Global Affairs

Another Financial Armageddon Expected In Near Future?

World Economy sleepwalking to another financial crises is quite a hot topic these days. Quite recently Mervyn King who was governor of Bank of England during the 2008 financial crises gave a speech in the semiannual meeting of the International Monetary Fund where he highlighted this issue.

I listened to his speech and he very rightly pointed out that by sticking to the new orthodoxy of the monetary policy and pretending that we have made the banking system safe and sound by introducing regulatory acts and laws we are sleepwalking towards the crises. It is predicted that the world will endure an extended period of low growth with ineffective ultra-low interest rates and infact the process has started already. Moreover, following the Great Inflation, the Great Stability, and the Great Recession, we have now entered the period of Great Stagnation.

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The World Economy is slowing down

There is no denying the fact that combating another financial crises would not be easy as the world already is experiencing a synchronized growth slowdown. The world is in a low growth trap for now and this can be validated by taking into account the performance of major economies. Quoting the example of China, its economy has grown by 6% in the third quarter of this year, its slowest pace in last 30 years. In addition to this, the German economy shrank by 0.1% in the second quarter and a contraction is expected in the third and fourth quarter as well placing its economy in a technical recession.

Main reasons for this slowdown in the world economy being the trade war between America and China, slowing manufacturing and shrinking investment opportunities. Furthermore, riots in Hong Kong, problems in key emerging countries such as Argentina and Turkey, growing tensions between France and Germany over the future direction of Euro and the increasingly bitter political conflict in the US. Also, not to ignore the ongoing tensions between Arab-foes which again are leading to slow world economic growth.

To conclude, prevailing trade tensions, policy uncertainty, and geopolitical risks will have to be resolved by all stakeholders who are shaping world economy.  Also, it is now time for the US Federal Reserve and other central banks to initiate talks with politicians behind closed doors to make legislators aware of how vulnerable they would be in another crisis. 

Period.

Global Affairs

A Glimpse Back in the Korean History and What is North Korea Up to Now?

Source: A Glimpse Back in the Korean History and What is North Korea Up to Now?

Global Affairs

A Glimpse Back in the Korean History and What is North Korea Up to Now?

Ever since North Korea tested her latest intercontinental ballistic missile last month, South Korea and her biggest ally America feel threatened. North Korea’s leader Kim John-Un has increased the number of missile tests since he came into power which was after his father Kim Jong II passed away in the year 2011. The country’s nuclear program was launched in the Soviet era and its first nuclear reactor was constructed in the year 1965, but the first successful nuclear test attempt was carried out in 2006. Despite witnessing sanctions by the UN over nuclear testing in the past, North Korea still continues to conduct more of its ballistic missile tests without fearing the consequences. The most recent threat to North Korea by the UN Security Council would be to ban its exports which are worth one billion. North Koreas response to this threat is still being awaited.

Before going any further it is imperative that we first understand the reasons which led to the division of Korea, reasons of conflict between North and South Korea and why is North Korea seen as a threat to US. During the beginning of the 19th century Korea was more of an isolated state and due to the fear of being exploited or weakened by the empires of that time, it avoided any trade with the outside world.

However, somewhere in the year 1880 the Korean government felt the need of connecting itself to the outside world as it did not want to lag behind other countries in terms of both technology and economy. The first country to have the privilege of signing a peace treaty with Korea was Japan. And then later on, Korea signed treaties with USA, Germany, Britain and France.

The privilege that Japan had over other countries was that it had the greatest influence on Korea. Sometime later, an uprising took place within Korea against Japan and a Japanese military leader was killed. The compensation that Korea had to pay for this was in form of another treaty called “The Treaty of Jemulpo” which increased Japanese influence in Korea.  Increasing Japanese influence meant interference of Japan in both Korea’s internal and external affairs. Japan imposed some radical reforms in the state and took control of Korea’s relations with other countries. However, Japan also got the credit of developing Korea by building bridges, railways and roads. The Japanese also built many factories in Korea. Japan’s plan of completely taking over Korea however failed during the World War II as it lost in the Great War.

From there onwards, the fate of Korea lay in the hands of Russia and US. Prior to the war, Russia and the US had decided to divide Korea into two zones. Korea was divided along an imaginary line, the 38th parallel. Russia took over North Korea and installed a communist government whereas South Korea chose to become a democratic state. In the year 1950, North Korea invaded South Korea and the invasion took the shape of a war as South Korea was helped by US. In 1953 the war ended at a stalemate and a cease fire was signed.

 

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North Korea after the War and to present day

After World War II, North Korea came under the rule of Russia. Russia’s red army trained the South Korean army. In 1946, North Korea’s Communist Party, called the Korean Workers’ Party, was inaugurated. Soviet-backed leadership was installed, including Red Army-trained Kim Il-sung.

In the year 1948, Democratic People’s Republic of Korea was proclaimed, with Kim II-sung installed as the leader. Soviet troops withdrew. After installing a communist government in North Korea, Russia withdrew its forces from there. After a three year war between North and South Korea, a cease-fire was signed between both the countries.

In 1960s, North Korean economy witnessed a boom. The focus of the Korean leaders from day one has been to improve military as an institution and therefore heavy expenditure of the country’s GDP is spent on missiles, and war equipment. One of the reason for which they do this is because they want their enemy to fear them. Despite signing agreements with UN on freezing their nuclear program and other relevant projects, they still continue to do so. Also, North Korea has so far carried out various ballistic missile tests and the most recent one happened last month. USA, by putting sanctions and giving statements against the nuclear capabilities shows how much it fears North Korea.

It would suffice to say that US sees North Korea as a threat to her power and North Korea enjoys frightening US out of her wits by carrying out nuclear tests frequently.