North Korean people are hungrier than usual whenever KCNA starts trumpeting new scientific breakthroughs in Soilent Green production.
“My maid just asked for leave,” a friend in Beijing told me recently. “She’s rushing home to buy property. I suggested she borrow 70 percent, so she could cap the loss.
It wasn’t the first time I had heard such a story in China. Some friends in Shanghai have told me similar ones. It seems all the housemaids are rushing into the market at the same time.
There are benefits to housekeeping for fund managers. China’s housemaids may be Asia’s answer to the shoeshine boy whose stock tips prompted Joseph Kennedy to sell his shares before the Wall Street Crash of 1929.
RE: Uh-oh
I saw plenty of empty and often unfinished luxury gated communities in my own city of residence and others while living in China several years ago. In some cases, the developers ran out of money; in others, they absconded. Local Chinese officials are the biggest thieves of all, as my former boss can attest after having been cheated out of prime oceanfront land. Yet the bubble keeps expanding. There’s going to be a loud bang when it finally pops.
For your 2 May edition: Is North Korea behind the BP oil disaster off the coast of Louisiana?
Maybe I don’t know any better, but I’m not too terribly worried about a property bubble in Korea simply because the money chasing after housing is doing so in neighborhoods generally considered desirable for reasons other than just their potential for profit. They are seen as better quality, often with better schools or easier access to jobs or infrastructure.
In the three property markets I’m most familiar with — Orange County, Honolulu, and Las Vegas — two did not really lose much value because when all is said and done, they are still desirable places to live (the OC and Honolulu being so close to the water, clean, low crime, etc.). Las Vegas, on the other hand, started to skyrocket because lots of people were moving out there. They weren’t moving out for the weather but for easy jobs, cheap housing, etc. In short, they were moving there despite it being an undesirable area. It is not surprise that this area could not bring new people in to fill the houses that went vacant.
Also, the percent of the housing cost one has to come up with in South Korea is rather large compared to the US, I believe. I could obtain a housing loan for only 60% of the value of my home (this hurt, because the rate had been 80% when I purchased, but dropped to 60% in the few months the holdover tenants were still there; when they left I couldn’t readily get a loan to cover the “key money” I had to pay them upon their departure).
I think South Korean property values may be in for a cyclical adjustment, perhaps, but not a crisis from a housing bubble bursting.
I’m just an armchair economist, though, just with experience watching things (and buying a thing or two) from the ground.
“Maybe I don’t know any better, but I’m not too terribly worried about a property bubble in Korea simply because the money chasing after housing is doing so in neighborhoods generally considered desirable.”
–kushibo
Well I’m no brain about things like this. But in just the last month, the Bank of Japan, Moody’s Investor Service, Samsung Economic Research Institute, the International Monetrary Fund, and Stephen Roach, chairman of Morgan Stanley Asia Ltd., just to name a few, all sounded to me like they are feeling more than just a little bit concerned. Korea Land & Housing Corp., “the leading state-run property and housing construction company,” according to JoongAng, ” had debt/equity ratio of 525 percent in 2009.” And it’s rising. The number of small construction firms expected to go bankrupt in Korea is supposed to rise as the year progresses because many of them are beginning to find it increasingly difficult to find financing for their projects. Household debt continues to rise, while employment issues remain shaky. The credit risk index used by Korean bankers continues to rise as a result.
I think what we are going to see is a domino effect. As the IMF said, it’s not just China and Korea. It’s also India, Hong Kong, and Singapore. When one goes, they could all go together. China is a problem because when they go, they may strike a number of states, like Australia and Brazil, that are exporting raw materials being used to feed their construction madness. But the real problem is going to be the scale of the wealth that is likely to be destroyed when the bubbles burst together. There’s just too much debt in Asia today and hardly enough income to cover any of it.
And apparently, a financial crisis tend to follow the bursting of a debt-fueled property bubble. As you say, maybe Orange County’s real estate situation wasn’t as bad as in other parts of the country. On the other hand, the country just went through the worst recession since the Great Depression.
Which is to say that I do feel uncomfortable about this. Needless to say, I’m hoping that you are right and that we’ll be alright.
😉