Dynamics
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Generational Dynamics |
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Will the 'Tea Party' become a real party?
All the talk on the Sunday morning news shows was about Sarah Palin and the Tea Party convention, and whether the Democrats or the Republicans are better off.
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From the point of view of Generational Dynamics, this kind of discussion is not the most important point. What's is important is that in this generational Crisis era, there's going to be a major political realignment of some kind.
According to a poll by Rasmussen, self-identified party affiliation has changed rapidly in the last year. Republicans have fallen slightly and Democrats have fallen sharply, while "Other" has risen sharply.
Other polls have identified a sharp increase in people saying that they belong to the "Tea Party," even though that party doesn't exist except as an informal movement. And those people have been drawn from both Republicans and Democrats.
However, the point is that the "Tea Party" is not the Republican party by any means, and it does not represent the views of Sarah Palin, despite her popularity. What the "Tea Party" represents is something new, even though it's not understood.
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Another sign is the dramatic fall in approval by Congress in 2009, according to Gallup.
My personal belief is that the obvious and loathsome corruption in Congress in pursuing the health care bill last year is the most important factor in driving both Democrats and Republicans to look for something new, something different from the debauched corruption that's filled Washington in the last year.
No one can predict what kind of realignment will occur, except that we can be sure that the realignment will be dramatic, and will not be pleasing to either party.
Here's a question for readers:
You'll recall that the "underwear bomber" failed to detonate his bomb in the airliner over Detroit on Christmas day. How would the political climate be different today if the bomb had detonated and the plane had crashed?
Would Scott Brown have still won in Massachusetts? Would the Republicans, Democrats and Tea Partiers be more or less popular today?
Readers are invited to post their thoughts in the "Comments" section.
On Sunday, Iran's president Mahmoud Ahmadinejad ordered his country's atomic agency to begin production of higher enriched uranium, according to the NY Times. As the February 11 anniversary of the 1979 Islamic Revolution approaches, Ahmadinejad seems to do something every day to provoke international controversy.
Frank Sinatra's song "My Way" seems to be provoking fights and killings in the Philippines, according to the NY Times, causing speculation that there's something sinister about the song.
North Korea is becoming desperate, as the price of rice has risen many times in the last month, triggering fears of famine, according to reporting by the Asian Times. This has resulted in "an explosion of casualties" from anti-government demonstrations. As a result, South Korean officials are "tightening the screws" on North Korea, to take advantage of their desperation.
(Comments: For reader comments, questions and discussion, see the 8-Feb-10 News - There are more self-identified independents thread of the Generational Dynamics forum. Comments may be posted anonymously.) (8-Feb-2010) Permanent Link
International tension grows over Iran's nuclear weapons development.
For years, the West has been looking for ways to convince Iran not to develop the technology for highly enriched weapons-grade uranium. Iran says that they need to develop enriched uranium to be used for medical isotopes and for generation of electricity in a nuclear-powered plant, and that they have no intention of using it for nuclear weapons.
Under a proposal made last year by Russia, France and the West, Iran would ship its low-enriched uranium to France. France would enrich it and return it to Iran a few months later. Iran rejected this proposal last year, but on Friday, Iran’s foreign minister, Manouchehr Mottaki, said that Iran might agree to the deal.
US Secretary of Defense Robert M. Gates scoffed at Iran's statement, according to the NY Times. According to Gates, Iran has done nothing to back up their words with action. "Based on the information that I have, I don’t have the sense we are close to an agreement," he said. Germany's foreign minister added that his discussions with the Iranian delegation had "not made me change my mind" about Iran’s intentions.
As I've described many times, Iran is a schizophrenic nation, with a government that virulently anti-American and anti-West, but with a young population that's pro-West, and generally with nothing against even Israel.
But one thing that Iran's government and young people agree on is Iran's nuclear development program.
During the Iran/Iraq war of the 1980s, Iran faced an enemy that used WMDs (weapons of mass destruction), and carried on various WMD development programs for many years. Furthermore, Iran is surrounded by countries, especially Pakistan and Israel, that have nuclear weapons. The Iranian people, young and old, feel that they need nuclear weapons to defend themselves. That's why, whatever else happens in the anti-government riots and demonstrations, Iran is going to continue its nuclear development program.
As Iran's nuclear program continues, there's the possibility that some Western power will take military action. The Telegraph reports that Britain's opposition Conservative Party (the Tories) would support military action if Iran developed nuclear weapons.
According to the article, such an attack would like consist of a missile attack on nuclear and uranium enrichment sites, rather a ground invasion.
The Tories are out of power, and with an election approaching, we can be sure that this is just campaign rhetoric. Still, the statement highlights the fact that Israel or some other Western country might panic and make a military attack on Iran's nuclear sites.
On December 27, hundreds people were arrested, and eight people were killed in violence perpetrated by Iran's security forces, after peaceful anti-government "Green movement" protests and demonstrations by young people in Iran.
Now new demonstrations are planned for Thursday, February 11, the 31st anniversary of the start of Iran's 1979 Islamic Revolution.
Iran's police are quoted as saying that they will show no tolerance whatsoever to anti-government demonstrators on Thursday, according to Reuters.
A police spokesman warned against using e-mail and text messages to spread word of protests, since police were monitoring those communications. "The new technologies allow us to identify conspirators and those who are violating the law, without having to control all people individually," he said.
Iran today is at the height of its generational Awakening era, 22 years after the end of its last crisis war, the Iran/Iraq war. The protests are similar to those in America's Awakening era in the 1960s and 1970s. (See my 2004 article, "Iraq Today vs 1960s America" for more information on Awakening eras.)
Russia's security forces are accusing Georgia of aiding al-Qaeda terrorists in Russia's Caucasus provinces (Chechnya, Dagestan, Ingushetia), according to a Jamestown Foundation analysis. Terrorist violence has been increasing in the Caucasus region, which historically has been the site of many wars between Muslims and Orthodox Christians, and Generational Dynamics predicts that a new war is approaching.
Most Chinese people believe that America and China are headed for a "cold war," while China's military is preparing for a military war within the ten years, according to a poll commissioned by the Times Online, and conducted by Global Times, a Chinese state-run newspaper.
(Comments: For reader comments, questions and discussion, see the 7-Feb-10 News - Iran threatens violence against Greens thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Feb-2010) Permanent Link
Government is paralyzed by vitriolic arguments
On Friday, a Shia worshippers in a religious procession in Karachi, Pakistan, were attacked by a motorcycle rigged with explosive, killing 12 people. The injured were taken to a nearby hospital. An hour later, a second explosion occurred, this time at the hospital where the injured were being treated. Dozens more were killed or injured. A third bomb was disarmed at the hospital before it could explode.
The perpetrators of the bombings have not yet been identified, but according to Dawn, the violence most likely comes from bitter relationships between two ethnic groups, represented by two political parties, the Awami National Party (ANP) and Muttahida Qaumi Movement (MQM).
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The bitterness stems from the one of the bloodiest genocidal wars of the 20th century, the war between Hindus and Muslims that followed Partition, the 1947 partitioning of the Indian subcontinent into Pakistan and India.
That war was fought between mainly between Sunni Muslim versus Hindu Punjabis, but the MQM represents large numbers of Muslims, known as Mohajirs, who migrated from India after the war, and settled mainly in the Karachi area.
On the other hand, the ANP represents Pashtuns who have fled from the FATA and Swat Valley regions of Pakistan. Islamist Pashtuns, known as the Taliban, have conducted a great deal of terrorist violence in northern Pakistan, but many have been forced to flee as the Pakistan army has driven them from their caves.
It's now been 62 years since that war, and younger generations have replaced the survivors. The survivors vowed that they would never let anything like that happen again, but now the younger generations are repeating the same kinds of mistakes that led to the 1947 war.
This is all part of a larger ethnic battle that's enveloped the entire region for centuries, pitting Sunni Muslims on one side versus Shia Muslims and Hindus on the other side. From the point of view of Generational Dynamics, this historic war will be fought again.
An interesting editorial appeared in Dawn on Tuesday, after several days of violence, though before the most recent bombings. The editorial refers to two political parties. One is MQM, described above. The other is the PPP, the Pakistan Peoples Party, that runs the government of Sindh province in which Karachi is located. Here's an excerpt:
This opinion piece really struck me, because this vitriolic paralysis is so similar to what's been happening in Washington. Both Pakistan and the United States are well into generational Crisis eras, and this kind of political bickering is common to Crisis eras in general.
The bickering ends only with a "regeneracy event," an event so shocking that that civic unity is regenerated again for the first time in decades. (For information about the term "regeneracy" and about generational eras, see "Basics of Generational Dynamics.")
"Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal" says Ambrose Evans-Pritchard in The Telegraph.
(Comments: For reader comments, questions and discussion, see the 6-Feb-10 News - Dual terrorist bombings in Karachi, Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (6-Feb-2010) Permanent Link
Problems in Greece and Portugal slam stocks around the globe
Lot's of news today.
Contents:
"China hits back at Obama's statements on trade"
"James Chanos: China's real estate bubble is 'staggering'"
""The whole world is laughing at China being stupid""
"Greek virus spreads to Portugal and other European countries"
"The euro falls, the dollar rises, and stocks are slammed"
"Brother can you spare a dime?"
"Additional Links"
It seems that US-China relations get worse every day.
At a meeting with Congressional Democrats on Thursday, President Obama took a hard line on China's trade policies:
I have shown myself during the course of this year more than willing to enforce our trade agreements in a much more serious way. And at times I’ve been criticized for it. There was a case involving foreign tires that were being sent in here [[by China -- JX]] and I said this was an example of where we have got to put our foot down and show that we’re serious about enforcement. And it caused the usual fuss at the international level, but it was the right thing to do.
Having said that, I also believe that our future is going to be tied up with our ability to sell products all around the world, and China is going to be one of our biggest markets, and Asia is going to be one of our biggest markets. For us to close ourselves off from that market would be a mistake.
Now the point you’re making, Arlen, which is the right one, is it’s got to be reciprocal. So, if we have established agreements in which both sides are supposed to open up their markets, we do so and then the other side is imposing a whole set of non-tariff barriers in place, that’s a problem and it has to be squarely confronted. So the approach that we’re taking is trying to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways.
One of the challenges that we’ve got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price. That puts us at a huge competitive disadvantage."
The last phrase about Chinese goods "artificially inflated in price" particularly angered the Chinese. This remark is related to an open US accusation that China is artificially weakening its renminbi currency, in order to make US goods more expensive.
According to the NY Times, Ma Zhaoxu, a Foreign Ministry spokesman, said:
The BBC provides a very convenient list of the issues that are raising US-China tensions:
I've written before about the enormous real estate bubble in China. (See "Skyrocketing real estate prices in China alarm officials.")
Appearing on CNBC on Thursday morning, James Chanos, president of Kynikos Associates, added some more information. Here's what he said:
They have hard currency at the government level, but the Chinese banking system is the problem. The banking system is loaded with bad debts. Remeber the government controls the banking system there, and the assets of the banking system are suspect.
Our geostrategic position is a lot better than China. Keep in mind China imports almost all its essential materials. ... They send us stuff, we send them pieces of paper. Who would you rather be?"
He made several points that are of interest.
First, there's enough commercial real estate under construction in China to give every man, woman and child a 5x5 cubicle. That's really mind-blowing, in a country of 1.4 billion people.
Second, contrary to popular belief, China is in a great deal of debt. Many people have suggested to me that China will do OK in the coming crisis because they're a creditor nation. My answer to that has always been to point to America in the 1930s, when America was a creditor nation. Being a creditor nation didn't do any good at all.
China is owed some $2 trillion by the US government, but that debt is never going to be repaid, so those are "toxic assets." Chanos makes the point that, even so, China owns the banks, and the banks are hugely in trouble. He doesn't say so explicitly, but I assume he's referring to the debt on 70 billion square feet of real estate under construction -- debt that will never be repaid.
So China may be owed a lot of money, but those debts are "toxic assets." China is just as bad off as America is, and probably a lot worse.
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Correction:The following story contains several errors, according to "Sensei Michael" in the Generational Dynamics forum: "Uh...the video is a parody of another song by the 3 girls (S.H.E. - they're one of the hottest singing acts in the Chinese-speaking world). The parody uses their MTV, and changes the lyrics in the video. The singer is also untrained - her voice was already very strained when she sang the chorus. It has nothing to do with the 3 girls." I apologize for the confusion. (Correction posted 5-Feb-2010) A year ago, I wrote about a a new best-selling book, called "Unhappy China - The Great Time, Grand Vision and Our Challenges." The book is highly nationalistic, and highly anti-American and anti-West. A new music video named "The whole world is laughing at China being stupid" was circulating around the Chinese internet, according to China Hush. Here are some of the lyrics:
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The whole world is laughing at China being stupid We act foolishly and let the world praising us being so obedient Various colored skins and hair Come here to trick and swindle For years the shoes, shirts and underwear we made These years in exchange for their dumping investigation and technology embargo to blackmail us To build the harmonious Chimerica Such charitable Chinese people and such cheap Chinese goods
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According to the article, the Chinese government initially endorsed the video, but later reversed their endorsement because the lyrics are so bitterly nationalistic.
From the point of view of Generational Dynamics, it's not surprising that the singers are three young girls. Young people in China know as little about America as young people in America know about China.
As I've said many times before, generational theory tells us that US-China relations are going to continue to trend worse, thanks to younger generations replacing the survivors of the last crisis war (WW II and Mao's Communist Revolution, respectively). At some point, a misunderstanding or miscalculation will lead to war.
The trigger was apparently a failed bond auction in Portugal on Wednesday.
The Portuguese government had attempted to borrow 500 million euros by selling Treasury bills at an auction on Wednesday, but they were unable to borrow more than 300 million euros. According to the Wall Street Journal, quoting Gavan Nolan of Markit, there was there was "panic buying" in the sovereign CDS (credit default swap) market. This means that investors were betting that Portugal was going to default on its debt.
A CDS is a kind of insurance policy that an investor can purchase for protection against debt default.
CNBC reported the following CDS rates as of Thursday afternoon:
Country CDS Rate Change since yesterday
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Greece 422.00 +30.00
Portugal 230.00 +34.00
Spain 171.25 +18.75
Italy 152.50 +21.25
Ireland 172.50 +10.50
A CDS rate of 422.00 means that you have to pay $422,000 to insure $1 million of debt against default. For comparison purposes, typical CDS rates prior to the financial crisis were in the range 10 to 30.
I've mentioned these five countries before -- the Europeans call them the "P.I.I.G.S." All of these countries appear in the same kind of debt spiral as Greece.
If you listen to the pundits, then you frequently hear something like, "Greece cannot solve its fiscal problems by itself. The European Union HAS TO to bail out Greece, because if Greece defaults, then the other four countries will also default."
But then you hear the other set of pundits. They say, "Greece has to solve its fiscal problems by itself. The European Union CAN'T bail out Greece, because if it does, then it will have to bail out the other four countries as well."
Either prospect is very daunting. Greece and Portugal have small enough economies, but Spain has a very large economy, and either a bailout or default would bring down the euro currency.
The panic buying of CDSs caused investors to panic over the euro currency as well. Reuters reports that the euro plunged to a seven-month low against the dollar on Thursday on concerns over the debt levels of the eurozone countries.
Now, as we've explained several times in the past, last year's stock market bubble was caused by the "carry trade" -- traders borrowing dollars at zero percent interest rates, and investing them in stocks, commodities, and other assets. Now, with the dollar strengthening, traders are scrambling to sell their assets in order to pay back the borrowed dollars.
The result was that Asian, European and North American stock markets all fell around 2%.
From the point of view of Generational Dynamics, this trend toward financial crisis is unstoppable. The survivors of the 1930s Great Depression were so traumatized by the starvation and homelessness that surrounded them that they mostly avoided debt for the rest of their lives. As they disappeared, and were replaced by Boomers and Generation-Xers, all the abusive practices that led to the Great Depression were repeated, and are still going on today. This behavior will not change until the new generations are traumatized by starvation and homelessness.
To give you a better idea of where we're headed, spend a couple of minutes with this video of one of the iconic songs of the Great Depression, Bing Crosby singing the 1931 song, "Brother, Can You Spare A Dime?":
According to Reuters, Moody's rating service is saying that it might have to lower the AAA rating on America's debt.
(Comments: For reader comments, questions and discussion, see the 5-Feb-10 News - China's nationalism and real estate bubble grow thread of the Generational Dynamics forum. Comments may be posted anonymously.) (5-Feb-2010) Permanent Link
Iran plays "cat and mouse" with nuclear politics.
Wednesday was report card day for Greece, and apparently the grade was "Pass."
Greece's Prime Minister George Papandreou has proferred a deficit reduction program, and the European Commission has recommended that the EU finance ministers endorse it, according to Bloomberg. Papandreou's plan raises taxes, raises the retirement age, and freezes public sector wages, breaking his campaign promises last year.
On one side, you have the public sector unions that have vowed to stop Papandreou's plan by having a major strike and street demonstrations planned for February 10. Greece has a history of settling political issues in the streets.
On the other side, you have the other EU countries, who are very distrustful of Greece, because of alleged lying in years past about deficit figures. They're expressing willingness to bail out Greece, but only if Greece makes further concessions, and only if Greece agrees to a continuing third party audit of their books.
Each side thinks that the other will be forced to back down, because it's thought that a default by Greece's government would spread to other countries, and might be the end of the euro currency.
This is "Europe's big game of chicken," according to Mohamed El-Erian, CEO of Pimco, the world's largest bond fund, in a Bloomberg interview on Wednesday. In another interview, El-Erian said that stock prices should slump in 2010, because investors are too optimistic about sovereign debt in Greece and other countries, including the US.
"Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes," according to El-Erian. "The global financial crisis has undermined growth and job creation; it has clogged many of the pipes that allocate funds to productive uses; and it has rapidly taken public debt and the budget deficit to worrisome levels."
February 11 is the 31st anniversary of the start of Islamic Revolution of 1979, and it provides a fresh opportunity for Iran's "Green" opposition movement to protest against the hardline government. The NY Times reports that two opposition leaders, Mehdi Karroubi and Mir Hussein Moussavi, have both called for non-violent protests.
If the December protests are any guide, then the government's Basij militia will use teargas, beatings, arrests, and possibly gunfire in an attempt to stop the protests.
So, with protests planned for Greece on Wednesday, and in Iran on Thursday, next week ought to be interesting.
On Wednesday, Iran demonstrated an advanced ballistic missile program by sending a rocket into space carrying a mouse, a turtle and two worms. President Mahmoud Ahmadinejad claimed that the animals will return to earth unharmed.
This reminds everyone that if Iran can send animals into space, then they may be able to send nuclear weapons to London or New York.
So, on the same day, Ahmadinejad made a small concession on the nuclear issue, by agreeing to ship some of its uranium for processing abroad, in accordance with a deal discussed last year.
According to an analysis in Times Online, Ahmadinejad is playing a game of "cat and mouse," buying time by making a small concession in one area to hold off further Western sanctions.
Ahmadinejad is not making the same mistakes that Saddam Hussein made. In 1991, after Saddam had invaded Kuwait, the US-led coalition forces were lined up, ready to invade and take back Kuwait. All Saddam had to do was back down and offer to leave Kuwait, and the invasion wouldn't have taken place. But he was incredibly stubborn, so the invasion occurred. A similar stubborness occurred in 2003 with WMD inspectors.
Ahmadinejad learned that lesson. All he has to do is make a small, meaningless concession, and the West has to back off from whatever they've been threatening.
This difference between Saddam and Ahmadinejad even fits their generational archetypes. Saddam was of the same generational archetype as our Generation-X, so we'd expect him to be nihilistic. Ahmadinejad is in the same generational archetype as our Millennial Generation (Generation-Y), so we'd expect him to a realistic warrior. And both of them fit their profiles very well.
New research is beginning to show that when a home's value falls below 75% of the amount owed on the mortgage, owners start walking away and allowing the bank to foreclose, even if the owner has the money to keep on paying, according to the NY Times.
The Samsonadzes is the Georgian version of the American TV show, The Simpsons. According to the BBC, the show became controversial and popular when it started mocking Vladimir Putin.
(Comments: For reader comments, questions and discussion, see the 4-Feb-10 News - Europe plays chicken, Iran poised for bloodbath thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Feb-2010) Permanent Link
Chess champion Garry Kasparov explains how computers and humans can work together.
Tensions between the US and China continue to increase. First there was the bitter division at December's climate change conference in December, then there were the mutual recriminations over internet freedom following Google's accusations, and last week there was Washington's announcement of arms sales to Taiwan.
On Tuesday, an Obama administration official confirmed that the President plans to meet with the Dalai Lama in April, according to Bloomberg. Obama had put off a similar visit a few months ago to avoid antogonizing the Chinese, but now, in the current spirit of mutual brinksmanship, the meeting is on.
A Washington Post analysis of the rising tension between the two countries says that China is becoming "newly combative," simply because the US owes China so much money:
"It therefore has become more assertive and uncompromising and self-confident, such that its actions seem arrogant to many," Friedman said. ...
"The fact that Beijing is Washington's banker is not lost on the Chinese government," said Oxford University China scholar Steve Tsang."
So, according to the article, China's government has become combative, assertive, uncompromising, self-confident and arrogant.
And yet, there's little doubt in my mind that if you were to ask a Chinese official, he would use exactly the same set of adjectives to describe the US government.
This rising level of confrontation could not have happened 5-10 years ago, because at that time senior officials in both countries had more survivors of the last generational crisis war (WW II and Mao's Communist Rebellion, respectively).
In America, the survivors of the Great Depression and WW II were originally called "Depression Babies," but in the 1950s, Time Magazine started calling them the Silent Generation, because they didn't complain about anything, they did their jobs professionally, and they were very conciliatory.
Now the Silent Generation is gone, and arrogant, incompetent Boomers are the senior officials, and most of the top-level managers are the nihilistic Generation-Xers.
The same kind of generational change is going on in China.
That's why both sides are increasingly combative, assertive, uncompromising, self-confident and arrogant. And that trend will continue until some kind of misunderstanding or miscalculation leads to war. That's what generational theory tells us.
Besides Bobby Fischer, Garry Kasparov has been the most colorful world chess champion in the last 80 years (since José Raúl Capablanca in the 1920s). Kasparov held the world chess championship in the 1980s and 1990s, and is considered by some to be the greatest chess player of all time.
Garry Kasparov is still in the news from time to time, but not necessarily for chess. He's known as a political opponent of Russian Prime Minister Vladimir Putin, and he heads several activist political organizations in Russia. When he gets into the news these days, it's sometimes because the Russian police have arrested him for his activism.
Now he's written a philosophical article for The New York Review of Books about computers and chess, including his own experiences in beating, and later losing to, the world's greatest chess-playing computers.
The most fascinating portion of his article has to do with experiments in chess tournaments where humans and computers collaborate.
Normally, chess players in tournaments are forbidden from using computers to help them, for obvious reasons. Then there are other tournaments where humans play against computers, or computers play against computers.
Lured by the substantial prize money, several groups of strong grandmasters working with several computers at the same time entered the competition. At first, the results seemed predictable. The teams of human plus machine dominated even the strongest computers. The chess machine Hydra, which is a chess-specific supercomputer like Deep Blue, was no match for a strong human player using a relatively weak laptop. Human strategic guidance combined with the tactical acuity of a computer was overwhelming.
The surprise came at the conclusion of the event. The winner was revealed to be not a grandmaster with a state-of-the-art PC but a pair of amateur American chess players using three computers at the same time. Their skill at manipulating and "coaching" their computers to look very deeply into positions effectively counteracted the superior chess understanding of their grandmaster opponents and the greater computational power of other participants. Weak human + machine + better process was superior to a strong computer alone and, more remarkably, superior to a strong human + machine + inferior process."
The significance of this experiment is its application to computer-assisted warfare.
Labs in countries around the world are developing intelligent devices that will fight wars and kill people. You can be absolutely certain that the Chinese, the Japanese, the Koreans, the Indians, the Russians and the Europeans, and probably a lot of others are all doing their own development in this area. Our DoD has announced the first generation of intelligent battlefield computers for 2015. It seems all but certain that before the end of this decade, there will be battles, and possibly entire wars, fought where intelligent soldier robots of some kind will be killing enemy soldiers based on their own decision making.
Kasparov's description of human+computer decision making provides lessons for how intelligent computers will first be used in warfare.
At some point in the 2020s, super-intelligent computer soldiers will be able to work completely autonomously in war. But before that point can be reached, computers will still need guidance from humans.
In my lengthy book chapter, "Chapter 7 - The Singularity," I defined what computer intelligence is, and I described the software algorithms that will be necessary to implement computer intelligence. However, these algorithms will require very powerful computers, and those won't be fully available until the 2020s. In the meantime, my algorithms will have to be modified to make it easier for computers to make decisions based on guidance from humans. That will be the process that will be used for the next decade or two. After that, computers will be intelligent enough so that they won't need any more guidance from humans.
Oscar the cat works in a nursing home in Providence, Rhode Island, and has the uncanny ability to predict the death the imminent deaths of its patients, according to The Telegraph. If Oscar comes to cuddle with you, it means you probably won't wake up.
More charges of fraud by climate change scientists. An investigation by The Guardian reveals that these scientists purposely withheld flaws in their data about about 42 weather monitoring stations in parts of China. The data from these stations purportedly implied that temperatures were rising in rural China, but now it turns out that they may have been located in cities with large populations.
Mir Moussavi, the opposition leader who supporters claim was the real winner in last June's presidential elections in Iran, is becoming increasingly harsh in his criticism of Mahmoud Ahmadinejad and the hardline government, according to The NY Times. There are some real questions about how long he can keep this up before he's arrested for treason.
(Comments: For reader comments, questions and discussion, see the 3-Feb-10 News - China objects to Obama's meeting with Dalai Lama thread of the Generational Dynamics forum. Comments may be posted anonymously.) (3-Feb-2010) Permanent Link
Greece faces another crunch.
After the budget deficit tripled in 2009 to $1.4 trillion, the Obama administration has announced that the 2010 budget will increase even further, to $1.6 trillion. But don't worry, folks, they've promised to reduce it in 2011 to a mere $1.3 trillion.
Two years ago, I wrote the article, "One, Two, Three ... Infinity," in which I compared to the ever-increasing government spending plans to a book by George Gamow that I read in school in the 1950s. My use of that particular phrase was to convey the idea that American debt was on an exponential growth path that would not be stopped except by a major financial collapse and crisis.
That's exactly what's going on. The exponential growth of the budget deficit is generational, and cannot be stopped by politicians.
Thus, President Obama's speech on the budget on Monday had the makings of a macabre joke. First, there's this:
This is total nonsense. The budget surplus of the late 1990s occurred because of increased taxes collected from the dot-com bubble. The dot-com bubble collapsed in 2000, the last year of the Clinton administration, and that's when the deficits started growing. Since then, the deficit has barely been affected at all by spending; the main factor was tax income, as I explained several years ago.
And that brings us to the next point. President Obama's claim that the deficit will start coming down in 2011 is based on the assumption that the economy will start growing rapidly by then -- i.e., that the old credit and real estate bubbles will start to grow again. That's not going to happen. As I wrote recently in "Report from TARP Inspector: We're driving off a cliff in a faster car," the economy is going to plummet sharply.
So the $1.6 trillion deficit in 2010 and the $1.3 trillion deficit in 2011 are vast underestimates. The deficit is going to continue its exponential growth until there's a catastrophic financial crisis, which can't be too far off now.
Here's another paragraph from the President's speech:
Look at this paragraph, Dear Reader, and see for yourself how moronic it is. There's going to be a freeze in government spending -- after government spending was substantially increased last year, so the freeze is at last year's ridiculously high levels. And the freeze doesn't apply to the biggest portions of the budget; just to some discretionary programs.
Is there any proposal that's too ridiculous to be endorsed by President Obama?
I suppose that I shouldn't be unkind. After all, President Obama has almost no control over the budget deficit, any more than President Bush or President Clinton did. These things are caused by tax collections, by Congress, and especially by ups and downs of the economy. In recent years, that's meant that the growing and bursting of bubbles have been the main factors.
Exactly the same kind of deficit song and dance is going on in Greece.
Wednesday is an important crunch day for Greece, according to EuroIntelligence, quoting FT. The EU is going to demand that Greece make big reductions in its public sector pay. There isn't a snowflake's chance in hell that Greece's public sector labor unions will ever let that happen.
The phrase "One, Two, Three ... Infinity" applies to Greece, as well as to America.
A very good overview of the Greek fiscal crisis can be found in a Reuters Factbox.
A fishing dispute between Canada and Denmark is heating up, according to the National Post. It turns out that Canada is complaining that Denmark is overfishing in Canadian waters.
49 Congressional websites were hacked over the weekend, according to Dark Reading.
The BBC is reporting that China is threatening sanctions against Boeing, since Boeing planes are included in the announced US arms sale to Taiwan.
Envoys from the Dalai Lama are in Beijing meeting with the Chinese government over the question of Tibet's autonomy. But The Hindu reports that the Chinese are unwilling to make any concessions at all. This isn't surprising, since China's government is becoming increasingly confrontational and less conciliatory, as younger generations take positions of power.
(Comments: For reader comments, questions and discussion, see the 2-Feb-10 News - Budget deficits continue to infinity thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Feb-2010) Permanent Link
TARP inspector reports to Congress
The Quarterly Report to Congress by the Obama administration's Special Inspector General for the Troubled Asset Relief Program (SIGTARP), finds that all the abusive practices that led to the financial crisis that began in August 2007 are still being used. The inevitable logic is that a much larger financial crisis is yet to come.
See my complete analysis of this report in: "Report from TARP Inspector: We're driving off a cliff in a faster car."
The Baltic Dry Index is poised for another crash, according to an analysis on SeekingAlpha.
Recall that the Baltic Dry Index (BDI) is a measure of shipping costs for cargoes in "capesize" vessels -- vessels that are too large to fit through the Suez or Panama canals, and so must go around the Cape of Good Hope or Cape Horn. These vessels transport the huge cargoes of copper, iron ore and other commodities.
The Baltic Dry Index surged to bubble levels in early 2008, thanks to enormous Chinese demand for commodities prior to the Beijing Olympics in August. Once the Olympics games ended, Chinese demand plummeted, creating a chain reaction that brought world wide trade and transportation almost to a standstill. The Baltic Dry Index plummeted an astounding 95%. (See "World wide transportation and trade sink farther into deep freeze.")
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In the last year, the BDI regained about 20% of what it lost in the crash, but now a new analysis indicates that it's poised to collapse again.
During the boom of early 2008, everyone thought that the bubble would never burst, and orders were placed for 1400 dry bulk carrier vessels to be delivered in 2010. As the adjoining graphic shows, the rate of delivery for the vessels is many times higher than the normal trend rate in previous years.
This is just one more "thing" that's coming at us in the next few months. There's a huge, growing shadow inventory of unsold homes in the US, ready to trigger a housing panic. Large banks are taking enormous risks, counting on the belief that they'll be bailed out if there's trouble. China's bubble economy is close to bursting, and the "PIIGS" countries in Europe (Portugal, Ireland, Italy, Greece and Spain) are all nearing default on their bonds, also expecting to be bailed out.
Yemen government forces claim to have killed 20 Houthi rebels in a fight in the northern provinces.
The Houthi rebels have accepted the government's offer of a ceasefire, and have agreed to comply with the five conditions, according to a report by News Yemen.
The five conditions are "that the rebels disarm, withdraw from sites they control, reopen blocked roads in Sa'ada, hand over weapons and military equipment they have taken over, release captured troops and civilians and stop attacks on territories of neighboring Saudi Arabia," according to the article.
Well, actually that's six conditions, and according to an Al-Jazeera report, the Houthi rebels have not accepted the sixth condition, stopping attacks on Saudi Arabia.
Yemen is fighting on multiple fronts. There's a Houthi insurgency in the north, and al-Qaeda insurgency in the south, and a secessionist movement in the south. In order to keep the country from deteriorating into complete chaos, the US is becoming increasingly involved. (See "Yemen wars escalate rapidly, as US provides military support" and "US military 'deeply involved' in Yemen.")
This ceasefire offer is obviously a political dance being performed by the two sides. From the point of view of Generational Dynamics, this fight is in the approach to a generational crisis war, where short-term ceasefire agreements are typical, before the war bursts into full genocidal fury.
The biggest villain in today's financial crisis was the securitation of debt that created the "toxic assets" that were fraudulently sold to investors by Goldman Sachs and other banks. However, the securitization market is not new, according to the NY Times. Quoting a report by the National Bureau of Economic Research, the article says that the original wave of securitizations took place in the 1920s, when the United States went on the greatest building boom ever. The details were quite similar to what's happened in the 2000s.
Russia's southern province of Dagestan, in the Caucasus region, is moving towards a war of ethnic and religious violence, according to the NY Times.
Fear of Iranian missile attacks is spurring American sales of anti-missile systems to American allies in the Mideast, according to Times Online. Saudi Arabia, Qatar, Bahrain and Kuwait are the customers purchasing the system. The article says that the Obama administration sped up the sales after it became apparent that its conciliatory Iran strategy has failed.
Iranian President Mahmoud Ahmadinejad says the nation will deliver a harsh blow to the "global arrogance" on February 11, the anniversary of the Islamic Revolution, according to Press TV. Mark your calendars.
(Comments: For reader comments, questions and discussion, see the 1-Feb-10 News - Trouble for Baltic Dry Index, Yemen ceasefire thread of the Generational Dynamics forum. Comments may be posted anonymously.) (1-Feb-2010) Permanent Link
Japan's economy also deteriorating.
China's defense ministry has announced measures to retaliate for the US administration's announcement on Friday that it would sell $6.4 billion in arms to Taiwan, according to The Guardian. The measures include suspension of military exchanges with the US and sanctions on companies selling arms to Taiwan.
The arms sale will cause severe damage to overall China-US cooperation, according to Xinhua. The article points that the US is violating a joint communiqué issued on August 17, 1982. Indeed, the communiqué states:
7. In order to bring about, over a period of time, a final settlement of the question of United States arms sales to Taiwan, which is an issue rooted in history, the two governments will make every effort to adopt measures and create conditions conducive to the thorough settlement of this issue."
A lot has happened in the 28 years since the joint communiqué was issued. The US policy is to do nothing to disturb the status quo. China has repeatedly threatened war with the US, and is militarily preparing to take control of Taiwan by force. The US justifies the arms sales to Taiwan as necessary to balance China's military threat against Taiwan, so that the status quo can be maintained. Everyone recognizes that a China-US war over Taiwan could start at any time.
It's thus worthy of note that US-China relations have deteriorated significantly in just the last seven weeks, when Chinese President Hu Jintao snubbed Barack Obama at December's climate change conference in Copenhagen. Since then, the US State Department has sided with Google in their dispute with China, and has openly criticized China's lack of internet freedom. Now the Taiwan arms sale and China's announcement of retaliation have made relations even more tense.
You can see one of the reasons why I've been so critical of Barack Obama before and after the election. He gives these great oratorial speeches where he makes absolutely ridiculous promises and commitments that can't be fulfilled. (See "After a week of foreign policy disasters, President Obama's entire program is adrift.") Now some of those promises are really biting him in the ass, and we're all paying for it.
A Washington Post analysis of the deterioration says that China's actions have "befuddled Western officials and analysts," who wonder whether it's a change in policies or just a change in tone. The article offers the following explanation:
From the point of view of Generational Dynamics, this explanation is bizarre in its naïveté. China is going through a major generational change, just like the US. The top level leaders are from the generation of survivors of the the last crisis war, Mao's Communist Revolution, and they're like our Silent Generation, looking for compromise and conciliation. But more and more, younger generations are making all the day to day decisions, just as Generation-X is doing in the US. And those younger generations are going to be more confrontational and less conciliatory.
That's why we're seeing a change in tone from BOTH the US and China. BOTH sides are being more confrontational. BOTH sides are moving closer and closer to "crossing the line."
This is not a "yo-yo" kind of trend, where things get bad for a while and then get better for a few years. There are minor ups and downs, of course, but the major trend is toward greater and greater confrontation, shock and anger. Generational Dynamics predicts that China and the US is headed for a "Clash of Civilizations" world war, and that could be triggered at any time.
Japan's consumer prices in December fell at the fastest rate since records began in 1971, leaving many analysts worrying that Japan is in the midst of a new deflationary spiral, according to the Financial Times. Furthermore, preliminary data from January shows that declines are accelerating.
I'm actually surprised by this. In 2007 I wrote "Japan's real estate crash may finally end after 16 years." Recall that Japan had an enormous real estate bubble in the 1980s, so large that at the time it ended, the nominal value of Tokyo's real estate was greater than the nominal value of all the property in the United States.
By 2007, 16 years had passed since the bubble burst and Tokyo's stock exchange had crashed. I felt that Japan's deflationary spiral must finally be over, and prices would start increasing again. But this week's news caps a period of increasing deflationary pressure in Japan.
My explanation for this is the same as I wrote last April in commenting on theories of Richard C. Koo, Chief Economist at Nomura Research Institute. (See "Fiscal stimulus programs in 1930s and today.")
Even though Japan went through a major financial crisis, including stock market and real estate crashes, they were able to avoid a great deal of suffering simply by developing an export economy that took advantage of the economic bubbles in China and the United States.
Apparently their financial crisis hasn't yet been painful enough, and there is a lot more to come.
Critical infrastructures worldwide, especially oil and gas, electrical, and telecommunications companies, are under constant cyber attack, according to Dark Reading, and the threat is growing. The cost of downtime incurred from an attack is $6-8 million per day.
France is very close to permanently banning women from wearing a veil or burqa, according to France24. This has spurred a national debate about discrimination against women and discrimination against Muslims.
Learning a foreign language is easier and cheaper than ever, thanks to courses offered over the internet, according to NY Times. Firms offering courses include Rosetta Stone, TellMeMore, Livemocha, Babbel and the BBC.
(Comments: For reader comments, questions and discussion, see the 31-Jan-10 News - US-China relations deteriorating thread of the Generational Dynamics forum. Comments may be posted anonymously.) (31-Jan-2010) Permanent Link
US will sell $6 billion in arms to Taiwan, infuriating China.
I watched a couple of hours of the questioning of Tony Blair on the BBC on Friday morning, and I noted that the Iraq War Inquiry commissioners asked Blair a lot of tough questions, but they never laid a glove him.
It was discouraging to me that this inquiry even has to be held, and even more discouraging because of the loons outside the meeting hall calling Blair a liar and war criminal. Blair was cleared of all those charges in 2004 in the the Hutton Inquiry, but the loons still persist.
The most important thing that I heard Blair say didn't even appear in the BBC story, but does appear in the Reuters coverage:
This paragraph is a devastating response to the loons, but they're apparently incapable of even the simplest coherent thought.
I've made the point in the past that the only reason we know that Saddam had no weapons of mass destruction (WMDs) is because of the invasion. Obviously, therefore, if there had been no invasion, then we still wouldn't know to this day. This continuing uncertainty would have destabilized the entire region, and might well have triggered an attack on Iraq by either Israel or Iran.
But Blair carries this a lot farther. My assumption was that if there had been no invasion, then the status quo (uncertainty) would have continued. But Blair points out that it was not a choice between invasion and status quo. Without the invasion, it would have been politically impossible to continue the sanctions and inspections. And once the inspections ended, Saddam had every intention of reconstituting his WMD program.
So without the invasion, we would have had Iraq developing WMDs. Saddam had used WMDs during the Iran/Iraq war, and so Iran would have sped up its own program to develop its own WMDs. There might even have been similar nervous reactions in Saudi Arabia, Turkey and Syria.
So, without the invasion, we might have several countries in the region developing nuclear weapons and other WMDs.
This is so obvious, but even the simplest reasoning appears to be out of reach of the loons.
Meanwhile, the Obama administration is getting into a situation in Afghanistan that is possibly even more dangerous than the Iraq situation was. Like Blair, Obama will eventually have to face questioning about every word in every sentence he says about the subject.
The government in China is furious over the Obama administration's announcement, on Friday, of $6 billion dollars in weapons, including Patriot anti-missile systems, helicopters, mine-sweeping ships and communications equipment to Taiwan, according to a report in the Washington Post.
I would guess that the anti-missile systems are to be used to defend against the 1500 or so missiles that China is ready at any time to launch at Taiwan.
China was "strongly indignant" about the arms sales to Taiwan, according to the article, and warned that they would have a "serious negative impact" on U.S.-China cooperation. China may sanction US companies, and the planned visit of Chinese President Hu Jintao to Washington in April may be canceled.
A commentary in Financial Times Deutschland (translation) says that negotiations are going on for an EU bailout of Greece, despite the fact that such a bailout would violate the EU constitution. However, German Chancellor Angela Merkel opposes a bailout because of Greece's history of lying about deficits.
But the talk of bailout encouraged investors, and pushed down credit default swap prices slightly from their historic highs, according to Bloomberg. (High credit default swap prices indicate an investor belief that Greece is going to default on its bond payments.)
Iran's hardliners are about to purge Ali Akbar Hashemi Rafsanjani, the remaining high-level moderate among the Islamic Revolution survivors, from his government post, according to an analysis in the Asian Times. From the point of view of Generational Dynamics, however, this will only outrage the opposition further, as Iran is in a generational Awakening era. (See "Theological split in Iran widens as opposition protests continue.")
(Comments: For reader comments, questions and discussion, see the 30-Jan-10 News - Tony Blair faces questions about Iraq thread of the Generational Dynamics forum. Comments may be posted anonymously.) (30-Jan-2010) Permanent Link
Ben Bernanke is confirmed
It's an interesting chain reaction.
Yesterday we mentioned the rumor that Goldman Sacks was putting together a deal where China would buy Greece's bonds, after Greece's public sale had been at very high interest rates. (The Greek newspaper Kathimerini (translation) contemptuously calls them "usurious.")
The rumor has been firmly denied by Goldman, by Greece, and by China.
That caused investors to become anxious over Greece's and Portugal's worsening budget deficit crises, with the prices of credit default swaps reaching fresh record highs on Thursday. The euro fell sharply against the dollar, reaching its lowest level since July 14, according to Bloomberg.
Now, let's recall how many pundits explained the unexpected stock market rally last year. (See, for example, "Nouriel Roubini apparently is predicting a global market crash.")
Last year's new stock market bubble was driven by massive stimulus spending by the government. With Treasury interest rates effectively zero, investors borrow money at zero percent interest rates and invest the money in commodities and stocks, or in foreign currencies paying higher interest rates. This is a typical "carry trade" scenario, especially since the stimulus spending caused the dollar to weaken against other currencies.
Once the dollar begins to strengthen again, the above reasoning reverses. Investors who borrowed cheap dollars rush to pay back the loans before the dollars become even more expensive. In order to pay back the dollars, they have to sell the assets they purchased with the cheap dollars, including stocks.
So that's the chain reaction:
The Greek deficit crisis is increasingly turning into a euro currency crisis. Whether it fizzles or gathers steam will affect a lot more people than the Greeks.
The opponents of Ben Bernanke's nomination claimed that he caused the real estate bubble that caused the financial crisis, or at least that he was oblivious to the danger.
These are idiotic reasons. He couldn't have caused the real estate bubble, because the world wide real estate bubble began in the mid-1990s. (See "The global housing bubble began in the mid-1990s." and "The housing bubble began in 1995.")
It's true that Bernanke was oblivious to the bubble, and I've been bitterly critical of him for that, but all the people criticizing were even more oblivious than he was.
One thing that's absolutely hilarious about this situation is that the analysts, journalists, politicians and economists who are now criticizing Bernanke were saying really stupid things at the time, like "There can't be a housing bubble, since everyone has to live somewhere." You didn't have to a rocket scientist to know that there was a real estate bubble, since I was writing about it on this web site in 2004. (See "Real estate is in an overpriced bubble all over the world.")
These people, who are now criticizing Bernanke, are simply hiding their own complicity in the bubble. Those who were able to got as much as they could out of the bubble -- money or political power. Having acted without a shred of ethics, they're now blaming Bernanke.
What's past is past, and now we're approaching a major new financial crisis. If Bernanke hadn't been confirmed, then the choice might have gone to some political hack, like Larry Summers or Paul Krugman. Ben Bernanke is the best person I can see on the horizon to help us get through the coming catastrophe.
The Financial Times says that "An explosion in trading propelled by computers is raising fears that trading platforms could be knocked out by rogue trades triggered by systems running out of control." I wrote about this last year. (See "The Bubble Algorithm - How computers and herd behavior are inflating the stock market bubble.")
The climate scientists who were exposed by the hacked "climategate" e-mail messages last year were apparently breaking the law, according to The Telegraph. They were illegally hiding or destroying data that they were required to reveal under Freedom of Information laws.
When there's nothing else to blame, then blame video games. Well, Dungeons and Dragons isn't a video game, but prisoners in Wisconsin prison are being forbidden from playing it because it "could lead to gang behavior and fantasies about escape," according to the NY Times. Hmmmm. I wonder if when bankers are in jail they're forbidden from playing "Monopoly"?
(Comments: For reader comments, questions and discussion, see the 29-Jan-10 News - Greece financial crisis spreading thread of the Generational Dynamics forum. Comments may be posted anonymously.) (29-Jan-2010) Permanent Link
Portugal, Italy and Spain aren't far behind.
U.S. military teams and intelligence agencies are deeply involved in secret joint operations with Yemeni troops, according to reporting by The Washington Post. The American advisors do not take part in raids, but provide intelligence and weapons, as well as missile strikes from drones. Dozens of people have been killed in the past six weeks, including six of the 15 top regional al-Qaeda leaders, according to the US.
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The American military intervention is supported by the Yemen government but is kept secret because it's deeply disliked by the Yemeni people.
All of this is occurring in the context of a conference being held in London, attended by foreign ministers from the US, Britain, Saudi Arabia and 20 other countries. The purpose of the conference: What do we do about Yemen?
According to The Guardian, there is widespread alarm that al-Qaeda is finding safe havens in the country's "ungoverned spaces" – tribal areas beyond the reach of the Yemen's government. However, the ministers in London are pledging not to interfere in Yemen's internal affairs.
LOL.
Credit default swaps on Greece's debt jumped to record levels, according to Bloomberg. Rising credit default swaps on any form of debt means that investors believe that that form of debt is more likely to default.
As we mentioned yesterday, Greece's bond sale earlier this week required Greece to pay exceptionally high interest rates. Investors presumably were reacting to the possibility that the country is in a spiral of increasing debt from which it can't escape.
Rumors spread on Wednesday that China was going to help Greece out by buying $35 billion in Greek bonds, in a deal being put together by Goldman Sachs. However, Reuters reports that both Goldman and Greece denied the rumors.
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The Bloomberg story says that Greece isn't the only European country in trouble, as credit default swaps have also risen substantially on debt from Spain, Portugal and Italy.
Ohio is spending $1 million in stimulus money to put up signs that brag that Ohio is spending stimulus money, according to CNN. The signs cost as much as $3,000 apiece.
Employer told not to post advert for 'reliable' workers because it discriminates against 'unreliable' applicants, according to The Daily Mail.
(Comments: For reader comments, questions and discussion, see the 28-Jan-10 News - US military in Yemen, investors bet against Greece thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-Jan-2010) Permanent Link
Higher tensions between North and South Korea.
South Korea's Yonhap news service reports that North and South Korea have exchanged artillery fire across a disputed sea border in the Yellow Sea. "No casualties or injuries were reported as both sides fired toward the air and no fishing boats were then on duty."
This will probably fizzle out, as similar flare-ups have done in the past. But both countries are armed to the teeth, and are fully prepared for full-scale war with one another. The possibilities for panic, misunderstanding and miscalculation are large.
The Colombo Page newspaper, published in Sri Lanka's capital city, reports that Tuesday's historic presidential elections were peaceful, with little violence.
Many people had feared that the elections would trigger a renewed round of the civil war that lasted thirty years, between the majority Sinhalese ethnic group vs the minority Tamils. Voting was heavy in the southern Sinhalese regions, lighter in the northern Tamil region.
However, the The Independent is reporting that the vote will be close for the two candidates (both Sinhalese, both war heroes), and it may be the Tamil vote that decides the winner.
Following the Sri Lanka civil war has been exciting for me in the development of Generational Dynamics, since it's the first generational crisis war that I've been able to follow to its climax.
In 2006, the final peace agreement unraveled, and the 30 year old war transitioned into a full-fledged crisis war. (See "While world watches Lebanon, Sri Lanka goes to war.") It began its final phases early in 2008. (See "Sri Lanka government declares all out war against Tamil Tiger rebels.")
At that time, the war became increasingly genocidal on both sides. The Sinhalese government forces were increasingly willing to kill civilians, and the Tamil rebel forces were increasingly willing to use civilians as human shields. This is typical as a generational crisis war approaches a climax.
By early 2009 it was clear that the end was near, and that the Tamil rebels were close to defeat. Analysts at Stratfor, BBC, and other organizations predicted that since the war had gone on for 30 years, it would continue on even after a rebel defeat. I said, based on generational theory, that this would be a crisis war climax, and that the war would end. Generational Dynamics turned out to be 100% right, and Stratfor, BBC and the others turned out to be dead wrong.
There is no other web site like this one in the world.
I renew my challenge to anyone to find an analyst, journalist, politician or web site, anywhere in the world, with anything even remotely close to the predictive success of this web site. Other analysts' predictions are no better than chance; after seven years, Generational Dynamics predictions have proved to be almost 100% correct. The validity of generational theory has been proven by the consistently correct results posted on this web site.
The fall of Constantinople in 1453 ended the (Orthodox Christian) Byzantine Empire, and launched the (Sunni Muslim) Ottoman Empire. The Turks changed Constantinople's name to Istanbul, and made it the Caliphate for Islam (playing the same role as the Vatican in Rome for Catholicism).
When the Ottoman Empire collapsed after World War I, Turkey became a secular nation, and worldwide Islam lost its Caliphate. The 1940s was an Awakening era for the Arab/Muslim world, and it resulted in pan-Arab and Sunni Muslim nationalism. According to an intelligence report on Islam, published by the US military in 1946:
Now, a new analysis in the Asian Times, Turkey in recent years has been moving back to its Muslim roots, along with an "irreversible shift in Turkish foreign policy towards Israel, the United States and the Middle East as a whole."
The main signpost of this shift was the election of Prime Minister Recep Tayyip Erdogan from the Islamist AKP party. The article concludes:
The Washington Post says that Hugo Chavez's revolution is crumbling, referring to the virulently anti-American president of Venezuela.
Greece has avoided (i.e., postponed) an immediate financial crisis by selling $11.3 billion of 5-year government bonds at a very high 6.2% interest rate, according to Bloomberg. It will have to sell tens of billions of dollars in additional bonds this year.
"Lower your voice when taking calls in public." That's the first rule of cell phone etiquette, according to Computerworld.
(Comments: For reader comments, questions and discussion, see the 27-Jan-10 News - Sri Lanka elections, Turkey returns to its roots thread of the Generational Dynamics forum. Comments may be posted anonymously.) (27-Jan-2010) Permanent Link
China's oil imports reach "alarming levels"
In the last few days I've mentioned that higher terror alerts have been announced in the UK and India, but Debka points out that many more governments, some without fanfare, are implementing elevated terror security levels.
These include the following:
In addition, The Telegraph reports that terror experts are warning that Al-Qaeda has trained female suicide bombers to attack West. The women, who may have a "non Arab" appearance and be travelling on Western passports, have been prepared for their missions by Al-Qaeda in the Arabian Peninsula (AQAP).
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China's oil imports reached "alarming levels" in 2009, and are poised to surge even higher in 2010, according to Xinhua.
China imported 52% of its oil in 2009, and "importing more than 50 percent is a globally recognized level for an energy security alert," according to the article.
Most of China's imported oil comes from Saudi Arabia, as you can see from the adjoining graphic.
So it's not surprising that China and Saudi Arabia are deepening ties with one another. Xinhua reports that the two countries plan to cooperate on energy and infrastructure projects, and to foster cultural exchanges.
From the point of view of Generation Dynamics, this is consistent with the expected trend that the Clash of Civilizations world war will be fought by China and Sunni countries, including Saudi Arabia, versus the West.
By contrast, as we've mentioned a couple of times recently, Iran and China are not getting along well at all. Two years ago, we reported that China had 'betrayed' Iran. And recently, we've described a cyberwar between Iran and China. (Paragraph modified - 26-Jan-10)
At the same time, hostilities between Saudi Arabia have been growing. The two countries are supporting opposite sides in Yemen's war against Houthi rebels, and it's thought that Saudi Arabia may have provided support for last October's Jundullah terrorist attack in southeast Iran.
Thanks to intelligence gained from high-ranking defectors from Iran, officials in Washington and Europe are concerned about Iran's plans to develop nuclear weapons, according to a report by Der Spiegel.
Officials who have read the report conclude that the government in Tehran is serious about developing a bomb, and that its plans are well advanced.
From the point of view of Generational Dynamics, the fear is that at some point the Israelis will panic and attempt to attack Iran's nuclear research facilities. Whether this is even possible is in doubt, since Iran has hidden them deep inside mountains that may not even be reachable by bombing raids.
As we've been saying for years, Iran is a schizophrenic nation with a government that's anti-American and anti-West, but a young population that's pro-American and pro-West. Iran is in a generational Awakening era, and the continuing student protests can only end in a political victory for the young people. Thus, it's expected that, when Iran is forced to pick sides in the Clash of Civilizations world war, they'll side with the West, including America, Europe and Israel.
Teens are choosing to wait to get their driver's licenses, according to the Washington Post. More differences between the young Millennial generation and their parents.
Facebook is increasingly becoming a security problem for computer users, providing a path for careless users to have their personal information stolen or a computer virus installed. The NY Times has "The 3 Facebook Settings Every User Should Check Now."
Tensions are increasing again between North and South Korea, according to a report by the Korea Times. The South threatened to strike the North "right away" if the North shows a clear sign of attacking with nuclear weapons. A North Korea military official called this remark "an open declaration of war."
(Comments: For reader comments, questions and discussion, see the 26-Jan-10 News - Elevated terror alerts around the world thread of the Generational Dynamics forum. Comments may be posted anonymously.) (26-Jan-2010) Permanent Link
The same may be true of some investors.
My favorite metaphor these days is to be "willing to drive off a cliff to prove you're right."
The Republicans, who polls show are as unpopular as the Democrats, have no power, no strategy and no leader. This is turning out to be to their benefit, since it means that they keep their mouths shut most of the time.
But the Democrats appear to be so consumed with hatred that they're determined to commit suicide. Probably the poster boy for this suicidal hatred is MSNBC's ardent Obama supporter, Keith Olbermann. On the day before Tuesday's election of Republican Scott Brown as Massachusetts Senator, Olbermann said:
What does one make of such a hate-filled, self-destructive statement? Is Olbermann too stupid to know how much damage he's doing to the causes he claims to support? Or is Olbermann, born in 1959 on the cusp of Gen-Xerdom, just following basal nihilistic Gen-Xer instincts and destroying everything in his path just to improve his ratings?
Not that he's improving his ratings. Ratings of MSNBC and other mainstream news media are plunging like necklines in summer against the Fox News Channel (FNC).
In fact, Fox News is cleaning up against everyone, according to TV By the Numbers. On Election night, for example,
Now, FNC does indeed lean to the right, but not as far to the right (in my opinion) as CNN and MSNBC lean to the left.
And this is nothing new. I started watching CNN in 1980, when it first came on the air. Its coverage of the Gulf War in 1990 was spectacular. By the mid 1990s, it had the best international news coverage in the world, except perhaps for the BBC.
The turning point came in 1998, with the Tailwind Scandal, where CNN erroneously accused the U.S. military of using nerve gas in a mission to kill American defectors in Laos during the Vietnam War.
By the 2006 elections, CNN was turning the entire network over to the Democratic party. By spring of 2009, it had really hit bottom, as I wrote in "Vile 'teabagging' jokes signal the deterioration of CNN and NBC news." The practice of using unbelievably offensive "teabag" references to "tea party" supporters -- and this practice continues to this day -- continues to show how deep in the sewer mainstream media has gone, and how willing these so-called journalists are to drive off a cliff to prove that they're right.
President Obama the pragmatist would like to move toward the political center, but it's obvious that the loony left is not going to allow him to do so.
A good example is Paul Krugman, who used to be an economist decades ago, but now only plays one on tv. Here's what he wrote earlier this week:
Health care reform — which is crucial for millions of Americans — hangs in the balance. Progressives are desperately in need of leadership; more specifically, House Democrats need to be told to pass the Senate bill, which isn’t what they wanted but is vastly better than nothing. And what we get from the great progressive hope, the man who was offering hope and change, is this:
In short, “Run away, run away”!
Maybe House Democrats can pull this out, even with a gaping hole in White House leadership. Barney Frank seems to have thought better of his initial defeatism. But I have to say, I’m pretty close to giving up on Mr. Obama, who seems determined to confirm every doubt I and others ever had about whether he was ready to fight for what his supporters believed in."
This is quite a remarkable statement. Obama tries to move toward the center, and Krugman calls it "running away." And then Krugman says that he's going to give up on Obama. With friends like these, Obama doesn't need enemies. In particular, the Republicans can just sit back and enjoy the show.
Krugman won the Nobel Prize last year because he had the major qualification that the Nobel committee was looking for: He hated George Bush. If Krugman turns his back on Obama, do you think he'll win another Nobel prize?
The loony ideology of people like Krugman and Olbermann isn't President Obama's only problem. He also has to deal with journalists and pundits who adore him but are incredibly naïve. That was pretty clear listening to the Sunday news talk shows.
A good example today was Fareed Zakaria, appearing on his Sunday news show GPS on CNN. Zakaria is something of a contradiction these days. He's way over on the left politically, but he's not imbued with the sheer hatred of people like Olbermann and Krugman.
Zakaria is also a contradiction because he's well-read, well-studied, he knows a lot about what's going on in the world, and yet he seems totally unable to grasp what it all means. I first wrote about Zakaria in 2006 in "Learning-disabled journalists and politicians continue to predict Iraq civil war," quoting him as saying, "If you look at the last 3-4 months, it's absolutely clear that a civil war dynamic has set in. This is happening. ... The trend is moving in the wrong direction on every issue that relates to a building civil war."
Now of course Zakaria was 100% wrong about this. (See, for example, "Brookings Institution does a full reversal on Iraq war.") And Zakaria, who sports a broad teethy smile, turns out to be wrong about most things. But he still produces a good show on CNN on Sunday that's worth watching.
Today's show (transcript here) is a good example because it shows how a complete lack of understanding of generational theory leads you to dramatically wrong conclusions (as was the case with his Iraqi civil war theory).
Fareed and his guests looked to the experiences of past Democratic presidents to help them conclude what President Obama should do next. Here's how he introduced his show:
So, Obama's situation is not dramatically worse than many of his predecessors, which means it can be corrected.
But what should he do? I would put it very simply. Obama needs to start acting like a president, and particularly the president he campaigned to become.
For the last six months, Barack Obama has seemed to be not a president, but a prime minister. He has not outlined a broad vision for the country and put forward grand plans to solve the nation's problems."
I cannot imagine a more dramatic misreading of what's going on. he says that Obama "has not outlined a broad vision for the country and put forward grand plans to solve the nation's problems."
Huh?
Obama was nothing BUT broad visions. He was going to heal the world with his mere presence -- cure global warming, provide universal health care, close Guantanamo, leave Iraq in peace, bring a two-state solution to Palestinians and Israelis, beat the Taliban in Afghanistan, restore the stock market bubble, and dismantle President Bush's war against terror. Nothing was beyond his reach. Unfortunately it now turns out that he was "all hat, but no cattle," (as the midwesterners like to say), but no one can credibly claim he had no broad visions. He was just in over his head.
But the most interesting part of Zakaria's theory are his comparisons to past Presidents. If he knew even the simplest facts about generational theory, he wouldn't compare President Obama, governing during a generational Crisis era, with Presidents who governed in generational Awakening and Unraveling eras. There simply is no basis for comparison.
In particular, let's move forward in the tv show to some statements by one of his guests, Robert Caro, a biographer of President Lyndon Baines Johnson (LBJ).
Caro's comparison of LBJ to Obama is so out of touch with reality, it's bizarre. Caro wants Obama to push health care reform through Congress with the same kind of "legislative genius" that LBJ used to get the Civil Rights act through Congress. In particular, he describes how he got cooperation from some Southern Democrats, who normally sided with the Republicans. He describes how LBJ did it:
Johnson needs 10 or 12 votes that he can deliver to the South. He says, what can I find? He finds the Western Democrats. What do they want? He says, I have to find something that 12 senators want enough to go along with the South on this.
And he finds Hells Canyon Dam on the Snake River, which divides Idaho or Oregon. He says, they've been fighting for this for 20 years for federal power. The South, if I can get Richard Russell, the head of the Southern Democrats, to agree to give them Hells Canyon, the South will let the bill move forward to the next level.
And he gets 12 votes.
If we had seen a stroke of genius like -- what else is legislative genius? Johnson is on the floor during this...
There's a moment where he's going to lose. There's about to be a vote called. He's going to lose. He's standing next to the senator from New Mexico, Clinton Anderson, and he sees that Anderson, a liberal, has been doodling on a paragraph, and changing it around.
And he says, "That'll work." He says, "Introduce it, introduce it now."
And Anderson says, "I can't introduce it. I'm too liberal. They won't trust me."
He says, "Get a good Republican."
He looks around and he says, "Get Aiken." George Aiken of Vermont ... who was working on it. He says -- Aiken introduces it, and the bill passes.
We don't see legislative genius like that anymore, I'm sorry.
It's an interesting story, about "horse trading" to get legislation passed, and Caro wants Obama to do the same kind of thing that LBJ did.
Why is this historian so dense? Why doesn't it occur to him that this comparison makes no sense, because the country was so different in 1965?
In 1965, the country was still on a "high." We had beaten the Great Depression, and we knew we could do it again if we had to. We had beaten the Nazis, and we knew we could do it again if we had to. The country was very confident about itself.
The leaders in Congress at that time were people whose fathers had fought in the Civil War. Abraham Lincoln and the Republicans had fought the South, and had freed the slaves. The Democrats had opposed fighting the war, and were feeling "liberal guilt" for having done so. The Southern Democrats were a special case. They were philosophically close to the Republicans, but couldn't be in the political party that had beaten the South.
The country was well into a general Awakening era. It had been launched two years earlier, in the great civil rights march on Washington in 1963, led by Martin Luther King. Then, in 1964, the beloved President John Kennedy had been assassinated.
This was also a time America transitioned from a "Protestant nation," with prejudice against Catholics and Jews, into a country of "religious equality." (See my 2006 article, "President George Bush talks about a 'Third Awakening,' but he has his history wrong.")
So this is the world that LBJ operated in.
Everything's upside down today. There's enormous anxiety over the economy and over terrorism. There's no "guilt" over health care. There's no sense of unity from having beaten a common enemy.
LBJ's "legislative genius" was more a product of generational era than of anything else. His "horse trading" worked because the climate was right.
Obama has been trying "horse trading" as well, to get the health care bill passed. LBJ's "Hells Canyon Dam" may have been a stroke of genius, but the numerous corrupt deals (known as the "Louisiana purchase" and the "Cornhusker's kickback") are only provoking anger today.
Caro, Zakaria, Krugman and the others are all living in the past. They're dreaming of the 60s, 70s, or 80s, when the GI and Silent Generations were still in charge, and compromise was still possible, because there was a sense of common purpose. There's no such sense of common purpose today, so LBJ's "horse trading" cannot possibly work.
What we're seeing here is generational theory and Generational Dynamics in action. This kind of political bickering is standard fare at the beginning of a generational Crisis era. For example, you can can google "FDR scandals," and you'll see that the political bickering for Franklin Roosevelt was equally bad. But once the Pearl Harbor attack occurred in 1941, the nation began to unify behind the President.
An event like the Pearl Harbor attack is called a "regeneracy event" in generational theory. It's an event that regenerates civic unity for the first time since the end of the preceding crisis war, World War II, in this case.
(For information about the term "regeneracy" and about generational eras, see "Basics of Generational Dynamics.")
Today, the country is almost just waiting for a "regeneracy event." It might be a terrorist attack on American soil, or it might be an overseas military disaster. But whatever it is, it will end the bickering, and regenerate civic unity again.
Universal health care may be dead for now, but it's not dead forever. This is the wrong time for this kind of legislation. In September I called Obama's bill a proposal of economic insanity, because it's basically a rehash of President Richard Nixon's wage and price controls, applied to health care. That was a disaster, and Obama's proposal is sure to be as well.
If you want to reduce health care costs, then the only way to do it is to increase the supply of health care services -- more doctors, nurses, hospitals and equipment. Obama's health care proposal does the opposite. But once the Clash of Civilizations world war is over, in 5-10 years, then universal health care will revived, and it will pass. And President Obama may still get some of the credit.
What I've been describing in politics and media also appears to be happening in the investor community. Here's how "xakzen" described it in the Generational Dynamics forum:
I've noticed this stratification as well. The stratification seems to be similar to the political split between Republicans and Democrats. Each side is absolutely convinced the other side is wrong, and is willing to drive off a cliff to prove it. I can't prove it, but I believe that the stratification among investors is related to the divisions among politicians.
If you listen to CNBC or read the Wall Street Journal, you could easily believe that all mainstream financial pundits are agreed that the only direction is up with the stock market, or that the worst that will happen is a minor new recession.
That actually isn't true. There are quite a few mainstream financial experts who believe that the situation is far more serious.
A web site reader pointed me to an article entitled "12 'Dr. Dooms' warn Wall Street's optimism misleads, will trigger new crash."
For example, according to the article, Money manager Jeremy Grantham warns that our irrational nightmare will repeat. A year ago we came dangerously close to the "Great Depression 2." Unfortunately, we've "learned nothing ... condemning ourselves to another serious financial crisis in the not too-distant future." We had our bear-market rally. Next, historical cycles plus our irrational behavior guarantees another, bigger global meltdown. We "learned nothing." There are 11 more like that in the article.
Why don't we hear from these people more often on CNBC and in the Wall Street Journal?
We actually have an analogy for that if we look at climate change scandal that was triggered by the release of thousands of hacked e-mail messages from climate change scientists. The hacked e-mail messages showed a pattern of deception and fraud by these "scientists." The scientists urge one another to smooth over data and hide unfavorable data; to enforce a unified view; and to blackball scientists with opposing views.
The same kind of massive corruption happened in Washington in the negotiations for the health care bill that passed the Senate. And when last Tuesday's Massachusetts election blew things apart, the mainstream media has been filled with oozing contempt for Scott Brown. The most extreme example, of course, is MSNBC's Keith Olbermann, calling him an "irresponsible, homophobic, racist, reactionary, ex-nude model, teabagging supporter of violence against woman."
Thus, Tuesday's election has performed the same role for the health care bill that the hacked e-mail messages did for climate change. In both cases, the mainstream politicians and the mainstream media had overwhelmingly adopted the "politically correct" position -- supporting climate change legislation and supporting the health care bill. And in both cases, the mainstream politicians and media simply showed contempt when the corruption was exposed.
But what about investors? Is it really even possible that Democratic supporters are more invested in the current stock market than Republicans?
There are certainly some obvious examples of that. Warren Buffett seems almost erotically in love with Barack Obama, and he's been saying loudly and often that the worst is over.
But that's just one example. Is there a trend? I actually suspect that there is, but I have no way of proving it or disproving it.
One thing's for sure. Just as the hacked e-mail messages caused the climate change support to collapse, just as the election of Scott Brown signaled the end of health care legislation, the coming financial crisis will be a devastating blow to investors who believe that it's ok to invest in a stock market with a P/E ratio over 80, just because Barack Obama is President.
(Comments: For reader comments, questions and discussion, see the President Barack Obama thread and the Financial Topics thread of the Generational Dynamics forum. Read the entire latter thread for discussions on how to protect your money.) (25-Jan-2010) Permanent Link
Theologians ask: Why did God punish the Haitians with an earthquake?
American Secretary of Defense Robert Gates is confronting a nominal contradiction in American foreign policy, according to an analysis in the Los Angeles Times: How could the US be selling military weapons to both Pakistan and India, especially when the US is concerned about a possible war between the two countries?
According to the article, the strategy is as follows:
However, Generational Dynamics predicts that India and Pakistan are headed for a new war re-fighting the massive war that began after Partition, the 1947 partitioning of the Indian subcontinent into India and Pakistan.
We mentioned this briefly yesterday, but few details were known beyond the fact that it means that chance of a terrorist attack is now "highly likely," instead of merely being "substantial."
It turns out to be a consequence of the attempted jetliner bombing over Detroit on Christmas day, according to an analysis by The Telegraph.
Recall that the attempt was perpetrated by an "underwear bomber," someone who hid bomb incredients in his underwear, but failed to explode them at his intended time.
The attempted Detroit attack demonstrated a "new methodology," according to the article, leading to fears that al-Qaeda is planning "a wave of attacks."
Francis X. Clooney, A Jesuit scholar, writing for The National Catholic Weekly analyzes Pat Robertson's recent remarks that God punished the Haitians because they made a deal with the Devil. He dislikes Robertson's statements, but he wonders what the correct answer is, if Robertson is wrong.
Michael Johnson, writing in The NY Times, quotes Voltaire as asking the same question about a devastating earthquake in Lisbon in 1755:
Would you say, seeing this heap of victims,
That God is avenged, that their death is payment for their crimes?
What crimes, what bad things have been committed by these children,
Lying on the breasts of their mothers, flattened and bloody?
Lisbon is a city no longer. Did it have more vices
Than London, than Paris, given to doubtful delights?
I'm not a religious person, but I like religion, and it plays an important part in Generational Dynamics theory. (See "Book review review: Christopher Hitchens: 'God Is Not Great: How Religion Poisons Everything'.")
The question that I ask of religious theorists is this: For millennia, the population rate has grown faster than man's ability to grow food, and this has been the root cause of thousands of genocidal wars. How, according to religious theory, could God allow this to happen?
I've asked may religious people this question, and have never gotten a credible answer. I should also mention that neither Clooney nor Johnson provide answers to why God might have punished Haitians with such devastation.
At the Global Economic Trend Analysis blog, Michael "Mish" Shedlock explains in detail why California is headed for bankruptcy. The short answer: California has some of the highest tax rates, but is being strangled by public service unions.
Gu Yan's China News blog quotes Chinese news sources as saying that Pakistan is buying 36 Chinese J-16 fighters, in addition to America's F-16 fighters described above.
(Comments: For reader comments, questions and discussion, see the 24-Jan-10 News - Arms sales to India and Pakistan, UK threat level thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Jan-2010) Permanent Link
News summary is New! Improved! with 'Additional Links.'
Detailed technical information about the announcement by Google last week that China had hacked its servers is coming out slowly but surely, but very slowly. The Dark Reading newsletter reports that the attack took advantage of a flaw in Internet Explorer that permits an attacker to install malware that takes control of the user's computer if the user visits an infected web site. Reverse engineering of the attack malware reveals that it contains code that can be traced back to Chinese programmers, although China's government claims that it had nothing to do with the attack.
The flaw in Internet Explorer is a serious one. Microsoft issued a "critical" patch to fix the flaw a couple of days ago. You should make sure that your version of the Internet Explorer is updated to include that patch. The Microsoft support site has further information.
However, the Google attack is metamorphosing from a tech story to a geopolitical story. The Obama administration has taken up Google's case, and demanded that China investigate the attack and provide some answers.
In a speech on Thursday, US Secretary of State Hilary Clinton said:
States, terrorists, and those who would act as their proxies must know that the United States will protect our networks. Those who disrupt the free flow of information in our society or any other pose a threat to our economy, our government, and our civil society. Countries or individuals that engage in cyber attacks should face consequences and international condemnation. In an internet-connected world, an attack on one nation’s networks can be an attack on all. And by reinforcing that message, we can create norms of behavior among states and encourage respect for the global networked commons. ...
The most recent situation involving Google has attracted a great deal of interest. And we look to the Chinese authorities to conduct a thorough review of the cyber intrusions that led Google to make its announcement. And we also look for that investigation and its results to be transparent."
Clinton's remarks were pretty threatening, and the Chinese are apparently infuriated by these remarks.
Here's the response from China's Foreign Ministry:
Hacking in whatever form and offence of others' privacy is prohibited by law in China. As a major victim of hacking in the world, China believes that the international community should intensify the cooperaion in jointly combating internet hacking so as to safeguard internet security and protect the privacy of citizens in accordance with law.
We urge the US to respect facts and stop attacking China under the excuse of the so-called freedom of internet. We hope that the US side can work with China to earnestly implement the consensus between leaders of both countries on developing bilateral relationship in the new era by strengthening dialogue, exchanges and cooperation, respecting each other's core interest and major concerns and properly handling differences and sensitive issues so as to ensure the healthy and stable development of China-US relationship."
The Foreign Ministry spokesman does make one very good point: Chinese web sites are as much victims of hacking as American web sites. As we described last week, there is a particularly vicious cyberwar between Iran and China.
Beyond that, the Chinese statement is about as weaselly as you can get. Note that:
From the point of view of Generational Dynamics, we're headed for a Clash of Civilizations world war with China and the US on opposite sides. It's becoming increasingly clear that a "cyber war" is going to be an important component of this real war.
The White House is still predicting that Ben Bernanke will be confirmed for a second term as Chairman of the Federal Reserve, according to the Baltimore Sun.
This is true even though four Senate Democrats have indicated that they will vote against confirmation. "It is time for a change," said California Democratic Senator Barbara Boxer.
However, a WSJ Blog says that the vote tally as of Friday evening is close:
Voting “Yes”: 26 (18 Democrats, 8 Republicans)
Voting “No”: 15 (4 Democrats, 10 Republicans, 1 Independent)
Officially Undecided: 21 (13 Democrats, 7 Republicans, 1 Independent)
The remainder of the senators haven’t officially commented.
60 "Yes" votes are required for confirmation.
Both supporters and opponents of confirmation are pointing to the aggressive actions that Bernanke took in implementing various monetary programs like quantitative easing, and advocating fiscal stimulus programs. Supporters say that he prevented a worse financial crisis, and opponents claim that he made things worse.
Actually, none of these politicians really has any idea whether Bernanke has made things better or worse. After this past Tuesday's election, these guys are just trying to decide which vote will make them more likely to get reelected next time.
I personally like Bernanke, even though I've been bitingly critical of his thinking. I think he's a decent honest guy. (See "The 'culture of complicity' continues with Tim Geithner's new toxic asset plan.")
If Bernanke's not confirmed for a second term at the Fed, then someone else will be chosen. And that someone else will be someone like Larry Summers or Hank Paulsen or Robert Rubin. These people are far less capable than Bernanke, and they're all sleazy, having made millions of dollars participating in the fraudulent creation and sale of toxic assets.
On the other hand, long time readers of this web site are well aware that we're headed for a major financial panic and crash. I believe that by this time Bernanke is aware of it as well. It's quite possible that Bernanke is HOPING that he won't be confirmed. That way, someone else will be blamed for what's coming.
The Times of India reports that India has gone on high alert based on intelligence that the Pakistan-based terror group Lashkar-e-Taiba (LeT) has acquired more than 50 para-gliders. These can be loaded with explosives and launched from unused airstrips to attack jetliners.
On Friday evening, the UK raised its terror threat level to "Severe," according to The Guardian. This means that the probability of a terror attack has gone from "substantial" to "highly likely."
European investors are beginning to talk about openly about a Greek default, according to Euro Intelligence, quoting FT Deutschland.
Another scandal involving global warming scientists: UN climate report riddled with errors on glaciers.
From web site reader Eric, a fascinating account by historian Sir John Glubb relating generations to empires. Glubb finds that an empire generally lasts for about ten generations.
News you can use: Too Much Sex Can Cause Wrist Pain.
(Comments: For reader comments, questions and discussion, see the 23-Jan-10 News - US vs China cyberwar, and Bernanke in trouble thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Jan-2010) Permanent Link
And he calls the Mideast situation 'intractable.'
President Obama gave a very interesting speech on Thursday. Extracts:
That's why we are seeking reforms to protect consumers; we intend to close loopholes that allowed big financial firms to trade risky financial products like credit defaults swaps and other derivatives without oversight; to identify system-wide risks that could cause a meltdown; to strengthen capital and liquidity requirements to make the system more stable; and to ensure that the failure of any large firm does not take the entire economy down with it. Never again will the American taxpayer be held hostage by a bank that is "too big to fail." ...
My message to members of Congress of both parties is that we have to get this done. And my message to leaders of the financial industry is to work with us, and not against us, on needed reforms. I welcome constructive input from folks in the financial sector. But what we've seen so far, in recent weeks, is an army of industry lobbyists from Wall Street descending on Capitol Hill to try and block basic and common-sense rules of the road that would protect our economy and the American people.
So if these folks want a fight, it's a fight I'm ready to have. And my resolve is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see soaring profits and obscene bonuses at some of the very firms claiming that they can't lend more to small business, they can't keep credit card rates low, they can't pay a fee to refund taxpayers for the bailout without passing on the cost to shareholders or customers -- that's the claims they're making. It's exactly this kind of irresponsibility that makes clear reform is necessary."
So President Obama is declaring war on the banks.
If you look at the history of the last century, this is almost hilarious. During the 1930s Great Depression, all sorts of laws were passed to regulate banks.
As the generations of Great Depression survivors disappeared (retired or died), all these 1930s regulations were ignored or repealed by the Gen-Xers and Boomers, who thought of them as vestigial remnants of an age dominated by doddering old fools. (See "Markets fall as investors are increasingly unsettled by bad economic news."
Since 2007, the Gen-Xers are learning the same rules that the doddering old fools of the 1930s learned, and we see the result today: President Obama is saying we have to regulate the banks again.
Pundits are pointing out that Obama is pivoting to a new issue, having suffered a major political defeat on Tuesday with the election of Republican Scott Brown as Senator from Massachusetts, in the seat formerly occupied by ultra-liberal Ted Kennedy. The vote is considered a repudiation of Obama himself, and particularly a repudiation of his health care plan, which I've called a proposal of economic insanity.
History tells us that this new issue is sure to be a winner for President Obama. Whereas his health plan was wildly unpopular, the public hatred being directed at banks is growing palpably each day.
History is repeating itself. As I've pointed out several times, when I was growing up in the 1950s, my parents and my teachers all hated bankers. I didn't understand it then, but I understand it today. Bankers in the 1930s perpetrated the same kind of fraud and extortion that they're practicing today, as standard operating procedure.
The fury directed at banks is going to grow, and will be around for decades. President Obama will do much better politically with this issue than he did with health care.
Finally, it's worth saying again that from the point of view of Generational Dynamics, the attitudes and behaviors of politicians are irrelevant; what's important are the attitudes and behaviors of the great masses of people, entire generations of people. These attitudes and behaviors follow generational trends that are completely independent of the wishes of the politicians. We're seeing this happen now, as Obama abandons his health care agenda and takes up his war against bankers.
President Obama didn't only talk about banks on Thursday. He also gave an interview to Time Magazine discussing a number of issues. Probably the most interesting part came near the end when he discussed his Mideast policy. In his statement, he refers to George Mitchell, the special envoy that he sent to the Mideast early in 2009 to negotiate a peace deal.
And on the Israeli front — although the Israelis, I think, after a lot of time showed a willingness to make some modifications in their policies, they still found it very hard to move with any bold gestures. And so what we're going to have to do — I think it is absolutely true that what we did this year didn't produce the kind of breakthrough that we wanted, and if we had anticipated some of these political problems on both sides earlier, we might not have raised expectations as high. Moving forward, though, we are going to continue to work with both parties to recognize what I think is ultimately their deep-seated interest in a two-state solution in which Israel is secure and the Palestinians have sovereignty and can start focusing on developing their economy and improving the lives of their children and grandchildren."
To begin with, let's remember that Obama was going to heal the world on January 21, 2009, when he took office a year ago today. And that wasn't just an empty campaign promise; it was clear from his statements that he actually believed it. It was clear that the believed that the problems of the world were caused because President Bush was evil.
But now, after a year in office, his foreign policies have failed in pretty much every area. (See "After a week of foreign policy disasters, President Obama's entire program is adrift.")
So now, President Obama is apparently learning from his lessons, and becoming more realistic. He's changing his major domestic issue from health care to banking, and he's beginning to understand that the Mideast problem is "intractable."
This is what Generational Dynamics has been predicting for years. The Mideast is dominated by younger generations that have no desire to compromise with the other side. They're prepared to re-fight the genocidal 1948-49 war between Jews and Palestinians that followed the partitioning of Palestine and the creation of the state of Israel, and nothing's going to stop that.
President Obama mentioned the efforts of his envoy, George Mitchell, "who helped bring about the peace in Northern Ireland."
What Obama and Mitchell don't understand is that the Northern Ireland peace was negotiated during a generational Unraveling era, a time when peace treaties are relatively easy to agree on.
Things are quite different different today, when the Israelis and Palestinians are in a generational Crisis era, when a negotiated peace is almost impossible. It's a shame the Obama and Mitchell don't understand that.
(Comments: For reader comments, questions and discussion, see the 22-Jan-10 News - President Obama declares war on banks thread of the Generational Dynamics forum. Comments may be posted anonymously.) (22-Jan-2010) Permanent Link
Stimulus spending on lending slows in China.
Speaking at a press conference in India, America's Secretary of Defense Robert Gates says that there is a "syndicate of terrorist operators," operating under the al-Qaeda umbrella, attempting to destabilize the entire region.
These include the Taliban in Afghanistan, Tehrik-e-Taliban Pakistan, which is focused on Pakistan, and Lashkar-e-Taiba, which is focused on both Pakistan and India, and which is responsible for the 2008 terrorist attack in Mumbai. (See "After Mumbai's '26/11' nightmare finally ends, India - Pakistan relations face crisis.")
Their objective is to cause a collapse of the Pakistan government through terrorist acts, or to provoke an India-Pakistan conflict through provocative or terrorist acts.
"And what we see is that the success of any one of these groups leads to new capabilities and new reputation for all," according to Gates. "A victory for one is a victory for all."
Gates' remarks reflect the increasing danger presented by Sunni Muslim terrorist groups in Afghanistan, Pakistan and India.
As I've said many times, these groups have been trying for years to repeat the success of the 1979 (Shia) Islamic Revolution in Iran, to create a Sunni Islamic nation. They've tried it in Iraq, Somalia, Yemen, Afghanistan, Uzbekistan, and Pakistan. They haven't succeeded yet, but they're committed to continuing, until they succeed.
India and Pakistan almost went to war in 2008, when India threatened to invade Pakistan to go after Lashkar-e-Toiba, following the Mumbai terrorist attack. This was nipped in the bud by hard intervention from Condoleezza Rice, but if a war does break out between the two nuclear powers India and Pakistan, then China will side with Pakistan and Russia and the US will side with India, spreading within a few months to world war.
Prices for oil and other commodities are likely to fall sharply if China keeps its word that it will slow lending to businesses, according to CNN Money. Oil prices could return to $40 per barrel, close to their lows in 2008.
As we've said in the past, China is experiencing a huge real estate and investment bubble, fueled by China's huge stimulus program, to the extent that even the Beijing government is concerned. (See "Skyrocketing real estate prices in China alarm officials.")
From the point of view of Generational Dynamics, a cutback in China's stimulus program could do more than just cause commodity prices to call. There is still a major worldwide panic and crisis predicted, and it's possible that Chinese cutbacks could serve as the trigger causing a chain reaction.
Greece's debt problems are causing the euro currency to fall sharply against the yen and the dollar, according to Bloomberg. The possibility of a bailout for Greece is putting pressure on other countries in euroland, and on the other hand, there is fear that if there's no bailout, and Greece defaults, then the defaults will spread to other countries.
Greece's government is proposing to put Greece on a three-year austerity program, but the program is facing facing substantial opposition, according to the WSJ's Athens Bureau Chief. Already, Greek farmers are blockading roads, and next month the civil servants union is planning a strike.
If there's any way out of this for Greece, I sure don't see it.
A couple of days ago I posted an item about a University of California study that says that blondes get their own way with men, and that their sense of entitlement makes them "more warlike they are than their peers on campus."
Professor Aaron Sell, the author of the study, has written to tell me that the news reports I quoted are in error. Here's his message:
If you'd like to see my actual research, which shows that attractive women are more prone to anger, feel more entitled, and believe they win more conflicts of interest then you can see the actual article and the press release here: http://www.psych.ucsb.edu/research/cep/topics/anger.htm
Note that the words “blonde” or even “hair” never appear there.
The writer Ryan Sager has reported accurately on the story here: http://trueslant.com/ryansager/2010/01/18/science-reporting-gone-wild/
I apologize to Professor Sell for propagating the error.
(Comments: For reader comments, questions and discussion, see the 21-Jan-10 News - Gates: Danger of India-Pakistan war thread of the Generational Dynamics forum. Comments may be posted anonymously.) (21-Jan-2010) Permanent Link
Hundreds die in Muslim-Christian riots in Nigeria.
Republican Scott Brown has won, by a substantial margin, the special election to replace the late Ted Kennedy in the Senate. That this is happening in Massachusetts, an overwhelmingly liberal Democratic state, illustrates how thoroughly the country is realigning politically.
To see what's going on, you have to understand what I've been saying for years: The great trends of any society or nation are generational, and are not determined at all by politicians. All the politicians can do is follow the generational trends.
President Bush represented the Silent and Boomer generations. The Generation-Xers, who generally speaking despise Boomers and Silents, turned to Gen-Xer Barack Obama because he was the un-Bush -- and by that I mean the un-Boomer and the un-Silent.
But now President Obama's presidency is turning out to be indistinguishable from President Bush's third term. President Obama is considered by many of his supporters to be just as much a "warmonger" as Bush was, and "change we can believe in" has been buried by loathsome corruption of the health care bill. The only difference between Bush and Obama is oratorial skill. The policies turn out to be the same.
A year ago, mainstream pundits were saying that the Republican party was close to death, and wouldn't recover for decades.
This evening, I'm hearing Republican pundits talk about this as a major political revolution, a huge victory for the Republicans that will be felt for decades. Yawn.
Other pundits are saying that Obama and the Democrats are going to move to the center. Yawn.
Actually, there is a revolution going on, but nothing that's going to make anyone happy. The Gen-Xers, who are pretty much running things now, are not going to turn back to the Republicans, nor are they going to move to the center. They're going to synthesize something new.
Who will be the new candidate who will lead the nation through this realignment? Who will be the new Abraham Lincoln or the new Franklin Roosevelt? It might be a Boomer or a Gen-Xer, but it will probably be a surprise to a lot of people.
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In three days of clashes between Christians and Muslims in the city of Jos in central Nigeria, nearly 200 people have been killed, according to a report in the Times Online. The Army has been called in to restore order.
The northern part of Nigeria is mostly Muslim, because of centuries of migration from the Maghreb, the region in northern Africa that was conquered by Arab Muslims in the centuries following the death of Mohammed.
The southern part of Nigeria, especially around the Port Harcourt area, is predominantly Christian, following centuries of colonization by the Europeans, taking advantage of opportunities for mining and the slave trade.
In the middle of Nigeria is the city of Jos, heavily populated by both Muslims and Christians. There have been a number of secular confrontations in Jos over time, so the current clashes are nothing new.
However, it comes at a bad time for the Nigerian psyche. President Yar'Adua has been out of the country since November, in a hospital in Saudi Arabia receiving treatment for a heart condition.
Even worse, the perpetrator of the attempted Christmas day jetliner bombing over Detroit has been identified as a Nigerian citizen, and Nigerians have been demoralized because the US has placed Nigeria on a list of "terror-linked" countries that include Afghanistan, Cuba, Iran, Libya, Pakistan, Somalia, Sudan, Syria and Yemen.
Politicians in Nigeria are calling this violence evidence of declining Nigerian state, according to the Nigerian newspaper The Punch.
"With the ongoing crisis, we have one more piece of evidence of decline," says one presidential candidate. "Something that repeats itself like that should by now be containable. There is a committee still working on the last riot and this one is taking place. Yet, we think the world has no right to talk about the character of the Nigerian nation, it is a shame and it is regrettable. ... In a way, the Jos crisis is an indictment. Being included on the United States‘ security risk list is a matter of perception of the character of the Nigerian state. This crisis reinforces that perception; it is acting negatively against us."
Nigeria is a country of dozens of separate tribes and ethnic groups, and I have not yet done the many hours of research necessary to completely sort out the generational timelines. But it appears that for most of the country the last generational Crisis war was the Nigerian-Biafran war of 1967-70. At that time, the southeast portion of Nigeria attemted to secede, creating a new country called the Republic of Biafra.
Based on that tentative assessment, there is no chance that the current violence will spiral into full-scale war, despite the fears of many.
(Comments: For reader comments, questions and discussion, see the 20-Jan-10 News - Republican victory in Massachusetts thread of the Generational Dynamics forum. Comments may be posted anonymously.) (20-Jan-2010) Permanent Link
Major Taliban attack on Kabul, Afghanistan.
The next 48 hours are critical for Greece as they negotiate with European financial ministers in Brussels, according to Kathimerini (machine translation).
The article warns that "The climate in Brussels is not the best for the Greek program," and when further information on the budget deficit is published at the end of January, the climate will get worse.
Meanwhile, the ECB is preparing the legal ground to eject Greece from the European Union, according to Ambrose Evans-Pritchard in The Telegraph.
This reflects the fury in Brussels at the Greek government for lying about budget deficits in the past.
This is a warning shot for all of the "P.I.I.G.S" (Portugal, Ireland, Italy, Greece and Spain), countries that are getting closer to being unable to pay their bills -- and the UK and the US are not far behind.
Two suicide bombings and multiple gun battles punctuated a five hour attack by the Taliban and Afghanistan's presidential palace and other government buildings, as well as a shopping complex.
The purpose of the attack is to reject an outreach by the Karzai government to the Taliban, according to an analysis by CS Monitor.
From the point of view of Generational Dynamics, this attack by the Taliban is likely to backfire. Afghanistan is in a generational Recovery era, having had a very bloody civil war in the early 1990s, and even Taliban supporters have little sympathy for this type of violence.
A study by the University of California has discovered that women with blonde hair tend to get their own way with men, and also feel entitled to get their own way, according to The Straits Times.
We can only hope that not too much taxpayer money was spent on the University of California study, because I think it's something that we already knew.
Actually, there's something else: "What we did not expect to find was how much more warlike they are than their peers on campus. Many blondes exist in a kind of bubble where they have been treated better than other people for so long, they may not even realise they are treated like a princess," according to study leader Aaron Sell.
According to Sell's web page, he's an expert on evolutionary psychology. The web page doesn't say whether Sell's wife (or ex-wife) is blonde.
Correction: Professor Aaron Sell, the author of the study, has written to tell me that the news reports I quoted are in error. Click here for the text of his message.
(Comments: For reader comments, questions and discussion, see the 19-Jan-10 News - Greece continues to head for default. thread of the Generational Dynamics forum. Comments may be posted anonymously.) (19-Jan-2010) Permanent Link
US State Department will make formal protest to China over Google.
There are 23 countries in the world whose government recognize Taiwan as a country, and one of them is Haiti. So China and Taiwan are competing to provide aid to Haiti, according to a report by Canadian Press.
China has another reason for providing aid to Haiti: Sympathy for Haitians, after China itself suffered its own major earthquake disaster in 2008.
Next week the U.S. will issue a formal protest to the Chinese government demanding an explanation for the cyber attack on Google and other American companies, according to a report from Bloomberg.
According to a CNET story, google's Chinese web site, google.cn, has already stopped censoring search results.
Text and image searches are now showing some "highly sensitive photos and page results." These are presumably in violation of Chinese law, but China has not yet pulled the plug on google.cn.
Haiti was the major topic in the news on Sunday morning. Every network has reporters in Port-au-Prince, Haiti, now showing live scenes of pain and destruction. One surprise, appearing on several shows, was a love-fest between President George Bush and President Bill Clinton, talking about what great friends they are, as they lead a fund-raising effort for Haiti.
There was some brief discussion among political pundits of whether President Obama had responded quickly enough, but political matters were mostly put aside. It's amazing how political bickering can end in the face of a major crisis.
The major political discussions were over the Massachusetts special election to fill Senator Ted Kennedy's Senate seat. Sitting here in my apartment in Cambridge, I can only express my astonishment that a Republican has a real chance of winning on Tuesday.
(Comments: For reader comments, questions and discussion, see the 18-Jan-10 News - China and Taiwan compete in Haiti. thread of the Generational Dynamics forum. Comments may be posted anonymously.) (18-Jan-2010) Permanent Link
President Obama promises "months and even years" of support for Haiti.
In his White House remarks on Saturday, President Obama appointed President George W. Bush and President Bill Clinton to lead a major fundraising effort for Haiti: the Clinton Bush Haiti Fund at http://www.clintonbushhaitifund.org.
He added,
The earthquake devastation is so bad that there's widespread concern that Haiti will become a major new commitment for America's armed forces that can last for years. This will add one more country, besides Iraq, Afghanistan, and possibly Yemen, where American forces will be committed.
The last time that I wrote much about Haiti was in 2004, when the government was collapsing and the country appeared close to total anarchy and possibly civil war from ethnic tensions. That scenario was prevented by large amounts of aid and lots of UN peacekeepers.
During the 1700s, the island was an extremely wealthy French colony, thanks to crops sugar, rum, coffee and cotton -- and thanks to the efforts of 500,000 slaves that the French had imported from Africa.
By the end of the 1700s, there were three groups of Haitians: The "whites," native Europeans; the "noirs" or "blacks," native black Africans whom the French imported as slaves; and the "mulattos," the children of mixed European and African blood.
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At that time, the mulattos were theoretically free, but in practice had as few rights as the noirs. In 1791, the noirs and the mulattos united in a violent slave rebellion that led to a 13-year civil war, resulting in formal recognition, in 1804, of Haiti as the second Republic in the Western hemisphere. However, the United States didn't grant Haiti diplomatic recognition until 1862 -- when Lincoln's Emancipation Proclamation freed America's slaves during the Civil War.
Today the mulattos are a small French-speaking minority, under 5% of the population, generally light-skinned, but a "market-dominant" minority, controlling well over 50% of the nation's wealth. The noirs generally live in extreme poverty, and speak Creole, a mixture of French and African language elements. (Other different variations of Creole are spoken throughout the Caribbean, including parts of Louisiana.)
After the whites were overthrown in 1804, the mulattos became the new élite class. There was a new crisis civil war in the late 1840s, followed by several decades of peace and the growth of a Haitian intellectual culture. However, there was one bloodless coup after another, resulting in a succession of dozens of Presidents.
The 1915 coup was different, in that it turned into a major generational crisis rebellion. With total anarchy breaking out, President Woodrow Wilson eventually felt it necessary to take complete control of all governmental and financial institutions in Haiti.
The American armed forces remained in Haiti for 20 years, withdrawing only in 1934.
American armed forces came back in 1994, when it appeared that Haiti was once again heading for anarchy. The same thing happened in 2004. Now, after the earthquake, things are worse than ever.
Haiti is one of the most densely populated countries in the world, and is the poorest nation in the Western Hemisphere, with the average income at about $3.50 per day per person. In addition, Haiti has the least water availability per capita of any nation in the world. In 2008, Haiti became an international story when there were huge food riots, with violence quelled by large increases in aid.
With so much poverty, there's nothing left for obvious services like cleaning garbage out of the street, resulting in pictures like the one shown above, which is typical. And with the population growing at almost 2% a year, Haiti is also suffering from the "Malthus effect" (population grows faster than available food and water), making poverty worse each year.
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Of course, not all streets of Haiti are covered with garbage. Here's a photo of Petionville from a Haiti travel site. Residents of Petionville are wealthy, mostly mulattos.
From the French phrase "rester avec" (stay with), restaveks (or restavecs) are the over 250,000 children who are sold or given away by their parents to other families. The children, usually noirs, are from families that can't afford to feed them, given to wealthy families, often mulattos.
Restaveks, as young as 5 years old, generally get no education, but are required to work all day as domestic servants.
This is the environment in which the earthquake occurred. Haiti's society was already very fragile, with unemployment above 70% and most people dependent on foreign aid.
The earthquake has killed tens of thousands, perhaps hundreds of thousands of Haitians across the country. Most buildings have collapsed, and there are thousands of dead bodies buried under the wreckage. The streets are filled with more dead bodies. Survivors are forced to sleep in the streets, for fear that an aftershock may cause other buildings to collapse.
The BBC reports that Haitians are becoming increasingly desperate, and looting and violence by roving gangs are spreading. This is made worse by the fact that the main prison also collapsed, freeing thousands of prisoners. Many roads are blocked by bodies and debris, making the distribution of aid difficult or impossible.
From the point of view of Generational Dynamics, this is a generational crisis civil war waiting to happen, across the mulatto vs noir fault line.
When anarchy broke out in 1994, and again in 2004, there would undoubtedly have been a civil war at that time, if it hadn't been for massive international aid and peacekeeping.
This situation has grown palpably worse since then.
One of the signs of this is the blogs and online discussions about Haiti, and here there's a story to be told.
When I do one of these analytical reports for this web site, I usually review dozens of online sources. These include current news stories, historical accounts, and international blogs and discussion forums. The latter are important because there you get a feel for what the people are saying and doing that goes beyond the politically correct mainstream media.
Here is one comment that appeared on a YouTube site on Saturday: "i jumped for joy upon hearing of the haiti earthquake. the sound of buildings collapsing is music to my ears. the sight of arms and legs sticking out from the rubble is awesome. blood streaming out from mangled bodies of hookers and johns under collapsed brothels holds great artistic value. the view of thousands of n----r bodies lined up is spectacular. i love the way that bodies are stacked up for bonfires. the streets of haiti is awash in n----r blood. there are now less n----rs to feed."
When you read a quote like that, of course you think, "That's crazy. That's the exception; few of them are like that." Amazingly, that not's true. The above quote is actually typical of the online discourse on Haiti. I don't believe I've ever seen anything like this. For example, I've read many online discussions by Palestinians and Israelis, and there's nothing like what I've seen for online discussions of Haiti.
The only thing I can conclude from this is that the seething hatred in Haiti's population and diaspora is greater than almost any other population on earth. Perhaps one could have guessed this anyway from the level of poverty and the highly visible contrast between garbage-strewn noir neighborhoods versus well-kept mulatto neighborhoods, maintained by noir restaveks, but the online discussions really make it clear.
This has significant implications for the United States.
At the very least, looting and violence are going to increase at least in the short run, with the possibility of thousands of "boat people" headed for the shores of Florida. But with most of Haiti's infrastructure destroyed in the earthquake, providing aid and peacekeeping is going to be next to impossible for many regions outside of Port-au-Prince.
Because of the danger that this violence could spiral into unlimited civil war, the United States and the United Nations will be under pressure for full-scale military intervention. This would end up being one more major military commitment for the United States, as President Obama said, "for months and even years."
(Comments: For reader comments, questions and discussion, see the Haiti thread of the Generational Dynamics forum.) (17-Jan-2010) Permanent Link
The 'rich nations' are not far behind.
According to a report by Reuters, euro zone finance ministers are so furious about Greece's previous lies about budget deficit figures that there is little willingness to bail Greece out.
"German taxpayers would have little patience if you tried to tell them you are using their money to bailout a country that has consistently and knowingly reported wrong data and has repeatedly infringed EU budget rules," according to one source.
Thus Greece and euro zone finance ministers continue on their collision course, a game of "chicken" as I called it a couple of days ago, and unless one side or the other swerves, the result will be a Greek default with consequences that no one can predict.
Moody's rating service says that Greece and Portugal face "a slow death," according to a Bloomberg report.
Both countries will have to dedicate a higher proportion of their wealth to paying off their enormous debt. To make matters worse, both countries have to pay very high interest rates because of the danger of default, because of their enormous debt. So both countries are in a vicious spiral.
From the point of view of Generational Dynamics, this conclusion is completely rejected. If Europe were in a generational Recovery or Awakening era, then some kind of prolonged paydown of debt might be a possibility, but not during a generational Crisis era. The population of each country will not tolerate such a debilitating scenario for long. Their "Boomer" and "Gen-X" populations will even choose war after a while, rather than suffer the kind of "slow death" that Moody's is describing.
An analysis by the Financial Times says that even in the "rich world," debt levels are rising almost uncontrollably. "The biggest increases have occurred in Iceland, Ireland, the US, Japan, the UK, and Spain. There is no peacetime precedent for the current speed and scale of public debt accumulation and it is difficult to assess the social tolerance for high debt levels, and for the pain of protracted fiscal restraint. In several EU member states, the threshold has already been breached. The spectre of sovereign default, therefore, has returned to the rich world."
From the point of view of Generational Dynamics, the financial system is like a huge ball rolling downhill, faster and faster, headed for an enormous collision and smashup.
2008 was the year of the defaults of failing banks -- Bear Stearns, Lehman -- and failures. 2009 was the year of the bailouts of failing banks and car companies. 2010 is shaping up to be the year of failing countries. Each year, the financial damage is worse than the preceding year.
As I've been saying for years, the world is in a deflationary spiral, as the massive real estate and credit bubbles continue to deflate. (Anyone who says we're facing superinflation is an idiot. See Ambrose Evans Pritchard's analysis.)
That means that everyone is "deleveraging," and each month there's less money in the world than there was the month before. As that process continues, there's less and less money to support failing banks, failing car companies, and failing countries. It's only a matter of time before some event triggers a massive worldwide panic. The timing can't be predicted, but the result is 100% certain.
(Comments: For reader comments, questions and discussion, see the 16-Jan-10 News - Greece and Portugal head for financial crisis. thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Jan-2010) Permanent Link
Pressure builds to send American forces to Yemen.
Google's announcement that it will no longer censor web sites in China, and will close its offices in China if necessary, has drawn worldwide comment. The announcement was precipated by a discovery that Chinese hackers were hacking into the corporate data of Google, Adobe, and 20 other (so far unidentified) corporations, and also were hacking into Google's Gmail.
InformationWeek's Dark Reading newsletter reports that the Chinese hackers used a "Spear Phishing" attack to gain control of corporate computers.
"Phishing" has been around for years. The hacker sends e-mail messages to millions of users saying, "Open the attached file for pictures of beautiful nude women." Opening the file launches an application that takes control of the computer and turns it into a zombie that can capture passwords, bank numbers, and so forth, and send them back to the central "Command and Control" computer of the hackers. Only a tiny percentage of the users open the file, but that gives the hackers control of thousands of computers.
Spear phishing is a refinement that's extremely sophisticated and highly targeted. The hackers find out the name of your employer, your boss, your girlfriend, or whatever, and then send you an e-mail message, making it appear that it's from one of them. Once again, it asks you to open an attached file that takes control of your computer.
According to the newsletter, "The wave of targeted attacks from China on Google, Adobe, and more than 20 other U.S. companies, which has led the search giant to consider closing its doors in China and no longer censor search results there, began with end users at the victim organizations getting duped by convincing spear-phishing messages with poisoned attachments. Google and Adobe both revealed last night that they were hit by these attacks, which appear to be aimed mainly at stealing intellectual property, including source code from the victim companies, security experts say."
The Chinese hackers obtained intelligence information about people in each of the 20+ corporations. Where did they get that information? There are two possibilities, according to the article.
The first possibility is that the hackers did their own research, using the internet. The second possibility is that the data was collected by engineers intercepting data that crosses routers, controlled by China, that carry internet traffic in and out of China.
"One source close to the investigation says this brand of targeted attack has actually been going on for about three years against U.S. companies and government agencies, involving some 10 different groups in China consisting of some 150,000 trained cyber-attackers," according to the article.
Spear-phishing attacks are becoming increasingly common, not only by Chinese attackers, but by hackers around the world. It's used to capture personal information, including bank and credit card numbers, used for identity theft.
As a computer industry professional, I try to keep reasonably up to date on various security threats that are going on, and I have to tell you that I'm finding it increasingly frightening. The types of exploits that malicious hackers are using is growing, and anyone can be victimized. I consider myself to be in the 99.9th percentile of vigilance about potential hackers, but some people may remember that this web site was hacked about a year ago. Fortunately, I've written all the web site code that runs this web site, so I was able to identify the problem and correct it fairly quickly. Still it illustrates the fact that the attacks are becoming so sophisticated that anyone's home computer, business computer or web site server could be victimized.
One thing that surprised me recently is that even PDF files can be exploited. Most people know that EXE files, DOC files and Excel files can contain malware that attacks computers, but PDF files were thought to be safe until now. Last week, Adobe Systems put up a patched version of Adobe Reader, the program that reads PDF files. You should make sure that you have the latest version of this program installed, so that you'll be safe from these attacks. (See Adobe web site.) (Paragraph corrected - 15-Jan-10)
The Microsoft web site contains some additional tips and information about avoiding spear-phishing attacks on your computer.
The larger picture is that there's a worldwide cyberwar going on.
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The National Post that China and Iran are two of the major belligerents, hacking each other's web sites.
And as I've said many times (see, for example, "China 'betrays' Iran, as internal problems in both countries mount"), when all is said and done, I expect Iran to be on the side of America and the West, including Israel, when forced to make a choice in the coming Clash of Civilizations world war. This cyberwar between Iran and China appears to be an early skirmish.
Thanks to a fairly weak monsoon season, harvests have been down in India, resulting in food prices that have increased by almost 20% in the last year.
The Hindu reports that the government in New Delhi is putting emergency measures into effect to try to curb soaring prices. These measures include removing duties on imported white sugar, and making hundreds of millions of pounds of wheat and rice available on the open market at low prices.
The Asian Times reports that US Senate Armed Services committee chairman Carl Levin is advocating further American military intervention in Yemen, including unmanned aerial drones, clandestine actions and air strikes.
Military analyst Brian M. Downing gives the following reasons why there's pressure for further American military intervention in Yemen:
From the point of view of Generational Dynamics, a major component of the coming world war will be a war between Sunni and Shia Muslims. With Iran and Saudi Arabia supporting opposite sides of the conflict in Yemen, things could spiral into something more serious at any time.
(Comments: For reader comments, questions and discussion, see the 15-Jan-10 News - China uses 'Spear Phishing' to attack American corporations. thread of the Generational Dynamics forum. Comments may be posted anonymously.) (15-Jan-2010) Permanent Link
How the Jews were driven out of Iraq.
Watching the bank CEOs testify before Congress on Wednesday, I was immediately struck by the remarks of Lloyd Blankfein, CEO of Goldman Sachs, the man who said that bankers are doing "God's work."
He agreed that Goldman Sachs could have done some things better, and indicated that he might have misled an investor or two, but he said of the things that Goldman Sachs did that "these are typical behaviors" and they are "standards of the times didn't work out well."
Phil Angelides, chairman of the Financial Crisis Inquiry Commission, responded to Blankfein by saying, "It sounds to me a little bit like selling a car with faulty brakes, and then buying an insurance policy on the buyer of those cars."
He's referring to the fact that Goldman created securities that are now known as near-worthless "toxic assets," and at the same time made other investments that bet against those securities, expecting to make money when those securities became worthless.
William K. Black is a professor at the University of Missouri, and was the senior regulator investigating the savings and loan crisis of the 1980s. He compares today's investigations to those he led in the early 1990s. I saw him being interviewed on Bloomberg TV on Wednesday afternoon.
He's extremely criticial of regulators who, he said, have done almost nothing. In the savings and loan crisis, regulators were very aggressive in prosecuting the CEOs of the offending savings and loans banks, but nothing like that is happening today.
This shouldn't be a surprise to anyone, especially after the revelations about how regulators treated Bernie Madoff, the man who defrauded hundreds of investors of $65 billion. The SEC was warned several times that Madoff was likely conducting a Ponzi scheme, but the SEC never did anything about it. The SEC management was absolutely pathetic, and they proved it last September when they published a report of their own investigation that absolved themselves of all blame. (See "Laughable SEC report on Madoff absolves SEC management of blame.")
What we see here is the generational pattern that I've been writing about for years. Blankfein referred to the "standards of the time" giving rise to this crisis. Well, the standards of the time are fraud and extortion being practiced by almost every financial and real estate organization in the country -- or in the world.
Once the Silent Generation disappeared, the world was managed by a lethal combination of greedy, nihilistic Generation-Xers, managed by greedy, incompetent boob Boomers. A generational explanation is the only one that explains why fraud and extortion has become "the standards of the time," and why fraud and extortion is still going on as bad as ever.
On his tv interview, William K. Black was asked why he thought bank CEOs and senior management should go to prison. Here's what he said (my transcription):
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We still get this dribble [from them] about "it's the 100 year flood" type of thing, "so there really ARE no lessons to learn. It's just bad luck that happened on my watch." ...
Many, many of those CEOs and senior officers should be in prison.
The shocking thing about the current crisis is that the regulators, the treasury, the prosecutors, and at least to this point, Congress and the Angelinis Commission have not gotten that information. [He adds that the prosecutors have only begun to get information -- emails, models, accounting books, etc.]
Here's what we know empirically. The FBI warns in Sept 2004 of an epidemic of mortgage fraud. It finds that 80% of the losses occur when lender personnel are involved. So it's not primarily borrowers -- it's coming from the lending institutions.
We know that when Fitch [Ratings agency] finally looks in Nov 2007 at the underlying mortgages on these CDOs, the collateralized debt obligations, it finds that the results are "disconcerting," and that there's the appearance of fraud in nearly every file. Now that means we have massive fraud at that level.
That inherently produces accounting and securities fraud all the way up the line, because of course these are not really assets - these are really net liabilities.
Every time, on average, a "liar's loan" was made, the bank that made the loan lost money.
And so all of this paper is underlying this roughly $2 trillion in non-prime paper.
Now we know what happened next. because there are Standard & Poors memos. Where the professional rater asked to see the underlying files, and he's told by his boss, "It is totally outrageous to ask to see the underlying files," which is the only way to rate risk, and he's ordered not to do that, and to produce a rating.
We know that those ratings are AAA for product that isn't even C. These are not small errors. ...
There are only two choices. Let's take a Goldman Sachs, that under [Hank] Paulsen, when he was still running them, went deeply into this toxic paper.
Either they DID underwriting, which is what an investment banker is supposed to do, and they found that nearly every file was fraudulent, in which case, if they sold it, that's a fraud; or they're telling us they never did any underwriting, in which case they're the most incompetent and unbelievable people in the world, and should be removed from office. And certainly shouldn't get bonuses."
This is an excellent statement why many of these bankers will be going to jail, just as bankers went to jail in the 1930s when they did similar things.
Here's something that I wrote years ago: "If you're an economics expert, journalist, investment broker, mortgage lender, analyst, regulator, pundit or politician whom the public decides is blameworthy for the major coming crisis, then I suggest that you'd better have your underground bunker picked out, because people are going to be coming after you, and the guillotine is going to seem mild compared to the punishment that they're going to want to inflict on you."
The fact that bankers are going to be paying themselves tens of billions of dollars in bonuses during the next few weeks means that they're too dumb to take that advice.
A MEMRI translation of a television interview with Dr. Rashid Al-Khayoun, an Iraqi scholar and author, tells how Jews were driven out of Iraq.
According to Al-Khayoun, Iraqi Jews of the 1940s were not much interested in going to Israel, because they had lived in Iraq for centuries, and considered it to be their home.
But Al-Khayoun says that Jews were coerced to move to Israel by a wave of pan-Arab nationalism within Iraq.
"[P]an-Arab nationalism grew stronger in Iraq, from the late 1940s to the early 1950s," says Al-Khayoun. "The Jew began to be the target of deliberate affronts. Iraqi Jews are known for their patriotism. They have nothing to do with Israel."
The rise of pan-Arab nationalism in the late 1940s is very interesting from the point of view of Generational Dynamics.
In North America and Europe, it's common to refer to "Boomers" and "Generation-X" and their specific behaviors, but those behaviors don't seem to apply to Russia, Turkey and Mideast countries such as Lebanon, Iraq and Iran.
There's a good reason for that. For the West, the most cataclysmic event of the 20th century was World War II. But for Russia, Turkey and the Mideast, the most cataclysmic events surrounded World War I, including the Bolshevik Revolution and the destruction of the Ottoman Empire.
Thus, the people born in Russia and the Mideast in the 20 years following WW I would have attitudes and behaviors similar to the West's Boomers, and the next generation would be similar to the West's Generation-X.
Iraq's crisis war at that time was the the Great Iraqi Revolution of 1920. According to Al-Khayoun, the movements to expel Jews from Iraq began in 1941. This was in Iraq's generational Awakening era, about the same point in Iraq's generational timeline as America's 1967 Summer of Love or Iran's political upheavals of 2009.
What happens in all of these cases is a great deal of political turmoil, followed by a sharp change in political direction. In the case of Iraq in the 1940s, this meant a change from the secularism imposed by the end of the Ottoman Empire, and a resurgence of Arab nationalism to the exclusion of other ethnic and religious groups. Hence, the expulsion of the Jews from Iraq.
There have been new crisis wars 60-70 years after the end of the Ottoman Empire, including the Lebanese civil war and the Iran/Iraq war of the 1980s. These countries are now, once again, in generational Awakening eras, going through the same kind of political turmoil as they did in the 1940s.
(Comments: For reader comments, questions and discussion, see the 14-Jan-10 News - Senior bankers may be headed for prison thread of the Generational Dynamics forum. Comments may be posted anonymously.) (14-Jan-2010) Permanent Link
The UK debates the Iraq war.
Question: What are the most terrifying ten words in the English language?
Answer: We're from the Government, and we're here to help you.
Well, perhaps Greece is hearing something even worse: "We're from the IMF, and we're here to help you."
Bloomberg reports that a team from the International Monetary Fund (IMF) arrived in Athens to help the government with "pension reform, tax policy, tax administration and budget management."
These are just some of the areas where Greece's budget has been growing uncontrollably.
This comes at a time when the European Commission is essentially calling Greece a liar, with "severe irregularities" in the nation’s statistical data. Other accusations claim that Greece used dishonest financial data in order to join the euro currency.
It's pretty clear that there's widespread distaste for the idea of bailing Greece out, and preventing the government from defaulting on its debts. The reason is that Greece's government is so out of control with spending, and apparently does not have the political will to cut back sufficiently.
Adding to Greece's troubles, Reuters reports that the major Greek civil servants' union has called a strike for February 10, to protest against the government's austerity measures.
There's apparently a big game of "chicken" going on. In American in the 1950s, the game of Chicken was quite popular among teen hot rodders. Two teenagers would drive their cars full speed straight towards each other from opposite ends of the field. The first driver to swerve to avoid an accident is the "chicken." If neither driver swerves, then both drivers die.
That's what may well happen in Greece. If the EU and the IMF refuse to bail Greece out, and if the Greek government and unions refuse to cut spending, then the repercussions of a Greek default will be worldwide. It'll be interesting to see which side swerves, if any.
According to Krugman's blog,
To be sure, America has at least minor-league versions of the same problems: we are having fiscal crises in the states, and the housing slump has depressed mobility in the recession. But we’re still better able to cope with asymmetric shocks than the eurozone.
Was the euro a mistake? There were benefits — but the costs are proving much higher than the optimists claimed. On balance, I still consider it the wrong move, but in a way that’s irrelevant: it happened, it’s not reversible, so Europe now has to find a way to make it work."
This guy has absolutely no sense of history. Since the end of World War II, there has been an increasing movement towards a European Union and a European currency. The momentum was unstoppable, because nobody wants to see a new European war.
From the point of view of Generational Dynamics, a new European war is inevitable. The European Union and the euro currency will not survive in anything like its current form, and both may collapse completely.
But that's not the end of the story. Once the war is over, in the 2020 time frame, Europe will enter a new generational Recovery era, and this time the European Union and the euro currency will succeed.
The UK is currently conducting a highly contentious inquiry into the history of the UK's involvement in the Iraq war, with the objective of assigning blame.
On BBC's Europe Today program, former Labour Party minister Frank Dobson made the following comments (my transcription):
It's also made it more difficult to deal with problems arising from Iran attempting, if they do, to get nuclear weapons.
All that has been made more difficult as a direct result of the stupid decision to invade and occupy Iraq."
If Dobson can call his political opponents "stupid," then that gives me leave to call Dobson a total moron, almost incapable of coherent thought.
Let's assume the counterfactual that there was no ground invasion of Iraq in 2003. Then we'd have to assume that Saddam Hussein was still in power today, and we STILL WOULDN'T KNOW whether he was deploying weapons of mass destruction.
In that scenario, Iran would be saying to us, "Saddam Hussein has already attacked Iraq with weapons of mass destruction (WMDs), during the Iran/Iraq war of the 1980s, and he may do it again any day. We need nuclear weapons to protect ourselves from Saddam's WMDs. If you want to stop the spread of WMDs, then you'd better start with Saddam!"
And so, contrary to Dobson's argument, without the Iraq war it would have been MUCH MORE DIFFICULT to talk to Iran about nuclear weapons.
Of course, Iran would be developing nuclear weapons capabilities under any scenario. The Iraq war made no difference, except that they might have gone faster without the Iraq war.
This is a good time for me to remind readers that I've never taken a position on whether the Iraq war was "right" or "wrong" or "good" or "bad." (See "The Iraq war may be related to the bombing of Hiroshima and Nagasaki.")
Dobson's statements illustrates the incredibly ignorant quality of most political discussions about the Iraq war.
First the bankers who created trillions of dollars in near worthless "toxic assets," and used them to defraud investors while paying themselves hundreds of billions in commissions and fees. Now that they've been bailed out by the government, they're forcing their own customers 30% interest, and they're using the money to pay themselves more billions in bonuses. This is criminal extortion, but it's the norm for the financial community these days.
I've been expecting something like this for years, since the same thing happened in the 1930s, but I've been sickened by the extent of the corruption being exhibited by these bankers.
On Wednesday, bank executive will be testifying on Capitol Hill before the Financial Crisis Inquiry Commission.
It is grossly loathsome and disgusting that these people are paying themselves million dollar bonuses after all the damage they've done. As I've said before, I truly believe that many of them are going to go to jail before this is all over.
The NY Times reports that Google has discovered that the e-mail accounts of human rights activists had been hacked.
According to the report, Google said that it had found a “highly sophisticated and targeted attack on our corporate infrastructure originating from China. ... These attacks and the surveillance they have uncovered — combined with the attempts over the past year to further limit free speech on the web — have led us to conclude that we should review the feasibility of our business operations in China."
Google has been criticized for years for agreeing to censor its search results to exclude anything that the Chinese Communist Party objects to. The company now says that it is no longer willingo to continue this censoring.
(Comments: For reader comments, questions and discussion, see the 13-Jan-10 News - Greece may be near financial collapse thread of the Generational Dynamics forum. Comments may be posted anonymously.) (13-Jan-2010) Permanent Link
While American 'Preppers' prepare for the worst.
In the past, I've frequently said on this web site that you can't prevent what's coming, but you can prepare for it. You should treasure the time that you have left, and you should use the time to prepare yourself, your family, your community and your nation.
Web site reader Joel has referred me to a Newsweek article about a growing group of people, called "preppers," who are doing exactly that.
These people hope for the best, but want to be prepared for the next hurricane Katrina, the next pandemic, the next financial meltdown, the next terrorist attack or, presumably, the next war.
Referring to one of the preppers, the article concludes, "But she believes that in times of uncertainty, what she's doing is simply common sense. As for the rest of us, isn't it a little bit crazy not to prepare?"
That's damn good advice.
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The BBC reports that a major poll conducted in December finds the Afghanistan people much more optimistic about the future than in previous years. (PDF here for full poll results.)
Compared to a year ago, many more Afghans believe that the country is going in the right direction, and more of them back the presence of US troops. 71% were optimistic about the future, compared to 51% a year ago.
This is good news for the armed forces "surge" fighting in Afghanistan, and it raises hopes that the war can be won. However, as I wrote last year, comparing the Afghanistan and Iraq wars, the Iraq "surge" strategy will not work in Afghanistan.
Afghanistan's last generational crisis war as the hugely genocidal civil war that ended in 1996, almost 15 years ago. Thus, Afghanistan is in a generational Recovery era, still recovering from that ghastly war.
Thus, the optimistic results of the Afghan poll make a lot of sense. The people are on a "high," looking forward to a bright future in a country that already settled its differences.
In fact, if it were up to the Afghan people, the war would be over. Even if it were up to the Pashtuns, who make up the Taliban terrorists, the war would be over.
But there are two reasons why the war can't be won.
The first reason is that there is no war. The war was won in 2002, when the American coalition forces, in conjunction with the Afghan Northern Alliance, decisively defeated the Taliban armies. Since then, the war has collapsed into a series of terrorist attacks and a counterinsurgency strategy.
The second reason that the war can't be won is that it's not up to the Afghan people. The terrorist insurgency is being fought by Pashtun, al-Qaeda and Uzbek terrorists hiding out in the tribal areas on Pakistan's borders. The war can't be won in Afghanistan any more than it can be won in Pakistan.
As if the prove the point, the London Independent reports that Taliban terrorists have developed a new generation of roadside bombs that are made out of wood, and have no metal or electronic parts, so they can't be detected by existing methods.
(Comments: For reader comments, questions and discussion, see the 12-Jan-10 News - Afghan people hope for the best thread of the Generational Dynamics forum. Comments may be posted anonymously.) (12-Jan-2010) Permanent Link
Understanding where the world is going in the 2010s.
As regular readers know, Generational Dynamics predicts that we're headed for a new "Clash of Civilizations" world war, pitting China and Sunni Islam forces against the West. As usual, Generational Dynamics tells you the final destination, but doesn't tell you the scenario that will get you there. (See "Generational Dynamics forecasting methodology.")
The new issue of The Diplomat Magazine presents an "end of decade" series of articles on the major events of the last decade and the major flash points of the next decade. The magazine doesn't mention anything about a world war, of course, but it does provide an overview of the major trends and major points of conflict, at least for the Asia-Pacific region.
The following are The Diplomat's Top 10 stories of the decade:
The article makes an interesting observation: "As if to prove the maxim that generals always fight the last war, the approaches that worked (sort of) in Iraq have been imported almost wholesale -- think ‘COIN’ [counterinsurgency] and ‘surge’ -- and supported by Obama in an unconvincing plan announced after much cogitation late in 2009."
This is certainly true, and one of the most remarkable aspects of our Afghanistan strategy. However, as I wrote in September the Iraq "surge" strategy will not work in Afghanistan.
If I had to choose, however, I would say that the spectacular Red Mosque attack in Islamabad, earlier in the same year, was more significant, since it was the first major terrorist attack, and it led to other attacks, including the Bhutto assassination.
In the Asia-Pacific region covered by the article, it's hard not to include China's crackdown on Tibet in March, 2008. This event electrified the world, and led to a big rise in hostility between the Chinese people and much of the rest of the world.
Outside of the Asia-Pacific region, we might add a couple of important events from the last decade.
First, the disappearances of Yasser Arafat and Ariel Sharon (through death and coma, respectively) have sent the Mideast spiraling into a worsening situation, resulting in three wars (so far): Israelis vs Hizbollah in Lebanon in 2006, Palestinian Fatah vs Hamas in Gaza in 2008, and Israelis vs Hamas in Gaza in 2009.
And second, the the 2004 Beslan school massacre in southern Russia unified the Russian people behind Vladimir Putin, who is still viewed by the Russian people as almost a god.
The Diplomat Magazine now describes the major flashpoints, any of which could trigger a major war in the Asia-Pacific region.
There are 1500 missiles on China's soil pointing directly at Taiwan, and that number continues to increase. Few people doubt that China intends, sooner or later, to forcibly make Taiwan part of China again. Any political move in Taiwan that even smells of "independence" might trigger such a move by the paranoid Chinese Communist Party (CCP) leaders, and the US would immediately counterattack, leading to war.
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The Beijing government claims sovereignty over all islands in the South China sea, including the Spratly Islands, but those claims are disputed by Brunei, the Philippines, Malaysia, Taiwan, and Vietnam. (See "China continues massive military expansion as it announces 18% budget increases.")
This is part of a much larger naval strategy -- a plan to gain hegemony over the entire Pacific and Indian ocean regions. China is developing a "String of Pearls" -- a collection of ports that link China with the Mideast and Africa.
Completion of this "String of Pearls" strategy will bring China into direct confrontation with both India and the US.
This list of flashpoints will be very useful for sorting out which news events are significant and which are not. One of these flashpoints could well be the trigger that leads to war.
Outside of the Asia-Pacific region, other flashpoints include the Mideast and the Caucasus regions, as can be seen on the conflict risk graphic on the home page of this web site.
(Comments: For reader comments, questions and discussion, see the 11-Jan-10 News - US threatens Israeli / Top Asian Events and Flashpoints thread of the Generational Dynamics forum. Comments may be posted anonymously.) (11-Jan-2010) Permanent Link
And a US political realignment is proceeding.
Responding to many requests, I'm now going to set up a separate forum thread for comments and discussion for each day's article(s). The thread for today's articles is called 11-Jan-10 News - US threatens Israeli / Top Asian Events and Flashpoints.
Furthermore, you'll be able to post in these threads (only) without having to register. To limit spamming, each thread will be locked after 24-72 hours.
The Jerusalem Post reports that Israel "can manage without US guarantees," after US Middle East envoy George Mitchell hinted on Thursday that the US might end US loan guarantees.
However, Ynet news reports that an unnamed American official has backed off, saying, "It was not a threat and not an implied threat."
As part of its numerous campaign promises to save the world on January 21, 2009, the Obama administration said it would focus on the Mideast, and would bring about peace treaty between the Israelis and Palestinians. Now the administration is discovering what the Bush administration discovered: That neither side is willing make almost any real concessions at all. (See "After a week of foreign policy disasters, President Obama's entire program is adrift.")
Now the Obama administration is taking its turn at being blamed for lack of progress. An al-Jazeera editorial blames the administration's "soft-handed approach" toward Israel.
When the Bush administration released its "Mideast Roadmap to Peace" in 2003, one of the first major prediction I wrote for this web site was that it would fail. (See "Mideast Roadmap - Will it bring peace?") From the point of view of Generational Dynamics, the Mideast is headed for a major war, re-fighting the genocidal war between Jews and Palestinians that followed the 1948 partitioning of Palestine and the creation of the state of Israel.
The Boston Globe reports on a letter from a local Democratic party activist and "lifetime Democrat" who is switching his voter registration from Democratic to Unenrolled.
As reasons, he says that the "state of Perpetual War is continuing and even expanding," and the bailouts are helping banks rather than people. "The final straw was the travesty of the Health Care Insurance Reform bill," he adds.
That's just one activist, but reading a Democratic Underground web site page, you can read many activists agreeing with the letter and expressing their own anger, with almost no dissenting voices.
From the point of view of Generational Dynamics, what we're seeing is a major political realignment. Pew Research describes by saying "the public has moved in a conservative direction on a range of issues," and implies that the Republicans will gain.
But that misses the point. The Republican party isn't very popular either. For example, people across the political spectrum want health care reform, but not the loathsome, corrupt bill passed by Democrats in December. And according to a Rasmussen poll, 45% say that a random group of people from phone book would be better than current Congress.
The biggest recent manifestation of this political realignment is the "Tea Party" movement. A December Rasmussen poll found that a new "Tea Party" is more popular than the Republican party. Other polls have found high interest among Democrats for a new "Tea Party."
In 2010, expect to see an increasing realignment that will synthesize views of both parties and create a new movement of some kind.
The main topic of discussion in Sunday mornings news talk shows was the failure of President Obama to respond quickly after the nearly-successful Christmas day jetliner bombing attempt over Detroit.
There was plenty of related discussion about the growing threat of al-Qaeda in Yemen, and whether it's possible to protect airliners against future "underwear bombers."
The major political drama of the morning was over the revelation that Senate Majority Leader Harry Reid (D-NV) said privately, during the 2008 Presidential campaign, that the US would be "ready to embrace a black presidential candidate, especially one such as Obama – a 'light-skinned' African American 'with no Negro dialect, unless he wanted to have one.'"
That remark is so bizarre, I barely know what to make of it.
Democrats rushed to defend Reid, but Republican National Committee Chairman Michael Steele, who is black, pointed out that if a Republican had ever said anything like that, he would be skewered by the Democrats. That's undoubtedly true, but Steele is in trouble with his own party for making money on the side by giving speeches and writing books. His response: "Either fire me or shut up!"
Great drama!
(Comments: For reader comments, questions and discussion, see the 11-Jan-10 News - US threatens Israeli / Top Asian Events and Flashpoints Flashpoints"#> thread of the Generational Dynamics forum. Comments may be posted anonymously.) (11-Jan-2010) Permanent Link
It seems like déjà vu -- it was less than a year ago that that terrorists attacked the Sri Lanka cricket team in Lahore. (See "Cricketing world in shock after attack on Sri Lanka team in Pakistan.")
Now it's the soccer world's turn. The the BBC reports that the Togo team's assistant coach are among the three killed and nine wounded by attackers with machine guns.
The bus was taking the taking the Togo team to the Africa Cup of Nations, a major African soccer tournament being held in Angola. The bus had just entered the Angola's Cabinda region, and terrorists demanding independence for Cabinda have claimed responsibility for the attack.
The world's biggest soccer tournament, the World's Cup, is scheduled to be held in Johannesburg, South Africa this summer. The attack has raised questions about whether proper security can be guaranteed this summer, but it's thought that the Togolese attack was a one-of-a-kind incident.
In fact, the Africa Cup of Nations tournament will go on as scheduled, and the BBC is reporting that, after changing their minds several times, the Togo team will participate.
(Comments: For reader comments, questions and discussion, see the Geopolitical Topics thread of the Generational Dynamics forum.) (10-Jan-2010) Permanent Link
As financial imbalances grow around the world, say goodbye to Saab.
Simon Johnson, MIT School of Management professor, and Peterson Institute Senior fellow, predicts financial catastrophe on CNBC:
Johnson talks about a financial "catastrophe" in the offing. He makes the following very interesting argument: The last crisis (beginning in 2007) was caused by banks that were "too big to fail" taking huge risks with other people's money.
Today, the biggest banks are even bigger, and are even more reckless than ever in taking risks. They can do this because they know that they're "too big to fail," and so they know that they can take any gamble they want: if they succeed, they'll make a lot of money, and if they fail, the government will bail them out.
Therefore, if the last crisis was caused by banks "too big to fail," then there must be an even worse crisis coming soon.
From the point of view of Generational Dynamics, this argument makes sense. The Great Depression of the 1930s made the survivors extremely risk-averse. When those survivors disappeared (retired or died) in the 1990s, they were replaced by Boomers and Gen-Xers who abused credit, causing the dot-com bubble and the credit/real estate bubble. The current crisis will not end until the new generations of Boomers, Gen-Xers and Millennials learn their lessons, and become extremely risk-averse again. The fact that they haven't yet learned that lesson is proof that the worst is yet to come. It's like an alcoholic who doesn't stop drinking until he really hits bottom.
Johnson points out the enormous hubris of these bankers. Goldman Sachs, for example, was bailed out by the government, but is just about to pay $20 billion (with a "b") in bonuses. It's amazing.
Another interesting thing about the above video is that the CNBC anchors don't believe a word that Johnson is saying. They haven't learned their lessons either.
Johnson predicts a financial crisis in China, similar to Japan's massive crash in 1990.
However, as we've written many times, a financial crash will be much worse for China, as even the Beijing government fears it will trigger a huge civil war.
The NY Times reports that wealth hedge-fund investor James S. Chanos is saying that China is in a huge real estate bubble, "Dubai times 1,000 — or worse," headed for a major crash.
In fact, a new report in China daily says that corruption is spreading throughout the grass-roots levels of China's government and state-owned enterprises (SOEs).
An interesting take on all this is to compare the generational timelines of the U.S. and China. America's Recovery era began in 1945, when WW II ended, while China's Recovery era began in 1949 when the Communist Revolution civil war ended. You can't be very precise when it comes to mapping these generational changes forward, but roughly speaking we can assume that China is a couple or a few years behind America in its generational changes. Since America's crisis began in 2007, we can assume that China is very close to a similar crisis.
A BBC report ties everything together by describing the resentment that ordinary Chinese people feel over the massive corruption. "There is widespread anger at the ostentatious lifestyle enjoyed by some Communist Party officials, police chiefs and bosses of state-owned companies," it says.
Even without Generational Dynamics, one can see that China is headed for a very substantial crisis. (See also: "Skyrocketing real estate prices in China alarm officials.")
Things are bad in America and China. Europe doesn't escape.
Eurozone unemployment is at 10%, headed for 11%. The level is at 20% for young people. Latvia is the worst off, at 22.3%. Spain is in second place, at 19.4%
European commentators call them the "P.I.I.G.S". Those are the Eurozone countries -- Portugal, Ireland, Italy, Greece and Spain -- so much in debt that they may default on their sovereign debt.
According to Lobito, a member of the Generational Dynamics forum visiting us from Portugal: "[A]lmost every one [in Portugal] is blind. I try to talk and people call me a pessimist or they say I´m too young to know anything about anything." So it seems that the Portuguese are as deeply in denial as the Americans and the Chinese are.
Euro Intelligence tells us that the EU may not bail out Greece if it's about to default. Jürgen Stark of the European Central Bank (ECB) is quoted as saying, "The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece."
The EU is conducting a grand experiment right now, by appearing willing to allow countries to default. If Greece or Spain or Portugal defaults on its sovereign debt bonds, then will the damage be contained? Will it spread to other countries in the EU? Will it spread to other countries around the world? Nobody knows.
Getting back to America, California and Illinois are also close to defaulting on their bonds. No one knows what effect that will have either.
I've known several people who REALLY love Saab cars, and I imagine many of them are crying in their beer tonight. But while Saab owners are merely sad, European politicians and labor unions are absolutely furious, according to a report in The Guardian. General Motors has appointed liquidators to shut down the Swedish car firm, despite the fact that two or three other firms have expressed an interest in acquiring Saab, but apparently GM didn't consider them to be serious offers.
The good news for Saab lovers is that there may be a fire sale of existing stocks of Saab cars.
(Comments: For reader comments, questions and discussion, see the Financial Topics thread, the China thread, the Portugal thread, and the Europe thread of the Generational Dynamics forum. Read the entire Financial Topics thread for discussions on how to protect your money.) (9-Jan-2010) Permanent Link
Al-Qaeda is jubilant, while Jordan is embarassed.
Today we focus on the repercussions of al-Qaeda's recent terrorist acts, as we come closer to world war.
Announcing the results of an investigation of the intelligence community's failure to stop the "underwear bomber" from taking a plane to Detroit on Christmas day, President Barack Obama said:
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As we've said several times last year, Obama is increasingly adopting President Bush's foreign affairs policies, abandoning his own blundering, dithering, befuddled, unfocused approach to terrorism. This reflects the increasing fear and anxiety of the American people.
Der Spiegel says that the European left is getting worried. They're asking, "How much Bush is there in Obama?"
It took President Bush only one day after 9/11 to say we're at war. Obama has taken quite a bit longer. Just imagine what Obama would be saying today if the Christmas day attack HADN'T failed.
From the point of view of Generational Dynamics, such an event would be a "regeneracy" event, the kind of event that, during a Crisis era, regenerates civic unity for the first time since the end of the last crisis war (WW II), and often leads to full-scale war.
(For information about the term "regeneracy" and about generational eras, see "Basics of Generational Dynamics.")
You'd think that the failed Christmas day attack would be considered an al-Qaeda failure, but leaders of Al-Qaeda on the Arabian Peninsula (AQAP), headquartered in Yemen, are apparently very proud that they got a bomb into a jetliner over Detroit.
"With Allah's grace, the hero mujahid martyrdom-seeker, brother Omar Al-Farooq, carried out a quality operation on an American plane that took off from the Dutch city of Amsterdam to the American city of Detroit, while they were celebrating the Christmas holiday on Friday December 25, 2009, [an operation] which broke through all modern advanced technological equipment and security barriers in world airports, ... rubbing their noses in the dust [in humiliation], and making all they have spent upon security technologies a waste for them," according to a MEMRI translation of AQAP statements posted on web sites.
According to the statements, the attack was revenge for "the savage bombing using cluster bombs and cruise missiles that was launched from American ships that occupy the Gulf of Aden."
The leader of Al-Qaeda in Afghanistan is taking pride in the suicide bomber who killed seven CIA operatives in Kabul last week. The NY Times quotes him as saying, "He detonated his fine, astonishing and well-designed explosive device, which was unseen by the eyes of those who do not believe in the hereafter."
Just as Obama's rhetoric is increasingly talking about war, al-Qaeda is becoming energized by these two events.
The suicide bomber that killed the CIA operatives was a Jordanian al-Qaeda terrorist whom Jordan had "turned" to be opposed to al-Qaeda. He was sent to Afghanistan to serve as a double agent -- working for al-Qaeda, but reporting what he learned to the CIA. But what the CIA didn't know was that he was a triple agent -- working for al-Qaeda, spying on the CIA. He was so well trusted that he wasn't searched when he came to the CIA compound, allowing him to explode his bomb.
Jordan is greatly embarassed by the CIA link, according to a detailed analysis in The Guardian. Jordan is America's strongest Muslim ally in the Mideast, but has kept the alliance as quiet as possible. Now that the CIA link has been exposed in the worst possible way, it could have political implications for Jordan's government.
(8-Jan-2010) Permanent Link
Also: Panic buying of kitty litter in Britain
Dear Reader, I'm going to try this for a while and see if it works for me. Ideally I'll produce a news summary every day, but that's probably unrealistic. I'll try to do it as often as possible.
Every day I come across one or more stories that I believe are very important (or just amusing). Often web site readers refer such articles to me. But my work schedule keeps me from writing a full article on them. The news summary will briefly cover stories that I believe are of international geopolitical or financial significance, and will provide a link to one or more articles.
The Caucasus is one of the most dangerous places in the world, since it's the nexus of centuries of wars between Muslims and Orthodox Christians. Ria Novosti reports that violence is increasing throughout the Caucasus, especially in Chechnya, Dagestan and Ingushetia.
This follows after a suicide bomber car drove into a major police station compound in Dagestan, killing 5 police officers and wounding 14 others. The carnage would have been much worse, but a quick-witted police car driver prevented the bomber from getting into the crowded areas of the compound. The CNN story has a map showing the location.
According to the Telegraph, the bitterly cold weather is causing people to stock up. Kinda makes you wish for more global warming, doesn't it.
One of the two bloodiest wars of the 1990s was the ethnic war in Bosnia and Herzegovina where an estimated 100,000 people were killed and another 2 million displaced. (The other one was the Rwanda genocide.)
A World Focus video says that kids in this region are learning history from textbooks that contain no events at all after 1990, just before the war broke out. "All possible content that could be insulting to any of the people of Bosnia was taken out of the textbooks. Most of the last 20 years of the history of our country is not in primary school textbooks," according to one Bosnian official.
"My personal opinion is that until all sides in Bosnia agree on facts about what happened in the last 20 years, I think it is good. But I hope that we will reach a time when some things could be described in the way they actually happened."
This kind of thing really fascinates me, and we've discussed it in Lebanon and Sri Lanka.
When a country enters a Recovery era following a bloody civil war, everyone walks on egg shells for fear that the war will break out again. But it can't, and won't until the next Crisis era, decades later. In the meantime, they take drastic steps like this one -- deleting 20 years of history from textbooks -- to keep anything from happening.
Ironically, this only pisses off the younger generation of kids who wonder why information is being kept from them.
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A great Der Spiegel article describes the split in Nigeria between Muslims in the north and Christians in the south. This came about because the Arabs colonized the north, and the Europeans colonized the south. Both sides are becoming more radical, and Nigeria is in the news now because the Christmas day attempted jetliner bomber comes from Nigeria.
The U.S. is imposing high duties on wire decking products imported from China, Reuters reports. This follows duties on steel pipes, that the U.S. claims the Chinese are "dumping" at unfairly low subsidized prices. The Chinese say the U.S. ignores the facts that U.S. manufacturers can't compete in today's recession world economy, and is making China a scapegoat.
On the other hand, China is threatening duties on U.S. chicken parts -- chicken feet and wings -- because they're delicacies in the China.
Everybody is thinking about the Smoot-Hawley act of 1931, where the U.S. imposed high duties on imported goods, supposedly to save jobs. The tariffs made the Great Depression worse. They destroyed the Japanese economy, and is one of the factors that led Japan, ten years later, to bomb Pearl Harbor.
A Wired article about some neat stuff (assuming that there are neat ways to kill people). Plenty of great photos.
(Comments: For reader comments, questions and discussion, see the Financial Topics and the Geopolitical Topics threads of the Generational Dynamics forum.) (7-Jan-2010) Permanent Link
"Operating earnings" are passé; "Normalized earnings" are in.
I normally don't want to pick on John P. Hussman, since he's one of the better financial analysts, and to be fair, he is a lot less Pollyannaish than most of the others. But his 21-Dec newsletter, "Clarity and Valuation," contains remarks about price/earnings ratios (also called "valuations") that are far off base, and introduce a new tool with which to defraud investors.
As regular readers of this web site are aware, price/earnings ratios have been above average since 1995. (See "How to compute the 'real value' of the stock market.") From about 2004-2007, the P/E ratio was around 18-20, still very expensive, and still above the historical average of about 14. (See the chart at the bottom of the home page of this web site.)
But after the credit crisis began in late 2007, earnings began falling, and P/E ratios started increasing. With the stock market rally in 2009, P/E ratios have been astronomically high, near 100. This is a remarkable and unique historical development, but you never hear or read about this on CNBC or in the Wall Street Journal. These mainstream sources make their money by advertisements from financial institutions, and financial institutions make money by selling investments, and talking about a P/E ratio close to 100 would turn off investors, so no one wants to talk about P/E ratios.
Early in 2009, we saw the ridiculous spectacle of financial commentators talking about P/E ratios based on "operating earnings," a phony earnings number that ignores many expenses. But it satisfied the needs of financial institutions who wish to make commissions and fees by investing other people's money. (See "Wall Street Journal sharply revises its fantasy price/earnings computations.")
By today, even the P/E ratios based on phony operating earnings are around 30, which is also astronomically high, so financial institutions can no longer even use those numbers.
Now we have Hussman's analysis which brings a brand new level of disinformation to the discussion. He discusses an even phonier kind of earning computation, called "normalized earnings":
According to Investopedia, "normalized earnings" are: "earnings adjusted for cyclical ups and downs in the economy" or "earnings adjusted to remove unusual or one-time influences."
In other words, you start from the phony "operating earnings," you remove even more expenses, and then you pretend that there was never a bubble. It's the height of stupidity and insanity, but that's the norm these days. If you don't like a number, then make up your own, and use that number to defraud investors.
According to Hussman, the high P/Es are "based on dividing the S&P 500 by extremely low, but temporarily depressed earnings. For example, the P/E for the S&P 500 currently is 86, because earnings have been devastated, but it would be foolish to take that figure at face value, and equally foolish to work it into a historical 'average' P/E."
So he uses this magic "normalized earnings" figure, which somehow gets the P/E ratio from 86 (for reported earnings) or 30 (for operating earnings) down to 20. Seeing this go on literally takes my breath away.
Hussman says that earnings have been "temporarily depressed" and "devastated," but it would be "foolish" to trust these earnings values. (Presumably, it's less foolish to use phony "normalized earnings.")
Of course earnings have been devastated. The credit and real estate bubbles have ended, and they're still collapsing. The high earnings were a product of the bubbles. Today's "devastated" earnings are a perfectly normal reaction, as the bubbles collapse.
The table below gives earnings per share for each year since 1988, taken from the Standard & Poors spreadsheet.
S&P 500 Reported Earnings per Share since 1988
Pre-bubble Dot-com Credit/RE Post-bubble
bubble bubble
----------- ----------- ----------- ---------------------
1988 $23.75 1994 $30.60 2001 $24.69 2008 $14.88
1989 $22.87 1995 $33.96 2002 $27.59 2009 $44.50 (Estimate)
1990 $21.34 1996 $38.73 2003 $48.74 2010 $45.50 (Estimate)
1991 $15.97 1997 $39.72 2004 $58.55 2011 $61.01 (Estimate)
1992 $19.09 1998 $37.71 2005 $69.93
1993 $21.89 1999 $48.17 2006 $81.51
2000 $50.00 2007 $66.18
These are the figures used to compute the S&P 500 P/E ratio. For example, earnings per share for the year 2007 were $66.18, and the S&P index on 31-Dec-2007 was 1468.36, and so the P/E index at that time was 1468.36/66.18 = 22.18, well above the historical average.
I've split the values into four columns, so you can see what happened. Before the dot-com bubble, a typical share earned around $20. The dot-com bubble pushed that up to $50 per share in 2000. The credit and real estate bubbles pushed the value of up $81 by 2006. Then earnings fell to $14.88 per share in 2008.
Now, $14.88 is certainly a "devastated" value, to use Hussman's word, but is it really "foolish" to take it at face value? It's comparable to the value $15.97 in 1991. That's not so long ago.
In fact, the value $14.88 is quite a reasonable value at this time, since it reflects the end of the credit and real estate bubbles. The future estimates of $45.50 and $61.01 are so unreasonable as to be fantasies, since they assume that the bubbles will be restored.
If you fit the last century's earnings into an exponential growth curve, and extrapolate that curve to 2009, then you get a trend value for about $41 for 2009. So in the absence of a bubble, you should not expect earnings per share to be above $41 for some time to come.
But it's a lot worse than that, since earnings have to fall much farther, to compensate for the bubble highs. This is the Law of Mean Reversion, which says that if a value is well above trend for many years, then it has to fall well below the trend value for roughly the same number of years. This is simple math, since it says that the average growth rate in the future will equal the average growth rate in the past.
During bubbles, there are always people who say "This time it's different." We saw this in the housing bubble, where I heard financial analysts, economists and journalists say, "Housing prices can't go down -- people have to live somewhere," and "Banks won't foreclose -- it's not in their interest to do so" and "These housing construction firms know what they're doing, and they wouldn't be building houses if it were just a bubble."
All of these arguments proved to be completely wrong, but financial analysts, economists and journalists are apparently too dumb to learn from their mistakes.
Let's see if we can give an intuitive explanation for why the earnings per share value has to fall well below the trend value (currently $41) for a long time to come.
During the dot-com and credit and housing bubbles, the following happened:
Once the bubble bursts, the above chain reaction goes into reverse.
This is why the Law of Mean Reversion works, and why it must always work. The bubble creates jobs, factories, and businesses that can no longer survive in the new world of reduced demand. This feeds on itself, and collapses the bubble even further.
The data value (earnings, in this case) can't simply return to the trend value that it would have had, if there'd been no bubble, since the bubble used up resources that have to be replenished, and that imposes costs and depresses the data value after the bubble bursts.
This is what ALWAYS happens, no matter how many times analysts claim, "This time it's different." It's NEVER different.
Some people hope that government stimulus packages can change things, but they can't change the fundamentals, and sometimes make things worse. The "cash for clunkers" program caused a temporary surge in car sales, but presumably only "borrowed" sales from months after the program ends. Many economists believe that the $75 billion program to protect homeowners from foreclosures has done more harm than good, since it causes homeowners to waste money on homes they're going to lose anyway. And in China, stimulus money is being used to create ghost towns and empty skyscrapers, pushing the price of real estate up in a new bubble. (See "Skyrocketing real estate prices in China alarm officials.")
The use of "normalized earnings" by Hussman and others is a bizarre and disturbing new development by financial analysts and journalists to hide what's going on.
But the underlying fundamentals have not changed. Since 1995, we've had a dot-com bubble, a housing bubble, a credit bubble, and a stock market bubble. We have not nearly begun to pay the full price for those bubbles, as they continue to collapse. (This article was lightly edited for clarity on 3-Jan.)
(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.) (2-Jan-2010) Permanent Link
Iranian police fired on protesters on Sunday, killing ten people, including the 35-year-old nephew of the opposition leader Mir-Hussein Moussavi. Moussavi was the principal opponent of Mahmoud Ahmadinejad in the June 12 presidential elections that many analysts have claimed were conducted fraudulently. Moussavi claims to have won the election.
In Iran's largest and most violent protests yet, nephew of opposition leader is killed:
Iranian police fired on protesters on Sunday,...
(28-Dec-2009)
Iran fails to smash student protests, as the Dubai crisis batters its economy:
Huge peaceful student protests in cities across Iran were met with violence...
(9-Dec-2009)
Theological split in Iran widens as opposition protests continue:
The Islamic Republic of Iran versus the Persian Republic of Iran....
(9-Nov-2009)
Iran plays a grand game in international nuclear weapons talks:
Will she or won't she?...
(26-Oct-2009)
Furious Iran blames Pakistan, US and Britain for Sunday's terrorist attacks:
Iran's Revolutionary Guards vow revenge....
(22-Oct-2009)
Big Iran street protests greet Ahmadinejad's fiery denunciations of Israel:
Iran's political crisis continues to grow, as the college year begins....
(19-Sep-2009)
Escalating civil war in Yemen threatens to pull in Iran, Saudi Arabia and U.S.:
Last week, President Obama said we would help Yemen in its "fight against terrorism,"...
(13-Sep-2009)
New Iran demonstrations commemorate the student protests of July 9, 1999:
Hardline Iranian mullahs had thought that they had crushed the demonstrations ...
(10-Jul-2009)
Ayatollah Ali Khamanei relives his childhood, as Iran arrests UK Embassy employees:
Following a week of massacres, protestors have taken to the rooftops,...
(28-Jun-2009)
Iran's Khamenei appears desperate, as reports of Tehran massacres grow:
An amazing generational battle is proceeding in Iran....
(26-Jun-2009)
A generational explanation of Iran's political crisis:
What happens when an irresistible force meets an immovable object?...
(23-Jun-2009)
Iran's government panics, as Supreme Leader hints at violence against protesters:
Friday's speech by Ayatollah Ali Khamenei was a significant escalation...
(20-Jun-2009)
Iran: Violent street demonstrations follow Ahmadinejad's landslide election victory:
Opposition supporters are claiming massive election fraud,...
(14-Jun-2009)
President Obama casts a vote against Iran's President Ahmadinejad:
Can reformist Mir-Hossein Musavi beat Ahmadinejad in the June 12 elections?...
(22-Mar-2009)
Stock markets in Iraq and Iran are surging.:
Iran's President Mahmoud Ahmadinejad says "it is the end of capitalism."...
(17-Oct-2008)
Wall Street Journal describes Iran's generational Awakening era:
Young Iranians turn away from the Quran and go for self-help and New Age....
(1-Jul-2008)
China "betrays" Iran, as internal problems in both countries mount:
Diplomats say that China has provided Iran's nuclear weapons plans to the UN....
(5-Apr-08)
Iranian speedboats threaten to blow up US ships in Gulf of Hormuz:
Question: Why did Iran do it?...
(9-Jan-08)
Students at Tehran University risk protest against Ahmadinejad:
When Iranian President Mahmoud Ahmadinejad spoke at Columbia University...
(8-Oct-07)
Iran's President Ahmadinejad facing a growing "generation gap":
Gas rationing and restrictions on women are infuriating the college-age generation....
(2-Jul-07)
Iranian police swoop down on women with loose headscarves:
Sorry, I just can't stop laughing at this one....
(25-Apr-07)
An Iranian scholar says that Tom and Jerry cartoons are a Jewish conspiracy:
Professor Hasan Bolkhari is loonier than Ahmadinejad....
(29-Mar-07)
Iran is using cartoons to fight decline in anti-Americanism:
Anti-Americanism has been declining in Iran for ten years,...
(24-Mar-07)
Iran and Russia increasingly at odds over Iran's nuclear development:
Saying that Moscow "will not play anti-American games" with Iran,...
(17-Mar-07)
Iran's President Mahmoud Ahmadinejad holds two-day Holocaust denial conference:
He says that Israel "will soon be wiped out."...
(13-Dec-06)
Iran and Ahmadinejad are waiting for the Mahdi:
Most people know about the belief by Christian fundamentalists about the Second Coming of Christ,...
(22-Aug-06)
Iranian President Mahmoud Ahmadinejad is a very charismatic leader:
In his 60 Minutes interview, he was witty, charming, confident and deadly....
(14-Aug-06)
State of the Union speech displays continuing misreading of Iran:
It's wishful thinking to believe that an overthrow of the Mullahs is coming....
(1-Feb-06)
Europe resigns itself to a nuclear Iran:
Defiant Iran President Mahmoud Ahmadinejad continues to lead Iran to be the regional superpower,...
(16-Jan-06)
Iran appears to be positioning itself as a post-war superpower:
Iran restarts its nuclear enrichment program while calling for Israel's removal....
(11-Jan-06)
Feminism flourishes in Iran, as the international crisis on nuclear weapons intensifies:
Iran's new president, Mahmoud Ahmadinejad, named a hardline Islamist cabinet on Sunday,...
(15-Aug-05)
Iran's plan to develop nuclear fuel is "irreversible":
France calls it a "major international crisis"...
(3-Aug-05)
Ultraconservative Mahmoud Ahmadinejad wins Iran Presidential election:
I try to find humor wherever I can for this serious web site, and with this guy it's easy....
(25-Jun-05)
Iran: Tehran University student unrest is building against the government:
"Moderate" President Mohammad Khatami blamed the hard-line Muslim clerics...
(8-Dec-04)
Iraq Today vs 1960s America (Revised):
They have much in common: Bombings, assassinations, student demonstrations, violent riots, calls for insurrection and civil war and harsh rhetoric. That's much more than a coincidence.
(8-May-2004)
Riots in Iran: Will there be a violent overthrow of the Iranian Mullahs? Generational Dynamics says 'No.' (25-Jun-03) | ||
The hardline government's threats of violence against protesters may have reduced the volume of protests during the last few months but, as would be expected during a generational Awakening era, the protests have come back stronger than ever during the last week. Hundreds of thousands of protesters took over the streets of Tehran on Sunday, and similar protests occurred in cities across the country.
However, two events have occurred recently that have given the protesters an "excuse" to come out in force and demonstrate:
Iran's government is panicking over these demonstrations because they seem very similar to the the demonstrations that led to the massive violence Islamic Revolution in 1979. From the point of view of Generational Dynamics, a repeat of the 1979 revolution is completely impossible at this time. In 1979, Iran was in a generational Crisis era, so a crisis civil war was quite plausible. Today, Iran is in a generational Awakening era, and a crisis civil war is literally impossible. (See "A generational explanation of Iran's political crisis.")
I heard one commentator on television say something like, "I don't know where these protests are going. They seem to have no leader and no objective." That's exactly right. The riots and demonstrations are just like those by the Boomer generation in America in the 1960s, and the '68er demonstrations in Europe at the same time. That was the time of the West's generational Awakening era. When tens of thousands of young people went to San Francisco to take part in the 1967 Summer of Love, they had no leader and no objective either. They were mainly demonstrating against their own parents, and the austere rules imposed by the generations that survived World War II. Today's demonstrators in Iran are really demonstrating against the austere rules imposed by the generations that survived the Islamic revolution and the Iran/Iraq war of the 1980s.
The death of Moussavi's nephew is certain to be considered a major event by the young demonstrations, infuriating them and causing enormous outrage. The hardline government is hoping that the demonstrations will fizzle, and they're using violence to try to stop them, but without success.
From the point of view of Generational Dynamics, Iran's riots and demonstrations can be expected to continue for years, and will only end when some sort of climactic event occurs, equivalent to America's resignation of President Richard Nixon in 1974.
(Comments: For reader comments, questions and discussion, see the Iran thread of the Generational Dynamics forum.) (28-Dec-2009) Permanent Link
The Yemen connection to the attempted airplane bombing has thrust Yemen into the news.
The 23-year-old would-be bomber is from a prominent Nigerian family, but apparently received terrorist training and the bomb ingredients from Al-Qaeda in the Arabian Peninsula (AQAP), headquartered in Yemen. This has caused various news anchors, bloggers and politicians to have to learn how to spell "Yemen" and to realize the growing al-Qaeda presence there.
 |
However, there's far more important news coming from Yemen, and it's about two wars that have been escalating rapidly since I first wrote about them in September. (See "Escalating civil war in Yemen threatens to pull in Iran, Saudi Arabia and U.S.")
In northern Yemen, the war was originally a rebellion by the Houthi ethnic group against the Yemen government. Since September, it's spilled over into a border war between Houthis and Saudi Arabia. Analysts were shocked this week when Saudi Arabia disclosed that it has lost 73 of its soldiers in its clashes with Yemen’s Houthi rebels.
Saudi Arabia's air force has been crossing the border into Yemen, with the Yemenis' consent, and striking at Houthi rebel bases. A Saudi air strike last Sunday on a north Yemen town reportedly killed dozens of people, including civilians. The US is thought to be providing intelligence information for the strikes.
In southern Yemen, the war is against al-Qaeda terrorists. Yemen's government in Sana'a is increasingly losing control of the country, and al-Qaeda groups are using Yemen as headquarters for AQAP, with a stronghold in the south. AQAP has been staging terrorist attacks throughout the country in order to destabilize the government.
Yemen has been conducting air strikes against al-Qaeda bases. The NY Times reports that the "United States provided firepower, intelligence and other support to the government of Yemen." The "other support" is thought to include American special forces soldiers and attacks by American cruise missiles.
According to a statement by General David Petraeus statement in April:
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, and now Yemen. So far they've been unsuccessful, but they'll keep trying in different countries until they're successful.
The growing American military presence in Yemen means that there is one more country, in addition to Iraq, Afghanistan, and Somalia, where American forces and al-Qaeda-linked Islamist forces are fighting one another. The potential for a major escalation is substantial.
From the point of view of Generational Dynamics, the world is headed for a "clash of civilizations" world war, pitting China and Sunni Islam forces against the West.
(Comments: For reader comments, questions and discussion, see the Yemen thread of the Generational Dynamics forum.) (27-Dec-2009) Permanent Link
It's been an incredible year, hasn't it?
In my own way, I lead a fairly ascetic life. During the day I develop computer software in the ancient language of C++, and in my remaining time I work on this web site. My obsession is nearly total. While I'm at work, writing C++ code, I have my headphones on, and I'm listening to the BBC or Bloomberg TV. At night, if I wake up at 4 am and can't get back to sleep, I turn on the BBC. At other times, I watch CNN, Fox News, CNBC, or MSNBC. I've also cut and pasted some 50,000 articles that I have filed on my hard disk. My obsession is a GOOD thing (I keep telling myself), because it makes me know everything that's going on in the world, and makes it possible to write all the articles I post on this web site.
This has been true for seven years, since I started this web site in 2002. Each day, or as often as I have time for, I look at the world through the prism of generational theory and write articles for this web site reporting on what I find.
But this year has been different from the previous six. The world went off the rails this year. I used to get up in the morning and wonder if I was crazy or the world was crazy, but that conundrum has been resolved at least partially. The question of whether I'm crazy is still open, but there's absolutely no doubt at all that the world has gone mad.
Let's take a look at some of the events of the last year:
I've been expecting something like this for years, because the same thing happened after the 1929 crash, and I've written about it many times, but it's still a shock how pervasive it's become.
I frequently mention Yves Smith's Naked Capitalism blog, because her blog has become a kind of "ground zero" for describing many of the criminal activities going on in the financial world. Smith calls people like me (without actually acknowledging me or this web site) "alarmists," but she's now confirming all the things that she used to consider alarmist. She even refers to bankers as "banksters."
The fraud and extortion have made writing for this web site more difficult, because what's going on is so far from reality. If the P/E ratio index is around 18, as it has been in previous years, then I can talk about how it's been above the historical average of 14 since 1995, and by the Law of Mean Reversion will have to fall equally far below 14 for the same amount of time. But what can you say when the P/E ratio index is around 100? How can you say anything that anyone sane can relate to?
Many things that happened last year were crazy in another sense, because they're just "business as usual." Some other events of note in the last year: the Gaza war between Israel and Hamas; the escalation of the Afghanistan war and the increasing instability of Pakistan; and in the last few days, we're learning that U.S. forces are getting involved in the border war between Saudi Arabia versus the Iran-backed Houthis in Yemen. There's also been the climactic end to the Sri Lanka crisis civil war, and the growing riots and demonstrations in Iran.
There are tens of thousands of people who read this web site regularly, according to the web site logs. The logs also tell me that there are plenty of people from universities, government and businesses, though of course I have no idea who they are.
I still have to joke that this web site is like a porn site: there are a lot of people reading it, but almost no one wants to admit it. I'd love to get some feedback from academics or government officials, but apparently few of them want to admit associating with the gloomiest person in the world, who writes for the gloomiest web site in the world.
The Generational Dynamics forum has had mixed success. There isn't a great deal of traffic, although the discussion that occurs is very intelligent.
For me personally, the forum has actually been very successful. I try to answer most of the e-mail questions and comments that I receive from web site readers, but at the end of 2008 and the beginning of 2009, the volume of e-mail queries was getting out of hand, and I couldn't respond to all of them. Furthermore, many people were asking me the same questions, usually something along the lines of "How can I protect my assets?"
So I started referring people to the forum, especially the Financial Topics thread. That's been pretty successful, as the number of e-mail queries has leveled off and is under control again, even as the traffic to the web site has increased.
Still, I would like the forum to be more useful to people, and if there's anything I can do (such as rearranging topics or categories, or something like that), I would be happy to do so. Feel free to write to me with suggestions, or post them in the forum itself.
I would like to simply wish everyone a Merry Christmas and Happy New Year, but it's not that simple. I'm a believer in trends, and the trend for the world is to become increasingly dysfunctional in the seven years since I started this web site.
There's something really dark going on. The stock market surge, the Copenhagen summit, the health care bill -- none of these things makes any sense at all. The investors, journalists and politicians whose behavior is responsible for these things are not that stupid. They may act like idiots, but they aren't idiots.
Sherlock Holmes said, "When you have eliminated the impossible, whatever remains, however improbable, must be the truth."
So these people are acting like idiots, but the "impossible" is that they actually ARE idiots. So we can eliminate that. Therefore, they must be acting like idiots on purpose, knowing the consequences, but having some venal personal motives. What are those motives? Usually money and political power, accompanied by total contempt for the people they're screwing.
There are actually plenty of examples of this.
I'll start with a couple of examples from China. Chinese food producers poisoned millions of Chinese children by bulking up their food products with melamine, to give the appearance of greater protein content. Chinese real estate firms are continuing to build empty cities and empty skyscrapers, creating a real estate bubble that's doing enormous harm to ordinary Chinese citizens.
In America and Europe, we have supposedly reputable companies like Priceline, Orbitz, FTD, 1-800-Flowers, Pizza Hut, and Continental Airlines scamming their customers online and making billions of dollars doing it.
And of course the entire financial disaster was perpetrated by people defrauding other people for their own gain. In particular, the "toxic assets" were being created and sold by people who, by 2006-2007, knew that they were toxic, but redoubled their efforts to sell them before the party ended. Today, banks like Citibank and Bank of America are still extorting their own customers by charging phony fees and 30% interest rates, in order to pay themselves million dollar bonuses.
Why is all of this happening? I know that one of the least popular things I can talk about on this web site is "The nihilism and self-destructiveness of Generation X," but with Gen-Xers increasingly in control of government and business organizations, there's really no other direction to go in.
Most people in every generation, including Gen-Xers, are decent, hard-working people, but what we have today are a small group of cynical Gen-Xers who really ARE nihilistic, and who have the skills to drive out the hard-working people. This is "the bad driving out the good."
The mechanism for doing this became clear from the hacked climate change e-mail messages that were revealed prior to the Copenhagen conference. In a word, these e-mail messages show that climate change science is junk science. And even if the polar icecaps ARE melting, these e-mail messages still show that climate change science is junk science. But instead of acknowledging that it's junk science, all the politicians, journalists and "scientists" acted like idiots, and went to Copenhagen, where the whole scene collapsed into farce.
But what's most interesting, and deserves a lot more study, is that the hacked e-mails showed how climate change advocates used the peer review process to systematically exclude anyone with dissenting views. The advocates were skillful in gaining control of climate research journals and then making sure that skeptics were ignored and never acknowledged. And if a skeptic published his research elsewhere, then the advocates would say that the research wasn't "peer reviewed."
That shows one way that "the bad drives out the good" in climate change.
In financial institutions, anyone who wants to conduct business honestly is fired, driven out, or threatened. Last June, Yves Smith described exactly how middle level employees are effectively able to extort management into continuing fraudulent activities and getting themselves overpaid.
The disintegration of the Copenhagen climate change conference is interesting, because it's a microcosm of what's happening in the world. The nihilism and self-destructiveness of these Gen-Xers in power is threatening the entire world with the same kind of disintegration, through worse financial crises and world war.
But other than that, Dear Readers, let me wish you a Merry Christmas and a Happy New Year. And I hope that this web site is helping you to prepare for what's coming. If it does, then it's serving its purpose.
Let's close this essay with a little Christmas music.
I wrote about the song "Have yourself a merry little Christmas" last year. I think I like this song because it fits my mood as the gloomiest person in the world.
Here's the video of Judy Garland singing this song in the 1944 movie "Meet Me in St. Louis":
Merry Christmas and Happy New Year, everyone, and thank you for your support in the last year.
(Comments: For reader comments, questions and discussion, see the Merry Christmas and Happy New Year 2010 thread of the Generational Dynamics forum.) (25-Dec-2009) Permanent Link
New home sales fell unexpectedly in November, when analysts had expected them to increase.
The CalculatedRisk blog has an interesting analysis of the relationship between new and existing home sales.
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This graph shows that new home sales (red line) and existing home sales (blue line) followed similar growth paths until the real estate bubble burst in 2006 and they started to diverge.
New home sales were supposed to increase in November, according to the analysts, but as you can see from the graph, they took another downward spike.
Since 2006, existing home sales have been doing better than new home sales (relatively speaking) because new home builders couldn't compete with the low prices of all the foreclosed properties (existing homes), according to CalculatedRisk.
On timing issues: New home sales are counted when the contract is signed, and usually before construction begins. So to close before the original Dec 1st deadline, the contract had to be signed early this Summer. Existing home sales are counted when escrow closes. And the recent surge in existing home sales was primarily due to buyers rushing to beat the tax credit.
November will probably remain the record high since existing home sales will decline sharply in December."
It's not surprising that existing home sales have been doing well, because of the foreclosed homes flooding the market.
As you can see from the above graph, new home sales took a slight upward blip a couple of months ago. Pollyannaish journalists and analysts took this as a sign that the housing crisis had bottomed, and that the worst was over.
But as we discussed in "'Shadow inventory' of unsold homes continues to grow," millions of additional distressed homes are expected to come on the market in 2010. This will trigger a sharp decrease in the market prices of homes, and may even result in panicked selling.
These are trends that analysts at CNBC, the Wall Street Journal, and other media ignore.
Steve Lieseman on CNBC was genuinely stunned on Tuesday morning, when the news came in that revised Q3 GDP growth was 2.2%. There were actually 10-20 seconds of total silence as Lieseman stared at the report, trying to figure out what was going on.
The financial community almost universally believes that the worst is over, and that GDP growth will reach 4% in either Q4 or Q1. As a consequence, they believe that the economy will start ADDING jobs by Q2, while they've been losing jobs for two years now.
These beliefs are based entirely on unrealistic hopes.
As another example, corporate earnings have been falling for over two years now, and analysts believe that they HAVE to start increasing, simply because too much time has passed. For example, here's what appeared earlier this week on CNBC Earnings Central:
As of Monday, December 21st:
The blended earnings growth rate for the S&P 500 for Q3 2009, combining actual numbers for companies that have reported, and estimates for companies yet to report is currently -14.1% versus an estimated earnings growth for Q4 2009 of 196.1%. Of the 498 S&P 500 companies who have reported Q3, 79% beat estimates, 7% were in-line, and 14% were below estimates. As of October 1st, the earnings growth rate was at -24.7%. (Data provided by Thomson Reuters)"
If you read the above carefully, you'll see that analysts expect earnings growth of 196.1% in Q4. After earnings growth has been negative for many quarters, this is truly an incredible belief, and it shows what ridiculous views mainstream analysts are holding.
All my life I've been reading about how foolish people were after the 1929 crash. Herbert Hoover said that "Prosperity is just around the corner." All kinds of analysts predicted that the market had bottomed and would start going up again.
That whole story has always been something of a joke, ever since I first encountered it when I was in school in the 1950s.
But now we see it playing out again. It's absolutely astounding to see this joke replayed before our eyes.
A couple of days ago, I posted a story on China's real estate bubble. As incredible as what's happening in America, China's real estate bubble is so cuckoo as to be worthy of a cartoon rather than real life.
I know I keep saying this, but the insanity keeps getting worse every day. How can journalists, analysts and politicians be more insane every day than they were the day before?
(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.) (24-Dec-2009) Permanent Link
Chinese home prices rose 5.7% in November from a year earlier, according to China's National Bureau of Statistics (NBS).
Having just posted a new article, "'Shadow inventory' of unsold homes continues to grow," indicating that the housing crisis in America is far from over, it's worthwhile taking a look at the even worse real estate crisis in China.
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China's growth rate in home prices was 2.2 percentage points higher than that of October, according to the NBS report.
Alarmed Beijing officials are imposing new regulations in an attempt to slow down the rapid bubble growth. "We’re at the start of an all-out crackdown on the property market," according to one Shanghai analyst. "The current speed of gains in property prices cannot be sustained. Local governments may also work out their own policies targeting house prices."
Announcement of this crackdown panicked investors this week in the Shanghai stock market, especially in stocks related to real estate.
According to former Morgan Stanley Chief Asia Economist Andy Xie, Chinese stocks and properties are 50-100% overvalued, fueled by bank lending and inflation fear:
The asset bubble is being caused by China's massive stimulus program. The stimulus program was intended to create jobs and increase consumption, but instead, state-run banks have channeled the money into real estate projects for their own benefit. The new landowners are being called "Land Kings," and they have little respect among the Chinese people.
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As stimulus money pours into real estate properties, the property bubble gets larger and larger, making home prices too expensive for ordinary citizens, even as many homes and apartment buildings lay empty.
This is one of the most incredible features of China's real estate bubble, and something that's different from America's recent real estate bubble.
There's no property tax in China, and so there's no cost to buying real estate and holding it indefinitely, according to Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management in Beijing.
So "land kings" have been able to use stimulus money or cheap bank loans to purchase properties and hold them, expecting to sell them later at big profits. According to Chovanec,
This has led to remarkable situations. The following video describes "China's empty city - Ordos." The entire city was built by real estate developers using other people's money, and there are no people living there:
In America, the real estate bubble took the form of financial institutions creating and selling mortgage-backed securities that later turned out to be worthless "toxic assets."
In China, the real estate bubble takes the form of financial institutions building and buying unwanted real estate with other people's money.
The details are different, but the core patterns are the same: Financial institutions defrauding the public and paying themselves huge salaries, fees, commissions, bonuses and bribes.
China's residential real estate problem is bad, but if anything, the commercial real estate problems are even worse.
According to a lengthy Xinhua analysis, China's commercial real estate boom occurred in 2003-2007:
But when the financial crisis hit, many multinationals pulled their offices and employees out of China or moved to less expensive spaces, while the hordes of shoppers that retailers were expecting to flood the malls tightened their purse strings. Now, major cities throughout the country are home to empty skyscrapers and shopping malls that are virtually empty, apart from store clerks and security guards. Meanwhile, construction continues."
The result is that the vacancy rate in big cities like Beijing and Shanghai is approaching 50%. Even when the buildings and shopping centers are occupied, owners are forced to give special deals, such as one year free rent on a five-year contract. Thus, effective rents have crashed by 40-50% in the last year, even though nominal rents have remained almost the same.
According to international real estate executive Jack Rodman, there are two reasons that explain why developers have been keeping leasing prices at the old rates:
Moreover, the commercial real estate building craze has not ended, as new stimulus money and near-zero interest rates continue to fuel additional development projects that are not needed.
This has led to an absolutely incredible scam where farmers have started "growing houses" instead of growing food.
The scam works as follows: When there are rumors of a new development project, the farmers in the region quickly get together and build numerous houses on their farm land. These are not real houses, in the sense that anyone could live in them, but they're houses nonetheless. For example, they may be nothing more than bricks held together by glue.
Then, if and when the development project begins, the houses have to be torn town to make way for the development. Beijing's policy is to reimburse owners when a new real estate project causes people to loses their homes. So the farmers make back double their money. Of course, if the rumored development project never actually occurs, then the farmers lose their money.
I seem to keep using the word "dysfunctional" these days, whenever I talk about almost anything having to do with finance or politics, whether in the US or Europe. But it's going to be hard for any other country to beat the dysfunction that's apparent today in China's real estate market.
It's not uncommon for observers to compare China's real estate market today to Japan's real estate market just before its huge stock market crash in 1990. At the height of Japan's real estate bubble, the nominal value of the real estate in Tokyo alone was greater than the value of all the real estate in the United States. Once the crash began, Japan's real estate prices continued falling for almost two decades. (See "Japan's real estate crash may finally end after 16 years.")
China is showing the same signs, according to the NY Times:
China has been building factories and production capacity in virtually every sector of its economy, but it’s not clear that the latest round of investments will be profitable anytime soon. Automobiles, steel, semiconductors, cement, aluminum and real estate all show signs of too much capacity. In Shanghai, the central business district appears to have high vacancy rates, yet building continues."
In America, the public is becoming increasingly furious with Citibank, Bank of America, and other bankers, who have defrauded the public with "toxic assets," and who are now raising interest rates to 30% and imposing phony fees on credit card customers in order to have the money to pay themselves million dollar bonuses.
In China, this discontent goes far deeper. I started reporting on this phenomenon in 2004. (See "Up to 50,000 workers riot and clash with police in southeast China.")
If there were even one incident of this type in the United States, it would be international news. But there are tens of thousands of these "mass incidents" in China each year. And this doesn't count the recent unrest in Tibet and among the Uighurs in Xinjiang province.
These incidents represent an extremely high level of social unrest, and according to an analysis by a Chinese think-tank, the level of social unrest is higher than ever. According to the report, deep resentment has been accumulating over the past few decades against unfairness and power abuses by government officials at various levels.
From the point of view of Generational Dynamics, a Chinese civil war is certain. As I wrote in 2005 in "China approaches Civil War," China has a long history of massive internal rebellions and civil wars, creating bloodbaths that have slaughtered tens of millions of people in a short period of time. These include the White Lotus rebellion that began in 1795, the Taiping rebellion that began in 1852, and the Communist Revolution that began with Mao Zedong's genocidal Long March in 1934.
The current real estate bubble and "asset Ponzi scheme" is a financial crisis waiting to happen. China is desperately trying to use stimulus money to prevent a panic. These attempts have postponed the panic, but the development of the "Land Kings" shows that the stimulus money is only making things worse. And the size of the bubble is so huge that a panic will be a catastrophe for China's social fabric.
From the point of view of Generational Dynamics, China is now about due for its next massive internal rebellion and civil war, and is headed for civil war with absolute certainty.
(Comments: For reader comments, questions and discussion, see the China thread of the Generational Dynamics forum.) (22-Dec-2009) Permanent Link
This study is oblivious to generational issues.
This study purports to show that men become better dancers (or think they do) suddenly at age 65.
The research was conducted in 2008-09 by Dr Peter Lovatt at the University of Hertfordshire. Here's the description:
This study has gotten quite a bit of publicity in the UK. Here's how it was described in The Telegraph:
"The message their dancing sends out is 'stay away, I'm not fertile'," said Dr Peter Lovatt, a psychologist at the University of Hertfordshire who has compared the dancing styles and confidence levels of nearly 14,000 people. His research has backed up scientific studies showing a connection between dancing, hormones and sexual selection.
Men between the ages of 35 and 60 typically attempt complex moves with limited co-ordination – an observation that will be obvious to anyone who saw George W Bush shake his stuff with a troupe of West African performers in 2007.
Dr Lovatt pointed to research showing that women could gauge the testosterone levels of their dance partners by the style and energy of their moves, and suggested that "dad dancing" may be a way of warning women of child-bearing age that they might be better off looking elsewhere.
"It would seem completely unsurprising to me that since middle-aged men have passed their natural reproductive age, and probably have a family already, evolution would act to ensure they are no longer attractive to 18-year-old girls," Dr Lovatt said.
"It's like an apple that is going brown – you want a fresh green one instead.""
The problem with all this is that Dr. Lovatt finds that everything changes once a man gets past age 60. He's a disaster on the dance floor from ages 35 to 60, according to Lovatt, but suddenly gets much better at age 65. He attempts various pseudo-psychological explanations for this phenomenon, but misses the most obvious explanation.
Age 65 is almost exactly the boundary that separates the Silent generation from the Boomer generation.
The Silent generation grew up during the Great Depression and WW II and, more importantly, the time of the Big Band Era.
During the 1930s and 1940s, millions of unemployed musicians formed bands and played music in dance halls around the country. Dancing was the favorite pastime to escape from the worries and anxieties of joblessness and the war. Couples developed very complex and very romantic dance steps from the Fox Trot to Swing.
By the 1950s, complex dance steps were passé. Counterculture Boomer music was rock 'n' roll, and complex dance steps were out. Dancing consisted of moving your legs back and forth in a simple repetition that never varied.
So now Dr. Lovatt is finding that men who grew up in the 1930s-40s are great dancers, while those who grew up in the 1950s-60s are lousy dancers, and he's completely oblivious to these generational differences.
As I keep saying on this web site, journalists, analysts, academics and politicians are apparently incapable of grasping even the simplest generational explanations for things, no matter how obvious.
Dr. Lovatt has appeared on numerous talk shows, demonstrating good and bad dance styles. For some "news you can use," here's a video of Dr. Lovatt's appearance on Graham Norton Show:
(Comments: For reader comments, questions and discussion, see the Music and Generations thread of the Generational Dynamics forum.) (20-Dec-2009) Permanent Link
Here's the text of the agreement, as announced by the Obama administration on Friday evening:
If you don't understand this, there's a good reason: This is almost total gibberish. The wording is intentionally garbled because it's utter nonsense. However, if you sort through the purposely obscure phrases, you get the following:
This agreement was reached between the United States and four other countries -- China, India, Brazil and South Africa. Other countries were excluded from the negotiations, infuriating some of them.
We can all be grateful that the entire conference ended in failure and farce. (See "Climate Change conference in Copenhagen is all about getting green -- money.") This is the best possible outcome for a conference that was absurd from the beginning.
Just when I think that Washington and Wall Street can't become any more insane and dysfunctional, they surprise me and become even worse. I don't know how they manage to do it.
I wrote yesterday that President Obama would not be blamed for this failure essentially because he's a member of the political élite and because he's not President Bush and not a Republican.
However, Obama went way out on a limb for this conference. He totally committed his own credibility to a successful outcome. He's going to receive plenty of blame from his political opposition.
(And there was an ironic finish to the day, when President Obama had to leave the global warming conference early because of a snowstorm and frigid cold weather in Washington.)
It's worth stepping back a moment and seeing the big picture here. President Obama has had one foreign policy disaster after another -- in Iran, in Pakistan, in the Mideast.
Domestically, he's bet his presidency on this health care bill. If it doesn't pass, it will be a political disaster for him. If it does pass, it will be an even bigger political disaster for him.
But there is one decision that appears to have bolstered his confidence: His decision to send 22,000 additional troops to Afghanistan, after sending 30,000 troops earlier this year.
My point is this: President Obama is failing at anything and everything that requires him to get consensus from other politicians, whether it's politicians in the Senate, or leaders of other countries negotiating climate change. Obama gives a good speech, but he's been a total failure as a negotiator, either domestically or internationally.
But the decision to escalate the war in Afghanistan required no consensus and no negotiation. It was his decision to make.
I've written many times for several years about how one country after another has experienced governmental paralysis. This is typical of a generational Crisis era, a time when all the survivors of the previous crisis war (WW II in this case) are all gone, and politicians are reduced to bickering.
But there's one thing that country leaders can usually do on their own: Start or escalate a war. This is especially true in a generational Crisis era, when the population is quick to take offense at a foreign enemy.
We're about to enter a new decade with the world increasingly insane and dysfunctional. 2010 is sure to be a year full of surprises.
(Comments: For reader comments, questions and discussion, see the Climate Change and the President Barack Obama threads of the Generational Dynamics forum.) (19-Dec-2009) Permanent Link
After eight years of blaming Bush, the world may blame China this time.
The week at Copenhagen has been an incredible spectacle, with everyone looking to the US and Europe to provide money to everyone else. There are 130 "developing countries" who are demanding American technology and $200 billion per year, supposedly to help them implement global warming technologies, but always with the implication that the developed nations owe "reparations" to the developing nations because we've been so evil in emitting carbon. And of course they want this money with absolutely no strings attached.
What's funny about this is that almost no one believes that these developing countries will spend this money on global warming. Imagine giving a few billion dollars to the likes of Robert Mugabe of Zimbabwe, the guy who regularly starves and slaughters his own people, especially those of the ethnic tribes other than his own.
Probably the darkest humor of the week was over the question of China receiving a chunk of that $200 billion, since they're a "developing country." Presumably, we would borrow the money from China and pay it back to them to do global warming technology. The suggestion that the US has to fund China has angered the US negotiators. Supposedly, the Chinese have said in back channels that they wouldn't accept US money even if it was offered, but they don't want to say so publicly because that would jeopardize their status as a "developing country."
The Copenhagen conference is a microcosm of all the dysfunction in the world today. In Washington we have a proposed health care bill that's economic insanity, and in Copenhagen we have a climate change conference that's an absurd and loony money grab. We should be watching these things on the Cartoon Network, rather than on CNN and Fox News.
The Copenhagen conference has gone from one chaotic disaster to another. There were arguments about money, and arguments about who will and will not be required to reduce carbon emissions. Things got so bad that the President of the Copenhagen Summit, Danish minister Connie Hedegaard, resigned in disgust.
There has been only one question left: Who's going to be blamed?
Western leaders have been scrambling to cover their asses. In the face of one chaotic disaster after another in Copenhagen, Gordon Brown and Barack Obama have been expressing confidence that an agreement will be signed before the conference ends. French President Nicolas Sarkozy said that it will be catastrophic if there's no agreement.
Climate change: A "meaningful and unprecedented" breakthrough agreement in Copenhagen:
Here's the text of the agreement, ...
(19-Dec-2009)
Climate change conference winds down with search for villains:
After eight years of blaming Bush, the world may blame China this time....
(18-Dec-2009)
Climate Change conference in Copenhagen is all about getting green -- money:
The banks are not the only pigs at the trough....
(14-Dec-2009)
Politicians are gloomy about reaching climate deal in Copenhagen. Awwwwwwwwww!:
It seems that this money and power grab is down for another year....
(12-Nov-2009)
After a week of foreign policy disasters, President Obama's entire program is adrift:
Obama's first term is indistinguishable from Bush's "third term."...
(28-Sep-2009)
Food crisis suddenly becomes a top media issue:
Is Al Gore planning a new movie, perhaps "An Inconvenient Famine"?...
(30-Apr-08)
The global warming fad is becoming the enemy of food production.:
Food prices are continuing to increase sharply around the world....
(16-Jul-07)
UN Climate Change conference reaches a compromise agreement:
The two-week conference at the Bali beach resort ended Saturday,...
(16-Dec-07)
UN Climate Change conference appears to be ending in farce:
After two weeks of fun on Bali beaches, participants appear to have agreed on only one thing:...
(14-Dec-07)
Ban Ki Moon blames Darfur genocide on global warming:
Damn! He's blaming the Darfur crisis civil war on America!!...
(19-Jun-07)
Kyoto protocol is evidently dead as European countries fail to comply:
Among the EU countries, only UK and Sweden are on target to meet requirements,...
(4-Jan-06)
| ||
President George Bush has been blamed for the failure of the Kyoto agreement of 1997. That agreement was sponsored by then-VP Al Gore, but the agreement was rejected in the US Senate by a vote of 97 to 0 -- i.e., unanimously. The should mean that Bill Clinton and Al Gore should be blamed for the failure of the Kyoto agreement, but what's happened instead is that President Bush was blamed.
If George Bush were still President, then he would be burned in effigy around the world for the failure of the Copenhagen conference. Barack Obama can't be blamed, because he's a member of the élite. If a Republican wins the White House in 2012, then that person will be blamed for the failure of the Copenhagen conference. But who will be blamed in the meantime?
My guess is that it will be China:
None of this is new. These disagreements have been well known for weeks, if not months, and yet the politicians keep play-acting, as if what they're doing makes any sense whatsoever, each hoping that the other guy will get the blame.
It's worth repeating a point that I've made many times before. The survivors of World War II were united in their desire to prevent any such war from ever occurring again. They created United Nations, World Health Organization, International Monetary Fund, World Bank, the Rockefeller Foundation (Green Revolution), and other international organizations not only to prevent a new world war, but also to end poverty and starvation and to improve health. Those organizations are all failing now, as the generations of WW II survivors disappear.
Even worse, the current generations of Boomers and Gen-Xers are incapable of accomplishing anything except to argue. The insanity and dysfunction of national and world political leaders is increasingly being reflected in polls. President Obama's approval rating has been in free fall.
This week, a new WSJ/NBC poll finds that 41% of Americans have a positive opinion about the "Tea Party movement," compared to 35% for the Democratic party, and 28% for the Republican party.
A new Pew Research poll shows that Americans are moving rapidly to the right on a variety of issues, including gun control, abortion rights, and global warming.
What we're seeing is something that I'm sure I'll be writing about a lot in the new year: A major political realignment is in the offing. This is something that happened in America's last two Crisis eras -- the Civil War era and the World War II era, and it's happening again today.
(Comments: For reader comments, questions and discussion, see the Climate Change thread of the Generational Dynamics forum.) (18-Dec-2009) Permanent Link
The banks are not the only pigs at the trough.
The big scandal at the Copenhagen climate change conference last week was that the "Danish text" was leaked to The Guardian newspaper on Wednesday.
Climate change: A "meaningful and unprecedented" breakthrough agreement in Copenhagen:
Here's the text of the agreement, ...
(19-Dec-2009)
Climate change conference winds down with search for villains:
After eight years of blaming Bush, the world may blame China this time....
(18-Dec-2009)
Climate Change conference in Copenhagen is all about getting green -- money:
The banks are not the only pigs at the trough....
(14-Dec-2009)
Politicians are gloomy about reaching climate deal in Copenhagen. Awwwwwwwwww!:
It seems that this money and power grab is down for another year....
(12-Nov-2009)
After a week of foreign policy disasters, President Obama's entire program is adrift:
Obama's first term is indistinguishable from Bush's "third term."...
(28-Sep-2009)
Food crisis suddenly becomes a top media issue:
Is Al Gore planning a new movie, perhaps "An Inconvenient Famine"?...
(30-Apr-08)
The global warming fad is becoming the enemy of food production.:
Food prices are continuing to increase sharply around the world....
(16-Jul-07)
UN Climate Change conference reaches a compromise agreement:
The two-week conference at the Bali beach resort ended Saturday,...
(16-Dec-07)
UN Climate Change conference appears to be ending in farce:
After two weeks of fun on Bali beaches, participants appear to have agreed on only one thing:...
(14-Dec-07)
Ban Ki Moon blames Darfur genocide on global warming:
Damn! He's blaming the Darfur crisis civil war on America!!...
(19-Jun-07)
Kyoto protocol is evidently dead as European countries fail to comply:
Among the EU countries, only UK and Sweden are on target to meet requirements,...
(4-Jan-06)
| ||
The Danish text is a 200-page document created by a small group of negotiators from the U.K, the U.S., and Denmark, hoping to create a compromise agreement, lest the entire conference end in chaos.
According to The Guardian, it will:
Well, there was chaos anyway. The "developing nations," including China and nations in Africa and South America, were outraged by the Danish text because it didn't satisfy the following demands:
Lumumba Di-Aping, the Sudanese chairman of the developing nations, was especially outraged. "The text robs developing countries of their just and equitable and fair share of the atmospheric space. It tries to treat rich and poor countries as equal," he said. "We will not walk out of the talks at this late hour, because we will not allow the failure of Copenhagen. But we will not sign an inequitable deal; we will not accept a deal that condemns 80 percent of the world population to further suffering and injustice."
The "rich" nations responded by offering a $10 billion "fast start" fund, with more to be offered later. What happened next is summarized in this analysis by AlterNet:
Stern's statement put him at odds not only with international law but with America's European allies. European Union leaders announced in Brussels today that their governments would provide 7.2 billion Euros over the next three years to help poor nations adapt to sea level rise, drought and other intensifying impacts of climate change. The EU's offer was in keeping with the provisions of the UN Framework Convention on Climate Change--the climate treaty President George H.W. Bush signed at the Earth Summit in 1992 and which the Copenhagen negotiations are seeking to extend. Nevertheless, it was quickly rejected by developing nations and aid agencies as grossly inadequate.
"We have talked about $100 billion a year," ambassador Lima told The Nation, citing an estimate the World Bank has made for climate change adaptation by poor nations. "Now we are hearing about $10 billion for three years."
"Worst of all, this money is not even new," Tim Gore, the climate adviser to Oxfam EU, told the BBC. "It's made up of a recycling of past promises and payments that have already been made.""
China is playing its own role as one of the so-called "developing nations," making its own demands. Here's what Chinese Vice Foreign Minister He Yafei said on Friday:
They have to fulfill their obligation -- to provide funds to the developing countries, to provide technologies to the developing countries, to help developing countries in capacity building.
The priority for developing countries is still the reduction of poverty. It's still economic development. Whatever the outcome, we do wish Copenhagen will have a very good outcome, whatever it is, it should not be done at the expense of the rights to development by developing countries.
History is a mirror. History is the basis on which we can move ahead, looking in the future. What is the history of climate change? I think this is why we're here in Copenhagen.
For developed countries, they have to face the history squarely. The obligations for developed countries to live up to their commitments in emission reduction and the provision of funds and technology transfer, is an obligation they have undertaken under international instruments. This is the departure point for any international cooperation in climate change."
So it's all about money for these guys.
In 2007, I wrote "UN Climate Change conference appears to be ending in farce," referring to a conference in Bali that attracted hundreds of climate change advocates who generated vast amounts of carbon emissions taking jet planes and sitting in air conditioned meeting rooms, when they weren't out on the beach.
In that report, I highlighted one Generation-X banker, Louis Redshaw, Head of Environment Markets, Barclays Capital, who was hoping to make millions of dollars. The scheme was to set up financial derivatives / structured securities based on carbon credits in the same way that other bankers had set up structured securities based on residential mortgages.
According to one banker that I quoted, "I think this is likely to get bigger than the interest-rate-swaps market within 10 to 15 years, particularly once America joins in."
Well, this is still the hope and dream of every investment banker today.
Well, here's a recent story about what JP Morgan is doing:
Masters says banks must be allowed to lead the way if a mandatory carbon-trading system is going to help save the planet at the lowest possible cost. And derivatives related to carbon must be part of the mix, she says. Derivatives are securities whose value is derived from the value of an underlying commodity -- in this case, CO2 and other greenhouse gases.
“This requires a massive redirection of capital,” Masters says. “You can’t have a successful climate policy without the heavy, heavy involvement of financial institutions.”"
This is so sickening that I can barely type because of how much it infuriates and disgusts me.
The whole "climate change" movement has reeked with sleaze for years, and it's very similar to the sleaze that's permeated the financial industry. So even if some (or all) of the climate change claims are true, they're so buried in sleaze that they're almost irrelevant.
You have people like Al Gore living in expensive mansions and driving expensive cars. You have climate researchers jetting around to places like Bali and Copenhagen, when they could be meeting via videoconferencing, saving huge amounts of carbon. These people obviously don't believe a word they're saying about climate change, but feel that they can get away with anything they want.
In November, thousands of e-mail messages were hacked from the web server at East Anglia University. The messages are begin in 1996 and continue until October of this year. This place has been at the heart of the climate "science" that supposedly proves the climate change claims.
The hacked e-mail messages showed a pattern of deception and fraud by these "scientists." The scientists urge one another to smooth over data and hide unfavorable data; to enforce a unified view; and to blackball scientists with opposing views.
If you'd like to read the hacked e-mail messages yourself, go to http://www.eastangliaemails.com .
Nothing in the hacked e-mail messages surprises me. These are the same kinds of people that you find at financial institutions selling worthless mortgage-backed securities to investors.
Phil Jones, who is director of East Anglia's Climate Research Unit, was forced to step down after some of his e-mail messages revealed egregious violations of scientific honesty. He was the recipient or co-recipient of some $19 million in grants between 2000 and 2006. So of course he's going to sell a bill of goods to anyone who'll listen, just as the investment bankers did.
They're all of the same mold. They're all pigs at the trough, anxious to scoop up their fat grants, not caring who else gets screwed.
In addition to all the general sleaze surrounding climate change, there's another reason why I know in my gut that the climate change scientists are lying, having to do with the Singularity. I mentioned this reason recently, but now I would like to discuss it some more.
The Singularity is the point in time, around 2030, when computers will become more intelligent than humans, and will be able to improve themselves, so that they'll soon far surpass humans in intelligence.
The approach of the Singularity is far more certain than the climate change claims. Computers have been doubling in power every 18 months for decades, and that trend is certain to continue. Several years ago, I designed a software architecture that would use this computer power to create a computer capable of doing everything that a human can, and much more, and much faster.
(See "I, Robot is science fiction, but intelligent computers will soon be science fact." and Chapter 7 - The Singularity in the book Generational Dynamics for Historians for more information on all of this.)
So I personally know with certainty that the Singularity is coming, because I've laid out how it will occur.
And I'm certainly not alone in that. There are thousands of scientists and engineers who have gone through the process of understanding how the Singularity will come about. Ray Kurzweil has popularized this understanding through his book, The Singularity is Near, and has a forthcoming movie that can be previewed at http://singularity.com/
So the approach of the Singularity is not in any reasonable doubt at all. There is only a debate about the date. My estimate is 2030, but other estimates range from 2020 to 2040.
So when climate scientists start talking about rising sea levels in 2050 and 2075, it's total nonsense. There is absolutely no way to know anything about what will happen after the Singularity occurs.
But it's much worse than that.
Here you have hundreds of brilliant climate change scientists, and apparently not a single one has considered the possibility that everything they're doing is meaningless with the Singularity coming.
I did a search of the hacked East Anglian e-mail messages for the word "Singularity," and it doesn't appear once. You would think that these brilliant scientists would have at least asked the question of one another: "Hey, what about the Singularity?" But apparently it was never asked once. It must have been forbidden subject, since it conflicts with their own claims.
But let's suppose that you consider the claims of the Singularity to be "too gloomy," or you think that a computer can never think like a human because it doesn't have a human soul, or something like that.
Even so, the world is on the verge of a cornucopia of new computer technology that will change the world. In the next ten years, computers will increasingly be able to make human-like decisions in limited areas, and perform tasks that require judgment far beyond what computers can do today.
I discussed this in my July article on the health care proposal. For example, within a few years we'll have computerized robots that can take care of a sick person in the home or hospital. They can monitor the patient 24 hours per day, take your temperature, dispense pills, give shots and provide meals. They will have computer vision and hearing, and will be able to respond to simple patient requests like, "Please bring me a glass of water." If something happens that they can't handle, they will wirelessly call for a real live human nurse or doctor.
This is the kind of health care technology that can barely be imagined today, yet it's really only a decade or so away.
The same computer technology will provide solutions to global warming that can barely be imagined today. For example, perhaps there will be intelligent battery driven vehicles that can navigate traffic with no driver, and so will replace the need for most cars.
What all of this means is that nothing that the climate change advocates are saying has any meaning whatsoever. And the fact that these scientists aren't even discussing it means to me that they're purposely avoiding the subject because it conflicts with their agenda.
So we'll all be watching what happens at the climate change conference in Copenhagen next week. With so much sleaze and with so many people grasping for their handouts, all we can do is hope that nothing happens.
Let's close this article with some music from an earlier, simpler time. Here's a video of the song "Wonderful wonderful Copenhagen" from Danny Kaye's 1953 movie, "Hans Christian Andersen":
(Comments: For reader comments, questions and discussion, see the Climate Change thread of the Generational Dynamics forum.) (14-Dec-2009) Permanent Link
This is President Obama's most significant speech since the election.
People on the left and right are applauding Thursday's speech, both for its rhetorical eloquence and for its thoughtful content.
Much of the 40 minute speech was pure politics. But there were portions of the speech that are relevant to Generational Dynamics theory. Here are some excerpts:
From the point of view of Generational Dynamics, war has always been a necessity because population keeps growing faster than the availability of resources such as land, food and water. If there isn't enough food for everyone to survive, if a man can't feed his family, then there will be war. That's still true today.
The easiest way to look at a war is to compare it to a natural disaster, such as a hurricane or earthquake. Looked at that way, a war is not "good" or "bad" or "good" or "evil." Mankind as a species could not have survived without sex, and equally could not have survived without genocidal war. Both are part of our DNA.
As a kid this concept puzzled me. If you're trying to kill the enemy, how can one way of killing them be any more "just" than another?
What's interesting about Obama's definition of a "just war" is roughly the same as a non-crisis war in generational theory. However, every nation goes through a generational Crisis era every 70-90 years or so, and that almost always means a crisis war. And a crisis war is fought with what I like to call increasing "genocidal fury." At these times, the people fighting the war believe that the very existence of their nation and their way of life is at stake, and that's when the value of any life, civilian or otherwise, becomes less important than the need to preserve the nation.
Actually, most wars are "just wars," because there are more non-crisis wars than crisis wars.
In many ways, these efforts succeeded. Yes, terrible wars have been fought, and atrocities committed. But there has been no Third World War. The Cold War ended with jubilant crowds dismantling a wall. Commerce has stitched much of the world together. Billions have been lifted from poverty. The ideals of liberty and self-determination, equality and the rule of law have haltingly advanced. We are the heirs of the fortitude and foresight of generations past, and it is a legacy for which my own country is rightfully proud.
And yet, a decade into a new century, this old architecture is buckling under the weight of new threats. The world may no longer shudder at the prospect of war between two nuclear superpowers, but proliferation may increase the risk of catastrophe. Terrorism has long been a tactic, but modern technology allows a few small men with outsized rage to murder innocents on a horrific scale."
This is a concept that I've discussed many times. After World War II ended, the survivors were determined that nothing so horrible should ever happen again. So they set up institutions and programs -- the United Nations, the World Bank, the International Monetary Fund, the World Health Organization, the Green Revolution -- whose purpose was to protect the world from repeating the horrors of WW II.
But the generations that grew up after the war ended -- the Boomers, the Gen-Xers, the Millennials -- did not experience WW II and could not grasp its horrors. They took society's survival for granted, and individual rights became more important that society's survival. As a result, all of these institutions and programs have been unraveling for decades.
This is out of touch with reality. Every crisis civil war is in this category. That includes America's Civil War. There have been many such civil wars since WW II, such as the Communist Revolution in China, the war between the Muslims and Hindus on the Indian subcontinent, the Vietnam War, the Cambodian killing fields, the Rwanda genocide, and many others. There's nothing new about such wars.
It's good to think in new ways, I suppose, but it's a mistake to think that anything will change. Obama doesn't have a solution because no solution exists. A belief that war can be ended is dangerous because it means you'll become less vigilant and more easily defeated by an enemy.
Of course violence never brings permanent peace. Nothing can bring permanent peace. This statement makes as much sense as saying, "Peanut butter never brings permanent peace."
This is a powerful statement. It's defused the anger on the right from people who said that Obama was a ditherer in foreign policy, and it's defused the anger on the left directed at Obama for escalating the war in Afghanistan.
But the statement is fundamentally flawed. Whether someone is "evil" depends on your political point of view. That is, any war can become a just war simply by declaring the enemy "evil." That's what al-Qaeda does when they say that Americans are evil because they're infidels. Another example: Few people would disagree that Saddam Hussein was evil, and therefore, by Obama's own logic, the war in Iraq was justified.
Basically, the concept of "evil" as a justification for war is meaningless. That's why I like to say that wars are like natural disasters. Nobody would say that an earthquake was "evil." It just is what it is.
This is basically the justification for America as "policemen of the world." (See my 2006 article, President George Bush talks about a "Third Awakening," but he has his history wrong.)
Obama's statement could just as easily have come from President Bush in justifying his "neo-conservative" philosophy, which also is historically wrong.
This sounds nice, but there's no evidence to support it.
There's no doubt that President Obama's speech was brilliant and eloquent, a tour de force. What bothers me about it is the same as what bothered me about his campaign speeches: I'm afraid that he believes what he's saying.
(Comments: For reader comments, questions and discussion, see the President Barack Obama thread of the Generational Dynamics forum.) (12-Dec-2009) Permanent Link
Huge peaceful student protests in cities across Iran were met with violence on Monday, as police and tens of thousands of Basij militia used teargas, beatings and arrests in a fruitless effort to stop the protests. There were also unconfirmed reports of gunfire.
Iran's government had partially shut down internet and mobile phone connections on Monday, but videos of the clashes were posted anyway to YouTube, Twitter and opposition Web sites.
Ironically, December 7 has been the day when anti-American rallies have been held in the past, commemorating the deaths of three students during an anti-government protest in 1953, protesting Iran's pro-American policies at that time. What all of these protests have in common is that they're targeted against the Iranian government of the day.
These continuing anti-government student protests are typical manifestations of the "generation gap" that takes place in any country's generational Awakening era. This generation gap occurs between the generations that survive a generational Crisis war (in this case, the 1979 Islamic Revolution and the Iran/Iraq war) and the generations that grow up after the war ends. (See "Theological split in Iran widens as opposition protests continue.")
The recent financial meltdown in the Dubai emirate of the United Arab Emirates (U.A.E.) comes at the worst possible time for Iran's President Mahmoud Ahmadinejad, and for the hardline Iran government. Just as Iran's government is facing its greatest internal domestic threat from student protests, the Dubai crisis threatens Iran's economy and its external import/export regime.
Iran is heavily invested in Dubai, and it appears that Iran has purchased 30% (tens of billions of dollars) of Dubai's real estate currently in financial distress. Dubai's real estate values have already fallen 50% since January, and so Iran is poised to suffer large, significant losses.
Even more important to Iran is Dubai's strategic importance. Iran has been under trade sanctions first imposed by President Bill Clinton's administration in 1996, and later increased in President George Bush's administration and by the United Nations. In the past couple of months, Iran has really been sticking it to the international community by announcing aggressive new nuclear development programs, with the result that, led by President Obama's administration, the UN is considering even greater sanctions.
Dubai has served Iran by providing a conduit by which Iran could bypass the sanctions. Dubai is a major exporter to Iran and a major re-exporter of Iranian goods. The trade between Iran and Dubai is one of the principal sources of Tehran's confidence that it can survive US-led sanctions.
Iran has been receiving high-tech equipment for its missile and nuclear programs via Dubai, and most of Iran's gasoline imports also come via bunkering facilities in Dubai, according to the Washington Institute for Near East Policy.
Unlike its neighbor Abu Dhabi, Dubai has little oil revenue, and has sought to generate income through ultra-extravagent real estate development and credit abuse that exceeds even the West in debauchery and depravity. They got away with building up some $100 billion in debt because investors have always assumed that Abu Dhabi would continue to bail out Dubai whenever necessary.
However, Abu Dhabi is allied with Saudi Arabia and the West, and is apparently going to hold back any bailout of Dubai unless Dubai stops allowing Iran to bypass the trade sanctions. According to reporting by Debka, Abu Dhabi will provide $50 billion in bailout money in return for control of Dubai's ports and the imposition of strict fiscal and monetary laws and regulations.
Thus, the Dubai financial crisis has the potential to cause some significant power shifts in the Persian Gulf region, especially with respect to the escalating power struggle between Iran and Saudi Arabia. (See October article, "Furious Iran blames Pakistan, US and Britain for Sunday's terrorist attacks," and September article, "Escalating civil war in Yemen threatens to pull in Iran, Saudi Arabia and U.S."
Tehran has been riding high for a few years. Suddenly, in the space of a few months, Tehran is being backed into a corner. The student protests are a serious existential threat to Iran's hardline government -- something that couldn't even be imagined before June.
And now, in the last month, with the government under domestic attack, the Dubai crisis has dramatically weakened Iran internationally and financially.
As I've said in the past, Iran is a very dangerous wild card in international politics. Ahmadinejad has plans to gain hegemony over the entire Mideast, including the Arabian peninsula. To that end, he's been funding Hizbollah in Lebanon, and terrorist Palestinian groups, including Hamas, and the Houthi rebels in Yemen.
The Tehran government may be getting increasingly desperate, like a trapped animal. We've already seen how they've jailed and slaughtered their own students for peaceful protests, perpetrating violence that's gone considerably farther than I had expected. Still, the student protests seem only to be growing, as would be expected in a generational Awakening era.
The real danger is that Tehran will now desperately strike out internationally in some way. For example, they might carry out their oft-repeated threats to use mines and missiles to block the Strait of Hormuz, causing an international oil crisis.
One possible sign of this is a recent rant by Mahmoud Ahmadinejad in a speech last week. The Iranian President accused America and the West of devising plans to prevent the coming of the Hidden Imam. (See "Theological split in Iran widens as opposition protests continue.")
Ahmadinejad's bizarre rant may be a sign that he's cracking up, or it may be a sign that he's laying the groundwork for some kind of religious justification for creating a new crisis.
One thing seems pretty certain -- that Iran's government in its current form cannot survive against this growing internal political opposition. A civil war something like the 1979 Islamic Revolution is, of course, impossible during a generational Awakening era, but the level of political and generational conflict will increase for years.
And as I've said many times (see, for example, "China 'betrays' Iran, as internal problems in both countries mount"), when all is said and done, I expect Iran to be on the side of America and the West, including Israel, when forced to make a choice in the coming Clash of Civilizations world war. It's possible that Iran is close to the next major step in that scenario.
(Comments: For reader comments, questions and discussion, see the Iran thread of the Generational Dynamics forum.) (9-Dec-2009) Permanent Link
Too bad they didn't listen to Obama's campaign speeches.
In his speech last week on Tuesday, President Barack Obama announced that he will direct the armed forces to send 30,000 more American troops to Afghanistan. This is Obama's second major escalation of the Afghan war since he took office in January, having ordered the deployment of 22,000 additional troops earlier this year. It will bring the U.S. forces in Afghanistan to more than 100,000 troops, and more than half of them will have been deployed by President Obama.
My friends who voted for Obama are suddenly completely disillusioned. "I'm beginning to have serious doubts about Obama," said one of them darkly.
During the election campaign, Obama supporters, suffering from Bush Derangement Syndrome, were drooling with erotic pleasure almost every time he opened his mouth. It's too bad that they were so engulfed with passion that they didn't bother to listen to what he actually said.
During the election campaign, Obama could say anything he wanted, as long as he criticized President Bush. He would receive wildly enthusiastic cheers from his supporters no matter what the content of his speech. As I wrote in July, 2008, in "Barack Obama in Berlin calls for greater European militarism," it was clear that the people, in America and Europe, who were wildly cheering Obama had absolutely no idea what he was talking about. They were cheering a fantasy Obama, not the real Obama standing before them.
As I wrote about the Berlin speech, I quoted the following excerpt:
This is the moment when we must renew our resolve to rout the terrorists who threaten our security in Afghanistan, and the traffickers who sell drugs on your streets. No one welcomes war. I recognize the enormous difficulties in Afghanistan. But my country and yours have a stake in seeing that NATO's first mission beyond Europe's borders is a success. For the people of Afghanistan, and for our shared security, the work must be done. America cannot do this alone. The Afghan people need our troops and your troops; our support and your support to defeat the Taliban and al Qaeda, to develop their economy, and to help them rebuild their nation. We have too much at stake to turn back now.
This is the moment when we must renew the goal of a world without nuclear weapons. The two superpowers that faced each other across the wall of this city came too close too often to destroying all we have built and all that we love. With that wall gone, we need not stand idly by and watch the further spread of the deadly atom. It is time to secure all loose nuclear materials; to stop the spread of nuclear weapons; and to reduce the arsenals from another era. This is the moment to begin the work of seeking the peace of a world without nuclear weapons."
So now I would say this to my friends who drooled over Obama: What the hell are you complaining about? You got what you deserve, so man up and quit whining.
And let's not forget that this is (at least) the second time in six years that people didn't pay attention. When the ground invasion of Iraq began in 2003, it was overwhelmingly popular with the American people, and with almost everyone in Congress. It's only when things started going badly, that suddenly these same people decided that they must have been lied to, and that President Bush was the Devil's Spawn. How much longer will it be before Obama's supporters decide that he's also the Devil's Spawn?
Listening to the Sunday morning news talk shows today, I don't believe that I heard anyone outside of the Administration say that he liked President Obama's speech on Tuesday. Here's the most important excerpt:
People on the left criticized it because it was another escalation of the Afghan war.
People on the right criticized it because of the 18-month deadline. And listening to the Sunday morning news talk shows, there's apparently a lot of confusion over how firm that 18-month deadline is.
It seems that most people (including myself) believe that the 18-month deadline was added as a sop to his supporters on the left, and that in practical terms it's meaningless. (By the way, how are those other promises going -- closing Guantanamo in one year, and pulling the troops out of Iraq in 16 months?)
What we're seeing here is Generational Dynamics in action.
President Obama is very young, and so he doesn't have much credibility on the world stage. What little credibility he started with has been used up bowing to foreign emperors, and advocating policies in Iran and the Mideast that are turning into disasters.
A worse irony is that President Obama's Afghan war strategy is modeled after President Bush's "surge" strategy in Iraq, something that Senator Obama bitterly opposed before it turned out to be successful. However, as I wrote in "American army general warns of imminent defeat in Afghanistan war," the Iraq "surge" strategy will not work in Afghanistan.
Meanwhile, what's coming up next week is so ludicrous, that even by today's low standards it's hard to believe.
First, President Obama is going to Oslo to accept his Nobel "peace" prize, where I understand he'll give a speech explaining why he's escalating the war.
Next, President Obama is going to Copenhagen to give a boost to the latest farcical climate change conference, a week after hacked 'Climategate' e-mail messages showed a pattern of deception and fraud among climate researchers that's similar to the deception and fraud used by financial institutions like Goldman Sachs or Citibank. Mr. Obama will make promises in Copenhagen that everyone knows don't even make sense, and will be rejected by Congress, just as Vice President Al Gore's promises in the 1990s were rejected by Congress.
I've written many times that if Al Gore had been President after 9/11, then we still would have invaded Iraq, and we would have been in the same place today. (See "The Iraq war may be related to the bombing of Hiroshima and Nagasaki.") When generational forces are at play, politicians have no choice but to follow.
Now we're seeing the same thing with President Obama and the Afghan war. President Obama undoubtedly wishes that things might go differently, but he's doing what he has to do. The Afghan war is following a certain path as part of the approach to the Clash of Civilizations world war, and neither Obama nor any other politician can change that. Still, it would be nice if President Obama didn't always look like he has no clue what's going on in the world.
(Comments: For reader comments, questions and discussion, see the Afghanistan, Pakistan and India thread of the Generational Dynamics forum.) (6-Dec-2009) Permanent Link
Worries about a "populist uprising against the bank."
I've been writing this web site for over seven years now, and I've been called many names in that time. A posting that appeared in 2006 drew criticisms of being "crazy" and "alarmist." It appeared at the height of the credit bubble, and I said the following:
Do you remember what happened in 2001 after the Nasdaq crash and the Enron scandal? People wanted to put CEOs in jail -- ALL CEOs, even perfectly honest ones. People were going crazy. Well, it's going to happen again.
The Enron scandal is one historical example, but a better example might be the bankruptcy of the French Monarchy in 1789 that led to the French Revolution. In the Reign of Terror that followed, any person who was an aristocrat, a relative of an aristocrat, a friend of an aristocrat, a servant of an aristocrat, or even had a resemblance to an aristocrat, would be tried and quickly convicted and sentenced to the guillotine.
So as we enter 2007, I have some advice for the economics experts, journalists, professors, investors, central bankers, pundits and politicians that have been telling us that everything is OK and getting better: You'd better have your underground bunker picked out, because people are going to be coming after you, and the guillotine is going to seem mild compared to the punishment that they're going to want to inflict on you."
Now we're beginning to see the first signs of those warnings coming to fruition. Bloomberg reporter Alice Schroeder has found that Goldman Sachs employees are purchasing handguns for self-defense against a possible "populist uprising":
“I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.
I called Goldman Sachs spokesman Lucas van Praag to ask whether it’s true that Goldman partners feel they need handguns to protect themselves from the angry proletariat. He didn’t call me back. The New York Police Department has told me that “as a preliminary matter” it believes some of the bankers I inquired about do have pistol permits. The NYPD also said it will be a while before it can name names."
This story has not been confirmed by Goldman Sachs, but it's been quoted in many places, and so far it hasn't been denied either. Goldman's employees must be very frightened.
And well they should be. These people were at the heart of the fraud that resulted in the real estate and credit bubble crashes. They defrauded investors out of hundreds of billions of dollars by creating and selling mortgage-backed securities and derivatives that have now turned out to be almost worthless.
As I've pointed out many times, the circumstantial evidence is overwhelming that they did this on purpose. Their excuse is that they didn't know that the structured securities they were creating would become worthless. That excuse might have worked in 2002, 2003, 2004, and 2005, but by 2006 it was becoming clear that the computerized models they were using to create these securities were failing. And by 2007, the failures were glaringly obvious to anyone who (like myself) bothered to figure out what was going on. If the bankers at Goldman, Citibank, Bank of America, Bear Stearns and Lehman Brothers had been honest, then they would have warned their investors that the models were becoming questionable. Instead, they redoubled their sales efforts, to sell as many of these securities as they could before the roof caved in. And they made billions of dollars in commissions for themselves by perpetrating this fraud.
This behavior has not changed, but has only taken a different form. These bankers, the exact same people who perpetrated the previous frauds, are now paying themselves million dollar bonuses, to reward themselves for having been clever enough to accept government bailouts.
And Citibank and Bank of America are taking it a step further. They're arbitrarily raising interest rates to 30%, doubling or tripling minimum payments, and engineering phony fees of hundreds or thousands of dollars per customer, and then using the money to pay themselves the million dollar bonuses. These bankers are committing criminal extortion.
And yet they're totally oblivious to the amount of hatred that they're generating against themselves. In a story last month in the London Sunday Times, based on an interview with Lloyd Blankfein, chairman and CEO of Goldman Sachs, author John Arlidge reports, "Call him a fat cat who mocks the public. Call him wicked. Call him what you will. He is, he says, just a banker 'doing God’s work.'"
In a story to appear in next month's Vanity Fair, Bethany McLean reports, "All in all, Goldman executives seem to be gambling that the current mood, in which the rest of us are rethinking the system that brought us to the very edge, and maybe into the depths, of a vast black pit, will blow over. And they may be right."
No, they are not right.
From the point of view of Generational Dynamics, we're seeing a repeat of what happened in the 1930s Great Depression. At that time, bankers were doing exactly the same kinds of things they've been doing today -- defrauding investors and paying themselves enormous salaries, fees and commissions. In the investigations that followed until the end of the decade, many bankers went to jail. We're seeing only the bare beginning of the prosecution of these individuals.
And as I've said several times on this web site, my parents and teachers hated bankers when I was growing up in the 1950s. I didn't understand why then, though I do now. The current mood will NOT blow over for decades to come.
And all this is going on in the context of a Senate Commerce committee investigation that dozens of supposedly honest companies have tricked millions of online customers into paying billions of dollars in mysterious credit card charges. (See "How Priceline, Orbitz, FTD, 1-800-Flowers, Pizza Hut, and Continental Airlines are scamming you online.")
In 2005, I posted an article describing what happened in 1929. What happens is that during a bubble, there's a lot of financial crime going on -- embezzlement and fraud -- but no one cares, because everyone is making money.
After the bubble bursts, people and prosecutors look back to see what happened, and every act is examined. The result is that crimes are discovered and prosecuted years later.
Here's how John Kenneth Galbraith described this phenomenon in his 1954 book, The Great Crash - 1929, as follows:
The stock market boom and the ensuing crash caused a traumatic exaggeration of these normal relationships. To the normal needs for money, for home, family and dissipation, was added, during the boom, the new and overwhelming requirement for funds to play the market or to meet margin calls. Money was exceptionally plentiful. People were also exceptionally trusting. A bank president who was himself trusting Kreuger, Hopson, and Insull was obviously unlikely to suspect his lifelong friend the cashier. In the late twenties the bezzle grew apace.
Just as the boom accelerated the rate of growth, so the crash enormously advanced the rate of discovery. Within a few days, something close to universal trust turned into something akin to universal suspicion. Audits were ordered. Strained or preoccupied behavior was noticed. Most important, the collapse in stock values made irredeemable the position of the employee who had embezzled to play the market. He now confessed. ...
Each week during the autumn more such unfortunates were reveled in their misery. Most of them were small men who had taken a flier in the market and then become more deeply involved. Later they had more impressive companions. It was the crash, and the subsequent ruthless contraction of values which, in the end, exposed the speculation by Kreuger, Hopson, and Insull with the money of other people. Should the American economy ever achieve permanent full employment and prosperity, firms should look well to their auditors. One of the uses of depression is the exposure of what auditors fail to find. Bagehot once observed: "Every great crisis reveals the excessive speculations of many houses which no one before suspected."" [pp. 132-35]
In 1929, these crimes were rampant before the crash, but were not discovered until after the crash, as Galbraith describes. These crimes have been just as rampant in the last few years, and are continuing to this very day. History tells us that the consequences for everyone will be harsh, and are only just beginning to be felt. If Goldman Sachs employees are really acquiring handguns to protect themselves against a "populist uprising" for doing "God's work," then things may get worse than even gloomy people like me expect.
(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-Dec-2009) Permanent Link
The UN is heavily criticizing the ban as "anti-foreigner scaremongering" and "clearly discriminatory," after the Swiss voters overwhelmingly ratified a referendum forbidding the building of minarets on any mosques in Switzerland.
Switzerland has a fairly small Muslim population, and there are only four mosques with minarets in the entire country, and those will not be affected by the referendum. However, the referendum forbids minarets on new mosques.
A minaret is a tower that stretches high above a mosque. Five times a day, a muezzin, or crier, climbs the minaret and intones a call to prayer directed at all Muslims in the vicinity.
For those who are unfamiliar with minarets and the Islamic call to prayer, it's well worth your time to take a couple of minutes to watch this video, which illustrates many mosques with minarets, accompanied by an Adhan, an Islamic call to prayer:
In terms of symbolism and purpose, the above is not much different from a Catholic priest intoning the Lord's prayer, as a bell rings in the steeple of the Church.
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But the atmospherics surrounding the Muslim call to prayer is quite foreign to a Christian. At times like this, I like to use the phrase "looking for reasons." A Christian who is "looking for reasons" to like Muslims will ignore the difference in atmospherics; one who is "looking for reasons" to dislike Muslims will emphasize the differences. From the point of view of Generational Dynamics, these changes in attitude are highly dependent on the generational era. Europeans and Americans were last in a generational Awakening era in the 1960s and 1970s, and during Awakening eras, attitudes emphasize diversity and commonality. Today, we're into a generational Crisis era, and during Crisis era, public behavior becomes increasingly xenophobic. The party that sponsored the referendum is the anti-immigrant Swiss People's Party, generally characterized by the media as "far right-wing." The conducted a very aggressive campaign, symbolized by the above poster, which depicts minarets as missiles being launched by a woman in a burka.
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This was actually a stunning victory for the People's Party.
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In 2007, the Swiss People's party conducted a very aggressive anti-immigrant Parliamentary election campaign, and got 29% of the vote, making it the largest single party in the Parliament. They called for the forced deportation of any foreign family where any family member is a criminal. The party's campaign featured posters, such as the one shown above, of white sheep kicking a black sheep away from a Swiss flag. (See "Anti-immigrant Swiss People's Party makes large gains in election.")
This time they got 57.5% of the vote in the referendum, a sharp increase.
It's very hard to see any rational reason for banning minarets. An opinion column in the Jerusalem Post by a Muslim writer, sympathetic to the referendum result, defends it for the following reasons:
These are all deeply emotional reasons, but they do not explain why banning minarets is going to make the Swiss people any safer.
I've written about several examples of European xenophobia on both sides in the past:
In the past we described the sudden growth in popularity of the British National Party in the UK. And Holland became increasingly nationalistic when filmmaker Theo van Gogh was murdered by a Muslim extremist.
In 2005, France experienced several days of rioting by Muslim youth in the suburbs. A year later, French youth counter-rioted over fear of losing jobs to Muslims.
Nonetheless, the Swiss referendum vote is a startling new round of purely emotional xenophobia. As the world approaches the "Clash of Civilizations" world war, the fault line between Europeans and Muslims is going to see increasing conflict.
(Comments: For reader comments, questions and discussion, see the Europe thread of the Generational Dynamics forum.) (2-Dec-2009) Permanent Link
Greece will receive a European Union reprimand this week for failing to take "credible and sustainable" measures to reduce its budget deficit, according to Bloomberg News.
Greece's plight is suddenly the focus of worldwide attention in the financial community because of Dubai's bombshell announcement on Wednesday that it would fail to make $3.5 billion in debt repayments next month.
Greece is suffering from the same malaise as Dubai (and, for that matter, the U.S.). The government has been spending money like mad for years. Public debt is expected to rise from 99% of GDP in 2008 to 135% in 2011. External debt is at 14.5% of GDP, and growing.
The situation in Greece wouldn't be causing much concern -- investor complacency has been at an all time high for several weeks now -- but the Dubai situation is making people nervous, and the situation in Greece appears to be similar.
Over the weekend, there have been mixed signals over whether Dubai's neighbor, oil-rich Abu Dhabi, would bail Dubai out.
In London, the Sunday Times headline was "Abu Dhabi rides in to rescue Dubai from debt crisis." But the Sunday Telegraph headline was "Abu Dhabi will not race to Dubai's rescue."
I guess from those two headlines, we're to conclude that Abu Dhabi will ride, but not race, help Dubai.
According to news reports, Abu Dhabi has $700 billion in cash on hand lying around. With that much cash around, it's strange that it won't help out with Dubai's $3.5 billion debt payment due next month. Apparently, relations are not serene between the two neighboring emirates, both part of the United Arab Emirates (U.A.E.).
According to a statement (PDF) put out by the U.A.E. central bank,
Central Bank has issued a Notice to UAE banks and branches of foreign banks operating in the UAE, making available to them a special additional liquidity facility linked to their current accounts at the Central bank, at the rate of 50 basis points above the 3 months EIBOR."
In other words, the U.A.E. government in Abu Dhabi will make sure that the Dubai problem won't cause a chain reaction putting the U.A.E. banks into default, but it won't do anything to help Dubai itself.
That's what's frightening investors, who had assumed that Abu Dhabi would bail out Dubai for sure, as it has several times in the past.
Investors in Greece had been hoping that the EU would bail out Greece -- again. The Dubai debacle has caused investors to become anxious.
From the point of view of Generational Dynamics, the stock market has been overpriced by 150-200% since 1995, and a stock market crash is 100% certain. (See: "How to compute the 'real value' of the stock market.") The only issue is the question of what will trigger the coming stock market crash. Next week, we may see whether the situations in Dubai and Greece will begin to settle down, or whether they cause more serious problems.
(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.) (30-Nov-2009) Permanen
