This Emperor Has No Clothes

First, we have to realize that the North Korean regime is so embedded with its propaganda that it enjoys a religious reverence, despite its extremely poor populace. South Korea right next door is 20 times richer, yet…

It has survived 70 years, longer than any top-down regime in the communist world.

But it has an “Achilles’ Heel.” The country’s demographics aren’t as bad as those of Russia…

But they’re still bad enough to make them desperate on top of their extremely low GDP per capita. How long can you keep the “bad dream” going?

The Soviet Union started to fail when people’s satellite dishes brought the American show “Dallas” over the borders… oh, the big bad West didn’t look so bad after that!

Which goes a long way to explaining why North Korea is doing a lot of nuclear saber-rattling.

Look at its spending wave of workforce growth for an emerging nation…

Between 2020 and 2030, North Korea’s predictable spending wave is peaking and now has a long, steady drop ahead. The problem is, the country is already as poor as dirt. As it faces a demographic slowdown ahead, the economic pain will be brutal.

And as we’ve seen throughout history, and recently with Russia with slowing demographics and crippling-high military spending: desperate is as desperate does.

Kim Jong-un knows his country is weak. He knows it’s in trouble. And he fears this makes it a target for more successful capitalist countries next door, like South Korea, to ultimately invade, and even possibly China at some point. He does not want South Korea to disrupt his 70-year regime where a few live like kings and drink more Louis XIII Cognac than any country in the world.

Why does China not cooperate with the Western powers and put pressure on North Korea? It desperately needs North Korea as a buffer against South Korea and U.S. forces there. They don’t want them to collapse and put South Korea on their border with all of their U.S. forces and bases. Nor do they want poor North Koreans fleeing over their borders if it collapses.

So Kim does what any desperate person would do. He’s making a show of his only “power,” like a cat that puffs itself up to look bigger than it really is when it’s feeling threatened. “I have a few nukes, and am just crazy enough to set them off if you challenge me in any way!

Does this sound a bit like Saddam Hussein?

He won’t likely ever do that as he would be destroyed in a moment. This “great puff” is all about a deterrent, like Hussein not wanting us to know he no longer had chemical weapons.

In short, North Korea is blustering but it’s a dying country with a weak economy that’s only power is a top-down regime that concentrates on military spending to enhance its leverage.

This will not end well for North Korea, as it did not end well with the Soviet Union… and as it will not end well for Putin ahead.

Top-down governments like Russia, North Korea, and China have no place in the bottom-up information world.

The confrontation between Trump and Kim Jong-un will likely continue to rock markets in the next few weeks – and possibly for a few years – but there’s no way that Kim wins in the end.

He’s the emperor with no clothes, like Saddam Hussein that threatened the “mother of all wars,” and ended up hiding in a trash can… and got hung after that.

Big talking dictators from small countries that threaten major countries rarely do well in the end.

Maybe this 70-year regime is ready to finally lose power after all… we’ll see.

Harry
Follow me on Twitter @harrydentjr

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About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.