Showing posts with label East Asia. Show all posts
Showing posts with label East Asia. Show all posts

Tuesday, December 26, 2017

Balloons & Flash Drives: How A Private Organization Is Trying To Incite Rebellion In North Korea

Authored by Anders Hagstrom via The Daily Caller,


The U.S.-based Human Rights Foundation (HSF) has worked with North Korean defectors to smuggle flash drives and other tools into their dictatorial homeland to counter the regime’s propaganda throughout 2017.



HSF director Alex Gladstein claims that his organization has successfully smuggled up to 10,000 flash drives into the country containing documentaries countering state narratives, according to The Telegraph.



The organization also uses massive hydrogen balloons plastered with news bulletins to float across the border into North Korea in hopes that citizens will realize their true situation and bring the country down from within.


“This is to liberate minds,” Gladstein told the paper.


 


“We’re creating little windows to the outside world so that the North Korean people can make decisions for themselves about what they want to do with their lives.”



HSF’s “Flash Drives for Freedom” campaign sees volunteers go to great risk smuggling USB sticks through black markets on the China-North Korea border. The majority of North Koreans have devices that can read the flash drives, and since the program began, HSF has smuggled in 2 million hours of footage and 48 million hours of reading material, reaching an estimated 1.1 million North Koreans. According to HSF’s website, the flash drives contain ebooks as well as an offline version of Korean wikipedia.


HSF began the program in 2013 by simply filling hydrogen balloons with DVDs and leaflets and floating them across the border. High level North Korean defectors have said that causing the general population to question their living conditions is one of the most effective ways to attack Kim Jong Un’s regime.


“Given the history of Eastern Europe, I hope that people can think about the potential of information rather than reckless conflict and provocation and totally failed diplomacy,” Gladstein said.


 


“There is nothing the government can do with information, they can’t manipulate it. It’s a very powerful thing.”



Thae Yong-ho, who was once second in command at North Korea’s U.K. embassy before defecting in 2016, calls the general population of North Korea Un’s “Achilles heel.”


“We cannot change the policy of terror of the Kim Jong-un regime,” he said. “But we can educate the North Korean population to stand up by disseminating outside information.”










Sunday, December 24, 2017

China"s Raging Against Dying Of The Light (Or Why Peak Employment Is Imminent)

Authored by Chris Hamilton via Econimica blog,


China"s working age population is clearly defined as those aged 16 to 50 years old for females (55 for "white collar" females) and 16 to 60 years old for males.  China mandates retirement at these outer age limits.  Perhaps of some interest should be that this working age population peaked in 2011 and has been declining since.  This decline will continue indefinitely as China has a collapsing childbearing population (detailed HERE), net emigration (outflow), and a still decidedly negative birthrate.


There is no evidence to believe the working age declines will abate any decade soon.  As the chart below shows, China"s potential workforce will be shrinking indefinitely... and by 2030 China"s potential workforce will be over 100 million fewer than the 2011 peak (an 11% decline)...and only further down from there.




China has one of the youngest average retirement ages in the developed world.  On average, according to a recent study (HERE), Chinese leave the work force by age 55 compared to age 63 in the US (Norway has the latest average departure at age 67).  So, perhaps China will be raising the retirement age to curb the ballooning 60+yr/old population entering retirement (chart below)?  More on that later.



Comparing the working age population versus the 60+yr/old population (chart below).  A shrinking potential workforce since peaking in 2011 and a rapidly growing elderly population.



Below, that elderly growth versus the working age depopulation as a % of all adults (chart below)...think hockey stick.  After nearly six decades of maintaining a consistent 60+yr/old % of the adult population...the elderly explosion is just beginning.



If we take the now declining total potential working age population vs. China"s still rising total number of employed individuals (according to Statista)...the chart below shows that if China adds just a mere million employees a year (about a third of the annual average employment growth seen from "06 through "16)...that by 2030 China"s employment will exceed 100% of the potential workforce.  Wait...what?!?  Or perhaps working from the premise that people who don"t exist can"t be employed...it"s time to start considering China"s employed population is set to begin falling.



This idea that there are "millions upon millions of Chinese just waiting to be incorporated into the workforce"...not so much.  While a continuing shift from rural to urban is likely, China has already or will soon experience peak employment. Simply put, there will be fewer consumers of everything (homes, cars, appliances, etc.) every year than the year before. 


Whatever overcapacity exists now will be joined by massive increases in excess housing, excess production, excess shopping malls as this depopulation plays out over the coming years and decades.


Five big points here:


1) China ends one child policy, with little to no impact...



  • Although China implemented its one child policy in 1979 and officially phased it out in 2015, China"s birthrate was actually consistently higher than most of the other major economies in East Asia (Japan, S. Korea, Taiwan, Singapore...chart below) and only N. Korea"s fertility rate is currently higher.





  • None of these other East Asia nations ever implemented birth restrictions.  Instead, their populaces chose not to replace themselves responding to the availability of birth control, surging costs of child rearing, and inclusion of females into the workforce, etc.  Simply put, the one child policy was inevitable and has now organically gone global.  The phase out of this policy will have little to no impact of China"s fertility rates.



2) China to raise retirement age, but no time soon...



  • In early 2015, China suggested it would detail in 2017 (which I still have not seen) a gradual, multiyear process to raise the retirement age (China"s version of political suicide).  Suggestions focused on slowly, incrementally, raising female retirement ages to match males and likewise, pushing retirements out by a month or two per year.  However, none of this was even suggested to start within the next five years and like most things, almost surely be back-end loaded so any real impacts are overstated.  Regardless Communist or "Capitalist" politicians, the game is the same.  A little "razzle-dazzle" that ensures any negative policy impacts never occurs on your watch.



3) China to institute Universal Pension Plan...



  • In late 2015, China said "We will achieve a basic pension for all employees nationally".  Currently, about 800 million of China"s 1.3 billion are eligible for state pensions.  According to Sinosphere, pensions for non-state employees vary widely, as high as 3000 RMB ($480) month in Beijing to as little as 80 RMB for rural farmers.  Civil Servants pensions are generally higher than those of non-state employees.  The party statement said, China would be;



    • “Building a fairer and more sustainable social welfare system.



      Implementing plans for every person to take part in social insurance.




      Diverting capital from state-owned enterprises to social security funds.





      Offering all urban and rural residents insurance for serious illness.”









4) Chinese wages & average per capita disposable income rising but gains are hugely variable...







  • While Chinese factory wages in tier 1 urban areas are now inline with Portugal or S. Africa, this terrific rise has created it"s own problems.  The rise in wages has been met with inflationary spikes in rents, fuel, food, etc. etc.  Average disposable income has risen in the urban areas but flat at best across rural China.  However, the response of employers to the spectacular rising wages has been automation, a shift away from labor intensive production, and outsourcing to lower cost countries.  This is at odds with the generally low skill/low education rural population looking for opportunity in the urban areas.  The breadth and size of further gains in disposable income is likely to be limited.  Economically, a declining total number of workers making marginally more money will not provide the desired growth.



5) China cannot export its way out of this...



  • The annual change to the 0-64yr/old combined populations of the 35 OECD nations (US, Canada, Europe, Japan, S. Korea, Australia/NZ) plus China, Brazil, and Russia begin declining in 2018 (chart below).  The core populations of the nations responsible for consuming 80%+ of all Chinese exports have peaked and begin shrinking.  Fewer consumers every year than the year before, indefinitely.  As for the nations that are doing all the growing, India and Africa, they consume about 4% of all Chinese exports.  BTW, the chart below shows when each nation/region 0-64yr/old population began declining.




Simply put, China is offering to increase and broaden it"s pension system to a ballooning population of elderly but will have a decreasing potential number of employees from which to pay for that increase?!? 


How will China achieve this?  Well, as the chart below shows, as Chinese core population growth has been decelerating, Chinese debt growth has been accelerating. 


While China"s GDP and energy consumption have led the world, they have not responded in kind to China"s debt explosion and exponentially more will be necessary to continue to show "growth".  Over a third and perhaps half of all the debt has been mal-invested in a housing bubble for a population that is never coming. 


What comes next isn"t going to be good for China nor the rest of the world as China looks to flood a depopulating nation with new debt only creating more housing overcapacity... China will look to beat the Japanese at the debt game.



For instance, the Chinese public-pension system as of 2014, took in 2.33 trillion yuan in revenue and paid out almost 2 trillion...with 3 trillion in net funds.  The net outflows and drawdown of those net funds is imminent.


But not to worry, the Communist Party explained that..."We will look at some opportunities with higher yields but will contain risk".  Again, no details were offered.  However, one asset it is clear the Chinese will not be buying...US Treasury"s (chart below, showing the net purchases since the debt ceiling debate of July 2011 according to TIC).  Since that date, China has been a net seller of US Treasury debt despite running record US dollar surplus" (BLICS = Belgium, Luxembourg, Ireland, Cayman Island, Switzerland).



From 2000 "til July 2011, China recycled 50% of its dollar trade surplus into US Treasury debt accumulating over $1.3 trillion.  Since July 2011, China has net sold over $100 billion and as of October, held about $1.2 trillion (chart below).



But I"m pretty sure those dollars aren"t sitting fallow and are finding their way into some asset, probably one in particular that is selling on the cheap about right now.




 









Sunday, December 17, 2017

Debunking The Myths About An Attack On North Korea

Submitted by The Saker,


First, the bragging dummies


Trump and Haley are still at it.  They want to force China to take action against the DPRK by threatening to take North Korea “into their hands” if China refuses to comply.  Haley said, “But to be clear, China can do more, (…) and we’re putting as much pressure on them as we can. The last time they completely cut off the oil, North Korea came to the table. And so we’ve told China they’ve got to do more. If they don’t do more, we’re going to take it into our own hands and then we’ll start to deal with secondary sanctions.”


First, let’s reset this scene in a kindergarten and replay it.


Kid A has a fight with Kid B.  Kid A threatens to beat up Kid B.  Kid B then tells Kid A to go screw himself.  Kid A does nothing, but issues more threats.  Kid B keeps laughing.  And then Kid A comes up with a brilliant plan: he threatens Kid C (who is much much bigger than Kid B and much much stronger too!) by telling him "if you don’t make Kid B comply with my demands, I will take the issue in my own hands!".  The entire schoolyard erupts in hysterical laughter.


Question: how would you the gauge the intelligence of Kid A? Anyway...


This would all be really funny if this was a comedy show.  But what this all is in reality is a slow but steady progression towards war.  What makes this even worse is the media’s obsession with the range of North Korean missiles and whether they can reach Guam or even the USA.  With all due respect for the imperial “only we matter” (and nevermind the "gooks"), there are ways “we”, i.e. the American people can suffer terrible consequences from a war in the Korean Peninsula which have nothing to do with missile strikes on Guam or the USA.



Image via The Saker


The lucrative target: Japan


This summer I mentioned one of the most overlooked potential consequences of a war with the DPRK and I want to revisit this issue again.  First, the relevant excerpt from the past article:


While I personally believe that Kim Jong-un is not insane and that the main objective of the North Korean leadership is to avoid a war at all costs, what if I am wrong?  What if those who say that the North Korean leaders are totally insane are right? Or, which I think is much more likely, what if Kim Jong-un and the North Korean leaders came to the conclusion that they have nothing to lose, that the Americans are going to kill them all, along with their families and friends?  What could they, in theory, do if truly desperate?  Well, let me tell you: forget about Guam; think Tokyo!  Indeed, while the DPRK could devastate Seoul with old fashioned artillery systems, DPRK missiles are probably capable of striking Tokyo or the Keihanshin region encompassing Kyoto, Osaka and Kobe including the key industries of the Hanshin Industrial Region.  The Greater Tokyo area (Kanto region) and the Keihanshin region are very densely populated (37 and 20 million people respectively) and contain an immense number of industries, many of which would produce an ecological disaster of immense proportions if hit by missiles.  Not only that, but a strike on the key economic and financial nodes of Japan would probably result in a 9-11 kind of international economic collapse.  So if the North Koreans wanted to really, really hurt the Americans what they could do is strike Seoul, and key cities in Japan resulting in a huge political crisis for the entire planet.  During the Cold War we used to study the consequences of a Soviet strike against Japan and the conclusion was always the same: Japan cannot afford a war of any kind.  The Japanese landmass is too small, too densely populated, to rich in lucrative targets and a war would lay waste to the entire country. This is still true today, only more so.  And just imagine the reaction in South Korea and Japan if some crazy US strike on the DPRK results in Seoul and Tokyo being hit by missiles!  The South Koreans have already made their position unambiguously clear, by the way. As for the Japanese, they are officially placing their hopes in missiles (as if technology could mitigate the consequences of insanity!).  So yeah, the DPRK is plenty dangerous and pushing them into their last resort is totally irresponsible indeed, nukes or no nukes.



Yet, for some reason, the western media rarely mentions Japan or the possible global economic consequences on a strike against Japan.  Very few people know for sure whether the North Koreans truly have developed a usable nuclear weapon (warhead and missile) or whether the North Korean ballistic missile truly can reach Guam or the USA.  But I don’t think that there is any doubt whatsoever that North Korean missile can easily cover the roughly 1000km (600 miles) to reach the heart of Japan.  In fact, the DPRK has already lobbed missiles over Japan in the past.  Some red blooded US Americans will, no doubt, explain to use that the US THAAD system can, and will, protect South Korea and Japan from such missile strikes.  Others, however, will disagree.  We won’t know until we find out, but judging by the absolutely dismal performance of the vaunted US Patriot system in the Gulf War,  I sure would not place my trust in any US made ABM system.  Last, but not least, the North Koreans could place a nuclear device (not even a real nuclear warhead) on a regular commercial ship or even a submarine, bring it to the coast of Japan and detonate it.  The subsequent panic and chaos might end up costing even more lives and money than the explosion itself.


Then there is Seoul, of course.  US analyst Anthony Cordesman put is very simply “A battle near the DMZ, directed at a target like Seoul, could rapidly escalate to the point at which it threatened the ROK’s entire economyeven if no major invasion took place."


[Sidebar: Cordesman being Cordesman, he proceeds to hallucinate about the effects of a DPRK invasion of the ROK and comes up with sentences such as “Problems drive any assessment of the outcome of a major DPRK invasion of the ROK, even if one only focuses on DPRK- ROK forces. The DPRK has far larger ground forces, but the outcome of what would today be an air – land battle driven heavily by the overall mobility of DPRK land forces and their ability to concentrate along given lines of advance relative to the attrition technically superior ROK land and air forces could inflict is impossible to calculate with any confidence, as is the actual mix of forces both sides could deploy in a given area and scenario“.  Yup, the man is seriously discussing AirLand battle concepts in the context of a DPRK invasion of the South!  He might as well be discussing the use of Follow-on-Forces Attack concept in the context of a Martian invasion of earth (or an equally likely Russian invasion of the Baltic statelets!).  It is funny and pathetic how a country with a totally offensive national strategy, military doctrine and force posture still feels the need to hallucinate some defensive scenarios to deal with the cognitive dissonance resulting from clearly being the bad guy.]



Why does Cordesman say that?  Because according to a South Korean specialist “DPRK artillery pieces of calibers 170mm and 240mm “could fire 10,000 rounds per minute to Seoul and its environs.”   During the war in Bosnia the western press spoke of “massive Serbian artillery strikes on Sarajevo” when the actual rate of fire was about 1 artillery shell per minute.  It just makes me wonder what they would call 10,000 rounds per minute.


The bottom line is this: you cannot expect your enemy to act in a way which suits you; in fact you should very much assume that he is going to do what you do not expect and what is the worst possible for you.  And, in this context, the DPRK has many more options than shooting an ICBM at Guam or the USA.  The nutcases in the Administration might not want to mention it, but an attack on the DPRK risks bringing down both the South Korean and the Japanese economies with immediate and global consequences: considering that rather shaky and vulnerable nature of the international financial and economic system, I very much doubt that a major crisis in Asia would not result in the collapse of the US economy (which is fragile anyway).


We should also consider the political consequences of a war on the Korean Peninsula, especially if, as is most likely, South Korea and Japan suffer catastrophic damage.  This situation could well result in such an explosion of anti-US feelings that the US would have to pack and leave from the region entirely.


How do you think the PRC feels about such a prospect?  Exactly.  And might this not explain why the Chinese are more than happy to let the USA deal with the North Korean problem knowing full well that one way or another the USA will lose without the Chinese having to fire a single shot?


The terrain


Next I want to re-visit a threat which is discussed much more often: North Korean artillery and special forces.  But first, I ask you to take a close look at the following three maps of North Korea:





These full-size maps can be downloaded from here.


What I want you to see is that the terrain in North Korea is what the military call “mixed terrain”.  The topography of North Korea article in Wikipedia actually explains this very well:


The terrain consists mostly of hills and mountains separated by deep, narrow valleys. The coastal plains are wide in the west and discontinuous in the east.  Early European visitors to Korea remarked that the country resembled “a sea in a heavy gale” because of the many successive mountain ranges that crisscross the peninsula. Some 80 percent of North Korea’s land area is composed of mountains and uplands, with all of the peninsula’s mountains with elevations of 2,000 metres (6,600 ft) or more located in North Korea. The great majority of the population lives in the plains and lowlands.



Being from Switzerland I know this kind of terrain very well (it’s what you would see in the Alpine foothills called “Oberland” or “Préalpes”) and I want to add the following: dense vegetation, forests, rivers and creek with steep banks and rapid currents.  Small villages and *a lot* of deep, underground tunnels. There are also flat areas in North Korea, of course, but, unlike Switzerland, they are composed mostly of rice fields and marshes.  In military terms this all translates into one simple and absolutely terrifying word: infantry.


Why should the word infantry scare so much? Because infantry means on foot (or horses) with very little airpower (AA and MANPADS), satellites (can’t see much), armor (can’t move around), gunships, submarines or cruise missiles can do.  Because infantry means “no lucrative targets” but small, dispersed and very well hidden forces.  Company and even platoon-level warfare.  Because infantry in mixed terrains means the kind of warfare the US Americans fear most.


The adversary


And with that in mind, let’s repeat that besides its huge regular armed forces (about a million soldiers plus another 5 million plus in paramilitary organizations) the DPRK also has 200,000 special forces.   Let’s assume that the Western propaganda is, for once, saying the truth and that the regular armed forces are poorly equipped, poorly trained, poorly commanded and even hungry and demotivated (I am not at all sure that this is a fair assumption, but bear with me).  But spreading that amount of soldiers all over the combat area would still represent a huge headache, even for “the best and most powerful armed forces in history” especially if you add 200,000 well-trained and highly motivated special forces to the mix (I hope that we can all agree that assuming that special forces are also demotivated would be rather irresponsible).  How would you go about finding out who is who and where the biggest threat comes from? And consider this: it would extremely naive to expect the North Korean special forces to show up in some clearly marked DPRK uniforms.  I bet you that a lot of them will show up in South Korean uniforms, and others in civilians clothes.  Can you imagine the chaos of trying to fight them?


You might say that the North Koreans have 1950"s era weapons.  So what?  That is exactly what you need to fight the kind of warfare we are talking about: infantry in mixed terrains.  Even WWII gear would do just fine.  Now is time to bring in the North Korean artillery.  We are talking about 8,600 artillery guns, and over 4,800 multiple rocket launchers (source).  Anthony Cordesman estimates that there are 20,000 pieces in the “surrounding areas” of Seoul.  That way is more than the US has worldwide (5,312 according to the 2017 “Military Balance”, including mortars).  And keep in mind that we are not talking about batteries nicely arranged in a flat desert, but thousands of simple but very effective artillery pieces spread all over the “mixed terrain” filled with millions of roaming men in arms, including 200,000 special forces.  And a lot of that artillery can reach Seoul, plenty enough to create a mass panic and exodus.


Think total, abject and bloody chaos


So when you think of a war against North Korea, don’t think “Hunt for Red October” or “Top Gun”.  Think total, abject and bloody chaos.  Think instant full-scale FUBAR.  And that is just for the first couple of days, then things will get worse, much worse.  Why?


Because by that time I expect the North Korean Navy and Air Force to have been completely wiped-off, waves after waves of cruise missiles will have hit an X number of facilities (with no way whatsoever to evaluate the impact of these strikes, but nevermind that) and the US military commanders will be looking at the President with no follow-up plan to offer.  As for the North Koreans, by then they will just be settling in for some serious warfare, infantry-style.


There is a better than average that a good part of the DPRK elites will be dead.   What is sure is that the command and control of the General Staff Department over many of its forces will be if not lost, then severely compromised.  But everybody will know that they have been attacked and by whom.  You don’t need much command and control when you are in a defensive posture in the kind of terrain were movement is hard to begin with.  In fact, this is the kind of warfare where “high command” usually means a captain or a major, not some faraway general.


You might ask about logistics?  What logistics I ask you? The ammo is stored nearby in ammo dumps, food you can always get yourself and, besides, its your home turf, the civilians will help.


Again, no maneuver warfare, no advanced communications, no heavy logistical train – we are talking about a kind of war which is much closer to WWII or even WWI than Desert Storm.


[Sidebar: as somebody who did a lot of interesting stuff with the Swiss military, let me add this: this kind of terrain is a battlefield were a single company can stop and hold an entire regiment; this is the kind of terrain where trying to accurately triangulate the position of an enemy radio is extremely hard; this is the kind of terrain where only horses and donkeys can carry heavy gear over narrow, zig-zagging, steep paths;  entire hospitals can be hidden underground with their entrance hidden by a barn or a shed; artillery guns are dug in underground and fire when a thick reinforced concrete hatch is moved to the side, then they hide; counter-battery radar hardly works due to bouncing signals; radio signals have a short range due to vegetation and terrain; weapon caches and even company size forces camps can only be detected by literally stepping on them; underground bunkers have numerous exits; air-assault operations are hindered by the very high risk of anti-aircraft gunfire or shoulder-fired missiles which can be hidden and come from any direction.  I could go on and on but I will just say this: if you want to defeat your adversary in such a terrain there is only one technique which works: you do what the Russians did in the mountains in southern Chechnia during the second Chechen war – you send in your special forces, small units on foot, and you fight the enemy on his own turf.  That is an extremely brutal, dangerous and difficult kind of warfare which I really don’t see the Americans doing.  The South Koreans, yes, maybe. But here is where the number game also kicks in: in Chechnia the Russians Spetsnaz operated in a relatively small combat zone and they had the numbers.  Now look at a map of North Korea and the number of North Korean special forces and tell me – do the South Koreans have the manpower for that kind of offensive operations?  One more thing: the typical US American reaction to such arguments would be “so what, we will just nuke them!".  Wrong.  Nuke them you can, but nukes are not very effective in that kind of terrain, finding a target is hard to begin with, enemy forces will be mostly hidden underground and, finally, you are going to use nukes to deal with company or platoon size units?!  Won’t work.]



If you think that I am trying to scare you, you are absolutely correct. I am.  You ought to be scared.  And notice that I did not even mention nukes.  No, not nuclear warheads in missiles.  Basic nuclear devices driven around in common army trucks.  Driven down near the DMZ in peacetime amongst thousands of other army trucks and then buried somewhere, ready to explode at the right time.  Can you imagine what the effect of a “no-warning” “where did it come from?” nuke might be on advancing US or South Korean forces?  Can you imagine how urgent the question “are there any more?” will become?  And, again, for that the North Koreans don’t even need a real nuclear weapon.  A primitive nuclear device will be plenty.


I can already hear the die-hard “rah-rah-rah we are number 1!” flag-wavers dismissing it all saying “ha! and you don’t think that the CIA already knows all that?”.  Maybe they do and maybe they don’t – but the problem is that the CIA, and the rest of the US intelligence community, has been so hopelessly politicized that it can do nothing against perceived political imperatives.  And, frankly, when I see that the US is trying to scare the North Koreans with B-1B and F-22s I wonder if anybody at the Pentagon, or at Langely, is still in touch with reality.  Besides, there is intelligence and then there is actionable intelligence. And in this case knowing what the Koreans could do does not at all mean know what to do about it.


Speaking of chaos – do you know what the Chinese specifically said about it?


Can you guess?


That they will “not allow chaos and war on the peninsula."


Enter the Chinese


Let’s talk about the Chinese now.  They made their position very clear: “If North Korea launches an attack that threatens the United States then China should stay neutral, but if the United States attacks first and tries to overthrow North Korea’s government China will stop them."  Since there is no chance at all of a unprovoked North Korean attack on the South or the USA, especially with this threat by the Chinese to remain neutral if the DPRK attacks first, let’s focus on the 2nd part of the warning.



What could the Chinese do if the US decides to attack North Korea?  There basic options depend on the nature of the attack:


  1. If the US limits itself to a combination of missile and airstrikes and the DPRK retaliates (or not), then the Chinese can simply provide technical, economic and humanitarian aid to the DPRK and denounce the US on a political level.

  2. If the USA follow up with a land invasion of some kind or if the DPRK decides to retaliate in a manner which would force the USA into a land invasion of some kind, then the Chinese could not only offer directly military aid, including military personnel, but they could also wait for the chaos to get total in Korea before opening a 2nd front against US forces (including, possibly, Taiwan).

That second scenario would create a dangerous situation for China, of course, but it would be even far more dangerous for US forces in Asia who would find themselves stretched very thin over a very large area with no good means to force either adversary to yield or stop.  Finally, just as China cannot allow the USA to crush North Korea, Russia cannot allow the USA to crush China.  Does that dynamic sound familiar?  It should as it is similar to what we have been observing in the Middle-East recently:


  1. Russia->Iran->Hezbollah->Syria

  2. Russia->China->DPRK

This is a very flexible and effective force posture where the smallest element is at the forefront of the line-up and the most powerful one most removed and at the back because it forces the other side to primarily focus on that frontline adversary while maximizing the risks of any possibly success because that success is likely to draw in the next, bigger and more powerful adversary.


Conclusion: preparing for genocide


The US has exactly a zero chance of disarming or, even less so, regime changing the DPRK by only missile and airstrikes.  To seriously and meaningfully take the DPRK “in their hands” the US leaders would need to approve of a land invasion.  However, even if that is not the plan, if the DPRK decides to use its immense, if relatively antiquated, firepower to strike at Seoul, the US will have no choice to move in ground forces across the DMZ.  If that happens about 500,000 ROK troops backed by 30,000 US military personnel will face about 1 million North Korea soldiers backed by 5 million paramilitaries and 200,000 special forces on a mix terrain battlefield which will require an infantry-heavy almost WWII kind of military operations.  By definition, if the USA attacks the DPRK to try to destroy its nuclear program such an attack will begin by missile and air strikes on DPRK facilities meaning that the USA will immediately strike at the most valuable targets (from the point of view of the North Koreans of course).  This means that following such an attack the US will have little or no dissuasive capabilities left and that means that following such an attack the DPRK will have no incentive left to show any kind of restraint.  In sharp contrast, even if the DPRK decides to begin with an artillery barrage across the DMZ, including the Seoul metropolitan area, they will still have the ability to further escalate by either attacking Japan or by setting off a nuclear device.  Should that happen there is an extremely high probability that the USA will either have to “declare victory and leave” (a time-honored US military tradition) or begin using numerous tactical nuclear strikes.  Tactical nuclear strikes, by the way, have a very limited effectiveness on prepared defensive position in mixed terrain, especially narrow valleys.  Besides, targets for such strikes are hard to find.  At the end of the day, the last and only option left to the USA is what they always eventually resort to would be to directly and deliberately engage in the mass murder of civilians to “break the enemy’s will to fight” and destroy the “regime support infrastructure” of the enemy’s forces (another time-honored US military tradition stretching back to the Indian wars and which was used during the Korean war and, more recently, in Yugoslavia).  Here I want to quote an article by Darien Cavanaugh in War is Boring:


On a per-capita basis, the Korean War was one of the deadliest wars in modern history, especially for the civilian population of North Korea. The scale of the devastation shocked and disgusted the American military personnel who witnessed it, including some who had fought in the most horrific battles of World War II (…).  These are staggering numbers, and the death rate during the Korean War was comparable to what occurred in the hardest hit countries of World War II. (…)  In fact, by the end of the war, the United States and its allies had dropped more bombs on the Korean Peninsula, the overwhelming majority of them on North Korea, than they had in the entire Pacific Theater of World War II.


“The physical destruction and loss of life on both sides was almost beyond comprehension, but the North suffered the greater damage, due to American saturation bombing and the scorched-earth policy of the retreating U.N. forces,” historian Charles K. Armstrong wrote in an essay for the Asia-Pacific Journal.  “The U.S. Air Force estimated that North Korea’s destruction was proportionately greater than that of Japan in the Second World War, where the U.S. had turned 64 major cities to rubble and used the atomic bomb to destroy two others. American planes dropped 635,000 tons of bombs on Korea—that is, essentially on North Korea—including 32,557 tons of napalm, compared to 503,000 tons of bombs dropped in the entire Pacific theatre of World War II.”  As Armstrong explains, this resulted in almost unparalleled devastation.  “The number of Korean dead, injured or missing by war’s end approached three million, ten percent of the overall population. The majority of those killed were in the North, which had half of the population of the South; although the DPRK does not have official figures, possibly twelve to fifteen percent of the population was killed in the war, a figure close to or surpassing the proportion of Soviet citizens killed in World War II.”


 


Twelve to fifteen percent of the entire population was murdered by US forces in Korea during the last war (compare these figures to the so-called ‘genocide’ of Srebrenica!).  That is what Nikki Haley and the psychopaths in Washington DC are really threatening to do when they speak of taking the situation “in their own hands” or, even better, when Trump threatens to “totally destroy” North Korea.  What Trump and his generals forget is that we are not in the 1950"s but in 2017 and that while the Korean War and a negligible economic impact on the rest of the planet, a war the middle of Far East Asia today would have huge economic consequences.  Furthermore, in the 1950"s the total US control over the mass media, at least in the so-called “free world” made it relatively easy to hide out the murderous rampage by US-lead forces, something completely impossible nowadays.  The modern reality is that irrespective of the actual military outcome on the ground, any US attack on the DPRK would result is such a massive loss of face for the USA that it would probably mark the end of the US presence in Asia and a massive international financial shock probably resulting in a crash of the currently already fragile US economy.  In contrast, China would come out as the big winner and the uncontested Asian superpower.



All the threats coming out of US politicians are nothing more than delusional hot air.  A country which has not won a single meaningful war since the war in the Pacific and whose Army is gradually being filled with semi-literate, gender-fluid and often conviction or unemployment avoiding soldiers is in no condition whatsoever to threaten a country with the wide choice of retaliatory options North Korea has.  The current barrage of US threats to engage in yet another genocidal war are both illegal under international law and politically counter-productive.  The fact is that the USA is unlikely to be able to politically survive a war against the DPRK and that it now has no other option than to either sit down and seriously negotiate with the North Koreans or accept that the DPRK has become an official nuclear power.


 









Friday, November 10, 2017

There"s No Such Thing As An "American" Homicide Rate

Authored by Ryan McMaken via The Mises Institute,



In September, the FBI released new homicide data, and the overall US homicide rate rose for the second year to an eight-year high. 


According to the report, the nationwide homicide rate in the US in 2016 was 5.3 per 100,000, up from 2015"s rate of 4.9. 


The homicide rate in 2014 - 4.4 per 100,000 - had been a 51-year low, and comparable to rates not seen since the 1950s. 


Homicide rates still remain well below where they were in the 1980s and 1990s, when homicide rates sometimes exceeded 9 per 100,000. 



homicide1.png


When it comes to making any serious analysis, however, nationwide homicide rates for a place as large as the United States are next to useless. When we look at numbers on a state-by-state basis, we find that homicide rates vary from 1.3 per 100,000 in New Hampshire to 11.8 per 100,000 in Louisiana. 


To offer some additional context, I"ve included rates from Canadian provinces (using Canada"s 2015 stats) side by side with US states:



statesprovinces.png


Presented as a map: 



homicde_canada_map_2.png


There are clear regional differences in many cases. States in the far north and far northeast of the United States report very low homicide rates while certain homicide "hotspots" apparently in Missouri, Maryland, Illinois, and the deep South are driving up US rates. 


These details emphasize the mistake of speaking of the nationwide US homicide rate as if it were in anyway descriptive of any single trend or legislative reality in the US. 


We often hear about homicides are rampant in "America" - presumably caused by high levels of private gun ownership - but any serious look at the numbers forces us to refine our question and instead ask why some parts of the US have some of the lowest homicide rates on earth, while the situation in other areas is considerably different. 


What Are the Important Factors in Homicides? 


Some places largely free of gun restrictions - like the Dakotas, Utah, Idaho, Minnesota, Vermont, and New Hampshire - have very low homicide rates. But other places with similar or more restrictive laws - such as Missouri, California, and most of Latin America - have much higher rates. Obviously, homicide rates are not simply a function of gun laws. 


Even researchers on the political left are increasingly coming to terms with the fact that homicide rates are not simply a matter of passing prohibitionist laws. 

One of the most recent examples of this is new research described by Leah Libresco at the Washington Times. Libresco noted that few, if any, of the gun bans being floated by policymakers is likely to be effective. Libresco notes


…my colleagues and I at FiveThirtyEight spent three months analyzing all 33,000 lives ended by guns each year in the United States, and I wound up frustrated in a whole new way. We looked at what interventions might have saved those people, and the case for the policies I’d lobbied for crumbled when I examined the evidence...


 


I researched the strictly tightened gun laws in Britain and Australia and concluded that they didn’t prove much about what America’s policy should be. Neither nation experienced drops in mass shootings or other gun related-crime that could be attributed to their buybacks and bans. Mass shootings were too rare in Australia for their absence after the buyback program to be clear evidence of progress. And in both Australia and Britain, the gun restrictions had an ambiguous effect on other gun-related crimes or deaths...


 


…no gun owner walks into the store to buy an “assault weapon.” It’s an invented classification that includes any semi-automatic that has two or more features, such as a bayonet mount, a rocket-propelled grenade-launcher mount, a folding stock or a pistol grip. But guns are modular, and any hobbyist can easily add these features at home, just as if they were snapping together Legos. … [S]ilencers limit hearing damage for shooters but don’t make gunfire dangerously quiet. An AR-15 with a silencer is about as loud as a jackhammer. Magazine limits were a little more promising, but a practiced shooter could still change magazines so fast as to make the limit meaningless...


 


By the time we published our project, I didn’t believe in many of the interventions I’d heard politicians tout. I was still anti-gun, at least from the point of view of most gun owners, and I don’t want a gun in my home, as I think the risk outweighs the benefits. But I can’t endorse policies whose only selling point is that gun owners hate them.



What Libresco did conclude, was that a host of societal issues are driving much of what we hear about in terms of so-called gun violence. Mental illness, suicide, gang violence, and domestic violence are all important factors that drive gun violence. The problem, Libresco admits, is that simply prohibiting certain types of guns doesn"t really address these issues. 


(For similar articles, see Jeffrey Goldberg at The Atlantic and Justin Cronin at The New York Times.)


Other factors we"ve covered here at mises.org include sky-high incarceration rates in the United States, and how the history, residential mobility, and cultural heterogeneity of the Americas make the US and Latin America quite different from Europe and East Asia in terms of homicide and violence. 


To understand the current trends, then, we have to look beyond a few headlines about rare mass shootings and look at larger demographics and societal trends. A focus on legislation, by contrast, tends to substitute wishful thinking for an understanding of the the complex reality.



 









Tuesday, November 7, 2017

Is Korea Just A Smokescreen?

Authored by Bryan McBride via Mises Canada,


Is Korea just a smokescreen?



In my last article (Sticking the arson charge on a couple of patsies) I questioned why North Korea’s nuclear program was attracting such attention from the United States. North Korea is a very poor and backwards country whose bellicosity reflects the regime’s need for an external enemy like the United States to galvanize domestic support. Attacking America and its allies in the region is the last thing North Korea’s leaders would want to do as such an attack would guarantee an American response that would be sure to destroy their lives, their government and the lives of millions of innocent Korean civilians.


However, this month I was made aware of another possible reason for the attention being paid to North Korea and its nuclear program.



What if the escalating tensions over Korea are just a smokescreen intended to legitimize an American military buildup in the region aimed at intimidating China?


In 2011, former U.S. President Barack Obama announced a change in U.S. foreign policy that was termed a ‘Pivot to Asia.’ The official thinking was that as China and the emerging countries of South-East Asia gained in economic importance, it made sense to devote more military and diplomatic attention to the region while reducing the attention paid to Europe and the Middle East.


Of course, observers also saw the pivot as a response to the rising economic, political and military power of a resurgent China. Just as the U.S. sought to contain the Soviet Union during the Cold War with a string of encircling alliances and economic agreements, so America today seeks to keep China in check through military alliances with East Asian countries like Japan, South Korea and Taiwan and trade agreements such as the Trans-Pacific Partnership (TPP).


Chinese leaders acutely resent continued American dominance in a region they consider their own backyard. However, they are not reckless and do not seek to engage in a potentially catastrophic military confrontation. Instead, they have spent the past few years establishing institutions and agreements which, taken together, will displace the U.S. dollar from the centre of the global financial system. Empire is expensive. Just as the British were forced to decolonize in the 1960s once the pound lost its reserve currency status in the years following World War II, so too will the demise of the dollar force American retreat from global (and, most importantly for the Chinese, East Asian) hegemony.


At this point, it is worthwhile to recall how the U.S. dollar became (and remains) the world’s reserve currency in the first place. At the Bretton Woods conference in 1944, it was agreed that all currencies would have a fixed exchange rate with the U.S. dollar, which itself would have a fixed value in terms of gold. From 1945 until 1971, foreign central banks were allowed to exchange their accumulated dollars for gold at a price of $35/ounce. As the U.S. dollar was literally ‘as good as gold,’ commodities were priced in dollars and foreign governments found it desirable to accumulate and hold dollars in order to purchase imports.


However, by the late 1960s the system was coming under stress. The value of the U.S. dollars in circulation abroad was far greater than the value of the 8000 tons of gold held by the U.S. Treasury in Fort Knox, Kentucky. In order to stop foreign governments stripping the U.S. of its gold reserves, in 1971 U.S. President Richard Nixon ‘temporarily suspended’ the convertibility of dollars for gold. Predictably, while a dollar bought 1/35th of an ounce of gold in 1971, by 1980 it only bought 1/850th of an ounce.


To try to arrest the decline in the value of the U.S. dollar Richard Nixon, in one of the last acts of his presidency, sent newly-appointed Treasury Secretary William Simon to Saudi Arabia in 1974. The agreement he came away with reinforced the dollar’s position as the global reserve currency by replacing gold convertibility with oil convertibility. In exchange for agreeing to price and sell oil in dollars and to lend their newly-acquired oil wealth to the U.S. by purchasing U.S. government Treasury bonds, the U.S. agreed to provide military aid and equipment to the Saudis.


To this day, oil continues to be priced and sold in dollars. As everyone therefore needs U.S. dollars (often referred to as petro-dollars) in order to purchase crucial energy imports, the dollar has remained the world’s reserve currency.


However, China has recently established two complementary markets aimed at removing this crucial pillar of dollar support. First, in April 2016 the Shanghai Gold Exchange launched a yuan-denominated gold price fix in order to become a price maker in a market historically dominated by London and New York. Uniquely, though, while in London and New York traders deal mainly in paper contracts for gold which are very rarely exercised, the Shanghai market is primarily a spot market whose participants purchase physical gold, usually in the form of one kilogram bars.


Second, within the last two months China has announced its intention to offer a crude oil futures contract denominated in yuan before the end of the year. This contract will establish a benchmark price for oil in yuan to compete with the dollar-denominated oil prices set in New York. To make the yuan-denominated contracts more attractive to oil exporters, the Chinese are emphasizing the convertibility of yuan for gold at the Shanghai Gold Exchange. As the economist and lawyer Jim Rickards put it recently:


“China, Russia and Iran are coordinating a new international monetary order that does not involve U.S. dollars. It has several parts, which together spell dollar doom. The first part is that China will buy oil from Russia and Iran in exchange for yuan.


 


“The yuan is not a major reserve currency, so it’s not an especially attractive asset for Russia or Iran to hold. China solves that problem by offering to convert yuan into gold on a spot basis on the Shanghai Gold Exchange.


 


“This marks the beginning of the end of the petro-dollar system that Henry Kissinger worked out with Saudi Arabia in 1974, after Nixon abandoned gold.”



Chinese yuan with the gold-convertibility of the pre-1971 U.S. dollar should prove an attractive alternative to the dollar for major oil exporters. Just this past month Saudi Arabia, the country at the centre of the petro-dollar arrangement, agreed to purchase S-400 air defense missile systems from Russia. By making this purchase, the Saudis are signaling that they no longer feel obliged to rely on America for their arms as laid out in the 1974 petro-dollar agreement. Might this historic first signal a repudiation of their commitment to price their oil in dollars as well?


If so, the end of the dollar is at hand, and with it the beginning of the end of the American empire. Weaker countries like Iraq and Libya which tried to price their oil exports in, respectively, euros and gold-backed dinars were invaded and bombed by the U.S. in order to maintain dollar supremacy. Given this history, the threat to American power posed by a yuan-denominated global oil market may also be met with force.


This being the case, it is reasonable to question whether the American air and naval units being moved to Asia are in fact being sent to protect American allies from North Korean missiles.


Looking at the bigger picture, it seems more likely that the entire Korean issue is a smokescreen designed to provide cover for a military buildup intended to intimidate or even force China to abandon its challenge to the U.S. dollar. However, China is not Iraq or Libya. It is a major nuclear power. Trying to enforce continued dollar dominance in East Asia could very well end in catastrophe for America, East Asia and the entire world.









Friday, November 3, 2017

The End Is Near... Depopulation Is Out Of Control... So Buy Stocks (Seriously)

Authored by Chris Hamilton via Econimica blog,


The world economy is premised on a ludicrous idea - that Asia, then India, and then Africa will continue to drive economic growth. 


So as not to turn this article into a book, lets consider this idea focusing on East Asia consisting of China, Japan, North and South Korea, Taiwan, and minor others.  This region consists of 1.6 billion persons or about 22% of earths inhabitants.  However, since 2008, it is this region that is responsible for nearly 100% of the global increase in demand for oil (best proxy available for true economic growth) and having primarily driven global economic growth.  My point in this article is that the growth in this region is entirely a credit driven supernova against collapsing populations which will never be able to fill the 100+ million newly added apartments or pay back the debt incurred to achieve the "growth".  Contrarily, from an investor standpoint, this weakness is the green light to "invest" as aggressively as possible because as long as central banks exist, they have your back.


Consider, since 2000, China"s debt outstanding has risen something like 14x"s to 17x"s or from about $2 trillion to something between $30 to $35 trillion presently.  As for Japan, who knows Japan"s true debt as Japan"s central bank is buying much or most of the debt and essentially throwing it in a black hole, never to be seen again(...monetization with a capital "M").


Why the massive debt creation and central bank monetization?  Depopulation with a capital "D".  First off, consider the collapse in fertility rates for these nations (chart below).  To maintain a constant, zero growth population, the childbearing population needs to produce 2.1 children in order to replace themselves (dashed line, below).  However, as the chart below shows, E. Asian nations have seen negative fertility rates for decades (Japan turning negative in "74, S. Korea in "83, China in "92, and N. Korea in "96).



Looking at the fertility rates from 2000 (chart below), some minor rises in fertility rates have been noticed in China since "00 and since "05 in Japan and S. Korea.  However, despite the minor upticks, all nations remain solidly negative and well below the 2.1 zero decline threshold.



For those expecting East Asia to continue driving global economic growth, I have a very big problem for you.  East Asia is in the midst of a population collapse.  The East Asian childbearing population, after rising by 366 million or +125% from 1950 until peaking in 2005, is now collapsing nearly as fast.  By 2030, those of childbearing age will have fallen by 180 million or a 27% decline (chart below).  By 2050, a clean halving of the childbearing population is likely.



So, the size of the childbearing population is back where it was in 1980 and by 2050 will be almost back to its 1960 size...but hypercritically, that population in 1960 was having approximately 5 children per family versus the 2020 or 2050 versions having somewhere around 1.6.  It is unlikely anything can be done to stop the depopulation daisy chain in East Asia and the economic collapse is already assured.  The collapse in demand against record quantities of assets is a mismatch for the ages...but of course central banks will continue to step in and monetize as long as possible.


As for the rest of the population, the growth among the heart of the regions economy, the 20 to 65 year olds, peaked in 1990 and has now indefinitely turned negative (falling something like 12 million from 2015 to 2020...and hundreds of millions fewer consumers, home buyers, tax payers by 2050).  Even the growth among the 65+ year old cadre will peak about 2035 before beginning to rapidly decelerate (change per five year periods, chart below).



Lastly, even growth among the old will be shifting to the very oldest as the bulk (and then the entirety) of the growth will be among the 75+ year olds (change per five year periods, chart below).



As for investors, this is your last and greatest chance.  The depopulation issue is not confined within East Asia.  The chart below shows the diving global fertility rate falling by more than 50% since peak fertility in the mid 1960"s.



It is a global phenomenon exhibited nearly everywhere but Sub-Saharan Africa.  The chart below shows global fertility rates are universally collapsing and it is nearly solely Africa that continues the global population increases...at least for now.



Even India and/or the Middle East / North Africa (MENA) are likewise seeing collapsing fertility rates. India"s fertility rate is almost sure to be negative by 2020.  There truly are no green shoots from a population growth perspective.



Central bankers will continue to "fake it" until they "make it".  Obviously, they never will "make it" but a select few will get absolutely rich beyond belief from central banker "efforts" as they continue to "fake it" as long as possible.  So, invest accordingly.









Tuesday, October 24, 2017

British Secretary Of State Refuses to Rule Out A "Preemptive Strike" On North Korea

Authored by Mac Slavo via SHTFplan.com,


Boris Johnson, the British secretary of state for foreign affairs, has said the option of military action against North Korea “must theoretically remain on the table” in discussions about the country’s nuclear crisis. Johnson refuses to rule out a preemptive strike.



According to The Independent UK, while speaking at Chatham House, the Foreign Secretary said it was “the duty” of United States President Donald Trump to keep the possibility of a preemptive strike against Kim Jong-un’s regime available at all times.


“It is the duty of any president of the US given the threat that his or her country could face from a nuclear-armed North Korea, it is the duty of the President at least to explore those military options and keep them on the table,” he said.


 


“And yet clearly it must remain on the table. The possibility of some kind of military option – there is a spectrum of things that could be done – that possibility must theoretically remain on the table.”



When pressured as to whether or not the United Kingdom would support a preemptive strike against North Korea, Johnson stressed that he preferred the “productive avenue” of talks orchestrated by China. “I don’t think anybody can conceivably want a military solution to this problem, and I know many who have studied the matter find it hard to see how the military solution might play out,” he said. He was also asked if it was now time that the world accepted the hermit nation as among the club of nuclear states. Although it didn’t appear that he answered that question directly, he did make reference to the Cold War.


“The public can be forgiven for genuinely starting to wonder whether the nuclear sword of Damocles is once again held over the head of a trembling human race,” Johnson said. However, the British politician did say the Pyongyang regime’s nuclear ambitions would not make the country safer.




“No one wants any kind of military solution to the problem,” he said.


 


“But Kim and the world need to understand that when the 45th President of the United States contemplates a regime led by a man who not only threatens to reduce New York to ‘ashes’, but who stands on the verge of acquiring the power to make good on his threat, I am afraid that the US president – whoever he or she might be – will have an absolute duty to prepare any option to keep safe not only the American people but all those who have sheltered under the American nuclear umbrella.


 


And I hope Kim will also consider this: that if his objective is to intimidate the US into wholesale withdrawal from East Asia, then it strikes me that his current course might almost be designed to produce the opposite effect.”



Johnson’s comments come on the heels of Donald Trump’s decertification of the 2015 pact with Iran. Trump said that his predecessor Barack Obama was taken advantage of in negotiations, and last week repeated his threat to pull out of the landmark deal entirely. Johnson alleged that the Iran deal proved crucial at a time when the country had been “only months away” from producing a nuclear weapon, which could have triggered an arms race in “one of the most volatile regions of the world.” He said: “Think of the nightmare that deal has avoided.” Johnson also added that Trump had not “junked” the deal and with “determination and courage” the joint comprehensive plan of action deal could be preserved.


Johnson also acknowledged concerns about Iran’s support for Hezbollah, its supply of weapons to Houthi rebels in Yemen and interference in Syria.


“But that does not mean for one minute that we should write Iran off, or that we should refuse to engage with Iran or that we should show disrespect to its people,” he said.


 


“On the contrary, we should continue to work to demonstrate to that population that they will be better off under this deal and the path of re-engagement that it prescribes.”










Monday, October 23, 2017

This Secretive Japanese Company Is Driving The Global Boom In Industrial Automation

As we’ve reported in the past, skyrocketing wages in mainland China have caused the adoption of robot workers by the country’s manufacturers to accelerate rapidly in recent years, cementing the country’s position as a world leader in industrial automation.



But while that trend has been widely cited and is widely known, particularly as the US plays catch up with one of its most prominent economic rivals despite President Donald Trump’s promises to bring back manufacturing jobs, what many don’t know is the worldwide boom in industrial automation has largely been driven by one press-shy Japanese company called Fanuc.


Fanuc, as Bloomberg Businessweek reports, manufacturers robots that can perform all manner of functions. From constructing complex motors to making injection-molded parts and electrical components. At pharmaceutical companies, Fanuc’s sorting robots categorize and package pills. At food-packaging facilities, they slice, squirt, and wrap edibles.



Sales of industrial robots in the US soared during the first quarter of 2017 as manufacturers spent more than half a billion dollars on new products bound for auto manufacturing centers in Indiana, Michigan and Ohio - and the overwhelming majority of these robots are being manufactured by Fanuc.


In the first quarter of 2017, North American manufacturers spent $516 million on industrial robots, a 32 percent jump from the same period a year earlier. A study published by the Brookings Institution shows many of them are ending up in steel and auto manufacturing centers such as Indiana, Michigan, and Ohio. According to the report, there are about nine industrial robots for every 1,000 workers in Toledo and Detroit—three times the figure for 2010. Many of these robots are Fanuc’s. Its machines are also in Tesla Inc.’s Gigafactory, in Nevada, lifting heavy chassis and delicately assembling battery trays, among other tasks. Its sorting robots, meanwhile, are ubiquitous at Amazon.com Inc.’s massive warehousing and shipping facilities.



But US sales are dwarfed by sales in China—which purchased some 90,000 units, almost a third of the world’s total industrial robot orders last year. Sales to China amounted to about 55 percent of the $5 billion that Fanuc’s automation unit generated in the fiscal year ended March 2017.


The International Federation of Robotics estimates that, by 2019, China’s annual industrial robot orders will rise to 160,000 units, suggesting Fanuc  will be insulated from any slowdown in the world’s second-largest economy. Yoshiharu told investors at his most recent Q&A session in April that the company expects demand in China to outstrip supply even after Fanuc opens a factory next August in Japan’s Ibaraki prefecture. The facility will be dedicated solely to keeping up with Chinese demand.


Fanuc, whose robots are painted in the company’s signature bright yellow, was founded in the 1950s by Seiuemon Inaba, a Japanese engineer. His son, Yoshiharu, now serves as CEO.



But of the many models of machines produced by Fanuc, none are more representative of the company’s dominance than the Robodrill - a machine used by Apple Inc. suppliers to make the metal casings that have been a feature of every iPhone since the iPhone four.


Analysts even cited Robodrill sales to discount rumors that the Apple 8 and Apple X wouldn’t feature the metal casing.


King of them all is the Robodrill, which plays first violin in one of the great symphonies of modern production: machining the metal casing for Apple Inc.’s iPhones. In the fiscal year surrounding the 2010 introduction of the iPhone 4, the first to use an all-metal casing, Robodrill sales more than doubled.


 


Since then, this relationship has become so chummy that, based solely on strong first-quarter Robodrill sales, analysts discounted early rumors the iPhone 8 would eschew metal casing for front-and-back glass panels. Instead, the recent iPhone 8 release and coming iPhone X launch spurred higher Robodrill sales to Apple’s manufacturers in China, some of which are building new factories to assemble the company’s phones. New iPhones also mean more demand for Robodrills from Chinese smartphone makers such as Xiaomi, Vivo, Oppo Electronics, and Huawei Technologies, which often present their own more affordable models in the wake of each fresh offering from Apple.



Indeed, Fanuc’s machines are directly responsible for the return of offshore manufacturing jobs to North America, as companies realize they can achieve more efficient streamlining and less costly economies of scale with “lights out” factories stocked with robots.



The Robodrill


Of course, this trend, as Bloomberg notes, won’t save American manufacturing jobs - if anything it will only slow the decline. Companies are spending more money than ever before on robots. And as academics and even investors like Bill Gross speak up about the potential for automation to reshape the global labor market in fundamental ways, there’s a strong argument that Fanuc is the most important manufacturing company in the world right now.


That this status is held by a Japanese company is hardly surprising. The country’s looming demographic crisis, driven by the lowest birth rate in the developed world, has bolstered domestic demand for machines that can augment or replace human workers.


And as China goes, so goes the rest of the industrial world. Multinationals that are reshoring operations from East Asia to North America and Europe are doing so in part because automation promises sophisticated production methods and labor savings; they, and companies who stayed out of China in the first place, are spending more than ever on industrial robots. The overarching pattern is less a reversal of the 20th century’s offshore manufacturing boom than an unraveling, with jobs vanishing from developing and developed nations alike.


 


Amid the tumult, there’s one clear winner: the $50 billion company that controls most of the world’s market for factory automation and industrial robotics. In fact, Fanuc might just be the single most important manufacturing company in the world right now, because everything Fanuc does is designed to make it part of what every other manufacturing company is doing.



Fanuc reached an important milestone in its conquest of the US market in the early 1980s when the CEO of GM purchased the first Fanuc robots to work on GM assembly lines.


The resulting press coverage caught the attention of Roger Smith, who had recently become president and CEO of General Motors Corp. Smith had joined GM’s accounting division 30 years earlier, after spending the final two years of World War II in the U.S. Navy. He’d risen through the corporate ranks slowly, gaining prominence as GM deftly navigated the gasoline crisis of the 1970s to become America’s top automaker.


 


When Smith took over, GM held 46 percent of the U.S. auto market, but the industry was in decline, and most companies were looking to cut costs and improve efficiency to compete with Japanese automakers. GM was in the enviable position of being flush with cash, and Smith had ideas, most of which sought to restore the company’s focus on technological innovation. Like Fanuc, GM had pioneered early developments in numerical control, including the use of a storage system to record the movements of a human machinist, then mimic them on demand. Such experiments had led Smith to imagine what he called a “lights-out factory of the future,” which would so limit reliance on assembly workers at GM plants that lights and air-conditioning would be unnecessary. The company failed to advance very far in that direction, though, choosing to focus instead on the traditional manufacturing methods that were helping it dominate the U.S. auto market.


 


Fanuc’s robots were unlike anything Smith had seen outside his own dreams, and he soon decided he’d found the way forward for GM. A year after he became CEO, on a humid June afternoon in Troy, Mich., a yellow robot bowed first to Smith and then Inaba before swinging its arm to cut the ribbon for a joint venture called GMFanuc Robotics Corp.



As advances in automation and machine learning continue to accrue, human workers in all but the most-skilled professions will slowly see their jobs lost to an army of robots. But as Bloomberg points out, while an optimist might hope the consequences of automation might be limited to workers enjoying more meaningful pursuits with their free time, whether automation will lead to a higher standard of living for all - or rather further imbalance already lopsided economic inequality remains to be seen.