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Generational Dynamics Web Log for 2-Nov-2011
2-Nov-11 World View -- Euro in crisis again, as Greece melts down after referendum bombshell

Web Log - November, 2011

2-Nov-11 World View -- Euro in crisis again, as Greece melts down after referendum bombshell

Foreign central banks are no longer buying US Treasuries

This morning's key headlines from GenerationalDynamics.com.

* Universal fury at George Papandreou for referendum call
* Papandreou's government in Greece may be near collapse
* 'Sighs of relief have been replaced with cries of horror!'
* Foreign central banks are no longer buying US Treasuries
* Speed of MF Global's collapse astounds and frightens investors
* U.S. says that Allied Home Mortgages defrauded homeowners
* Outflow of ethnic Russians from North Caucasus worsens
* Kyrgyzstan demands that U.S. close its air force base

Universal fury at George Papandreou for referendum call


A tired George Papandreou meets with his cabinet
A tired George Papandreou meets with his cabinet

Everyone is furious about Greek Prime Minister George Papandreou's abrupt call for a public referendum on whether to accept the euro bailout deal negotiated last week. Greek people, Greek politicians, and EU politicians are all expressing shock and incredulity that Papandreou is throwing the entire negotiation into crisis mode again, just a few days after the deal was negotiated, since a "no" vote on the referendum would evidently mean that Greece will go bankrupt, leave the eurozone, and return to the drachma currency. In fact, Greece is scheduled to receive its next bailout payment in a few days, but will run out of money again in January, when the referendum is supposed to take place. Greek people feel that they'll be screwed either way. A lot of people are wondering why he did it. Was it for domestic political purposes? Was it to force European leaders to sweeten the bailout deal? Or was he just completely disgusted and exhausted? My vote is on the last option. At any rate, Europe is in a state of crisis again on Tuesday evening. Reuters

Papandreou's government in Greece may be near collapse

Prime Minister George Papandreou faced a fight for his political survival as he came under intense pressure from within his own party and from opposition politicians to ditch the referendum idea and call snap elections or form a coalition government. Papandreou met with the Cabinet on Tuesday night to discuss his decision to demand a referendum, an initiative that even Finance Minister Evangelos Venizelos was in the dark about. Venizelos was hospitalized early on Tuesday with suspected appendicitis. The meeting went on late into the night but Papandreou is thought to have told his ministers that he would not back down from his referendum proposal and a planned vote of confidence in Parliament on Friday. Kathimerini

Sighs of relief have been replaced with cries of horror!

That's how the BBC introduced the story about the European reaction to the referendum announcement. What's absolutely fascinating about this is that the cries of horror are over the question of letting the people decide what they want to do, which is what's supposed to happen in a democracy.

I love it when there's a referendum, because a referendum tells us a lot about what the people are thinking, and what generational changes are occurring, especially if we can get exit poll data breaking down the vote by age group. That's what happened in the 2005 referendum where "France rejected the EU Constitution." I was able to show from the exit polling data that the vote was generational, with older people favoring the constitution, and younger people opposing it. My favorite quote was from a man interviewed on the BBC, who said, "My grandfather fought in World War I. My father fought in World Wars I and II. I fought in World War II. And now, for 60 years, my children and grandchildren have lived in peace. That's a good enough reason to me to vote 'yes' on the Constitution."

That rejection was an incredible shock to the EU leaders, who decided that the people should never be given another chance to make another decision. When the Lisbon Treaty came along to replace the Constitution, they made sure that no one could vote for it. But they had to let Ireland vote in 2008, as I described in "Europe in 'chaos' as Ireland rejects Lisbon Treaty." But they got Ireland to take another vote, and the Lisbon Treaty finally passed.

As I've said many times before, it's a basic principle of Generational Dynamics that, even in a dictatorship, great events are determined by generations of people, not by the politicians. We've seen politicians try to force decisions on an unwilling population, and it works for a while, but every time, the results are just as if the politicians hadn't tried at all.

Last week's crazy Rube Goldberg bailout scheme was so pathetic as to be laughable. The euphoria lasted only a couple of days before Italy's bond yields began to surge again, indicating that investors didn't believe it. It's now pretty clear to everyone that Greece can never be saved, that China won't come to Europe's rescue, and that Italy is following Greece down the drain.

As I've also said many times before, a global financial crisis is mathematically certain, coming with 100% certainty. If the crisis occurs in the near future, then history may blame Greek Prime Minister George Papandreou for causing it.

Foreign central banks are no longer buying US Treasuries

For years, the ability of the U.S. government to run exponentially growing deficits has been made possibly by foreign central banks (FCBs) purchasing U.S. Treasuries. An analysis shows that foreign central banks began slowing purchases a little over a year ago. About 7 weeks ago, FCBs began actively selling U.S Treasuries. As this trend continues, without FCB support, the US Treasury and equities market will both be in big trouble at some point in the not too distant future. As I've said many times, my expectation is that the U.S. will default, but the dollar will remain strong in a spiraling deflationary environment. Lee Adler - Wall Street Examiner

Speed of MF Global's collapse astounds and frightens investors

Two weeks ago, hedge fund firm MF Global had a market cap of $600 million. A couple of days ago, the firm was bankrupt and worthless. Superstar manager Jon Corzine, former Governor of New Jersey, managed to destroy the firm in one year by betting $6.3 billion that Italy and Spain's debt would increase in value. As the euro crisis continued, Italy and Spain had increasing financial problems, and MF Global was busted. And now, the firm is worse than bankrupt -- it's also under investigation for criminal activity. MF Global advertised itself as a "broker" (as opposed to an "investment bank"). As a broker, they were required to keep their clients' funds strictly separate from their own assets. Clients' funds amounted to $7.3 billion, but now some $900 million is missing, and the FBI is investigating. Meanwhile, clients should be able to move their money out of MF Global to another brokerage, but MF Global's accounts are frozen, and there may not be any money left to move. The same people who caused the financial crisis in the first place are still in the same jobs, paying themselves multi-million dollar bonuses to do the same things, setting us up for the next major financial crisis. Bloomberg and Wall Street Journal (Access)

U.S. says that Allied Home Mortgages defrauded homeowners

Allied Home Mortgage Capital Corp., which last year claimed to be the biggest closely held mortgage broker in the U.S., was sued by federal authorities for alleged fraudulent lending practices. The government claims one-third of the 112,324 loans originated by Allied from 2001 through 2010 defaulted, forcing the U.S. Department of Housing and Urban Development to pay $834 million in insurance claims. Saying that the company had a "culture of corruption," the complaint said, "Allied has profited for years as one of the nationís largest FHA lenders by engaging in reckless mortgage lending, flouting the requirements of the FHA mortgage insurance program, and repeatedly lying about its compliance. In the past decade, Allied has originated loans out of hundreds of branches it never disclosed to HUD." Bloomberg

Outflow of ethnic Russians from North Caucasus worsens


Moscow envoy Alexander Khloponin is offering a 'most-favored-migrant' regime to lure ethnic Russians back (Moscow Times)
Moscow envoy Alexander Khloponin is offering a 'most-favored-migrant' regime to lure ethnic Russians back (Moscow Times)

Russian officials are increasingly concerned that the ethnic Russian population of the North Caucasus regions is decreasing, as people flee the violence and threats of terrorist attacks. At the same time, the mostly Muslim indigenous population is increasing rapidly, giving support to the North Caucasus separatist movement. Moscow is increasingly concerned that it will lose control of the entire region. Historically, the Caucasus region is one of the most violent on earth, because of the interethnic wars, and because it's one of the major regions (along with the Crimea and the Balkans) where fault line wars have been fought between the Muslim civilization and the Orthodox Christian civilization. Generational Dynamics predicts that another war of this type is approaching. Jamestown

Kyrgyzstan demands that U.S. close its air force base

Almazbek Atambayev, who was elected president of Kyrgyzstan on Sunday in a disputed election, said that the U.S. air base needs to close by 2014 because its presence on Kyrgyz soil puts the nation at risk of retaliatory strikes from those in conflict with the United States. "We know that the United States is often engaged in conflict. First in Iraq, then in Afghanistan, and now relations are tense with Iran. I would not want for one of these countries to launch a retaliatory strike on the military base." The Manas air base in Kyrgyzstan is a key logistical hub for operations in the Afghanistan war, but the U.S. has said it would withdraw from Afghanistan by 2014. AP

(Comments: For reader comments, questions and discussion, see the 2-Nov-11 World View -- Euro in crisis again, as Greece melts down after referendum bombshell thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Nov-2011) Permanent Link
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