“We need a global New Deal–a grand bargain between the countries and continents of this world,” said Gordon Brown on Sunday.  At a time when the European Union cannot agree on stimulus measures and the Doha Trade Round is failing, the concept of planetary cooperation sounds a bit far-fetched.  So strike the British prime minister off the list of people who can end the global crisis.

And who does that leave?  Don’t look to Vladimir Putin, who is helplessly watching the ruble collapse and his economy slide.  And how about Hu Jintao, who presides over the authoritarian superstate that supposedly owns this century?  He cannot even stop his subjects from smuggling out billions of dollars a day to the outside.  As Tom Friedman, one of the apostles of American decline, wrote this morning, there is only one place that people are looking for answers at this moment.  “Only the U.S. can lead the world,” he quotes a South Korean official as saying. “We have never had a more unipolar world than we have today.”

That assessment is not quite right, because America was relatively more powerful in the moments immediately following the Second World War than it is today.  Yet the South Korean gets at a fundamental truth.  In Friedman’s “flat world,” America was being marginalized by globalization and authoritarian states were on the march.  In this worldwide crisis, however, no one feels the authoritarians have any answers.  In short, there is no nation but the United States to turn to, and that’s more true than it was six decades ago, when some thought the Soviets had a fine model.  “At no time in the last 50 years have we ever felt weaker, and at no time in the last 50 years has the world ever seen us as more important,” Friedman notes.

So as humanity turns from prosperity to poverty, Washington has an opportunity to put the international system back on course.  “We have it in our power to begin the world over again,” Ronald Reagan told us.  Yes, now would be an excellent time to do so.

What happens when two nuclear submarines collide in the Atlantic? The New York Times issues a truly atrocious editorial, which it did this morning.  Early this month, British and French missile subs bumped each other, causing minor damage to both of them.  There was no release of radiation and no risk of accidental launch.

So what does the Times do?  It issues a call for an agreement among the United States, Britain, France, and Russia — the four nations operating missile subs in the Atlantic — to assign cruising depths.  As the paper notes, this would be like restricting airplanes to certain altitudes.

This is a truly atrocious idea.  First, an agreement of this sort would be unenforceable. The collision occurred because missile boats are silent and essentially untrackable.  So how are we going to detect violations?  Second, collisions are extremely rare — this was the first between two nuclear subs — and NATO on its own could further reduce a low risk by ensuring closer coordination among its member states.  Third, the security of the United States depends on masking the location of its missile subs.  Therefore, the last thing we should be doing is giving adversaries a clue as to where we are lurking in the ocean.  Not every problem in this world requires a treaty.

I believe in arms agreements, and I believe the United States is at risk as long as there are nuclear weapons in the world.  But as long as they exist, we need to do all we can to ensure that nations wishing us harm cannot locate the six or so missile boats that are on patrol at any one time.  The existence of our nation critically depends on keeping them hidden.

“We are truly going to rise or fall together.” That was Hillary Clinton yesterday before departing Beijing, the last stop on her four-nation trip.  The secretary of state, repeating accepted wisdom, was referring to the American and Chinese economies.

Okay, Mrs. Clinton, time for an elementary lesson in economics.  It’s true our economies share an “interconnection” as you put it, but that does not mean we will share the same fate.  On the contrary, our economies are bound to move in opposite directions in the months ahead.

China earns large current account surpluses, and we run large deficits.  The current global downturn will, not surprisingly, treat us differently.  In the Great Depression, perhaps the closest analogy to what we are seeing today, the surplus countries had the hardest time adjusting.  Why?  Because they could not continue to sell their products to a slumping world.  And this pattern is repeating itself: even in the initial stages of the current crisis, the Chinese economy is manifesting severe problems.  January, for example, was the third consecutive month China’s exports fell.  Export falls are especially worrisome for Beijing because an extraordinarily high 38 percent of its gross domestic product is derived from sales of products abroad.  China, unfortunately for the Chinese, has an economic model particularly ill-suited to the current economic environment of plunging growth and trade.

The United States, unlike China, has the means to solve its own problems.  American consumers are cutting way back, which means our trade deficit is falling as imports decline.  As a consequence, our savings rate is increasing.  We may not be able to fund all our government’s need for cash at this moment, but we are moving in that direction.  And unlike China, we would do relatively well if the global economy fell apart.

I’m not arguing we should reject international commerce or adopt protectionist measures — in fact, I believe the opposite — but we do need to correctly understand our situation today.  So, Madame Secretary, we will not rise or fall together with China.  Quite the opposite, in fact.

“It’s a bit chilly in Beijing,” said Yang Jiechi, “but I have confidence that you will see the biggest number of smiling faces here.”  China’s foreign minister was not commenting on yesterday’s weather in friendly banter with Secretary of State Hillary Clinton.  His point was that China’s happy people were proof of the regime’s good human rights record.

Yang was lying, of course.  But that’s not the point.  Clinton knew he was lying, and that’s not the point either.  The point is that Yang knew that Clinton knew he was lying but did not challenge him.  The Chinese, in short, were putting forth their version of reality and Americans were accepting it.  Minister Yang knew he had just humbled the United States.

“You know, a lot of international diplomacy is a head game,” Mrs. Clinton said on Friday before arriving in Beijing.  She’s right, and the Chinese have just outmaneuvered her.  She thought she could buy their good will by accepting an obvious deception.  They, however, interpreted her acceptance of their outrageous views as a sign of weakness.  As one Indian observer recently remarked, Beijing now perceives the United States to be “a beakless eagle.”  Abe Greenwald noted on Friday that the issue of human rights in China cannot be separated from the supposedly “broader issues.”  He’s correct because the Communist Party, which has yet to shed the mentality of its early years, only respects strength.

Mrs. Clinton has lost the initial round of the “head game,” so don’t expect Beijing to be cooperative in the near future.  President Obama’s diplomacy in China has just gotten off to a truly bad start.

Yesterday, the Chinese Foreign Ministry said that China was “shocked” by a Russian warship firing upon and sinking a Chinese cargo ship near Vladivostok on the 15th of this month.  At least seven of the crew were missing and undoubtedly died in the incident.  Beijing lodged a formal protest.

The New Star, flying a Sierra Leone flag, was leaving Russian waters and apparently ignored warning shots.  What happened next is in dispute.  Moscow’s story is that the ship kept trying to outrun two Russian coast guard vessels, which eventually opened fire.   The Russians, it appears, fired more than 500 rounds at the bow and the stern of the New Star.  An early Interfax report claims the Chinese ship actually responded to the warning shots by turning around but then sank in rough seas.

In any event, the Chinese are outraged, the Foreign Ministry saying that Russia’s attitude was “hard to understand and unacceptable.”  Moreover, Beijing claims the Russian ships did not do enough to save the crew.  Moscow, for its part, says the New Star’s captain “behaved extremely irresponsibly” and “is fully to blame.”

The Chinese and Russian governments have many reasons to put this incident behind them.  They see the world in common terms and share many interests.  Both of them are deeply suspicious of the West and want to reorder the international system.  They share many friends.  They are developing trade ties.  They call themselves “strategic partners.”

But that’s only half the story.  Almost two decades of economic development have made both the Dragon and the Bear prosperous and, as a result, increasingly arrogant, assertive, and self-centered.  Now, the global downturn has shaken their economies especially hard and made their governments vulnerable.  So both Beijing and Moscow have reasons to create a foreign enemy to rally their restive populations.  Even as fraternal communists they were often trading barbs and sometimes gunfire.  And after this month’s New Star incident, they just might turn on each other again.

Today, a Swedish court approved an application to restructure carmaker Saab under the protection of Sweden’s bankruptcy laws.  The General Motors subsidiary will now undergo a reorganization resembling one under our Chapter 11.  Said Jan Ake Jonsson, Saab’s managing director, “It was determined a formal restructuring would be the best way to create a truly independent entity that is ready for investment.”

Is that so?  Perhaps he should have a conversation with his boss, Rick Wagoner, who continually maintains bankruptcy is not a good idea for vehicle companies.  Says the General Motors chief, “We don’t have any strategy or plan to file for bankruptcy.”

Of course that’s right – General Motors does not have a plan for anything other than accepting more Federal money.  On Tuesday, it asked for a $16.4 billion “loan,” a sum on top of the $13.4 billion approved in December.  And it will undoubtedly ask for more funds soon because, among other things, Americans are not buying vehicles, the United Auto Workers is not making meaningful concessions, bondholders are intransigent, and GM’s managers are idiots.  Today, David Brooks, in a column entitled “Money for Idiots,” writes that “sometimes you have to shower money upon those who have been foolish or self-indulgent.”  Maybe that’s right, but, as Saab showed us today, there are alternatives to enormous and inadequate bailouts.  Oh, almost forgot: Saab’s bankruptcy filing immediately followed a rejection from the Swedish government for a bailout.

So perhaps we should conclude that what’s good for Saab is also good for General Motors.  And that, by the way, would also be good for the United States.

China and the United States will resume military-to-military ties, reported People’s Daily, the Communist Party’s flagship publication, on Tuesday.  A two-day meeting will start on the 27^th of this month in Beijing between a U.S. deputy assistant secretary of defense and a deputy chief of the People’s Liberation Army.  China broke off military ties last October to express displeasure over Washington’s sale of $6.5 billion of arms to Taiwan, which the Chinese government considers to be one of its provinces.

“It’s our desire to have more exchanges with the Chinese,” said Admiral Timothy Keating, commander of U.S. forces in the Pacific, this week.  “We want to do more with them.”  That’s an extraordinarily bad idea, especially because the exchanges have essentially been one-way giveaways of information and know-how to the Chinese.  Yet Keating keeps on trying.  In 2007, he said the United States would be willing to help the People’s Liberation Army Navy — yes, that’s what they call it — build aircraft carriers. Now, he says the U.S. Navy would be willing to “work with” Beijing’s carriers when they are built.  In other words, he is willing to help the Chinese learn things that would take them years to figure out on their own.

Unfortunately, our admirals think they are so far ahead of the Chinese navy that they can afford to be generous with information.  Moreover, they have a seemingly unshakable belief that they can establish stable relations with the Chinese even though Beijing’s goal is to remove American forces from Asia and surrounding waters.  Our admirals apparently trust their goodwill gestures will be reciprocated when past years’ events show the opposite.

So here’s a newsflash for you, Admiral Keating: The Chinese are configuring their navy to sink your ships.  You can help them do that, but I suspect most Americans would not think this is a good idea.

So far, Secretary of State Clinton’s trip to Asia has been long on symbolism, as a maiden excursion should be.  It was important to reassure our “cornerstone” ally, Japan, and in Tokyo she was pitch-perfect.  In Jakarta, she said the right words about Indonesian democracy.

So much for the easy part.  The next stopover is Seoul.  There, the secretary of state will have to confront one of the planet’s most vexing problems, North Korea.  No nation has ever had satisfactory relations with Pyongyang.  Consider the United States. Over six decades, the most abhorrent regime in history has, at almost every turn, bested the world’s strongest power.  Whether bearing carrots or carrying sticks, Republicans and Democrats have failed to accomplish all but minimal objectives.  Lack of achievement, unfortunately, is a bipartisan legacy.

Selig Harrison, writing in the Washington Post yesterday, unwittingly outlined how badly we have failed.  The Korea specialist correctly noted that Pyongyang has taken a hardline turn in recent months and then attributed the change in approach to Kim Jong Il’s stroke last August.  The medical excuse sounds a bit too convenient — it is more likely Mr. Kim never contemplated giving up his most destructive weaponry and recent negotiations on verification have flushed out his real intentions.   In any event, Harrison, perhaps America’s leading advocate of soft policies toward Pyongyang, suggested we just live with a nuclear North Korea.  Unfortunately, some in the Obama administration feel the same way.

Does Mrs. Clinton?  There are strategies for defanging Kim and taking away his arsenal of nukes — such as squeezing him harder and putting China on the spot for supporting Pyongyang.  When America’s top diplomat rolls into Seoul tomorrow, she will have to begin to tip her hand as to how she will deal with the seemingly impossible Kimist state.  Up to now, Clinton has gotten away with saying that a North Korean missile launch would be “very unhelpful” and repeating generalities about reaching out to Pyongyang — statements made yesterday from Tokyo — but that won’t be good enough when she is on Korean soil.  Maybe it’s not fair for the South Koreans to demand specifics so soon into her tenure, but no one should have expected Kim to give her time to formulate policy.

And when it comes to Washington’s Korea policy, she has to get it right the first time.  After all, the Iranians, about a year away from building a nuclear device of their own, are watching to see whether she can disarm Pyongyang.  Mrs. Clinton’s trip gets serious tomorrow.

By a decisive margin, Venezuelan voters removed all term limits for officeholders yesterday. And they did something else, at least according to President Hugo Chavez, who will now be allowed to run for a third consecutive term in 2012.  “Those who voted ‘yes’ today voted for socialism, for revolution,” he said.

In a sense, the pudgy revolutionary is right.  Yesterday’s referendum was a setback of enormous proportions for representative governance and capitalism in Venezuela.
Chavez evidently wants to be president for life, but in his public pronouncements he talks about leading the country until 2049, when he will be 95.  “Effectively this will become a dictatorship,” says opposition leader Omar Barboza.  Just about everyone agrees.  Now in control of the government, Boss Hugo can do what he wants.

Maybe.  The one thing Chavez cannot do is control the price of oil, which makes up 94 percent of his country’s exports and produces about half of the national government’s revenue.  His current budget assumes oil will average $60 a barrel, but it is now about $37.  Global energy markets have figured out that we’re in a severe and long downturn, so oil prices will stay low.  Even if producers can force prices up, they will be able to do so only with drastic production cuts, which will end up reducing proceeds to governments like Venezuela’s.  The problem is even worse than that for Chavez because his “21st-century socialism” has led to results that 20th century socialists would find familiar.  For instance, his state oil company, PDVSA, is laying off workers and cannot meet its payroll or pay bills.

Now that Chavez has even more power, he is bound to go overboard and bring his nation to ruin even faster.  The dominant narrative is that the global downturn is proof that capitalism must be tamed, so the world needs another lesson in the power of socialism to destroy wealth and ruin societies.  Let’s all join in thanking President Chavez, who will remind us why collectivism does not work.

Hillary Clinton starts her trip to Asia tomorrow, her first abroad as secretary of state.  The first stop is Tokyo.  That’s followed by Jakarta and Seoul.  She ends her excellent adventure in the magnificent capital of Beijing.  Long on symbolism and short on substance, Mrs. Clinton’s trip signals the importance of Asia in her calculations.

Everybody’s talking about what she’ll be doing on the trip, but it’s just as important to say what she will not.  She will not, for instance, be going to two places that should have been on the itinerary: Canberra and New Delhi.  To her credit, Mrs. Clinton will be reassuring American allies Japan and South Korea by her visits there.  Yet she is not making the effort to go to the most reliable friend in the region, Australia.  In a time when Washington will need all the support it can get in Asia, the omission is a mistake, especially because Obama’s Washington needs to renew the ties that George W. Bush and John Howard, then prime minister, worked so hard to strengthen.  Skipping Australia is especially sensitive because Mrs. Clinton is going out of her way to visit Indonesia, with which Canberra has often had uneasy relations.

A bigger omission, in many senses, is India.  The most important foreign policy legacy of the Bush years will undoubtedly turn out to be the beginning of a strategic relationship with New Delhi.  The partnership of the world’s largest democracy and its most powerful one can be the most important force for peace and prosperity in the world.  The Indians do not want to be used by the United States, but they have so many common interests with Americans that the unspoken alliance is a natural one.

Instead of going to New Delhi, Mrs. Clinton is headed to the Chinese capital.  The stopover will produce a lot of nice words but no results, or at least none favorable to us.  Just weeks in office, the Obama administration has had insufficient time to think through its China policy or even name its ambassador to Beijing.  The best the secretary of state can hope for from her China stopover is that she leaves without making any blunders of lasting significance.

If she really wants to accomplish anything with the Chinese during her time in office, Mrs. Clinton should show them that the United States is prepared to work closely with the one nation they truly fear.  So the route to an effective China policy runs through New Delhi.  That’s just one of the many reasons why the new secretary of state should have gone there on her first trip.

Yesterday, the Commerce Department reported that America’s 2008 trade deficit with China hit a record $266.3 billion.  That’s up four percent from 2007’s whopping deficit, also a record.

Virtually every American pundit says an ailing United States has little leverage over a rising China.  That, in short, is wrong.  For one thing, China’s economy is extraordinarily dependent on exports: a staggering 38 percent of its economic output is derived from sales abroad.  Moreover, Beijing’s bulging surpluses have been built on numerous violations of its World Trade Organization commitments and predatory currency practices.  The Chinese, therefore, are extraordinarily dependent on Washington’s lax enforcement attitude.

Saying we have little influence over Beijing — China’s many friends love to repeat this mantra — is essentially unilateral disarmament on our part.  We have the weapons — figuratively speaking, of course — to get the Chinese to do the right thing.  It’s just that we have persuaded ourselves not to use them.

We want Beijing to, among other things, stop supporting genocide in Darfur, stop transferring nuclear weapons technology to Iran, and stop supplying rockets and other instruments of death to terrorists in the Middle East and Central Asia.  And yesterday, the Commerce Department just gave the Obama administration 266.3 billion reasons why we can do something about all these irresponsible acts-as well as a few others.

This Saturday, Dominique Strauss-Kahn said the world’s advanced economies are “already in depression.”  “The worst cannot be ruled out,” the chief of the International Monetary Fund declared.  That assessment is consistent with the increasingly dire pronouncements from President Obama, who now talks about a “profound economic emergency.”

Undoubtedly, both of them came out with their gloomy statements so they could get what they wanted — more resources for lending in the case of the IMF and passage of the stimulus bill for the American president.  Yet that does not mean they are wrong.

Many analysts shy away from categorizing the downturn in stark terms.  They say, for instance, that economic indicators are not nearly as bad as they were in the 1930s.  Of course, they’re right, but that is only because we are in the initial stages of the crisis.

The irony is that if Messrs. Strauss-Kahn and Obama are right — and they are — then the relief measures they are seeking are inadequate.  The truth is that virtually nothing multilateral institutions or governments can do at this time can fix the fundamental causes of the downturn.  Governments can — and should — relieve pain by measures such as unemployment insurance, but all their grander schemes will only make things worse.  Government measures like President Bush’s TARP have created problems, and President Obama’s schemes are no more promising than his predecessor’s.  His costly stimulus bill will not stimulate — or its positive effects will be lost as the crisis gathers momentum — and Treasury Secretary Timothy Geithner’s bank plan is a disaster, and not just because he did not provide sufficient detail yesterday.

So agree with President Obama when he says this is no “run-of-the-mill recession.”   In fact, it is no recession at all.  And that’s why his government cannot do much about it for the next few years, perhaps for the next half decade.  Although Alan Greenspan is now discredited, we still believe in Greenspan-like figures implementing plans, making adjustments, solving problems.  Yet because the downturn is as severe as Strauss-Kahn and Obama have just told us, only “markets” — in reality, the world’s six billion people all trying to better their lot — can get us out of this.

One day historians may see our ongoing efforts to end piracy off the Horn of Africa as marking the beginning of the end of Pax Americana, at least according to the always interesting J. E. Dyer, a retired naval intelligence officer.  “Without any particular notice being paid by Americans or Europeans,” she writes in her new blog, “we are seeing develop, in the waters off Somalia, a most informative kind of evidence that we are no longer the hyperpower we were fifteen years ago: the arrival of navy after navy to operate in support of UN resolutions, but independently of official leadership by the US, according to multiple national agendas.”

There are some who think the United States, by not acting, hoped other nations would get involved in what Dyer calls an “anti-piracy gaggle,” the “biggest naval free-for-all in modern history.”  If that was our strategy, we have invited troublemakers — like Russia, China, and even Iran — into those troubled waters.

And in so doing we have intentionally abandoned our responsibility as the guarantor of the sea lanes and legitimized the role of our adversaries.  In short, we have not only marginalized ourselves, but we have also boosted the worst states in the world today.  This is not how the United States maintained order last century.

As Yale’s Paul Kennedy has written, some nations fail after “imperial overstretch.”  In our case, it looks as if Dyer may be right and we will fade away after empowering those who wish us harm.  We will not, as we hope, make autocrats responsible members of the international community by giving them a role in maintaining order.  We will just make them better able to accomplish their aims.

Yesterday, India’s Congress Party, part of the ruling coalition, suggested that Pakistan be declared a terror state due to the release of Dr. Abdul Qadeer Khan.  On Friday, Islamabad set the ringleader of a nuclear proliferation gang free after five years of house arrest that followed a hastily arranged confession and pardon.

Khan sold nuclear technology to terrorist states Libya, North Korea, and Iran.  Yet that does not necessarily make him a terrorist, nor does it make his country a terrorist state.  What does, however, is Islamabad’s support for the ongoing series of attacks against India.  It appears, for instance, that the November raid on Mumbai was planned at the highest levels  of the Pakistani intelligence services, specifically the ISI, the Directorate for Inter-Services Intelligence.  Islamabad has long supported and protected Lashkar-e-Taiba, which carried out the horrific attack, and Lashkar’s front organization, Jammat-ud-Dawa.  Pakistan is also behind terrorism in India’s Kashmir and in other parts of its rival.  Yet Pakistan is not one of the four nations-Cuba, Iran, Sudan and Syria-currently on the State Department’s list of terrorism-sponsoring states.

Nor is China, which has continually backed both Iran’s campaign of terror against Israel and Pakistan’s campaign against India.  The terrorists attacking Mumbai used Chinese equipment — the distinctively blue Type 86 grenades, manufactured by China’s state-owned Norinco, which has continually supplied terrorists operating inside India.  China has given Pakistan most of the ordinance that the ISI gives to terrorists.  Almost all of the sophisticated communications equipment used by terrorists in India, especially Kashmir, is Chinese-made and was routed through the Pakistani army, which acted as a conduit.  Training the Chinese give to Pakistani personnel is leached to terrorists-with Beijing’s knowledge.  Furthermore, China blocked U.N. sanctions against and censure of Lashkar and Jammat in April and May 2006, May 2007, and August 2008.  And Beijing has worked with terrorist groups, including the Taliban, outside South Asia.

If we are serious about fighting all terrorism, then we need to add Pakistan and China to the State Department list.  And if we’re not serious, we will surely lose the global struggle.  How can we prevail if we cannot even identify our adversaries?

Today, an official of the Collective Security Treaty Organization said the Russian-dominated grouping will create an integrated air-defense system that will cover the skies from China to Europe.  Specifically, there will be three such systems anchored by the Russian one.  Of these, a Russia-Belarus system looks like it will be the first to be put in place.

The move is just the last of a series of Russian initiatives to reclaim leadership in Central Asia and comes on the heels of a major victory for the Kremlin.  On Tuesday, Kyrgyzstan’s president, speaking from Moscow, announced his country was expelling the United States from the Manas air base, a vital link in the supply of NATO forces in Afghanistan.  The Kremlin insisted that Kurmanbek Bakiyev’s base-closure decision had nothing to do with Russia providing Bishkek $150 million in aid and $2 billion in loans as well as forgiving $180 million of its debt.  The Russians have always resented the presence of American forces in what they believe should be their sphere of influence, and now they are tightening their bonds in the region to exclude others.

“One Cold War was quite enough,” Defense Secretary Robert Gates famously said two years ago as he tried to damp down tensions with Moscow.  Unfortunately, we don’t get to determine whether there will be another multi-decade struggle with the Kremlin.  There is one going on at this moment whether we choose to recognize it or not.

Are we completely clueless?  We still have a we-are-the-only-superpower view of the world and maintain a we-can-afford-to-ignore-hostile-acts approach.  The conciliatory tactics of the last few years failed to achieve a sustainable relationship with Moscow, so the change I can believe in is recognizing that our engagement policies have failed.  In short, we need to understand that Moscow, through a byproduct of its initiatives, is indirectly aiding the Taliban, and we should treat the Russians accordingly.  The watchword for the coming years should be “reciprocity.”

Today, South Korea’s Yonhap News Agency reported that intelligence officials have just spotted a train carrying what is believed to be North Korea’s longest-range missile, the Taepodong-2.  A 2006 test of this missile ended in apparent failure, but technicians have undoubtedly corrected flaws and included upgrades since then.  As one observer in Seoul mentioned, we could call the missile on the train “a Taepodong-3.”

The Taepodong-2 is thought to have a range of a little over 4,100 miles, which means it can reach Alaska.  A 1998 Taepodong test ended with debris falling in that state or just off its coast.  The version on the train undoubtedly has a much longer range.  So if you live in Washington, Oregon, or California, now would be a good time to see if anyone will sell you insurance for scrap metal falling from the sky.  A few years ago, some analysts thought a new version of the Taepodong could then hurl several hundred pounds up to 9,300 miles, enough to reach most of the rest of the United States.  Of course, we won’t know how far North Korea’s missiles can fly until we witness a successful test.

Korea experts are saying Pyongyang is trying to get the attention of an Obama administration distracted by Gaza and the deepening global downturn.  Perhaps that is what Kim Jong Il is doing.  Yet his miserable regime is always improving its missiles, whether or not his relations are worsening with Washington, as they now are.  Ari Fleischer, when he was President Bush’s spokesman, said: “Technology and time mean that regimes like North Korea will increasingly have the ability to strike at the United States.”

And it’s not just the regime in Pyongyang that we should worry about.  Today, Iranian President Mahmoud Ahmadinejad announced his country put its first domestically produced satellite into orbit.  At this moment, we do not know if the claim is accurate, but a U.S. defense official, speaking anonymously, confirmed that the Iranian missile did in fact reach space.

Will Beijing buy more American debt?  Yesterday, Wen Jiabao arrogantly said that President Obama will want to know the answer to this question.  Then the Chinese premier announced this:  “Whether we will buy more U.S. Treasury bonds, and if so by how much-we should take that decision in accordance with China’s own need and also our aim to keep the security of our foreign reserves and the value of them.”

Premier Wen wants Obama to call, but the American leader doesn’t have to.  We already know how the Chinese are going to make their decision regarding purchases of American debt.  There are two parts to the Chinese premier’s answer.  The first is “China’s own need.”  Up until the global crisis, 38 percent of the Chinese economy related to export sales.  In 2007, the last year for which figures are available, all but $5.9 billion of China’s overall trade surplus or $262.2 billion related to sales to the United States.  So China is forced, as a practical matter, to recycle its export earnings into dollar-denominated assets if it wants to keep selling into the American market.

The second part of Premier Wen’s answer is “keep the security of our foreign reserves and the value of them.”  Beijing is sitting on top of substantial unrealized losses on its purchases of American equities, and it would also have had unrealized losses on its purchases of non-Treasury debt had the Bush administration not rescued Fannie Mae and Freddie Mac.  So, to avoid even more losses, the Chinese appear to be restricting their purchases of American debt to the safest instruments around, obligations of the U.S. Treasury.

As American consumers buy less and save more-imports fell a record amount in November and registered a large fall in the last quarter of last year-China will have fewer dollars to invest in Treasuries.  Chinese purchases of American debt will drop accordingly.  Premier Wen is trying to cloak Beijing’s investment of its dwindling export earnings in mystery, but the basic economics is easy to understand.  So, Mr. President, don’t call Mr. Wen and make concessions in the hope he’ll buy more debt.  Just pull out your calculator.  After you make a few assumptions about trade, you will be able to estimate how much the Chinese will buy this year.

Today, North Korea declared it was repudiating agreements with South Korea, including the landmark 1991 reconciliation accord.  “Relations between the north and south have worsened to the point where there is no way or hope of correcting them,” stated Pyongyang’s Committee for the Peaceful Reunification of Korea.  “They have reached the extreme point where the clash of fire against fire, steel against steel, has become inevitable.”

South Korea never signed the 1953 armistice that ended the Korean War, so that document could not have been covered by the North’s announcement.  Today, Pyongyang called the armistice a “useless peace of paper.”  Yet it need not have bothered: in August 2006 North Korea issued a statement declaring it “null and void.”

Analysts assume that today’s statement is just a bid to get President Obama’s attention. But that may not be the case because Kim Jong Il looks as if he is getting a bit desperate.  He is in bad health, the concept of a succession to a younger-generation Kim is in doubt, his economy has been shrinking since 2006, and there is another severe food shortage.

Mr. Kim and his father have a history of using violence to upset status quos they thought to be unacceptable, so continually ignoring Pyongyang may not be the best strategy for us, especially at this crucial moment.  We have always let the Kim family pick the time and place for its next provocation, and that is what the current Kim could be doing now.

So if we want to keep the peace on the Korean peninsula, some nation needs to explain to Mr. Kim that his inflammatory words are unacceptable.  Of course, there is no better party to do that than the guarantor of the geopolitical order, the United States of America.

Bill Clinton received a $300,000 speaking fee from a company managed by a man fleeing authorities in China, Hong Kong’s South China Morning Post reported today.  The fee relates to an event held on December 4, three days after President Obama nominated his wife to be secretary of state.  A spokesman for the event’s organizer, Hybrid Kinetic Automotive Holdings, confirmed that the firm’s chairman, a Benjamin Yeung, is none other than Yang Rong, the former boss of Brilliance China Automotive.  Mr. Yang is wanted in China for “economic crimes” and is one of that country’s more notorious fugitives.

There is no shame in being pursued by Beijing if your name is Tenzin Gyatso — in which case you’re also known as the Dalai Lama.  But if you’re Benjamin Yeung, also known as Yang Rong, then you have not led such a noble life, and many think you could be a bit shady.  So if you go by the name Bill Clinton, you shouldn’t be accepting large amounts of cash from fugitives from countries that can affect the future of the planet.

In late November, Bill Clinton agreed to submit future speeches for review by State Department ethics officials and, where appropriate, White House counsel.  It looks as if the system broke down just a week after being put in place.  And if you’re Mrs. Clinton and want to avoid further embarrassment, you can either resign or file for divorce because one thing’s for sure — Bubba is not going to change.

Yesterday, NATO’s Secretary-General Jaap de Hoop Scheffer suggested the organization engage Tehran to defeat the Taliban.  “We need to stop looking at Afghanistan as if it were an island,” the alliance’s senior statesmen said.  “We need a discussion that brings in all the relevant players: Afghanistan, Pakistan, India, China, Russia-and yes, Iran.”

Iran?  Landlocked Afghanistan is indeed a troublesome spot, and NATO needs to employ more resources.  Yet the solution is not to invite every troublemaker-big and small-in the region to lend a hand.  Sometimes you just have to go out and defeat your enemies by yourself.  Yes, the mullahs have no love for the Taliban, but the idea of allying with Iran is just absurd.

The Year of the Ox arrives tomorrow.  The Chinese — in China and in communities around the world — are now celebrating with fireworks and food.  And with traditional thoughts about good fortune for the future.  “Just like everyone else I hope that life this year will be a little better than last year,” said Angela Zhu, a young lawyer, in Beijing.

For most of China’s Chinese, the Ox’s year will be worse.  Stock markets are sinking, property prices are crashing, and economic output is shrinking.  No economy is falling faster than China’s at this moment.  For tens of millions of Chinese, there will be no jobs after the long break to mark the beginning of the year.

The country has been plagued by strikes, protests, and insurrections for more than a half year but especially since October.  “The crisis in the West is purely economic,” said labor rights activist Li Qiang this month.  “But in China it’s a huge political problem.”

The Communist Party’s senior leaders undoubtedly view the coming months as especially precarious.  This year, the country will see an unusual number of sensitive anniversaries.  March 10 is the 50th anniversary of the uprising in Tibet.  Each year monks march to commemorate the event, and in a few months security forces will go on special alert to prevent any demonstrations against Beijing’s abhorrent rule over this minority.

April 25 will see the tenth anniversary of the surrounding of the Communist Party’s leadership compound in Beijing by approximately ten thousand adherents of the Falun Gong faith.  The protest, which shocked Chinese leaders, was followed by a murderous crackdown lasting years.

May 4 will be the 90th anniversary of what is probably the most important demonstration in modern Chinese history.  On that day in 1919 students rallied in Beijing’s Tiananmen Square against the decision, made at Versailles, to give Germany’s possessions in the Shandong peninsula to Japan instead of back to China.

May 4 will be followed by June 4, the 20th anniversary of the Tiananmen massacre in 1989.  Tiananmen is still an open wound for the Communist Party and the country as a whole.

And four months after that comes the 60th anniversary of Mao’s founding of the People’s Republic on October 1.  The Party will put on a massive military parade — reminiscent of those in Moscow’s Red Square — to show off its growing might.

Any of these anniversaries can be used by angry Chinese citizens as an excuse to air grievances against the Party.  In a time of severe economic downturn — the first in memory for most Chinese — anything can happen during the Ox’s reign over the Chinese calendar.

Yesterday Timothy Geithner, in written responses to the Senate Finance Committee, stated that China was “manipulating” its currency.  The Treasury secretary nominee emphasized that “President Obama has pledged as President to use aggressively all diplomatic avenues open to him to seek change in China’s currency practices.”  The Bush Treasury had consistently refused to designate China a currency manipulator in its twice-yearly reports to Congress pursuant to the Trade Act of 1988.  The next such report is due in April.

The Trade Act doesn’t mandate anything more than negotiations once a country has been branded a currency manipulator.  Yet as Geithner also noted, Obama, while a senator, called for “tough legislation to overhaul the U.S. process for determining currency manipulation and authorizing new enforcement measures so countries like China cannot continue to get a free pass for undermining fair trade principles.”

The Bush administration approached China gingerly on trade and had relatively little to show for its polite and deferential approach.  The Chinese have lots of experience intimidating foreigners, and they were certainly successful with past administrations, which seemed to lose their swagger when approaching the Grand Celestial Court in Beijing.

These days, Beijing is not so fearsome.  Its economy, for one thing, is decelerating at an alarming rate.  Yesterday, the National Bureau of Statistics announced that China’s growth in the fourth quarter of last year was 6.8 percent.  Yet in reality it was closer to zero, and in December the economy probably shrank.  The slide is dramatic, considering that growth in 2007 was, according to newly revised official numbers, 13.0 percent — and it may have been higher than that due to poor sampling procedures that did not capture the results from small producers.

Not surprisingly, senior Chinese leaders are in a panic about the drop-off in economic performance.  Should the Obama Treasury label China a currency manipulator in April, they will undoubtedly huff and puff, but we should refuse to cower.  At this moment Beijing’s leaders know they need us more than we need them.  The stability of their regime depends on prosperity, and prosperity depends on access to the American market.  The United States, on the other hand, has the resources to fund its own debt, especially since American savings rates are increasing as consumption falls.

Will Obama trigger a trade war with China?  No one wants one, of course.  But no one in Washington should shrink from defending the American economy.  Beijing, after all, has never shed its mercantilist thinking, and now it is trying to protect its domestic market with currency and other barriers.  We need to speak plainly about this, and Geithner’s statement is a good start toward a sensible trade policy.

“Mexico is not a failed state,” declared Patricia Espinosa at the end of last week.  The country’s foreign minister was reacting to, among other things, a recent U.S. Joint Forces Command report warning that two countries-Pakistan and Mexico-are at risk of “rapid and sudden collapse.”

The Pentagon’s assessment sounds about right.  The Mexican government is fighting a brutal war with drug barons, who are also fighting each other.  Last year 5,300 Mexicans were killed in the various struggles, some shot in public, many beheaded or mutilated.  Tijuana, the sprawling city opposite tranquil San Diego, and Juarez, across El Paso, are littered with bodies each morning.  President Felipe Calderon, to his credit, deployed the army in the battle in 2006, but he has nonetheless been losing ground to the cartels, which now control large parts of the country.  Earlier this month Stephen Hadley, then national security adviser, stated that the violence even threatened Mexico’s democracy.

And our nation is also endangered.  “Mexico could represent a homeland security problem of immense proportions to the United States,” the Pentagon report notes.  Drug violence has already spilled over the almost 2,000-mile border, the world’s most frequently crossed international boundary.  “There is a wave of barbarity that is heading toward the U.S.” said one Mexican.

Whether or not Mexico is a failed state, we need to work with Mr. Calderon for the good of both of our countries.  “The more secure Mexico is, the more secure the U.S. will be,” the Mexican leader said as he met Mr. Obama in Washington before he took office.  There are many international challenges for the United States, but perhaps the most pressing is the one closest to home.

Yesterday the Dow Jones industrial average shed a little more than four percent and ended under the 8,000 mark, the biggest decline on an Inauguration Day in the index’s 124-year history.  The S&P 500 posted a 5.3 percent fall.  Asian and Europe markets today followed suit as investors around the world began to realize the extent of the weakness of European and American banks.

Nouriel Roubini, the New York University economist, thinks American financial institutions are carrying $3.6 trillion in credit losses.  Of that amount, half belongs to banks and broker dealers.  “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion,” he noted.  “This is a systemic banking crisis.”

Not surprisingly, the Obama administration has yet to figure out how to deal with what could be the complete failure of the American banking system.  There are many proposals on the table – Roubini predicts nationalization and many suggest the creation of a “bad” or “aggregator” bank for toxic assets – but the magnitude of the problem makes fashioning any solution difficult.  There are, however, valuable lessons from past crises, domestic and foreign.

The first lesson is that a series of partial bailouts don’t work.  Why?  Because, when bankers suspect that more help is on the way, they don’t have the incentive to change imprudent practices.  So the next bailout should be the last one.

Second, government attempts to merge weak institutions into strong ones in times of crisis just create more weak ones.  Bank of America’s absorption of Merrill Lynch and Wells Fargo’s takeover of Wachovia – both arranged under government pressure – has now created problems for the survivors.  This tactic may work in normal times when one institution flounders, but it can bring down the whole system when, as has been the case for the past half year, the dislocations are systemic.

So what should we do?  It’s time to accelerate the liquidation of the weakest institutions and make sure the survivors are not so large that they become “too big to fail.”  This solution could take years to implement, but, given the severity of the downturn, there are no promising shortcuts.  In any event, it will take even longer for the rest of the economy to absorb overcapacity, a precondition to general recovery.

The remedies can no longer be piecemeal.  And the time for more fumbling in the dark is over.  We probably have only one more chance to get the financial system right.

Today, the Kremlin released the text of a decree issued by Dmitry Medvedev.  The order requires his cabinet to introduce “special economic measures” — sanctions — against countries, organizations, and individuals selling arms to Georgia.

Whether or not the Russian president intended to be the first foreign leader to test Mr. Obama, he has issued a challenge that cannot be ignored.  Medvedev has just poked us in the eye, and it’s time to poke him back.

Our recent policy of indulging the Russians has only encouraged the type of aggressive behavior we had wished to avoid.  So, it is time to change course and tell the world we will sell weapons to Georgia and defend it with American troops if necessary.  And when should we do this?  Preferably in the speech to be delivered a few moments after noon tomorrow.