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11-Jan-17 World View — China threatens Trump with ‘revenge’ over one-China policy

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This morning’s key headlines from GenerationalDynamics.com

  • Taiwan president Tsai Ing-Wen meets with Senator Cruz in Texas
  • China threatens Trump with ‘revenge’ over one-China policy

Taiwan president Tsai Ing-Wen meets with Senator Cruz in Texas

Tsai Ing-wen (standing) meets with Texas Governor Greg Abbott on Sunday
Tsai Ing-wen (standing) meets with Texas Governor Greg Abbott on Sunday

Ignoring demands that the US forbid Taiwan’s president Tsai Ing-wen from making “transit stops” in Houston and San Francisco en route to and from meetings with Central American leaders, Tsai met with both US Senator Ted Cruz and Texas Governor Greg Abbott during a stopover in Houston.

China’s foreign ministry spokesman made this statement about the visit:

“I have taken note of relevant reports. I want to reiterate that we are firmly opposed to the Taiwan leader’s contact with any US officials in any form and engagement in actions that disrupt and undermine China-US relations during the so-called transit. We once again urge relevant people from the US to abide by the one-China policy and the principles of the three Joint Communiqués, and cautiously handle Taiwan-related issues so as not to harm the overall interests of China-US relations and peace and stability across the Taiwan Straits.”

As I’ve said before, it really amazes me that the US is supposed to bow to demands from China not to speak to or meet with people that China tells us not to speak to or meet with, and yet we’re supposed to accept without question China’s right to build military bases in the South China Sea, in clear violation of international law as decided by the United Nations Permanent Court of Arbitration (PCA) in the Hague in July of last year, while annexing other countries’ territories as Hitler did just prior to World War II.

Prior to the meeting, China’s Consul General Li Qiangmin of Houston sent a letter to Cruz:

“For U.S. leaders in administration and legislature, not to make any contact with Taiwan leaders nor send any implication of support of ‘Taiwan Independence’ are in the interests of China, the U.S. and the international community. So, dear Senator, I sincerely hope that you will neither meet, nor have any contact with Tsai during her upcoming visit to Houston, and continue to play a significant role in promoting mutual understanding and friendship between the two peoples of China and the U.S.”

After the meeting, Cruz issued a statement saying the US doesn’t dictate to China whom its leaders can meet with, and China should not dictate to the US:

“Shortly before our meeting, the Houston congressional delegation received a curious letter from the Chinese consulate asking members of Congress not to meet with President Tsai, and to uphold the ‘One-China policy’.

The People’s Republic of China needs to understand that in America we make decisions about meeting with visitors for ourselves. This is not about the PRC. This is about the U.S. relationship with Taiwan, an ally we are legally bound to defend. The Chinese do not give us veto power over those with whom they meet. We will continue to meet with anyone, including the Taiwanese, as we see fit.

The US-Taiwan relationship is not on the negotiating table. It is bound in statute and founded on common interests. I look forward to working with President Tsai to strengthen our partnership.”

Governor Abbott said, “It was an honor to meet with President Tsai and discuss how our two economies can expand upon our already prosperous trade partnership.” Houston Press and China’s Foreign Ministry

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China threatens Trump with ‘revenge’ over one-China policy

The “One-China Policy” states that there is one China, not two, but leaves ambiguous exactly what that means. Beijing interprets it to mean that Taiwan is province of China, to be completely governed one day by Beijing. Taiwan interprets it to mean that they are the official government of all of China. By not speaking these interpretations out loud, everyone is supposed to get along by saying “there is only one China.”

China’s politicians have made it clear that they will use military force against Taiwan and the United States if there is any threat that Taiwan will declare independence. In 2005 Beijing passed an “anti-secession law” requiring China to take military action even if Taiwan’s leadership simply makes plans or gives speeches about independence. President Tsai has refused to confirm the “1992 consensus” which is the vehicle that reaffirms the One-China policy.

Under these circumstances, it’s not surprising that China is becoming increasingly belligerent towards Taiwan. Arguably, Taiwan has already met the conditions set forth in the anti-secession law.

The reaction from China’s Foreign Ministry, quoted above, states China policy, but is fairly non-belligerent. However, an editorial in the state run Global Times promises revenge if Donald Trump abandons the one-China policy after taking office:

“The US passed bills that allow serving officers to visit Taiwan, while Chinese fighter jets patrolled around Taiwan and China’s aircraft carrier passed the island. It is widely expected that the mainland will impose further military pressure. Tsai needs to face the consequences for every provocative step she takes.

Trump is yet to be inaugurated, and there is no need for Beijing to sacrifice bilateral ties for the sake of Taiwan. But in case he tears up the one-China policy after taking office, the mainland is fully prepared. Beijing would rather break ties with the US if necessary. We would like to see whether US voters will support their president to ruin Sino-US relations and destabilize the entire Asia-Pacific region.

Beijing does not need to feel grateful to Trump for not meeting Tsai. The one-China policy is the basic principle reiterated in the three Sino-US joint Communiqués. It is also the foundation of the profound bilateral relationship. Sticking to this principle is not a capricious request by China upon US presidents, but an obligation of US presidents to maintain China-US relations and respect the existing order of the Asia-Pacific. If Trump reneges on the one-China policy after taking office, the Chinese people will demand the government to take revenge. There is no room for bargaining.”

This article threatens to break relations with the US if Trump does not reaffirm the one-China policy, and hints at unspecified military action against Taiwan.

Trump has said that his administration will review the one-China policy, but in view of the real possibility that China will end diplomatic relations, I’m going to assume that Trump will adopt the one-China policy, or some close variant.

But completely apart from anything the US administration does, it’s the attitude of the Taiwanese people that is most important. Time is not on China’s side, and Chinese officials know it, as the Taiwan’s population become more pro-independence every year. The Chinese people are highly nationalistic with regard to Taiwan, and it won’t be too much longer before Chinese officials decide that time has run out. Global Times (Beijing) and Xinhua

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KEYS: Generational Dynamics, Taiwan, Tsai Ing-wen, China, Ted Cruz, Greg Abbott, Li Qiangmin, United Nations Permanent Court of Arbitration, PCA, Anti-secession law
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The views in this World View article are those of the author, John Xenakis, based on Generational Dynamics analyses of historic and current events, and do not necessarily represent the views of Algora Publishing.

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8-Jan-17 World View — Violent protests in Sri Lanka over China’s takeover of Hambantota seaport

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This morning’s key headlines from GenerationalDynamics.com

  • Britain’s hospitals run out of beds as Red Cross declares NHS in ‘humanitarian crisis’
  • Violent protests in Sri Lanka over China’s takeover of Hambantota seaport

Britain’s hospitals run out of beds as Red Cross declares NHS in ‘humanitarian crisis’

About 6,000 patients per week are being left in ambulances because the hospital is too crowded to admit them (Evening Standard)
About 6,000 patients per week are being left in ambulances because the hospital is too crowded to admit them (Evening Standard)

The British Red Cross is declaring the National Health Service (NHS) to be in “humanitarian crisis,” because 6,000 patients per week are being left in ambulances outside of hospitals that have run out of beds. When patients are left in ambulances, then the ambulances can no longer be used to transport new patients in medical emergencies. So the NHS has asked the Red Cross to help out by providing volunteers and use Land Rovers to transport patients.

Red Cross chief Mike Adamson said:

“The British Red Cross is on the front line, responding to the humanitarian crisis in our hospital and ambulance services across the country.

We have been called in to support the NHS and help get people home from hospital and free up much-needed beds.

This means deploying our team of emergency volunteers and even calling on our partner Land Rover to lend vehicles to transport patients and get the system moving.

We call on the UK government to allocate immediate funding to stabilize the current system and set out plans towards creating a sustainable funding settlement for the future.”

Not surprisingly, a politician like Adamson is simply calling for more money. I’ve been writing about the NHS for years, and the problem is that there’s no more money.

As we reported a year ago, Britain’s National Health Service (NHS) is facing an existential crisis, with a huge and accelerating deficit expected to reach 22 billion pounds ($32 billion) by 2020.

The system is corrupt, with doctors falsifying records, claiming for work that was never done, or putting in for bogus overtime. Dentistry services are so bad that people are buying “do-it-yourself (DIY) dentistry kits” to take care of their whole families, as was done centuries ago.

In desperation to save money, many hospitals have had bed cuts, or have closed their Accident & Emergency departments (known in America as Emergency Rooms). Many maternity units have also been targeted for closure.

One of the biggest farces of the 2016 was perpetrated by the “Leave European Union” camp of the Brexit campaign. They promised that if the UK left the EU, then £350m-a-week that is currently being sent to Brussels would not be invested in the NHS. It was a total lie, and it was retracted soon after the referendum passed, but it’s typical of the lies we hear from politicians on a daily basis.

It would be nice if it were possible to give free health care to everyone, but it isn’t. In America, both the Veterans Administration and Obamacare are financial disasters. At least the NHS was designed carefully enough that it was financially healthy for fifty years of its life, but Obamacare was so poorly designed that it’s a financial disaster within five years of its life. Jonathan Gruber said that Obamacare passed because of “the stupidity of the American voter,” and that same stupidity is continuing, in both America and Britain. London Evening Standard and Reuters and British Red Cross and Guardian (London, 10-Sep-2016)

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Violent protests in Sri Lanka over China’s takeover of Hambantota seaport

Thousands of Sri Lanka’s Buddhist monks and anti-government protesters held demonstrations on Saturday that turned violent, protesting China’s takeover of Sri Lanka’s Hambantota seaport by the Chinese in repayment of a debt to the Chinese incurred by the government.

In 2009, China invested $1.2 billion in the port as part of its “string of pearls” strategy to surround India. Sri Lanka had expected to repay the debt through profits earned by the port, but the slowdown in trade throughout the entire region in the last few years has meant that Sri Lanka has been unable to repay the debt.

Now Sri Lanka’s government has been forced to give China a 99-year lease to take over the port. In addition, China will lease 15,000 acres in the region for an industrial zone for Chinese factories. China is expected to invest another $5 billion in Sri Lanka for industrial development.

At least 21 people were injured on Saturday in violent clashes between government supporters versus those opposed to the plan, the latter led by Buddhist monks. The two groups threw rocks at each other, and police responded with water cannon.

Opponents of the plan say that thousands of people will lose their homes because of the project. They say that China will establish a “Chinese colony” on Sri Lankan soil that will grow and can never be removed.

Supporters of the plan say that China will invest $5 billion in the region, and the new industries will generation 100,000 new jobs.

There are other international implications. China will have responsibility for security at the port, which means that it the port will host the Chinese military, including warships and submarines.

China already has similar seaports in Myanmar, Bangladesh and Pakistan, and India is concerned that it’s being surrounded by China’s military and warships. Daily Mirror (Sri Lanka) and AP and News First (Sri Lanka) and BBC

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KEYS: Generational Dynamics, Britain, National Health Service, NHS, British Red Cross, Mike Adamson, Brexit, Veterans Administration, Obamacare, Jonathan Gruber Sri Lanka, China, Hambantota, Myanmar, Bangladesh, Pakistan
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The views in this World View article are those of the author, John Xenakis, based on Generational Dynamics analyses of historic and current events, and do not necessarily represent the views of Algora Publishing.

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1-Jan-17 World View — Taiwan’s president responds to military threats from China

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This morning’s key headlines from GenerationalDynamics.com

  • In New Year’s address, Taiwan’s president responds to military threats from China
  • Did Taiwan’s president say that Taiwan is ‘an independent, sovereign country’?
  • Taiwan president’s planned US visit angers China even more

In New Year’s address, Taiwan’s president responds to military threats from China

Tsai Ing-wen at news conference on Saturday
Tsai Ing-wen at news conference on Saturday

In the aftermath of the 10-minute phone conversation with president-elect Donald Trump and Taiwan’s president Tsai Ing-wen, tensions between Taiwan and China have been substantially increasing.

Reports indicate that China’s military, the People’s Liberation Army (PLA), has become increasingly alarmed by this phone conversation, since they feel that it threatens additional steps towards attempts by Taiwan to become an independent nation, not a province of China.

Since then, China’s military has been stepping up military drills near Taiwan, in a show of military force. China sent its aircraft carrier and a naval fleet into waters near Taiwan, and also sent military jets to circle the airspace near Taiwan. Taiwan’s defense minister has warned that enemy threats were growing daily.

In a New Year press conference on Saturday, president Tsai addressed a range of issue, including relations with China. She accused China of threatening Taiwan, and said that “we will not bow to pressure”:

“Since [we took office on] May 20, we have endeavored to maintain peaceful and stable relations across the Taiwan Strait in accordance with the people’s will and consensus in Taiwan. Driven by our respect for history and the spirit of seeking common ground while setting aside differences, we have continuously expressed goodwill towards the other side across the strait. We hope that the two sides can gradually reduce confrontations and differences through positive interactions.

But in the past few months, it has been the general feeling of the Taiwanese people that the rational and calm position that both sides have worked hard to maintain has seen certain changes. Step by step, Beijing is going back to the old path of dividing, coercing, and even threatening and intimidating Taiwan. We hope this does not reflect a policy choice by Beijing, but must say that such conduct has hurt the feelings of the Taiwanese people and destabilized cross-strait relations.

For the sake of safeguarding regional peace and prosperity, I want to once again reiterate that our commitments will not change, and our goodwill will not change. But we will not bow to pressure, and we will of course not revert to the old path of confrontation.

Whether cross-strait ties can take a turn for the better in the coming year will depend on our patience and resolve. But it will also depend on how Beijing sees the future of cross-strait relations, and whether it is willing to assume its share of the responsibility for building new models for cross-strait interactions. This is necessary to answer the collective hope for peace from the people on both sides of the strait, as well as the different parties in the region.”

Tsai added, “In 2017, our society is going to face some turbulence and face some uncertainties. It’s going to test our whole national security team, as well as the whole government’s ability to handle change. We need to face this matter calmly.”

Reports indicate that China is planning retaliatory measures against Taiwan, such as conducting war games near Taiwan or imposing trade sanctions.

It never ceases to amaze me that China gets away with illegally annexing huge regions in the South China Sea, in violation of international law by the international tribunal in the Hague, but then considers a ten-minute phone call an act of war. AFP and Office of Taiwan’s President and Reuters

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Did Taiwan’s president say that Taiwan is ‘an independent, sovereign country’?

The excerpt from Tsai’s press conference quoted above is the official translation of Tsai’s statement from a Taiwan government web site.

However, other news reports say that Tsai also said the following:

“The Republic of China is an independent, sovereign country.”

This is a highly inflammatory statement by the president of Taiwan, and so it’s not surprising if it was removed from the official text. (Republic of China is the full official name of Taiwan.)

In a press conference two weeks ago, President Obama said:

“China views Taiwan as part of China, but recognizes that it has to approach Taiwan as an entity that has its own ways of doing things.

Taiwanese have agreed that as long as they’re able to continue to function with some degree of autonomy, that they won’t charge forward and declare independence.”

Obama’s description of Taiwan as an “entity” has angered some Taiwanese activists, saying “Taiwan is an independent state, not an entity.”

Some activists claim that Taiwan is already a de facto independent state, because “Taiwan has already cut through the mire of its troubled history to become recognized by humanity, irrespective of official diplomatic relations.” In fact, these activists claim that calling Taiwan an “independent nation” does not contradict the One-China principle.

That may be the reason why President Tsai felt that it was OK to refer to Taiwan as “an independent, sovereign country.” Bloomberg and Reuters and Taipei Times and China Post (Taiwan)

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Taiwan president’s planned US visit angers China even more

Taiwan has confirmed that president Tsai Ing-wen will make a foreign visit to Central America, and will visit Nicaragua, Guatemala, El Salvador and Honduras between January 7-15.

The part of the trip that’s further infuriating the Chinese is that Tsai will make “transit stops” in the US before and after the trip to Central America. She will make a stopover in Houston en route to Central America and San Francisco on her return trip to Taiwan.

There has been media speculation that Tsai will meet with representatives of Donald Trump during one of the stopovers, but Tsai’s office has refused to confirm or deny these speculations.

China has repeatedly demanded that Washington not permit Tsai to visit the US during her trip. However, a Tsai spokesman says, “These transit stops are undertaken out of consideration for the safety, comfort, convenience and dignity of the traveler. President Tsai’s transits will be private and unofficial.” China Post (Taiwan)

KEYS: Generational Dynamics, Taiwan, Tsai Ing-wen, China, Nicaragua, Guatemala, El Salvador, Honduras
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The views in this World View article are those of the author, John Xenakis, based on Generational Dynamics analyses of historic and current events, and do not necessarily represent the views of Algora Publishing.

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31-Dec-16 World View — Hacking of Democratic National Committee computers – I blame the victim

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This morning’s key headlines from GenerationalDynamics.com

  • Obama and Putin play bizarre diplomatic game after expulsion of Russian spies
  • It’s almost always the victim’s fault when computer networks are hacked

Obama and Putin play bizarre diplomatic game after expulsion of Russian spies

Barack Obama and Vladimir Putin
Barack Obama and Vladimir Putin

So President Obama is pissed off because Russian hackers hacked into the Democratic National Committee, and so, just three weeks before he’s leaving office, he ordered 35 Russian diplomats to leave the country.

Russia’s president Vladimir Putin, who always permits his security people to threaten and harass American diplomats just for the fun of it, announced on Friday that Russia would not reciprocate. Instead, Putin invited the children of US diplomats in Moscow to a New Year’s party in the Kremlin.

In the back and forth between Obama and Putin, I sometimes feel as if I’m watching the psychodrama of delusional politicians — a tale rooted in old grudges and revenge plots hatched in one-sided peace negotiations over Ukraine and Syria over eight long years — played out on the international stage. Russia Direct (5-May) and Belfast Telegraph

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It’s almost always the victim’s fault when computer networks are hacked

As a Senior Software Engineer who has developed many web sites, I’m pretty much in the camp of “blame the victim” when a company’s networks get hacked. At one company where I worked several years ago, I told my managers that they needed to encrypt the social security numbers in their database, and I even told them how to do it easily. I reminded them again after one of their servers got hacked. But the problem is that protecting your networks doesn’t generate sales, and Gen-X managers think that when a Boomer software engineer tells them what to do, they’d rather eat mud than do it.

So that’s one reason there’s a news story almost every week about another company whose networks have been hacked. I write about these every now and then.

However, the real monster hack, the mother of all hacks, was announced last year. Chinese hackers stole the personal and security information of many millions of Americas from the servers at the U.S. Office of Personnel Management (OPM) and Department of the Interior. That hack included the SF-86 forms that everyone fills out when applying for security clearances.

There is little doubt that the Chinese military is still sifting through this massive amount of data and using it in a variety of ways — from simple blackmail and extortion of individuals to the creation of sophisticated “spear phishing” e-mail messages used to hack into networks of other agencies and corporations. This massive collection of espionage data will be a powerful weapon in any future military confrontations.

OK, so the DNC hack hurt President Obama’s feelings, while the OPM hack is putting the survival of the country at risk. So which is more important? Why, the DNC hack is more important, because President Obama’s feelings are always more important than the survival of the country. That’s why there have been no expulsions of Chinese diplomats.

I was really appalled when I read the stories about Hillary Clinton’s home server and other flagrantly stupid violations of common sense. Apparently the same stupidity pervaded all of the networks of the Democratic National Committee, so it’s not surprising at all that they got hacked. The CIA and other intelligence agencies have concluded that the perpetrators were linked to Russia’s government, and I believe them, but the DNC servers were apparently so poorly protected that the hacker could have been from anywhere.

I last wrote about the hack of the DNC’s computers in July. At that time, I made the following points:

  • No self-respecting hacker would attack the Democratic party servers without also attacking the Republican party servers. However, there have been no leaks of Republican party e-mails.
  • If the hacker’s intent was to help Trump beat Hillary, then releasing the e-mails was risky because it might have backfired, and created sympathy for Hillary.

So my personal conclusion is that most likely explanation of what happened was that the hacker tried to hack both parties’ servers, but succeeded only with the Democratic party servers, and then released the e-mails because that’s what hackers do, and probably didn’t care who won the election.

It’s not always the victim’s fault when computers are hacked, of course. Hacking is a huge worldwide industry, and hackers are always finding new ways to get around firewalls or to install malware or ransomware. A good idea is to keep separate backups of all your data, so that if you’re hacked then you still have the backup. All you can do is reduce the probability that you’ll be hacked, and for that you need to be totally paranoid. Lawfare (11-Mar-2016)

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KEYS: Generational Dynamics, Russia, Vladimir Putin, U.S. Office of Personnel Management, OPM, Department of the Interior, SF-86, China
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The views in this World View article are those of the author, John Xenakis, based on Generational Dynamics analyses of historic and current events, and do not necessarily represent the views of Algora Publishing.

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29-Dec-16 World View — China punishes Mongolia for Dalai Lama visit during financial crisis

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This morning’s key headlines from GenerationalDynamics.com

  • Mongolia’s herders faces a ‘dzud’ weather catastrophe
  • China punishes Mongolia for Dalai Lama visit during financial crisis

Mongolia’s herders faces a ‘dzud’ weather catastrophe

During a Mongolian 'dzud', animals starve because they cannot dig through a thick, solid layer of ice to reach food
During a Mongolian ‘dzud’, animals starve because they cannot dig through a thick, solid layer of ice to reach food

An extremely harsh winter in Mongolia is sending temperatures to -50°C (-70°F), causing a humanitarian disaster, and threatening both lives and livelihoods.

Mongolia appears to be headed for another winter “dzud.” The word “dzud” refers to a phenomenon that appears to be somewhat unique to Mongolia.

It usually occurs after a dry summer combines with heavy snowstorms creating an ice crust that makes it difficult for livestock, mostly cows, sheep and goats, to dig through to reach grass. This year, the dry summer in the northeast and late autumn rains means the dzud risk is high. Heavy snowfall from October has refrozen after more heavy snow in November.

A third of Mongolia’s population rely directly on livestock — milk, cheese and meat for food, dung for heating, fur for clothing, and income from selling these items. Over 1.2 million livestock died in last winter’s dzud, leaving tens of thousands of herders in poverty. The worst dzud in memory occurred in 2010, killing 8 million animals. UB Post (Mongolia) and Deutsche Welle

China punishes Mongolia for Dalai Lama visit during financial crisis

In 2011, Mongolia economy grew by an astronomical 17.5%, thanks to its huge reserves of copper, coal and gold, making the economy seem invincible. Instead of saving some of that money, Mongolia borrowed billions of dollars more to invest in huge road and infrastructure projects. Now Mongolia is in a major economic crisis, thanks to reduced purchases by China and falling commodity prices, at a time when it’s being hit hard by a new harsh winter “dzud.”

In the midst of this economic and financial crisis, the Buddhist leader the Dalai Lama visited Mongolia’s capital city Ulaanbaatar in November for a six-day visit. More than half of Mongolia’s population are Buddhist, and tens of thousands of them flocked to see the Dalai Lama, with some traveling hundreds of miles.

China does not like the Dalai Lama, as he is worshipped by millions of Tibetan Buddhists in China. So China punished Mongolia by closing part of the border, leaving hundreds of trucks carrying copper and coal backed up on the highway in sub-zero temperatures.

Mongolian officials quickly saw the error of their ways. Foreign minister Tsend Munkh-Orgil made what is apparently an official apology to China:

“You can understand that during the full term of this government, the Dalai Lama will not be allowed to visit Mongolia even for religious purposes.”

According to a Chinese analyst: “China shall accept Mongolia’s apology because China doesn’t want to create friction in Northeast Asia either, particularly at a time when it is facing tensions with other nations, such as Japan and South Korea.” Shanghaiist and Global Times (Beijing) and Al-Jazeera

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KEYS: Generational Dynamics, Mongolia, dzud, China, Tibet, Dalai Lama, Tsend Munkh-Orgil
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28-Dec-16 World View — Bank run worsens Italy’s banking crisis

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This morning’s key headlines from GenerationalDynamics.com

  • Bank run worsens Italy’s banking crisis
  • Following the money, Sao Tome and Principe switches allegiance from Taiwan to China

Bank run worsens Italy’s banking crisis

A horse-drawn carriage passes a branch of Banca Monte dei Paschi bank in Rome.
A horse-drawn carriage passes a branch of Banca Monte dei Paschi bank in Rome.

A week after Italy’s government announced that it would bail out the failing the Banco Monte dei Paschi di Siena (MPS) bank, with a “bail-in” that would put the life savings of tens of thousands of depositors at risk, the European Central Bank said on Tuesday that MPS’s financial situation is deteriorating far more rapidly than expected.

MPS has €55.2 billion in bad loans. Three weeks ago, MPS said that it had enough funds to stay afloat for 11 months. Then last week, MPS said that it would run out of money within four months.

According to one financial analyst:

“It’s a national tragedy. Monte Paschi survived the Inquisition, the unification of Italy, fascism and two world wars. But it couldn’t survive the mismanagement and corruption of bankers and politicians in the 21st century.”

The government of Italy announced last week that the size of the bailout would be €5 billion, the amount needed to allow MPS to meet its immediate obligations and avoid bankruptcy. However, the ECB said that MPS’s financial position has suffered a “rapid deterioration” during the period from November 30 to December 21, now the €5 billion figure is too small. €8.8 billion will be required to get past the immediate emergency.

It’s believed that the “rapid deterioration” is being caused by run on the bank. It’s known that from June to September of this year, customers removed deposits of €6.7 billion, and it’s believed that this run on deposits is continuing, or even accelerating and spiraling out of control.

ECB rules require that if any government bails out the country’s banks, then a percentage of the bailout must come from the assets of investors who had invested in the shares and bonds issued by the bank. In most countries, that would “bail in” sophisticated investors, who would then “take a haircut.” But Italy has a special problem that many ordinary savers have invested their life savings in bonds, so that would put their life savings at risk. This situation has been the subject of intense public debate in Italy at least since June, and that would explain why depositors have been rushing to move their funds out of the bank.

Italy’s government is looking for a way under ECB rules to avoid having to “bail in” bond holders. Since MPS is still technically solvent, the plan is to take advantage of a loophole in the ECB rules by calling the cash injection a “precautionary recapitalization” rather than a bailout. However, this path limits the amount of money that the government can inject into the bank, so it’s far from clear that it will work.

Jens Weidmann, the president of Deutsche Bundesbank, Germany’s central bank, says that Italy’s bailout plan requires careful scrutiny:

“For the measures planned by the Italian government [to work], the bank must be economically healthy at its core. The money cannot be used to cover losses [that are] already expected. All this must be carefully examined. …

These [rules] aim to protect taxpayers in particular and keep responsibility on investors. Government bailout is only meant to be a last resort, that’s why the bar is high.”

Italy’s rescue plan requires approval by both the EU and the ECB.

Banco Monte dei Paschi di Siena (MPS) was founded in 1472, and is the world’s oldest operating bank. Seeking Alpha and MarketWatch and Financial Post

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Following the money, Sao Tome and Principe switches allegiance from Taiwan to China

China scored a victory over Taiwan on Monday, when the nation Sao Tome and Principe officially resumed diplomatic relations with China after breaking relations with Taiwan. The former Portuguese colony Sao Tome and Principe is an impoverished island nation off the coast of west-central Africa with a population of almost 200,000.

China will not have diplomatic relations with any nation that has diplomatic relations with Taiwan. There are now about 20 countries that still have diplomatic relations with Taiwan.

It’s often a question of money. China would like Taiwan to be recognized by as few countries as possible, and so China will offer financial aid and investments to a country willing to switch. It sometimes gets into a bidding war, but China is much wealthier and always wins such battles.

Other countries, including The Gambia, Malawi, and Senegal, have in recent years broken off relations with Taiwan, in the hope of enjoying financial largesse from China. China has not always been willing to establish relations with these countries because of a long-standing “diplomatic truce” between China and Taiwan, designed to prevent countries from playing China and Taiwan against each other. However, China abandoned the diplomatic truce after this year’s election as president of Tsai Ing-wen, who is lukewarm to the “One-China Policy” that makes Taiwan a province of China.

The United States officially recognizes the One-China Policy and does not officially recognize Taiwan, but has a close relationship with Taiwan anyway. President-elect Donald Trump has said that he’ll review the US position.

It’s not just China who is playing this diplomatic game. After Russia invaded Georgia in 2008, it declared two Georgia territories, South Ossetia and Abkhazia, to be independent nations until Moscow’s protection. Only five countries sided with Russia in recognizing at least one of the two territories as independent. In 2011, Tuvalu recognized Abkhazia and South Ossetia in return for “promising areas for bilateral cooperation [with Russia], including trade, fisheries and education.” However, Tuvalu switched sides in 2013, for a reason that was not explained. Med Africa Times (Switzerland) and China Post (Taiwan) and New Republic (2-Apr-2014)

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KEYS: Generational Dynamics, Italy, Banco Monte dei Paschi di Siena, MPS, European Central Bank, ECB, Jens Weidmann, Deutsche Bundesbank, China, Taiwan, Tsai Ing-wen, One-China policy, Sao Tome and Principe, The Gambia, Malawi, Senegal, Russia, Georgia, South Ossetia, Abkhazia, Tuvalu
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The views in this World View article are those of the author, John Xenakis, based on Generational Dynamics analyses of historic and current events, and do not necessarily represent the views of Algora Publishing.