North Korea Does It Again
  • 15 September 2017

North Korea Does It Again

Yes, unbelievably they are at it again, with another missile launch over Japan.

Japan again had to issue an alert to its citizens and to say the least, the Japanese are fuming.

They are really angry now and they want something done.

The US Defense Secretary, in an immediate response, has said indeed more has to be done. He specifically singled out China and Russia to take their own unilateral measures against North Korea. To make it clear this is totally unacceptable. He also said measures other than sanctions were required.

This is the first round of response only.

We can be sure there will be more to follow in the next few days. This will likely be front page news tomorrow, and mistakenly, some buyers will be cautious at auctions around the country.

Citibank came out and said a Korean conflict will lead to a global war?

Now this is absolute nonsense from a bank that is the biggest in the world, and also most wrong in forecasting, well, just about anything. No one should pay any attention, but unfortunately, some will. Simply for the reason that Citibank is big.

People generally make the error that big organisations know better than we do. This is not correct. In fact, the evidence of the past two decades clearly points in the direction of “the bigger they are the more hopeless they are”. From the GFC to the European sovereign debt crisis, all starting with the collapse of the US housing market, these banks made consistently larger and larger errors.

We need to address the North Korean issue as it will be weighing on many peoples minds, and while it is the wild card risk for stock markets in a short term sense, this is not so true of the property market. Even if buyers stood back for a moment, there would be no rush of selling to drive prices lower. This is because any conflict would be short and sharp. Most likely a significant military exchange accompanying a simultaneous coup within North Korea.

A new cease fire would occur very quickly indeed.

The reason this is possible is because it is now so abundantly clear to everyone that North Korea will not cease and desist, but rather persist. It would seem North Korea really believes there will be no first strike on nuclear facilities by US lead forces, or any military response of any kind. Therefore, from North Korea’s perspective, it is a clear open road ahead to missile tests and hydrogen bomb tests all the way to becoming a fully fledged nuclear power.

Now, when we consider that Japan feels immediately threatened. North Korea today said it would “sink” Japan, as there was no longer any need for the existence of Japan. Yes, they did actually say that. And we add that Guam has been threatened. And we add that the US, among others, is finally grasping that this will never stop. Then, you have the perfect set up for the US and Japan, if not South Korea too, to make it very clear that they are willing to take military action. The only way to do that now, would be to actually do it.

Therefore, we have to consider turning on our screens one morning and seeing that the US has carried out a Tomahawk cruise missile attack on a few carefully selected targets. At that point, the world will stop for a moment, and wait for North Korea to blink. As in, announce a coup, or at least a zero to limited response to the US attack.

This is because the North Koreans seem so sure nothing will happen, that they will likely be in a state of shock. It will be a wake-up call of such proportions to the surrounding Generals, that even if the North Korea leader gave the border for a military reply, it may not actually happen.

So this is my slightly negative, but then positive suggestions on the subject. When confronted with a bully, warning them not to do anything can only take you so far.

Russia and China will remain neutral or actually support the overthrow of the North Korean leadership. They will not act as military allies to North Korea, and in fact, China has readied troops for an invasion of North Korea.

This latest missile test may well be the tipping point. The tipping point that leads to a small managed conflict and at last the removal of the North Korean leader.

So while this all sounds dire. It will not at all derail the global economy. In fact, the economies of China, South Korea and Japan could well surge at a resolution finally being in place.

As for the Australian property market, we would in fact only see the briefest of hesitations.

The domestic economy continues to do well. Exports are strong. All in an environment of an accelerating Europe, very strong China, retail sales just came in above 10% yet again, and the re-accelerating USA with full employment.

So watch out for some scary headlines, and at the same time look to take advantage of anyone else’s hesitation.

Clifford Bennett

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