March/April 2002 Vol.5, No. 3 Contents America's Growing Isolation by Melvin Rhodes Restoration: A Dangerous World by Darris McNeely Debate Over Islam Continues: Is It a Religion of Peace? by Cecil E. Maranville The Last Battle for the British Empire by John Ross Schroeder Generations in Crisis by Doug Johnson Disastrous Weather By Graemme Marshall In Brief...World News Review by Ken Martin and Jim Tuck This Is the Way... Forgiving the Unforgivable by Robin Webber March/April '02 WNP Main In Brief... World News Review Can We Shrug Off Japan's Economic Crisis? The fact that Japan's 12-year slump has fallen into a full-scale crisis is beginning to be realized by the world. The downward slide of various indicators in the second most powerful economy resembles the United States during the Great Depression of the 1930s. It was once thought that Japan could buy its way out of financial trouble. Many believed the heavy debt from the nation's terrible banking system and the actuarial deceit of its postal- and insurer-based retirement systems was just Japan owing itself. However, Japan's economy isn't like Russia or Argentina or Thailand. By comparison, Japan's massive economy is 42 times that of Thailand. Kenneth Courtis, vice chairman of Goldman Sachs in Asia, said Japan represents the "largest economic crisis since the 1930s." Royoji Musha, strategist for Deutsche Bank said the "...world is heading for a once in-a-century economic crisis." The Japanese are dedicated to saving their money, and have as much as $11 trillion socked away. Unfortunately, Goldman Sachs estimates debts from household, corporate and government sectors to be around $30 trillion, which is six times Japan's gross national product (GNP). The U.S. ratio of debt to GNP is 2 to 1. Japan's situation is being made worse each month by an annual deflation rate of 4 percent. Deflation in the 1930s worsened the U.S. Depression. Already Japan's economic tsunami is being felt here in America. Toyotas are putting pressure on Detroit's prices. If Japan opted to devalue the yen, more pressure would fall on the United States and Europe. Japan's four largest troubled banks alone have total claimed assets worth nearly $4 trillion. It has been predicted for over a decade that Japan could panic under its heavy debt, causing a run on the banks as depositors withdraw their savings. If this happened, its banks could be forced to call in overseas loans and create an economic contraction that would sweep around the world. It hasn't happened yet, and some economists don't think it will. However, reflect on the fall of Hokkaido Takushoku, a medium-size Japanese bank with assets worth $80 billion. Its collapse expanded Thailand's economic problems into a regional crisis. Within a few months of the bank's failure, Japanese financial institutions pulled $118 billion out of the worldwide economy. The brunt of the impact was felt by South Korea, but other parts of Asia and eastern Europe were also affected. The crisis severely crippled South Korea, the world's 10th-largest economy. Is anyone out there alert to the potential problem? Most of the press is more concerned with Enron or the economic woes of Argentina. There are some voices sounding an alarm, including Treasury Secretary Paul O'Neill. Former Federal Reserve Board head Paul Volcker says he can't recall in his career a touchier global economic situation. wnp Source: Forbes. The Intensification of Global Instability This is a time of destabilization in the world. Colombia has fallen deeper into the ranks of the unstable with the outbreak of civil war. Iran appears to be moving toward internal crisis, Venezuela's political problems are deepening and conflict between Israelis and Palestinians is entering a new phase. This troubling spread of instability is rooted in the current structure of the international system. As the world's only superpower, the United States' inevitable obsession with al Qaeda has contributed to this process of destabilization. Consider these recent events, in no particular order: Venezuela, a major oil producer, is experiencing a major political crisis over its president, Hugo Chavez. In Afghanistan, the CIA has issued a report warning that internal chaos is looming. In the Middle East, Palestinians have shifted tactics toward waging guerrilla war, and Israel is contemplating a major shift in its own strategy. In Iran, a majority of the Majlis has signed a petition demanding an investigation of U.S. charges that elements in Iran have aided al Qaeda members in escaping Afghanistan. This action creates a massive internal confrontation between forces around the Ayatollah Ali Khameni and those around President Mohammad Khatami, with a very uncertain outcome. What has emerged from U.S. President George W. Bush's meeting with the Japanese prime minister is that Japan has no idea how to manage its intensifying financial crisis. One of the world's major economies appears to be inching toward meltdown. Add these to the U.S. war on al Qaeda, the India-Pakistan confrontation, the Iraqi crisis, the ongoing Balkans puzzle, the Argentine default and the rest. Clearly, the destabilization process is intensifying and spreading. The instability can be found on each continent and in all possible areas. The world has always been a dangerous place. The 1990s represented an interregnum in which it appeared that the end of the Cold War had ushered in a new, more stable world. In a very few years, we have moved from a world in which it appeared that most crises were marginal and easily contained, to a situation where marginal crises cannot be contained and not all crises are marginal. Meanwhile, other regions are falling into chaos. The United States is intruding in a wide range of countries on an unpredictable basis, built around al Qaeda's behavior. This is creating unintended tensions and consequences. Countries and issues that are not directly tied to the war are receiving limited attention, regardless of potential consequences. Throughout history the solution to instability has been the imposition of order by a great power in competition with other great powers. However, the United States today does not compete with any great power, but is at war with an international network. Unconstrained by other powers and driven by its war, the United States inevitably destabilizes some countries, lacks the interest or resources to stabilize other countries and creates opportunities for destabilization by other powers. wnp Source: Stratfor. U.S. to Weigh Computer Chip Implant The Associated Press reports: "A Florida technology company is poised to ask the government for permission to market a first-ever computer ID chip that could be embedded beneath a person's skin." It's being touted as a solution for high-security facilities. But privacy advocates warn the chip could lead to encroachments on civil liberties. A computer chip, about the size of a grain of rice, would be difficult to remove and tough to mimic. The technology could even be used to one day allow satellite tracking of an individual's every movement. wnp Source: Associated Press. 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