Dynamics
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Generational Dynamics |
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PIIGS countries are facing worse debt crisis, while Germany thrives
There are many aspects of today's world that fascinate me, and one of the greatest is the similarity in unrealistic attitudes between now and the early 1930s.
When I was in school in the 1950s, there was a great deal of talk about the Great Depression, and there was one theme that my teachers repeated over and over: How journalists and politicians of the time would predict that the 1929 stock market crash was a temporary dip, and that it would start going up again the following week or month or season. Prosperity was always just around the corner. How could so many people consistently gotten everything so wrong, time after time after time? Couldn't they learn from their mistakes? Why did they make the same mistakes over and over?
So what's fascinating to me today is to see exactly the same scenario playing out in real time, as exactly the same kinds of mistakes are made by exactly the same kinds of people in exactly the same way.
Some of you may not remember, but this was supposed to be the "Recovery Summer" for the Obama administration.
As far as I can tell, they bet all their chips on this strategy. They pushed through the monsters health care bill and wasted time and effort on all sorts of other things, because they REALLY BELIEVED that the economy was going to recover dramatically this summer.
In fact, prosperity has always been just around the corner since the financial crisis began in late 2007. There were people on CNBC or Bloomberg TV constantly saying that the economy would pick up in one or two quarters. First it would be the last half of 2008, then it would be early 2009, then it would be the last half of 2009, then it would be early 2010, and then it would be the "Recovery Summer."
It's hard for me to convey how astonishing it is for me to be living through this, to see this puzzle that occupied many of my teachers in the 1950s be repeated right before our very eyes.
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So on Tuesday, I saw a Bloomberg TV interview with Jeremy Siegel, profssor of finance at the Wharton School of Business. This interview seemed to capture everything that's wrong with todays analysts, journalists and professors. He seems to have learned nothing from his past mistakes, promises that prosperity is just around the corner, and even provides almost contradictory reasoning in support of his promise.
Here are some excerpts from the interview (my transcription):
SIEGEL: First of all, I am disturbed that there is so much debate about whether they should use quantative easing, if this slowdown continues. This surprised me. I did not think we were going to have this slowdown. I do think we're going to have an acceleration by the fourth quarter for a number of reasons.
I want the Fed to to be ready to use more QE [quantitative easing] without a fight in the FOMC. I think Ben Bernanke was right. It looked like he moved to an easing status from his speech at Jackson Hole, but he obviously has opposition in the FOMC if he wants to move further.
I think that is unfortunate because we're not getting clarity on the fiscal side with the taxes, which I think is a very big negative for the markets, particularly the equity markets.
I want at least a proactive monetary authority that is ready to move if it feels it has to."
Here's where the see the basic internal contradiction in his reasoning, that I find entirely puzzling. He thinks that we're going to have "an acceleration in the fourth quarter for a number of reasons." But then he says that he wants to apply stimulus in the form of quantitative easing.
So what does he believe? Does he believe that there will be an acceleration in the fourth quarter with or without QE, or is QE a precondition? I can't figure out from the interview which he means. And this is where I begin to wonder whether he's lying to get on television.
The way the QE works is that the Fed purchases bonds and other financial assets from companies, in order to give them cash. For example, if a bank holds a billion dollars in mortgages on its books, the Fed could purchase the mortgages, so that the bank would have a billion dollars in cash to buy more mortgages.
This is what he's proposing: that the Fed purchase all the securitized loans that banks have on their books -- credit card loans, mortgages, etc. -- so that banks will have the money to make more loans. He calls this "lowering of risk premiums" -- that is, making it less risky for banks to make loans.
There are two problems with this proposal. One is that it's already tried, and the Fed has a couple of trillion dollars of these assets on its books, but it hasn't worked.
And the second problem is that the mood of the public has changed, and is increasingly opposed to these unchecked and uncontrolled stimulus and bailout programs.
He defended quantitative easing in the case of Japan:
This is an absolutely remarkable statement. As I reported a few days ago, Japan has recently announced its 17th consecutive month of deflation. Japan is still in a deflationary spiral 20 years after its stock market bubble crashed in 1990. So what on earth does Siegel mean?
His sentences were fairly garbled, so perhaps he meant that Japan only tried QE for a while, and while it was going on, it stopped deflation. But even in that interpretation, it misses the point. What these stimulus and bailout programs are supposed to do is "jump start" the economy so that the bailout programs can start, and the economy can become "self sustaining." If that doesn't happen -- if the money is simply wasted, and doesn't do any permanent good -- then what's the point of spending the money? You're only using up resources and wasting them.
This situation with Japan is really serious, and ought to give anyone pause. Ben Bernanke is known to have believed that deflation is impossible in any economy based on "fiat currency" -- that is, currency that's not limited by some gold standard. In such case, according to the theory, the central bank can just issue as much money as necessary to prevent deflation from occurring.
What's amazing to me is that so many economists still believe this, even though the Japan case clearly proves that its wrong. What's wrong with these idiots? How can Siegel point to the Japan case that so clearly invalidates his case?
One of the problems that Siegel identifies is that more "clarity" is needed on taxes, and he's counting on Congress to provide that clarity. He was asked why on earth he believes that's going to happen:
I think that the market is anticipating absolutely the worst - a total lapse to th pre-Bush taxes, which is a sharp increases in taxes, which is not going to be good for stocks and the economy. I don't think it's going to be that bad. I think that there's a game of chicken going on between the Democratic congress and the Republicans.
And I personally think the Democrats are going to have to step back, because this election is not looking good for them, unless they bring some clarity for the economic outlook. So I do think we're going to get some resolution there.
And this worst case scenario, which I think that investors are now looking at, is not going to materialize."
This is about as close to total fantasy as I can imagine. There's a great deal of political debates these days is whether to extend the Bush tax cuts that will expire on January 1. President Obama was highly critical of these tax cuts during the campaign, and he'd rather have all his teeth pulled then see them extended. There is no chance that they'll be extended before the November elections, though there's a possibility that they'll be extended after that, before January 1. But that will be too late for Siegel's scenario, so what Siegel is saying is total nonsense.
So once again, what does Siegel believe? Does he believe that there'll be prosperity in the fourth quarter no matter what happens in Washington? Or does he set these impossible preconditions? Or is he simply lying? I have no idea. All I know is that he's reciting the kind of nonsense that one can hear all day from these financial experts on TV.
Recall the following GDP growth table that I posted a few days ago, after the Commerce department issued a disastrous 2nd quarter GDP report:
Quarter GDP Growth rate
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Q1 2009 –4.9
Q2 2009 –0.7
Q3 2009 1.6
Q4 2009 5.0
Q1 2010 3.7
Q2 2010 1.6
What this table shows is a steady decline in GDP growth for three quarters in a row. Many analysts are concerned that GDP growth is going to turn negative in Q3 (this quarter), signalling the start of a "double-dip recession." But not Jeremy Siegel:
These two paragraphs represent the heart of his reasoning -- and there's nothing there. The fall in GDP doesn't matter because we've had "soft patches" before. We'll get "a little clarity" on the fiscal side because Congress will do as he demands. Throw in a little psychology, and happy days are here again.
In the end, he predicted that the S&P 500 index will rise to 1250 or 1300 by the end of the year. He had expected the stock market to be much higer at this time, but he says he was wront about that. But he's certain that he's right about what will happen by the end of the year. This time it's different.
I want to emphasize some things I've pointed out many times before. Mainstream economists like Siegel didn't predict or explain the tech bubble, or why it occurred in 1995 instead of 1985 or 2005. They didn't predict and can't explain the real estate bubble, the credit bubble, the credit freeze, the financial crisis, or the worldwide trade and transportation freeze. They can't explain what's happening today, and they have no idea what's coming next year. Everything they say is lying or guesswork.
I wanted to present these excerpts to show how vacuous these people are. But what about the puzzle that's been bothering me since the 1950s? Do I yet have an answer to what's going on today, and what happened in the 1930s?
One thing that I notice when I listen to Siegel or any of the people I see on CNBC or Bloomberg TV is that they have absolutely no historical grasp whatsoever. They believe that economic problems are cause by some kind of public malaise, and that if you can only snap people out of it, then the economy will return to normal. In the case of the stock market, I've noted before that analysts think that only the past 200 days of stock prices are relevant to what's going to happen next.
From the point of view of Generational Dynamics, this is completely wrong. The 1929 stock market crash and subsequent Great Depression created risk averse generations that rarely even went into debt. By the 1990s, these people all disappeared (retired or died), all at once, leaving behind generations born after the Great Depression who had no sense of the dangers of the abusive use of debt.
Mainstream economists simply have no concept of this, as I've said many, many times. They don't understand how the Great Depression created a population wave that's affecting us today. They can't grasp that a generation born in the 1920s-30s has completely different attitudes towards money and debt than a generation born in the 1960s and 1970s, and how that can mean that the worst today is far from over.
One of the most hilarious news stories these days is this one from Bloomberg:
The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse, said Ethan Harris, head of developed markets economics research at BofA Merrill Lynch Global Research in New York. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 40 percent below five years ago.
“It doesn’t rule out a recession,” Harris said. “It just makes it less likely than otherwise.”
The possibility of the economy lapsing into another contraction during the next year is 25 percent, he said in a Sept. 1 report. Harris cut his forecast for growth this year by 0.1 percentage point to 2.6 percent and lowered his 2011 estimate by a half point to 1.8 percent, according to the report."
Once again, one can only marvel at the stupid things that these analysts and experts say. Harris probably makes hundreds of thousands or even millions of dollars a year, and he comes up with this nonsense.
Here's one other example. I was listening to Stuart Varney on Thursday morning on the Fox Business Network. I don't have an exact transcript, but he said that a Republican victory in the November elections would give such a jolt to the economy that the stock market would go up and up and up. Where the hell do they get this stuff from?
I'm telling you, dear reader, that I often listen to Bloomberg TV over the internet while I'm working, and I listen to CNBC at other times, and at least 75% of what they say is total, utter nonsense.
So really, I still do have an answer to the 1950s conundrum. How could the analysts in the 1930s have been so wrong, and how can they be so wrong today? Are they lying or are they stupid? I'm still just as puzzled as I was in the 1950s.
The PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) are still in a great deal of financial trouble, while Germany is doing very well, thank you. This "two speed economy" in Europe has a lot of people worried, as "bond spreads" are increasing. This means that Ireland, Spain and Portugal have to pay much higher interest rates to borrow money than Germany does. Greece has the highest interest rates of all, but doesn't have to worry because they were bailed out by the EU and the IMF last May, and won't have to borrow money from private sources for two more years. Financial Times (Access).
Afghanistan's banking system is near collapse, as depositors are panicking and withdrawing money from the banking systems. Unless the U.S. provides aid by guaranteeing deposits, some banks may fail. NY Times
Iran's banking system and stock market may also be near collapse. The stock market has been booming, which is a puzzle in a country where productivity has fallen for 28 consecutive months, and where profitability has been negative for most state-owned banks. It's believed that the booming stock market may be an artificial bubble, where different government controlled companies buy and sell stocks to each other, bossting the price each time. RFE/RL
Red Cross aid workers in Pakistan are facing angry crowds when distributing food. Reuters
Vladimir Putin announced that Russia's ban on exporting wheat will extend into next year, causing a further rise in world wheat prices. Bloomberg
Speakers of a remote Australian aboriginal language do not use words like "left" and "right" when giving directions. Instead, they might say, "When you get out of the elevator, walk south, and then take the second door to the east." These people have a completely different way of viewing the world, and at any time they can always tell you which way is north. NY Times
In Japan, real men go to a hotel with virtual girlfriends. Wall Street Journal (Access)
Heavy drinkers live longer than those who abstain from drinking. Time
(Comments: For reader comments, questions and discussion, see the 3-Sep-10 News -- Financial expert Jeremy Siegel makes no sense at all thread of the Generational Dynamics forum. Comments may be posted anonymously.) (3-Sep-2010) Permanent Link
Suicide bombers attacked Shia worshippers in Lahore, Pakistan
It's about Mideast peace and a Palestinian state, but this summit is President Obama's show. The President greeted Israeli prime minister Benjamin Netanyahu and Palestinian Authority president Mahmoud Abbas in Washington on Wednesday, in preparation for peace talks to begin on Thursday.
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Obama pushed hard to get this meeting going without further delay, because there's a kind of a deadline. Last year, the Israelis agreed to a ten-month moratorium on building new settlements in the West Bank, and that moratorium is due to expire on September 26.
Netanyahu has said that the moratorium will not be extended, and it's believed that his governing coalition would not survive if he tried.
Abbas has said that the talks will end if the moratorium is not extended.
So the first order of business for the peace talks will be to find a compromise on the moratorium issue. One possibility will be to allow settlements only in certain areas that are expected to be part of Israel in some final agreement, but that's all up in the air.
The Hamas terrorist group, which is in control of the Gaza strip, doesn't like the peace talk at all. On Saturday, Hamas leader Khalil al-Hayya said, "Abbas and his negotiating team do not represent Palestine, Jerusalem, the refugees, or al-Aqsa, and we will not recognize any agreement signed by the Zionist enemy. Hamas continues to grow stronger and prepare for the final battle until your banishment from Palestine. Your existence is on its way to disappearing," according to Ynet news.
Hamas would like to throw a monkey wrench into the peace summit, and may have partially succeeded. Hamas has taken responsibility for the the shooting of four Israeli settlers on Tuesday, and has promised more killings, according to Bloomberg. Settler leaders responded by pouring cement for new settlements at several sites, openly violating the moratorium.
(Late news is that there are more shootings on Wednesday evening, and the threat of a campaign of shootings to derail the peace talks.)
How many times have I written about this dance? The first major Generational Dynamics prediction that I made on my web site came when President Bush announced his "Mideast Roadmap to Peace" in May, 2003. (See "Mideast Roadmap - Will it bring peace?")
That prediction was pretty straightforward, as generational predictions go. Palestinian president Yasser Arafat, whom everyone considered to be a terrorist and a liar, was thought to be the only obstacle to the adoption of Bush's Mideast peace plan. But from the point of view of Generational Dynamics, Arafat was part of the generation that survived the genocidal war between Arabs and Jews that followed the partitioning of Palestine and the creation of the state of Israel in 1948, and people in his generation would be doing everything possible to prevent another war. Hence, my prediction was that the death of Arafat, whenever it may come, would not mean peace, but would be part of a generational change that would lead to a re-fighting of the bloody 1948 war, and that in any event, the Roadmap to Peace would fail.
There was more worldwide euphoria after Yasser Arafat died in November, 2004. There was a lot of silly rhetoric from politicians at that time that now that this "truly evil man" was gone, peace was at hand.
It was interesting to see what happened next. Chaos and suicide attacks began to increase and worsen almost by the day, and there have been three wars since then -- the war between Israelis and Hizbollah, fought largely on Lebanon's soil in 2006; the war between Palestinian factions Hamas and Fatah in Gaza in 2008, that led to Hamas control of Gaza; and the war between Israel and Hamas in Gaza early in 2009. There are rumors and reports that Hamas and Hizbollah are preparing for a new war, with the help of Syria and Iran.
So now we have Netanyahu and Abbas in Washington at a peace summit that's supposed to resolve all the issues and create two side-by-side states, Israel and Palestine.
Here's one thing that nobody ever mentions, but it's crucial: The median age of the entire population of Gaza is 17, according to the CIA Fact Book. That means that Gaza is being largely run by kids with guns and missiles.
It's a major principle of Generational Dynamics that major events in history come from the people, massive numbers of people, entire generations of people. What politicians say or do is irrelevant, except insofar as their actions reflect the attitudes of the people that they represent, and so politicians can neither cause nor prevent the great events of history.
So you have the kids in Gaza, restless and bored just like American kids, wondering what their future is going to be like in a region dominated by the Jews who took their land away from their parents and grandparents. And just like American kids, they have no fear of war. Does anyone really think that these Gaza kids are going to listen to a couple of old farts like Abbas and Netanyahu, no matter what they come up with?
So as the peace talk summit begins on Thursday, nothing has changed since the Generational Dynamics prediction of 2003. The Mideast is headed for a massive new war between Arabs and Jews, re-fighting the war that followed the creation of Israel in 1948. And nothing that President Obama or any politician does is going to stop it.
With Pakistan still trying to handle the floods, a series of suicide bombings in Lahore attacked a Shia religious procession, killing 25 people and injuring hundreds. The concern is that further suicide attacks will be directed at foreign aid workers helping with the flood recovery. CS Monitor
Pakistan's farmers are in desperate need of wheat seeds, after the floods devastated much of the country's farmland and seed stock. They need it quickly, or they'll miss the next sowing season. Dawn
Europeans are losing faith in the European Union. Just 42% of Europeans say they trust the European Union, according to a new opinion poll, down six percentage points in just six months. EurActiv
France is facing enormous international criticism for it's new policy of rounding up Roma Gypsies and deporting back to their home countries, usually Bulgaria or Romania. However, many of them are unable to find work in their home countries, and they're planning to return to France as quickly as possible. Spiegel
Why Congressional web sites suck. Fierce Government IT. And check out the worst political web site ever http://www.georgehutchins.com
(Comments: For reader comments, questions and discussion, see the 2-Sep-10 News -- Mideast peace talks begin in Washington thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Sep-2010) Permanent Link
Palestinian gunmen try to sabotage upcoming Mideast peace talks
My web site software failed on Monday because of the large number of web log postings I've made this year. So I had to spend last night making critical changes to the software, and there was no time for a news story. I apologize for the interruption.
It was a fairly drastic change to a section of the software, and bugs are always a possibility. If you run into any problems -- a bad link, or an error message embedded in the article text, for example -- please let me know.
The news on Tuesday was certainly bizarre.
Two men of Yemeni descent traveled by plane to Chicago. From there, they went on to Amsterdam, planning to go on to Dubai, but their luggage went to Washington DC -- which already is a breach of Homeland Security rules. When the luggage was searched, they found several cell phones taped together, and another cell phone taped to a bottle of Pepto-Bismol, according to the NY Times.
Security officials became concerned that the flight was a dry run for a terrorist attack, and the two Yemenis were held for questioning in Amsterdam. However, it's been concluded that all the evidence had innocent explanations -- it's a "cultural" thing to tape things together. OK, fine.
But the story is one more example of the extreme sensitivity that's developed towards Yemen, and to Al-Qaeda on the Arabian Peninsula (AQAP), headquartered in Yemen -- ever since it was learned that last year's Christmas "underwear bomber" was trained in Yemen.
As we've reported, the CIA has made a remarkable reassessment: They now consider AQAP to be a bigger security threat to the United States than the core al-Qaeda group in Pakistan and Afghanistan.
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Furthermore, the BBC is reporting that there are now British military personnel stationed in Yemen.
Yemeni politicians and journalists have reacted sharply and negatively to these stories, apparently for fear that an escalating American presence in Yemen could turn the country into another theatre of war, like Iraq and Afghanistan.
Yemen's Defense Ministry is quoting officials who are denying reports that there are British and American troops in Yemen, and are labeling those reports as "lies," according to News Yemen. "Yemen doesn't accept any foreign military existence on its land and it has a strong security and military institutions able to carry their tasks in combating terrorism and control security," he says.
An opinion column in the Yemen Post says that local analysts are "lost and astonished" to hear that the US government is claiming that AQAP is a bigger threat than "its mother in Pakistan," and blames the situation on Saudi Arabia.
Readers may recall that on several occasions I've reported on a war in northern Yemen between Houthi rebels and Yemen's army, with support from the U.S. army in the form of intelligence, American special forces, and attacks by America cruise missiles. (See "Yemen wars escalate rapidly, as US provides military support.")
In that story, I reported that the Houthis, who are Shia Muslims with links to Iran, were expanding the war by crossing the border into Saudi Arabia, and that the Saudi air force was making bombing strikes on Houthi positions in north Yemen.
Much to my surprise, the opinion writer referenced above has a completely different interpretation of that whole scene:
Even with Saudi being a bigger Al-Qaeda threat, we all know the United States can’t rage war against Saudi, who has been tremendously loyal and obedient to Washington over the last three decades.
Is Al-Qaeda in Yemen really a threat to America? Let’s change the question. Is the United States a threat to Yemen? Will the United States be the cause for killing thousands of civilians in Yemen as it did in Pakistan, Afghanistan and Iraq?
In an interview I had with Al-Jazeera earlier, I stated that the United States must understand that its strategy in its war against terror has failed in every country it approached, and that spilling blood will not solve problems. The United States has not won a single war against Al-Qaeda in its short history, only if you think that the 5% of lands the Afghan government controls in Afghanistan is a success in the war on terror."
This is a substantially different set of facts than what the media has reported before. We'll be watching this situation in the future to get a clearer picture, and we'll be especially watching to see how the Obama administration escalates its military involvement in Yemen's fight with al-Qaeda.
As the Mideast peace talks approach, Palestinian gunmen opened fire on an Israeli car in the West Bank, killing four passengers. It's thought that the purpose of the attack was to sabotage the peace talks. Associated Press
Concerns are growing in Mongolia that China is trying to gain economic hegemony over the country. As a result, a new railway will be built entirely in Mongolian territory, rather than taking a much shorter route that crosses Chinese territory. Geopolitical Monitor
At the same time, tensions are growing between Russia and China over Russia's mineral-rich Far East, which is increasingly being populated by ethnic Chinese. Telegraph
As President Obama announces that US combat troops are withdrawing from Iraq, Baghdad residents are mourning their departure. Spiegel
As tensions grow between India and China, India is feeling concern about China's increasing presence in the Indian Ocean. Reuters
Overseas remittances to Saigon (Ho Chi Minh city) in South Vietnam totaled $2.56 billion in the first eight months of the year, a drop of 20% from the same period in 2009. Reuters
China is supposed to be a wealthy nation, but the Moody's ratings agency is expressing concern that China is borrowing a great deal of money (presumably for its stimulus and bailout programs) and going into debt. As I've said, China's economy is in even more trouble than America's economy, and by the Law of Diminishing Returns, the bailout and stimulus programs are less and less effective. Telegraph
ROTC was abolished at many politically liberal colleges in the 1960s and 1970s, but now it's poised to make a comeback at many élite colleges. Time Magazine
US consumers are split into two clear and distinct groups. The ones with secure jobs, who are surviving the economic downturn are spending as much as ever, while the ones who war dealing with chronic unemployment have cut back sharply, spending only on the bare necessities. Thus, for example, McDonald's is doing well, and high-end restaurant chains like Starbucks are doing well, but businesses in the middle are faltering. Financial Times (Access).
The constant use of computers and smart phones is giving young people in both Japan and China "character amnesia," where they're unable to write any more in the character based writing system. Independent
Man-eating giant squid devouring fish stocks. UK Express
(Comments: For reader comments, questions and discussion, see the 1-Sep-10 News -- Amsterdam arrests highlight Yemen confusion thread of the Generational Dynamics forum. Comments may be posted anonymously.) (1-Sep-2010) Permanent Link
Iran labels Carla Bruni as a 'prostitute'
An editorial in Bahrain's Gulf Daily News chides Iranian president Mahmoud Ahmadinejad essentially for being a loudmouth.
The editorial quotes Ynet reports of provocative statements by Ahmadinejad -- Israel is "too weak" to handle an offensive in Iran, and he doesn't think that talk of an attack on Iran is "serious."
The editorial then asks, "Is there a better way to provoke the hawks in Israel and America to join forces and attempt to prove Tehran's most aggravating Israel-basher wrong? ... [This is] is nothing less than a call to arms for both Israel and America. As such, he seems to want to stimulate the West's unthinking warmongers into catastrophic action and a devastating new war. ... Ahmadinejad would do well for himself, the Gulf and the world if he bit his tongue occasionally and restrained his inordinate pride."
This kind of bombast has been going on for years. Is it just pride? After so much time, it must be part of a larger strategy.
From the point of view of Generational Dynamics, Ahmadinejad's statements are part of a larger strategy that comes from political desperation, based on the mindset of the Great Islamic Revolution of 1979, and the subsequent Iran/Iraq war that ended in 1988.
To the hardliners who survived the war, the Revolution was a miracle that the united the entire country into a powerful Islamic unit that could then expel the invading Iraqis. This was an achievement of gigantic historic proportions to the entire Muslim world, since it revived the hope that Muslims throughout the region or even the world could be united behind one government, as they'd been united behind the Turkish government before the Ottoman Empire collapsed after WW I.
As always happens in every country, the children who grow up after a crisis war don't see the world in the same way that the war survivors do. Thus, when young people started having pro-American demonstrations in the late 1990s, Iran's hardliners began to panic.
That's why a new strategy became important with the election of Mahmoud Ahmadinejad as president in 2005, and everything he said and did should be regarded as a part of that strategy -- to unite the country and the region behind Iran's government. Thus, Ahmadinejad has talked about pushing Israel into the sea and about denying the Holocaust; he's providing funding to terrorist groups Hizbollah and Hamas, to provoke them into a war with Israel.
To suggest that this is all the words of a bumbling fool who is unintentionally provoking Israel and the world is not credible. The purpose is to unify the nation again, even at the risk of provoking a military strike. In fact, a military strike by Israel or America might even be welcomed.
As the student and "green movement" protests have grown and spread, the hardliners have become increasingly desperate. The protests are not simply putting a few policies at risk; they're jeopardizing the country's entire foreign policy. Furthermore, as the economy falters, they're even jeopardizing domestic policy. The protests that began after last year's disputed June 12 presidential election even bring the survival of the entire government into question, leading to brutal violence by Iran's security forces, firing into crowds, mass arrests, torture and brutalizing protestors.
Last year, analysts at Stratfor, BBC, and elsewhere were comparing the protests to the Tiananmen Square protests in 1989, that were crushed within a few days. But as I wrote at the time, that's the wrong historical comparison.
What Iran is going through is called a generational awakening era. (See "Basics of Generational Dynamics.")
It occurs in every country when the youngsters who grow up after a crisis war rebel against their parents and the austere rules and institutions created by the older generation to prevent a new crisis war. The political chaos reaches a peak some 20-25 years after the end of the crisis war.
The correct historical comparison is to America's Summer of Love, in 1967, 22 years after the end of World War II. This was followed by almost a decade of protests, climaxing in the resignation of President Nixon, and a political victory by the young Boomer protestors.
In Iran, those analysts who expect the the generational chaos to end soon will be disappointed. Even if street protests have been discouraged, the underlying generational conflict is still exploding, as shown by an explosion of stories recently about splits between moderates and hardliners within the government itself.
(As an aside for those of you who hate Boomers, if you'd like to know what they were like when they were young and cute, just talk to young Iranians. They're in the same generational archetype as America's Boomers.)
In one story, for example, hundreds of officers in the Revolutionary Guard Corps had to resign recently, because they were supporters of the Green Movement, as reported by WSJ. (Access)
One of the most dramatic splits in the government goes to a fundamental theological contradiction within the Revolutionary spirit itself.
The fantasy is that Iran will unite the Muslim world behind Iran's government. The reality is that Iran is a Shia Muslim state, and the countries on the Arabian peninsula are overwhelmingly Arab Sunni Muslims, and there isn't a snowflake's chance in hell that they'll ever agree to be subordinate to a Persian Shia Iran.
To make matters worse, Ahmadinejad has claimed to be a devout believer in the Mahdaviat -- the Shia Muslim belief that the Mahdi (or "the 12'th Imam" or "the Hidden Imam") is coming to save mankind. This belief is roughly equivalent to the Christian belief in the second coming of Christ. (By the way, there's also a Buddhist belief in the Maitreya -- that a new Buddha is to appear on earth, and will achieve complete enlightenment.)
This zealous belief, which is not shared by Sunni Muslims or even all Shia Muslims, is a clear contradiction with the strategy of universal Muslim hegemony. (See "Theological split in Iran widens as opposition protests continue.")
Now this inside theological split has burst out into the open. In an analysis by RFE/RL, Ahmadinejad and his chief of staff, Esfandiar Rahim Mashaei, have infuriated hardliners by appearing to be making statements that move away from fundamentalist Shia Islam, and towards a more nationalist idea. In one controversial remark, Mashaei has said that Iran should be friendly with all people of the world, "including Israelis." According to the Asia Times, the right-wing factions in Iran's government are splintering so quickly that Ahmadinejad may be threatened with impeachment.
Every awakening era has a winner, and there are only two possibilities: the older generations that survived the war, or the youngsters who grew up after the war. The younger generation usually wins because, after all, the older generations die off. But if the older generations win, as has happened in China for example, it's very ominous for the country and will lead to a civil war in later years.
Right now, Iran is a schizophrenic nation, with a hardline government policy that's bitterly anti-American, and younger generations that are largely pro-American and pro-West, and who don't really have anything against Israel. Right now, it looks to me that the younger generation is going to win, but it may take a few years.
My expectation, as I've been saying for years, is that when Iran is finally forced to choose one side or the other in the Clash of Civilizations world war, they will be on the side of the West, including America and Israel. That's one very good reason why a military strike on Iran would be a bad idea.
Carla Bruni, the wife of French president Nicolas Sarkozy, has been labeled a "prostitue" by Iran, because she is part of a campaign to save the life of an Iranian woman, Sakineh Mohammadi-Ashtiani, who is sentened to death by stoning after she cheated on her husband and tried to kill him. Daily Mail
(Comments: For reader comments, questions and discussion, see the 30-Aug-10 News -- Generation gap splits Iran's government thread of the Generational Dynamics forum. Comments may be posted anonymously.) (30-Aug-2010) Permanent Link
Home prices expected to fall after disastrous GDP report
On Saturday, Hamas leader Khalil al-Hayya has called for an uprising against the planned Mideast peace talks between Israel and the Palestinian Authority, scheduled to begin on September 3 in Washington. He said the talks were an excuse for the Palestinian government to allow Israel "to wipe out the Palestinian issue, continue Judaizing (sic) Jerusalem, continue building settlements, and erase the Palestinian right of return."
The Ynet news quotes him as directing a monologue at Israel: "Abbas and his negotiating team do not represent Palestine, Jerusalem, the refugees, or al-Aqsa, and we will not recognize any agreement signed by the Zionist enemy. Hamas continues to grow stronger and prepare for the final battle until your banishment from Palestine. Your existence is on its way to disappearing."
Hamas is the Palestinian terrorist group that gained control of the Gaza strip from Fatah and the Palestinian Authority in a war in 2008.
Fatah is in control of the West Bank, and represents the "old guard" in Palestinian politics, with leaders who survived the genocidal crisis war between Arabs and Jews that following the partitioning of Palestine and the creation of the state of israel in 1948. This group, like survivors of crisis wars in general, tends to be moderate and compromising in policies, and dedicated to preventing a new crisis war like the previous one.
Hamas was formed in the early 1980s by post-war generations, and they tend to be more radical and much less willing to compromise. In fact, the average age of the entire population of Gaza is 16, meaning that Gaza is a place which is run by children with guns and missiles.
An analysis on Saturday by the Arab News defends Hamas and blames the United States:
Such an outcome is altogether unnecessary. It is clear enough that the Americans would lose the Israeli participation instantly if they were to extend a welcome to Hamas at this point. But they could establish communication with the Hamas leadership, most likely through Track II mediation, and could stop the sabotaging of their governance. They could make evident to the Palestinian participants in the process their realization that the Palestinians can accomplish nothing while disunited."
This is an interesting opinion, but it's totally at variance with the generational analysis: These are kids with guns and missiles, and they have no intention of listening to any old farts in the Palestinian Authority or Israel.
We talk a lot about Boomers on this web site. The reason that they're called boomers is that there was a "baby boom" at the end of World War II, when millions of couples that had postponed having children suddenly decided to so.
Now we're seeing the other end of the baby boom. As the financial crisis worsens, and as anxiety increases about war and terrorism, couples are once again deciding to postpone having babies.
According to the latest CDC Report, the birth rate has fallen for two years in a row:
Year Number of births per 1000 population
---- ------------------------------------
2007 14.3
2008 13.9
2009 13.5
This is the lowest level in at least a century. The Associated Press quotes the demographer who wrote the report as saying, "It's a good-sized decline for one year. Every month is showing a decline from the year before."
After the Clash of Civilizations world war ends, we can once again expect a new "baby boom."
It's time to let home prices fall, according to the Calculated Risk blog.
The posting quotes Tom Petruno of the LA Times:
Now, a grim reality has set in: Despite the still-rich basket of tax breaks for residential property owners, and the lowest mortgage rates in a generation, the pool of willing or able buyers is dwindling.
Well, there is one ['fair' answer here]: Leave housing to market forces, let prices fall until buyers are motivated to come in, and hope that the economy can stand one final cathartic wave to clear the excesses of the bubble."
This is all wishful thinking, of course. Real estate prices are positioned to fall precipitously, and the idea that the government will "let" them fall is fantasy. They're going to fall whether the government wants to or not.
The resignation that house prices are going to fall follows from the latest set of dismal economic figures.
Both existing home sales and new home sales have fallen far deeper and faster than analysts had expected, as we've been reporting all week.
Then, on Friday, the Commerce Department issued a report on the Gross Domestic Product for Q2 that was disastrous. According to the report (PDF), the growth rate has been falling for three quarters in a row:
Quarter GDP Growth rate
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Q1 2009 –4.9
Q2 2009 –0.7
Q3 2009 1.6
Q4 2009 5.0
Q1 2010 3.7
Q2 2010 1.6
The US economy was officially in a recession starting in 2008. It officially ended in Q3 2009, as can be seen by the above table. Then in Q4 the GDP growth rate was 5%, because of the effects of the stimulus and bailout programs, and much higher than analysts had expected.
Analysts were overwhelming predicting and promising a "V-shaped recovery," expected the GDP growth rate to remain at the 4-5% level each quarter.
Instead, it fell to 3.7% in Q1 of this year, and the new report is at 1.6% for Q2.
Fed Chairman Ben Bernanke seemed to be surprised by the report in a speech he gave on Friday, using words like "unexpected slowing," "disappointing," and "sharp deterioration."
What's worrying analysts is not so much the individual number as the spiraling downward trend. Whereas a few weeks ago most analysts were predicting continuous growth -- with some predicting "spectacular" growth -- I don't believe I've heard anyone in the last couple of days who expected the growth rate to be higher than 1.6% in Q3, and many expect it to turn negative, leading to a so-called "double-dip recession."
From the point of view of Generational Dynamics, there is one event that still MUST occur - a spectacular stock market crash and financial crisis that will be remembered for decades, like the one that occurred on October 28, 1929. The stock market is still overpriced by a factor of close to 200%, as it has been since 1995, and I discussed in "Updating the 'real value' of the stock market."
It's impossible to predict when this event will occur, or what will trigger it, but things have been getting very menacing since May. (See "7-Jun-10 News -- Globally, May was a month of ominous events.") Q3 earnings will start coming out on October 1, and if they turn out to be disappointing, then we may be in for an "October surprise."
An estimated 500,000 people in the anti-incumbent "Tea Party" movement gathered on the National Mall on Saturday to hear Glenn Beck give an inspirational speech in the spirit of Martin Luther King's "I have a dream" speech at the same site, exactly 47 years ago. Sarah Palin also spoke. Not surprisingly, the NY Times coverage was incredibly snarky, but Politico and LA Times provided decent coverage.
Paul Krugman, who used to be an economist, but has turned into a hard left political columnist, was true to his new career by saying that the Democrats had to change economic policy because they need to be reelected in November. He says that "this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact. ... Yet policy makers are in denial" by "sugar-coating economic reality," and saying that everything is ok when it isn't. NY Times
Iraq's Prime Minister Nuri al-Maliki has put the country on the highest state of alert, after the "Islamic State of Iraq" (al-Qaeda in Iraq) took credit for the recent wave of suicide bombings in cities across the entire country. CNN
The U.S. is planning to sell massive amounts of military jet fuel to the Israelis. Speculation is that either it's for an Israeli attack on Iran, or that it will provide necessary stockpiles to Israeli in case Iran shuts down the Strait of Hormuz, cutting off Israel's supply of fuel. Debka
China used to take a neutral stance on whether the various portions of Kashmir and Jammu are part of Pakistan or India. But recent policy changes indicate that China is increasingly siding with the Pakistanis against India. At the same time, Pakistan has been aiding China in quelling the revolt of the Uighurs in China's Xinjiang province. These changes are consistent with the Generational Dynamics expectation that Pakistan and China will be allied in the Clash of Civilizations world war. Eurasia Review.
It was recently reported that Pakistan's Inter-Services Intelligence (ISI) agency has decided, for the first time, that Islamist militants were now a greater threat to Pakistan's security than India. However, a security official has clarified this decision. "These are two mutually exclusive threats. The magnitude, the type, is quite different. One is an internal threat which is insidious, difficult to quantify. It is a clear and present danger. This is a very serious threat. The other is a conventional threat. What has India done, politically and militarily, for this threat to have been reduced?" He added that the threat from India has, if anything, increased. Reuters
Fierce fighting is continuing in Somalia between government forces and the al-Qaeda linked al-Shabab terrorist group. Dozens have been killed in the capital Mogadishu, and it's feared that the government is close to defeat. Eurasia Review
(Comments: For reader comments, questions and discussion, see the 29-Aug-10 News -- Hamas issues warning about Mideast peace talks thread of the Generational Dynamics forum. Comments may be posted anonymously.) (29-Aug-2010) Permanent Link
Turkey says it's committed to good relations with Israel
The United Nations Committee on the Elimination of Racial Discrimination has issued a report condemning France for deporting Roma Gypsies back to their countries of origin in eastern Europe, usually Bulgaria or Romania.
"Our concern is that the removal or return of the Roma has been done on a collective basis rather than examining their individual circumstances," according to a member of the committee quoted by the Telegraph.
The report also criticized "political speeches of a discriminatory nature in France."
The French government has deported over 8,000 Romanian and Bulgarian Roma so far this year, according to
"We do not accept caricatures," said Foreign Minister Bernard Kouchner, quoted by Agence France-Presse (AFP). "Never has the president stigmatised a minority because of its origin. Never will we accept that a minority be penalised for being what it is." He indicated that the Roma were being individually as foreign nationals, not by their ethnicity.
The interesting thing about the Gypsy debate in Europe is that it has the same kind of feel and intensity and the Ground Zero Mosque debate in the United States. On each side of the Atlantic, you have EXTREMELY vociferous political arguments across a xenophobic dividing line.
Here's something for web site readers to think about:
When Muslims bombed the WTC in 1993, the bombers were tried in criminal courts. There was no national outcry against Muslims.
Even after 9/11, we went to war with Afghanistan, but I can't recall anything like today's level of Islamophobia. In 2005, we gave to the Pakistanis after the tsunami, and there was no outcry.
The point I'm making is that we have a trend here: Islamophobia has been monotonically increasing from 1993 to 2001 to 2005 to the present day. What's causing that trend?
What's happened since 2005 to cause this huge change in attitude?
From the point of view of Generational Dynamics, the explanation is the disappearance of the Silent generation, the survivors of World War II. In the 1990s, we were in a generational Unraveling era, with the Silents in charge. The bombing of the World Trade Center in 1992 was small compared to what they had seen on a daily basis in WW II.
Those who had been in London, in particular, had suffered something like three 9/11's a day for months during WW II, so even 9/11 didn't cause the kind of national hysteria that the mosque is causing.
The same dynamic is happening in London with regard to the Roma Gypsies. France plans to continue exporting Gypsies for the remainder of the year, so this is going to be a major growing controversy. It'll be interesting to see whether France is forced to back down and stop deporting.
Turkish officials visiting Washington have said that they're committed to continuing good relations with Israel. With regard to the flotilla incide, the Turkish officials said that "the incident had nothing to do with Turkey’s relations with the Israeli state or with the Jewish people, but rather was an issue with the Israeli government." Today's Zaman
MidEast peace talks begin on Sept 2, and Israel's prime minister Benjamin Netanyahu is facing the question of whether to extend the settlement building moratorium past its current ending date of September 26. Different factions of his cabinet are threatening to break away for either decision. One possible compromise will be to allow new settlements to be built only within large blocs of existing settlements. IsraCast
The Pakistan flood catastrophe continues to worsen, with 20% of the country under water, and water spreading further in the south. In the north, in Swat Valley, where the floods began almost a month ago, anger has been rising over the government's hanling of the situation, and it's likely to get worse as flood victims demand compensation for destroyed houses, crops and livestock. However, they're receiving no aid money, and they're accusing government officials of stealing the aid money. Reuters
(Comments: For reader comments, questions and discussion, see the 28-Aug-10 News -- France is rebuked for deporting Roma Gypsies thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-Aug-2010) Permanent Link
Japan announces 17th consecutive month of deflation
In a remarkable change in assessment, CIA analysts now see Al-Qaeda in the Arabian Peninsula (AQAP) as a greater threat to US security than the core al-Qaeda group in Pakistan and Afghanistan.
The Washington Post reported on Tuesday that this new assessment has helped prompt senior Obama administration officials to call for an escalation of U.S. military operations in Yemen, the current home of AQAP. There are no plans to scale back operations in Pakistan and Afghanistan.
The main change will be in the use of Predator drone attacks in Yemen. These are unmanned planes carrying missiles, controlled remotely by pilots, sometimes as far away as in Nevada. Pictures from the drones' cameras are transmitted back to the base, and when a target is identified, a pinpoint missile attack can be launched remotely.
According to the article, officials believe that unmanned Predator drone strikes had decimated al-Qaeda in Pakistan over the years, causing Pakistan's al-Qaeda to be relatively less dangerous to American security than AQAP.
Congressional pressure has been increasing for additional American military intervention in Yemen ever since the attempted Christmas day bombing of an airliner over Detroit by the "underwear bomber."
AQAP is thought to have trained the underwear bomber. Furthermore, AQAP is assessed as being more agile and agressive, and capable of training many more suicide bombers, so that sooner or later one of them will succeed in launching a successful terrorist attack on American soil.
In addition, Yemen is just opposite Somalia across the Gulf of Aden, and there the al-Qaeda linked al-Shabab terrorist organization is gaining power in Somalia. An al-Qaeda victory in both countries would affect the shipping lanes in the region.
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An article in Germany's left-leaning Die Tageszeitung, translated by Spiegel, recognizes the danger, but warns that the West is "playing the wrong card:"
Somalia has long been a failed state and Yemen is not too far from becoming one. In both countries there are areas where the rule of law does not apply, a factor that can be exploited by international terrorists. And they are tolerated by the local population because the West continues to play the wrong card. Constant war is regarded as preferable to seeing fundamentalists take over, so corrupt officials from the central government are supported over local self-determination, and a blind eye is turned to what regional allies like Ethiopia and Saudi Arabia do, without reflecting that this only increases sympathy for the enemy. Stability should really be the highest aim in any security policy, but in Somalia and Yemen, the opposite is achieved."
However, the reaction in Yemen itself has been quite negative.
Yemen officials are saying that the U.S. has exaggerated the size and danger of al-Qaeda in Yemen, according to the Yemen News Service, and that "Yemeni forces, with the support of friends and brothers, are able to bear their full responsibilities in fighting al-Qaeda militants."
Yemen's officials are saying what they have to say, but Yemen's government is unstable for more than one reason. Not only are they fighting al-Qaeda in the south, but they're also fighting a Shia insurgency in the north.
It's believed that Iran is supplying weapons to the rebels in the north, so it's not surprising that Iran is opposed to the U.S. plan to intervene in Yemen. An article in the Iran's news service Press TV quotes Amnesty International claims, denied by the U.S., that there are already drones operating in Yemen, demanding an investigation of "the serious allegations of the use of drones by US forces for targeted killings of individuals in Yemen and clarify the chain of command and rules governing the use of such drones."
The situation in Yemen is becoming increasingly critical, and it's possible that America will soon be at war there, in addition to Iraq and Afghanistan.
Japan's severe deflationary spiral continues. the Ministry of Internal Affairs and Communications said on Friday that consumer prices fell 1.1% in July -- the 17th consecutive month of deflation. Individual components that fell the most were education, furniture, recreation, clothing and food and medical care. Remember the good old days when Ben Bernanke and other economists used to believe that deflation was impossible with a "fiat currency"? LOL! RTT News
Honey bee colonies around the world have been dying for several years. For a long time, the cause was a mystery, but it's been found that the cause was the tiny Varroa mite. Now, a beekeeper in the UK claims to have bred a strain of bees that "groom" one another, removing the mites.He's been artificially inseminating queen bees in the hope they will establish themselves. Reuters
Hundreds of thousands of Pakistani flood refugees are pouring into Karachi, in Sindh province, possibly overwhelming the city's resources. Ethnic tensions are growing, as the Sindh nationalists are orgnizing protests and occupations by hundreds of Sindh protests, provoking confrontations with Pashtuns that have fled Taliban violence in the northwest and tribal areas. A third ethnic group, the Muttahida Qaumi Movement, or MQM, comprised of ethnic groups from India that arrived after the 1947 Partition, is joining with the Sindhis in confronting the Pashtuns. WSJ (Access)
Step by step, Islamist tenets and Sharia law are taking hold in Russia's Caucasus provinces of Chechnya and Ingushetia, raising concerns that the Kremlin is losing control of the region. Women's headscarves are turning into a major point of conflict. The Caucasus region has historically been a major crisis war battlefield across the fault line of the Muslim civilization versus the Orthodox Christian civilization, and Generational Dynamics predicts that there will be a new major war in this region. Reuters
(Comments: For reader comments, questions and discussion, see the 27-Aug-10 News -- U.S. considering escalating military role in Yemen thread of the Generational Dynamics forum. Comments may be posted anonymously.) (27-Aug-2010) Permanent Link
World grain prices rise by up to 20% last week
Suicide bombers struck 13 cities all across Iraq from top to bottom on Wednesday, killing at least 56, with hundreds wounded, according to the Independent.
The attack came a day after the US withdrew all of its combat troops from Iraq.
The bombings are thought to have been perpetrated by al-Qaeda in Iraq, to prove that they're still a power in the country.
Kenneth M. Pollack of the Brookings Institution has written an article for the Washington Post called "Five myths about the Iraq troop withdrawal." This provides a good summary of what's going on in Iraq.
Not even close. Roughly 50,000 American military personnel remain in Iraq, and the majority are still combat troops -- they're just named something else. The major units still in Iraq will no longer be called "brigade combat teams" and instead will be called "advisory and assistance brigades." But a rose by any other name is still a rose, and the differences in brigade structure and personnel are minimal."
The apparent intent of Wednesday's al-Qaeda bombings is to make it politically impossible for America to continue withdrawing from Iraq.
Security in Iraq has improved enormously since the darkest days of 2005-2006, but the jury is still out on what will happen in the months and years ahead.
Extensive research on intercommunal civil wars -- that is, civil wars that, like Iraq's, were caused by a breakdown in governance that prompted different communities to fight one another for power-- finds a dangerous propensity toward recidivism. Moreover, the fear, anger, greed and desire for revenge that helped propel Iraq into civil war in the first place remain just beneath the surface.
Academic studies of scores of civil wars from the past century show that roughly 50 percent of the time, war will recur within five years of a cease-fire. If the country has major "lootable" resources such as gold, diamonds or oil, the odds climb higher still. The important bright spot, however, is that if a great power is willing to make a long-term commitment to serving as peacekeeper and mediator (the role the United States is playing in Iraq today), the recidivism rate drops to less than one in three. This is why an ongoing American commitment to Iraq is so important.
It's also worth pointing out that a civil war doesn't recur because the public desires one. Most average people recognize that civil war is a disaster. Instead, such wars flare up again and drag on because leaders still believe they can achieve their objectives by force. Until they are convinced otherwise -- ideally, by a great power's military forces -- they will revert to fighting."
This is total nonsense when applied to Iraq. As I wrote repeatedly, starting in 2003, a civil war is impossible in Iraq at this time, because Iraq is in a generational Awakening era. What happened in 2006-7 was a daily series of suicide bombings mostly perpetrated or incited by foreign fighters imported into Iraq by al-Qaeda in Iraq. There were no large groups of Sunnis and Shias fighting each other on a battlefield. There were neighborhood gunfights between Sunnis and Shias, but that's not a war, any more than Al Capone launched a civil war in the 1930s.
I wrote about what was really going on in Iraq in my April, 2007, article, "Iraqi Sunnis are turning against al-Qaeda in Iraq," which I still believe was the best analytical article about the war in Iraq written anywhere at that time.
There is absolutely no chance whatsoever that Iraq will have a civil war if American troops withdraw. Pollack's analysis is completely wrong.
If some on the right want to claim (wrongly) that the surge stabilized Iraq to the point that civil war is impossible, their counterparts on the left try to insist (equally incorrectly) that the change in U.S. tactics and strategy in 2007-2008 had no impact on Iraq's politics whatsoever."
This paragraph is so garbled that it's hard to even know what it means. However, I'll return to the "broken political system" point later.
Be very, very careful with Iraqi public opinion. Polls are rarely subtle enough to capture the complexity of Iraqi views. Typically, they show a small number of Iraqis who want the Americans out immediately at any cost, a small number who want them to stay forever and a vast majority in the middle -- determined that U.S. troops should leave, but only after a certain period of time. When Iraqis are asked how long they believe our troops are needed, their answers range from a few months to a few years, but are strongly linked with however long the respondent believes it will take Iraq's forces to be able to handle security on their own."
This is true. The Iraqis really don't know what they want. They're in a generational Awakening era, so all they really want to do is argue with each other.
Much as we should all want the Obama administration to succeed in Iraq, this statement by the president in a speech to veterans this month should also make us wary. If uttered in the first act of a Greek tragedy, it is exactly the kind of claim that would end in a Sophoclean fall."
Well, there isn't a war going on, so it's hard to know what to make of Obama's claim that the war will end on schedule. However, it's certain that the roadside bombs and suicide bombings won't stop on any sort of schedule. In that sense, the war will never end.
I'd now like to return to the question of whether Iraq has a "broken political system."
One way to understand what's happening in Iraq today is to look at what happened in Iraq in the decades following Iraq's previous crisis war, the Great Iraqi Revolution of 1920. In my April 2007 article, I quoted some of the Library of Congress history of Iraq. What's amazing is that today "groken political system" is very similar to the one of the 1930s. Here are some excerpts:
Today, it's the "American-imposed political system" being overwhelmed by these conflicting demands. Eventually, by the 1960s, the political system was so chaotic, that it took a torturing dictator like Saddam Hussein to prevent a complete collapse of the government.
So call Iraq's political system "broken," if you wish, but it's perfectly normal for Iraq at this time on its generational timeline, and it makes no difference whether Americans are there or not.
I've always expected that American troops would have to remain in Iraq until they were forced to withdraw by the Clash of Civilizations world war. The real question is whether al-Qaeda will make it politically impossible for America to withdraw completely from Iraq.
The bad news keeps pouring in, as the deflationary spiral really begins to take hold.
As I've been saying, the economy started spiraling downward in May, as the bailout and stimulus programs in America, China and Europe have run out of gas, and as the Law of Diminishing Returns kept them from having any further effects anyway.
Worldwide prices on wheat, barley and other grains has been skyrocketing as much as 20% in the last week. According to this article, the fault lies with commodities speculators. Spiegel
German firm Hypo Real Estate, which was seized by the German government in 2009, has foreclosed on Snowmass Village, a huge $1-billion resort in Aspen, Colorado, in a spectacular real estate failure. Foreign banks held $35 billion of U.S. commercial real estate loans as of last month, and more than $15 billion is classified as troubled, meaning delinquent, defaulted, foreclosed or in bankruptcy, up from $10 billion a year ago. Bloomberg
A venomous speech by Hamas' Damascus-based political leader Khaled Meshaal on Tuesday, directed at Palestinian president Mahmoud Abbas, has made the breach between Hamas and Fatah final and irrevocable. Hamas is planning large-scale terror attacks Israeli and Palestinian West Bank targets, according to Debka, which has contacts within Israeli intelligence, but sometimes gets things wrong.
Former president Jimmy Carter arrived in North Korea on Wednesday, intending to return to America with North Korean prisoner American Aijalon Mahli Gomes. Some analysts are wondering whether the unpredictable Jimmy Carter will attempt to negotiate nuclear policy, against the desires of the Obama administration. Former President Bill Clinton went on a similar mission last year and freed two prisones, but no policy changes resulted from it. CS Monitor
South Korean government officials believe that North Korean president Kim Jong-il is visiting China. His son, Kim Jong-un, who is the heir-apparent to the presidency, is accompanying the president. Chosun
The European Parliament will open in September with a debate on xenophobic acts by France, Belgium and Italy, in expelling Roma (Gypsies). EurActiv
An unnamed U.S. official says that the Taliban plans to conduct attacks against foreigners, including Americans, who are participating in the ongoing flood relief operations in Pakistan. BBC
(Comments: For reader comments, questions and discussion, see the 26-Aug-10 News -- Suicide bombers blanket Iraq as Americans leave thread of the Generational Dynamics forum. Comments may be posted anonymously.) (26-Aug-2010) Permanent Link
Suicide bomber kills 30 in Somalia, including 7 members of Parliament
In June, I posted a report about an apparent worldwide decline in economies around the world, and that we appeared to be headed once again to a worldwide freeze in trade and transportation, just as happened at the end of 2008. (See "7-Jun-10 News -- Globally, May was a month of ominous events.")
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Since that time, I've reported on one trend after another that confirms that this is continuing, including jobs trends, manufacturing trends, GDP, and collapsing European economies (Greece, Spain).
On Tuesday, analysts were stunned to learn that existing home sales fell 27.2% nationwide from a month early. This was more than twice as bad as expected by analysts, who had expected a fall of only 12.1%.
The LA Times quotes one analyst as saying, "You are seeing the sales drop off a cliff again, and that is really starting to scare people. Are we going to have a double dip? Nobody knows."
A number of analysts claimed that the figures were anomalous or outliers. The justification for this claim is that the homebuyers' tax credit expired for purchase agreements signed after April 30. Many people rushed to sign agreements before the deadline, and those deals closed in May and June, and so the reasoning goes that the July number is only temporary, and it will be back to "normal" by August or September.
Well, that might be true, but the above charts don't support it. The third chart shows the rate of existing home sales of a 20 year period. The housing bubble began in the mid 1990s, and peaked in the mid 2000s decade. Since then, existing home sales have been falling steadily -- except for the brief period in which the homebuyers' tax credit was in effect. I've drawn a yellow line on the graph to show the general downward trend, and the July plunge appears to be returning to the long-range downward trend. In other words, it's the increase in sales in the previous months that were the anomaly. We're now returning to the actual trend.
In fact, the figures for housing are devastating. There is already a 12.5 month inventory of homes on the market. Not counted in that is the "shadow inventory" of foreclosed and delinquent homes held by banks, but not yet put on the market. (See "'Shadow inventory' of unsold homes continues to grow.")
And not counted in those two groups are houses that are "sidelined." I hadn't heard this term before today, when it was discussed by an analyst on tv. This refers to people who would like to sell their homes, but are holding off doing so in the hope that the housing prices will start going up again. If you add this group to the two groups described in the previous paragraph, there are probably 3-4 years of inventory on the market or waiting to go on the market.
For months, so-called "experts" have been promising that the end of the housing bubble, and the prosperity that goes with it, were just around the corner. I heard one expert today on television predict an "upside surprise" after Labor Day, and a stock market surge by the end of the year. It's exactly the same promise I've been hearing month after month, ever since the financial crisis began in October, 2007.
Meanwhile, the second quarter GDP report is due out Friday, and some analysts have expressed fear that it will be lower than expected.
Somalia's al-Qaeda linke al-Shabab terrorist group conducted a suicide attack on a hotel in Mogadishu that killed 30 people, including seven members of Parliament. VOA
Somalia's government says that hundreds of foreign fighters have joined al-Qaeda linked terrorist groups in Somalia, from countries including Afghanistan, Pakistan and the Arabian peninsula. The al-Shabab terrorist group has gone from a local threat to a regional threat, as it's launched attacks in Uganda and Kenya. Reuters
Authorities investigating the 2008 crash of Spanair flight 5022 have discovered a central computer system used to monitor technical problems in the aircraft was infected with a trojan horse style computer virus. The infected computer failed to detect several problems that would have aborted takeoff. Tech News Daily
If you're interested in horse racing, and even if you're not, take a couple of minutes to watch this video of the 7th race at Monmouth Park on Monday. YouTube
TheUglyBugBall.co.uk is a dating web site for ugly people. "Just because they don't look like Kate Moss or Cheryl Cole doesn't mean they don't have a lot of love to give," according to the owner. The Sun
(Comments: For reader comments, questions and discussion, see the 25-Aug-10 News -- Existing home sales plunge 27% thread of the Generational Dynamics forum. Comments may be posted anonymously.) (25-Aug-2010) Permanent Link
Italy wants to follow France in expelling Gypsies
In the 2006-2008 time frame, I used to write about some of the ridiculous things that I heard on CNBC or Bloomberg TV, especially when they lied about price/earnings ratios (also called valuations).
I haven't done that as much lately, because it's hard to know what to choose; probably 75% of everything said on CNBC and Bloomberg TV is utter nonsense.
But what I heard on Monday from Charles Bobrinskoy, Vice Chairman, Director of Research, Ariel Investments has infuriated me so much, that I had to do it again.
This is going to be a rant, but in this interview, they discuss price/earnings ratios that are total fantasies. These are the kinds of people who caused the global financial crisis, and they ought to be in jail.
Here is the interview of Charles Bobrinskoy by Bloomberg TV anchor Matt Miller:
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BOBRINSKOY: Absolutely. I would not feel that way if valuations were high.
But they are ridiculously low. You've got high-quality large-cap stocks are trading at some of their the lowest multiples since the 1970s. You've got a higher dividend yield on J&J than a government bond, which is ridiculous. You've got got great value here, even in depressed earnings. You do not want to buy when people are afraid that the earnings are not there, but the earnings are there, and the values are there, so this is absolutely a right time to buy.
MILLER: When you say "ridiculously low," it's sounds like you're talking about some pretty specific names. For the market as a whole at 14 times, that's not ridiculously low - that could get cheaper.
BOBRINSKOY: Well, 14 times the S&P -- I think it's less than 14 times. I don't know what ... people have different estimates for the S&P, but for large cap quality, we would put it under 13 times.
You're right, there are cyclical names that are trading at higher multiples, maybe 14 times trailing, but going forward I would put the overall market at something like 12.5.
MILLER: For the record, 14.2 times trailing, 12.8 times forward looking.
So Brobrinskoy puts the S&P 500 P/E ratio at 14, or maybe 13, or maybe 12.5, and Miller agrees. Are those figures correct?
Well, let's go to the Wall Street Journal page that provides the current S&P 500 price/earnings index:
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I've circled the correct figure in red -- the S&P 500 P/E index, based on trailing earnings, is 16.53 -- not 14, not 13, not 12.5, but 16.53.
Also, take a look at the chart on the bottom of the home page of this web site -- it shows the S&P 500 P/E ratio for the last ten years, and it's never been below 16 in the entire decade.
And so Dear Reader, before going any further, I'd like to ask your opinion. Which of the following words and phrases best describes Brobrinskoy?
So where did Brobrinskoy's (and Miller's) numbers come from? Well, I've answered this many times before, most recently in my article several weeks ago, "Updating the 'real value' of the stock market."
In this case, they talk about "forward earnings," which are analysts' estimates of how much these companies will earn next year. They don't have a clue how much these companies will earn next year, and historically analysts' estimates are twice as high as they turn out to be.
They're also using "operating earnings," which are fraudulent earnings values obtained by adding back "one time expenses" into the earnings, and then calling everything possible a "one time expense."
The REAL P/E ratio is based on AS-REPORTED earnings for the last year, and that comes out to 16.53.
One reader criticized me, saying that it's just as valid to use "operating earnings" for everything as "as-reported earnings."
Well that's probably true, but there's a catch. The historical average for P/E ratios based on as-reported earnings is about 14. And so, with the market today at 16.53, the market is a lot more expensive than the historical average. Valuations are certainly not "ridiculously low," as they are in Brobrinskoy's fantasy.
If you use P/E ratios based on "operating earnings," then you have to compute the historical average for that measure, and it's going to be a lot lower than 14. Nobody knows what the historical average is for P/E ratios based on "operating earnings," since brokers only started using that measure in the late 1990s, as they needed a way to convince people to invest, even though stocks were in a huge bubble. My guess is that it's around 8 or 9, and I would make the same guess for P/E ratios based on "forward earnings."
Thus, if the current S&P 500 P/E ratio based on operating and/or forward earnings is 12 or 13, then it's still "ridiculously high," and stocks are still ridiculously overpriced.
Now let's look at a bit more of what Brobrinskoy said, because he actually lied in two different ways. He also said, "You've got high-quality large-cap stocks are trading at some of their the lowest multiples since the 1970s." Now, maybe he's talking about one or two particular stocks that he has in mind, but I get the impression that he's talking about the bulk of large-cap stocks -- like the 30 stocks in the Dow Jones Industrial Average (DJIA). As you can see from the WSJ chart above, the P/E ratio for those stocks is 13.78.
Is that likely to be their lowest values since the 1970s? Hardly. Here's the graph I included in my article several weeks ago:
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As you can see, the S&P 500 P/E ratio fell to 6.79 in 1982. Well, maybe Brobrinskoy was only exaggerating a little -- he really didn't mean the 1970s. He actually meant the 1980s. Or maybe the 1990s. What's a decade or two?
But even referring to the 1990s is deceptive, because that's when the tech bubble began. So he's claiming that stocks are cheap compared to the tech bubble, which is at best deceptive, and at worst a lie.
Now that the rant has almost exhausted itself, I guess I should apologize for picking on poor Brobrinskoy. After all, he's just doing what everyone else does. He may be a crook and a liar and a thief, but the norm on Wall Street, CNBC and Bloomberg TV is to be a crook and a liar and a thief. And you can't be a crook if everyone else is a crook, can you?
I keep saying that the same people who brought about the financial crisis are still doing the same things today, only more so. This is a perfect example. This is fraud, either through lying or through incompetence. And this is the norm today -- on Wall Street and in Washington.
How pathetic these people are. Take another look at the article that I wrote in April, "Financial Crisis Inquiry hearings provide 'smoking gun' evidence of widespread criminal fraud." This article shows that these financial experts, some of whom have been described as mathematical geniuses, must have purposely committed criminal fraud, in order to collect huge commissions, fees and bonuses. Do I think that Brobrinskoy knows that what he's saying is a lie? There's no doubt in my mind whatsoever.
Applauding France for expelling some of its population of Gypsies, Italy now wants to do the same. Italy's interior minister will ask the European Commission to endorse the plan. EurAcriv
French President Nicolas Sarkozy faces nationwide strikes and falling approval ratings, as harsh austerity measures take hold, to reduce the country's soaring deficit. Reuters
Another country is going into a debt crisis. Moody's has cut the rating on bonds from the Kingdom of Bahrain, because of increased spending and debt, and because the price of oil has been falling. Bloomberg
There were two more suicide bombings on Monday in Pakistan's tribal areas. LA Times
The City of Philadelphia has been sending out letters to bloggers telling them that if they're going to blog, then they must pay $300, the price of a "business privilege license" that allows you to have a business in Philadelphia. I wonder how much brotherly love that policy will spawn? Washington Examiner
Due to a diplomatic spat, Saudi Arabia is limiting the number of Saudi students who will be able to attend Australian universities. The policy is being extended to other western nations as well. Arab News
What do women find to be the most annoying of men's habits? According to a new poll, it's leaving the toilet seat up. Don't forget to read the comments on this story. Independent
How to be frugal and still be asked out on dates. NY Times
(Comments: For reader comments, questions and discussion, see the 24-Aug-10 News -- Ariel's Bobrinskoy gives price/earnings fantasy thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Aug-2010) Permanent Link
A new Pentagon report describes China's military capabilities and strategy
In 2005, I quoted General Zhu Chenghu, a top-level Chinese army officer, as saying what would happen if America interfered with Taiwan: "If the Americans are determined to interfere [then] we will be determined to respond. We ... will prepare ourselves for the destruction of all of the cities east of Xian [a city in central China]. Of course the Americans will have to be prepared that hundreds . . . of cities will be destroyed by the Chinese." (See "Furious Chinese ambassador harshly threatens U.S. over Taiwan.")
That threat seemed distant in 2005, but according to a new DOD report on Military and Security Developments Involving the People’s Republic of China (PDF) General Zhu's threat could be carried out today.
According to the report:
In addition, "China is developing and fielding large numbers of advanced medium-range ballistic and cruise missiles, new attack submarines equipped with advanced weapons, increasingly capable long-range air defense systems, electronic warfare and computer network attack capabilities, advanced fighter aircraft, and counter-space systems."
While China's nuclear capabilities are far less than those of the U.S., and China claims to have a "no-first use" policy towards nuclear weapons, the strategy is to threaten unacceptable damage on the enemy:
Thus, it seems to me, that General Zhu's threat could be carried out today -- and I have no reason to believe that Zhu was lying or even exaggerating. Thus, from China's point of view, if there were a war and all cities east of Xian were destroyed, China's People's Liberation Army (PLA) would still maintain the capability to launch missiles that would destroy hundreds of American cities.
The report lists the following strategic decisions that guide China's leaders:
According to the report, "China’s leaders describe the initial decades of the 21st century as a “strategic window of opportunity,” meaning that regional and international conditions will generally be conducive to China’s rise to regional preeminence and global influence, and seek to prolong that window of opportunity as much as possible."
From the point of view of Generational Dynamics, there are several problems with these priorities.
The first issue is economic. China's economy almost crashed in the last half of 2008, along with the global economy. China recovered, along with the global economy, by massive stimulus and bailout programs injecting some $10 trillion into the world economy. By the Law of Diminishing Returns, this cannot continue to be effective, and anyway, the political era of big bailouts seems to be over for a while. Furthermore, China is the midst of a real estate bubble of almost unbelievably gargantuan proportions. Mainstream economists agree that China cannot continue with its current rate of growth, and yet it needs to in order to prevent social unrest.
And that's the second problem. China has a long history of massive nationwide rebellions, and the CCP knows it as well. There are tens of thousands of "mass incidents" every year, and the number of growing. The CCP has held things together by means of a powerful security force and stimulus spending, but the right kind of trigger could trigger an economic panic and a social rebellion.
The Pentagon report recognizes this, and says:
I listen to commentators on tv all the time who complete ignore generational changes and social unrest. It's incredible to me how naïve so-called experts are, but at least the Pentagon report appears to recognize the issue.
The report identifies Taiwan, Tibet and South China Sea as China's three main territorial disputes.
We've discussed each of these at length in the past, but here we only wish to focus on the Taiwan issue.
The report lists seven "red lines" which, if crossed, would lead to a Chinese military attack on Taiwan:
The report indicates that Beijing might use a "measured approach" at military action, or "surprise to force rapid military and/or political resolution before other countries could respond."
According to the report, "If a quick resolution is not possible, Beijing would seek to: Deter potential U.S. intervention; Failing that, delay U.S. intervention and seek victory in an asymmetric, limited, quick war; or, Fight to a standstill and pursue a political settlement after a protracted conflict."
From the point of view of Generational Dynamics, these choices are not really choices, since the U.S. and China would be at full scale war within days or, at most, weeks. Both countries are in generational Crisis eras, and so any trigger at this time would escalate.
As I've said many times, the U.S. could be at war with China tomorrow over Taiwan. Thus, China's seven "red lines" listed above are also red lines for the United States.
I've heard so-called experts claim that we could simply choose not to come to Taiwan's defense. I can't emphasize too strongly what a fantasy this is. In a generational Crisis era, there would be an immediate, overwhelming American political response to counter China's invasion of Taiwan.
(As a modern day example of what can happen, I like to point to the 2006 war between Israel and Hizbollah that took place mostly on Lebanon's soil. In that war, Israel panicked, miscalculated, and attacked Hizbollah and Lebanon within four hours after the kidnapping of two soldiers -- with no plan, and no clear objectives. Once the war began, Israel blundered from one objective to another, one plan to another. The entire war was pursued through improvisation. See "How Israel panicked in pursuing the summer Lebanon war with Hizbollah.")
Finally, I have to point out that American has no choice but to defend Taiwan in case of a Chinese invasion. We have a defense agreement with Taiwan, and if America decided to "let Taiwan go," then countries like Japan and Israel, with whom we also have defense agreements, would go into nationwide panic, creating worldwide instability.
The report pays special attention to cyber warfare, and indicates that China has already begun action in this arena:
In March 2009, Canadian researchers uncovered an electronic spy network, apparently based mainly in China, which had reportedly infiltrated Indian and other nations’ government offices around the world. More than 1,300 computers in 103 countries were identified."
China responded specifically to the cyber warfare portions of the report with an immediate rebuttal in Xinhua:
"I've never heard about any plans by China to develop its cyber attack forces, not to mention China's so-called 'organized cyber intrusion," Hu Qiheng, president of the Internet Society of China (ISC) told Xinhua on the sidelines of the China Internet Conference, which opened here Tuesday.
"It is a mere fabrication that China is using computer technologies to intrude on other countries' sovereignty," Hu said."
China disliked the entire Pentagon report, but it's interesting that they singled out the cyber warfare section for specific denials.
In the past, I've pointed out some fairly substantial military disadvantages that China has versus the United States, especially social instability and inexperience in foreign wars. The report also focuses on some of these weaknesses.
One example is their lack of experience in "Integrated Joint Operations":
Obstacles. China’s military leaders recognize and acknowledge that one of the primary obstacles to IJO is that many PLA commanders have little or no training for, or experience operating in, a joint environment. Key challenges include a shortage of commanders and staff qualified for such operations; a lack of understanding of the capabilities, equipment, and tactics of the other services; and a lack of advanced technology to enable communication and information sharing among the services."
This illustrates a point that I've made several times in the past. Whatever you may think of the Iraq and Afghanistan wars, they've given America a great deal of experience in actual field use of new technologies, where the Chinese have no such experience.
There are similar issues with the Navy:
China's official response was posted in Chinese on the Ministry of Defense web site. The following is the machine translation of the entire statement (with some grammatical corrections). It's worth reading in its entirety.
2010-08-18 15:19:30 Source: Department of Defense Web site of: Gilbert Time :2010-08-18 15:19:30
Department of Defense Web site on Aug. 18 Xinhua Li Jia Report: China's Defense Ministry spokesman Colonel Geng Yansheng 18 interview that: U.S. Department of Defense recently released the 2010 annual "China-related military and security Development Report." The report ignores the objective facts, accusing China's normal national defense and army building, rendering Taiwan a so-called "military threat" by the mainland, accused the United States suspended military exchanges between China hampered military cooperation. The Chinese side expresses its resolute opposition.
China unswervingly take the road of peaceful development, firmly pursues a defensive national defense policy, and does not engage in arms race or pose a military threat to any country. China's military development is reasonable, appropriate, and is to defend national sovereignty, security and territorial integrity, but also to adapt to the rapid development of the world's new military changes in the trend. Chinese military has actively conducted exchanges and cooperation, and safeguards world peace and regional stability.
China always attaches importance to China-US military relations, and has made unremitting efforts. The report published by the United States is not conducive to the improvement and development of military relations. We ask the U.S. side to look at China's national defense and army building, to stop two armed forces is not conducive to Sino-US relations and mutual trust of the words and deeds, to stop publication of "China-related military and security Development Report", for the improvement and development of military relations to create a good atmosphere and conditions."
This response undoubtedly comes right from the top -- from President Hu Jintao. So what does it mean? Is this another Adolf Hitler promising "peace in our time" to a Neville Chamberlain? Or does Hu sincerely believe what he says, and has no intention of using the huge military force that he's overseeing?
I actually believe that Hu is sincere. Born in 1942, Hu is a member of the "Artist archetype" generation that grew up during very bloody Communist Revolution that ended in 1949. And like America's Silent Generation, they spend their lives doing everything possible to prevent a recurrence of the last crisis war. (See my similar discussion a couple of days ago about Palestinian Authority President Mahmoud Abbas in "21-Aug-10 News -- Mideast peace talks to begin on Sept 2.")
When I think of someone in this generation, I often think of President Bush's Secretary of Defense Donald Rumsfeld. He was a perfectly nice guy, always polite to everyone, and you'd think that he wouldn't hurt a fly. But one day at a press conference, he was asked a question about collateral damage from bunker-buster bombs. His response was very genial, as I remember: "We're not trying to be nice to these people; what we want is to KILL them."
That, I think, illustrates how people like Rumsfeld, Abbas and Hu think. Growing up during the horrors of a generational crisis war, they suffer a kind of generational child abuse that makes them indecisive leaders who devote their lives to doing everything to prevent a recurrence of the crisis war. But the other side is that they know that a new war may well be inevitable, and when a decision is made (by others in the government) that they must pursue war, then they'll do so vigorously and ruthlessly. They're indecisive decision makers, but they're powerful implementers.
I wrote about this in 2006, when Hu came to Washington and presented a gift to President Bush -- A silk edition of the famous Chinese war classic, Sun Tzu's The Art of War. (See "Eerie similarity: Chinese President Hu Jintao and Donald Rumsfeld.")
No one in the press that I saw even commented on what might be the significance of this gift, but to me it was clear. He was sending the message, "I don't want a war, but you must realize that you may take some steps that will result in war." However, it was not just a message of threat; it was a message of sadness.
On Sunday on CNN, I heard Nina Hachigian of the Center for American Progress say the following, with regard to our relationship with China:
I'm totally astonished by statements like this. Does she really not know that Britain and Germany also worked together on many things, and fought two wars anyway?
In an article a couple of years ago ("The gathering storm in the Caucasus"), I quoted John Maynard Keynes, in his 1920 book, The Economic Consequences of the Peace, describing the world economy prior to World War I:
[He] regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement ... The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion ... appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice."
We're in the same international atmosphere today. In 1914, it all came crashing down when Austrian Archduke Franz Ferdinand was assassinated by a Serb high school student, triggering the massive war. If a high school student could trigger a war in 1914, then anyone could do it today.
Through well over two millennia of Chinese history, the glorified emperors were those who expanded Chinese territory; those who made concessions and ceded land to the barbarians are condemned as the "criminals of history." This Taiwanese perspective on the Pentagon report relates to Chinese history, and shows why no compromise is possible on Taiwan. China Post
The situation in the South China Sea has deteriorated lately, and three key players have emerged - China, the United States and Vietnam. These are the three "elephants" who are dancing in the region, endangering stability. And when the elephants are dancing, the smaller creatures get trampled. RSIS
The Pentagon report on China has increased Taiwan's anxieties about the possibility of a Chinese invasion of Taiwan. As a result, Taiwan President Ma Ying-jeou is pleading for the U.S. government to provide advanced F-16 war planes so that Taiwan can defend itself from China. RTT News
In an effort to avoid further hostile reactions from China, the U.S. has decided that the forthcoming joint naval drills with South Korea in the Yellow Sea will not involve the nuclear powered aircraft carrier U.S.S. George Washington. The George Washington did participate in the last joint exercises, but they took place in the Sea of Japan, which is farther from Chinese territory. JoongAng
The North Koreans have a Twitter account, and as soon as it posted its first tweets, the South Korean government blocked South Koreans from accessing the site. Reuters
Pakistan is not the only region being drowned by torrential rains and vast floods. The Yalu River, which acts as a border between China and North Korea, has been overflowing its banks in both countries, creating the worst floods in a decade. Over 100,000 people had to be evacuated. Guardian
A "black swan" is the popular term for an event that should happen only once every 100 years, but happens anyway. It's exactly the kind of event that might trigger a war with China, as I've been discussing above. Actually, "black swan" events can only happen during certain generational eras, usually crisis eras, and in crisis eras, they really aren't so improbable. Here's how to prepare for the next "black swan," and to profit from a market calamity -- unless it doesn't work. WSJ (Access)
Hamas canceled direct peace talks with Fatah and the Palestinan Authority, after the Palestinian Authority agreed to have direct peace talks with Israel. Jerusalem Post
Violence is continuing in the south of Yemen between security forces and militants from Al-Qaeda on the Arabian Peninsula (AQAP), with multiple killings on Saturday. Yemen has also been fighting against militants in the Shia-dominated areas of northern Yemen, and there are fears that the Yemen government will collapse. Al-Jazeera
As we've written many times, Iran is in the most volatile period of a generational Awakening era, and you can expect further chaos of the kind that forced Richard Nixon to resign in 1974. In fact, a political split is growing within the conservative factions of Iran, triggered by president Mahmoud Ahmadinejad's chief of staff Esfandiar Rahim-Mashaei. Rahim-Mashaei said that Iran's Shia Islam is the only true form of Islam -- undermining the intentions of the hardliners to gain hegemony over the entire Arabian peninsula, which is mostly Sunni. RFE/RL and Asia Times.
On hot days, Chinese men like to roll up their shirts and expose their stomachs. These men are called "bang ye," which means "exposing grandfathers," even though men of all ages do it. They don't care when they draw smirks from fashion-conscious passersby. Officials in Beijing and Shanghai have been trying to discourage the uncouth habit, without much success. LA Times
(Comments: For reader comments, questions and discussion, see the 23-Aug-10 News -- China is ready for war thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Aug-2010) Permanent Link
Islamophobia in America and Europe is only a small part of the issue.
The word "Islamophobia" has been in the news a lot this week, after Time magazine ran a cover article wondering where America had become Islamophobic.
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The question arises because of two major news stories in the last week:
I've been startled by the level of irrational Islamophobia, especially on the right, that I've seen in the last couple of weeks because of these two stories.
But I see it as the mirror reflection of the widespread xenophobia from the left, directed at Christians and even America in general. Every political and ideological group today is simultaneously xenophobic toward someone and outraged at other groups' xenophobia.
These kinds of xenophobia are growing, and something that I've been discussing for years on my web site. Generational Dynamics predicts that this kind of xenophobia grows in all societies in a generational Crisis era, once the survivors of the previous crisis war (WW II) all disappear (retire or die), all at once.
It's worth pointing out that the level of xenophobia in America hasn't grown to the level it has in Europe. I've reported on such events for years: the sudden growth in popularity of the British National Party in the UK, and how Holland became increasingly nationalistic when filmmaker Theo van Gogh was murdered by a Muslim extremist. And this week we've seen stories in France about expelling the Gypsies.
These kinds of stories come and go during any generational era, but in a generational crisis era they grow and become more frequent, and become manifest in discussions about terrorism, immigration, and ethnic violence.
Let's return to the subject of the floods in Pakistan, and American and European xenophobia about Pakistan. The floods been going on for three weeks now, and incredibly, they keep getting worse, and more regions, especially in the Sindh province in the south, are being flooded. One-fifth of the entire country is now under water.
People should realize that the vast majority of Pakistanis are ordinary people with families who are suffering enormously because of the floods.
Pakistan has been much more victimized by al-Qaeda and Taliban violence than almost any other country in the world, including the US. Suicide bombings, beheadings, blowing up girls' schools, etc., have forced millions of Pakistanis, especially in Swat Valley, to flee for their lives -- and this was before the floods. (See "After a week of terrorist carnage across Pakistan, the army declares war on militants.")
Terrorist attacks in Pakistan have targeted ordinary civilians, police installations, and even other Muslim sects. (See "10-Jul-10 News -- Pakistan shocked again by terrorist attack.") So Pakistanis have suffered far more from Islamist terrorism than Americans have.
Anti-Americanism in Pakistan is widespread, but it's not because Pakistanis hate Americans, any more than Americans hate Pakistanis; it's because Pakistanis blame the rise of Taliban and al-Qaeda violence on actions by the Americans in the Afghan war and in bombing Pakistan's tribal areas. This conclusion is irrational.
Thus, Pakistani xenophobia about Americans is parallel to, and just as irrational as, American xenophobia about Pakistanis.
Some people are claiming that God is using the floods to punish the Pakistanis for hating Christians and Jews. By EXACTLY the same reasoning, you should conclude that Allah used 9/11 and Katrina to punish Americans for hating Muslims and Arabs.
This kind of xenophobia is occurring around the world, and Generational Dynamics predicts that it's going to continue to grow, as more and more people in the generations of World War II survivors die off. In particular, the mutual xenophobia between Americans and Chinese has been growing for years, and will continue to grow. As the xenophobia keeps growing, it's only a matter of time before someone gets pissed off and starts a world war.
(Comments: For reader comments, questions and discussion, see the 22-Aug-10 News -- The global rise of xenophobia thread of the Generational Dynamics forum. Comments may be posted anonymously.) (22-Aug-2010) Permanent Link
Is President Barack Obama a Muslim?
How many times have I written about the dance? The first major Generational Dynamics prediction that I made on this web site was that the "Mideast Roadmap to peace" would fail, and that Jews and Palestinians would be re-fighting the genocidal war that occurred following the partitioning of Palestine and the creation of the state of Israel in 1948. Well, the peace plan never went anywhere, but it's been resuscitated several times for new "peace talks," with the resuscitations alternating with the three Mideast wars (Israelis vs Hizbollah in Lebanon in 2006, Palestinian Fatah vs Hamas in Gaza in 2008, and Israelis vs Hamas in Gaza in January, 2009) since then.
So now the dance begins again. On Friday, US Secretary of State Hillary Clinton announced that new face to face peace talks would begin between Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas.
Former Sen. George Mitchell, who is President Obama's envoy to the Mideast, said that the goal of the negotiations was to end the Middle East conflict "for all time," according to CNN. I have no way of knowing whether the reporters listening to this rolled their eyes or even chuckled at this statement. This would be accomplished, as in the Roadmap to Peace, with side-by-side Israeli and Palestinian states. Mitchell added, "I believe the two leaders ... are sincere and serious and believe it can be done and will do everything possible to see that it is done."
The first meeting will be held on September 2 in Washington. An early date was desired because there's a kind of deadline: Last year, Israel agreed to a 10-month moratorium on building new settlements in the West Bank, and the moratorium expires on September 26.
However, that already has become a point of contention that may sink the meetings before they even start. The Israelis have said repeatedly that they would not extend the moratorium, and Reuters quotes chief Palestinian negotiator Saeb Erekat as demanding that the moratorium be extended: "If the Israeli government decides to announce new tenders on Sept. 26, then we won't be able to continue with the talks,"
However, according to EurActive, while a majority of Netanyahu's inner cabinet oppose extending the settlement freeze, a minority are seeking a compromise. The proposal might be that Israel would be allowed to build settlements in areas that Israel expects to keep in a peace deal, but not in areas that it would hand over in a land swap with the Palestinians. Whether the Palestinians would consider this an acceptable compromise to continue the peace talks remains to be seen.
In May, 2003, when the Roadmap to Peace was announced, it was widely assumed that peace was at hand, once Yasser Arafat retired or died. I wrote at the time that Arafat was not the one preventing a peace agreement; it was the younger generations that didn't want it. That's still true today.
Unlike in 2003, skepticism about the peace talks today is very high. The same issues that prevented peace talks in the past are just as much issues today -- the building of settlements, the right of return of Palestinians to their grandparents' and great-grandparents' property, the protection of Israelis from Palestinian suicide bombers, and so forth. It's not that the old folks don't want to compromise on these issues; it's that the young Palestinians -- and even many young Israelis -- don't want to compromise on these issues.
According to an editorial in Haaretz, the agreement to hold peace talks is a small diplomatic victory for Netanyahu, because he demanded peace talks "without precondition," and got his way. However, that victory could dissolve very quickly, over the settlement issue or any of the other issues we discussed.
And what about Abbas? Agreeing to face to face talks with the Israelis, after he had said that it would never happen without certain guarantees, is a bit of a humiliation, and surely he must know that there isn't a snowflake's chance in hell that the peace talks would succeed. So why did he agree to it?
Abbas was born in 1935, and lived through the genocidal war between Arabs and Jews, and has spend his entire life with the objective of never allowing anything like that to happen again.
It's worth repeating some extracts from an interview, translated by Memri, in which Abbas stressed his commitment to the peace talks:
Thus, there is one path before us, and that is peace, by means of a clear and defined initiative with no obscurity, ambiguity, or opaqueness. We hope that it will resonate with the Israeli leadership [as well]... Naturally, whether we like [Israeli Prime Minister] Netanyahu or not, he is the prime minister of Israel, elected by the Israeli people. We must negotiate with him, because we do not choose our partner, just as they do not choose their Palestinian partner. ...
We do not have the capability to confront Israel militarily, and this point was already discussed at the Arab summit in Sirte [Libya] last March, when I told the Arab countries: If you want war, and if everyone will fight Israel – then we will support it. But the Palestinians will not fight alone, because they have no capability to do so. The West Bank was completely destroyed [in the Al-Aqsa Intifada], and we will not let it be destroyed again."
Abbas also expressed much sadness during the interview, and explained why he would not run for another term as Palestinian president: "I cannot go on ruling, and I need to rest; I'm at the age where I can't continue to lead."
And so, at the end of his career and possibly his life, Abbas is making one last try to prevent a recurrence of the bloody 1948 war, even though a part of him knows that a recurrence can't be avoided.
A growing number of Americans believe that President Barack Obama is a Muslim, according to a recent Pew Research poll.
The belief that Obama is a Muslim has increased most sharply among Republicans, but even among Democrats, only 46% say that Obama is a Christian, down from 55% in March, 2009.
One thing that surprised me as I researched this article is that, although Obama is not a Muslim today, he USED TO BE a Muslim.
According to a May 12, 2008, article in the NY Times:
Of course, as most Americans understand it, Senator Obama is not a Muslim. He chose to become a Christian, and indeed has written convincingly to explain how he arrived at his choice and how important his Christian faith is to him.
His conversion, however, was a crime in Muslim eyes; it is “irtidad” or “ridda,” usually translated from the Arabic as “apostasy,” but with connotations of rebellion and treason. Indeed, it is the worst of all crimes that a Muslim can commit, worse than murder (which the victim’s family may choose to forgive)."
The article goes on to say that Obama's apostasy would cause complications in dealing with the Islamic world if he became President. "But of all the well-meaning desires projected on Senator Obama, the hope that he would decisively improve relations with the world’s Muslims is the least realistic."
A gloomy state unemployment report on Friday says that more states posted rising jobless rates in July than in the previous month. CNN Money
Reports of cybercrime in Switzerland in 2009 were much higher than in 2008. Swiss Info
Shale oil extraction in the United States has gotten off to a slow start, but there is one little-publicized success story: In the course of three years, oil production in the North Dakota's Bakken formation has jumped to 135,000 barrels per day in 2009 from recoverable reserves now estimated at nearly 4 billion barrels. Reuters
Food prices have been following an upward trend since 2000, and the recent droughts in Russia and Ukraine have focused attention on the coming food crisis, caused by rising global populations and demand for food, climate change-related crop failures, higher fuel and fertiliser prices, speculation on commodity markets, dysfunctional global agricultural markets and greater biofuels production. Africa and Afghanistan are the two regions that will be hit the hardest at first. EurActiv
Women activists would like to set sail in a ship from Cyprus next week, with the intent of breaking the Gaza blockade, but the Cyprus police say that they won't allow the ship to leave. Reuters
After many days' delay, Pakistan is finally agreeing to accept $5 million in flood aid from India. Pakistan snubbed a similar offer after the tsunami in 2005. Dawn
Pakistan is clamping down on Islamist militant charities that hope to exploit anger against the government and undermine the fight against groups like the Taliban. Reuters
Protests and violence are continuing in Indian-controlled Kashmir, as two people were killed by Indian security forces on Thursday. Separatist sympathizers have strongly condemned the killing of an 8 year old boy by Indian troops, saying that police were targeting the young boys to suppress the pro-freedom sentiment in the occupied territory. South Asia News Agency
Radical Islam continues to spread in Russia's province of Chechnya, and now women are being threatened and harassed if they don't wear headscarves. Analysts say that the growth of Islamic Sharia law in the Russia's Caucasus regions are a major blow to Kremlin efforts to control the region. Reuters
A fascinating story about how Adolf Hitler snubbed Winston Churchill for dinner in 1932, and how the war between Britain and Germany was also a personal war between Hitler and Churchill. Spiegel
(Comments: For reader comments, questions and discussion, see the 21-Aug-10 News -- Mideast peace talks to begin on Sept 2 thread of the Generational Dynamics forum. Comments may be posted anonymously.) (21-Aug-2010) Permanent Link
Arab states cut financial aid to Palestinians
Investors were "stunned" on Thursday by a bunch of job news stories that indicate that the economy is spiraling downward.
In June, I posted a report about an apparent worldwide decline in economies around the world, and that we appeared to be headed once again to a worldwide freeze in trade and transportation, just as happened at the end of 2008. (See "7-Jun-10 News -- Globally, May was a month of ominous events.")
Since then, I've reported on one trend after another that confirms that trend. It seems increasingly certain that things will be pretty bad in the fall.
From the point of view of Generational Dynamics, the worst is yet to come, including a major stock market crash and financial crisis.
Arab states have cut financial aid to the Palestinian Authority (PA), and countries like Saudi Arabia are not fulfilling their promises. The PA will face a serious liquidity crisis in September, and will have difficulty paying salaries. Reuters
Russia and Belarus have been on bitterly disagreeable terms since the breakup of the Soviet Union in 1991, but relations may improve after the coming presidential elections, since they may result in the defeat of Belarus president Alexander Lukashenko after 16 years in power. Spiegel
The U.S. State Dept. said on Thursday that a new agreement for the start of direct peace talks between Israel and the Palestinians is close to completion. I wonder how long it will be before someone pisses someone off again, and the whole thing collapses? VOA
(Comments: For reader comments, questions and discussion, see the 20-Aug-10 News -- Bad economic news stuns investors thread of the Generational Dynamics forum. Comments may be posted anonymously.) (20-Aug-2010) Permanent Link
The Mosque at Ground Zero
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The Roma -- also known as Gypsies or by the politically correct euphemism "travelling people" -- are a semi-nomadic ethnic group that have been persecuted for centuries. The was even a Nazi holocaust of Romas. Today, there are some 350,000 Gypsies in Europe, mostly in eastern Europe. (Roma people are not Romanians except, of course, when they live in Romania.)
There are some 15,000 Gypsies living in France, many living in unathorized refugee camps or abandoned buildings. France's President Nicolas Sarkozy has ordered a crackdown on Roma living in some 300 unauthorized campsites, according to Radio France Internationale.
By the end of the month, 700 Roma will be returned to their countries of origin, usually Bulgaria or Romania, and more will be expelled in the months to follow.
The expulsion of the Gypsies is part of a larger law and order plan by Sarkozy, according to WSJ (Access). Other measures proposed by Sarkozy and his political party are to strip French citizenship from people of foreign origin who were convicted of trying to kill police or other public officials, and to imprison the parents of delinquent children.
The law and order drive is popular with the French people, but the expulsion of the Gypsies is causing widespread human rights criticism, according to Agence France-Presse (AFP). Romania's foreign minister expressed the view that the economic crisis was causing "xenophobic reactions" in France.
France's Green Euro-MP party called Sarkozy's policy "state racism," according to AFP, and a Le Monde editorial says that the policy activates "racist impulses."
From the point of view of Generational Dynamics, xenophobia is a characteristic of generational Crisis eras, resulting in political conflicts in mild cases, and in full scale wars in the worst scenarios.
We see a similar dispute of this kind going on in the U.S. with respect to the proposal to build a mosque next door to the Ground Zero site where the World Trade Center was brought down by Islamist terrorists on 9/11/2001. This has resulted in a drama of almost comic proportions, with a lot of politicians saying things and making fools of themselves. The NY Daily News reports that Nancy Pelosi, who is arguably the nation's politicizer-in-chief, is accusing her opponents of politicizing the issue, and is calling for an investigation of the finances of those who oppose the mosque, as if the families of 9/11 victims need to be paid to oppose the mosque.
On the one hand, you have a great deal of xenophobia, as well as a lot of people who are genuinely offended by the idea of a mosque at Ground Zero. On the other hand, you have the loony left that couldn't care less about the mosque, but see it as an opportunity to humiliate the United States.
Outside of those who sympathize with the victims of 9/11, no one actually believes the strongly held opinions they claim to have. This is shown by the fact that no one cares about the Greek Orthodox church that used to stand near Ground Zero, according to Fox News, but no one is applying the same principles to the Greek Orthodox Church that they're apply to the mosque.
Muslims themselves have a much more sensible view of the dispute. Memri quotes Al-Arabiya director Al-Sharq Al-Awsat as saying that, "The majority of Muslims do not want or need a mosque near ground zero," and adds:
"What the citizens of the U.S. fail to understand is that the battle against the 9/11 terrorists is not their battle. It is a Muslim battle – one whose flames are still raging in more than 20 Muslim countries... I do not think that the majority of Muslims want to build a monument or a place of worship that tomorrow may become a source of pride for the terrorists and their Muslim followers, nor do they want a mosque that will become a shrine for the haters of Islam... This has already started to happen: [the Islamophobes] are claiming that a mosque is being built over the corpses of 3,000 U.S. citizens who were buried alive by people chanting 'Allah akbar' – the same call that will be heard from the mosque..."
Japan and India are close to signing a nuclear cooperation agreement, where the Japanese will build nuclear reactors in India. This corresponds to the agreement that China has to build nuclear reactors in Pakistan. As I've said in the past, I expect Pakistan to be allied with China, and Japan and India to be allied with the U.S. in the coming Clash of Civilizations world war. South Asia Analysis Group
Swat Valley in northwest Pakistan used to be a favored and glamorous vacation spot for Pakistanis and rich Europeans alike. But first there was the devastating earthquake of 2005; then there was the invasion of the Taliban, and their reign of terror; and now the astonishingly vast floods have made the region a disaster zone. Spiegel
No heavy rains are forecast for Pakistan this week, but even without more rain, the floods will last at least until the end of the month. RFI
The unemployment rate is as high as 70% in some parts of Greece, as the country's draconian austerity measures reduce the country's budget deficit, at enormous social cost. As shops and businesses shut down, Greece appears to be in a death spiral, with no end in sight. "Things are starting to simmer here," says an unemployed shipbuilder. "And at some point they're going to explode." Spiegel
After years of debate over whether low-fat diets were better or worse than low-carbohydrate (Atkins) diets, the question has been resolved: They're both equally effective, or ineffective, depending on your point of view, but neither is better than the other. NY Times
(Comments: For reader comments, questions and discussion, see the 19-Aug-10 News -- France orders expulsion of Gypsies thread of the Generational Dynamics forum. Comments may be posted anonymously.) (19-Aug-2010) Permanent Link
Pakistan's government is snubbing flood aid from India
The May confrontation between the Israel Defense Force (IDF) and the "freedom flotilla" that tried to break the Gaza blockade has had an unexpected consequence.
That confrontation resulted in the deaths of nine Turkish citizens, and resulted in international outrage and demands for Israel to end the blockade.
Israel never agreed to end the blockade, but they ended up changing the import rules: Anything can be imported into Gaza except for a specific list of items, things like weapons or building materials that Hamas, the terrorist group governing Gaza, could use to build bunkers.
Up until that time, there was a vigorous "tunnel economy" in Gaza. Thousands of Gazans were employed digging tunnels under the wall separating Gaza from Egypt, and then smuggling all kinds of goods through those tunnels.
But now that many of these goods can be imported legally, the tunnel economy is going through a "depression," as the people who built, maintained and smuggled goods through the tunnels are now mostly unemployed. The unemployed include people who were some of the best paid Palestinians in Gaza, earning some 120 shekels ($32) a day, according to Reuters.
At their peak, there were 2,500-3,000 tunnels in operation, but now there are just 50 operational tunnels, with only 10 working at any one time, according to the article. Palestinian merchants now buy their goods from Israel, rather than from smugglers.
The end of the tunnel economy is actually a disadvantage to Hamas, according to CS Monitor. Hamas has benefited in two different ways from the blockade: first by generating international sympathy and playing the victim, and second by shifting the economy to the black market that it largely controls.
However, Hamas remains firmly in control of Gaza, as the Palestinian Authority remains in control of the West Bank. As I've been writing since 2003, from the point of view of Generational Dynamics, the region will be re-fighting the genocidal was between Jews and Arabs that followed the partitioning of Palestine and the creation of the state of Israel in 1948.
Pakistan's government is refusing to acknowledge or accept millions of dollars in flood aid offered by the Indian government, just as they snubbed aid from India after the 2005 tsunami. This is what my mother used to call "cutting off your nose to spite your face." Times of India
In four days, Russia will deliver nuclear fuel to Iran's Bushehr nuclear reactor. This means that after four days, Israel can no longer launch an attack on Bushehr, for fear of triggering widespread radiation. Jerusalem Post
The Pentagon has released its annual report on the military capabilities of China. We will have more to say about this report in the coming days, but suffice it to say that China is fully capable of a large-scale missile attack on the U.S. and the Pacific fleet. Department of Defense
An analysis of the Afghanistan war concludes that the U.S. withdrawal from Afghanistan will leave the Taliban in control of "vast areas" of the country. Memri
Pakistan's Inter-Services Intelligence (ISI) agency now says that homegrown Islamist militants have overtaken the Indian army as the greatest threat to Pakistan's national security. This is the first time since Partition in 1947 that India hasn't been viewed as the top threat. WSJ (Access)
A new book debunks the myth that Hitler was a heroic soldier during World War I who was radicalized by the war, leading to the birth of the Nazi movement. Newly discovered letters and papers suggest that Hitler was referred to as a "rear area pig" (Etappenschwein) by his comrades, and that the heroic story was fabricated by Nazi propagandists. Independent
I actually met chess champion Bobby Fischer once, when we were both teenagers and I was in NYC and made an improptu visit to the Manhattan Chess Club. He was kind of a childhood hero of mine -- until he lost by default to Spassky in 1974, and then later turned into a Nazi. Anyway, he died in 2008, and a nine year old Filipina girl has been claiming to be Bobby Fischer's daughter, but a DNA test proves that she isn't. BBC
(Comments: For reader comments, questions and discussion, see the 18-Aug-10 News -- The collapse of the Gaza tunnel economy thread of the Generational Dynamics forum. Comments may be posted anonymously.) (18-Aug-2010) Permanent Link
'Hindenburg Omen' predicts stock market crash
Western governments are alarmed by reports by the state-controlled Press Tv news service that Iran will begin construction of ten new uranium enrichment centers next year.
Currently, Iran's Natanz enrichment facility is enriching uranium to a level of 20%, and another facility is already under construction. An Iranian official is quoted as saying, "Studies for the location of 10 other uranium enrichment facilities have ended. The construction of one of these facilities will begin by the end of the (current Iranian) year (March 2011) or start of the next year."
Iran claims that they need to produce 20% enriched uranium for a medical research reactor, but former U.N. weapons inspector David Albright, in an interview with the LA Times says that these reasons aren't credible.
According to Albright, Iran already makes far more than enough 20% uranium to fuel the medical research center. He asks, "Why are they doing this? This could just be centrifuge people trying to be more efficient, or it could be that they want to make 20% material that is way beyond what they need for the research reactor, so you do have to ask: Is there a hidden weapons motivation?"
This comes at a time when many people are wondering if either Israel or the U.S. is planning a military strike to take out Iran's nuclear capabilities. The Arab countries don't want Iran to have nuclear weapons either, and both Saudi Arabia and the United Arab Emirates have recently indicated that they might approve military action.
Iran's statements on Monday were alarming. One would not be blamed for wondering if Iran were intentionally trying to provoke an actual attack.
I've described Iran's strategy many times, but a summary is appropriate here.
Iran's last crisis was was the 1979 Great Islamic Revolution, followed by the Iran/Iraq war that ended in 1988. Like any crisis war, it unified the country behind its leaders.
Today, Iran is in a generational Awakening era, and last year experienced massive student protests, along with political opposition that's expected to last for years. The geriatric leaders are desperately searching for a strategy that will unify the country again behind its leaders, just as occurred in the 1980s and 1990s.
The strategy they're using is the strategy that worked in 1979 -- blame everything on the Great Satan (the U.S.), and even provoke a military action that will force the population to support its leaders, just as the Iraqi invasion of Iran did. (See "China 'betrays' Iran, as internal problems in both countries mount"),
From the point of view of Generational Dynamics, this strategy works during a generational Crisis era, but cannot possibly work during a generational Awakening era. Even a U.S. military strike will not unite the Iranian people behind their leaders, as the students will blame the government for provoking the strike.
Iran is a schizophrenic country, with a bitterly anti-American and anti-Western leadership, but where the younger population is generally pro-American and pro-West, and have no particular desire to see Israel pushed into the sea. Iran's leaders are aware of this, and their attempts to reverse those attitudes cannot succeed during an Awakening era.
However, even the younger population favors Iran's nuclear program. They know that Saddam used weapons of mass destruction (poison gas) during the Iran/Iraq war, and the Iranians are surrounded by countries (Pakistan and Israel) that already have nuclear weapons.
On the other hand, the Israelis and the Arabs are extremely anxious about the possibility of Iran obtaining a nuclear weapon, and it's possible that a military strike on Iran will occur.
As I've said in the past, it's my expectation that when forced to choose in the Clash of Civilizations world war, Iran will be on the side of the West.
The internet is buzzing about the "Hindenburg Omen," a set of technical indicators that supposedly indicate an imminent stock market crash. The conditions for the Hindenburg Omen were met last week, but other analysts claim that it's all meaningless. CNBC
Swaziland has the highest HIV/Aids infection rate in the world, and the lowest life expectancy, but experts are puzzled about why Swazis have resisted all attempts to change the behaviors that put them at risk for AIDS. Reuters
On Sunday, Financial Times reported that the Barack Obama had personally warned Turkish Prime Minister Recep Tayyip Erdogan that the U.S. would refuse some armed sales to Turkey, if it doesn't change its position on Iran and Israel. But Turkey's President Abdullah Gül denies that any such threat had been made. Zaman
Israel's Prime Minister Benjamin Netanyahu began a visit to Greece on Monday to develop closer Israeli-Greek ties, just as relations between Israel and Turkey have been souring. Greece and Turkey are historic enemies, but both Greece and Israel deny that they're forming an alliance against Turkey. Deutsche Welle
Pakistani flood victims blocked highways on Monday to protest the lack of government help. Public anger has grown after two weeks of floods, and hundreds of villages have been marooned. The situation continues to deteriorate. Reuters
(Comments: For reader comments, questions and discussion, see the 17-Aug-10 News -- Iran announces new uranium enrichment centers thread of the Generational Dynamics forum. Comments may be posted anonymously.) (17-Aug-2010) Permanent Link
Boomers threaten the U.S. economy
The United States and South Korea will hold 10 days of joint military exercise, beginning Monday, and continuing through August 26. The exercises are called the Ulchi Freedom Guardian (UFG) war games, and they've been held every year to maintain readiness in case North Korea invades South Korea. The 1950s Korean war ended in a stalemate, and technically the two countries are still at war.
The participation will be massive -- about 30,000 American troops and 56,000 South Korean soldiers, according to VOA. However, many of the participants will take part remotely, using computer simulations and communications.
The nuclear-powered aircraft carrier U.S.S. George Washington will take part, and the U.S. has said that some of the exercises will take part in the Yellow Sea.
The war games take place as tensions have increased substantially on the Korean peninsula, after the South Korean warship was sunk by an explosion on March 26, killing 46, and later investigations indicated that the sinking was caused by a North Korean torpedo.
As usual, the North Koreans put out a statement filled with angry bluster. Yonhap quotes the North Korean statement as saying, "Now that the uproar of the reckless military drill aiming at our republic has heightened to an extreme ... our military and people will wield the iron hammer of a merciless response. Our military's reaction will be the worst punishment anyone has ever experienced." Blah, blah, blah.
China's state-controlled media Xinhua also reacted angrily, saying, "The real intention of the U.S. maneuvers in the waters of Northeast Asia, the commentary said, is to consolidate the U.S.-South Korea and U.S.-Japan military alliance and boost U.S. military presence in the region, and therefore intimidate and contain China. Washington's intention to contain China becomes clearer as it tries to interfere in the South China Sea disputes and strengthen its military presence in Southeast Asia, said the magazine. To a larger extent, the U.S. moves reflect the Obama administration's ambition to return to Asia to seek dominance of regional affairs."
However, another article in the Chinese media downplays the importance of the exercises. The Global Times says that "Worries over US aircraft carrier [are] overstated," and that "the US sending a carrier to the Yellow Sea just demonstrated that Sino-US relations are not as intense as some people argue." The article points out that an aircraft carrier would be extremely vulnerable to missile attack sailing so close to the Chinese mainland, and the fact that the U.S. is willing to risk sailing into the Yellow Sea "is of more symbolic significance than practical significance."
The article adds that the U.S. is not planning any military move against China because "At home, the US economy is weak and debts are piling up; while overseas, the prospect of failure in Afghanistan grows ever more likely."
It adds, "As the US extends its battle line, the limited number of US military is like a stretched dumpling wrapper around Europe, Middle East, South Asia, and now even East Asia. The stuffing of the dumpling is swelling, while the wrapper is getting thinner and thinner."
That was the headline on the home page of WSJ.com on Sunday.
According to the article (Access), the Boomers ARE threatening the U.S. economy. How? By spending less!
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According to the article, Boomers haven't saved for retirement, no one will hire them, and they've lost money in the stock market. The result is that they have far less money to spend. For several decades, Boomers have been the main consumer spending engine of the economy, and if Boomers cut back, then the economy will suffer.
Face to face talks between Israelis and Palestinians may begin again soon, after having been broken off two years ago. LA Times
On Sunday, Japan, South Korea and China commemorated the 65th anniversary of Japan's surrender, ending World War II. Associated Press
Deadly smog still fills the air in Moscow from the wildfires. Guardian
VisitBritain research provides tips for Brits who want to be the best hosts possible to foreign visitors to the 2012 Olympics in London. Some samples: "A smiling Japanese person is not necessarily happy." "When meeting Mexicans it is best not to discuss poverty, illegal aliens, earthquakes or their 1845-6 war with America." "Never call a Canadian an American." BBC
(Comments: For reader comments, questions and discussion, see the 16-Aug-10 News -- U.S. and S. Korea begin massive military exercises thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Aug-2010) Permanent Link
Bond yields for Greece, Spain and Ireland once again at crisis levels
Saturday was the 63rd anniversary of Pakistan's Independence Day, but the celebrations were muted by the unfolding and growing catastrophe facing the country, with 20 million people were homeless from the floods, according to Pakistan's prime minister Yousaf Raza Gilani, and the torrential monsoon rains are continuing. Cholera is spreading, and many isolated groups of people are starving because the floods have destroyed food supplies.
U.N Secretary-General Ban Ki-moon is visiting Pakistan to see the devastation for himself. VOA quotes him as saying, "We will try to mobilize all necessary assistance. And remember that the whole world is behind the people of Pakistan in this time of trial."
The United Nations has appealed for $459-million to deal with the immediate aftermath of the floods, saying billions of dollars will be needed in the long term. However, aid organizations are surprised that financial aid has been very slow in coming.
In his Independence Day speech, Gilani compared the ongoing disaster to the huge genocidal war between Muslims and Hindus that followed the 1947 Partition that created Pakistan and India. Pakistan's Daily Times quotes him as saying, "The nation will confront the challenges as it did at time of Partition, with the blessings of Almighty Allah. This time too we shall succeed."
In the speech, Gilani appealed to the nations of the world to aid Pakistan, but little aid so far has been forthcoming.
This has been a shock to aid organizations, who compare the aid received from individuals for the Pakistan floods -- about $10 million -- to the hundreds of millions of dollars donated for the South Asia tsunami in 2004 or the Haiti earthquake earlier this year, according to the Telegraph.
At the governmental level, the United States has been leading the way with $80 million in aid, and the UK is in second place, but many other countries have contributed little or nothing. The Daily Times asks, "Are Saudis, Iranis not Pakistan's friends anymore?" Except for Kuwait, Turkey and the UAE, no Islamic country has donated a penny to help Pakistan.
Saudi Arabia, which has given nothing to its Pakistan ally, donated $50 million to aid for the Haiti earthquake, according to an analysis by the Hindustan Times. The article provides three reasons why aid has been slow in coming:
Another reason is provided by the Daily Times article cited above. It seems that during the 2005 Kashmir earthquake, India offered $500 million in aid to Pakistan, but "the offer was refused by Pakistani authorities in the first place and whatever was allowed in was let to rot at security checkposts on the border." This snub would not be easily forgotten by the Indians.
I personally would add one more reason. In the past six months, the mood of the world has changed. At the time of the Haiti earthquake early this year, it was widely believed that the financial crisis was over, and that the economy would experience a "V-shaped recovery" in the Spring, with a surge in corporate hiring.
Today, that mood has almost reversed. Both consumers and corporations are holding on to cash for fear that business will collapse again or that joblessness will go up again. (See "12-Aug-10 News -- Wall Street turns pessimistic.")
This change in mood is one more reason for the reluctance to provide aid to Pakistan.
As I reported a few days ago, a protestor threw shoes at Pakistan's President Asif Ali Zardari during a speech in Britain last week. Now I'm shocked to read in the Guardian that several Pakistan cable television stations have been shut down for trying to broadcast the story of the shoe-throwing. There are additional bans affecting news coverage of the relief efforts, and this is on top of violence being perpetrated against some journalists.
When a government resorts to this kind of newspaper censorship, it's a sign that the politicians believe that the government is in trouble.
A constant theme of public criticism in the past week has been that Pakistan President Asif Ali Zardari didn't cut short his trip to France and Britain when the floods became disastrous.
Zardari is an odd figure in Pakistan's government. He would never have become President, had it not been for the assassination of his wife, Benazir Bhutto. Zardari is a Shia Muslim, in a largely Sunni Muslim government, where most of the power is in the hands of the army and the intelligence services, both largely Sunni organizations. And, of course, the Taliban are Sunni extremists.
Pakistan has had a number of coups in the last few decades, so it's not surprising that a coup is being discussed now. Thus, the Karachi News says that there's talk of the Pakistan army 'plotting the overthrow' of the Zardari government.
So far, this is just talk and rumor. But there's no doubt that Zardari is less popular than ever, and it would not be surprising at all if he were forced out of office.
Corporations are going on a "borrowing binge" by issuing high-risk "junk bonds" at very low interest rates. Even though the bonds are very risky, investors are snapping them up, hoping to recover money they've lost in the stock market. WSJ (Access)
Something similar is happening in Europe, as yields on German bonds are falling, while bond yields for Greece, Spain and Ireland are once again reaching crisis levels. Bloomberg
India has reimposed a curfew in Kashmir, after four more protestors were killed when security forces fired into the crowd. Reuters
Russia's Foreign Ministry has formally thanked the United States for help in fighting the wildfires. Ria Novosti
Ten reasons why a stock market crash may be coming. #1: P/E ratios are too high. #2 The Fed is getting nervous. #3: Too many people are bullish. #4: Deflation is already here. Wall Street Journal (Access)
(Comments: For reader comments, questions and discussion, see the 15-Aug-10 News -- Talk of a coup in Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (15-Aug-2010) Permanent Link
German prosecutors are investigating corruption
The near-default of Greece's government several months ago forced the EU to agree to a huge bailout. (See "11-May-10 News -- Europe's super-nuclear bailout.")
And as we reported yesterday, the bailout hasn't helped much, as Greece's economy shows signs of collapsing.
Portugal has not yet come close to defaulting, but it's one of the PIIGS countries (Portugal, Ireland, Iceland, Greece and Spain), and with a faltering economy and heavily in debt, many fear that it's not far behind Greece.
Both countries are implementing severe austerity programs to reduce the debt, and try to stave off default. These austerity programs are creating enormous hardships for their people.
So why are these two countries purchasing German-built submarines and other weapons, with money that they don't have? And why were some of these deals signed just as the bailout was being negotiated?
That's what German prosecutors would like to know. Deutsche-Welle reports that they're investigating corruption between German and Greek officials who sought to benefit from the bailout at a time when the German people were strongly opposed to it.
There were several large side deals, known as "offset contracts," signed along with the submarine deal, though little is yet known about the details. They would work as follows: Germany provides bailout money to Greece; Greece uses some of the ;money to purchase submarines and other weapons systems from German firms; the German firms would invest part of that money in projects in Greece favored by the Greek government. The money is effectively laundered, and everyone gets to pocket something.
The investigation is spreading to Portugal, according to EU Observer, and is touching on some high-level EU officials.
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The deal has some important historical significant for Americans. Greece and Turkey are perennial enemies, and a post-war conflict between them in 1947 led President Harry Truman to declare the Truman Doctrine, which essentially made America the Policemen of the World. (See "President George Bush talks about a 'Third Awakening,' but he has his history wrong" for details on how America became Policemen of the World.)
Since that time, Turkey and Greece went to war on the island of Cyprus, and almost went to war on other occasions. Greece is the largest importer of conventional weapons in all of Europe, and it's thought that much of this weaponry is in preparation for a possible future war with Turkey.
(Comments: For reader comments, questions and discussion, see the 14-Aug-10 News -- Germans selling submarines to Greece and Portugal thread of the Generational Dynamics forum. Comments may be posted anonymously.) (14-Aug-2010) Permanent Link
Worldwide heat prices surge after USDA lowers forecast
Deep into August, with seemingly half the world on vacation, it almost seems as if nothing is happening. And yet, bills continue to pile up, even in summer, and notes become due, and people still have to eat.
So it's perhaps not too surprising that Greece's economy is turning out to be worse than expected or predicted, after the huge European bailout in May, triggered by Greece's impending financial default. (See "11-May-10 News -- Europe's super-nuclear bailout.")
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As the graph shows, the growth rate of Greece's economy turned negative in Q3 2008, and it's been negative ever since.
On Thursday, Greece announced the biggest fall in recent times. Experts had predicted that Greece's growth rate would hold steady at around -1.0%, but it now turns out that in Q2, the rate was -1.5%, according to MarketWatch.
What's even worse is the overall trend since Q1 of 2008, which is clearly downward, and there's little hope in sight of a revival.
Notice that the one time when the growth rate increased -- in Q2 of last year -- was the time when the U.S., China, Europe and other countries were pouring trillions of dollars in bailouts and stimulus packages into the global economy, resulting in last year's stock market rally. But Greece's economic growth only last one quarter, not even as long as the stock market rally.
Furthermore, the most recent collapse, in Q2 of this year, coincides with the collapse of many other economic indicators, as I've been describing for two months now, starting with "7-Jun-10 News -- Globally, May was a month of ominous events."
Early in 2009, I was expecting the world economy to keep collapsing, but I turned out to be wrong because of something like $10 trillion dollars in stimulus and bailout money injected into the world economy.
But nothing like that is about to happen now. People around the world are panicked about the high levels of government debt everywhere. Whereas Presidents Bush and Obama were able to get trillion dollar stimuluses and bailouts passed in 2008 and 2009, nothing like that is possible in 2010.
This mood is apparent from a survey of 57 economies published on Thursday in an article in the Wall Street Journal (Access). The economists were generally very pessimistic about the U.S. economy, but nonetheless most said that the economy doesn't need any more fiscal or monetary stimulus.
The economic pessimism was increased even further on Thursday when new claims for unemployment insurance hit their highest level in six months, according to VOA. 484,000 people signed up for unemployment insurance last week, when the experts were hoping that the figure would fall to 400,000.
Generational Dynamics predicts that we're headed for a major worldwide financial crisis, the worst in history, because the world has created an amount of debt astronomically larger than at any time in history.
The U.S. Department of Agriculture (USDA) revised downward its global forecast for wheat product, by 2.3% less than July. Much of the downward revision was caused by Russia's drought and the hottest summer in 130 years. Wheat prices surged 2.5% on Thursday, giving rise to fears of food riots. Associated Press.
The North Korean football (soccer) team that lost three games at the World Cup games this summer are being harshly punished by Kim Jong-il's government. World soccer officials will conduct an investigation. LA Times
Floods in Pakistan are still growing, in a disaster of epic proportions. The rains have destroyed 500,000 tonnes of wheat and 500,000 tones of sugar, exacerbating the food shortages. Reuters
The commander of Iraq's military has indicated that U.S. troops should not leave Iraq, since the Iraq army will not be ready to defend the nation until 2020. Long time readers will recall that I've said that it's my expectation that the U.S. will not withdraw from Iraq until forced to by the Clash of Civilizations world war. Associated Press
The spreading revolt in Kashmir is causing India to reevaluate its strategy there, although there seem to be no answers in sight. NY Times
India is joining United Arab Emirates (UAE) and Saudi Arabia in threatening to shut down BlackBerry email and messenger services, unless the vendor, Research in Motion, makes the contents of encrypted messages available to the government. India's deadline is August 31. Reuters
If you take a picture with a smartphone or a digital camera and post it on the internet, then you may be revealing more than you realize about yourself -- specifically your location. These devices use the GPS capability to implant a "geotag" into the picture that an expert can use to determine where the picture was taken. NY Times
Turkey is being accused of using chemical weapons against PKK militants. Spiegel
The Arab League has issued a statement saying that the Palestinians' "right to return" to their land in Israel will be on top of their list of priorities. Eurasia Review
Mexico hopes $270 million in social spending will help end Juarez drug violence. Fat chance. Washington Post
A team of French scientists have finally discovered how to drink champagne properly. Start by pouring it into a tilted glass. Tonic.com
(Comments: For reader comments, questions and discussion, see the 13-Aug-10 News -- Greece's economy goes deeper into recession thread of the Generational Dynamics forum. Comments may be posted anonymously.) (13-Aug-2010) Permanent Link
World Health Organization says that swine flu pandemic is over
As usual, financial experts on tv on Wednesday looked at one another with puzzled expression and asked, "Why is this happening? There's no news that we didn't already know."
Statements like that, which are very common, never cease to astound me. If you think about the mind frame of the person saying it, he obviously believes that stock prices have absolutely no meaning except the emotional state of the investor based on the news of the day. And these idiots give investment advice to other people!
Wall Street stocks fell roughly 3% on Wednesday. According to the NY Times, stocks fell because, "evidence is mounting that growth abroad is also slowing and may be unable to sustain the fragile rebound here." A major reason for the pessimism, according to the article, is that the Federal Reserved released a report warning that "the pace of the nation's recovery had slowed." In addition, China's economy is cooling, and American exports are faltering.
Thus, "The optimism had pervaded Wall Street only weeks ago has faded quickly. In its place is a growing realization of what many ordinary Americans have been feeling in their bones: this is not the economic recovery the nation had hoped for. Indeed, while the economy is growing again, it is growing too slowly to create many jobs or boost household incomes."
What's becoming clear is that the mood on Wall Street is changing as the effects of the multi-trillion dollar bailouts and stimulus packages wear off.
One interesting aspect of the increasing gloom is that even people making dire predictions are becoming more mainstream, according to an article several days ago in the NY Times. According to the article,
“Nothing is ridiculous anymore,” said Philippe Jabre, a hedge fund executive in Geneva. “There is no doubt that these days extremely negative research is being tolerated more.”
Mr. Jabre said that most of the research that came his way had a distinctly negative bias and that finding actionable ideas with a positive spin was becoming far more difficult. “These guys are reinforcing a conviction among many who invest in hedge funds that they should remain scared,” he said."
As long-time readers know, I realized in 2002 that we were headed for a new 1930s style Great Depression when I was eating lunch at the mall reading the Boston Globe, and I saw a graph of the Dow Industrials going back to the early 1900s. I took one look at it and said, "Ohmigod, the stock market is going to crash." It was that obvious, just from the graph. (See "Updating the 'real value' of the stock market.")
I was ridiculed for many years, but I must say that I almost never hear any ridicule these days. People are indeed scared, and they're finally willing to listen.
Another issue is the debate between those who are predicting deflation and those who are predicting hyperinflation. It's so obvious that we're in a deflationary spiral that I can only ascribe predictions of hyperinflation to human perversity.
In fact, a recent article in the Wall Street Journal (Access) is entitled "How to Beat Deflation," and provides investment strategies:
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My own recommendation, incidentally, is for everyone but the most sophisticated investors to stay out of the markets completely. Cash is king during a deflationary spiral, you should keep you cash in your mattress, in FDIC-guaranteed bank accounts, and in short-term treasuries.
However, even seeing an article like this in the Wall Street Journal shows how much the mood on Wall Street has changed.
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The World Health Organization (WHO) has announced that the H1N1 swine flu pandemic has entered the "post-pandemic" period. According to the announcement:
In the post-pandemic period, localized outbreaks of different magnitude may show significant levels of H1N1 transmission. This is the situation we are observing right now in New Zealand, and may see elsewhere.
In fact, the actions of health authorities in New Zealand, and also in India, in terms of vigilance, quick detection and treatment, and recommended vaccination, provide a model of how other countries may need to respond in the immediate post-pandemic period.
Globally, the levels and patterns of H1N1 transmission now being seen differ significantly from what was observed during the pandemic. Out-of-season outbreaks are no longer being reported in either the northern or southern hemisphere. Influenza outbreaks, including those primarily caused by the H1N1 virus, show an intensity similar to that seen during seasonal epidemics.
During the pandemic, the H1N1 virus crowded out other influenza viruses to become the dominant virus. This is no longer the case. Many countries are reporting a mix of influenza viruses, again as is typically seen during seasonal epidemics."
However, Dr. Henry Niman of the Recombinomics web site, says that the danger is far from over:
However, the H1N1 virus can aggressively target those under 65, the demographic for over 90% of the fatalities. These fatal cases are linked to the ability of the virus to target the lower respiratory tract, which has been linked to receptor binding domain changes such as D225G as well as low reactor alterations at positions 157-159. Recently released 2010 sequence has demonstrated that these genetic changes are on the rise, raising concerns for the emergence of a more virulent H1N1 in the upcoming months or years."
The emergence of H1N1 swine flu has nothing to do with generational theory, of course, but I continue to recommend that any household should stock up on enough dried foods, water and medicines to be able to surivive a couple of weeks. This preparation could also help in other circumstances, as the 2005 Katrina hurricane showed.
An antibiotic resistant "superbug" bacteria has developed in India, and is spreading around the world. In the US, the superbug is likely to appear first in hospitals. NY Times
World commodity grain prices have risen 70% in the last couple of weeks, after the worst drought in 130 years and wildfires forced Russia to ban wheat exports, at least until the end of the year. The result is that we could see street riots over food in underdeveloped countries, particularly in the Middle East, North Africa, and parts of Europe. Reuters
Israel says that it will stop, with bullets if necessary, any future aid flotilla that tries to break the blockade of Gaza. Jerusalem Post
For many parts of Pakistan, especially the south, the worst of the floods is yet to come, as the nation begins the holy month of Ramadan. CNN
Australia is being overrun by rabbits. Reuters
(Comments: For reader comments, questions and discussion, see the 12-Aug-10 News -- Wall Street turns pessimistic thread of the Generational Dynamics forum. Comments may be posted anonymously.) (12-Aug-2010) Permanent Link
Nobody wants to use the U.S. one dollar coin
The giant nuclear-powered aircraft carrier USS George Washington has docked in a Vietnamese port in preparation for week-long naval exercises between the two countries. They will focus on non-combatant operations such as sea rescues, according to VOA.
With the U.S. and Vietnam having been at war in the 1970s, no other exercise like this have ever taken place. What's motivated them now is China's increasingly belligerent attitude involving its claim to the entire South China Sea that we reported on several weeks ago. (See "24-Jul-10 News -- US confronts China on South China Sea claims.")
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As we described in that report, US Secretary of State Hillary Clinton chastised China at an ASEAN meeting for its claims to the islands of the South China Sea, particularly the Paracel Islands and the Spratly Islands. It turns out that the South China Sea issue was on the ASEAN agenda because Vietnam put it there, in order to turn the world spotlight on the issue, and apparently they've succeeded.
China has reacted angrily, and several countries in the region are asking for help from the U.S. in countering China's threats. Among these, the Philippines and Malaysia have laid claim to the Spratlys, and Vietnam has laid claim to the Paracels.
Thus, the United States has been expanding its military relationships with Vietnam, Malaysia and Indonesia, according to Retired US Navy Adm. James A. Lyons, writing for the Washington Times. In particular, Lyons recommends leasing sophisticated military hardware to the Philippines, including a squadron of F-16 fighters and T-30 supersonic trainers.
In response, China has conducted its own military exercises in the South China Sea. And a new article in the Beijing Review details the "Historical and legal evidence [that supposedly] proves China's indisputable sovereignty over the South China Sea."
Generational Dynamics predicts that China and the U.S. will be on opposite sides in the coming Clash of Civilizations world war. Whether it will begin in the South China Sea, or on Taiwan, or in Central Asia or elsewhere cannot be predicted, but the end result is certain.
Vietnam's last generational crisis war was the the civil war of the 1960s and 1970s. The war was not fought against the Americans, though the Americans were there, supporting the South Vietnamese. It was fought between the North and the South, and the Americans were irrelevant.
In fact, generational crisis wars between North and South Vietnam have occurred regularly, every 70-90 years, since North and South Vietnam have had different ethnic origins. North Vietnam (Vietnamese Kingdom) was originally populated by ethnic Chinese, while South Vietnam (Champa Kingdom) was populated by Polynesian settlers from Indonesia and Malaysia. These ethnic differences resulted in one crisis war after another over the centuries, whether the Americans were there or not.
Generational crisis wars in 1471 and 1545 finally ended the Champa Kingdom in the south, and also drove out the Chinese Army from the north. However, the country remained partitioned until the Tay-Son rebellion, 1771-1790, the most celebrated military event in Vietnamese history. In its explosive climax in 1789, the Vietnamese troops repelled a much larger Chinese army in a brilliant battle that united the country for the first time.
The generational awakening era that followed the Tay-Son rebellion changed the country enormously. The 1800s were the high point of literary culture in Vietnamese history, and, thanks to the French, Christianity bloomed, with hundreds of thousands of Catholic conversions from Confucianism and Buddhism. That lasted until the next crisis war, the French conquest of Indochina in 1865-1885.
Under the French, the Catholic Church flourished, opening missions, schools and hospitals all over the country.
Vietnam's next Awakening era featured riots and demonstrations directed at the French colonialists, and the rise of Ho Chi Minh. Ho took part in the founding of the French Communist Party in 1920, and formed the Revolutionary Youth League in Vietnam in 1925. Ho led numerous anti-colonial uprisings in the following decades, and during WW II, Ho formed the Viet Minh political / relief organization, for people starving to death thanks to confiscation of goods by the occupying Japanese.
After WW II, Ho Chi Minh led the effort to drive the French from Vietnam, and succeeded with human wave assaults against a large French encampment at Dien Bien Phu in 1954.
With the French gone, Vietnam was once again partitioned into North and South. Ho controlled the North, with support from the Soviet Union and China, and over half a million Catholics migrated from the North to the South. America feared that South Vietnam would also fall under Communist control.
This was the time when America had fought two world wars, and was desperately fearful of a third one on the horizon, this time with the Communists. It was considered essential to stop Communism before it could become too threatening, and so America endeavored to stop Communism from spreading from North to South Vietnam. America began providing advisors in the 1950s, growing to full-scale armed intervention in the 1960s. The North-South crisis civil war finally ended in 1974, with Hanoi's victory, followed by Hanoi's reign of terror.
Today, Vietnam is well into one more generational awakening era. When President Bush visited Vietnam in 2006, the young people of Saigon (they don't call it Ho Chi Minh city) lined the streets and cheered wildy, expressing admiration for America, and also hostility towards their Hanoi masters.
Today, even Hanoi wants to be friends with America, to counter threats from China in the South China Sea.
And so, the cycle of life takes one more click forward. The Vietnamese don't give a shit about us, but we're still policemen of the world, and we will do what we have to do, in the South China Sea and elsewhere.
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The U.S. introduced a $1 coin in 2007, but nobody wants to use it, and so there are $1.1 billion of the coins in storage. BBC
Omar Khadr was 15 years old when US forces in Afghanistan captured him and sent him to Guantanamo prison. He may be the youngest person in history ever to be charged with war crimes. Al-Jazeera
President Obama's press secretary Robert Gibbs has infuriated many of his supporters by calling them the "professional left." He said that these people "wouldn’t be satisfied if Dennis Kucinich was president." I wonder why he doesn't just call them nihilistic Generation-Xers? Politico
Japan’s Prime Minister Naoto Kan apologized Tuesday for Japan's colonial rule of Korea. The apology comes as the 100th anniversary of Japan's August 29, 1910, annexation of Korea approaches. The Koreans are pleased with the apology, but say that it doesn't go far enough because it isn't accompanied by a promise of monetary compensation. Xinhua
The U.S. is winning friends in Pakistan with helicopters delivering food and water to stranded victims of the torrential floods. AP
Islamist terrorist groups are also winning friends in Pakistan by providing medicine and helping to rebuild homes. Reuters
(Comments: For reader comments, questions and discussion, see the 11-Aug-10 News -- US and Vietnam conduct naval exercises in South China Sea thread of the Generational Dynamics forum. Comments may be posted anonymously.) (11-Aug-2010) Permanent Link
A generational analysis of Kashmir
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Acting like petulant teenagers on Monday, the North Koreans fired 130 rounds of artillery into the Yellow Sea, according to Yonhap.
Most of the artillery shells landed in the North Korean side of the Northern Limit Line (NLL), the line defining North Korea's territorial waters. However, some of them splashed into the water south of the NLL.
At America's State Department press briefing on Monday, assistant secretary Philip J. Crowley said that animal rights activists should be complaining about the fish that were killed:
MR. CROWLEY: I’m sure it resulted in a lot of dead fish and we certainly hope that PETA will protest. It is not a helpful sign by North Korea and this is exactly the kind of behavior we would like to see North Korea avoid.
QUESTION: But just to continue on North Korea. I mean, since they – you passed your UN Security Council resolutions warning against further provocation, I mean, they seem to be doing a host of things. I mean, the shipping boat was just the other day was just one. Then there are continued little small skirmishes that we’ve seen. I mean, is there a concern that there is going to be continued provocation by North Korea, one of which might not just be left to joke about later?
MR. CROWLEY: Again, based on – if past is prologue, are we likely to see more provocations? Regrettably, the answer is we’re likely to see more provocations. All we can continue to communicate to North Korea is that there will be no reward for these provocations. North Korea will continue to be isolated. We’ll continue to work with the international community to fully implement Resolution 1874, and we will continue to find ways as we’ve talked about to put pressure on the North Korean Government to change course. As to what North Korea will do, my crystal ball is not that effective.
QUESTION: P.J., I presume that your initial comments there were a bit tongue – you were trying to be tongue and cheek, yes? I just want to make sure that – you’re not suggesting that the only thing that needs to be protested here is the death of a bunch of fish.
MR. CROWLEY: No –
QUESTION: I mean, you want PETA to protest this? Are you willing to protest it as a provocation?
MR. CROWLEY: Well, we have –
QUESTION: With (inaudible) intention to be –
MR. CROWLEY: We have made our views known to North Korea directly and repeatedly. We want to see North Korea cease its provocative actions. We want to see North Korea find a way to work constructively with its neighbors. We want to see North Korea reduce tensions. The fact that they have sunk a North Korean ship[i], we are aware that they have taken a fishing vessel in the high seas. It’s unclear the specific circumstances; South Korea is investigating that incident. But certainly the firing of a very large number of rounds in the region is the last thing that we want to see and is certainly not the best way to reduce tensions.
It’s unclear to us exactly what North Korea feels it is trying to achieve through this ongoing chest thumping that it has engaged in. All we can say is that we will continue to work effectively and closely with South Korea, other countries in the region, and there will be no reward for North Korea, for these provocations."
As you can see, the questioner was not impressed by Crowley's little joke about dead fish and the animal rights organization PETA.
However, the entire interchange indicates how directionless the policy towards North Korea is. This is because no direction is possible.
The North Koreans seem to be attempting to provoke a war. The North Koreans are going through a succession crisis, as President Kim Jong-il is old and frail. The North Koreans have a million man army ready to march south into Seoul, and they undoubtedly fantasize uniting North and South Korea until their control.
If the North Koreans are intent on provoking a war, there's little that the South or the Americans can do about it, except continuing with things like the naval exercises as a show of force, so that the North Koreans will understand that winning a war will not be as easy as their fantasies tell them.
The South Koreas are still furious about the sinking of the Cheonan, killing 46, and they're undoubtedly also furious that the North seems to have gotten away with it.
Thus, tensions are still great on both sides, and are probably growing. Both sides are pushing the limits of provocation, and if one side or the other takes a step too far, the result would be a major war.
The prosecution of former Liberian president Charles Taylor on charges of aiding the rebels in the Sierra Leone crisis civil war in the 1990s continues to hinge on the question of whether Charles Taylor gave supermodel Naomi Campbell a diamond at a 1997 dinner for Nelson Mandela. For, if he did, it would indicate that it was a "blood diamond" that Taylor had obtained from the rebels for large sums of money and weapons.
Several days ago, we reported that Naomi Campbell testified that she did receive some "dirty pebbles" from two men who knocked on her door in the middle of the night, but she didn't bother to ask who they were from because "I get gifts all the time: sometimes in the middle of the night without knowing who they are from. It is quite normal for me."
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Actress Mia Farrow had also been at the 1997 Mandela event, and her court testimony on Monday contradicted Campbell. The LA Times quotes Farrow as saying that she spoke to Campbell the next morning and, "She said in the night she had been awakened by men knocking at her door and they had been sent to her by Charles Taylor, and they had given her a huge diamond," Farrow said, adding that Campbell had been "quite excited" about it.
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Meanwhile, the Telegraph has published the above 1997 photo of Naomi Campbell nuzzling Nelson Mandela.
So it remains to be seen how much bearing all this supermodel testimony will have on whether Charles Taylor is convicted. He is charged with 11 counts of instigating murder, rape, mutilation, sexual slavery and conscription of child soldiers during wars in Liberia and Sierra Leone in which more than 250,000 people were killed. He denies all the charges.
An expert analysis of the situation in Kashmir, published by Eurasia Review, has a generational flavor.
The analysis by Mohammad Ashraf begins as follows:
From the point of view of Generational Dynamics, the young people that this paragraph talks about are in the "Hero" archetype, just like America's World War II GI generation, and just like today's Millennial generation (Generation Y).
Kids in Hero archetype generations start out as a generation in waiting -- waiting for the day when they'll go without hesitation to save the society and its way of life from the enemy, whoever that may be.
Death rates in Moscow have nearly doubled to 700 per day, compared to a normal 380 per day. City morgues are dangerously close to filling up, as the smog from the wildfires is unabated. Moscow News
German authorities have permanently shut down the Taiba Mosque in Hamburg. The September 11 suicide pilot Mohammed Attah had attended the mosque, and had used his contacts there to plot the 9/11 attacks. Deutsche Welle
Torrential rains continued to make the Pakistan floods even worse. The apparent incompetence of the government in handling the emergency has further damaged its stature, and given increased stature to the army. McClatchy
Two Demcratic Congressman are going to hold up $100 million in aid to Lebanon's army that had previously been approved. The aid was blocked after the recent deadly border clash between Lebanon and Israel. Telegraph
The U.S. is not only conducting naval exercises with the South Koreans, but it's also doing so with the Vietnamese. A U.S. warship will dock in Vietnam on Tuesday as part of week long naval exercises. The exercises will take place in the South China Sea, and will be sure to anger the Chinese. Bloomberg
(Comments: For reader comments, questions and discussion, see the 10-Aug-10 News -- North Korea fires artillery shells into Yellow Sea thread of the Generational Dynamics forum. Comments may be posted anonymously.) (10-Aug-2010) Permanent Link
Wildfires in Russia are infuriating the public
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North Korea has seized a 41-ton South Korean fishing boat, the "Daeseung 55." The boat was in the Sea of Japan near the border between North Korea and Russia, and may (or may not) have accidentally entered North Korean territorial waters.
The South Korean maritime authorities had regular contact with the ship until around 5:30 am on Sunday morning, according to the Korea Times. At that point the signal was lost, and it was confirmed via satellite phone call that the boat was being towed by a North Korean patrol boat to a North Korean port.
The seizure appears to be in retaliation for naval exercises being conducted in the Yellow Sea by South Korea, involving 4,500 men and all four branches of the military. The CS Monitor reports that the South Korean vessels conducted nighttime live-fire antisubmarine exercises in the same general area where a South Korean warship, the Cheonan, was sunk on March 26, killing 46. An international forensic team concluded that a North Korean torpedo had sunk the Cheonan. In the exercises, South Korean vessels, supported by warplanes, began firing on targets in the Yellow Sea at sundown and were expected to keep up the exercises for the next six or seven hours.
North Korea had claimed that the drills amounted to an "undisguised military intrusion." CNN quotes North Korea's state-run news agency as saying:
In case you don't know, the word "puppet" refers to the claim that the South Koreans are puppets of the United States.
There were seven crew members of the fishing boat, four Koreans and three Chinese. Having the Chinese on board will pose some issues for the North Koreans, because they wouldn't want to keep hostages from their ally. However, the fate of the four South Korean crew members will certainly be in doubt.
Joint U.S. - South Korean naval exercises took place a couple of weeks, and there are plans for several additional rounds of exercises by the end of the year. All of these exercises are in reaction to the sinking of the Cheonan, but the North Koreans and the Chinese are bitterly opposed to them.
The current exercises by the South Koreans alone are taking place in the Yellow Sea, over the objections of the Chinese. Different news stories seem to make different statements as to whether any of the joint US/S.Korean exercises will take place in the Yellow Sea. Some stories indicate that Yellow Sea exercises will take place in September, while other news stories indicate that the U.S. has decided against Yellow Sea exercises to avoid provoking the Chinese.
The wildfires in Russia continue to burn.
There are 500 fires burning across Russia, about 50 of them on the outskirts of Moscow. Muscovites are warned to stay indoors because of the heavy smog, and if they do go outdoors, they choke on the smog and can't see more than a few feet in front of them.
The fires are having an effect on internal politics. Russians are furious at Moscow for being so poorly prepared for this wildfire epidemic, according to Spiegel.
But it goes beyond just feelings of frustration. In 2007, then-president Vladimir Putin dismantled Russia's forestry service, replacing it with a high-tech system based on satellites. Unfortunately, the new high-tech system is incapable of detecting small files, according to a summary of analyses by Russian experts published by Eurasia Review. One normally doesn't fire firemen during a fire, but things are so bad that BBC reports that President Dmitry Medvedev is sacking top military officers over Russia's fire failures.
We're seeing the same kinds of things in Russia that we've seen in America since the Gulf oil disaster and in Pakistan since the floods -- A population increasingly furious at the incompetence of the government. With all three countries in generational Crisis eras, we can expect the three populations to become more nationalistic and xenophobic, though it remains to be seen how these behavioral changes will manifest themselves.
More than 57 young men, mainly in their teens, were in Indian-controlled Kashmir's hospitals in the last week, after they'd been fired upon by security forces. Separatist leaders warn that the Indians are creating a new generation of angry teenage militants dedicated to confrontation with the Indian security forces. Telegraph
The same monsoon rains that are flooding Pakistan are also flooding parts of Indian-controlled Kashmir. Thousands of people have been forced to leave their homes to flee to higher ground, and sleep in open air. al-Jazeera
The Juarez drug cartel appears to be losing ground to the Sinaloa drug cartel in Juarez, Mexico. In desperation, the leaders of the Juarez drug cartel are committing acts with the objective of drawing U.S. government forces into the Juarez conflict, in the belief that the U.S. will attack the Sinaloa cartel. However, the U.S. shows no inclination to get involved in Juarez, and the Mexican government would oppose U.S. intervention. Stratfor
Trade between North and South Korea has fallen 30% since the South cut almost all business relations with the North after an international investigation found Pyongyang torpedoed one of its naval ships in late March, the customs office here said yesterday. JoongAng
Women buy sexier clothes on days when they are most fertile. Toronto Sun
(Comments: For reader comments, questions and discussion, see the 9-Aug-10 News -- N. Korea seizes S. Korean fishing boat thread of the Generational Dynamics forum. Comments may be posted anonymously.) =eod
(9-Aug-2010) Permanent Link
Pakistan's president faces scandal over his absence during floods
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Torrential rains continued to pour down on Pakistan, worsening an already catastrophic situation, according to Dawn.
The Indus river, which runs down the middle of Pakistan from top to bottom, almost for the entire length of the country, has been overflowing its banks, submerging villages for miles on either side. The powerful, gushing streams of water have been breaking dykes, killing thousands of people, and forcing several million to people to flee their homes and seek shelter elsewhere.
Prime Minister Yousuf Raza Gilani has appealed to the international community for help with the floods, according to Dawn.
"Pakistan has been hit by the worst flood in its history. While still struggling to cope with the negative impact of the situation on our western borders and the crisis of internally-displaced persons, we have yet again been hit by a natural disaster," said Gilani.
"The loss of human lives and infrastructure is colossal. Real assessment of the damage can only be done once the water recedes. I would take this opportunity to appeal to the overseas Pakistanis to extend support to their countrymen in coping with the losses and sufferings. I also urge the corporate sector of Pakistan to come forward and shoulder its social responsibility and generously support the victims of the disastrous flood," he said.
Crowds heckled him and a protestor threw shoes at Pakistan's President Asif Ali Zardari during a speech in Britain on Saturday, according to the Telegraph. Throwing shoes is a form of insult among Muslims, and the incident was reminiscent of an incident several years ago where an Iraqi journalist threw shoes at President George Bush.
Zardari is in Britain on a visit that was scheduled some time ago. People in Pakistan are wondering why the President of the country didn't cut his visit short and return to Pakistan to comfort the millions of people victimized by the floods.
Zardari already had low popularity ratings before, and this scandal is pushing them even lower.
(Comments: For reader comments, questions and discussion, see the 8-Aug-10 News -- Pakistan appeals for international help with floods thread of the Generational Dynamics forum. Comments may be posted anonymously.) (8-Aug-2010) Permanent Link
Devastating Pakistan floods worsen with new rains
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Friday's jobs report was much worse than financial experts had expected.
The top graph shows that 131,000 jobs were lost in June. A lot of these were expected, since it was the end of the time when hundreds of thousands of temporary government employees were out interviewing people for the census.
The real focus was on the non-government payrolls, shown in the second graph, and there were two shocks here. First, the growth in private payrolls was 71,000, lower than the 90,000-100,000 that experts had predicted, according to Reuters.
And second, there May and June figures were adjusted downward by 97,000 from where they stood a month ago. That is, 97,000 fewer jobs had been created in May and June than had previously been reported.
The reason that all this is shocking is because the trend is in the wrong direction. The Pollyannaish theories all depend on jobs creation to be surging. If job creation falls at all, especially by these large numbers, it freaks the experts out.
A number of pundits on TV on Friday mentioned temp hiring, and this was another disconcerting figure. As shown on the bottom graph, which shows temp hiring by the private sector (hence does not include the temporary census workers), shows that temp hiring fell by 6000.
The reason that this is important is because the Pollyannaish theories all assume that temp hiring will increase for a while, as businesses "test the waters" in the growing economy, and that these temp workers will be converted to permanent workers when the economic growth seems solid. Thus, the earlier rises in temp hiring were considered to be good news. The fall in temp hiring in July might have been considered good news if it had been accompanied by growth in permanent employment. But since permanent job growth was so anemic, it simply meant that businesses were hiring a lot less than expected, and were not confident about the future.
It's time, once again, for me to quote this passage from John Kenneth Galbraith's 1954 book The Great Crash - 1929, as I have several times in the past:
This is exactly what's happening again. All the experts on TV say things like, "In every postwar recession, yada, yada, yada." The problem is that this isn't like any postwar recession. The only comparable "recession" is the one that occurred after the 1929 crash.
In every postwar recession, jobs came back quickly. In this recession, jobs are coming back slowly, if at all.
But this also explains why Generational Dynamics works. Nobody remembers the 1930s depression any more, and so they consider it to be something from the age of dinosaurs that can't even exist any more.
A couple of days ago I tried to explain why the Law of Mean Reversion works. (See "Updating the 'real value' of the stock market.")
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The problem is to explain why, if the S&P 500 price/earnings ratio has been way above the historical average since 1995, then it has to be way below average for a similar time into the future -- i.e., until 2025.
The explanation I'm looking for is to compare the huge debt bubble of the last few years with a poison that affects every part of the economy. The poison is the debt that people and businesses take on during the bubble, and then it takes them many, many years to pay off the debt.
I asked an online correspondent if he could think of a kind of human poisoning that works something like that. He suggested lead poisoning. If you're exposed to lead, then it builds up in your body tissues. Once the problem has been identified, it's necessary to take various medicines for a while to get rid of the lead.
But then I heard a woman on TV say the following: "I always say it too me nine months to have a baby and two years to lose the weight."
Now there's a great analogy. If you're a woman and you get pregnant, then you can (hopefully) enjoy the pregnancy for nine months. But once the little bundle of joy has been delivered, then it may take you years to lose the weight that you gained.
So there you have two different analogies you can think of, to help you understand why the Law of Mean Reversion works, and why it's a mathematical certainty that the stock market is going to have to fall very far, and stay down there for many years.
Part of the Pollyannaish view that the economy is improving is the assumption that the 2007 financial crisis is over and all the debt has been removed from company books. However, the poison analogy that I described above says otherwise -- that it will take a long time to remove the poison of debt from businesses.
Here's how Brett Arends, a columnist on Market Watch, described what's going on:
You could hear this great news pretty much anywhere -- maybe from Bloomberg, which this spring hailed the "surprising strength" of corporate balance sheets. Or perhaps in the Washington Post, where Fareed Zakaria reported that top companies "have accumulated an astonishing $1.8 trillion of cash," leaving them in the best shape, by some measures, "in almost half a century."
Or you heard it from Dallas Federal Reserve President Richard Fisher, who recently said companies were "hoarding cash" but were afraid to start investing. Or on CNBC, where experts have been debating what these corporations are going to do with all their surplus loot. Will they raise dividends? Buy back shares? Launch a new wave of mergers and acquisitions?
It all sounds wonderful for investors and the U.S. economy. There's just one problem: It's a crock."
The problem is that US companies have not been DECREASING their debt levels; they've been INCREASING them since the 2007 credit crunch:
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Arends calls this situation the "biggest lie about US companies." The Pollyannaish "experts" on tv tell you that the companies have tons of cash sitting on the sidelines, waiting to move into the market, and cause the stock market bubble to grow again.
What this graph shows is that it's completely untrue. US companies must be in a great deal of trouble, because they keep going deeper and deeper into debt. This is just like a consumer who's buried in credit card debt, borrowing more money on another credit card to make payments on the other debt. Sooner or later it all collapses -- for the consumers and the businesses.
This goes back to the poison analogy that I've been describing. The poison of debt has built up in the body tissues of the entire economy, and it will take many, many years for the poison of debt to be removed.
From the point of view of Generational Dynamics, the financial crisis that started in 2007 has barely begun, and we're headed for a truly major financial crisis of historic proportions. This is an absolute certainty.
The devastating floods in Pakistan, already the worst in 80 years, are growing worse, as more heavy rain is expected in the next two days, causing hundreds of thousands more people to leave their homes. As the floods spread, power plants are being threatened. Dawn
As the floods continue to spread in Pakistan into the country's agricultural breadbasket, aid is pouring in from the United States. At the same time, militant Islamist groups are providing volunteers around the country, and are operating medical camps. CS Monitor
Fires continue to spread in Russia and choke Moscow, resulting in intense anger at the government for allowing it to happen. Global Post
A Japanese tanker carrying 270,000 tonnes of oil through the Strait of Hormuz suffered an explosion on July 28, but then made it to port. The UAE Coast Guard has now confirmed that the explosion was a terror attack on the vessel, inflicted by a boat loaded with explosives. An al-Qaeda linked group called the Abdullah Azzam Brigades has claimed responsibility. The National (UAE)
In Indonesia, which has the world's largest number of Muslims, there are 1.2 million of the faithful now on a government waiting list to make the trip to Mecca. These people are required to deposit money with the government to get onto the waiting list, but now it turns out that government officials and politicians have been misusing the money to fatten their own pockets. NY Times
The Chinese government is concerned because young people in China are increasingly unable to write in Chinese characters, because of computers. When typing on a computer, a Chinese can type out the beginning of the word in pinyin, the Romanized version of Mandarin, and the computer software will translate the pinyin into the appropriate Chinese character. Asia Times
Coming soon is the 100th anniversary of Japan's August 29, 1910, annexation of Korea, which the Japanese occupied until World War II ended in 1945. Recent polls show that Koreans are still bitter about the brutal treatment of the Koreans by the Japanese. Asia Times
Anti-nuclear activists in Pakistan are questioning the help that Pakistan is getting from China in constructing nuclear reactors, claiming that they only make Pakistan more vulnerable. Memri
The 42 year old Julia Roberts has disclosed that she is a practicing Hindu. She goes with her husband to temple to "chant and pray and celebrate." Telegraph
(Comments: For reader comments, questions and discussion, see the 7-Aug-10 News -- Financial experts freaked on jobs report thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Aug-2010) Permanent Link
Many Americans in the UK are renouncing US citizenship
Wheat prices on the Chicago board of Trade rose the maximum amount permitted in a single day on Thursday to $7.85 per bushel, according to Reuters. Prices have risen 82% since June 9, when a bushel of wheat was priced at $4.25.
Thursday's price surge was sparked by Russia's decision to freeze all wheat exports at least until the end of the year. In addition, Moscow has requested that former Soviet states Kazakhstan and Belarus also freeze their wheat exports, according to Ria Novosti. Russia is the world's third largest exporter of wheat.
These decisions were made as Russia is suffering the worst heat wave and drought since records began 130 years go. The result of the drought is that the 2010 grain forecast has been cut to 70 million tons from 90 million tons.
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The drought has destroyed one-fifth of Russia's wheat crop, and now wildfires are finishing off some of the fields that remained.
Moscow is engulfed in smog, thanks to hundreds of wild fires that are out of control, burning villages to the ground. Like the floods in Pakistan that we described yesterday, Russia's fires are achieving geopolitical significance, as can be seen from the freezing of exports.
In 2008, wheat prices rose to $13 per bushel, causing enormous hardship in poor regions. Wheat prices are lower than that amount today, but they're still rising.
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The juiciest international news on Thursday is that supermodel Naomi Campbell testified at the war crimes trial of former president of Liberia Charles Taylor, who is accused of supporting the Sierra Leone crisis civil war in the late 1990s, despite the fact that Taylor wasn't even in Sierra Leone. He's accused of purchasing "blood diamonds" from the Sierra Leone rebel force, who had perpetrated widespread atrocities, in order to give them money to buy weapons.
Naomi Campbell was subpoenaed to testify because she had attended a dinner for Nelson Mandela at which Taylor was present. According to the charges, she flirted and exchanged phone numbers with Taylor, who reciprocated by having two men knock on her door in the middle of the night and give her a pouch of "dirty diamonds" (meaning that the diamonds were covered with actual dirt, as if they had just come out of a mine).
Campbell denied that she had flirted with Taylor, and she stated further that she hadn't known that the diamonds were from Taylor, until another guest, Mia Farrow, told her that they might be from him.
According to her testimony, quoted by the Independent, she has never heard of Liberia, and: "It is not abnormal for me to get gifts," she told the court. When she was asked why she didn't the two men where the diamonds came from, she said, "I get gifts all the time: sometimes in the middle of the night without knowing who they are from. It is quite normal for me."
This drama hasn't ended, since Mia Farrow will be testifying next week, and she's expected to contradict Campbell's testimony, according to the Independent.
From the point of view of Generational Dynamics, the Sierra Leone civil war was obviously a generational crisis war of the most genocidal kind, and it's highly doubtful that Charles Taylor could have had any substantial influence on the progress of the war. A generational crisis war, especially one this vicious, is a force of nature, and politicians have little or any control over it.
Many Americans living in the UK are turning in their passports and renouncing US citizenship, in order to avoid paying US taxes. Financial Times (Access)
Here's an oddball story. Apparently, financial firms using programmed (computerized) trading programs are sending thousands of orders a second through electronic stock exchanges, with no intent to actually complete trades. The orders have no apparent purpose. Speaking as a software developer myself, I would guess that they're test patterns being used to stress test computers programs, in preparation for the day when they have to get orders through during a panic or crash. Atlantic
The Library of Congress is setting up a national organization for the preservation of digital objects, the National Digital Stewardship Alliance. Fierce Government IT
Iran claims to have tricked Russia by obtaining Russian-made long-range S-300 surface-to-air missiles from Belarus and other sources, after Russia had indefinitely delayed filling a 2007 contract for them. The U.S. had objected to the contract because of the missiles' long-range capabilities. Associated Press
Many Arabs supported Adolf Hitler during WW II, since at that time they were living under British or French occupation. A Saudi columnist is condemning the sympathy that Arabs feel today for Hitler. Memri
Yesterday we reported an item that Iran's president Mahmoud Ahmadinejad was denying an early report that an assassination attempt had been made on him, using an explosive device that was hurled at him. It now appears that an assassination attempt did take place, and at the same time, a huge explosion occurred at a large petrochemicals complex, destroying large sections of the complex. Iran is playing down the simultaneous attacks. Debka
More than a million BlackBerry users in Saudi Arabia will lose messaging services on Saturday, when the Saudis cut off the service. The Saudis have demanded that Research in Motion, the BlackBerry vendor, give them the codes so that they can monitor encrypted messages. The UAE has already announced a similar ban to begin October 11. The question that's going through my mind is this: Does all this mean that users of iPhone and other hand-held devices DO have their messages monitored? The National (UAE)
In an interview with Palestinian Authority president Maymoud Abbas, he revealed that a recent Arab summit discussed plans for war with Israel. Memri
China's government is taking step to stop people from speaking in the Cantonese dialog of Mandarin, the Chinese language. There are some 50 million Cantonese speakers. Asia Times
In Greece, the rate of suicides has doubled or tripled in the last year, as one of the effects of the financial crisis. Kathimerini
Drug cartels are so powerful in Mexco's Nuevo Laredo that they completely control al the news coverage. Washington Post
A very interesting history of U.S. - Mexican relations, dating back before the Mexican-American war, and how they influence today's immigration issues. Stratfor
Japan is commemorating the 65th anniversary of the nuclear bombing of Hiroshima that brought about the end of World War II. VOA
(Comments: For reader comments, questions and discussion, see the 6-Aug-10 News -- Wheat prices climb after Russia announces export ban thread of the Generational Dynamics forum. Comments may be posted anonymously.) (6-Aug-2010) Permanent Link
In Turkey, a confrontation between the government and the army is building
Sifwat Ghayoor, the police chief who has been leading the jawans (troops) fighting the Taliban terrorists, was killed by a suicide bomber on Wednesday, along with three bodyguards, according to Dawn. The attack took place in Peshawar, in Pakistan's Khyber Pakhtoonkhwa province. This is the new name of the former North-West Frontier Province.
Ghayoor was a hero, according to the Daily Times. The article quotes him as saying, "An officer has to lead from the front," when asked to protect himself more. If I do not go to spots (after terrorist attacks) my jawans will get demoralised and this is precisely what I don’t want to happen." According to the article, "Such brave men are far and few between. He is no longer with his family, friends and well-wishers. But he will live in everyone’s hearts and minds as long as Pakistanis continue to sacrifice their lives for their country."
I've only briefly mentioned the floods in Pakistan before now, but now it's becoming increasingly apparent that they'll have geopolitical importance, as illustrated by the above suicide attack.
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This is the worst flood that Pakistan has seen since 1929 (before the country even existed as a country). Hundreds of villages have been flattened and washed away, according to the BBC.
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America's Katrina floods in 2005 affected New Orleans and surrounding areas, but this flood has literally affected most of Pakistan. As you can see from the above map, the flooding has wiped out villages from the top of Pakistan to the bottom, along the Indus River. Millions of people have lost their homes. The rain is continuing, and is not expected to let up until the weekend.
"All the major roads, bridges have been destroyed and so are the police stations, administration buildings, telephone exchange. Thousands of houses have been razed to the ground by the storm and at least one million people have been homeless," according to an official quoted by the Hindustani Times.
The result is an opportunity for militants. One official is quoted as saying, "Militant commander Mullah Fazlullah [leader of TTP = Tehreek-e Taliban Pakistan, or Pakistani Taliban] has announced a Taliban rebound plan in the Swat valley through a video message and now the whole area is inundated with storms, limiting the movement of the military and wiping out all the infrastructure."
Fazlullah's announcement shows indicates that the Taliban expect to take full advantage of the situation, while Pakistan's army is overwhelmed, attempting to save lives and provide shelter, food and clothing for the survivors.
According to an analysis in the Asia Times, all operations by the army against militants have been put on hold, giving the Taliban and other terrorist groups much more freedom. Furthermore the with all main bridges collapsed in some regions, the situation could be affected for a year.
The floods have also severely affected the flow of supplies to Nato forces in Afghanistan. Normally, these supplies arrive in port in Karachi, and travel by truck through the Khyber Pass in the tribal areas to Afghanistan, but many of these roads are closed now.
We've been reporting on the violence in Karachi, and it continued on Wednesday when unidentified attackers hurled a grenade at a Karachi mosque during evening prayers, according to Reuters.
The original violence was triggered by the assassination of Raza Haider, a Shia Muslim and leader of the MQM political party. According to the Daily Times, The Karachi Police are investigating the role of TTP (Tehreek-e Taliban Pakistan, or Pakistani Taliban) in the assassination. According to the article, the assassination was masterminded by an anti-Shia terror group affiliated with TTP, who are Sunnis and ethnically Pashtun.
There is an interesting historical analysis of the city of Karachi in the Asia Times. According to the article, Karachi was largely a business-oriented city, a cosmopolitan home to many ethnic groups.
The first faultline emerged after the Soviet Union's invasion of Afghanistan in 1979, according to the article. Karachi became one of the biggest refugee camps for Afghans fleeing the war. This provided a big boost for religious organizations and in 1983 the first large-scale Shia-Sunni riots broke out. This also occurred near the end of a generational Awakening era, a typical time for this kind of riot to occur, but then to fizzle quickly.
9/11 changed the allegiances of some of the groups that had originally favored the U.S. According to the article, all jihadi organizations and Pashtuns are in one camp. They are lined up against the MQM, the Sunni Tehrik (an anti-Taliban Sunni group), and all Shia groups. It's a highly explosive situation.
According to the article, al-Qaeda's strategy in Pakistan all along is to set up "war centers" all across Pakistan, in order to force the army to spread itself too thin. Thus, I would assume that al-Qaeda leaders are thanking Allah tonight for the massive floods, as they allow al-Qaeda and the Taliban to pursue their strategy.
In Turkey, a confrontation is building between the pro-Islam government of president Prime Minister Recep Tayyip Erdogan and Turkey's secular army, which is accused of a coup plot, polarizing the country. Eurasia Net
The danger in withdrawing US troops from Iraq was never a civil war, as many pundits claimed, but influence and/or invasions from neighboring countries -- Turkey, Syria, Iran, Saudi Arabia, Kuwait. Already, the 5-month-old effort to form a new government in Iraq has become snarled in the battle for influence, with rival nations lining up behind the factions and political leaders shuttling among neighboring capitals for talks with their patrons. LA Times
There were reports on Wednesday morning that Iran's president Mahmoud Ahmadinejad had been the target of an assassination attack by a homemade explosive device, but officials later denied this and said that the sound was a firecracker welcoming Ahmadinejad. NY Times
(Comments: For reader comments, questions and discussion, see the 5-Aug-10 News -- Multiple crises overwhelm Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (5-Aug-2010) Permanent Link
China's real estate bubble appears to be bursting
Five more people were killed on Monday, when government forces fired on protestors, totaling 43 deaths since June 11, according to the Kashmir Observer. A government-ordered curfew is being ignored, as thousands of protestors are filling the streets, according to the article.
The violence appears to be spiraling out of control, with even Kashmiri separatist leaders appealing for calm, according to Reuters.
Kashmir is at the heart of the disagreements between Pakistan and India, and the site of the bloodiest part of the war between Muslims and Hindus that followed Partition, the 1947 partitioning of the Indian subcontinent into India and Pakistan. Generational Dynamics predicts that this war will be re-fought soon.
Past uprisings in Kashmir have appeared to be spiraling out of control, but they settled down after a few days. However, as India and Kashmir go deeper into a generational Crisis era, it becomes increasingly likely that an uncontrolled riot will spread to a larger war.
The number of those killed in rioting in Karachi, Pakistan, and Sindh province rose to 53 on Tuesday, as gunmen have carried out numerous attacks, according to The Hindu. The attacks were triggered by the murder of Raza Haider, a leader of the MQM political party.
As far as I can tell, this violence is politically based, rather than ethnically based. In fact, an acquaintance of mine who was born in Karachi tells me that it's the "Karachi Mafia" that's doing all the killing.
If that's true, then the current violence in Karachi is most similar to the Chicago gang wars of the 1930s, led by Al Capone.
Five people were killed in a firefight on the border between Lebanon and Israel, according to the BBC.
This was the worst violence since the 2006 war between Israel and Hizbollah. However, Tuesday's firefight appeared to be a brief skirmish between the Lebanese army and the Israeli army, and is not expect to spiral into anything more serious.
Megalomania is in full swing in China's booming economy, according to an analysis of China's real estate bubble in Spiegel.
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A month ago, we quoted Kenneth Rogoff as predicting that China's property market was collapsing. (See "7-Jul-10 News -- Rogoff: China's property market near 'collapse.'"
Since then, real estate prices in 70 large Chinese cities declined over the previous month for the first time in 1.5 years, according to the Spiegel article. Xu Shaoshi, China's minister of land and resources, is quoted as saying that the real estate market could undergo a "total correction" in the third quarter.
At the same time, Reuters reports that there is widespread discontent over property seizures by Chinese Communist Party (CCP) élite, who then use the land to build large real estate complexes with borrowed money. China has a record of tens of thousands of "mass incidents" every year, and the practice of land seizures is one of the leading causes.
I've often said that, as bad as the American economy is, China's is even worse. China has a long history of massive rebellions against the political élite, the last one being Mao Zedong's Communist revolution that ran from 1934-1949. From the point of view of Generational Dynamics, a new one will be coming soon.
Nasa's Spirit Rover has been roaming the surface of Mars since January 2004. However, this past winter, Spirit's wheel got stuck in a hole from which it could not free itself, and so Spirit could not travel to a place where it could get maximum sunlight. Apparently, Rover is gone for good, according to Discover Magazine.
However, Nasa is inappropriately showing little sensitivity to poor the lost Spirit Rover, according to Physics Central. Nasa is already moving on to the next project and the next rover.
To stir up a little sympathy, the article references an xkcd comic strip that captures the moment:
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A significant challenge for the development of super-intelligent computers is speech recognition -- giving the computer the ability to listen to a speaker and translate the voice sounds into the corresponding text. (See "29-Jun-10 News -- Speech recognition brings Singularity closer.")
A new version of Dragon NaturallySpeaking for Windows from Nuance Communications Inc. offers exceptionally high accuracy, according to a review by David Pogue in the NY Times
Once in a previous life I served as Technology Editor for CFO Magazine, and I had occasion to review a number of speech recognition programs. They all claimed to have something like 98% accuracy. That sounds pretty good until you realize that it means that it gets a word wrong every two or three lines, which ends up being quite annoying.
So I was interested to read that Pogue was able to dictate a 1,300 word column, and the software achieved 100% accuracy.
As I've said many times, the reason that artificial intelligence (AI) technology keeps improving is not because the algorithms are improving (although Pogue says that Dragon's algorithms have some improvements), but because computers are getting more and more powerful. When you utter a phrase like "the book," the software compares your voice against a large library of sounds. The more powerful the computer, the more comparisons it can make quickly. By 2020, desktop computers or their descendants should have no difficulty at all understanding spoken sentences in English or any other language.
A year ago, ethnic fighting between Han Chinese and Muslim Uighur populations ended up killing at least 197 people in the city of Urumqi in Xinjang province.
Now, there are 47,000 cameras scanning streets and intersections in Urumqi, and by the end of the year there will be 60,000. Experts are predicting that China will have 15 million surveillance cameras by 2014, according to the NY Times
These camera systems use technologies that border on artificial intelligence. Video software can read license plates, and cameras can take pictures of people inside autos. Facial recognition software is being used increasingly.
What will happen to human beings when the Singularity occurs and computers do all the work, leaving human beings nothing to do? Web site reader Nigel Strange has written a short story exploring what happens when a planet is composed of entirely of over-educated unemployed migrant slaves. Plastic Children
PKK militants bombed a train in East Turkey. Although the train was carrying cargo and passengers, there were no casualties. Press TV
Escalating hostilities between Turkish forces and PKK Kurds are threatening US policy in Iraq, which calls for a unified government when U.S. troops withdraw from Iraq. World Politics Review
A year ago, Iranian soldiers arrested three American hikers in Iraq near the Iran border, and accused them of espionage. Why are they still holding them hostage? Because Iran has a history of using hostages to make political statements. Duh. CS Monitor
In a sharp reversal of an earlier decision, Israel has agreed to cooperate with the United Nations probe of the Gaza flotilla incident that killed nine Turkish citizens. Israel hopes to improve relations with Turkey again. Jewish Telegraphic Agency
To stop the proliferation of nuclear weapons in North Korea, the U.S. is planning to choke off the international network of companies and banks that largely fund its nuclear weapons program and the lifestyles of its elite. Washington Post
Speaking in France, Pakistani President Asif Ali Zardari says that the war against Taliban is "being lost." BBC
Prime Minister Vladimir Putin is positioning himself to reclaim the presidency of Russia in 2012. LA Times
(Comments: For reader comments, questions and discussion, see the 4-Aug-10 News -- Kashmir violence spirals upward thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Aug-2010) Permanent Link
Why we're headed for a financial crash.
The stock market reached its historic high in October, 2007, but two months earlier, in August, I wrote "How to compute the 'real value' of the stock market." This and other articles I had written resulted in a fair amount of derision directed at me, since at that time the financial experts and politicians were predicting that, except for an occasional minor bump in the road, the stock market would keep going up forever.
By the end of 2007, I was hearing far less derision, and as the stock market slumped in 2008, I actually heard some occasional grudging praise.
Then the rally occurred in 2009, and since then some level of derision has recurred.
In this article, I'm going to update the diagrams, and outline the reasons why we're still headed for a stock market crash.
Most investors today are no different from drunken gamblers at roulette tables in Las Vegas. When they aren't playing, they're desperate and depressed. When they make money, they experience a burst of endorphins that keep keeps them happy for hours. When they lose money, they obsessively double their bets. Brokers have the best of all worlds, since they get to do all of that with other people's money, and then collect fat commissions.
For those investors who wish to make stock purchases based on real value, there's only one reliable measure: past earnings. And you can obtain a measure of the value of a share of stock by means of the price/earnings (P/E) ratios (also called "valuations") -- divide the current stock price by total earnings in the last year.
The average P/E ratio for the S&P 500 stocks between 1871 to 1995 was 13.91. This means that if you purchased an average share of stock a year ago, then the company would have earned 1/13.91 = 7.2% of the share price.
Here's a graph of the price/earnings ratio from 1871 to the present:
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As you can see from this graph, the P/E ratio has really skyrocketed since 1995, much higher than its historical average at several points, and ALWAYS higher than its historical average since 1995.
Now, the Law of Mean Reversion says that the average (mean) since 1995 also has to equal roughly 13.91, and if it doesn't, then the average will eventually revert to its historic average. In order to do that, the P/E ratio must go BELOW 13.91 for roughly the same amount and period of time as it was ABOVE 13.91 -- i.e., for 15 years.
This means that the P/E ratio must fall well below ten, and stay there for years. There are people who say "this time it's different," but the burden of proof is on them to explain why it's different.
One fantasy argument that these people use is that we're using "old data" that applied to the doddering old fools who lived years ago and didn't even have iPhones. Well, when the 1929 crash occurred, those doddering old fools were young, and were giving similar reasons why "this time it's different."
In fact, as you can see from the graph, the P/E ratio was as low as 6.79 very recently -- in 1980. If it can fall to 6.79 in 1980, then it can certainly do so again today, and anyone who thinks otherwise is a fool.
Claiming "this time it's different" is a fantasy. Just one look at that graph will tell you that we're headed for the biggest crash in history, much larger than the 1930s crash. This is a mathematical certainty.
When will this crash occur? It's impossible to predict, of course, but here's one way to look at it:
Notice that the three points that I labeled as lows (5.31, 5.82 and 6.79) occurred at 31-year intervals. (But there's nothing like that in 1887, so this may be completely wrong.) So we have to consider the possibility that there's some kind of as-yet not understood 31-year cycle in price-earnings ratios. With only three data points, it's hard to be anywhere near certain. However, if the 31-year cycle holds, then the next low will be in 2011.
The average financial "expert" doesn't consider any historical data relevant. Something that I hear all the time on CNBC or Bloomberg TV is that a stock is "oversold, because its price is lower than the 200 day moving average." In other words, to these "experts," nothing that occurred more than 200 days ago is even relevant to the stock price.
The very high values of the P/E index since 1995 indicate that we've been in a huge bubble. A bubble does permanent harm to an economy, and that harm lasts much longer than 200 days. In fact, a bubble can be compared to a poison that harms every nook and cranny of the economy for a long time.
Let's take the obvious example of the real estate bubble. When that crashed, it obviously affected things a lot longer than 200 days. In fact, the effects today are far from over. The overall foreclosure rate is still increasing. The shadow inventory is so large that even mainstream forecasters are saying that prices will be falling for years. That's an obvious example of how a bubble has longer effects than 200 days.
Another obvious example is the level of personal debt. During a bubble, there's plenty of money available in the form of debt, and so people go deeply into debt, expecting that there'll be more money (credit) in the future to pay off the old debt. At some point, when the credit bubble crashes, and there's no more debt money available, people have to start paying off their debts, and that can take years.
The same kind of thing is true for every business. Businesses borrow a great deal of money during a bubble, and use the money to hire new employees. When they can't borrow anymore, they lay employees off, and don't hire any more. This creates joblessness that lasts for years.
There's another aspect that applies to business. During a bubble, the world looks different than it does after the bubble bursts. In the bubble world, no expense is spared for glamour, with the result that businesses spend their resources on developing the labor and infrastructure to develop and manufacture products that only interest consumers during the bubble. Once the bubble ends, these businesses turn out to have the wrong kinds of employees with the wrong kinds of skills and the wrong kinds of infrastructure. Years are required for the business to figure out what the correct products should be, and to hire employees with the right skills. In the meantime, many of them go out of business.
Every person and business in the country is affected by the bubble. When the bubble ends, it takes many years to pay off debts and restructure businesses. During this time, the P/E average is much lower than it would have been if there had been no bubble.
The auto industry is an obvious example of this. During the bubble, people traded in their cars for new models more often than necessary, and they chose their new cars for prestige value. Large SUVs were the norm. Once the bubble burst, the market shifted away from SUVs, and people held on to their cars much longer, resulting in significant problems for the industry.
The poison that filled every corner of the economy, starting in 1995, was debt. Debt filled the business economy, debt filled the consumer economy, and debt filled the government economy -- in America, in Europe, in China, and elsewhere. The poison created consumer products, created jobs, and created a risk-seeking population. It takes as many years to remove the poison as it did to create it.
One obvious sign of this is that trillions of dollars of "toxic assets" are still in financial portfolios around the world at nominal value -- without having been "marked to market." This "deleveraging" process has already taken several years and has hardly begun. It will take much longer than 200 days. (Paragraphs added - 4-Aug)
That's why the Law of Mean Reversion works. Don't blame me. I didn't make up the Law of Mean Reversion. I'm only telling you what it says.
When the Great Depression survivors (GI and Silent generations) were running things, they were very risk-averse and very careful with their investments. The P/E ratio was one of their main tools.
When the Silents finally retired in the 1990s, and the Boomers took over in senior management positions, the dot-com bubble began in 1995 (as well as the global real estate bubble).
Since the price/earnings ratios were suddenly out of whack, financial "experts" came up with several alternative ways to compute the P/E ratio to justify the bubble prices:
At this point, you rarely even hear about P/E earnings or valuations used much, or if there's a financial "expert" on tv who refers to valuations, he pulls a number (like 10) out of the air, and announces that stocks are underpriced. It's absolutely incredible.
In 2002, I was eating lunch at the mall reading the Boston Globe, when I saw a graph of the Dow Industrials going back to the early 1900s. I took one look at it and said, "Ohmigod, the stock market is going to crash." It was that obvious, just from the graph.
The graph must have looked something like the following:
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Since I was familiar with exponential curves and growth forecasting, I could see immediately that the DJIA had been growing sharply faster than exponential growth since about 1995, and that meant that we had to have a crash.
Let me start by pointing out a big mistake that I see all the time on the internet. Some people, looking at the above graph, would say that the DJIA was pretty much linear at the beginning, and only began exponential growth around 1960 or 1980. I see this kind of claim with regard to long-range population charts or other charts, all over the internet.
In fact, the curve is exponential from the beginning. The only reason that it isn't evident is because the values at the beginning are too small.
One way to see it is to add a "best fit" historical exponential curve. The blue line in the next graph is a best fit exponential curve from 1904-1994 (I've experimented with other year ranges, and it doesn't affect the final conclusion):
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What this graph shows is that the long-term trend value of the DJIA at the present time is around 6049, and that's the value that could currently be called the "real value of the stock market." By the Law of Mean Reversion, the index will fall far below that amount to compensate for the period since 1995 when it war far above value. Because of the length of time that the DJIA has been above average, my expectation is that it will fall well below 3000 before everything is over.
To make it clearer that the early part of the graph is not linear, let's restrict the above graph to the years 1900-1950:
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What happened in those years was that the bubble of the 1920s crashed in 1929, and the DJIA was below the long-term trend line for a long time, only catching up around 1960.
The best way to display a long-range exponential growth curve, including a population curve, is on graph with a logarithmic Y-axis, as follows:
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With a logarithmic scale, the exponential "curve" becomes a straight line, and you can easily when the DJIA is above or below the trend line.
I use the mathematical term "points of inflection" in a somewhat informal way, to indicate points in the graph that take a sharp turn (indicating that the second derivative is infinite).
Take a look at the following graph of the DJIA since 1950:
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Prior to 1995, the graph of the DJIA moved in a fairly steady manner, not counting the minor jitters that occur every day. But in 1995, something very different happened. You can see that the graph should have leveled off and started falling, but instead, it turned a sharp corner to the left and moved rapidly upward, resulting in the tech bubble.
Economists are completely baffled by this. They certainly didn't predict it, and even now, they have absolutely no explanation for it.
As I always like to point out, mainstream economists didn't predict or explain the tech bubble, or why it occurred in 1995 instead of 1985 or 2005. They didn't predict and can't explain the real estate bubble, the credit bubble, the credit freeze, the financial crisis, or the worldwide trade and transportation freeze. They can't explain what's happening today, and they have no idea what's coming next year.
I've often complained that mainstream economists must have some kind of brain blockage or mental deficiency, because they seem completely incapable of seeing a generational explanation, no matter how utterly obvious it is.
And in this case, the generational explanation is perfectly obvious. This was the time that the survivors of the 1930s Great Depression all disappeared (retired or died), all at once, leaving the incompetent Boomers to take senior management positions.
Once the tech bubble crashed in 2000, a different dynamic took place. Generation-Xers who were caught in the Nasdaq crash began reaching their 40s, and began taking middle management positions in organizations. Their contempt for Boomers and Silents is well known, and it's well documented that the Generation-Xers created the tens of trillions of dollars of synthetic mortgage-backed securities that created the financial crisis. That explains the point of inflection around the year 2003.
Since my 2007 article, I've added a third point of inflection, occurring around March 2009, the beginning of the 2009 rally.
This was caused by the massive worldwide bailout and stimulus injection. Some $10 trillion of bailout and stimulus money was poured into the economies of America, Europe, China, and other countries. In doing so, the stock market bubble, which was in the middle of crashing, was revived again.
As you can see from the last part of the graph, the stock market seems to have begun its descent again. I would be very surprised if any bailouts or stimuli or quantitative easings will have anything like the effect they had in 2009, but I've been wrong about this before.
Things are quite different today than they were at the beginning of 2009 when these massive liquidity injections occurred. The U.S. debt level is almost unimaginably higher, so much so that any further major bailout or stimulus would be met with enormous domestic and international political opposition. China's economy is in a massive bubble, and Beijing has been doing everything possible to slow it down. Several European countries are deeply in debt (remember the PIIGS?), and more stimulus is out of the question.
If I were to speculate (and these speculations have not always been correct), I would say that it appears that the stock market indexes will continue falling, subject to minor perturbations, and that the DJIA will be much lower by 2011.
That may be a speculation, but there is one thing that's absolutely certain: By the Law of Mean Reversion, the stock market MUST fall sharply at some point. Whether it's 2010 or 2011 or 2012 remains to be seen, but it is a mathematical certainty.
Some people ask me why I don't use P/E10 -- price divided by the average earnings over the previous ten years. In fact, I used to use P/E10, but I decided that people understand P/E1 better, and that it makes the same point -- that by the Law of Mean Reversion, there will be a stock market crash.
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The P/E10 graph looks a little different than the P/E1 graph since, by averaging earnings over ten years, the results are less volatile and extreme. Nonetheless, you can see that there was a huge bubble from 1995 on, and the Law of Mean Reversion requires that P/E10 fall below the long-term average for an equivalent amount of time. Once again, this graph makes clear that we're headed for the greatest financial crash in history.
(Comments: For reader comments, questions and discussion, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (3-Aug-2010) Permanent Link
US military has a plan to attack Iran, if necessary
Anyone who's been paying attention for the last ten years is aware that the level of public acrimony has been increasing steadily. This applies to acrimony in politics and journalism, as well as to surging xenophobia in many countries around the world, involving Jews, Catholics, Americans, Christians, Muslims, Hindus, Chinese, Japanese, French, Mexicans, and so forth.
I've written about this many times on my web site, over the last eight years. The one time that I got a big chuckle out of all the political bickering and acrimony occurred in 2007, when I wrote, "Today's Schadenfreude: The Congressional pay raise is blocked," because of political bickering. If bickering prevents a Congressional pay raise, then it can't be all bad.
Journalistic acrimony was the subject of CNN's Reliable Sources on Sunday. Moderator Howard Kurtz began the program this way:
What accounts for these mean-spirited attacks on the media, and in many cases perpetuated by the media? Why are journalists being called not just wrong, but dishonest, racist, corrupt? ...
It's not that the criticism is not legitimate. The media did perform badly, by and large, in the sacking of Shirley Sherrod. Liberal journalists did say some awful things about conservatives on that off-the-record discussion group [the Journolist]. Conservative commentators did accuse the mainstream media of shilling for Obama by not getting exercised about that New Black Panther Party controversy. There are serious questions about what Rolling Stone's Michael Hastings did with General McChrystal.
But never in my professional lifetime has the media bashing been so deafening, so personal, and so much of it carried out by some pundits against other pundits."
Here are quotes from several of the clips that Kurtz showed to illustrate the point:
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Kurtz said that "never in my professional lifetime" has it been so bad. And that's true, since Kurtz is too young to remember the 1930s. Bickering is a part of every culture during generational crisis periods.
In the 1860s, the acrimony got so bad, we actually fought a Civil War over it. In the 1930s, the acrimony was turned first on President Herbert Hoover for failing to stop the stock market crash, and then President Franklin Roosevelt was the target of many scandal accusations, some of which still haven't yet been settled. (Just google the term "FDR scandals" and get thousands of hits.)
Generational Dynamics theory explains why this acrimony is occurring, and also explains exactly how it's going to end.
I like to start by reminding people how different the world was in the 1980s.
At that time, the people in charge were from the generations that had survived the Great Depression and World War II -- the great GI generation, that had fought the war, and the Silent Generation, the children who grew up during that period, and suffered a kind of generational child abuse as a result. These people understood the importance of putting political differences aside and reaching compromises, for the good of the nation as a whole.
Thus, in the 1980s, Ronald Reagan and Tip O'Neill could get together in a bar in the evening, tell jokes, and drink Irish beer. The Republicans and the Democrats could cooperate with each other to change the Social Security system to make it a sounder system. After that, they could cooperate again to specify new rules to control the budget deficit. Compromise was still possible in 1996, when Democratic President Bill Clinton, saying that "the era of big government is over," cooperated with the Republican Congress to eliminate the welfare entitlement.
I doubt that anyone will argue with me when I say that NOTHING, ABSOLUTELY NOTHING like that is possible today. The only argument will be that Democrats will blame Republicans, and Republicans will blame Democrats.
Since the 1990s, the GI and Silent generations have all but disappeared. The Boomers came next, and now Generation-X is pretty much in charge of things. The result has been the dot-com bubble, the real estate bubble, the financial crisis, and an unlimited amount of acrimony.
Here's a quote from South Carolina Senator Lindsey Graham on CNN on Sunday:
"And to the American people, immigration is broken and will never be fixed until we change our laws. Our laws are broken. If you want to fix immigration, allow Republicans and Democrats to get in a room and do some good old-fashioned horse trading to -- to get this thing fixed. If we keep yelling at each other; if we keep just saying no to each other's idea, we're going to have one thing in common: we're going nowhere together."
The problem is that this is literally impossible today. It was possible in the 1980s, but "horse trading" between Republicans and Democrats on anything but trivial issues is impossible, because the mood of the country is acrimony.
The acrimony will keep on increasing, and will only end when something forces it to end.
The word "regeneracy" is a technical term in generational theory. It refers to a point in time when the political bickering ends, and civic unity is regenerated because the survival of the country is at stake.
What kinds of events cause a regeneracy? In the Civil War it was the Battle of Bull Run, the first battle that made everyone aware that the country might not survive. In World War II, it was the combination of Pearl Harbor and the Bataan Death March.
What kinds of regeneracy events might be in our future? It's impossible to predict, or course, but there are some obvious possibilities. One possibility is a massive terrorist attack on American soil, such as a nuclear explosion somewhere. Another possibility is a big military defeat, such as the sinking of an aircraft carrier or two by Chinese missiles. When an event of this kind happens -- and it WILL happen -- then the regeneracy will occur.
The good news is that the bickering will be reduced, and the nation will be unified once more behind its leaders. And I would expect the Tea Party movement to play an important role in that.
The bad news is that we'll be in a world war.
Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, says that the military has a plan to attack Iran if necessary. Iran promised a "firm response" if an attack takes place. Associated Press
The United Arab Emirates has threatened to terminate BlackBerry's Messenger, e-mail and web browsing services on October 11, unless RIM, the vendor, agrees to supply the UAE with the codes that will allow the country to intercept and read e-mail messages. Bloomberg
Two South Koreans were killed when they picked up boxes containing land mines that had apparently floated downstream from North Korea in heavy rain. JoongAng
New online services are available that let you learn a foreign language from native speakers in other countries who wish to learn English in return. NY Times
Zimbabwe's President Robert Mugabe, 86 years old and emotionally disturbed, told the European Union to "go to hell" yesterday at a funeral, because of the EU's refusal to lift travel sanctions and bank freezes of his ZANU-PF élite. Mugabe has turned Zimbabwe, the breadbasket of Africa in the 1990s, into a starving, disease-ridden country. where torture and murder of his political enemies are the norm. Scotsman
A new surgical robot being developed at Duke University is able to perform certain kinds of surgical procedures with no human assistance. Duke University
(Comments: For reader comments, questions and discussion, see the 2-Aug-10 News -- The rise of political and journalistic acrimony thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Aug-2010) Permanent Link
Violence in Kashmir is escalating
British Prime Minister David Cameron's remarks earlier this week, accusing Pakistan of supporting terrorist activities in India and Afghanistan, have exposed several rifts among different entities.
In Pakistan itself, Gen. Ahmed Shujaa Pasha, the head of the Inter-Services Intelligence (ISI) agency, has canceled a long-planned visit to London, according to CNN. The purpose of the meeting was to discuss intelligence sharing for the war on terror, but right at the moment, the entire intelligence sharing arrangement is in doubt.
On the other hand, Pakistan's president Asif Ali Zardari has a separately scheduled meeting in London next week, and different news reports are saying different things about whether that meeting too will be canceled. Apparently the planned meeting with David Cameron is on, according to Associated Press of Pakistan. At a news conference, Pakistan's Information Minister said that Cameron's remarks were not in "good taste," but that Zardari would attempt to convince Cameron of the importance of Pakistan's role in the war on terror.
The confused response by different officials in Pakistan's government exposes a division within the government, according to Dawn.
From the point of the view of Generational Dynamics, the long-term trends are consistent with this division in Pakistan's government.
The ISI is a largely Sunni Muslim organization, with people mostly from the Punjab region. Zardari is Shia Muslim, and became President as a consequence of the assassination of his wife, Benazir Bhutto, who was from a prominent Shia family.
Historically, Shia Muslims have been allied with Hindus against Sunni Muslims, and so it stands to reason that Zardari and Pasha see things a bit differently, especially since the long-term trend is for a new war between Pakistan and India.
There are been three major events in the last few weeks that have affected Pakistan's internal and external relations:
These events are triggering changes in public opinion in Pakistan, and from the point of view of Generational Dynamics, those changes could be significant.
The violence in Kashmir is escalating, with six deaths in the last two days. Hindustani Times
A Taliban spokeman announced that the Taliban are poring over the Wikileaks documents to find the names of pro-American Afghans. NY Times
Israel's air force continues to bomb Hamas targets in Gaza for a second day, in retaliation for a Kassam rocked fired into Israel last Saturday. Jerusalem Post
Many indigent refugees who are severely disabled or over the age of 64 will lose all their benefits on October 1. NY Times
(Comments: For reader comments, questions and discussion, see the 1-Aug-10 News -- Pakistan cancels intelligence sharing mission with UK thread of the Generational Dynamics forum. Comments may be posted anonymously.) (1-Aug-2010) Permanent Link
Israel bombs Hamas sites in Gaza
On Friday, I actually heard someone on the BBC say, "America's fiscal engine might be running out of puff!" Those crazy Brits!
However, financial analysts and pundits, one after another, had exactly the same message. Thus, the Associated Press said, "The recovery lost momentum in the spring as growth slowed to a 2.4 percent pace, its most sluggish showing in nearly a year and too weak to drive down unemployment."
Two months ago, I wrote a report about an apparent worldwide decline in economies around the world, and that we appeared to be headed once again to a worldwide freeze in trade and transportation, just as happened at the end of 2008. (See "7-Jun-10 News -- Globally, May was a month of ominous events.")
Friday's GDP report confirms this trend. The May and June figures translated into an economy that was slower in Q2 than it was in Q1.
According to the Consumer Metrics Institute,
In other words, the reason that the Q1 GDP figures were as high as they were was because manufacturers and distributors believed the Pollyannaish claims in Washington and on Wall Street, and they built up their inventories of new products, expecting a surge in consumer demand by Q2 or Q3.
But in Q2, "real final sales of domestic product" continued to be weak, with the result that growth of reported inventory adjustments continued to fall. This is all consistent with the overall trend that trade and transportation are falling.
Israel's Air Force bombed several sites in Gaza on Saturday morning, targeting Hamas-linked sites. Jerusalem Post
Moody's Investors Services warns that the U.S. needs a credible plan to address its soaring debt, in order to maintain its AAA credit rating. Reuters
Harvard Professor Niall Ferguson agrees. Alarm bells should be ringing very loudly in Washington, as the US contemplaces a 2010 deficit of more than $1.47 trillion. There comes a moment when a complex system (like the American economy) "goes critical". A very small trigger can set off a phase transition from a benign equilibrium to a crisis. Australian
A subtle but significant shift is occurring within the Federal Reserve, as members become increasingly concerned that the US economy is heading for a deflationary spiral. This is what I've been predicting for several years, so I guess it's nice that even the Fed is starting to see it. NY Times
Credit card issuers have dreamed up new ways to trip up consumers and charge excessive fees and interest rates to pay for their million dollar bonuses. How to protect yourself. WSJ (Access)
Global AIDS activists are pining for former president George W. Bush, who was much more supportive than Obama in the fight against AIDS. The mood of activists is a "combination of rage and panic." The rage is particularly directed at President Obama, for reneging on commtments to support global AIDS spending. Washington Post
Once again, there are fears of a new civil war in Lebanon. Hizbollah leader Hassan Nasrallah is threatening violence because a new U.N. report is expected to implicate Hizbollah members in the killing of former prime minister Rafik Hariri in 2005. However, as I've written many times, a civil war in Lebanon at this time is impossible, since Lebanon is in a generational Awakening era. The National
In Pakistan, hundreds have been killed and hundreds of thousands have been driven from their homes by torrential rains and subsequent floods. Daily Times
In Kashmir, with hundreds of protesters filling the streets, four people were killed when police opened fire on protesters. Indian Express
China's dangerous arrogance is threatening freedom of the seas in the Pacific, especially the South China Sea. The Diplomat
China says that it held large scale military exercises in the South China sea, that coincided with the joint exercises in the Sea of Japan by the U.S. and S. Korea. VOA
A spike in Army suicides is being blamed on a "permissive" environment with inconsistent discipline. CNN
A furious Defense Secretary Robert M Gates announced that the FBI will assisting in finding the source of the Wikileaks documents. NY Times
The major ethnic clashes in Kygyzstan in March have not completely ended, as Uzbeks are still the targets of violence by ethnic Kyrgyz. As a result, tens of thousands of Uzbeks are emigrating to Russia. Global Post
300 camps for Roma people, also known as "Gypsies" or "travelling people," are going to be dismantled, and the residents deported back to their country of origin, usually Romania or Bulgaria. The policy was announced by French president Nicolas Sarkozy, and activists are calling it "racist." France24
Jackie Cobell, a 56 year old woman, took 28 hours and 4 minutes to swim the English channel, allowing her to set a world's record -- for the longest known time to complete the achievement. Telegraph
(Comments: For reader comments, questions and discussion, see the 31-Jul-10 News -- GDP figures show economy is slowing thread of the Generational Dynamics forum. Comments may be posted anonymously.) (31-Jul-2010) Permanent Link
Wikileaks editor Julian Assange loves 'crushing bastards'
From the point of view of Generational Dynamics, the interesting thing to watch is how events affect history, and how the effects are different during different generational eras.
British Prime Minister David Cameron's remarks have infuriated the Pakistanis. (See "29-Jul-10 News -- British PM sides with India against Pakistan.")
Cameron accused Pakistan of supporting terrorism in India and Afghanistan. And he humiliated Pakistan by making those accusations in Bangalore, in the home of Pakistan's arch-enemy, India.
On Thursday, now in New Delhi, Cameron defended his remarks as a duty to speak "clearly and plainly," according to UK Press.
He repeated his charges: "It is not acceptable, as I have said, for there to be within Pakistan the existence of terror groups that cause terrorism both within Pakistan and also outside Pakistan, in Afghanistan, in India and elsewhere in our world. What we will continue to do is work with the Pakistan government to do everything that we can to encourage them to crack down and to take on these groups that have caused so much pain and so much suffering."
However, he was a little nicer on Thursday, since he didn't say that the Pakistan government were directly supporting the terror groups.
The Pakistan Ministry of Foreign Affairs issued a statement:
Pakistan has done much more than any other country in combating terrorism. Our people and security forces have rendered innumerable sacrifices. We hope that our friends will be able to persuade India to view this issue objectively and the value of “cooperation” in counter terrorism."
In addition, the Foreign Ministry will demand from the British envoy to Pakistan a full explanation of Cameron's remarks, according to Dawn.
Spiegel quotes Pakistan's ambassador to London, Wajid Shamsul Hasan, as saying that the comments were an "immature reaction from an immature politician."
So how far will this war of words go? Will the Pakistani people, many of whom are already blaming the U.S. for motivating the Taliban's terrorist acts in Pakistan, turn further against the U.K. and the U.S.?
Recall that it was just a couple of weeks ago that India-Pakistan peace talks collapsed. (See "17-Jul-10 News -- India-Pakistan peace talks collapse in acrimony.")
The peace talks never had a chance of succeeding anyway, but Cameron's remarks may have made it certain that they won't even start again. This is something to watch for in the next few days and weeks.
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On Thursday, the Pew Global Attitudes Project issued a report on public opinion in Pakistan. I've extracted two graphics of interest.
The top graphic shows that Pakistanis' attitude toward the United States and President Obama. As you can see, opinions are very low, though a major say that they'd like them to improve.
However, I was struck by the graphic on the bottom. It shows attitudes that are very, very far from Western views. I believe that it would be very hard to find someone in the West who would say that, as a rule, adulterers should be stoned (though some might wish it for their particular ex-wives or ex-husbands).
But 82% of Pakistanis, according to this poll, agree with stoning adulterers. That's amazing, since stoning anyone is a particularly bloody pursuit.
These questions show what how different the Pakistanis' world view is from the West's word view.
And if Pakistanis have such widely different views about stoning adulterers or cutting off hands, then it stands to reason that their attitudes toward the Afghan war and terrorism are also very different.
That's why Cameron's remarks, accusing Pakistanis of exporting terrorism to India and Afghanistan, will almost certainly not have the desired effect of getting the Pakistanis to control terrorism better (as if such a thing were possible). Instead, his remarks could change Pakistani public opinion in a way that cannot easily be understood in the West. This is something to watch for.
You have to wonder what Julian Assange hoped to accomplish by faciliting this massive leak of tens of thousands secret documents, and you have to wonder whom, exactly, he loves crushing when he says that "loved crushing bastards."
Actually you don't have to wonder for long, because from a generational point of view it's pretty obvious. Born in 1971, Assange is a Generation-Xer, and like many Generation-Xers, there's a good chance that he hates all Boomers. Those are most likely the "bastards" he's referring to.
He says that he wants to promote a debate about the Afghanistan war. It's already the most publicly debated subject these days, so how much more debate was he expecting to promote?
Actually, he was dreaming of becoming another Daniel Ellsberg, who became a hero to the left in 1971 by releasing the Vietnam war "Pentagon Papers" to the NY Times.
But 1971 was the height of the generational Awakening era, and the height of the anti-war protests by college students.
Today, we're in a generational Crisis era, and there are few anti-war protests, almost none by college students.
So instead of being viewed as a leftist hero, there's a good chance that even the left will hold Assange responsible for putting the lives of Nato soldiers, American intelligence officers, and Afghan and Pakistani informants in danger.
In the end, this may be just one more example of the nihilism, destructiveness and self-destructiveness of Generation-X.
At any rate, you can be sure that intelligence officers in al-Qaeda and the Taliban are studying the Wikileaks documents, and will take appropriate action.
(Comments: For reader comments, questions and discussion, see the 30-Jul-10 News -- Cameron's accusations roil Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (30-Jul-2010) Permanent Link
Mideast Peace talks face Sept. 26 deadline when settlement freeze ends
British Prime Minister David Cameron has been a busy little bee this week, as he goes from country to country.
Yesterday I reported that Cameron, in Ankara, Turkey, sided with Turkey against Israel. (See "28-Jul-10 News -- Britain's PM sides with Turkey against Israel.")
On Wednesday, Cameron was in Bangalore, India, siding with India against Pakistan.
The Guardian quoted Cameron as follows, referring to Pakistan:
That is why this relationship is important. It should be a relationship based on a very clear message: that it is not right to have any relationship with groups that are promoting terror. Democratic states that want to be part of the developed world cannot do that. The message to Pakistan from the US and the UK is very clear on that point."
Cameron was reacting to several recent charges that Pakistan's government, especially Pakistan's Inter-Services Intelligence (ISI) agency, has been helping terrorists in Afghanistan and India. These charges infuriate the Pakistanis, and they vehemently deny them. However, Cameron appears to be decisively siding with India against Pakistan.
There are two major categories of these charges that Pakistan supports terrorists:
Since Pakistan also favors that Kashmir, which has a most Muslim population, be independent of India, India has accused Pakistan of supporting Lashkar-e-Toiba.
In Generational Dynamics, we're always looking for changes in attitude and behavior of large masses of people, generations of people, and that appears to be going on today. For weeks it appears that there's been increasing recognition of the futility of the Afghan war. And with the Wikileaks release, there seems to be an increasing belief, fair or not, that Pakistan is aiding the Taliban.
This is a potentially dangerous situation, as Pakistanis become increasingly hostile to Nato, India and the West, while they get closer to China.
It's far from clear to me what David Cameron is doing. Perhaps there is no more complicated explanation than that Cameron is a young Generation-Xer, doing dumb things like many Generation-Xers.
As I wrote yesterday, siding against Israel runs counter to long-term trends, so Generational Dynamics predicts that this change in political direction is only temporary.
But his criticisms of Pakistan are consistent with long-term trends, and so his statements are going to be part of the scenario that pushes us toward the Clash of Civilizations world war.
Mideast peace talks are facing a deadline of sorts on September 26, when a 10-month freeze of Israeli settlement construction is set to expire. Foreign Minister Avigdor Lieberman, who is not from Prime Minister Binyamin Netanyahu's party, but is part of his coalition, has reassured settlers that life will return to "normal" when the freeze ends on that date. A return to settlement construction would lead to enormous anger from the Palestinians, and from Western leaders. Washington Post
Israeli Prime Minister Binyamin Netanyahu says that any attempt to continue the freeze on settlement construction past September 26 would bring down the government. Haaretz
A Sunni Muslim leader in Lebanon is expressing concern about the exodus of Christians from Lebanon and the region, in reaction to the growing population and hostility of their Muslim neighbors. Media Line
Egyptian forces took control of 10 smuggling tunnels under the Egypt-Gaza border on Wednesday and thwarted a cement-smuggling operation. Eurasia Review
A malware software program called Stuxnet has been demonstrated to be able to steal industrial data from Siemens control systems on the US power grid. Another demonstration showed how a hacker could break into a massive power turbine and physically destroy it. ComputerWorld
Russia is becoming increasingly concerned about Iran's development of nuclear weapons, and that's leading to a war of words between the two countries. Geopolitical Monitor
Increasing violence by PKK Kurd terrorists in Turkey is leading to conspiracy theories within the government, including explosive charges that members of Turkey's "deep state" are fueling conflict with the PKK in order to undermine trust in the government. WSJ (Access).
The first phase of the U.S. / South Korean naval exercises have ended without incident beyond verbal threats from North Korea. The joint exercise focused particularly on antisubmarine maneuvers. On the last day, they conducted simulation drills in which they practiced detecting infiltrations of enemy submarines, and dropping antisubmarine bombs and torpedoes. Ten more exercises are planned. Korea Herald
Are you addicted to cosmetics? There can be a dark side to being a beauty and cosmetic junkie. LA Times
(Comments: For reader comments, questions and discussion, see the 29-Jul-10 News -- British PM sides with India against Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (29-Jul-2010) Permanent Link
Turkey abandons Armenia for Azerbaijan
Turkey's influence in the Mideast continued to grow on Tuesday, as British Prime Minister David Cameron called Gaza a "prison camp" during a state visit to Ankara, the capital of Turkey.
CNN quotes Cameron as saying, "Let me also be clear that the situation in Gaza has to change. Humanitarian goods and people must flow in both directions. Gaza cannot and must not be allowed to remain a prison camp."
The perception is that the new Prime Minister is taking a sharp turn against Israel and the balanced policy pursued by his predecessor, Tony Blair.
This comes at a time when the perception is growing, whether fair or not, that President Barack Obama is also turning against Israel, as can be seen from this sardonic opinion piece in the Jersusalem Post. Both Cameron and Obama are taking these positions following the flotilla incident, resulting in nine deaths. Both are calling for an end to the Gaza blockade.
From the point of view of Generational Dynamics, these perceptions cannot survive for long. America is closely wedded to Israel as its protector. (For more information about why America is Israel's protector, see my 2006 report, "President George Bush talks about a 'Third Awakening,' but he has his history wrong.")
Thus, this change in political direction can be seen as temporary, since it goes counter to a strong long-term trend. In fact, as soon as a major crisis strikes Israel, America (and Britain) will come to Israel's aid.
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Around the same time that Turkey's relations with Israel were deteriorating, Turkey's relations with Armenia were also deteriorating.
Turkey's dispute with Armenia goes back almost a century to 1915, when hundreds of thousands of Armenians living in Turkey were killed. Armenia has fought to have this declared an act of genocide by the Turks, a description that Turkey bitterly opposes. (See my 2008 report, "Consequences of Russia/Georgia conflict spread to southern Caucasus.")
Turkey and Armenia do not have diplomatic relations, but appeared to be on the verge of restoring them just a few months ago. However, Armenians insisted as a precondition that the Turks admit to a genocide, and that was never going to happen. In April, negotiations to restore diplomatic relations and reopen their common border collapsed.
Azerbaijan is a country split into two non-connected parts, as shown in the above map. The enclave on the left is Nakhchivan, which has been the subject of past conflicts involving Turkey, Armenia and Azerbaijan. Turkey is now moving closer to Azerbaijan's position, by signing energy and transportation deals with Azerbaijan, according to EurasiaNet.
The Caucasus nations are sharply split along the Muslim / Orthodox fault line. Turkey and Azerbaijan are Muslim nations, while Armenia, through the Armenian Apostolic Church, is an Orthodox Christian nation -- like Georgia and Russia.
As we move in the direction of the Clash of Civilizations world war, we can see realignments taking place that follow the historical trends established decades or centuries ago.
In the war, Turkey and Azerbaijan will be aligned with the Muslim countries, along with Pakistan and China, and Armenia and Russia will be aligned with the west.
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This photo, taken on Sunday shows a child swimming in a lake whose surface is choked by duckweed, an algae-like plant, in Jiaxing, Zhejiang Province, according to China's Global Times.
The U.N. Security council received a report on Tuesday indicating that the fighting and violence in Darfur is increasing substantially. From the point of view of Generational Dynamics, this is a generational crisis war that has yet to reach a climax. If the situation continues to deteriorate, the explosive, bloody climax may come in the next few months. CNN
Many college students are facing hunger and homelessness, as they are forced to choose between paying rent and paying tuition. NPR
Oscar winner Oliver Stone, who is among the looniest of the loony left, is saying that Hitler and Stalin weren't so bad, even though each of them was responsible for the slaughter of tens of millions of people. Stone is sympathetic to modern dictators like Fidel Castro and Hugo Chavez, and presumably thinks that they're all wonderful compared to George Bush. What a pathetic and repulsive human being. NBC NY
Carla Bruni, the wife of French President Nicolas Sarkozy, will make her acting debut with Hollywood star Owen Wilson in a Woody Allen film being shot in Paris. The movie is a romantic comedy named "Midnight in Paris." AFP
On Thursday, Barack Obama will appear on The View, America's version of the ITV show Loose Women. Daily Mail
(Comments: For reader comments, questions and discussion, see the 28-Jul-10 News -- Britain's PM sides with Turkey against Israel thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-Jul-2010) Permanent Link
EU will provide 10 million euros to Yemen
I am now a contributor to Andy Breitbart's BigPeace.com where I am continuing to write non-partisan analyses of world events, based on Generational Dynamics theory.
My first two published articles are as follows:
http://bigpeace.com/jxenakis/2010/07/26/u-s-and-china-are-headed-for-a-generational-crisis-war/
Posted July 26: The North Koreans are threatening a 'sacred war' and 'physical response' to the joint U.S.-South Korean naval exercises taking place in the Sea of Japan, and soon in the Yellow Sea. This is typical of North Korea's bluster, but the confrontation between the U.S. and China is far more significant.
http://bigpeace.com/jxenakis/2010/07/20/iraq-and-afghanistan-generational-differences-in-war/
Posted July 20: On Tuesday of last week, Talib Hussein, a trusted Afghan soldier, launched a well-planned attack on his British soldier comrades, killing 3, and fled the camp. A spokesman for the Taliban claimed that he was a “sleeper,” planted in the British ranks to carry out the killings. This statement was evidently a little joke for credulous Western journalists and politicians.
This will hopefully provide Generational Dynamics with a much wider audience.
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After weeks of strikes and protests, life in Kashmir was being described as "normal" over the weekend. But the relief was short-lived after the death, allegedly in the hands of the police, of Tariq Ahmad Dar. Dar had been arrested on charges of being involved in militant activities, according to DNA India. Separatist militants are demanding that India-controlled Kashmir be given independence.
According to the pro-militant Kashmir Media Service, Dar was an innocent youth who was arrested and tortured to death while in custody. His body was returned to his family on Saturday evening.
The police have promised a full investigation, but most shops, businesses and schools were closed and streets were deserted on Monday, as separatist militants called for five days of strikes and demonstrations, according to the Pakistan Daily Times.
Kashmir and Jammu were a major site of the extremely bloody war between Hindus and Muslims after Partition in 1947 (when the India subcontinent was partitioned into Pakistan and India). After the war, Kashmir and Jammu were split into Pakistani-controlled and India-controlled regions, separated by a "line of control" (LoC). Since then, Pakistan and India have fought two non-crisis wars over the region, and it's been a continuing source of unrest, terrorist attacks, and violence.
Prior to 9/11/2001, most of the terrorist violence in Pakistan and India was directly related in one way or another to Kashmir, which has become a highly emotional symbol of the differences between Sunni Muslims and Hindus in Pakistan and India. However, once the war in Afghanistan began, the war presented an opportunity for al-Qaeda to directly attack India's ally, the United States. If the United States and Nato withdraw from Afghanistan, then al-Qaeda, the Taliban, and other Islamist terrorists would declare victory, and violence would quickly surge in Kashmir, possibly triggering another war.
Generational Dynamics predicts that India and Pakistan are headed for a major new war, re-fighting the war between Hindus and Muslims of 1947-48. Both countries have nuclear weapons. Pakistan will be supported by China, and India will be supported by the US and Russia, so this war will quickly spiral into a nuclear war and a world war.
Here's a great graphic from Jim Quinn's Burning Platform blog:
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Financial pundits look at these figures, and they talk about ways to save money -- cut a weapons system from defense, cut fraud and abuse from medicare, etc.
Unfortunately, from the point of view of Generational Dynamics, that's not the way it's going to work.
First off, no substantial cuts will be made anywhere until a major crisis occurs.
Once the major crisis occurs, then nothing is sacred. Medicare and Social Security may be canceled entirely, simply because there will be no money to pay for them. There's no way to predict how it will unfold, but we can be sure that everyone will be miserable.
With Yemen's government facing the possibility of total collapse, the EU is providing 10 million euros in emergency aid to respond to urgent humanitarian needs. Eurasia Review
Within 24 hours after agreeing to a ceasefire, Army-backed tribes and Houthi rebels resumed fighting in northern Yemen. UAE's The National
Tuesday will be the third day of joint South Korea - US naval drills in the Sea of Japan. The two allies will fire naval guns and artillery at an abandoned submarine disguised as a North Korean submarine in the East Sea. Arirang
A 'must read' article describing the "trust deficits" among the various players in Asia -- Pakistan, India, Afghanistan and the US. Pakistan Daily Times
The recent ethnic violence between Uzbeks and Kyrgyz in Kyrgyzstan may have been caused by organized crime in the country. Eurasia Net
Corruption cases in Thailand may accomplish what the Red-Shirt protestors were unable to do: Force Prime Minister Abhisit Vejjajiva to resign. Washington Times
Turkey's influence in the Mideast and Asia continues to grow at the expense of Iran. This is consistent with the Generational Dynamics view that, when forced to choose, Iran will side with the West. VOA
(Comments: For reader comments, questions and discussion, see the 27-Jul-10 News -- Kashmir protests erupt again thread of the Generational Dynamics forum. Comments may be posted anonymously.) (27-Jul-2010) Permanent Link
The 'rule of 20' - another away to cheat on stock valuations
European politicians and financial execs were in a tizzy all last week because they were afraid that the results of the stress tests of European banks, which were to be released at 5 pm on Friday in Europe (noon, NY time), would be bad.
They needn't have worried. Of the 91 banks being tested, only 7 failed -- one German bank, one Greek bank, and 5 regional Spanish banks (cajas). And all seven of the 'failed' banks are going to raise enough capital to make sure that the markets are calm when they open on Monday, according to the Independent.
The consensus of financial pundit opinion over the weekend seems to be that the tests were a "joke," or "flawed," or "cyncially calibrated" or "not rigorous," but that the markets won't care.
"If you tried to test the safety of cars or children’s toys using the same method the European Union applied in its stress tests on banks, you would end up in jail," said Walter Münchau of Financial Times (Access). "How so? Simply because the testing mechanism was calibrated to fix the result. The purpose of the exercise was to ensure that the only banks that failed it were those that would have to be restructured anyway."
Let's recall how the financial crisis came about. First there was a global real estate bubble that artificially raised the prices of homes by a factor of 2 or 3. Then the bankers figured out a way to create artificial securities (collateralized debt obligations, or CDOs, backed by mortgages) that leveraged even the bloated real estate prices by a factor of 5 or 10. Thus, tens of trillions of dollars of these synthetic securities, now known as "toxic assets," were created and sold at prices 10 to 30 times their real market value.
These synthetic securities are in financial portfolios around the world -- individual investors, banks, country treasuries, etc. These securities were used as collateral for further bad loans, or to pay off labor unions with extravagant wage and benefit guarantees. Everybody had an angle, and everyone was out to screw other people.
One of the problems with the European bank stress tests is that not all the toxic assets were required to be marked to the market value. This is the same problem with American banks. Regulators have told banks to continue to defraud their investors by misrepresenting the values of the toxic assets on their balance sheets. Anyone who buys stock in banks, based on the asset values shown in the banks' balance sheets, is a victim of fraud, perpetrated by the banks with the full cooperation of the regulators.
The biggest and most serious problem with the European stress tests, according to Münchau, is that they ignore the problem of sovereign default. For example, it's all but certain that Greek debt is going to default, and any bank that has invested in Greek bonds is going to lose a lot of money. But the stress tests almost completely ignore that problem.
As Münchau points out, "The stress tests follow a pattern that has been evident since the outbreak of the acute phase of the financial crisis in September 2008. The EU’s approach to the financial sector has been to apply patchwork fixes – a blanket bail-out, some not very serious recapitalisation plans, plus loads of liquidity – rather than solve the problem."
In other words, in Europe as in America, the same kinds of fraud that have been going on for years are still going on.
You might wonder whether these politicians and financial people have any plans. The answer is "Yes, they have a plan." The plan is to pray that the world economy will begin to grow again as it did in the mid 2000s decade, and "grow the economy out of debt."
This is like a person racking up more and more credit card debt, hoping that his salary increases will eventually allow him to pay them off. There are two flaws in that reasoning. One is that he may not get the salary increases. And the other is that if he does get the salary increases, then his wife will just get him to rack up even greater credit card debt. Nothing will change until the buy is bankrupt.
The same flaws are apparent in the world economy plan. First the economy may not grow. And second, even if it does grow, then the labor unions and the liberals and progressives would make sure that any additional funds are used for more union wages and social programs.
The above is actually sort of a mathematical proof that a much worse crisis is going to come soon. Since no steps except "patchword fixes" will ever be taken to resolve the problems, the only thing that will end the crisis is the international form of bankruptcy.
From the point of view of Generational Dynamics, nothing has changed. Generational Dynamics predicts that we're headed for the biggest financial crisis in history with mathematical certainty. These stress tests are just game-playing along the way.
I heard a financial analyst mention the "rule of 20" on Bloomberg TV the other day. In checking it out, I discovered an interesting historical artifact of one of the many ways that researchers justified the dot-com and subsequent bubbles.
The Great Depression survivors were very cautious investors, and never allowed any of the debauched practices that caused the Depression. However, those survivors pretty much disappeared (retired or died) by the mid-1990s, and the Boomers and Gen-Xers who took over had no particular reluctance to refrain from any kind of financial debauchery whatsoever.
The paper, "Tactical Asset Allocation: Follow the Rule of 20" (PDF), by Glenn Tanner, appearing in the Journal of Financial and Strategic Decisions in 1999, is a great illustration of how this particular kind of debauchery took place.
Here are the first few paragraphs from that paper:
One of the most often-cited indications of stock market overvaluation is a high price earnings ratio. The widely reported version of the PE ratio is simple to calculate – it is the ratio of current stock price to the sum of the four most recent quarterly accounting earnings per share, or the number of dollars that investors are willing to pay per dollar of earnings. Thus, according to conventional wisdom, the higher the PE ratio of the market (the more investors are willing to pay for earnings), the more overvalued the market is likely to be; lower PE ratios indicate a good time to buy. This idea has been empirically tested by Bleiberg (1989) and Good (1991); both studies found that market PE ratios were inversely correlated with subsequent market returns – low PE ratios signaled high market returns and high PE ratios were generally followed by low market returns.
Recent market performance has motivated traders to look for improvements on the PE ratio. Those who believe that high PE’s are a danger signal likely missed out on the 30%-plus market returns in 1995, which came in the midst of PE ratios in the 21-to-22 range. Many traders explained this apparent contradiction by claiming that the high PE ratios were justified by low inflation.1 This explanation yielded a derivative of the PE ratio as a market predictor – the Rule of 20. The measure is calculated by adding the annualized inflation rate to the market PE ratio.
The name comes from the supposedly key point of the measure – if the measure is under 20, expect the market to do well; if over 20, be wary of a declining market."
These words are so full of irony that they're laughable.
Tanner apparently was not aware, or did not believe, that the market was in the middle of the dot-com bubble in 1999. What he was saying was that if you used the traditional measure of stock valuation (the price/earnings ratio that the old geezers who had survived the Great Depression used), then you missed out on the dot-com bubble.
As I've said many times, the historical P/E average (stock price divided by one year trailing earnings) is around 14. Since 1995, the P/E ratio has been far above the historical average, and by the Law of Mean Reversion will have to fall down to a value well below average (around 5) for the same period of time, around 15 years. (See "How to compute the 'real value' of the stock market.")
The "Rule of 20" is a way of ignoring the realities of stock valuation, and is interesting for its historical value. In a period of near-zero inflation, like today, it justifies a P/E ratio of 20, which is absurd.
In recent years, the financial analysts have dreamed up even more imaginative ways to deal with high P/E ratios. The one we've discussed most often is to use "operating earnings" rather than real earnings. Operating earnings are a fiction computed by ignoring one-time expenses in computing earnings. This effectively pushes earnings up artificially high, and lowers P/E ratios.
For the survivors of the Great Depression, valid computations of price/earnings ratios were the best guide to investing in stocks. The Boomers and Gen-Xers did everything in their power to distort the P/E ratios to justify the stock market bubble. With the coming financial crisis, we're all going to pay the price.
Safeway supermarkets cut its 2010 earnings forecasts substantially, saying that price deflation caught them by surprise. Safeway had "expected the recovery to start right around now with a little more momentum and a little more pricing power," but found instead that "Deflation continues in price per item and is not expected to significantly improve until the fourth quarter." Reuters
Former Fed Governor Lawrence Lindsey predicted that the Fed will have to take additional easing steps because of deflation. "It will be obvious for the Federal Reserve by the end of this year that we are entering in a deflationary trap and I would expect some response by the Fed by that time." Bloomberg
Last year's H1N1 swine flu pandemic turned out to be nowhere near as bad as had been feared, but the danger hasn't ended. A new mutation is spreading rapidly among swine in Iowa and Illinois. The new mutation has not yet been transmitted from swine to humans, but that could change, resulting in a much worse pandemic than last year's. Recombinomics
With Israel-Turkey relations disintegrating since the flotilla incident, relations between Syria and Turkey are becoming much friendlier, and tens of thousands of Syrian shoppers are flocking to the city of Gaziantep in southeastern Turkey for bargain hunting. NY Times
China is building a fleet of aircraft carriers and, at the same time, developing land-based anti-ship ballistic missiles that can destroy America's aircraft carriers. Asia Times
China is making huge investments in Pakistan's energy infrastructure, but the U.S. will oppose a Chinese nuclear reactor sale to Pakistan on the grounds of preventing nuclear proliferation. Washington Times
The use of internet among rebels in Kashmir to promote Kashmiri independence is small but growing. The Hindu
The situation in Somalia continues to deteriorate as tens of thousands of people have tried to flee the conflict, but are being turned back by the refugee camps in surrounding regions. Eurasia Review
During WW II, Switzerland was preparing for a major Nazi invasion that never came. In preparation, the Swiss build large underground bunkers, designed to hide their soldiers, along with weapons, ammunition and other supplies. These fortifications were maintained until the 1990s. Time
(Comments: For reader comments, questions and discussion, see the 26-Jul-10 News -- Markets shrug off flawed European stress tests thread of the Generational Dynamics forum. Comments may be posted anonymously.) (26-Jul-2010) Permanent Link
Sudan's president Bashir thumbs his node at Darfur genocide charges
The war in Darfur has been an interesting study for Generational Dynamics. The war began in the 1970s, but the world only discovered it in 2004. In 2005, the UN announced that it wasn't a genocide, because they didn't want to deal their obligations once that determination had been made. However, the United States DID officially call it a genocide. After that, movie stars were constantly flying over there. Activists were demanding that the U.S. military get involved and stop the war -- as if that were possible, and as if the two wars we're fighting weren't enough. (See "Jesse Jackson calls for sending American troops to Darfur" and "Senator Joe Biden wants to move troops from Iraq to Darfur civil war.")
In February of this year, Sudan's president Omar Al Bashir announced that the Darfur war was over, even though there was still fighting going on. (See "27-Feb-10 News - War in Darfur may be starting again.")
Recent reports indicate that the fighting between the rebel group Justice and Equality Movement (JEM) and the Sudan army has been increasing, according to AFP, although other rebel groups are are indicating a willingness to agree to at least a temporary ceasefire, according to Bernama.
A detailed analysis of the humanitarian situation by Eric Reeves appeared in the Sudan Tribune (Part 1 and Part 2).
There are 2.7 million refugees living in tents, entirely dependent on international food aid. As the fighting continues, the number of refugees is still growing, and camps are overcrowded, according to the articles.
From the point of view of Generational Dynamics, this is a generational crisis war that has not yet reached a climax. Those 2.7 million people are extremely vulnerable to army attacks and to starvation if the international aid is suddenly disrupted. This war is far from over.
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The UN's handling of the situation in Darfur since 2004 has been mostly a stage show, and every stage show has to name a villain. In this case, the UN has named Sudan's president Omar al-Bashir as the individual to blame for the genocide in Darfur. In particular, the International Criminal Court (ICC) issued two arrest warrants in March of last year for Bashir, on charges of war crimes and crimes against humanity.
On Friday, Bashir returned home to Khartoum from a summit meeting in Chad, declaring a victory, according to the AFP. The victory is that Chad is a member of the ICC, but still refused to arrest Bashir and turn him in to the ICC during his Chad visit.
An adviser to Bashir is quoted as saying, "This summit... shows African solidarity and it also exposes the ICC and its agenda and it also exposes the agenda of some European countries and the United States in particular. We praise our relations with Chad very much. We have made very clear in previous occasions that we cannot see an end to the problem in Darfur without fixing the relationship with Chad. It is a victory in the profound sense of the word (and) we are happy,"
The "agenda" that the adviser referred to is the claim that the ICC only targets African nations. The ICC is currently handling 5 cases, all African: Uganda, Central African Republic (CAR), Democratic Republic of Congo (DRC) , Darfur and Kenya.
The West has been outraged at Chad's refusal to arrest Bashir. The BBC quotes Human Rights Watch as saying, "Chad risks the shameful distinction of being the first ICC member state to harbour a suspected war criminal from the court." Amnesty International also called on Chad not to shield Mr Bashir and said the visit was an opportunity for justice.
But Chad's ambassador responded, "We are with the rule of law and everybody has to pay for his mistakes and for any crime he commits but when it will be selectively and targeting only African leaders it should not be accepted."
The African Union (AU) is holding a summit in Uganda on Sunday, and Reuters reports that the AU will advise its member states not to cooperate with the ICC. "(The AU) reiterates its decision that AU member states shall not cooperate with the ICC in the arrest and surrender of President Bashir," according to the draft resolution.
(Comments: For reader comments, questions and discussion, see the 25-Jul-10 News -- Fighting continues in Darfur thread of the Generational Dynamics forum. Comments may be posted anonymously.) (25-Jul-2010) Permanent Link
North Korea promises a 'sacred war'
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As I've reported in the past, China is very aggressively claiming that the entire South China Sea region, including the Paracel and Spratly Islands and some 200 other islands, is China's sovereign terrority, and that they have the right to prohibit foreign ships from entering that region.
China's claims are challenged by several other countries in the region, as well as by the United states. (See "28-Jun-10 News -- Military tensions increase in South China Sea.")
On Friday, Secretary of State Hillary Clinton gave a press conference in Hanoi at a meeting of the Association of South East Nations (ASEAN). For the first time, a high level US official confronted China on their South China Sea claims. Here's what she said, according to the official transcript:
I’d like to briefly outline our perspective on this issue. The United States, like every nation, has a national interest in freedom of navigation, open access to Asia’s maritime commons, and respect for international law in the South China Sea. We share these interests not only with ASEAN members or ASEAN Regional Forum participants, but with other maritime nations and the broader international community.
The United States supports a collaborative diplomatic process by all claimants for resolving the various territorial disputes without coercion. We oppose the use or threat of force by any claimant. While the United States does not take sides on the competing territorial disputes over land features in the South China Sea, we believe claimants should pursue their territorial claims and the company and rights to maritime space in accordance with the UN convention on the law of the sea. ...
I think that 12 participants raised the South China Sea and general maritime navigation and claim issues in our discussion. Because if you look at a map of this region, there are many countries that are increasing their trade, their commercial maritime traffic. There is a lot of activity. This is some of the busiest sea lanes in the world, and there’s a concern that we all abide by the international rules in order to determine how to proceed and certainly, the 12 participants including the United States, that raise this issue would want to see the application of the principles agreed to previously by ASEAN, the existing international laws and regulations and the custom of how all these countries in this region can share this common space of the oceans."
Clinton's words were not particularly bellicose, but the Chinese, who sometimes become almost hysterical when confronted with criticism, were definitely unhappy with this statement, according to Reuters. The article quotes an unnamed diplomat describing the private reaction of Clinton's counterpart, Chinese Foreign Minister Yang Jiechi. Yang made "a very strong and emotional statement ... He was distinctly not happy."
This reminds me of a statement by Sha Zukang, China's U.N. ambassador, in an interview with a BBC reporter in 2006. I've never seen this interview reported anywhere else, but I transcribed this myself because I was so startled at hearing Sha screaming at the top of his lungs at the BBC interviewer. (See "Furious Chinese ambassador harshly threatens U.S. over Taiwan.") He screamed the following:
It's not a matter of how big Taiwan is, but for China, one INCH of the territory is more valuable than the LIVES of our people."
[With regard to the U.S.'s constant criticism of China's rapid militarization:] It's better for the U.S. to shut up, keep quiet. That's much, much better. China's population is 6 times or 5 times the United States. Why blame China? No. forget it. It's high time to shut up. It's a nation's sovereign right to do what is good for them. But don't tell us what's good for China. Thank you very much."
This is the same reaction that China always exhibits. They are reacting the same way with regard to the South China Sea as they are with Taiwan, and a military confrontation is possible at any time.
From the point of view of Generational Dynamics, the U.S. and China are headed for a war with absolute certainty. This war might begin in Taiwan or in the South China Sea or in central Asia.
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North Korea also attended the same ASEAN conference, and responded to the plans for joint U.S.-South Korea naval exercises planned in the Sea of Japan for July 23-25, with additional exercises planned for the Yellow Sea in September. The exercises were scheduled after evidence showed that North Korea was at fault for the torpedo attack that caused the South Korean warship to sink, killing 46.
A North Korean spokesman threatened a "physical response" to the military exercises, but did not say what that response would be, according to the Guardian. "It is a threat to the Korean peninsula and the region of Asia as a whole." He said the drills harked back to 19th-century gunboat diplomacy and violated North Korea's sovereignty. "And [our] position is clear: there will be physical response to the threat imposed by the United States militarily."
Later in the day, the BBC reported that the Korean Central News Agency (KCNA) was quoting the National Defense Commission as saying, "All these war manoeuvres are nothing but outright provocations aimed to stifle the Democratic People's Republic of Korea [DPRK = North Korea] by force of arms. The army and people of the DPRK will start a retaliatory sacred war of their own style based on nuclear deterrent any time necessary in order to counter the US imperialists and the South Korean puppet forces deliberately pushing the situation to the brink of a war."
Although this kind of bluster is not uncommon from North Korea, there's no doubt that tensions are very high in the region, and will continue to be high for a while to come.
Another unintended consequence of the health care bill: Some health insurance companies have stopped issuing individual insurance policies for children altogether. The new law requires that insurance companies accept children who had no insurance until the day they were sick. Under the law, it's even possible for a hospital to buy an insurance policy for an uninsured child who's just come into the emergency room. NY Times
Lebanon's parliament is acting to pass laws to take advantage of huge gas and oil reservoirs that the Israelis have discovered off the coasts of Israel and Lebanon. Media Line
Members of Afghanistan President Hamid Karzai's staff are leaving because he's thought to be favoring Pashtun regional leaders, giving less favorable treatment to Hazari, Tajik and Uzbek leaders. Washington Post
(Comments: For reader comments, questions and discussion, see the 24-Jul-10 News -- US confronts China on South China Sea claims thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Jul-2010) Permanent Link
Venezuela's Hugo Chavez severs diplomatic ties with Colombia
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A February ceasefire appears to have ended in northern Yemen, as army clashes with Houthi rebels have resulted in dozens of deaths, at least 30 deaths in the last day alone, according to the UAE's The National.
Last year, it was thought that Iran was supplying weapons to the Houthis, although that was never proved, and Saudi Arabia's army also got involved the fighting. (See "Yemen wars escalate rapidly, as US provides military support.") So far this time, the fighting is just between the Yemen army and the Houthi rebels.
In southern Yemen, when gunmen killed at least five Yemeni soldiers in an ambush of a military convoy. It's believed that the gunmen were from Al-Qaeda on the Arabian Peninsula (AQAP). This is the third attack on state targets in five weeks.
It's believed that United States special forces are operating in Yemen, and that the U.S. is providing intelligence information to the Yemenis.
As I've described many times, al-Qaeda's aim is to duplicate the success of Iran's 1979 (Shia) Islamic Revolution in a Sunni Muslim country. They've attempted this in Iraq, Somalia, Algeria, Afghanistan, Pakistan, Uzbekistan and elsewhere, as well as Yemen. So far they've been unsuccessful, but they'll keep trying in different countries until they're successful.
The fight between the Yemenis and the Houthi rebels is following a familiar pattern, alternating between fighting and ceasefire. At some point, a "regeneracy" event will occur, and the war will transition into a full-scale generational crisis civil war.
Venezuelan president Hugo Chávez severed diplomatic ties with Colombia on Thursday. He was reacting to a presentation by Colombia at a meeting of the Organization of American States showing evidence that Chavez was supporting violent terrorists in Colombia. Guardian
As we reported three days ago, Hungary has refused to meet its austerity commitments, and the IMF has refused to provide any more financial aid. Hungary claims that it can get without further IMF made but an analyst at Nomura International says that Hungary's survival without IMF support is a "myth," and that Hungary's actions endanger the euro, as Europe's debt crisis may be spreading. Bloomberg
Ethnic divide threatens in Afghanistan. LA Times
The Pentagon is planning to build a counter-terrorism training compound in Kyrgyzstan in the Fergana Valley region near Osh that was the site of so much violence in the last couple of months. Eurasia Net
Gen. David Petraeus, who recently replaced Gen. Stanley McChrystal as allied commander in Afghanistan, believes that McChrystal's implementation of the counter-insurgency strategy was flawed, and will change it. McChrystal's supporters dispute this conclusion. WSJ (Access)
Prime minister Abhisit Vejjajiva's government in Thailand, supported by the Thai-Chinese elite class, came to power by passing anti-corruption laws and used them against former prime minister Thaksin Shinawatra and his allies. Now those same laws will be used against Vejjajiva's government, which may collapse as a result. Asia Sentinel
With new ethnic violence flaring up in South Africa, refugees that fled from violence in Zimbabwe two years ago are now fleeing back home. CS Monitor
Some women who are sick of being manipulated by consumerism are going on a "shopping diet." As an experiment, one woman selected six items of clothing and wore only those for an entire month. Her husband didn't even notice. NY Times. This story shows how much attitudes towards money have changed in the last ten years, as people learn to be as frugal as their grandparents were in the 1930s.
Beer is to be sold in dead animals. Twelve bottles of The End Of History ale have been placed in dead animals, and will be sold for 500 pounds apiece. Telegraph
Five mistakes online job hunters make. WSJ (Access)
Scientists reveal the formula for the perfect handshake. Fox News
(Comments: For reader comments, questions and discussion, see the 23-Jul-10 News -- Fighting in Yemen flares again thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Jul-2010) Permanent Link
Korean Air Lines terrorist bomber visits Tokyo
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Despite objections from China, the U.S. and South Korea will conduct large scale naval exercises in the Sea of Japan (East Sea) starting on Sunday, according to Chosun.
Codename "Invincible Spirit," the exercise will last four days from Sunday and involve over 200 fighter jets including four F-22 stealth fighters, 8,000 forces, and 20 warships including the U.S. nuclear-powered aircraft carrier George Washington and South Korea's 14,000-ton transport ship Dokdo.
The article says that a decision had been made to hold the exercises in the Sea of Japan rather than the Yellow Sea because of China's objections.
However, the NY Times reports that a later announcement by the US Department of Defense said that later exercises would be in the Yellow Sea.
China's People's Liberation Army (PLA) held its own military supply drill in the Yellow Sea during the last weekend, according to Xinhua. Codenamed "Warfare 2010", the drill's announced objective was to improve defense capabilities against long-distance attacks. Four helicopters and four rescue vessels were deployed for the exercise on Saturday. According to the article, the drill was not linked to the planned U.S/S. Korea drill.
Xinhua says that the Yellow Sea exercises are expected in early September. The article quotes China's Foreign Ministry spokesman Qin Gang as expressing "deep concern" over the US-S.Korea announcement, and saying, "We resolutely oppose any foreign military vessel and aircraft conducting activities in the Yellow Sea and China's coastal waters that undermine China's security interests. We will continue to follow closely the developments of the situation.
As we recently reported, China is making extraordinary claims of sovereignty over large sections of the South China Sea (see "28-Jun-10 News -- Military tensions increase in South China Sea"), and is also making various claims in the East China Sea and the Yellow Sea.
The U.S./South Korea war games were scheduled in reaction to the sinking of the South Korean warship Cheonan in March. South Korea has produced evidence that proves that the Cheonan was sunk by a North Korean missile, but North Korea vehemently denies this, and China is siding with North Korea. The United Nations refused to blame North Korea, and recently issued a statement saying less than nothing.
Secretary of State Hillary Clinton and Defense Secretary Robert Gates announced new sanctions on North Korea in a visit to South Korea on Wednesday. The sanctions target illicit and lucrative activities like counterfeiting and contraband sales, according to CS Monitor.
The new measures are unlikely to have any effect, because they repeat piecemeal steps of the past, according to the article.
The article quotes Brookings Institution expert Ken Lieberthal as saying, "The one approach that has caught North Korea’s attention in the past is financial sanctions that disrupt its access to the international banking system. If we are not resorting to any Treasury-Department-sponsored efforts to get at North Korea’s banking activities abroad, there is reason to lack confidence that more sanctions will have any significant effect."
This quote references a 2005 incident where the U.S. Treasury designated a Macau bank as a money launderer of North Korean illicit assets. This designation caused a chain reaction in the international banking system that shut down many of North Korea's illegal activities. The move was highly effective, but the U.S. backed down after a few months, giving North Korea a victory.
Now, North Korea seems to have scored another victory by sinking the Cheonan and getting away with it.
Tensions are extremely high on the Korean peninsula, and the South Koreans are furious that the North got away with it. There's still a desire for revenge on the part of the South Koreans. It's possible that one side or the other will cross some line at any time, causing a military confrontation.
This is a complicated story, so I'm going to try to outline it.
Now, believe it or not, Kim Hyon Hui has arrived in Tokyo for the purpose of answering questions by the relatives of Yaeko Taguchi and other North Korean abductees. According to Yomiuri, it's doubtful that Kim will provide any new information that will shed light on the fate of the abductees.
How did this bizarre visit come about?
Kim now lives in South Korea. In 1989 she was sentenced to death in South Korea for the bombing, but in 1990 she was freed.
Recently, the Japanese asked the South Korean government to allow Kim to visit Japan. Japan's purpose was to humiliate North Korea and "generate resentment toward the abductions and prick public awareness of the issue."
This played right into the hands of the South Koreans, who also wish to humiliate North Korea for the Cheonan attack.
I'm sure that this will be turned into a movie before long.
I came across a couple of very interesting videos, produced by al-Jazeera, about the lives of Koreans living in Japan. They describe that, despite attempts by the Japanese to assimilate them into their culture, many of the Koreans are discriminated against, and remain loyal to their homeland -- and in this case, their homeland is North Korea.
Japan invaded and colonized Korea in 1905, and was only expelled when Japan was defeated in World War II. Korea's attitude toward Japan remains bitter to this day, especially because of the use of Korean "comfort women" by the Japanese army during World War II. In fact, it was this use of comfort women that motivated the North Korean abductions of Japanese women in the 1970s, described in the previous story.
North Koreans remained in Japan after WW II and the occupation ended, and now there are large groups of third and fourth generation Koreans still living there.
The first video is a news story tied to the visit of Kim Hyon Hui, described above. It describes how ethnic Koreans prefer to attend special schools partially funded by North Korea, where lessons are taught in Korean and classrooms feature portraits of leader Kim Jong-il.
The second video focuses on how ethnic Koreans (called Zainichi Koreans) in Korea suffer discrimination and racism.
If you have a few minutes available, the two videos are worth your time. Their point of view is more sympathetic to the Koreans than to the Japanese, but they provide an interesting description nonetheless.
Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, is expressing increasing concern about a "fairly significant investment" in equipment such as satellites, aircraft, anti-ship missiles and a planned aircraft carrier group VOA. As I've said in the past, we can be certain that China is planning a full-scale war with the United States. The only thing we don't know is when they plan to start it.
In the past, North Korean president Kim Jong-il has refused to allow statues of himself to be erected, as this would symbolize the end of his regime. But now a new bronze statue of Kim Jong-il is sparking rumors that he is close to death. Telegraph
Is the sharp fall in the Baltic Dry Index caused by too many ships? Or is it caused by a sharp drop in shipments of iron ore and steel to China? Ambrose Evans-Pritchard favors the second reason. Telegraph
Supporting Evans-Pritchard is a report that China's Ministry of Commerce is saying that the outlook for exports for China in the last half of the year is "grim." The reason is planned austerity measures in European countries, as well as in Brazil and India. Xinhua
Fannie Mae and Freddie Mac are requiring much larger bailouts that the administration has previously indicated. Anew report by the administration's TARP inspector general, Neil Barofsky, indicates that bailouts are $700 billion larger than anticipated, due largely to guarantees of bad mortgages by Fannie and Freddie. (I heard one TV pundit call Fannie and Freddie the garbage dump of American finance.) Reuters
The housing market is stalling again. In markets across the country, home sales are deteriorating, inventories of unsold homes are piling up and builders are scaling back construction plans. The expiration of a federal home-buyers tax credit at the end of April is weighing on the market. WSJ (Access)
A new United Nations scandal is brewing. Inga-Britt Ahlenius, a Swedish auditor who stepped down Friday as undersecretary general of the Office of Internal Oversight Services, personally attacked Ban Ki-Moon, accusing him of undermining her attempts to identify corruption. Washington Post. Ban's aides are circling the wagons and striking back. Independent
Iran's shippers are being severely crippled by new sanctions that the United States and the United Nations imposed a few weeks ago. Washington Post
Thailand is receiving a great deal of international criticism for remaining under emergency law, two months after the Red-Shirt protest movement became dormant and goes underground. ISN Security Watch
British prime minister David Cameron is being criticized for saying that the UK was the "junior partner" in the allied WW II fight against Nazi Germany. BBC
India has traditionally favored the Palestinians over the Israelis, and formal relations between India and Israel were not established until 1992. But India also has a military alliance with Israel, and must walk a tightrope between the Jews and the Arabs. Al-Jazeera
Saudi Islamic scholars are having a debate about "Dark-Eyed Virgins." Among the questions being discussed and debated are: Are terrorists exploiting young men, telling them that if they become suicide bombers, then dark-eyed virgins will welcome them in paradise? And the most important question of all is: Is there sex in Paradise? The scholars' answer is "Yes." Memri. There's no word from the scholars about whether female suicide bombers in Paradise are welcomed by dark-eyed studs.
(Comments: For reader comments, questions and discussion, see the 22-Jul-10 News -- US/S.Korean naval exercises begin Sunday thread of the Generational Dynamics forum. Comments may be posted anonymously.) (22-Jul-2010) Permanent Link
PIIGS to the slaughter
In a happening reminiscent of last fall's release of the "Climate-gate," some e-mail messages exchanged on a list server for liberal and left journalists, professors and analysts only have been released.
The formerly secret "Journolist" e-mail list server came to light last month, when it was revealed by the conservative Daily Caller web site, revealing that Washington Post David Weigel was guilty of biased reporting. Weigel resigned, and the Journolist list server was shut down.
Now in a new story, the Daily Caller has released additional e-mail messages showing that there during the 2008 presidential election there was widesp