Generational Dynamics: Forecasting America's Destiny Generational
 Forecasting America's Destiny ... and the World's


Web Log - July, 2004

Summary John Kerry's foreign policy, low payroll data, Kashmir violence, Putin's plans for Yukos, China getting more girls and a slower economy, Darfur genocide and musical chairs, how to be a suicide bomber.

Real estate is in an overpriced bubble all over the world

A study by investment bankers Morgan Stanley warns that the bubble will burst with devastating results.

Residential properties in countries around the world, including America, Australia, the United Kingdom, China, South Korea, Spain, the Netherlands, and South Africa, are overpriced by 50% or more.

The cause is clear, according to Stephen Roach, chief economist of Morgan Stanley. The stock market bubble of the late 1990s caused the Fed to lower interest rates to historic lows, and the same happened in central banks around the world. With interest rates low, excess liquidity flowed into the housing market.

"Courtesy of property-induced wealth effects, the global economy was neatly able to sidestep the potentially devastating aftershocks of the [late 1990s] burst equity bubble," says Roach. He adds that as interest rates continue to rise and the global property bubble finally bursts, there will be no secret weapon for the global economy to turn to this time.

What this means for you personally is this: If you own, or you're thinking of buying, residential property, then you should be aware that the market value of that property may fall by 30-50% in the next few years.

Since 2002, we've been pointing out that Generational Dynamics predicts that we're entering a new 1930s style Great Depression, and that stock prices will fall by 50% in the next few years. The Fed's low interest policy has postponed the effects of the Nasdaq crash of 2000, but has not eliminated them. (30-Jul-04) Permanent Link
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John Kerry vows to strengthen the US military

In his acceptance speech at DNC, Kerry showed the passion that was necessary, proving wrong those who doubted he was capable of it.

Saying that we're a nation at war, he said that he'd increase the size of the military by 40,000, but wouldn't send them to Iraq.

"In these dangerous days there is a right way and a wrong way to be strong," he said. "We need a strong military and we need to lead strong alliances. And then, with confidence and determination, we will be able to tell the terrorists: You will lose and we will win."

This portion of the speech lasted about 20 minutes. The rest of the speech was the usual silly laundry list of promises for everyone of high-paying jobs, high-cost medicare, day care, and everything else he could think of. This is the stuff that politicians like to promise, knowing that it would cost zillions of tax dollars to provide even a fraction of it.

The first part of Kerry's speech was very good, in my opinion, so much so that I actually gave my full attention to it. I believe that his major issue, that George Bush's policies since 9/11 have squandered the respect of the world, is a very powerful one, and it gives him an opportunity to make the vacuous promise that he'll cooperate with other nations and get back respect. He hit exactly the right note, in my opinion, to reassure people that he understands the dangers we're facing and is ready to face them, and he's attacking President Bush's major strength.

What I found missing is any details about how Kerry would handle the Iraq situation, or how he'd handle the Israeli/Palestine situation. This doesn't surprise me because there isn't the slightest difference between Kerry and Bush on these subjects, and if Kerry wins, he'll pursue those problems no differently than Bush would.

That illustrates the problem that Kerry will face in the next few weeks. Other than promising more international cooperation, a promise which most people correctly suspect cannot be fulfilled, he has nothing to say that distinguishes him from Bush. He's rejected the demands from his left wing to name a final date for leaving Iraq, but they haven't let their distress turn to anger because Kerry winning is their highest priority.

There are now two major factors left to decide the election:

(30-Jul-04) Permanent Link
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Yukos freeze order rescinded after worldwide oil prices soar to all time high.

The Kremlin's ham-handed treatment of Yukos brings memories of its Communist days, when the Soviet mismanaged its "controlled economy" so poorly that the entire nation fell decades behind America.

Now Russia's Ministry of Justice has lifted the order, issued just yesterday, that ordered Yukos to stop selling oil. The order had caused a harsh worldwide reaction that pushed oil prices to over $43 per barrel, an all-time high. It appears that the Ministry of Justice rescinded the order when it became clear how much damage they were doing, something that any international financier could have told them in first place.

This crisis du jour handling of Yukos makes it look like full-scale mismanagement is back.

In the Soviet days, the Kremlin just seized anything they wanted, no matter who was hurt. Today, Russian President Vladimir Putin wants to get his hands on Yukos, and its enormously rich assets, but now there are rules imposed by international investors. So Putin has to use any legal trick possible.

But he's trying too hard, is moving too quickly, and is making mistakes. He's coming across as desperate.

Remember, this whole saga only began last fall, when former CEO Mikhail Khodorkovsky, one of Russia's wealthy Jewish oligarths, announced his intention to challenge Putin politically. Since then, the whole Yukos affair has had an ever-increasing stench of political retaliation. (29-Jul-04) Permanent Link
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Senator John Edwards says "Hope is on the way" to DNC

VP candidate's masterful speech was cheerful and optimistic, and received almost continuous cheers from the wildly enthusiastic audience at the Democratic National Convention in Boston. He criticized the "negative politics of the past," and called for "the politics of hope."

Anyone who reads through this web site may guess that I'm not a wildly optimistic kind of person, and anyone who knows me personally can tell you I'm a bit of a curmudgeon.

So I hope I can be forgiven for saying that this speech didn't turn me on at all. This kind of wild ebullience is a bit irksome to me in any circumstances, and here as well. Maybe that's one reason why I'm not really crazy about any politicians.

But I think this speech was a mistake. This is a very anxious time for our country, and the speech should have reflected that. As I've previously said, the people need to be reassured that they're safe with Kerry.

Edwards himself has a youthful, cheerful appearance, and this speech may have come across to the American people as naive rather than hopeful.

I hope that John Kerry finds a way to give a much more somber speech on Thursday evening. I believe that the American people will respond to this much more readily. (29-Jul-04) Permanent Link
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Kremlin orders Yukos to stop selling oil.

Oil prices spiking today to $42 per barrel as the worst possible scenario unfolds in Russia. Today's order from the Russian Justice Ministry to stop selling oil pushes the company toward bankruptcy, and guarantees that it will be unable to use its income to arrange payment of a disputed tax bill.

Meanwhile, bailiffs are proceeding with plans to sell Yuganskneftegaz, Yukos' largest subsidiary, for as little as 10% of its market value, to pay the tax bill. Two other subsidiaries, Tomskneft and Samaraneftegaz, are also being readied for sale. No buyers have been named, but it's expected that the buyers will be Kremlin-controlled oil firms, effectively nationalizing the the company.

In a separate development, a close aide of President Vladimir Putin has been voted chairman of the board of Rosneft oil company, which is owned 100% by the Kremlin. This has raised speculation that Rosneft will be the buyer of the Yukos' subsidiaries.

It's becoming clearer that Russian President Putin's intention from day one has been to nationalize Yukos, one of Russia's largest companies, and the supplier of 11.4% of the world's oil, and that the motives are political. The Kremlin has stonewalled or rebuffed several proposals to pay the back tax bill, and save the company to preserve investors' savings. Only one scenario seems acceptable to the Kremlin: Bankrupt the company, and nationalize its assets.

The Kremlin's move will strongly discourage foreigners from investing in Russia, and is certain to roil the international oil markets for months to come.

There are still too many unanswered questions to feel certain that we know what Putin's full motivation is. Is this a desperate sign that the Russian economy is a lot worse than we know about? Is this related to the conflict between Orthodox Christian and Muslim populations in its southern provinces (Chechnya, Ingushetia, Dagestan, North Ossetia), increasingly involving countries Caucusus region (Georgia, Armenia, Azerbaijan)? We have to wait and see. (28-Jul-04) Permanent Link
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Here's how to sign up to be a suicide bomber

Check one: "I want to murder (a) Salman Rushdie (b) Israelis or (c) Americans."

Last month, a recruiting event was held in Tehran, Iran, to provide opportunities for people to sign up to be suicide bombers. Some 2,000 people signed up, according to a report translated by Of these, 25% are under 18; 55% are 18-40, and 20% are 40-80.

Volunteers are asked to fill out a form with name, age and contact information. Occupation and education are not important.

"There are three options on the form for registration for martyrdom operations. The volunteers can choose one: murdering Salman Rushdie, [martyrdom] operations in the holy [Shi'ite] cities [in Iraq] against the Americans, or attacking the Israeli forces in Palestine," says the report.

The first option refers to author Salman Rushdie, who was condemned to death by a fatwa issued by the former Iranian spiritual leader Ayatollah Ruhollah Khomeini on February 14, 1989. Rushdie had just published Satanic Verses, a book which Khomeini claimed was blasphemous to Islam. The Nobel writer V.S. Naipaul described Khomeini's fatwa as "an extreme form of literary criticism." Rushdie has been in hiding most of the time since 1989, and even today Iran is still offering a reward of over $2 million for his murder. It's a wonder he's still alive. (27-Jul-04) Permanent Link
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Jesse Jackson calls for sending American troops to Darfur

You see how it works? Everyone has a war they like.

Live on CNN International this morning, peace activist Jesse Jackson had just finished condemning Bush for sending troops to Iraq, when he called on Bush to lead a worldwide effort to send troops to prevent further deaths in Darfur. He said, "If we can have troops in Korea, in Nato, there should be nothing shameful about defending life in Africa."

This is interesting to me because it provides a little more insight into how wars start. Jackson opposes America's involvement in the Iraq war, but calls for America's involvement in the Darfur war.

In her speech to the Democratic National Convention last night, NY Senator Hillary Clinton criticized Bush for doing too much in Iraq, but not enough to prevent development of nuclear weapons in North Korea. Evidently she thinks we should have invaded North Korea instead of Iraq.

Actually, I've heard a number of pundits, on both the left and the right, say that in the last few weeks. That's how wars get started. (27-Jul-04) Permanent Link
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Stocks are apparently poised for a fall

More and more pundits say that uncertainty in Iraq and fall in leading indicators portend a bear market this summer.

The Conference Board announced that the U.S. index of leading economic indicators fell slightly, the first decrease since March 2003.

I wish someone would someone would create a "financial pundit index," which keeps track of various pundits' statements predicting whether stocks will go up or down. The reason I suggest this is because I've noticed in the last month or so that more and more pundits are expecting a downward trend. When all these pundits, who are normally inclined to be more optimistic than usual, suddenly become pessimistic, there must be a good reason.

Since 2002, Generational Dynamics has been predicting that stocks would fall 50% by 2006 or 2007. We see no reason to change that forecast. (23-Jul-04) Permanent Link
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Saudi amnesty expires - What now?

Only four al-Qaeda militants have turned themselves in under the one month amnesty / ultimatum, amid news reports that three more are negotiating surrender as the amnesty period expires today. Saudi officials had said that they expected many more militants to surrender.

Crown Prince Abdullah announced the amnesty a month ago, along with an ultimatum promising a crackdown on anyone not surrendering by the deadline.

Saudi Arabia is a Kingdom in crisis, thanks to a series of terrorist bombings targeted at vulnerable targets within the Royal family and the oil industry.

So what happens now? The Kingdom has made an ultimatum and is committed to it, and must follow through or lose credibility. Will the Kingdom declare war on al-Qaeda? Or will it make a few symbolic arrests, and give al-Qaeda another victory? Either of these choices will lead to increasing violence, and that's why ultimatums make me nervous. This is a situation to watch for the next few days. (22-Jul-04) Permanent Link
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Yukos: Bankruptcy is near

The Kremlin is stonewalling Yukos and preparing to nationalize its major asset according to CEO Steven Theede at at a press briefing today.

Theede said he had sent 11 letters to various Russian government officials to discuss a way out, and has not received a single formal response. In the meantime, the process to sell Yukos' major asset, it's Yuganskneftegas subsidiary, to a Kremlin-controlled firm at 10% of market value is proceeding. Nationalization of Yukos is clearly not far off. (22-Jul-04) Permanent Link
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Russian President Putin appears maneuvering to nationalize Yukos

This situation smells worse for investors every day, as it appears that Putin is harvesting Yukos' wealth for whatever purpose, as I described two weeks ago.

For several days, investors have been suspicious of a planned forced sale of Yukos' "crown jewel," it's largest subsidiary, Yuganskneftegaz, to pay off back taxes.

That may seem OK, but it's not the right way to do it. In order to protect the investors, Yukos should be given an opportunity, for example, to auction off Yuganskneftegaz, in order to get as much money for the subsidiary as possible.

But that's not what happening. Instead, Putin evidently plans the forced sale of Yuganskneftegaz to a Kremlin-controlled oil firm, at a fraction of its market value. This means that investors lose a great deal of money, and Yuganskneftegaz is effectively nationalized.

Yukos is planning to hold a press briefing later today, at which it's expected to say it will file for bankruptcy. This appears to be a counter-maneuver to take advantage of Russian laws and prevent the sale of Yuganskneftegaz. Yukos might then be able to sell off Yuganskneftegaz itself, and gain more money for the investors.

The stench is growing. We'll see if Putin permits this counter-maneuver. (22-Jul-04) Permanent Link
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Greenspan very upbeat about the economy

but he seems to be too optimistic.

Federal Reserve Chairman Alan Greenspan's testimony to Congress (full Monetary Policy Report here) was positively bubbly.

He said that the economic recovery has become "self-sustaining," thanks to rising employment and increases in disposable income and consumer spending, and that the Fed could return to a "neutral stance" with respect to the Fed funds rate. He added that the economy's recent "soft patch" was caused by a spike in oil prices and would be "short-lived."

Generational Dynamics predicts that the economy will return to a deflationary trend (see below). The reason is that businesses are producing products and services that younger generations find increasingly obsolete, and the businesses have, on average, become too bureaucratic to change quickly enough to satisfy younger generations.

The next few months will tell us which of these views is correct. (21-Jul-04) Permanent Link
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On the 60th anniversary of the failed assassination attempt on Adolf Hitler

it's well to remember that World War II would have occurred even without Hitler.

Major European "world wars" have been occurring through the centuries like clockwork: the Franco-Prussian war (1869-70), the French Revolution and Napoleonic Wars (1789-1814), the War of the Spanish Succession (1701-14), the Thirty Years War (1618-48). The list could be extended back into medieval times as well, and Hitler had nothing to do with any of those wars.

There's a kind of "humanity clock" that determines major wars and puts them on a timeline, determined by the flow of generations. It's well to remember that, as we enter a new generational crisis period in Europe and America, that a new European war is not impossible.

How could it happen? Of course when it happens, we'll all be shocked and surprised, but here's one scenario: A Mideast war brings in England on the side of Israel and France on the side of the Palestinians. (20-Jul-04) Permanent Link
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Darfur saga like depraved game of musical chairs

As I've said before, I've gotten good at turning off my own feelings of horror whenever something like this happens.

Darfur - southwest region of Sudan <font size=-2>(Source: BBC)</font>
Darfur - southwest region of Sudan (Source: BBC)

Hundreds of thousands of people in the Darfur region of Sudan will die in the next few months. This is a genocide by the northern white Muslim against the southern black Muslims. The men are mass murdered and the women are mass raped. These genocides are forces of nature, like typhoons, and can't be stopped by mere humans.

But there's a certain fascination at turning off your feelings and watching events transpire, as the genocidal horror progresses. It's a depraved game of musical chairs, played by Kofi Annan of the United Nations, along with politicians from America, England, Europe and Africa. The politicians point to each other and say, "Do something! Do something!" Meanwhile the negotiations between various groups in the Sudan are reduced to squabbling over details, and have finally broken down.

As long as agreements can't be reached, Darfur moves closer to the edge of the cliff of mass starvation and disease.

It's a contradiction that pervades all of the findings of Generational Dynamics. People read the stories on this site, and can't believe that these kinds of things could ever happen. And yet, they've happened as regular as clockwork throughout human history, and they will again.

Follow the news if you have the stomach for it, and watch the depraved game of musical chairs play out. My prediction is that nothing will be done to stop the progression of the genocide. And my prediction will turn out to come true.

And next year, there'll be another speech by politicians who'll say, "We must never let this happen again." But it will, because it always does. (19-Jul-04) Permanent Link
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This week's financial data points to trend back toward deflation.

Several inflationary indicators are down for June -- import and export prices, producer prices and consumer prices were all lower than expected.

In a world where the Fed funds rate is 1.25%, we should be seeing signs of inflation everywhere. The fact that the inflation rate continues to be tepid is seen as very good news by many analysts, but there's more to the story.

The CPI (consumer price index), which measures prices paid by consumers, rose only 0.3% last month, half the rate recorded in May. The core index, which excludes volatile food and energy prices, rose a tiny 0.1%, the smallest increase this year.

The PPI (producer price index), which measures prices by manufacturers and other producers for raw materials, actually fell 0.3%, while the core rate rose only 0.2% in June,

Import and export prices were also lower than expected, indicating that the moderating inflation trend is international.

Inflation had been increasing more than expected during the first half of the 2004. This was attributed to the low Fed rate (1.00%), and to the demands of China's superheated economy. Now, with the Fed rate 0.25% higher, and with the Chinese government cracking down on bad debt in its own banking system, inflation seems to be moderating again.

Consumer price index (CPI) from 1870 to present, with an exponential growth trend line.  The CPI is 185 in 2003, and 2010 has a trend value of 129.
Consumer price index (CPI) from 1870 to present, with an exponential growth trend line. The CPI is 185 in 2003, and 2010 has a trend value of 129.

Although you can't tell much from a single month's figures, the moderating inflationary trend is consistent with the Generational Dynamics prediction that we're entering a deflationary period.

This prediction is largely based on the adjacent graph, which shows the long term CPI values with an exponential growth trend line. This graph indicates that consumer prices should decline 30% or more in the next few years.

Why would prices decline so much?

The proposed explanation that I gave in my book is called the "crusty old bureaucracy" theory. According to this, there's a generational cycle in businesses, where bureaucracy sets in, and the products become gradually obsolete, and that this happens on a national basis. In the extreme, once enough businesses are producing obsolete products, inflation can't increase because no one will want the products at any price. The only way to fix the problem is through massive business bankruptcies and a new set of businesses.

In the current economy, one of the most visible examples is music CDs (compact disks). There's a huge chunk of business associated with manufacturing, distributing and selling CDs. However, CDs are becoming increasingly obsolete, because people want their music on their computer, and don't want CDs around cluttering up their homes. In other words, people don't want CDs at any price. CDs is one example, but you can easily think of many more examples in other domains where computerization are making products obsolete, or at least way overpriced.

The inflation rate is very mysterious. It's supposed to be controlled by the Fed funds rate, but it's not clear how much control the Fed actually has. The Fed can't make people want to buy products at high prices if the products are obsolete or unwanted, and that's what could be going on right now. If the Fed floods the economy with money, then it can push up the inflation rate, but only at the cost of making money more and more worthless. (17-Jul-04) Permanent Link
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The Singularity is discussed on a news show

I just saw the subject of super-intelligent computers discussed on Neil Cavuto's business show, in conjunction with the movie "I, Robot", this afternoon on Fox News Channel.

The guest, Peter Rojas of, discussed the Singularity as the time when computers will become self-aware and improve their own technology astronomically quickly. Cavuto was totally clueless, and kept worrying about computers taking his job. Even Rojas was afraid to go too far and utter the 2030 date, saying only that it won't happen for "a long long time."

As I've previously discussed, This is a problem that the general public should become more aware of, for the sake of humanity, and maybe the "I, Robot" phenomenon will be the thing that makes that happen. (16-Jul-04) Permanent Link
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Bobby Fischer is arrested in Japan.

Bobby Fischer used to be an idol to this nerd, and I once got his autograph when I visited the Manhattan Chess Club as a high school student in 1960. I also played in a speed chess tournament in which he also participated, though of course I never got close to him.

Bobby Fischer in his heyday
Bobby Fischer in his heyday

This has nothing to do with Generational Dynamics, of course, but I'm posting this as a matter of personal privilege. I was transfixed by the live (sort of) public television coverage, hosted by Shelby Lyman, of Fischer's capture of the world chess championship against Boris Spassky in 1972, and was saddened to see him withdraw from the world and refuse to defend his title.

Now he hates America, hates Jews, hates democracy, applauds 9/11, and seems to be falling into total insanity. Having been arrested in Japan, Fischer will probably be extradited to the United States to face charges of violating international sanctions when he traveled to Yugoslavia in 1992 to play a new match with Spassky. So this sad story is not over. (16-Jul-04) Permanent Link
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Speaking of China, the economy grew by 9.7% in the first half

This compares with a 9.1% growth last year, and is a lot faster than the 7% target that China is supposed to be aiming for. (15-Jul-04) Permanent Link
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China is getting more girls

With a huge surplus of boys, ultrasound exams are illegal in China, so that parents can't find out whether their unborn children are boys or girls. Parents are likely to abort unborn girls or to kill baby girls after they're born.

Here's proof that a government program can produce unexpected result. China's gender balance used to be normal. Then, in 1980, in order to control population, China introduced a "one-child" policy that forbade any couple from having more than one child. The Chinese claim that the policy has prevented some 380 million births since it was introduced.

Trouble is, parents want to be taken care of when they're old, and they need boys for that, since girls go off and take care of their husbands' families. So many parents decided that if they were going to have only one child, it had better be a boy, and that's why they started killing girl fetuses and babies.

That's why there are 117 boys born for every 100 girls, and why demographers predict a surplus of 40 million bachelors by 2020.

That's the bad news. The very bad news is that this causes further instablity in the Chinese culture. There are very many young men who are unable to find wives, and young girls are being driven into prostitution, in order for a small number of women to provide for a large number of men.

That why the Chinese are cracking down on using ultrasounds and aborting girls.

As we've written previously, China is going through a generational unraveling period, with an overheated economy and a stock bubble that's going to burst one day soon. China is expected to experience a new secular civil war within the next ten years, following on the White Lotus Rebellion (1795-1805), the Taiping Rebellion (1852-62), and Mao's Long March and Civil War (1934-49). The last two secular civil wars killed tens of millions of people, and the next one is expected to continue the pattern. (15-Jul-04) Permanent Link
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Two events affect al-Qaeda psychology.

Saudi cleric Khaled al-Harby turns himself in, and the Filipinos capitulate to al-Qaeda.

Terrorism works with psychology. Everyone knows that setting off a car bomb in the middle of a crowd of Iraqis or blowing up a train station in Madrid are acts with little pure military value, but they do have a psychological value of, well, terrorizing people.

On June 23, the Saudis issued a one-month amnesty and ultimatum to terrorists to turn themselves in. Well, a couple have already, but there has just been a big catch, Khaled al-Harby, who is Osama bin Laden's close associate. That's going to make al-Qaeda very angry.

Yesterday, the Philippines capitulated to al-Qaeda by agreeing to withdraw its 50 troops from Iraq a few weeks earlier than had been scheduled. The terrorists had threaten to behead a Filipino hostage unless Manila complied. That's making al-Qaeda very happy.

No other country has capitulated to terrorists in this way. The Philippines' capitulation has been widely criticized around the world -- by America, Poland, Australia, Bulgaria and South Korea have all deplored the move. Because of al-Qaeda's success, we can expect to see more kidnappings in Iraq.

The Saudi ultimatum period ends in nine days. What will happen when it expires? Will the Saudis go after the other terrorists in a more aggressive manner, or will the ultimate just be dropped? Stay tuned. (14-Jul-04) Permanent Link
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Pope John Paul apologizes for 1204 sacking of Constantinople

People laugh at stuff like this, but it's a really big deal.

The Patriarch of Constantinople visits Vatican
The Patriarch of Constantinople visits Vatican

My mother, a devout Greek Orthodox, always loved the Catholics, but she always made it clear that we were better, and she expressed particular anger at this event. In 1204, a new Catholic Crusade was heading out to recapture Jerusalem back again from the Muslim Turks. Along the way, the Catholic army sacked Constantinople, starving and murdering its citizens, and plundered the Orthodox Church's treasures accumulated over the centuries.

The deed was capped by placing a prostitute on the Emperor's throne at the church of St. Sophia, at that time the most beautiful church in Christendom.

In studying Generational Dynamics, I've learned what might be called "the biggest lesson of history": That people never remember the atrocities that they commit against other people, but they never forget the atrocities that other people commit against them.

Every tribe, society and nation commits atrocities during crisis wars and forgets about them later. The Pope has broken the mold in recent years by actually remembering Catholic atrocities and apologizing for them. This apology took place in Constantinople (Istanbul). In 2001, in a visit to Athens where he encounted large anti-Catholic protests, the Pope apologized to the Greeks for the same incident. And in a visit to France in 1997, he made a plea for forgiveness and reconciliation for the slaughter of Protestant Huguenots in the St. Bartholomew's Night Massacre in 1572.

The fact that people remember these things for centuries is one of the reasons why wars repeat themselves, time after time. Desire for revenge is as much a part of being human as a desire for sex. The Pope's apologies, which are almost unique in history, are a reflection of his desire that he's not going to allow a war to occur on his watch for lack of saying, "I'm sorry." (13-Jul-04) Permanent Link
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Wall Street Journal: Today's soaring deficits don't inspire fears

Back in the 1980s, Ronald Reagan's advisers worried that his federal budget deficits risked causing an economic calamity. But the calamity never came, and that's why politicians of today are far more complacent, even though a "deficit-induced crisis" is far likelier, according to a front-page article in yesterday's WSJ.

Many economists are very concerned about the situation: Within four years, surging Social Security and Medicare expenditures will begin to overwhelm the economy, and worse, an enormous 40% of U.S. debt is held by foreigners.

"Oddly, the lesson many Americans seem to have drawn from the experience of the past two decades is that nothing need be done," says Harvard University economist Benjamin Friedman.

There's also a pretty simple generational explanation. In the 1980s, most government, business and education senior management positions were filled from a generation that lived through the Great Depression; today's leaders know nothing of that hardship, and at worst experienced only mild recessions. (13-Jul-04) Permanent Link
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Forbes Russia editor shot dead

This is a grizzly new sidelight to the story about Yukos and Khodorkovsky (see below). Paul Klebnikov, the editor in chief of Forbes Russia magazine has written a book on Boris Berezovsky, one of the Jewish oligarths that I've previously mentioned, and another book on organized crime in Russia's continuing war with Chechnya. In addition, Forbes Russia in May published a list of Russia's 100 wealthiest business people, including 36 billionaires.

The new openness of the Kremlin was welcomed worldwide when it began in the late 1980s and continued through the 1990s. But starting in the late 1990s, Russia starting cracking down on freedom of religion and freedom of the press, and today media independence has been almost completely eliminated.

Generational dynamics predicts that Russia is "scheduled" to repeat the secular civil wars it's had for centuries. (10-Jul-04) Permanent Link
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"We want to create a light-skinned baby."

That's what a raped black woman told Congressman Frank Wolf when he visited Darfur.

The white Muslims in northern Sudan are in a crisis war with the black Muslims in Darfur, western Sudan. The whites are killing the black men and raping the black women.

Darfur - southwest region of Sudan <font size=-2>(Source: BBC)</font>
Darfur - southwest region of Sudan (Source: BBC)

UN President Kofi Annan and US Secretary of State Colin Powell have both been visiting Darfur, and have tried to shame the world into doing something about Darfur.

If you really want to know how the world works, watch this situation develop. There is no stopping this genocide. Close to a million people will die in the next few months, and nothing will stop it. It's nobody's fault, because nothing can be done about it, except that politicians can run around and say "Tsk! Tsk!"

This kind of genocide is built into the human DNA, and is as basic a human force as sex is. It happens to people of all races, all religions, and all places. It happens because nature requires that population grows faster than food production, and genocide is the way of thinning the population so that the survivors can eat.

Some people object to Generational Dynamics simply because they can't believe that its conclusions are humanly possible. Well, you can watch for yourself now. (8-Jul-04) Permanent Link
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Hussein al-Houthi and Yemen's "Believing Youth"

There's a new militant Islamic group to worry about.

Yemen <font size=-2>(Source: BBC)</font>
Yemen (Source: BBC)

Almost 200 Yemenis have died in rebel clashes in northern Yemen, near the Saudi border.

The attacks were launched by the group "Believing Youth," a Shia Muslim militant group with ties to terrorist groups in Iran and Lebanon. The group is opposed to Israeli and American presence in the Mideast.

Hussein al-Houthi <font size=-2>(Source: al-Jazeera)</font>
Hussein al-Houthi (Source: al-Jazeera)

"Believing Youth" was formed in 1997 by Hussein al-Houthi, a (now) 50 year old rebel cleric who used the group to form religious schools in northern Yemen. (His name is also spelled al-Hawthi and Husain al-Huthi and Hussein Badr al-Deen al-Hothy in news stories.)

From a generational dynamics point of view, fault line wars are often launched by youthful soldiers under the guidance of elder "prophets." This is a fluid situation. North and South Yemen have had cultural clashes including civil wars frequently, so this situation bears close watching. (8-Jul-04) Permanent Link
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I wish we knew more about Putin's plans for Yukos

The gathering crisis for Russia's oil giant Yukos threatens both Russia's economic stability and world oil prices.

Yukos is Russia's second largest oil group. It supplied 11.4% of all the oil for the whole world last year, and alone accounts for 4% of Russia's economy. If Yukos stops pumping, which could possibly happen by the end of the month, then oil prices would spike upward and Russia's economy would take a big hit.

If Yukos is nationalized, which could also happen, then Russia's entire economy could suffer, as panicked investors take their money out of other Russian companies that might get nationalized.

I just have the feeling that we aren't being told everything about what's going on. There are just too many surprises.

Mikhail Khodorkovsky in happier times <font size=-2>(Source: BBC)</font>
Mikhail Khodorkovsky in happier times (Source: BBC)

There was the surprise stealthy arrest of the then CEO Mikhail Khodorkovsky in October 2003, with strong political overtones.

There was the sudden appearance of massive tax bills for Yukos from 2000 and 2001 - along with requirements to pay them immediately, which would force the company into bankruptcy.

And there was the surprise raid on the company's headquarter's this past Saturday for reasons not yet fully explained.

All these moves were evidently ordered by Russian President Vladimir Putin. And it's possible that there were good valid reasons for all of them, based on genuine concerns over tax fraud and other illegal activities.

The problem is that, given Russia's history, there's a more ominous explanation. It's only since 1991 that Russia eschewed Communism, a political system that gave the government the right to take any company's or any individual's profits at any time for any reason or no reason. This has been the Russian culture for decades.

This practice was used by Nicolai Lenin from the beginning of the Bolshevik (Communist) Revolution in 1917 when he destroyed the Russian Orthodox Church in order to harvest its wealth. In one of his early letters to the Politburo he writes:

Now is history repeating itself, with Putin harvesting Yukos' wealth for whatever his purposes are? I don't know, of course, but it was a common Russian practice through 75 years of Communism.

And there's more.

Mikhail Khodorkovsky is one of the new Russian "oligarths," the six or seven people who took advantage of the new Russian capitalism of the 1990s to build up huge businesses and huge wealth for themselves. Khodorkovsky is actually the wealthiest man in Russia.

And yet more: Khodorkovsky is Jewish, as are all but one of the new oligarths. Why is this important? Because Russia has a history of anti-Jewish pogroms, that may be at least a visceral factor here. It should not be a major historical surprise to anyone to learn that many people who are still in poverty after Russia's adoption of capitalism might blame their lot on the oligarths and or on the Jews in general.

Now, I'm not saying those are Putin's motives for sure, but I'm saying that the more I read, the more I get a queasy feeling in my stomach.

Otherwise, I'm still waiting to hear why Khodorkovsky just happened to be arrested last October just after he had announced a political campaign against Putin, and why Putin seems to be anxious to put Yukos out of business. (6-Jul-04) Permanent Link
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Kashmir violence heating up even more

A 115-year-old Islamic school in Srinagar was burned down on Monday. The fire destroyed one of the world's oldest copies of the Quran as well as thousands of other ancient Islamic texts. The fire appears to be an arson attack by radical Islamist terrorists, targeting a moderate Muslim leader.

It breaks my heart to read of the destruction of such hallowed, irreplaceable historical treasures such as these, and I'm not even Muslim. You can imagine how much a crime like this can ignite the fury of a Muslim to whom these documents are sacred.

This is the kind of thing that happens in a generational crisis period. Each side practices brinkmanship, increasing the level of conflict and surprise, until finally the situation spirals out of control. (6-Jul-04) Permanent Link
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Kashmir violence is making news again.

Earlier today, bomb blasts exploded in two cities Kashmir in India-administered Kashmir, Srinagar and Anantnag.

Bomb blasts in Kashmir cities <font size=-2>(Source: BBC)</font>
Bomb blasts in Kashmir cities (Source: BBC)

Kashmir is an overwhelmingly Muslim area, but has been disputed by both Pakistan and India since the UN partitioned it in 1947 into Pakistani and Indian regions, to settle a violent regional war in the region. Pakistan claims the entire region, and points out the partition was supposed to be temporary, and that the UN Security Council mandated an election in 1951 to permit Kashmiri self-determination. That election has never been held. Today, India is building a fence along the line separating the two regions of Kashmir. This fence is much like the one the Israelis are building to separate themselves from the Palestinians.

When crisis wars are settled by artificial means, such as partitioning (as also happened in the Palestinian region when Israel was created), belligerents often stop fighting out of sheer exhaustion, but the underlying issues are not settled. Generational Dynamics predicts that the crisis war will recur when the generation of people who grew up during the last crisis war are gone (retired or dead). This could happen any time in the next ten years. However, the Kashmir dispute has become linked, by Islamist militants, with other disputes in the Caucasus (Chechnya) and in the Palestine region. Furthermore, any major Kashmir war would expand into a regional war involving Pakistan and India, and both of these countries are prepared to use nuclear weapons. (3-Jul-04) Permanent Link
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Kerry approves security fence separating Israel from Palestinians.

This marks a significant change in Kerry's position to be much more pro-Israeli, according to an article in today's Boston Globe.

A Palestinian walks by the security fence.  <font size=-2>(Source: AFP)</font>
A Palestinian walks by the security fence. (Source: AFP)

The fence, which is part of Israel's disengagement plan, designed to insulate Israel from suicide bombings and other terrorist attacks, infuriates the Palestinians, who see it as an encroachment on their lands. The significance is that Kerry's position is, once again, much more closely aligned with Bush's, further indicating that whatever happens in the Mideast next year will happen irrespective of who's elected President.

Generational Dynamics predicts that during crisis periods like this one, there are always major political realignments, as there were during the Depression-World War II period and the Civil War period.

The alignment of the Christian right with the Jewish left is one of the more startling changes that are happening in the current realignment. These two groups were formerly political polar opposites, but now they've put their differences aside for the most part and joined in their commitment to the defense of Israel.

Thus, Kerry's position change is being forced on him to prevent further Jewish defections. But it may cut into his big lead with Arab-American voters, who may now be tempted to vote for Ralph Nader, who claims that Bush is a puppet of the Israeli government. (2-Jul-04) Permanent Link
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Civil Rights Act signed 40 years ago today.

Americans today are not as interested in invidual rights as they were in 1964. In fact, today they're most focused on threats from Islamist terrorist, and consider the civil rights battle to be mostly settled. See 1960s America for more information. (2-Jul-04) Permanent Link
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Low payroll data shows economy's fragility

Today's unemployment report for June showed employers added only 112,000 jobs to their payrolls last month, less than half the 250,000 economists had been expecting, showing how fragile the economy is.

There's little doubt about this: If the economy were in the robust economy that many pundits were claiming, then the job growth would be in the 300,000-400,000 range by now.

You can't tell much from a single month's report, except that volatility is a way of life, but Generational Dynamics predicts that we're entering a new secular 1930s-style depression. At the very least, we can say that the job reports for the last year have done nothing to refute that prediction, especially with the vast amounts of very low interest credit that have been available for the last three years.

The "good" news is that the weak employment number means that the Fed will not be any rush to increase interest rates further, thus guaranteeing continue low interest credit for the foreseeable future. (2-Jul-04) Permanent Link
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Kerry slams Bush Army reserve call-ups

Those who believe that a John Kerry victory in November will extract America from Iraq are in for a nasty surprise, if we're to believe what Kerry said yesterday in criticizing the Bush administration's callup of retired and discharged soldiers, according to a 7/1 Boston Globe article.

The gist of Kerry's criticism of Bush is that there are too few troops in Iraq to do the job. Kerry and other members of Congress have previously called for increasing the size of the Army to meet Mideast commitments. Kerry has been repeatedly challenging Bush's management of national security in general and the war in Iraq in particular.

The point is that whatever happens in Iraq and the Mideast is already "baked into the cake," and whatever happens will happen irrespective of who is elected President in November. In fact, if there's any difference at all in how Bush and Kerry might act, Kerry will act at least or more aggressively militarily than Bush. Why? Because Bush's natural enemies, the Democrats, will slow him down, while Kerry's natural enemies, the Republicans, will pressure him not to be weak militarily.

One of the things that people ought to understand better, that Generational Dynamics teaches us, is that great events happen irrespective of who the politicians are. World War II would have happened even if Hitler had never been born. These events are caused by generational changes. I predicted in 2002 that there would be no important anti-war movement in America, and except for a small group of Naderites, there is none. I predicted late in 2002 that there would be no civil war in Iraq and no uprising against America in Iraq, and that's come true for very good reasons I've repeatedly said (here and here and here, for example) on this web site, despite hysterical pundits who have been wrong every time.

So now we have Bush furtively increasing the size of the armed forces, and Kerry calling for even more forces. Generational Dynamics tells us that we're heading for a much larger war, and both Bush and Kerry are heading in exactly that direction. (1-Jul-04) Permanent Link
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