Monday, August 26, 2013

The China Sea is gathering storm




If there were a war between China and Japan (the #2 and #3 economy), the US (#1 economy) will most likely support Japan and all the forecasts in this book as of 4/2013 will be off and we will be return to a global recession.


There have been disputes with the islets between China, Taiwan, Japan, Korea, Philippine and Vietnam for the presumed oil or gas in the near-by ocean. The disputes have been mild for over 40 years (I remember the protest when I was a college student) and no side wants to do anything until recently. All these countries would not want to agitate China and China would not want to harm the trading relationship. Now, the U.S. wants to side with countries against China. With the backing of the U.S.'s Seventh Fleet and the U.S.'s promises, all these countries suddenly cry out loudly for the last few years.

If China starts the dispute initially, China grossly miscalculates and grossly underestimates the military might of the U.S. navy. If Japan resumes the dispute, they are risking losing trade (#1 export to China) and the tourists from China.

It is the U.S.'s intention to remain as #1 and the big brother in this part of the globe. It is not a wise decision unless we still live in the past glory when you're either my puppet or my enemy. Most likely, it is decided by the politicians who want to divert our attentions as they cannot resolve our problems such as employment. The government still wants to be the leader (to another recession?) by giving and spending billions here and there.

If the U.S. wants to promote selling weapons to Asian countries (the U.S. is #1 in exporting weapons), we are playing a risky game and the potential profit most likely will not justify the consequences.

China might withdraw the loans and we would be back to the worst depression in our history. It is quite dumb for China to loan us money to build the Asian missile wall against N. Korea and most probably against China. When Japan and Korea fight against each other on the disputed islet, which position would we want to side with? If your answer is both, should we send missiles from one of our battleships to another one of our own? J

We cannot afford another war. We've spent $1.365 trillion in the two current wars so far. We cannot visualize how much is one billion, not to mention one trillion. The current tallest building in the world (in Dubai) costs about $1.5 billion. We can build about nine hundred (900, not a typo) tallest buildings in the world and not even fathom of how many jobs would be created.

Wars cause human suffering. China is not a tiger, but it is far from a paper tiger. Japan's navy is stronger than most folks in the U.S. can ever imagine. Japan has been the aggressor to China for centuries and has been war criminals against Korea, China and most other Asian countries in WW2. They have not compensated all the damages to Asian countries that they destroyed during WW2. Their leaders still pay respect to the war criminals in their ‘shrines’ and rewrite history books not admitting Nanjing Massacre had happened.

As usual, we always pick up the brick, aim and hit our own big toe. It was Vietnam, then the two wars in Middle East and now potential wars in China Sea. We have not yet learned lessons from the French, the Brits and the Russians who had been to Vietnam, Afghan and they all lost big.

No politicians would tell us that all our troubles are due to the high expense of the wars we participated in. We have had about 20 years of secular bear market due to the Vietnam War, followed by about 20 years of secular bull market due to the lack of war, and now 12 years of secular bear market (as of 2012) due to the Middle East wars. At the mean time, many of us do not have jobs or under employed.

The disputes will not be good for all countries involved. The U.S. does not have sufficient resources to start another war. Hope it will not happen. Let the sleeping dogs lie and silence is golden. The one who started to surface the dispute has  grossly miscalculated.


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The above is from  my book Debunk the Myths in Investing (from amazon.com).

It is one of the 133 chapters. The most important chapter is to show you how to detect the next market plunge via simple techniques.



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