Western Economic Influence Waning.

Nov. 25, 2010 - PRLog -- The North Korean attacks on an island in disputed territory may not be enough to warrant a retaliatory response of the magnitude that many in South Korea would like but it is enough to remind the world that, like it or not, the global economic imbalances that so enriched the West are being irreversibly addressed.

“Without doubt, North Korea would never have felt emboldened enough to engage in such naked aggression five years ago but, with America’s global influence and, by extension, its ability to prosecute military operations being undermined by its economic tribulations, the rogue state probably expects to get away with it”, said a “Continental-trade” analyst.

It is a convincing argument when one considers that China, which has seen its political and economic power increase significantly in recent years, is a North Korean ally and it has, so far, refused to issue an outright condemnation of the attacks.

The reality of the situation is that, despite rhetoric from the Obama administration reiterating their commitment to protecting South Korea, the United States simply can’t afford for the skirmish to escalate. Battling deficits as far as the eye can see and being uncomfortably dependent upon China to maintain its appetite for US treasury debt, the US must engage in a humbler form of diplomacy.

“Continental-trade” believes that an escalation in the hostilities could be disastrous for markets which are, according to one of its analysts, “barely holding up over the Irish debt crisis and the likelihood of further monetary tightening in China”.

The contrast between East and West in terms of consumer and economic activity couldn’t be any sharper. A visit to Beijing, Kuala Lumpur or Bangkok reveals bustling shopping malls and relatively widespread optimism among the indigenous populace whilst their counterparts in London, New York and Madrid are facing lower incomes, higher prices and a prolonged period of readjustment to the kind of harsh economic realities not seen in generations.

“Continental-trade” traders say they expect the US dollar to benefit from the decline in risk appetite that further hostilities would cause and urged clients to retain their holdings in gold and commodity currencies like the Canadian and Australian dollars for the time being.