Northern, WI  9/18/2012 (BasicsMedia)  —  Lou Brien: Sometimes Dots should not be connected, But sometimes they are anyway.  says Lou Brien a respected market watcher..

” I received an email the other day, it said; “Are you guys watching this? This is getting to be nuts!” The attachment to the text was a series of photos, including those of: anti-Japanese protestors in several Chinese cities, countless throngs of them out in the streets; Japanese businesses in China, such as car dealerships and sushi restaurants, being demolished and burned by rioters; derogatory signs outside Chinese businesses, like the one at a hotel explaining that “Japanese guests are not currently being accommodated by our hotel”, or another at a hair salon declaring that “Japanese and dogs not allowed inside”. The attachment included at least a couple of dozen photos. Many Japanese companies in China have temporarily closed factories and offices; workers were told to stay inside or otherwise keep a low profile during the disturbances. The only quibble I might have with the text of the email is the use of the word “getting”; after looking at the pictures I would say it can rightly be described as “being” nuts. The question that remains is how nutty the situation can get.

In the East China Sea there is a group of five uninhabited islands and three barren rocks. This cluster is located about 120 miles northeast of Taiwan, 200 miles or so east of the Chinese mainland and 200 miles southwest of Okinawa, Japan. In Japan the island group is known as the Senkaku Islands; in China they are called the Diaoyu Islands. In 1969 the United Nations Economic Commission for Asia and the Far East determined that there might be oil and gas reserves in the vicinity. In 1972 the US Senate returned the island group to Japanese control; the US had been in charge since the end of World War II. “Not so fast”, said China. They say those islands have been a part of Chinese territory since 1534 and they only lost control as a result of the Sino-Japanese War of 1894/95. And so it was for several decades, a back burner issue between less than friendly neighbors. While they do a great deal of business with one another, with $345 billion in two-way trade last year China is Japan’s single largest trading partner, they cannot be described as amicable; in particular at this time of year since September 18 is the date Japan marched into Manchuria in 1931, leading to an invasion of China in 1937.

The dispute over control of the islands is now boiling over on the front burner. Somewhere along the line the island group became privately held by Japanese owners. But last week the Japanese government bought at least three of the islands, seen as a way to assert their sovereignty of the grouping, maybe with an eye to exploiting the energy resources beneath them. China responded by sending six surveillance ships to the area. They remained for a short while, at least until they were ordered out by the Japanese coast guard, says Japan’s Kyodo news service. There has been some saber rattling and hints at economic retaliation. For instance the Chinese Vice-Minister of Commerce said, “With Japan’s so-called purchase of the islands, it will be hard to avoid negative consequences for Sino-Japanese economic and trade ties.” Japan’s Prime Minister Noda told NHK broadcasting, “We need to take a coolheaded approach to avoid negative impacts on overall relations. Japan will do so, too, but we need to strongly call on China to show restraint.” China is said to be attempting to calm the protests, but a Communist Party newspaper, the People’s Daily made clear the issue is far from settled; “in struggles concerning territorial sovereignty, if Japan continues its provocations, then China will take up the battle.”

It is of more than passing interest that China is at this point in time preparing to change leadership in the next month or so and that the process is not going smoothly. “We hear that the congress will be held in late October or early November,” a security official from southern China said. “Currently we are planning for that,” reported the New York Times in the last few days. The congress at which the power transfer was to occur was figured to be set for mid-October, but that doesn’t look to be the case any longer, said the NY Times article. “One reason for the delay, the experts say, is what now appears to have been a contentious meeting in early August at the seaside resort of Beidaihe, China. According to the official script, this was to have been the final big meeting before the congress of leaders from the party’s various factions: the military, big state enterprises, descendants of revolutionary families, leaders of critical Communist Party organizations and others. The details of the congress were to be finalized at Beidaihe and the dates announced later in August. Instead, according to information that is slowly leaking out, the Beidaihe meeting and other sessions beforehand in Beijing were especially tense. ‘The atmosphere was very bad, and the struggles were very intense,’ said a political analyst with connections to the party’s nerve center, the General Office.’” Then of course there is the two week disappearance of the presumptive leader to be, Xi Jinping, from early September on. Is it worthy of note that he resurfaced just a couple of days after Japan’s purchase became known, in order to discuss food safety at an agricultural university? A steady hand at the helm would seem to be required, but the prevalence of Mao portraits being carried by anti-Japan protestors is probably not the preference and the recent mystery surrounding Xi is less than ideal in this regard.

US Defense Secretary Leon Panetta is in the region. As far as I know his original purpose was to announce an agreement with Japan to deploy an advanced missile-defense radar system on Japanese territory and also to try to explain to China why the US feels that it’s necessary to shift the balance of its off-shore military might into that part of the world. But the island controversy has changed the perception, suggests the NY Times; “The joint missile defense system objectively encourages Japan to keep an aggressive position in the Diaoyu Islands dispute, which sends China a very negative message,” said Shi Yinhong, a professor of international studies at Renmin University in Beijing. “Japan would not have been so aggressive without the support and actions of the US.” Panetta is a bit worried, he was quoted in the Stars and Stripes newspaper saying, “I am concerned when these countries engage in provocations of one kind or another over these various islands, that it raises the possibility that a misjudgment on one side or the other could result in violence or could result in conflict.”

Washington has declined to take sides in the island dispute. “But,” reports the UK newspaper The Guardian, the US “acknowledges that under the US-Japan security treaty it is required to come to its ally’s aid if attacked. Japan’s foreign minister, Koichiro Gemba, who met Panetta in Tokyo on Monday, said it was ‘mutually understood between Japan and the United States that (the Senkakus) are covered by the treaty.’” The treaty of which they speak is The Treaty of Mutual Cooperation and Security between the United States and Japan, signed by the countries on January 19, 1960, which says that both parties assumed an obligation to maintain and develop their capacities to resist armed attack in common and to assist each other in case of armed attack on territories under Japanese administration; just like the disputed islands are, now that the Japanese government has purchased some of them.

Just because dots exist it does not mean that it should be connected to some other dot or dots. Sometimes the pattern that is formed by connecting the dots is a misleading illusion, or even a delusion of the one who has taken it upon oneself to connect the dots in question. China and Japan will probably figure things out. But if they don’t the dot represented by the US-Japan Treaty is worth keeping in mind. There are other worrying dots that may beg to be connected by the paranoid dot connectors amongst us. Dots such as the joint statement signed by the leaders of China and Russia earlier this summer that came out against the use of military action against Iran, is one such dot. Relations between Israel and the US may be in flux, but there is little question of the dots that connect the two.  And what of the dot that already connects Russia to Syria, considering the uncertain path that troubled country will trod; or what dots it will run into along the way. There is no question that troubling dots exist, but there is always a question as to whether cooler heads will prevent their unfortunate connection, no matter how foolish, or unworthy of connection, the original dot may seem to be.

Otto von Bismarck was the first Chancellor of the German Empire, something he essentially created through a series of wars in the 1800s; he died in 1898. As Barbara Tuchman recounted in her book The Guns of August; “Some damned foolish thing in the Balkans,” Bismarck had predicted, would ignite the next war. The assassination of the Austrian heir apparent, Archduke Franz Ferdinand, by Serbian nationalists on June 28, 1914, satisfied his condition. The assassination was undertaken by a Serbian nationalist group called The Black Hand, formed because they resented being ruled by the Austro-Hungarian Empire. The killing set the stage for a series of pre-existing dots to be connected in a very unfortunate way. Because the continent had become so militarized in the preceding years there was little preparation necessary to set the ball in motion.

The Austrian government blamed the Serbian government and so they declared war on Serbia exactly one month after the assassination. Russia was allied with Serbia, so they mobilized their military to help. Russia also called upon France to mobilize its military, because they had a treaty with France. Germany was allied with Austria, so they declared war on Russia on August 1. But because of Russia/France treaty Germany had to declare war on France as well, which they did on August 3. Germany’s strategy to attack France had been drawn up almost a decade earlier, it was called the Schleiffen Plan and called for their troops to go through neutral Belgium’s territory and come into France from the north. But France not only had a treaty with Russia, but also with Britain. Robert Massie described what happened next on the final page of his book Dreadnought: Britain, Germany, and the coming of the Great War.

On Tuesday morning, August 4, the German Army crossed the Belgian frontier. The British Cabinet met at eleven o’clock to hold what Asquith dryly described as an “interesting” session: “We got the news that the Germans had entered Belgium and had announced…that if necessary they would push their way through by force of arms. This simplifies matters, so we sent the Germans an ultimatum to expire at midnight.” Again, Whitehall was filled with excited crowds wildly cheering every person going in or out of 10 Downing Street. The Commons took the news of the ultimatum ‘very calmly and with a good deal of dignity,” Asquith reported. This dispassionate style belied the emotions churning beneath. “This whole thing fills me with sadness,” he confessed to Venetia Stanley. “We are on the eve of horrible things.” Margot saw her husband immediately after his speech when she went to visit him in the Prime Ministers room at the House of Commons:

            “‘So it is all up,’ I (Margot) said.

            “He answered without looking at me:

            “‘Yes, it’s all up.’

“I sat down beside him with a feeling of numbness in my limbs…Henry sat at his writing table leaning back…What was he thinking of?…His sons?…would they all have to fight?…I got up and leaned my head against his; we could not speak for tears.”

Asquith went for an hour’s drive by himself. He returned to Downing Street to wait for the expiration of the British ultimatum. The hours passed. Margot looked in on her sleeping children, then joined her husband, who was sitting around the green table in the Cabinet Room with Grey, Haldane, and others, smoking cigarettes. At nine o’clock Lloyd George arrived. No one spoke. Eyes wandered back and forth from the clock to the telephone which linked the Cabinet Room to the Foreign Office. Through the windows, open to the warm night air, came the sound of an immense crowd singing “God Save the King.” Against the anthem, the chimes of Big Ben intruded, signaling the approach of the hour. Then—“Boom!”—the first stroke sounded. Every face in the Cabinet Room was white. “Boom! Boom! Boom!—eleven times the clapper fell against the great bell. When the last stroke fell, Great Britain was at war with Germany.”

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