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1. With this new development, how great of a threat is North Korea, particularly compared to Iran?
By itself, I don't believe North Korea is really much of a threat to any one but itself... as an exporter of military technology though I believe this is a grave and serious development that, if allowed to continue, will lead to another stalemate between the west and the Islamic powers, especially Iran.
Basically, what we are witness to here is an evil and aggressive ideology, gradually but steadily, establishing the means to threaten all of Europe with nuclear attack at its whim and there is nothing we can do to stop it short of the pre-emptive attack which, in our infinate wisdom we have come to regard as evil.
We have faced this sort of threat before, but never from a religiously motivated power. The Soviet Union, no matter how aggressive and greedy for conquest it was, was never without reason. The same cannot be said for Islam which is an ideology based on superstition and mumbo jumbo.
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2. How should the free world respond if North Korea tests a long-range missile?
We should stop fiddling about with political correctness and identify the launch as a serious threat to democracy, then if the launch goes ahead anyway, openly declare it the act of aggression it really is, shoot it down, or at least use it as target practice for anti missile defence systems.
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3. If conditions deteriorate, do the United States and its allies have the capability to deal with North Korea and Iran at the same time as the situation in Iraq?
Yes, but we don't have the will to do it.
If by no other means, the United States and its allies should launch a nuclear attack against the North Korean missile site and reiterate the lesson of Dresden, Tokyo, Hiroshima and Nagasaki.
That strength does not lie in weapons, but in the will to use them.
Let there be no mistake here. If we don't have the will to use these weapons to defend ourself, then our enemies, whom I have no doubt, do have that will, will dismantle our democratic freedoms. The United States is the foremost democratic power on the planet and as such has the moral responsibility to do what it must to protect democracy. Its democratic allies have the moral obligation to support it in this. This is not 'imperialism', 'colonialism' nor 'hegemony', but simple survival.