North Korea: The Mouse That Roared?

In 1959, a film starring Peter Sellers, called The Mouse That Roared, was released.  The Internet Movie Database (imdb.com) describes the plot like this:

"An impoverished backward nation declares a war on the United States of America, hoping to lose, but things don't go according to plan. The Duchy of Grand Fenwick decides that the only way to get out of their economic woes is to declare war on the United States, lose and accept foreign aid. They send an invasion force to New York (armed with longbows) which arrives during a nuclear drill that has cleared the streets."

This reminds me of current day North Korea.  North Korea is a country devastated by years of corrupt, centralized, communist control of the economy.  The CIA World Fact Book estimates the entire GDP of the country is only $40 Billion.  It further describes their economy:

North Korea, one of the world's most centrally directed and least open economies, faces chronic economic problems. Industrial capital stock is nearly beyond repair as a result of years of under-investment,  shortages of spare parts, and poor maintenance. Large-scale military spending draws off resources needed for investment and civilian consumption. Industrial and power output have stagnated for years at a fraction of pre-1990 levels. Frequent weather-related crop failures aggravated chronic food shortages caused by on-going systemic problems, including a lack of arable land, collective farming practices, poor soil quality, insufficient fertilization, and persistent shortages of tractors and fuel. Large-scale international food aid deliveries as well as aid from China has allowed the people of North Korea to escape widespread starvation since famine threatened in 1995, but the population continues to suffer from prolonged malnutrition and poor living conditions. 

This is a country on the verge of collapse...if it weren't for foreign aid, they would have already collapsed and starved.

There is no way they can believe that they can actually prevail in a military contest against the South...let alone the United States.  In 1990, I remember the media telling us all how dangerous Iraq was.  We were told that they had the fourth largest standing-army in the world...the largest tank force...and they knew how to wage desert warfare.  The war was, in effect, over in 100 hours.  And, at least Iraq had oil money.  North Korea has no chance what-so-ever.  Even if they do have a nuclear weapon...it is probably only one, or two.  Then they have to be able to deliver it and set it off.  I think chances are better than even that, as in the movie, the bomb could be nothing but a dud.

It would not surprise me if Kim Jong Un's current saber rattling and bluster is nothing more than a scheme to get foreign countries to make concessions, in the form of pay-offs, as an attempt to keep his regime in power. I cannot think of any other possible reason for such foolhardy brinkmanship by North Korea other than hoping to get bought off for "peace."

While I don't think we should take any threat of nuclear attack lightly...I also can't quite take these clowns completely seriously either.  What will their price be?  $40 Billion and Starbucks franchise rights?  Maybe a McDoanlds in Pyongyang?  Whatever it is, we cannot pay it...we cannot allow ourselves to be shaken down by this ridiculous boy dictator.

The best thing for a roaring mouse is a simple mouse trap.

The More Things Change...

It's as true today as it was then...people don't know history...they are clueless about how the economy works...and don't know or care about the consequences of the way they vote.  People STILL believe that the Great Depression was a failure of the Free Market.  Why?  Because those really at fault, government, told them so.  But Friedman tells a different story:

"So the Great Depression was not produced by a failure of business.  On the contrary, it was produced by a failure of government...and a failure of government in an area in which responsibility had been assigned to government since the founding of this country...We have learned from that failure.  The Federal Reserve will not fail in the same way again.  This time it will fail in a different way.  This time it has been failing, not by producing a Great Depression, but by producing an inflation.  Because just as you will hear the story that it was business that was responsible for the depression, so you will today  hear the story that it is labor and management that are responsible for inflation.  It is the same kind of a myth."

The inflation he is speaking of here is in the 1970s when interest rates were in the double-digits and much of the American manufacturing base, such as steel, collapsed.  President Gerald Ford ran on a W.I.N. platform, which stood for Whip Inflation Now.  It was a time of what was being called "hyper-inflation," and it was devastating to our economy.

Today, we are on the verge of another devastation to our economy.  The Federal Reserve is printing more and more money.  This causes the value of the dollar to drop, and therefore, prices to raise...this is inflation.  But who is to blame.  Once again, Friedman tells it like it is:

"Inflation is made in one place, and one place only...Washington D.C.  And in Washington D.C., the chief source...immediate source of inflation...is a Greek temple on Constitution Avenue, which houses the Federal Reserve Board.  An accomplice, and a major accomplice of course, sits in the halls of Congress in Washington.  They are a major accomplice because you tell 'em to be.  The American people have been telling Congress for many years, 'Spend more money on us, please.'  But they've been telling us, 'Don't raise our taxes.'  Congress has been listening.  It's been spending more money on you, but, on the other hand, its been very unwilling to raise taxes.  As a result, its imposed inflation as a tax. That's one tax you don't have to vote for...but you have to pay."

I fear, though, that things are building to be even worse.  With the debt as high as it is, many in government today seem to have no problem both causing inflation and increasing taxes.

Watch the whole video.  It's an interesting history lesson, one that is very relevant for today.