Lately North Korea has been causing quite a stir with the obstreperous military threats of its leader, Kim Jong Un, against the U.S. and South Korea. North Korea’s threats can be ascribed to the singular frustration arising from the country’s worsening economic condition.
The country's frustration, moreover, is reflected in the declining fortunes of its neighbors and trading partners – South Korea, Russia and China.
Notice, for instance, that China’s stock market has been locked up in a bear market since 2011. The long-term weekly chart for the iShares China 25 ETF (FXI) reflects a pattern of declining tops for China stocks that has been intact since the peak in late 2010. Historically, periods of social unrest – which usually lead to war – are gestated in a period of economic stagnation. Economic stagnation is normally preceded by equity market weakness. The stock market trends for China, India and South Korea suggest a period of Asian regional economic stagnation has either begun or is soon forthcoming.
The flagging equities trend in the Asia region also suggests the sociopolitical climate is ripe for revolutionary fervor of the type we saw in Egypt and some of the Arab countries a couple of years ago. The declining trend for Egypt’s stock market (below) began well before the so-called “Arab Spring” revolutions commenced in 2011. Most expressions of violence, whether military or of the people, are born during periods of economic stagnation near the bottom of a major down cycle.
What the stock market indices for the major Asian countries tell us is that the region is ripe for a militant uprising of the type we’re now seeing in North Korea. With the 24-year cycle of war due to bottom in late 2014 it should not surprise us to see a potential outbreak of war as we head closer to this fateful time frame.