World View–Luxembourg: Cyprus-Style Bailouts Will Kill Investment in Eurozone

This morning's key headlines from
  • Russia warns that North Korean situation could spiral out of control
  • Luxembourg opposes using Cyprus as a 'template' for euro bailouts
  • Relationship between Gulf nations and U.S. at a crossroads

Russia warns that North Korean situation could spiral out of control

Russia's Foreign Minister Sergei Lavrov called on both North Korea and the United States for "all sides not to flex their military muscle." He added: "We are concerned that alongside the adequate, collective reaction of the UN Security Council, unilateral action is being taken around North Korea that is increasing military activity."

His remarks come a day after the U.S. flew B-2 bombers across South Korea as part of scheduled military drills. Russia and China have criticized flying the B-2s, but refused to criticize North Korea in 2010, when they attacked a South Korean warplane with a torpedo, killing 46, or when they attacked and killed civilians on a South Korean island. 

The U.S. has been following a strategy of "strategic patience," which means that we don't respond to North Korea's stream of belligerent actions, in the hope that if we're patient long enough, then the North Koreans will stop doing them. That would require North Korea to exhibit a conciliatory mood and behavior, but from the point of view of Generational Dynamics, such a mood would be extremely unusual during a generational Crisis era. What's actually happened is that the North Koreans have been raising the stakes and adopting an increasingly belligerent attitude. 

Now the United States is raising the stakes as well with the B-2 overflights, and with actions by the Treasury Dept. targeting North Korea's banks and finances. This appears to signal that the policy of strategic patience is at least partially ending. 

Lavrov is right that the actions on both sides to cross red lines can spiral into full-scale war. In fact, from the point of view of generational theory, that's exactly the way that a violent crisis war begins during a generational Crisis era. 

Many analysts are referring to the danger of a "miscalculation," which means that a war might begin because of carelessness on one side or the other, but that's not the real danger. Japan's decision to bomb Pearl Harbor was not a careless decision. It was a thoroughly planned decision, based on hallucinatory assumptions. That's often the way generational crisis wars begin, and that's the real danger today. A lot of people believe that Kim Jong-un is a maniac, and maniacs start the worst wars. 

"Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule." -- Friedrich Nietzsche

Russia Today and Washington Post

Luxembourg opposes using Cyprus as a 'template' for euro bailouts

Leaders in Luxembourg are warning that if the Cyprus bailout model -- a levy on bank deposits -- is used in bailouts of other troubled euro zone countries, then investors will pull out of Europe. According to the country's finance minister: "This will lead to a situation in which investors invest their money outside the euro zone. In this difficult situation, we need to avoid anything that will lead to instability and destroy the trust of savers."

Luxembourg's leaders have good reason to worry. Luxembourg is described as a nation that's like "Cyprus on steroids," with a smaller population but a much larger banking sector, in a great deal of debt. 

In fact, the idea of using people's bank savings accounts to bail out countries in debt is very much on the table. The trend is that bailouts are getting more frequent and more serious, and the northern countries, particularly Germany, do not feel an obligation to continue bailing out other countries in Europe. Is Germany's money really Europe's money? The Germans say that it's Germany's money. Bloomberg and Spiegel

Relationship between Gulf nations and U.S. at a crossroads

The Gulf Cooperation Council (GCC), comprising Kuwait, Saudi Arabia, the UAE, Qatar, Bahrain and Oman, was founded in the early 1980s, in the shadow of the Iran/Iraq war. For the most part, the GCC states and the U.S. have shared a clear common and mutual interest in the stability and security of the Gulf region. But now they're growing further apart on an almost daily basis, with the two sides taking different positions on several major issues: 

  • On Syria, the GCC position is that the Bashar al-Assad regime has lost all legitimacy and the conflict is spilling over into neighboring nations. The GCC states are supporting the armed resistance, but the United states is supporting a continued arms embargo.
  • With regard to Iran's nuclear program, the U.S. favors a diplomatic approach, while the GCC nations see this as simply a way for Iran to stall for years to buy time to develop a nuclear program. The Arab Gulf states see this possibility as extremely dangerous, and view the U.S. position as underestimating the danger.
  • The U.S. has persistently failed to play an honest broker in the Arab-Israeli conflict. While the GCC states have repeatedly tried over the past decades to work toward a resolution of the crisis, including expanding diplomatic contact with Israel and sponsoring peace initiatives, the US has refused to take a more balanced position or undertake a concerted push for realistic Middle East peace.

Other areas of disagreement include Iraq, Yemen, and Bahrain. In the GCC view, the US fails to understand the overall strategic environment, and the dangers associated with the shifts taking place. 

The result is that the GCC states have no choice but to act on their own and without consideration of US interests and concerns. Arab News

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