t_co
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The World in 2024.
Stars are capital cities of independent countries. Red stars are enemies. Yellow stars are neutrals. Blue stars are allies.
A peaceful place - for China.
Here is how it happened.
As the clock struck midnight on December 31st, 2019, Japan's government teetered on the brink of default, shouldering over ten trillion dollars of debt on a mere five trillion dollars of GDP and a population, that, thanks to long lifespans, low birthrates, and exclusion of women from the workplace, had the lowest ratio of workers to retirees in the developed world.
One day later, North Korea declared war on South Korea, and fired ten ballistic missiles at Tokyo to 'dissuade intervention'.
While the Japanese shot down the missiles, the fuse on Japan had been lit.
With market skittishness in Tokyo at all-time highs, China found this the perfect opportunity to begin the long-awaited collapse in the Japanese bond market, and as the Nodongs arced over the Sea of Japan, began dumping its $500 billion in Japanese bonds. Yields skyrocketed. Private foreign investors were then forced to sell as well, because many of them were investment funds using the Japanese bonds as cheap collateral on riskier assets. The Saudis followed. Within minutes, 15% of Japan's bond market was being 'offered', but there were no incoming bids to take the securities. Japanese bond yields then rose (or bond prices then fell) over 40% in a half-hour as desperate sellers unloaded into a bone-dry market. At this point, the Japanese government shut down the bond market and set up a 'liability reconciliation commission' to sort out the nation's finances in an 'orderly and just manner', which the markets understood to mean a partial default.
Several Asian nations were late to the selloff. South Korea, busy dealing with a North Korean invasion, saw $400 billion in paper wealth halve by the end of day. Malaysia, Thailand, and the Philippines, too, bled heavily. On the streets of Manila, Filipino housewives who had been encouraged by the government to buy Japanese 'friendship bonds' began smashing and overturning Japanese cars. The Bangkok branch of the Mitsubishi-UFJ bank froze withdrawals, until angry depositors overwhelmed police, stormed into the vaults, and 'withdrawals' resumed.
Russia also held over $100 billion in Japanese bonds, and it, too, was late. A dozen destroyers and submarines flying the Cross of St. Andrew slipped out of Vladivostok on 'peacekeeping exercises' as the Moscow time zone awoke. Instead of heading towards the Koreas, however, they set sail straight for Hokkaido.
The world kept turning, and financial markets kept opening the year to bad news. Fistfights broke out on the floor of the NYSE. In Canary Wharf, the London police spread out nets and foam pads on sidewalks below bank headquarters. A hedge fund trader in Chicago parked his car atop a rail crossing; the train barely stopped in time, whereupon the trader moved his car out of the way, climbed into the locomotive, apologized to the train engineer, and shot himself.
Even as the world economy went off the deep end, the South Koreans were having a field day. The North's attack was driven by desperation, as Beijing had finally decided to cut off its petroleum shipments. The North's divisions had limited reserves of fuel; relentless South Korean air and fire strikes on rear-area depots only made it worse. More than a half-century of preparation had paid off; engineers breached the DMZ in reverse the Korean peninsula, armored divisions penetrated into the operational rear, and infantry and artillery began rolling up isolated elements one by one.
China sat and brooded.
When Pyongyang was at risk, China decided to act. The leadership summoned the North Korean ambassador to Zhongnanhai, where they offered North Korea a large portion of China's 'obsolete' military inventory in exchange for China occupying North Korea's 3 northern provinces. North Korea accepted, and China sent another 10,000 artillery guns and rocket launchers, half a thousand fighter aircraft, two thousand tanks, and six thousand APCs, plus unlimited fuel and ammunition replenishment for 30 days.
China had no misconceptions about what would happen.
The war ended 3 weeks later. North Korea fought, and fought hard - but lost, yet lost gloriously. In the end, their tooth-and-nail resistance created over 2.5 million North Korean military dead, 8 million NK civilian dead, over 80,000 South Korean military casualties and 1 million South Korean civilian casualties. They also damaged or destroyed all infrastructure between the 38th parallel and the Yalu River, and destroyed over a quarter of Seoul's military equipment, and increased Seoul's external debt by 75%. Net net, they ensured that South Korea would be so focused on rebuilding and so hungry for Chinese trade that she would not pressure China for 15 years, and so drained of military-age manpower and military equipment that even if she so desired she could not.
China honored their sacrifices in private, and then immediately sent envoys to Seoul as the hostilities were winding down. There, in the midst of multilateral peace talks, China's envoys offered the 3 North Korean provinces back - a shocking gesture of magnanimity that earned respect from its intended recipients - ASEAN. China also pledged resources to the rebuilding of North Korea. At the same summit, Japan, pressured by South Korea to pay its bonds in full in order to help with reconstruction, categorically refused, for it knew that agreeing to the South Korean demand at a multilateral summit would induce the other nations there to also pressure it for full repayment. And thus, with North Korea - the main reason for the South Korea's begrudging acceptance of Japan and the US - out of the way, South Korea (now Korea) was free to vent its full anger at Japan. A permanent rift was driven between South Korea and Japan at the summit, and China followed up its diplomatic goodwill by signing a non-aggression pact with Seoul.
Meanwhile, the world's economies continued to descend into chaos. To be continued...
Stars are capital cities of independent countries. Red stars are enemies. Yellow stars are neutrals. Blue stars are allies.
A peaceful place - for China.
Here is how it happened.
As the clock struck midnight on December 31st, 2019, Japan's government teetered on the brink of default, shouldering over ten trillion dollars of debt on a mere five trillion dollars of GDP and a population, that, thanks to long lifespans, low birthrates, and exclusion of women from the workplace, had the lowest ratio of workers to retirees in the developed world.
One day later, North Korea declared war on South Korea, and fired ten ballistic missiles at Tokyo to 'dissuade intervention'.
While the Japanese shot down the missiles, the fuse on Japan had been lit.
With market skittishness in Tokyo at all-time highs, China found this the perfect opportunity to begin the long-awaited collapse in the Japanese bond market, and as the Nodongs arced over the Sea of Japan, began dumping its $500 billion in Japanese bonds. Yields skyrocketed. Private foreign investors were then forced to sell as well, because many of them were investment funds using the Japanese bonds as cheap collateral on riskier assets. The Saudis followed. Within minutes, 15% of Japan's bond market was being 'offered', but there were no incoming bids to take the securities. Japanese bond yields then rose (or bond prices then fell) over 40% in a half-hour as desperate sellers unloaded into a bone-dry market. At this point, the Japanese government shut down the bond market and set up a 'liability reconciliation commission' to sort out the nation's finances in an 'orderly and just manner', which the markets understood to mean a partial default.
Several Asian nations were late to the selloff. South Korea, busy dealing with a North Korean invasion, saw $400 billion in paper wealth halve by the end of day. Malaysia, Thailand, and the Philippines, too, bled heavily. On the streets of Manila, Filipino housewives who had been encouraged by the government to buy Japanese 'friendship bonds' began smashing and overturning Japanese cars. The Bangkok branch of the Mitsubishi-UFJ bank froze withdrawals, until angry depositors overwhelmed police, stormed into the vaults, and 'withdrawals' resumed.
Russia also held over $100 billion in Japanese bonds, and it, too, was late. A dozen destroyers and submarines flying the Cross of St. Andrew slipped out of Vladivostok on 'peacekeeping exercises' as the Moscow time zone awoke. Instead of heading towards the Koreas, however, they set sail straight for Hokkaido.
The world kept turning, and financial markets kept opening the year to bad news. Fistfights broke out on the floor of the NYSE. In Canary Wharf, the London police spread out nets and foam pads on sidewalks below bank headquarters. A hedge fund trader in Chicago parked his car atop a rail crossing; the train barely stopped in time, whereupon the trader moved his car out of the way, climbed into the locomotive, apologized to the train engineer, and shot himself.
Even as the world economy went off the deep end, the South Koreans were having a field day. The North's attack was driven by desperation, as Beijing had finally decided to cut off its petroleum shipments. The North's divisions had limited reserves of fuel; relentless South Korean air and fire strikes on rear-area depots only made it worse. More than a half-century of preparation had paid off; engineers breached the DMZ in reverse the Korean peninsula, armored divisions penetrated into the operational rear, and infantry and artillery began rolling up isolated elements one by one.
China sat and brooded.
When Pyongyang was at risk, China decided to act. The leadership summoned the North Korean ambassador to Zhongnanhai, where they offered North Korea a large portion of China's 'obsolete' military inventory in exchange for China occupying North Korea's 3 northern provinces. North Korea accepted, and China sent another 10,000 artillery guns and rocket launchers, half a thousand fighter aircraft, two thousand tanks, and six thousand APCs, plus unlimited fuel and ammunition replenishment for 30 days.
China had no misconceptions about what would happen.
The war ended 3 weeks later. North Korea fought, and fought hard - but lost, yet lost gloriously. In the end, their tooth-and-nail resistance created over 2.5 million North Korean military dead, 8 million NK civilian dead, over 80,000 South Korean military casualties and 1 million South Korean civilian casualties. They also damaged or destroyed all infrastructure between the 38th parallel and the Yalu River, and destroyed over a quarter of Seoul's military equipment, and increased Seoul's external debt by 75%. Net net, they ensured that South Korea would be so focused on rebuilding and so hungry for Chinese trade that she would not pressure China for 15 years, and so drained of military-age manpower and military equipment that even if she so desired she could not.
China honored their sacrifices in private, and then immediately sent envoys to Seoul as the hostilities were winding down. There, in the midst of multilateral peace talks, China's envoys offered the 3 North Korean provinces back - a shocking gesture of magnanimity that earned respect from its intended recipients - ASEAN. China also pledged resources to the rebuilding of North Korea. At the same summit, Japan, pressured by South Korea to pay its bonds in full in order to help with reconstruction, categorically refused, for it knew that agreeing to the South Korean demand at a multilateral summit would induce the other nations there to also pressure it for full repayment. And thus, with North Korea - the main reason for the South Korea's begrudging acceptance of Japan and the US - out of the way, South Korea (now Korea) was free to vent its full anger at Japan. A permanent rift was driven between South Korea and Japan at the summit, and China followed up its diplomatic goodwill by signing a non-aggression pact with Seoul.
Meanwhile, the world's economies continued to descend into chaos. To be continued...
