Bill Blain: "It Looks Like North Korea Is No Longer Playing To The Chinese Script"

Tyler Durden's picture

Submitted by Bill Blain of Mint Partners

What we don't know about Korea and China?

“The Chinese use two brush strokes for “crisis”. One brush stroke stands for danger, the other for opportunity.”

Everyone is guessing about North Korea! Who knows what happens next… Probably less than markets fear.. but that won’t stop us worrying about it…

The reaction of markets (on a US holiday) might mean the antics of the Hermit Kingdom are losing some of their capacity for immediate shock and destabilisation. Are markets becoming blasé about the repeated threats? Probably not - the pressure on asset prices and price volatility remains high as participants anticipate a wide range of outcomes.

What’s the right asset positioning? Risk on/off? What are the dangers in terms of the liquidity/return/safe-haven equation? Do nothing and hope it all plays out positively? (Hope is never a strategy.) How contained will it be? Take a defensive stance and miss upside if/when its resolved? Or buy the dips because the risks are massively overstated and its “opportunity”!

Either you know… or you are guessing.

Smarter political minds than I might be able to work out scenario probabilities on how this plays out.

I buy into the current impasse as a China story: To what extent can/might China exercise guidance and control? It rather suited them to watch Trump fulminating and leave him embarrassed. That may no longer be true. It rather looks like the North Koreans are not playing to the script – clearly catching China as surprised and angry as the rest of us at a hydrogen blast 10 times more powerful than Hiroshima. The potential for China to lose patience with N Korea adds a new factor.

Initially it looked like China would be the likely winner, playing the blessed peacemaker role in its own backyard. We were trying to figure what potential upside for China of scoring geo-political points if Korea goads Trump into doing something “hasty” might be? And, what would be the figurative and literal fallout if the Americans lose patience.. (pretty much a worst case scenario)? 

The current what-ifs could change in an instant… I read a number of analysts making contrarian calls about the opportunity to buy cheap Korean stocks and go long the Won. Perhaps it changes the China equation – especially if there is a flood of refugees from the North as some analysts suggest?  Putting China under pressure immediately ahead of the Peoples National Congress in October (picking the next leaders) is an “interesting” shot across the bow.

The other big known unknown this week will be the ECB meeting - and in this case I confidently expect market disappointment.  Draghi will wait before giving any definitive guidance on the direction and scope for further asset purchase schemes. In other words it will be more uncertainty about when the ECB starts to tighten (for that is what a taper effectively is.) We won’t know till later this year.

The big question is the Euro – at what stage does the ECB start to signal its “concern” about the strength when inflation remains weak and the fledgling recovery is still taking hold. Or does the market decide for them? No sign of weakness from a market still convinced Europe is a big recovery story. That could change. 

I continue to harbour suspicions on just how papier-mâché the European façade is. Last week I was reading through the lists of eligible ECB bonds - it’s a pretty complete list of every bond deal ever launched. We know what, but not how much, they buy of that list.

Based on a hint from the excellent Marcus Ashworth of Bloomberg, one issue that got me thinking is the stack of European Sovereign and Agency bonds the ECB holds: there is a letter from Draghi on line confirming the ECB holds no EIB bonds.

So what do they hold in that Euro 180 bln SSA portfolio?

There is a long list of eligible European agencies and banks with government support, ranging from French railways to Landesbanks, to Italian savings banks to Portuguese agencies.. Not saying - not for one moment - that these are tat issuers… but they are sovereign obligations with sovereign ratings for a reason..…

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Looney's picture

 

Why would China or Russia confront us directly, when they can use Little Kim as the kid that screamed, “Look, the King is Naked”?

Looney

strannick's picture

North Korea is America's / CIA vassal. Not Chinas.

There will always be/ have always been rumours of wingnut North Korea. This serves America's interest not China's. Keeps South Korea and Japan close and Asia unintegrated.

sincerely_yours's picture

N Korea plays both sides.

It takes money from the US for its nuclear ambition and allows itself to be wagged when US Presidents need a distraction.

But it'll NEVER betray China. Never.

BaBaBouy's picture

China/Russia aint' Happy...

They got radiation drifting into their backyards...

sincerely_yours's picture

China & Russia are ALL business, while the US is ALL warmongering. http://wp.me/p4OZ4v-2g9

Mtnrunnr's picture

Playing chicken with a suicidal maniac is inadvisable.

Got The Wrong No's picture

I wonder what the North Korean people think of Kim's posturing? 

Also, is there any kind of exodus from South Korea?

Our Propaganda level has reached a strong 8 and rising. 

johngaltfla's picture

With fat boy in NK doing this, the markets will not be dull tonight.

Luc X. Ifer's picture

Wrong. Actually NK always did, do and will do. What happens now must be analysed in a larger context.

1. China is officially at war over trade with US for some days since DT declarations, so they know they will lose value here.

2. China has to deal with its over-inflated economy and the insurgence of the crypto's threatening the established monetary system it's economical value generation is built upon.

3. China officially engaged into leaving the $ and moving into gold to price the crude.

4. US is obviously badly hurt now socially and economically due to long term illness and the random nature events given bad wounds which seem will aggravate in the very near future. US barely survives anymore like an old rich aristocrat in a hospital emergency room where all medical teams struggle around the clock to keep the old fart alive for some few more days or hours.

So, it is in the interest of China to unleash the NK dog to engage the badly weakened old fart US.

Escrava Isaura's picture

strannick :North Korea is America's / CIA vassal. Not Chinas.

You need to take some history classes before commenting. Neither nation is US vassal.

North Korea is doing exactly what is expected by what history has shown them, meaning, this is not 1953 Korea, this time they will do some damage to whoever try to invade them.

 

 

strannick's picture

Did I offend your normalcy bias?

I realize the MSM paints very compelling portraits of its villans.

Maybe he serves both their interests. I can't say for sure since I'm not invited to these councils tho America benefits most from the hubris of Mr. Jong Il and nobody can continue to maintain that kind of power, wedged between two/three SuperPowers, without outside help. World Leaders have been boyonetted in the ass and dragged thru the streets for much less.

Escrava Isaura's picture

Still, neither nation is US vassal, and that’s why we have this mess. This has nothing to do with North Korea, and the quote below summarize it, what is at stake, very well:

 "The American way of life is not negotiable." — George H. W. Bush, 1992 Earth Summit in Rio de Janeiro.

 

lew1024's picture

NK has 25M people and an agriculture, coal and generally-illegal drugs economy, with hunger chronic and famine intermittant.

No way in hell that economy and that society support a nuclear weapons program for both fusion and fission, an ICBM program with several different models in development simultaneously, 10 million people in some kind of military group, 1.9M under arms. And a submarine fleet.

The idea that NK is a signficant enemy is ridiculous. They bought all of their armaments and programs with drug profits. From the genuine enemies, most of whom are very likely allies or our own military suppliers. Also, likely the Clinton's sales of America's secrets, of course.

No doubt many countries in the world trade their weapons for drugs, but the US is surely a leader in this. The Deep State-MIC need fearsome enemies, legacy media certainly thinks NK is fearsome!

Swampster's picture

How many billions have 'we' given N. Korea again?....but they are not working for the jew world order......uh huh....right!

Cash2Riches's picture

The time to topple North Korea is coming soon, very soon. They have violeted the NAP over and over again, by threatening to blow part everyone of their neighbours repeatedly. This is one of the very few interventions that I would support.

This is going to cause massive effects on the global markets, but hey, take action and you will be prepared. Its a change that is needed.

edotabin's picture

I've been screaming it for a month. Cooperate and drop him like a sack of shit. While I'm not on the inside, there is a good chance China's leash is snapping or has snapped.

Kim is by far the worst character in a bad story. He represents a 70 year old wound. China is not the same as back then and neither is Russia.

Cooperation of the 3 major powers is one thing the Kims' plan didn't count on, couldn't foresee and cannot withstand.

Stupid, stupid leaders....... you don't play games with people like Kim. Anyone who would treat his people this way cares about nothing and will stop at nothing.

Block him off completely and absolutely. Assassinate him if you can. Disseminate info to his people. Shoot down every fucking missile he tries to launch and be ready to move in at a moment's notice.

lew1024's picture

Total marine charge the bunker BS thinking.

Do it subtly. Trade with NK, remove all the restrictions, open them to the internet.

10 years, some criminal syndicate partnering with the CIA will have infiltrated the country and control it.  We deal with those people all the time, no problem.

MasterControl's picture

Strange how NK is pushing war feverishly as soon as the US swamp begins to be drained.

lew1024's picture

I don't see that any swamp draining has begun.  Merely the possible threat has caused all this.

GETrDun's picture

Dang it! thats what i was gonna say!

Ben A Drill's picture

It's not about money. It's about military power. The money will come later.

ET's picture

Kim Jong Un targeting his missiles at Guam in the second island chain was part of the Chinese strategy to strengthen China's territorial claims in the South China Sea.

Guam is a major staging area for US military operations and power projection.

The Chinese leadership plans to control the Strait of Malacca and the Indian Ocean to protect its trade with the Middle East, Europe and North Africa. The US military is a potential obstacle in this endeavor. India, Vietnam, Malaysia and Indonesia, all to a lesser extent, are also potential obstacles. This is part of the reason for Chinese arms sales to Pakistan, a rival of India, and the frequent telling of the maritime history of Zheng He, the admiral who sailed to East Africa centuries ago and colonized no foreign lands.

Annexing Taiwan is also part of China's strategy for long-term control of sea lines of communication and trade through the South China Sea.

China is moving forward with its Chinese equivalent of the Monroe Doctrine and claiming regional hegemony of the East and Southeast Asian seaboard. All going according to plan.

kommissar's picture

would also explain the ramming of 2 us warships.

ET's picture

Unlikely.

This is most likely due to poor seamanship and complacency close to port.

Joshua2415's picture

I have no doubt that the Chinese are the ones giving ICBM's and nukes to North Korea.  Kim is playing the same role for China that Fidel played for the USSR in 1962.

ET's picture

A way to de-escalate the Korean Peninsula missile crisis is for the US to agree with Russia and China that it will do two things in return for their assistance in the North Korean problem.

1) Withdraw from Ukraine and halt further eastward expansion of NATO.

2) Stop all arms sales to Taiwan.

wisehiney's picture

Hurricane Kim.

Not in alphabetical sequence.

Cheating, line breaking, mofo.

Yes We Can. But Lets Not.'s picture

Do you recall when in November 2016 President-Elect Trump noted that Obama had felt compelled to identify to him a 'big problem for the country'?  http://www.bbc.com/news/world-us-canada-38176047

When media asked Trump to identify the 'big problem' he suggested they inquire with Obama. Obama never identified the 'big problem'.

Well, now it seems the 'big problem' that Obama dumped in Trump's lap has been identified.

Golf clap for Barack H. Obama.

Son of Captain Nemo's picture

Bill Blain: "It Looks Like North Korea Is No Longer Playing To The Chinese Script"

Question for Bill. How does he know that to be true?

https://www.rt.com/news/401947-china-trump-trade-threat/

https://www.rt.com/news/401974-unsc-approves-resolution-north-korea/

DPRK "IS" CHINA and RUSSIA'S "BUSINESS" EVER SINCE THE U.S. HAS BEEN THERE SINCE 1952!

Pleb_From_Windsorstan's picture

We need to quickly export democracy to NK.

Stan Smith's picture

Im amused by how few folks seem to think China's issues arent issues with this.    In the long game, isnt this really just about China.   On both sides, from both ends?

I'd argue the only really thing that can happen here is China finally gets tired of NK and whacks the fat little fuck.    Im confident they can find some other crazy bastard they can have more control over in there.  

Regardless, it's going to be China's move(s) to make regardless of how much bloviating we in the USA do about it.

I'd rather they flatten the place than us.

Winston Churchill's picture

Stop bloviating.

Unless his new powers have gone to Kims head(possible,but unlikely), the Chinese must have

their agents inside his inner circle.That would only be natural considering the very deep ties

the Un family has with the CCP.They were an essential part of Mao's victory over Chiang in

his revolutionary war.If they wanted him gone,he'd be dead, buried and almost forgotten by

now.

If he deviates from the plan, which is unkown to us,thats what will happen.

Ergo, he is doing exactly what China wants.

What China wants is the real question ?

researchfix's picture

What China wants is the real question ?

China wants Asia yankee-free. So they will be pushed out of SK. By nuking the Dollar or by force if US starts it.

Gohigher's picture

Gold Star for rational thoughts. Yankee Free Zone just starts at the DMZ with more to follow. And SK remembers all those killed above and below the 38th, they were Koreans. SK will become Crimea. They will side along cultural and trade lines, not some hijacked political ideology.

kommissar's picture

that would be the "kim" family, actually.

Consuelo's picture

 

 

With regard to Orientals:  Read the Strategems.

 

"Make a sound in the East, strike in the West"...

ET's picture

https://www.youtube.com/watch?v=VBPEiZRcaWY

China's Active-Defense strategy is to lure the enemy deep and then strike with overwhelming force.

Byrond's picture

The script is the same, but it was written for POTUS Hillary. That's the problem. But say, for example, we shoot down NK's next ICBM. What will happen next? Sadly, nobody can write a script faster than missiles can be launched. One goes up, a bunch more go up, then a bunch more go up, all in the blink of an eye (or in a few blinks).

ET's picture

A massive salvo of ballistic missiles with multiple warheads in each missile can overwhelm anti-ballistic missile defenses. Ballistic missiles with conventional warheads or no warheads at all can be launched as decoys.

Launching one ballistic missile at a time is mainly for test purposes. If we ever see a massive salvo of ballistic missiles, then it is Global Thermonuclear War.

CPL's picture

19 days to go. 

"Kim", drop what you are doing.  Time to go.  Need some distance between us and the big bang boom, dumb fuckers left it running too long.  Run through the checklist I've sent over.  Grab anything not nailed down.  Pull in the nets. Secure cargo, lock up and gtfo fast.  Storm coming and here's a piece of advice.

If half your herd wanders out and a storm is coming, you don't give a shit.  You lock up the barn and get to the bunker.  Just make sure you got more cows than bulls for breeding.  All the ones outside, you consider them dead already.

brushhog's picture

Who the fuck knows? Is China lying? Are we being lied to by inside interests? Is Bill Blaine using hyperbole?

wisebastard's picture

if hurricane irma takes out the east coast and KJU takes out the rest of the east coast what the hell do you think is gonna happen......

wisebastard's picture

The most important of these is self-preservation. The country says it wants a nuclear bomb because it saw what happened when Iraq and Libya surrendered their weapons of mass destruction: their regimes were toppled by Western-backed interventions. It wants to stop others, namely the administration of President Donald Trump, from toppling its totalitarian regime.

"They learned their lesson from Libya and Iraq that the sure-fire way to prevent an attack is to have weapons of mass destruction, rather than just bragging about it," said John Nilsson-Wright, a senior research fellow at Chatham House, a London-based think tank.

 

https://www.nbcnews.com/news/world/north-korea-after-icbm-test-what-does...

Duc888's picture

 

 

This has nothing to do with WMD's.  This is all about Norks walking away from the Petro Dollar, as did Iraq, Libya and Syria..

francis scott falseflag's picture

 

NorKo's threats to the US are no more real than Israel's threats to Iran. 

THERE'S A MUCH BIGGER GAME BEING PLAYED.

"Mattis warns North Korea of 'massive military response' if it threatens US, allies"

 

The US is playing catch-up.  Russia said it would do the same 5 years ago.  This is the US trying to start a

conventional war with Russia by starting a conventional war with NorKo.  

 

Not gonna work, fellas.


turkey george palmer's picture

China can't know for sure. Or do they? About  the NK they certainly do. About us they for sure do. Nothing this serious can be possibly a guessing game. That would negate the point of the NWO. So what's it gonna be. The us in a pickle or not. I'd bet not. So Kim will go somehow and China gets the credit. Stocks to the moon of course.russia might be  OK then if that's what China wants.

lolmao500's picture

NKorean fusion bomb has russian markings so

In.Sip.ient's picture

Yes, It does "look" like a Sakharov design.

 

OTOH, that would be "conventional" for that type

of device.