Photo, above:  Aberdeen, Kings College.

JOHN BATCHELOR SHOW

Co-hosts:  Gordon Chang, Forbes.com.  Dr. David M. Livingston, The Space Show.

Hour One

Wednesday  26 February  2014 / Hour 1, Block A: Scott Harold, Associate Political Scientist at RAND, in re: Virgin and the latest round of Branson bravado.  [Kiev:  city security unsure. Odd characters in assorted body armor.  An appointed PM.]  China has been preparing for a "short, sharp war" with Japan. Over the last year, US Navy has recognized that China's naval aggression has been meeting with resistance.  Beijing intends to have a short-sharp war – a sort of long, bad weekend - with Japan, finish it before the US could arrive. Not credible; no prospect that such a thing could exist.  Note how the PLA trains. Last time Japan and China engaged militarily, it was sharp but certainly not short.  US flag officers on this topic: they duck the issue.   . . . . JMFDF: highly sophisticated; but Chinese are looking to swamp quality with quantity, also climb the  quality ladder.   . . . An unlikely assessment by Captain James Fanell, director of intelligence and information operations at the U.S. Pacific Fleet.  US is treaty-bound to defend Japan if Japanese forces come under attack. US plus Japanese military capabilities, it becomes a long confrontation – or else a very very sharp one.  Probably the same reason Taiwan deterrence has held so long. Does it go nuke?  Everyone thinks about it.  All war games so far has eventually gone nuke. 

Pentagon plays down intelligence officer's provocative China assessment  The Pentagon on Thursday played down remarks by a senior Navy intelligence officer who told a public forum that he believed China was training its forces to be capable of carrying out a "short, sharp" war with Japan in the East China Sea.  The comments by Captain James Fanell, director of intelligence and information operations at the U.S. Pacific Fleet, were little noticed when he made them last week at a conference on maritime strategy called "West 2014" in San Diego. They can be seen here: link.reuters.com/qyq96v

Fanell also predicted China, which declared an air defense zone last year in the East China Sea where it is locked in a territorial dispute with Japan over a string of small islands, would declare another air defense zone by the end of 2015, this time in the South China Sea.

The Pentagon's top spokesman, Rear Admiral John Kirby, declined to comment on whether it was appropriate for Fanell to publicly offer such a blunt assessment, but said the Pentagon wanted closer ties with China's military.

"Those were his views to express," Kirby told a Pentagon news conference. . . .  [more]

Wednesday  26 February  2014 / Hour 1, Block B: Lobsang Nyandak,  Executive Director of The Tibet Fund and former Representative of His Holiness the Dalai Lama to the Americas, in re: HH the Dalai Lama met with Pres Obama last week. Beijing howled. Pres Obama simply ignored that. WH knows exactly how China will react.  Max Baucus, the new US ambassador to Beijing, said, "I don’t know anything about China."  What is known of him is that he's a tough guy.  The Tibetan people have been watching the US closely and are highly aware of the American stance; are encouraged by this meeting. Does this relate to the East China Sea?  Pres Obama has very much done the right thing.

Wednesday  26 February  2014 / Hour 1, Block C: Douglas Messier, ParabolicArc.com, in re: Virgin Galactic and the latest round of Branson bravado. Committed to delivering suborbital flights soon – was to have been 2013, not maybe 2014.  Virgin Galactic aims at putting up to six passengers per flight, float around four or five minutes.  Testing with a hybrid engine uses nitrous oxide; flown three flights over about eight months: 16-sec burn, then 20-sec.  But oscillation & vibration problems. Got up as far as 71,000 feet, way lower than wished.  Now trying a new engine.  Branson selling tix to go above the Carmen line (100km – 80 mi); can’t do that right now. Is Bert Rutan ready to make promises abt SpaceshipTwo?  No, he's been retired for several years; SpaceshipTwo was designed by one of his staff members. Bert said, Spaceflights will be about as safe as aviation was in the 1920s.  Ooops.  Doesn't look as though a liquid engine will work out, but the nitrous oxide-nylon engine may succeed. CFO, safety director and others have left in recent months.  Rumor that people on the engine side are trying to leave – reports of resumes's being received. 

Wednesday  26 February  2014 / Hour 1, Block D: Gregory Copley, StrategicStudies director, & author, UnCivilization, in re: PRC, PLA navy. Australia has noted the PLA navy voyage, which was perceived as very interesting, not necessarily hostile  Differing views on what level of threat PRC may have for Australia.  US wants Australia to pick an either-or situations, which of course Australia can't do. All across Asia and the rest of the world, huge trading relations with PRC.  Australia tends to cleave to Anglophone partners, not including Japan.  At this stage China can enforce its Monroe Doctrine in the South China Sea and East China Sea, completely disregarding all history. US and Australia have handled this very badly , done nothing to support ASEAN nations or Republic of China/Taiwan, even though the SU has strong treaty ties since 1954 with Taiwan. Washington needs to think how it'll honor those; if the US fails, Australia, New Zealand, the Philippines, et al., will see the US as an unreliable partner.  Rebalancing US Forces, report /book from US Naval War College:  US surface fleet to vulnerable to Chinese missiles. US and its allies need to think a lot more creatively about containment of China.   Japan-India relations becoming more important.  "Short, sharp war" is very credible in the coming year. The US should have responded [better] when this began, and it did not. 

Hour Two

Wednesday  26 February  2014 / Hour 2, Block A:  Bruce Bechtol, Angelo State, author, The Last Days of Kim Jong-il: The North Korean Threat in a Changing Era, in re:  UN report on the sadism and brutality of the North Korean regime.  Conversation between John Kerry and Xi  Jinping: Kerry characterized it as useful, but they talked past ach other.  Bush 1, Clinton, many US presidents have asked China to put pressure on DPRK.  Uncle Chong and his huge coterie (cronies) were killed last fall in a gigantic purge; now there's a dearth of North Koreans who know how to talk with Chinese.  After the Soviet Union collapsed, Kim grandpere had to figure out how to speak with PRC. Chinese delegation of Foreign Ministry officials visits Pyongyang: probably a warning from China to North Korea. Brinkmanship, rogue behavior, are one thing; killing all the interlocutors is another.  Historically, the delegations were Communist Part guys; here, its devolved into a state-to-state relation.  When Kim baby eliminates all  our contact men, don’t you want to eliminate him?  Yes, like to – but no way to govern the country except via the Kim family: one brother is effeminate, another is crabby; this leaves Kim Jong-eun.  Females not welcome; looks as though the whole mess could be heading toward collapse. 

..  ..  ..

Beijing 'exploring whether or not to change tactics' over North Korea relationship

Beijing is looking into new ways of engaging the unpredictable Pyongyang amid growing doubts that it remains the hermit state's staunchest ally China is exploring whether to change tactics in engaging with North Korea, which is becoming increasingly unpredictable since Kim Jong-un came to power, observers and analysts say.

The development comes as the foreign ministry in Beijing sent two delegations to Pyongyang in less than a month - a move that scholars and government think tanks say is aimed at seeing whether North Korea still holds China as its staunchest ally. The motives behind Pyongyang's actions over the past year - from nuclear tests to the high-profile execution of Kim's uncle Jang Song-thaek - have mystified many in the region, including China. Many Chinese scholars and government think tanks say they are being kept in the dark about its latest developments.

Contact between Beijing and Pyongyang under the younger Kim is not as high profile as under his father Kim Jong-il, and the execution of Jang - a key figure in North Korea's economic engagement with China - has triggered worries that North Korea no longer highly regards its ties with China, said Cai Jian , deputy director of Fudan University's Centre for Korean Studies.

The visits to Pyongyang by the Chinese delegations - one headed by Deputy Foreign Minister Liu Zhenmin - will help Beijing gauge whether Pyongyang is still politically stable in the wake of the purge. They also signal that Beijing may seek changes in how it engages North Korea.

The International Department of the Communist Party is the main organisation behind cultivating ties between Beijing and Pyongyang, but Cai said the foreign ministry may now become more involved in contact with North Korea.

"Communications with the International Department usually stresses more on the relationship between the ruling parties … and that usually conveys a sense that the two are brothers or allies," Cai said. "With the involvement of the foreign ministry, it is more like nation-to-nation routine exchanges, stressing less on brotherly ties."

Jia Qingguo , an international relations professor at Peking University, said "nation-to-nation" ties would allow Beijing to deal with North Korea in a more "normal" way, focusing more on China's national interests instead of heavily emphasising ideology. That would clearly spell out under what conditions Beijing would continue to provide aid to Pyongyang.

"China is very upset with the younger Kim," Jia said. "China had expectations he would further open up the North Korean economy, but now it is not sure if such expectations can continue."

One of the accusations made against Jang was that he sold Pyongyang's valuable resources to another country, widely believed to be China. Before the execution, Pyongyang also put China in an embarrassing spot by launching nuclear tests, raising doubts over whether Beijing still held significant influence over Kim's regime.

Pyongyang has recently said it was willing to return without preconditions to the stalled six-nation talks on its nuclear programme.

But Zhang Liangui , a professor of international strategic research at the Communist Party's Central Party School, said Pyongyang's real intentions were unpredictable.

"North Korea has not resorted to provocation mainly because it wants economic aid and for the international community to recognise its nuclear development," Zhang said. "It will make provocative moves again when it has other strategic aims."

Cai said China's access to inside knowledge about North Korea was now limited. On some occasions, Beijing even had to rely on information from non-governmental organisations and politicians from Seoul, making it difficult for Beijing to make accurate judgments about the situation in Pyongyang and to formulate its strategy, he added.

"What North Korea reveals to us is just too little," he said.

..  ..  ..

Wednesday  26 February  2014 / Hour 2, Block B: Alan Tonelson, Research Fellow at the U.S. Business and Industry Council Educational Foundation, in re: Fisker disappeared  in a welter of bad news; who'll buy it? Gosh – never give a sucker an even break – China.  What kind of national policy will have on transferring sensitive assets to a country like China.  Wanxiang also has recently bought A123 Advanced Battery Co – dvpd advanced technology with huge amounts of US taxpayer money.   Fisker was eligible for $500 million in subsidies; spent $130 million before going bust. US money went to bldg patents that China now will own: soar car technology, electronic drive train patents – R&D on high-priority project (as designated by Washington).  A123 has important secure technology that was ringed off in the sale.  US gvt hbdles transactns that may carve out some areas, there's zero monitoring, zero enforcement.  Need red flags in Penatagon and White House. Interagy govt process supposed to screen foreign takovers: it’s full of holes, and foreign interests wanting to buy don’t even need to report the proposed acquisition to the US govt! Fisker Karma had a lithium rechargeable battery – China wants that technology.

Court clears sale of hybrid car maker Fisker to China's Wanxiang. A unit of China's Wanxiang Group received U.S. bankruptcy court approval on Tuesday to buy the assets of Fisker Automotive, a defunct manufacturer of plug-in hybrid sports cars that was funded in part with a U.S. government loan.

Wanxiang America Corp, an affiliate of China's largest auto parts company, bid $149.2 million for Fisker in a three-day auction that pitted it against Hybrid Tech Holdings.  "I'm very pleased to approve the sale," said Kevin Gross, the U.S. bankruptcy judge in Wilmington, Delaware, who is overseeing Fisker's Chapter 11 bankruptcy.  The auction for Fisker has been dubbed a battle of Chinese billionaires, with Wanxiang's founder Lu Guanqiu squaring off against Richard Li of Hong Kong, who controls Hybrid. Bidding had started at $55 million.

At the center of the fight is Fisker, which ceased production of its elegant $100,000 sports cars in 2012 to save cash after a series of tech glitches and cost overruns.  "We are delighted that our client prevailed at the auction, and we look forward to completing the next step in this process," said Bojan Guzina, a Sidley Austin attorney who represents Wanxiang.  The company said in court papers it could restart production in the coming months, estimating that it would sell more than 1,000 Karma hybrids in the first 18 months in the United States and 500 in Europe.  Wanxiang bought Fisker's battery supplier, A123 Systems LLC, last year through a similar bankruptcy sale, and said  . . . [more]

Wednesday  26 February  2014 / Hour 2, Block C: Christian Whiton, RealClearWorld, and author, SmartPower, in re: U.S. Can Free Europe from Putin's Gas Grip  The collapse of Moscow's ally in Kiev, Viktor Yanukovych, presents the U.S. with an opportunity to help its friends and allies. But after the celebration subsides over Yanukovych's fall from power, Washington and its allies have much to do in order to turn this opportunity into sustained advantage. Don't expect Russian President Vladimir Putin to quietly accept defeat.

Yanukovych did not fall under Putin's sway because of his charm; Russia still wields real power over Central Europe. Moscow's weapon of first resort is no longer the former KGB, but energy supplies -- especially natural gas. Even though Ukraine gets half of its electric power supply from nuclear reactors, the country is dependent on imported natural gas for other uses. It produces 30 percent of the gas it consumes domestically; the rest comes via pipelines from Russia.  The political and economic leverage this gives Moscow is not just theoretical; Putin has applied it repeatedly. The most recent major dispute occurred in 2009, when Russia cut off gas supplies for nearly three weeks. Officially, the dispute was over the price of gas and outstanding payments. Unofficially, Moscow was seeking to undermine leaders in Ukraine who had reoriented the nation toward the West after the 2004 Orange Revolution.  The shutdown didn't just affect Ukraine. Many U.S. allies unfortunately must consume Russian gas as well, much of which flows through pipelines in Ukraine. The shutoff impacted NATO allies like Poland and . . .   [more]

Wednesday  26 February  2014 / Hour 2, Block D:  Joseph Sternberg, WSJ Asia editorial board, in re: HSBC actually prints money for Hong Kong.   . . .  When you could rely on a 5,6,7% interest rate . . .  Financial systems are innovative in the West because they needed to be; not in Asia, where it’s plain-vanilla bank loans, etc.   Silver lining of taper: force dvpt of new capital-allocation  models and in govt regs.  Taper tantrum.  Asia has seen huge inflows of capital in recent years: as QE pushed down rates in the US, people went to Asia for higher returns Now that it looks as though the Fed will taper, money flowing back to US, which will oblige real change in Asia. "high-yield bonds" = junk bonds. There do exist shadow-banking products that are the equivalent.  See: David Morton's piece. 

Hour Three

Wednesday  26 February  2014 / Hour 3, Block A: Adam Satariano, Bloomberg,  in re:  TECH & THE INCOME INEQUALITY DEBATE: Google Buses Fuel Inequality Debate as Boom Inflates Rents – San Francisco’s private bus drivers are at the center of a swelling debate about income inequality and the role of technology’s nouveau rich in turning the city into a place that’s becoming unaffordable for everyone else. With the highest rents in the country and rental evictions at a seven-year peak, the rising presence of company-funded buses in densely populated neighborhoods has led to protests and occasional violence in a city known for tolerance.   [more]

 

Wednesday  26 February  2014 / Hour 3, Block B: John Tamny, RealClearMarkets,  in re: That the minimum wage could force automation is a good thing despite what the pundits say.  Economic growth is happily a function of job destruction as evidenced by how few of us farm for a living.  What's most cruel about the minimum wage is that it protects those at the top from the 99% who would like to take their place.  Sometimes we need to be "exploited" so that we can eventually exploit our employers. The Minimum Wage Exploits the 99 Percent, While Protecting the 1 Percent  President Obama's push to impose a $10.10 minimum wage on employers has generated all manner of commentary about the implications of such a rule. Most has focused on how many or how few jobs will be lost thanks to legislation of this kind.  . . .

Wednesday  26 February  2014 / Hour 3, Block C: Rachel Abrams, NYT, in re:  Trading Site Failure Stirs Ire and Hope for Bitcoin  With one of its earliest marketplaces gone, the world of virtual currency may have to become a more mature part of the financial system.  DealBook: Defending Bitcoin, Andreessen Says Mt Gox Is ‘Like MF Global’

MT GOX      Magic: The Gathering Online eXchange

Wednesday  26 February  2014 / Hour 3, Block D: Stanley Reed, NYT, in re:  Scot Oil and Gas an Issue in Vote on Independence  Alex Salmond, Scotland’s first minister, who supports independence, and Prime Minister David Cameron of Britain, who does not, also differ on the future of oil and gas reserves in the North Sea.

Hour Four

Wednesday  26 February  2014 / Hour 4, Block A: Freeman Klopott, Bloomberg, in re:  TECH & THE INCOME INEQUALITY DEBATE: Google Buses Fuel Inequality Debate as Boom Inflates Rents – San Francisco’s private bus drivers are at the center of a swelling debate about income inequality and the role of technology’s nouveau rich in turning the city into a place that’s becoming unaffordable for everyone else. With the highest rents in the country and rental evictions at a seven-year peak, the rising presence of company-funded buses in densely populated neighborhoods has led to protests and occasional violence in a city known for tolerance.  [more]

Wednesday  26 February  2014 / Hour 4, Block B:  David Weidner, WSJ, in re: Laughing all the way to an economic crash.  Opinion: Fun at the Fed: How the central bank coped with a crisis. Oh how they laughed as the economy was crashing.

“There are some critics who say we panicked in response to the market sell-off of that Monday. I do not believe that’s the case, and I don’t believe it’s the case because I find it impossible to believe.”  Hilarious. What’s also impossible to believe was that curious bit of logic was spoken by Richard Fisher, president of the Federal Reserve Bank of Dallas, in 2008. Fisher was speaking at one of several meetings of the Fed’s Open Market Committee in response to a financial crisis that was unfolding.

Transcripts of those meetings, more than 1,500 pages worth, were released at the end of last week. And they are a fascinating read. There’s despair, serious discussion, debate and a sense of responsibility. The content of the Fed meetings is reassuring at times, maddening at others and frequently alarming. The conversation is not too far from a J. C. Chandor script .  But they do show that the folks at the Fed kept their spirits up by making fun of themselves and the dire straits facing the nation. Slideshow: The 208 times the Fed laughed amid 2008 chaos  Here’s another bit of Texas wisdom from Fisher. ““I liken the Fed funds rate to a good single malt whiskey — it takes time to have its ameliorative or stimulative effect.” . . .

Wednesday  26 February  2014 / Hour 4, Block C: Charles Blahous, Hoover & e21, Economic Policies for the 21st Century, in re: Record-High Deficits Are Not "Austerity" 

Wednesday  26 February  2014 / Hour 4, Block D: Jeff Bliss, The Bliss Index, in re:

Subpar: Anti-Obama Street Art Covers Santa Monica  An unknown artist is covering the streets of Santa Monica, Calif., with posters declaring President Obama to be “subpar.”  The artwork, which features images of Obama golfing with the message, can be found on trashcans, in Porta-potties, and on . . .  [more]

..  ..  ..  ..  ..  ..  ..  

Therefore I say that it is a narrow policy to suppose that this country or that is to be marked out as the eternal ally or the perpetual enemy of England. We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.

Speech to the House of Commons (1 March 1848), Hansard’s Parliamentary Debates. 3rd series, vol. 97, col. 122.

..  ..  ..

Music

Hour 1:

Hour 2:

Hour 3:

Hour 4: