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


Web Log - October, 2004


Arafat will not return to Ramallah

For years, America and Israel have been trying to get rid of Arafat; now they've gotten their wish.

Yasser Arafat in 2000
Yasser Arafat in 2000

Yasser Arafat is "not in control of his mental faculties" because of leukemia, and the "Arafat political era is now over," according to the news this morning.

Since the beginning of the "second Intifada" in 2000, both Israel and America have refused to speak to Arafat officially. Both countries have taken the position that Israel and Palestine could reach agreement on a peace treaty if only Arafat would be willing to abide by his commitments, and stop perpetrating terrorist acts against Israelis. According to this view, it's Arafat's fault that the "Roadmap to Peace" has failed, and that without Arafat we'd be creating a new Palestinian state living in peace side by side with Israel.

That whole view is fundamentally flawed, because it assumes that Arafat was in control of all these decisions.

From the point of view of Generational Dynamics, it's large masses of people who usually direct the policy of a nation, not the political leaders. From that point of view, the rejection of the "Roadmap" comes from the Palestinian people, not from the Palestinian leaders.

I've always felt that the terrorist acts against Israelis, as horrific as they are, have been quietly supported by Arafat because they represent a compromise position which is short of total war. This concept is speculative, but it makes sense because Arafat, born in 1929, is old enough to have lived through the genocidal wars between the Jews and Arabs in the 1940s, and considers any compromise to be small compared to the horror of a repeat of those wars.

There will now be a power struggle among a younger generation of Palestinian leaders, but these youthful new leaders have no personal memory of the 1940s genocidal wars, and so have no fear of seeing them return. That means that they'll be much more willing to take risks in rhetoric and actions, and much more willing to risk total war.

The thing to watch for in the next few month is how this power struggle evolves. Politically, Arafat's Palestinian Authority will claim control of the Palestinian people. But "on the streets," terrorist groups like Hamas and Hizbullah will attempt to fill the power vacuum left by Arafat's departure.

Generational Dynamics predicts that no political solution is possible for more than the short run. The Palestinian dynamics are coming from the Palestinian people, and are not controlled by any political leader.

Arafat's disappearance does mean one big thing however: Many of the Palestinian people have been willing to exercise restraint, simply out of respect for the elder Arafat, who is considered to be a Palestinian hero. With Arafat gone, that restraint is gone as well. (30-Oct-04) Permanent Link
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Yesterday was the 75'th anniversary of Black Tuesday, October 29, 1929, the stock market crash

Analysts and historians yesterday completely missed the point.

There were lots of retrospectives yesterday, talking about what happened when the stock market crashed 75 years ago, and why it couldn't happen again. The AP story by Michael Martinez is a great historical summary.

The reason that most people give that it can't happen again is because the Federal Reserve has changed policy since 1929. Unlike 1929, today the Fed policy is to make a great deal of money available during times of financial crisis -- that's why interest rates have been near-zero for the past few years. That didn't happen in 1929.

Major stock market declines <font size=-2>(Source: WSJ)</font>
Major stock market declines (Source: WSJ)

Those who say it can't happen again point to the day in 1987 when the stock market fell by the greatest amount (on a percentage basis) in history. The Wall Street Journal used the adjacent graphic. According to one analyst I saw on tv, "The Fed made plenty of money available in 1987. If it weren't for that, a new Great Depression would have begun in 1987."

This represents a complete misunderstanding of what's going on, but before we get to that, here's a table of then ten worst days in the history of the stock market, as measured by falls in the Dow Jones Industrial Average (DJIA):

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So if you see this table, you might be inclined to agree. After all, if we recovered so quickly in 1987, then we can recover any time, can't we?

Historical Price/earnings ratio for S&P 500
Historical Price/earnings ratio for S&P 500

The reason that these analyses are wrong is because stocks were generally not overpriced in 1987. In fact, price/earnings ratios had been below 10 in 1980, and were rising slowly.

In 1929, stocks were way overpriced, with price/earnings ratios into the 30s. No Fed action in 1929 could have prevented the stock price fall that brought price/earnings ratios below 10 again.

So I completely disagree that the Fed saved us from a new "great depression" in 1987. The Fed's actions kept a lot of things running smoothly of course, but even without them, stocks would have returned to the growth path they exhibited through the 1990s.

Total credit market debt <font size=-2>(Source: PIMCO)</font>
Total credit market debt (Source: PIMCO)

Today, things are much more like the 1930s, in that stocks are still way overpriced. The Fed's zero-interest policy has kept stock prices up, but that can only work so long.

The price/earning ratio is not some obscure measure that I made up to make some sort of point; P/E ratios were commonly used by analysts until the last decade or so to decide the relative values of stocks. Back in those days, prior to the early 1990s, all the senior financial managers in the country were people who had lived through the 1930s Great Depression, and so were very risk-averse investors. They considered P/E ratios to be one of the best measures of stock value.

In the last ten years, senior financial managers have all been in the generations born after the Great Depression, and these risk-seeking people have thrown out P/E ratios as a valuable indicator. Nonetheless, it simply doesn't make sense for investors to purchase stocks from companies whose annual earnings per share of stock are less than 5% of the value of that share of stock.

We're now into some three years of consistently wrong forecasts of jobs, inflation rates and output by a wide variety of analysts of all kinds - forecasts that have been proven overly optimistic to the point of wishful thinking.

I've recently been highly critical of statements by Alan Greenspan and Fed Governor Ben Bernanke that are increasingly self-serving and questionable, so much so that economists are becoming increasingly skeptical of the Fed's credibility.

On the 75'th anniversary of the 1929 stock market crash, the risk-averse generation of people who lived through the Depression are gone. Today's financial leaders are from subsequent risk-seeking generations, and are getting increasingly restive and confused about what's going on in today's economy. (30-Oct-04) Permanent Link
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An eerie parallel between Pakistan and Israel

Pakistani President Pervez Musharraf has proposed a Kashmir peace plan which, like the Mideast "Roadmap to Peace," has no chance of succeeding.

Musharraf's plan offered to negotiate over three possible options:

However, leaders in both Pakistan and India are rejecting Musharraf's plan.

India, Pakistan and Kashmir. <font size=-2>(Source: Peter N. Stearns)</font>
India, Pakistan and Kashmir. (Source: Peter N. Stearns)

Both Palestine and Kashmir were partitioned by UN fiat following the end of World War II. The partitioning of Palestine resulted in the creation of the state of Israel. The partitioning of Kashmir was part of an overall UN solution which created the state of Pakistan, separate from India, and provided for referendums within the disputed Kashmir and Jammu regions to decide whether the would be part of either Pakistan or India.

Both Palestine and Kashmir have been the sites of non-crisis wars - Kashmir in 1965, and Palestine in 1967 and 1972. Both have experienced low-level violence for several years now. Both have been the subject of major international attempts at peace plans -- the "roadmap to peace" for Palestine and the new Musharraf plan for Kashmir.

From the point of view of Generational Dynamics, both regions are in generational crisis periods, with a new regional war coming with near 100% certainty in the next few years. Thus, there is no possibility that either peace plan will work.

The new "Mideast Peace Roadmap" was announced in May, 2003, and called for a Palestinian state side by side with Israel by 2005. There are few people in the world who believe that that goal will be met, in view of the continuing violence in the Mideast.

Indeed, Israel has all but abandoned the "roadmap," in favor of Ariel Sharon's unilateral disengagement plan from Gaza in 2005. However, Yasser Arafat's health problems have threatened new conflicts, and recent news stories hint that Arafat may be near death.

Pakistan has also been suffering from continuing violence. Indeed, both the Mideast and Pakistan were subject to massive terrorist bombings on the same day, earlier this month.

There is a difference: The Mideast violence is between Arabs and Jews, while the Pakistan terrorist violence is mostly between Sunni Muslims and Shi'a Muslims. But from the point of view of Generational Dynamics, that difference is no difference at all, since both are part of the trend lines of increasing violence, that will eventually lead to major new regional wars in the next few years. (29-Oct-04) Permanent Link
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My son Jason was wrong

Last week, out of frustration, he said, "The Red Sox will NEVER win another World Series."

This statement led to a discussion of the fact that professional baseball will not exist 10-20 years from now.

The reason is that advances in biotechnology research, in which Jason is an expert, will create "augmented human beings" in the next few years who will have above-human skills in strength, running, pitching, and everything else. With these kinds of players available, many professional sports will no longer make sense.

Well, that part is still true, but my son's first statement is wrong.

Within the last half hour, the Boston Red Sox won the World Series, for the first time since 1918. (28-Oct-04) Permanent Link
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Ariel Sharon's Gaza victory and Yasser Arafat's illness are roiling the Mideast

The two ancient lions holding back chaos are facing new troubles.

Ariel Sharon's spectacular U.S.-backed victory in the Knesset Tuesday moves Israel along the path of a Gaza pullout in 2005. Under this plan, 8,000 Jewish settlers will evacuate their Gaza settlements and move back into Israel.

Sharon's unilateral Gaza disengagement plan has caused massive protests in both the Jewish and Palestinian communities, for completely different reasons.

The radical proposal is splitting Israel's party lines and may threaten Sharon's coalition, as thousands of Jewish settlers have been demonstrating in Jerusalem to protest against being forced to give up the Gaza settlements.

Even Sharon himself has voiced fears of an Israeli civil war, and is rejecting a national referendum on the Gaza pullout apparently for this very reason: "My position on the referendum is unchanged - I am opposed because it will lead to terrible tensions and a rupture in the public."

This comes at a time when Palestinian Authority Chairman Yasser Arafat has been experiencing severe health problems. The official party line is that Arafat has the stomach flu, but the secrecy surrounding Arafat has lead some to speculate that his illness may be much worse, even life-threatening.

A loss of power and control by Arafat would lead to a violent generational power struggle among the Palestinians. This became evident last summer when the Palestinians appeared to be close to civil war over Arafat's attempt to shake up his security forces.

For several years there has always been a strange irony in America's view of both Ariel Sharon and Yasser Arafat. American politicians support Sharon, but many express a view that he's harsh and uncooperative, and that Israel would be better served by a younger leader. Arafat is being officially shunned by Washington these days, and it's been official American policy for several years that the Palestinians would be better off if Arafat would leave and be replaced by a younger leader.

For some reason that baffles me, people seem to believe that young leaders are more likely to be flexible and peaceful, even though history has shown that massive civil wars and uprisings are always led by younger leaders.

From the point of view of Generational Dynamics, the Palestine region has been replaying the events of the 1930s and 1940s that led to a massive regional war. The earlier conflict began in 1936 with rock throwing. The level of violence increased over the years until the partitioning of Palestine and the creation of Israel in 1948 triggered a full-scale crisis war.

Today's conflict could be said to have started with the first Intifada in 1989. The level of violence increased significantly with the second Intifada that began in 2000, and has been increasing ever since.

Ariel Sharon and Yasser Arafat hate each other, but they're the only two major leaders left who lived through the massive genocidal war of the 1940s, and who would rather do anything than see such a war occur again.

Generational Dynamics predicts that such a war will occur again, with near 100% certainty. What will trigger the renewed war is not yet known, but it could happen tomorrow, next month, next year, or in two or three years. Since 2002 I've been saying that I consider the most likely time to be in the months following the disappearance (through death or retirement) of Yasser Arafat, since he's the only leader sufficiently respected to keep the Palestinian factions under control.

Historians of the future will look back and see what steps led to the new Mideast war, but we can see the trend lines coming together now. Arafat's health is weakening, and therefore his power is weakening, leading to open splits among the Palestinians. Sharon's plan is succeeding, but it's infuriating the traditional Jews, leading to open splits among the Israelis. So we have Palestinian against Palestinian, Jew against Jew, and Palestinian against Jew, and those conflicts have only been getting worse. (27-Oct-04) Permanent Link
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Violent crime dropped, continuing a trend

Violent crime has been declining since 1994, and reached the lowest level ever recorded in 2003, according to the Department of Justice, Bureau of Justice Statistics.

Violent crime rate per 1,000 persons, 1973-2003
Violent crime rate per 1,000 persons, 1973-2003

The adjoining graphic is a line chart of overall violent crime rate per 1,000 persons 1973-2003. According to the Department of Justice:

From the point of view of Generational Dynamics, this reduction in crime rate confirms an important finding of the generational paradigm.

William Strauss and Neil Howe, the historians who studied generational changes in the 1980s and published the results in their book, Generations, found that children who are born during a "generational awakening" period, such as America in the 1960s, have the highest crime rates. The "generational awakening" period occurs one generation past the end of a crisis war (World War II in this case), and Strauss and Howe verified this result for six cycles, all the way back to the 1500s, by studying hundreds of histories and diaries throughout American history.

The kids born in the 1960s have been named "Generation X" by the media, but Strauss and Howe use the term "Nomads" to refer to any generation born during an awakening period like the 1960s. These kids have to grow up during a period of enormous political struggle caused by a "generation gap." (See my discussion of Iraq Today vs 1960s America for more information.) The kids in this generation have very difficult childhoods and grow up statistically more likely to become violent young adults.

By contrast, the kids born in the next generation are called generational "Heroes," because then end up being the soldiers who fight in the next crisis war. Research shows that this generation has a lower crime rate than other generations. (26-Oct-04) Permanent Link
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Two online polling web sites show overwhelming worldwide support for Kerry for President.

But a third site, where you have to pay to cast your vote, favors Bush.

Results of global poll by BBC World Service
Results of global poll by BBC World Service

A global poll conducted by the BBC World Service found that John Kerry was favored by 72% of respondents worldwide, George Bush by 19%, and Ralph Nader by 9%.

The adjoining graph shows the results of the BBC poll, broken down by region.

A similar poll, from, found an even bigger margin: 88% for Kerry, and 11% for Bush. The web page breaks the results down by country.

Those two polls aren't particularly accurate. Anybody in the world can access either of those poll web sites and vote, and so the votes are subject to cheating.

But the global poll of ten nations that we described last week is a valid poll, and has similarly lopsided results.

Expectation that George Bush will win - at 9:00 PM ET - according to
Expectation that George Bush will win - at 9:00 PM ET - according to

On the other hand, Bush is the favorite in another kind of online poll, conducted by On that web site, a "vote" is actually a monetary bet, and when the election is over, you can win real money if you're right.

Thus, this poll measures something quite difference from the preceding polls. In the preceding polls, you vote for whom you want to be elected; in the poll, you vote for whom you expect to be elected.

As the adjoining graph shows, respondents expected Bush to win by 57% to 43% at the moment when I captured the graph. However, the results are fairly volatile, even during a single day, so check the web site frequently. If you look at the web site after the election is over, it should show a value of either 0% (if Bush loses) or 100% (if Bush wins). (26-Oct-04) Permanent Link
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Britons advise Americans on whom to elect for President

Saying that "the US election will affect the lives of millions around the world [who] have had no say in it," the left-leaning UK newspaper The Guardian initiated a project for Britons to write letters to Americans, providing election advice.

As we wrote yesterday, a ten-nation survey shows that non-Americans around the world overwhelmingly favor Kerry, but it's also clear that most of these people have very unrealistic expectations of what a Kerry or a Bush presidency means.

The Guardian project allows Britons, at least, to express their opinions directly to Americans. It worked like this: Any reader could request the name and address of a voter in Clark County, Ohio, to write to, and over 14,000 did so.

Some Americans wrote back to the Guardian with their opinions of the whole idea. Here are some brief excerpts

Go here for lengthier excerpts. (25-Oct-04) Permanent Link
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UN report points to a surge in use of robots for work and home

In Japan's auto manufacturing plants, there is already one robot for each ten human employees.

That's just one of the findings of the report World Robotics 2004, by the United Nations Economic Commission for Europe (UNECE).

Japan's auto industry has been leading the way in the use of robots, but today robots are being used in numerous industries throughout the world. In 2003, robot use increased by 28% in North America and 25% in Japan. The European Union's use is growing far less quickly, increasing by only 4% in 2003. (Although political aspects are not addressed by the report, this appears to me to be an ominous sign that Europe's industrial capabilities will be falling behind North America and Asia for years to come.) Altogether, there are over a million industrial robots hard at work worldwide.

Robots are rapidly improving in performance and coming down in price, just as desktop computers have been doing for over twenty years. And just as desktop computers have eliminated large categories of desk jobs, starting in the 1980s, we can expect to see automated robots eliminate large categories of labor-based jobs, especially manufacturing jobs.

The report does not discuss the issue of increasing intelligence of computers, that we discussed in conjunction with the release of the movie I, Robot. Supercomputers will be as intelligent as human beings by 2010 or so, and autonomous super-intelligent desktop or mobile computers will be surging in the 2020s, and will take over a variety of jobs: a computer plumber, a computer nursemaid, a computer soldier.

However, the report highlights a point that I hadn't considered: That even without super-intelligence, autonomous robots will be taking over many human tasks by 2007, far earlier than the 2020s dates that I estimated. In the home, robots are just getting started with tasks like automated vacuum cleaning and lawn mowing. Before 2010, we can expect to see robots that aid the handicapped, clean hazardous waste sites, and, of course, prosecute war.

The following table, abstracted from the report, lists the major categories of professional and domestic robots that installed in each category, today and in 2007. If a field is blank, it means that the UN report didn't provide data.

2007 isn't very far off. If these projections hold, then we can expect a real explosion of these devices into the 2010s, for many more categories of work.

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(22-Oct-04) Permanent Link
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Iran moves forward with developing nuclear weapons technology

Iran has indicated that it won't budge on its plans to develop nuclear enrichment technology, which can be used for nuclear weapons development. However, Iran insists that it's only for peaceful power generation, a claim that many find dubious.

Early this month, Iran announced a new missile capability which, together with the nuclear capability it's developing, will allow it to deliver a nuclear weapon to the soil of its arch enemy, Israel.

For the last year, the Europeans have been trying to use multilateral negotiations and incentives to convince Iran to abandon its nuclear enrichment program. The political subtext is that the Europeans would show how things should be done, in contrast America's handling of Iraq through invasion.

Europe has offered a last chance incentive: the Europeans have offered Iran free nuclear technology for power generation, if only Iran agrees not to go ahead with nuclear enrichment.

Iran has said it's studying the proposal, but has also said it won't give up nuclear enrichment development.

If Iran rejects the European proposal, as expected, then a confrontation will develop in the United Nations, and the Security Council will subject Iran to the horror of threatened economic sanctions. (Sorry for the sarcasm.)

Iran is an interesting dichotomy. The ruling mullahs are fundamentalist Islamists, while most of the people are secular Muslims. Iran, like Iraq, is in a "generational awakening" period, and opposes many of the mullahs' policies. A couple of years ago there were even large pro-American rallies in the streets of Tehran, though the Iraq war pretty much ended those. And despite the peoples' distrust of the mullahs, there is still very strong popular support of Iran's right to have nuclear weapons. "Why should the US, Britain and Israel all have nuclear weapons and not us?" asks one student?

So a potent confrontation appears to be in the works, and we're not referring to the UN's economic sanctions.

For the last few weeks, Israel has been very quiet about Iran. When we last heard, Israel was insisting it would defend itself, and Israeli Prime Minister was saying that Iran will reach the "point of no return" in its nuclear weapons program by November.

This might possibly mean that Israel will take some unilateral action next month, presumably after the American election. We'll be keeping our eyes on the situation. (22-Oct-04) Permanent Link
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Economists increasingly skeptical about Fed Chairman Alan Greenspan

"Greenspan's modus operandi now is always to play down problems," said Stephen Roach at Morgan Stanley.

"Greenspan's trying to soften fears," says Josh Stiles, a bond strategist with IDEA Global in New York, adding, "There just doesn't seem to be that much that worries him."

As we wrote yesterday, Greenspan's colleague, Fed Governor Ben Bernanke has been saying repeatedly these last few months that the Fed will say anything it wants, even misleading things, to influence the economy,

We can feel pretty certain that's what was happening on Tuesday, and that Greenspan doesn't believe what he was saying.

The question is this: Given the bizarre, crazy things that Greenspan and Bernanke have been saying, just how much of a state of denial are they in? Are they completely oblivious to what's going on?

I wouldn't be asking this question if it weren't for the fact that I've studied what happened in 1929. The bright economists, financiers and bankers of that day were totally duped. They had no idea what was coming, and even after the crash occurred, they thought it was temporary. It took them three months just to figure out what was happening. And then there was a second crash in 1937. The economy didn't fully recover until around 1950.

From the point of view of Generational Dynamics, I've been predicting since 2002 that we're entering a new 1930s style Great Depression, and that stocks will fall 50% by the 2006-07 timeframe. I see no reason to change that prediction.

Consumer Price Index (CPI) shows modest growth

Meanwhile, inflation has continued to be modest, though higher than in the past. The Consumer Price Index for September grew only .2%, and the "core index," which excludes food and energy items, increased 0.3%. These increases are larger than those of the preceding three months, but still far lower than the much higher rates that would be expected from the near-zero interest rates of the last couple of years, and the over-$50 per barrel oil prices.

The following table shows the values of the PPI (Producer Price Index) and CPI for each month so far in 2004:

                        Changes from preceding month    
                     Jan. Feb. Mar. Apr.  May June July  Aug Sept
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1   .1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1   .2
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----

As we've said before, Generational Dynamics predicts that we're in a deflationary period, and that prices will fall by about 30% by 2010.

Private foreign investments drop sharply

In a surprise, private investments in America fell sharply in August.

The fall was dramatic -- - to $37.4 billion in August from $72.9 billion in July. Asian central banks made up the difference, saving the dollar currency from disaster.

Maybe this was a one-month blip, but if it continues then it could be the trigger for a serious problem. America's level of public debt is astronomically high, and it's being supported by foreign investors. If those investments fall off, then the American economy will fall sharply, generating a domino effect that will be felt throughout Asia and Europe. (21-Oct-04) Permanent Link
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Fed Chairman Greenspan uses circular reasoning to defend economy

In an extremely bizarre statement to a bankers' association on Tuesday, Federal Reserve Chairman Alan Greenspan said that yes, household debt (especially credit card debt) is at historically high levels compared to disposable income, and yes, housing prices have experienced "an exceptional run-up."

But hey, folks, it doesn't matter. It's OK. It's fine. Here's why:

In other words, high household debt is OK because of high home prices; and high home prices are OK because they provide people with cash to pay household debt -- although not enough cash to reduce household debt below historic levels. It's a remarkably bizarre form of circular reasoning.

Greenspan did concede that there are "concerns":

"To be sure, some households are stretched to their limits. The persistently elevated bankruptcy rate remains a concern, as it indicates pockets of distress in the household sector. But the vast majority appear able to calibrate their borrowing and spending to minimize financial difficulties. Thus, short of a significant fall in overall household income or in home prices, debt servicing is unlikely to become destabilizing."

In other words, high household debt and high housing prices are both OK as long as they both remain high, and neither one of them falls.

But that's what a bubble is.

In a stock market bubble, like the 1920s bubble or the 1990s bubble, you could say that stock A isn't overpriced, because stock B is also overpriced; and stock B isn't overpriced, because stock A is also overpriced. And both stocks are OK as long as neither one of them falls.

And that's what Greenspan is saying now. High household debt is OK because of home prices are high, and high home prices are OK, because of household debt is high.

You know, dear reader, if you're like me then you used to listen carefully to everything that Alan Greenspan said because he was highly credible, presumably without any partisan political motivations to affect his pronouncements. At least, that's what I used to think until a few months ago.

But in recent months, I've been harshly criticizing statements by a Greenspan colleague, Fed Governer Ben Bernanke, for saying, in effect, that it's Fed jawboning rather than fundamentals that have the greatest effect on the stock market.

A couple of weeks ago, I criticized Fed Governor Ben Bernanke for saying that he believes that stock and bond prices are determined almost exclusively by Fed policy and Fed verbal statements. The Fed is ignoring fundamentals, such as astronomically high public debt, astronomically high stock valuations, and falling inflation rates.

Last month, I harshly criticized Bernanke for saying, in effect, that Fed jawboning, even misleading statements, are the major drivers for the economy rather than fundamentals.

Now, when Bernanke says things like this over and over, we have to get the message: That Greenspan's statement may or may not reflect the Fed view of the state of the economy. Bernanke has clearly and unambiguously said that Greenspan's statements are designed to influence the economy, not to credibly describe the state of the economy.

This is a big difference. Bernanke has been quite unequivocal that, within limits, the Fed is permitted to issue misleading statements to the public in order to influence the public. This is not what we normally mean by "partisan political" statements, but there's not much difference.

So, based on Bernanke's repeated statement, we must conclude that Greenspan's speech yesterday may well have been purposely misleading.

So when we're talking about historically high household debt and surging real estate prices, we're left to our own devices to determine whether the situation is serious or not.

So, we can only go back to fundamentals.

If you want to find out whether you're in a stock market bubble, you can't compare one stock price to another; you have to compare stock prices to historical stock prices using standard historical measures -- price/earnings ratios. And price/earnings ratios show that stock prices today are overpriced by 100%.

Similarly, you have to compare housing prices today to historical housing prices, and you find that real estate is in an overpriced bubble all over the world, and that housing prices are beginning to cool down after a year of record increases. With household debut, you find that public debt is at historic highs.

I'm well aware that many readers of this web site don't fully agree with all the economic concerns I've raised. But whether you do or not, you should be aware that there is something very weird going on over at the Fed.

As the weeks go by, and we read more bizarre statements by Bernanke, Greenspan and other Fed governors, we should all be getting a lot more concerned about what's happening. (20-Oct-04) Permanent Link
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"The Red Sox will NEVER win another World Series"

My son Jason said that last night out of frustration, as the Yankees pulled ahead by a score of 4-2.

This led to a discussion of the following question: Just how long will the sport of baseball continue to exist?

The Red Sox haven't won the World Series since 1918, 86 years ago. If professional baseball is going to exist only another 10 or 20 years, then yes, it's quite literally possible that the Red Sox will NEVER win another World Series.

With the huge amounts of biotechnology research going on today, it won't be long before it will be possible to "augment" an individual human being to make him stronger, faster, and sharper. That means that we'll be "augmenting" professional athletes within 10-15 years. This will throw a question mark around the viability of baseball as a professional sport, and also around all other professional sports, including the Olympics.

Think of how many headaches we have today dealing with athletes who may or may not be on steroids, and multiply those headaches by a million. At some point, the professional sports become more trouble than their worth.

My son Jason is quite familiar with this kind of discussion. He's majoring and doing research in biotechnology as a student at Georgia Tech. He's been working on a biotechnology research project to provide new heart tissue to fix damaged hearts, and we're well within sight of the kinds of "athlete augmentation" technology that I've been describing.

Incidentally, the Red Sox finally did beat the Yankees last night. (19-Oct-04) Permanent Link
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Five African nations oppose intervention in Darfur

Many months ago, I said that the United Nations would never stop the Darfur genocide, which is a force of nature. The Darfur genocide began receiving worldwide attention just three months after a big ceremony on the tenth anniversary of the Rwanda genocide, during which Kofi Annan said "never again" would the world permit something like that again.

Now, after months of name-calling, meetings, visits, discussions, criticisms, condemnations, and so forth, by the United States, United Nations, European Union and African Union, little has been done. There are well over a million people who have been forced from their homes, and many of them will die from cold or starvation this winter.

A crisis war is a force of nature, and can no more be stopped by the United Nations than a raging typhoon can be stopped.

This fact was emphasized yesterday when a meeting of five African nations -- Sudan, Libya, Sudan, Egypt, Nigeria and Chad -- ended with a statement rejecting "foreign intervention" to stop the genocide.

There are 20-some wars going on in the world today, but there's only one crisis war in progress right now: The Darfur genocide. There's no reason to believe that anything is going to stop it. (19-Oct-04) Permanent Link
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Outsourcing of US jobs to India is accelerating

Outsourcing should accelerate even more after the November 2 Presidential election, according to India's top outsourcing firms, who have already been showing record profits.

Many American firms have been outsourcing numerous categories of jobs to India, where salaries are just 20% of American salaries. Even companies that would prefer to continue hiring Americans have been forced to hire Indians instead, in order to remain competitive.

However, outsourcing has been made an election issue by John Kerry, and this has inhibited some outsourcing of jobs, but that's expected to end when the election is over, according to analysts.

These developments portend an even more difficult American labor market next year, and they also shed light on a mystery.

From the point of view of Generational Dynamics, the American economy is entering a new 1930s style Great Depression. In fact, with current stocks overpriced by a factor of 2 (as measured by standard price/earnings ratios), why hasn't there been a sharp fall in stock prices?

It's beginning to look more and more that a wide variety of plans and expectations around the world are awaiting the election.

For example, as we've recently written, there is a widespread expectation that American forces will be withdrawn from Iraq in 2005, even though both Bush and Kerry have expressly denied planning this, and even though such a withdrawal would be extremely dangerous to Israel.

Now we see by example that many financial decisions are also being postponed.

In today's campaigning hothouse, it's almost impossible to give a weather report without someone making a political accusation. Any company that announces good news or bad news, especially about things like layoffs or outsourcing, risks political accusations and possible retribution. For that reason, many decisions are simply being postponed until after the election.

If there are many negative decisions that have been postponed until 2005, this might mean that the major stock market fall predicted by Generational Dynamics may also wait until sometime in 2005. (18-Oct-04) Permanent Link
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The Producer Price Index continued its near-deflationary path in September

The PPI, which measures wholesale prices, increased by 0.1% in September.

The "core index," which excludes food and energy items, increased by 0.3%. Both figures had fallen in August.

For months, analysts have been predicting increasing inflation, based on economic models that were developed since the 1970s. However, longer term models are required to understand why inflation has been falling recently, despite very low interest rates and very high oil prices.

The following table shows the values of the PPI and CPI for each month so far in 2004:

                        Changes from preceding month    
                     Jan. Feb. Mar. Apr.  May June July  Aug Sept
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1   .1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----

The September Consumer Price Index (retail prices) will be available later this month.

As we've previously said, if you look at long-term trends instead of just a few months, we're actually in a long-term deflationary period. We actually expect prices to fall by 30% in the next few years. (18-Oct-04) Permanent Link
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Violence is escalating in Haiti

An activist Roman Catholic priest has been jailed for inciting violence in Haiti, where everyone seems to agree that the level of violence is continually increasing.

The priest, Rev. Gerard Jean-Juste, is supporting the return of Jean-Bertrand Aristide from the exile he was forced into last February. The two sides in the intensifying violence are nominally "pro-Aristide" and "anti-Aristide."

Poor neighborhood in Haiti
Poor neighborhood in Haiti

As we pointed out in our analysis of the Haiti situation several months ago, Haiti is suffering from extreme poverty, because of the "Malthus effect" that strikes every nation: The population grows faster than the food supply, forcing more and more people into poverty each day.

There is now only one region of the world which is in a full-scale genocidal crisis war -- the Darfur region of Sudan in Africa. As we predicted, the United Nations has been unable to do anything to stem the genocide, which is expected to get worse as winter approaches. A genocidal crisis is like a force of nature, and once it gathers enough energy it can't be stopped any more than a raging typhoon can be stopped.

From the point of view of Generational Dynamics, Haiti is also deep into a generational crisis period. If the level of violence continues to increase, then it will spiral out of control into a full scale genocidal crisis war. This could happen tomorrow, next week, next year, or in a couple of years, but it's going to happen before long.

The interesting and every-present contrast is with Iraq, which is not spiraling out of control, despite numerous wishful predictions from journalists, pundits and high-priced analysts for almost two years. As we've repeatedly said, Iraq is in a "generational awakening" period, during which a spiral out of control into a massive civil war or anti-American uprising is impossible.

So we have three different regions:

(14-Oct-04) Permanent Link
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40 days after the massacre, it's a time of decision for Beslan

The residents of Beslan, North Ossetia, are choosing between revenge and getting on with their lives today.

On September 1-3, a terrorist massacre occurred at a school in Beslan, North Ossetia, killed more than 340 people, almost half of them children.

The Russian Orthodox religion calls for 40 days of mourning and prayer for the souls of the dead. The 40 days have ended. The people of Beslan are taking off their shawls and shaving their beards.

Troubled areas in Caucasus region - including North Ossetia, Ingushetia and Chechnya
Troubled areas in Caucasus region - including North Ossetia, Ingushetia and Chechnya

So what happens now?

Interviews with Beslan residents yesterday indicate that feelings are mixed. Some want to try to just get on with their lives -- though that's not particularly easy after such a traumatic event -- and others are talking about revenge against the neighboring Muslim provinces of Ingushetia and Chechnya.

I've said repeatedly the past few months that the Caucusus is the most danger region on earth, mainly because it's deeper into a "generational crisis" period than other regions. Furthermore the Caucusis has been the site of numerous major ethnic and religious wars for centuries. Generational Dynamics predicts another major war is to come, and we can see how the that war seems to approach closer every day.

Generational Dynamics predicts that the Caucusus region will have a major crisis war in the next few years with almost 100% certainty. The fact that this region is deeper into a crisis period means that the people are more ready, willing and able to wage war. That's why Russian President Vladimir Putin is calling for calm.

This situation is not going to go away. There is no way that the massacre of so many children and their parents is going to be forgotten. Even if revenge does not occur right away, this is one more issue that will inflame the region for years to come. (14-Oct-04) Permanent Link
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Fallujans are getting angry with insurgents

Just a few hours after my posting that al-Zarqawi's most formidable enemy may be the 40-50 year old mothers of Fallujah, the Washington Post has published a story that the citizens of Fallujah are turning against the foreign-born Arabs led by Abu Musab al-Zarqawi.

In my posting earlier today, I said that the al-Sadr's agreement to disarm may trigger the people of Fallujah to turn against al-Zarqawi, and that's exactly what appears to be happening.

In fact, we're finally seeing what I predicted over a year ago, when I wrote that terrorist suicide bombings in Iraq may backfire against terrorists.

What's happening in Iraq is completely predictable from Generational Dynamics. The people of Iraq are in a "generational awakening" period, which means they are not in the mood for war.

Generational Dynamics cannot predict the actions of any individual or any small group of individuals, but it can predict the behaviors and actions of large masses of people. Thus, there's no way to predict what Abu Musab al-Zarqawi or his small group of foreign-born Arab jihadists may do, but we can predict with almost 100% certainty that the Iraqi people do not want to be in the middle of this.

The Arabs and the Iraqis are at different times within the generational cycle. Palestine and Jordan are in a "generational crisis" period which means, to put it bluntly, that they're ready, willing and able to go to war, and that they'll pursue any such war with genocidal fury.

But Iraq is in a "generational awakening" period. They had their genocidal fury in the 1980s Iran/Iraq war, and they won't be ready for it again until several decades and three more generations pass.

In the meantime, the war isn't over. Abu Musab al-Zarqawi is extremely wealthy, and extremely resourceful, and he'll pursue the war in any way he can, just like Osama bin Laden. He'll have millions of Arabs cheering him on, but the people of Iraq will not have their heart in it. (13-Oct-04) Permanent Link
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Al-Sadr's Shi'ite militia fighters turn in their weapons

The war in Iraq took a significant turn this week when the Shi'ite militias agreed to disarm, as Moqtada al-Sadr decided to enter the political field in anticipation of January's Iraqi elections.

It was just two months ago that most of the media was talking about an imminent mass anti-American Shi'ite uprising in Iraq, perhaps spiraling out of control to a full-scale civil war.

I wrote at the time that it was a mop-up operation, not a civil war, and Surprise! The mop-up operation seems to be coming to an end.

Indeed, I've been saying for almost two years that a civil war or uprising in Iraq was impossible, even though journalists, pundits and high-priced analysts have been emitting hysterical warnings for almost that long.

And the way I knew that a massive civil war or uprising was impossible is because I've studied history. Only one generation has passed since the genocidal Iran/Iraq crisis war of the 1980s. In my study of Generational Dynamics, I've examined well over 100 events throughout history, and there has never been a new crisis war less than 40 years after the end of the preceding crisis war, and rarely in under 50 years. Based on those figures, I knew and know that a new crisis civil war or uprising in Iraq now is impossible.

Iraq is in a "generational awakening" period, and al-Sadr's move into politics is very typical of awakening periods. During awakening periods, there is always a turbulent political battle between the people in the hero generation that fought during the crisis war and their children, who have no personal memory of the war. The battle between the young Moqueta al-Sadr and the elder Shi'ite Ayatollah Ali al-Sistani is what this political move is all about. And although the military battle may be over, the political opposition to the American forces will continue or grow stronger.

The greater significance of the disarmament is that there's a good chance that it will convince the Sunni insurgents in Fallujah to do the same, since otherwise the Shi'ites will gain a political advantage in the January elections.

This will not sit well with Jordanian terrorist leader Abu Musab al-Zarqawi, whose goal is to destabilize Iraq and trigger a "clash of civilizations" war. Al-Zarqawi is well funded and has plenty of money to throw around in Fallujah, and he undoubtedly has a cadre of loyal followers from Jordan, Palestine and Saudi Arabia who are willing to die for his cause.

But Generational Dynamics tells us he has a problem motivating the local Iraqi population to follow his leadership. The fact that only one generation has passed since the genocidal Iran/Iraq war of the 1980s has real significance on the ground. Every 40-60 year old mother living in Fallujah today lost a father, a brother, a husband or a son in the Iran/Iraq war, These mothers are telling their Iraqi sons, "Don't listen to al-Zarqawi, just because he has money. He'll just get you killed."

So America has its problems in Iraq, but al-Zarqawi may have worse problems, as shown by the disarmament of al-Sadr's militias. And if we think that al-Zarqawi's worst enemy is the American-led coalition forces, we have to remember that he has an even greater, more formidable enemy: Those 40-50 year old Fallujah mothers who see through al-Zarqawi and who are telling their sons not to have anything to do with him. (13-Oct-04) Permanent Link
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Kerry's "Terrorists as mere nuisances" remark

Let's assume that Kerry's remarks were merely a slip of the tongue, which they may well have been. What I want to consider here is the question of what impression they make on foreign populations, including foreign terrorists.

Let's begin by quoting in full the two relevant paragraphs from the article " Kerry's Undeclared War" by Matt Bai in Sunday's New York Times Magazine:

For our purposes, the second paragraph is even more important than the first, because it focuses not on what Kerry said, but on what Kerry is perceived to have said.

From the point of view of Generational Dynamics, whatever happens in Iraq or in the coming "clash of civilizations" world war is already decided, based on events and trends that have been occurring for decades. Nothing that happens in the short term now, including the choice of American president, is going to affect what's going on in the Caucasus, in Taiwan, in Pakistan, or in Palestine.

But there appears to be a powerful worldwide dynamic going on, based on the belief or perception, encouraged by both Bush and Kerry, that Bush and Kerry have entirely different world views.

The difference between reality and perception here is truly astonishing. Kerry has never put forth any plan that differs in any way that differs from anything that Bush is doing or planning. From the point of view of reality, there is literally no difference between the two candidates.

But the difference in perception is enormous. There is a "feeling," not only among Kerry's supporters in America, but in those who favor Kerry around the world, that a Kerry presidency would bring enormous change.

What kind of change? As I research events and opinions around the world, I see it appear in various ways. For example, one Japanese commentator says that the Iraqi "Coalition of the willing" is going to dissolve under a Kerry presidency, and even under a continuing Bush presidency, and that therefore a quick withdrawal from Iraq is going to happen early in 2005.

Another example is an Israeli opinion piece that says that Palestinians expect Kerry to be harsher with the Israelis than Bush is, because of statements made by Kerry to that effect in the past.

These examples, including the "nuisance" example, illustrate a larger pattern that seems clear: That many people in the world expect a Kerry victory to mark a major change, and even a Bush victory would result in some changes. Like a person whose giddy belief is that his personal problems would be solved if he quit his job, and then finds that his personal problems are the same when he quits his job, many people in the world seem to have a giddy belief that terrorism will somehow get "better" in 2005.

There's no real reason to believe that much of substance will change. Kerry's policy toward Israel and Palestine is certain to be a continuation of Bush's, as is his policy toward Taiwan and Iraq. These are decades old American policies.

Now, what happens in 2005 when the realization sets in that the giddy dreams of change will not be realized? That's a question we want to explore some more in the next few days. (12-Oct-04) Permanent Link
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"It's going to be the 1950s all over again"

Young women in droves are staying home to take care of the kids, according to a 60 Minutes report Sunday evening.

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"Could it really be that this generation of women, the first to achieve success without having to fight for it, is now walking away, willingly, and without regrets?" asks narrator Leslie Stahl.

Indeed it is. This is exactly what Generational Dynamics has been predicting. Women's behavior goes in generational cycles, varying between strong gender roles and weak gender roles.

Leslie Stahl interviewed a feminist professor, Linda Hirshman, who's been studying the issue. She surveyed high-powered couples who announced their weddings in the New York Times in 1996. 85% of those women were staying at home to take care of the kids, either full-time or part-time.

This is a remarkable swing of the pendulum, and is one of the most dramatic examples of how Generational Dynamics works.

America in the 1960s was in a "generational awakening" period, when individual rights are emphasized. These include "gender rights," and traditional gender roles are politically suppressed.

The same thing happened in the 1830s and continued through the 1850s until the Civil War, and then happened again in the 1890s and continued through the 1920s, until the Great Depression. In between those periods, and traditional male and female roles are emphasized.

Today, America is in a "generational crisis" period, when individual rights are sacrificed for the unity of the nation, and traditional gender roles are emphasized.

As I've previously written about the negative public reaction to Janet Jackson baring her breast at the Superbowl half-time show, the American public is expecting women to act more like women, and men to act more like men. And if 85% of high-powered women graduates are really staying at home to take care of the kids, then the 1950s really are back. (11-Oct-04) Permanent Link
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Do both Bush and Kerry lie on purpose in the debates?

That's the charge of Gloria Borger on CNN's Reliable Sources this morning. Here are some examples:

In other words, telling a lie during a debate has a positive value, because it calls attention to the subject being lied about, and forces the post-debate commentators to talk about the "mistake," thereby calling attention to the subject of the "mistake."

If you've been reading my commentary about the debates these last few days, you know that I don't think much of them. The debates are simply a repackaging of stump speeches, and cover only the past, never the future, They're completely vacuous.

Borger's comments provide additional support for this view, and add an even darker dimension to it.

Why is this important to this web site?

From the point of view of Generational Dynamics, the public is completely shocked and surprised when unexpected surprises occur, leading to crisis wars. Thus, the public was completely na´ve in the 1930s about the danger form Adolf Hitler, although after the war there was public fury that we "should have stopped Hitler in 1935 when we could."

Prior to the Civil War, the North and the South both completely underestimated the fury that was to come. According to one anecdote, the wealthy residents of Washington, DC, went out in carriages to view the early battles of the war as a kind of entertainment. By the time the war was over, it was by far the bloodiest war in American history.

Today we're seeing similar na´vetÚ on the part of the public.

Earlier today, I criticized Fed Governor Ben Bernanke for believing that stock and bond prices are determined almost exclusively by Fed policy and Fed verbal statements. The Fed is ignoring fundamentals, such as astronomically high public debt, astronomically high stock valuations, and falling inflation rates.

The same criticism applies to the public as a whole as regards the dangers around the world. In the 1960 Presidential election, the question of war between China and Taiwan was a major election issue, while today, when war over Taiwan is becoming increasingly likely, I doubt that nine out of ten people in the public have even heard of Taiwan.

Similarly, the Caucasus region is the most dangerous region in the world today, but the public is blind to it. Secular violence is occurring daily in Pakistan and other locations, but it's barely reported.

That's why analyzing the debates is so instructive. The na´vetÚ and shallowness of the debate arguments is a reflection of the na´vetÚ and shallowness of Americans' understanding of the world as a whole, and even of politician's understanding of the world. (And there's no excuse for the politicians, since we actually pay them to keep track of this stuff.)

So, if there's another terrorist act on American soil, or if China attacks Taiwan, forcing America into the same war, or if Pakistan or the Caucasus spiral out of control, triggering a regional war that we're forced into, then the politicians will be as surprised as anyone else is.

As famous American satirist Ambrose Bierce once said, "War is God's way of teaching Americans geography." (10-Oct-04) Permanent Link
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The Fed congratulates itself - again - on its jawboning policy

The Fed appears to be indicating a slowdown on interest rate increases in a lengthy self-congratulatory analysis of the Fed's jawboning policy.

Federal Reserve Governor Ben S. Bernanke emphasized that the Fed has been following a gradualist approach in raising interest rates.

His emphasis has led some analysts to read between the lines and conclude that the Fed plans to slow down its program to increase interest rates.

This speculation increased on Friday, after the September jobs report was much poorer than had been expected.

However, today we want to focus on the main thrust of Bernanke's luncheon speech on Thursday to the Japan Society.

Bernanke talked at length about the Fed's jawboning policy -- providing guidance on the Fed's view of the economy, so that investors will be able to make longer range plans, based on a reasonable expectation of what the Fed will do in the future.

So when the Fed said earlier this year that it would proceed with interest rate increases "at a pace that is likely to be measured," investors could reasonably conclude that interest rate increases will be gradual.

Now, I have no objection to more information from the Fed. I think it's great. What bothers me is what bothered me last month when I criticized Bernanke because he seemed to be saying that verbal statements from the Fed can affect stock prices in the long run.

In Thursday's speech, Bernanke didn't talk about stock prices, but he did talk about falling interest rates on 10 year notes that are occurring at the same time that interest rates are rising on short term notes.

According to Bernanke, the reason that interest rates are falling on ten year notes is as follows:

Bernanke has a good point here when he relates inflation to long-term interest rates, and it's a point I should have discussed when I wrote last month that yield curves are flattening, indicating a problem.

It's true that interest rates in general are related to inflation, and that if inflation is under control, then interest rates are likely to be lower.

But the problem I have with all this is that it completely ignores fundamentals. When I last criticized Bernanke, I pointed this same thing out. Bernanke apparently believes that the Fed can use verbal statements, even misleading verbal statements, to affect the economy -- stock prices, interest rates (bond prices), and so forth -- in the long run!

If you want a simple demonstration that verbal statements by the Fed don't work, take a look at Alan Greenspan's 1996 statement complaining that the high stock prices were a sign of "irrational exuberance." This statement got a great deal of media play, but it didn't stop na´ve investors from bidding up the prices stock to astronomically high levels, which only fell after the Nasdaq crash in 2000.

What Bernanke doesn't even discuss is the kinds of fundamentals that I described in my piece on flattening yield curves: that public debt is at astronomically high levels, higher than even in the 1930s, that stock valuations (as measured by price/earnings ratios) are at historic highs, worse than even in the 1930s, and that the common measures of inflation (the Producer Price Index (PPI) and Consumer Price Index (CPI)) are showing that the economy is in a long-term deflationary period, not an inflationary period.

In Bernanke's strange world, fundamentals like these are completely irrelevant. Nothing matters except what the Fed says and does.

When Bernanke gives historical examples (in this speech, and in a speech that he gave on Friday on another subject,) his historical examples never go back more than a few decades.

Once again, we see why Generational Dynamics can provide the accurate forecasts that it does. Generational Dynamics says that today we're in another period like the 1930s, but even professionals like Bernanke can't go to the trouble to make historical comparisons to the 1930s, because they have no personal memory of anything that happened before they were born, and tend to discount it all.

I'm glad that the Fed is providing more information, but I object to the vanity, conceit and self-deception that Bernanke and the other Fed Governors exhibit when they claim that verbal messages can affect long-term interest rates. More information from the Fed means less volatility in short-term rates, resulting in less volatility in derivative values, including stock prices and the value of the dollar, in the short term.

But the Fed's verbal statements provide at most six months of guidance beyond what the market would know if the Fed provided no verbal guidance whatsoever. In the end, it's necessary to look at the fundamentals, and that's what the Fed and most other analysts are avoiding.

Finally, here's an aside: On Friday, a Wall Street Journal editorial criticizes Bernanke's speech, and the Fed in general, for not raising interest rates more quickly. The editorial blames the Fed for high oil prices and says that "the Fed may lose its focus on its core mission, which is supposed to be maintaining price stability."

Apparently the people who write WSJ's editorials don't bother to read the paper's own news pages. Oil prices are at a historic high, but that's because of China's increasing demand for oil, not because of anything the Fed is doing. And anyway, we're in a deflationary, not an inflationary, period, as the news about the PPI and CPI for the last few months has shown. (10-Oct-04) Permanent Link
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I just saw Saturday Night Live's parody of Friday's Presidential debate.

In the televised parody, Bush and Kerry said some really stupid, moronic things, so stupid and moronic that any American would be embarassed to hear their Presidential candidates say them out loud.

The only trouble is: They're exactly the same kinds of things that the real Bush and Kerry said on Friday. (See my comments following the actual debate.) (10-Oct-04) Permanent Link
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Australian Prime Minister John Howard wins reelection battle decisively

This election has been closely watched because of Howard's strong support of George Bush's Iraq war policy.

As of Thursday, polls shows Howard with a small margin, but with a large number of undecided voters. Saturday's decisive election results appear to indicate that the undecided voters tended to favor Howard.

The Australian election has been watched as an early indicator of the American election in November, and a possible English election next year. In fact, George Bush, England's Tony Blair, and Australia's John Howard were the three major leaders in launching the Iraq war last year, and Opposition Labor Party leader Mark Latham has been highly critical of Australia's participation in the Iraq war, and indicated that if he won he would pull Australian troops out of Iraq.

From the point of view of Generational Dynamics, this is the expected result. America, England and Australian are all in a "generational crisis" period. During such a period, a nation's citizens tend to reject bitter political battles and unite around a leader that they trust, rather than risk someone new.

We saw this during America's last generational crisis period, when Franklin Roosevelt was elected President for a historic four terms.

Because we're in a generational crisis period, history favors the incumbent. The same reasoning applies to England and Australia, for similar reasons.

However, there is one big difference between Australia and America: Australia is doing better economically at the current time. The September jobs report in America was much poorer than expected, George Bush could still be defeated because of the economy. (9-Oct-04) Permanent Link
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In second debate, Bush and Kerry simply repeated what they said in the first debate

You know how you have an argument, and then the next day think of the zinger that you should have used?

That's what happened last night. Both George Bush and John Kerry have had a week to think over what they should have said in the last debate, and they used those lines last night. But there was absolutely no new content.

In the past couple of days we've had massive terrorist actions in Pakistan and Egypt, but those weren't mentioned last night, even though the Egypt action opens up a new front between the terrorists and Israel.

There was only one moment when my ears perked up, because John Kerry said he was going to describe what he would do differently in Iraq. But all he said was that he'd get support from other countries, which he's said before, and it's a silly statement anyway because he won't have any more success with other countries than Bush has had.

So nothing, absolutely nothing, was said last night. All that mattered is how the two candidates looked, which is somewhat the way we choose Miss America.

Generational Dynamics predicts that whatever is going to happen in Iraq and the Mideast will happen the same way, no matter who's elected this November. Both candidates have put forth policies that are virtually identical, which supports the Generational Dynamics prediction. (9-Oct-04) Permanent Link
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Kenyan woman environmental activist wins Nobel Peace Prize

What does planting 30 million trees have to do with world peace?

Nobel Peace Prize winner Wangari Maathai in Nairobi, Oct. 8, 2004. <font size=-2>(Source: Reuters)</font>
Nobel Peace Prize winner Wangari Maathai in Nairobi, Oct. 8, 2004. (Source: Reuters)

That's the question a lot of people are asking, now that the winner of the prestigious Nobel Peace Prize is a woman from Kenya, an environmental activist.

Maathi's principal achievement was that she founded The Green Belt Movement, which has since been credited with planting 30 million trees across Africa.

Now that's a wonderful accomplishment, but how is it related to promoting world peace?

The problem is that if you think about it, almost every political figure in the world would have been controversial. Thus, if George Bush were selected, the committee would be called pro-America, and if French President Jacques Chirac were selected, then the committee would be called anti-American.

One puzzled Norwegian researcher, Espen Barth Eide, is quoted as saying, "There was no lack of traditional candidates, like the International Atomic Energy Agency."

But in fact, the International Atomic Energy Agency wouldn't do at all. After all, the IAEA has recently condemned Iran for continuing to develop a nuclear weapon capability. To the pro-Iranian community wouldn't be happy with the IAEA as a Nobel Peace Prize winner.

So, Wangari Maathai: A politically correct black African woman, and a tree planter. Who could object to that? (8-Oct-04) Permanent Link
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September jobs report much poorer than expected

George Bush will face harsh attacks on the employment issue at this evening's debate as a result of a Bureau of Labor Statistics (BLS) report that the American economy created only 96,000 jobs in September.

The figure is substantially below the amount that economists had predicted. Economists had been forecasting an increase of 128,000 to 144,000. At the beginning of 2004, economists had been predicting that the economy would be creating several hundred thousand jobs each month by now.

Last month, I wrote that the August jobs report, at 144,000 new jobs, was much more positive than expected, helping Bush as the Republican convention ended.

Today's report contains even more bad news, however: The BLS has revised the August figures down to 128,000.

This increases the danger that Bush will be "Hooverized," by being compared to Herbert Hoover, who lost his fight for reelection to Franklin Roosevelt in 1932, mainly because of the jobs issue.

As I've been saying since 2002, Generational Dynamics predicts that the economy is entering a new 1930s style "great depression," and that stocks will fall by 50% or more in the next two or three years.

The reason is the following: The stock market bubble of the 1990s occurred at exactly the time that the generation of people who lived through the stock market bubble of the 1920s and the following Great Depression all disappear (retired or died), all at about the same time. Today, we haven't yet "paid the price" of the 1990s stock market bubble, as can easily be seen by the fact that stocks today are overvalued by 100% by ordinary price/earnings evaluations.

Unemployment since 2001 <font size=-2>(Source: WSJ)</font>
Unemployment since 2001 (Source: WSJ)

After the Nasdaq crash in 2000, the economy didn't follow the path of the economy after 1929 because the Fed has flooded the economy with money by keeping short-term interest rates close to zero. This allowed people and businesses to avoid bankruptcy by borrowing low-cost money, but the result is that public debt has now increased to the highest levels since the 1930s.

Generational Dynamics predicts that the economists who are predicting a surge in job growth will continue to be as wrong as they've been in the last two years, and that unemployment will reach historically high levels within the next two or three years. (8-Oct-04) Permanent Link
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Massive terrorist bombings yesterday in Pakistan, Iraq and Egypt cause hundreds of casualties across the Mideast in a single day

The Pakistan government has ordered a ban on all public gatherings, following a car bombing in Multan, Pakistan, that killed 40 people and injured hundreds. The bomb went off near a crowd of 3,000 Sunni Muslims who had congregated for a memorial service.

The bombing of the Sunni congregation was evidently in retaliation for a bombing last week of a Shi'ite temple in Sialkot that killed 31, and caused massive riots and looting.

The ban on all public gatherings was ordered evidently to prevent further rounds in the cycle of violence. No indication was given for how long the ban would last.

From the point of view of Generational Dynamics, this follows a familiar pattern which we've seen recently in Russia, France, Israel, and America -- the willingness of a nation to sacrifice individual rights in favor of unifying the nation for its own survival.

Pakistani officials on Thursday were saying things like, "Terrorists want to damage the integrity of Pakistan through such acts."

These kinds of words -- saying that terrorist acts are attacks on the nation rather than attacks on individuals -- are the same sorts of things we've heard from Russian President Putin and American President Bush. It's this kind of language -- a call for national unity against a common enemy -- that is one of the signals that a nation has entered a generational crisis period.

This was also a day when insurgents fired two rockets into a Baghdad hotel occupied by journalists and foreign contractors. No deaths were reported.

But the day couldn't end without more bombings. A massive truck bomb explosion at an Egyptian Red Sea resort was quickly followed by coordinated bombings at two more resorts.

Egypt has long been a target of Islamic extremists. In 1981, Egyptian President Anwar Sadat was murdered by Islamic extremists in retaliation for having signed a peace agreement with Israel in 1979. Today, Islamic extremists remain very critical of Egypt for having relative cordial relations with Israel and America.

However, the Egyptian bombings appear to be directed against Israel, rather than Egypt. The targets were hotels on Egyptian soil, but it was clear that the bombs were directed against the hundreds of Israelis who were guests of the hotels. There were dozens of deaths and over 120 injuries.

Thus, we don't hear Egyptian officials saying anything like, "These are attacks against the nation of Egypt." Indeed, Egypt is apparently not yet in a generational crisis period, since its last crisis war was the Egyptian Revolution, 1948-1954, which ended only 50 years in the past.

As we wrote on September 11, terrorism is increasing significantly around the world. With multiple terrorist bombings all across the Mideast, October 7, 2004, has to be considered one of the worst days. (8-Oct-04) Permanent Link
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Top Israeli aide says that Israel has abandoned the American-sponsored 'Road Map to Peace'

The plan to create a Palestinian state has effectively been scuttled by Israeli President Ariel Sharon, according to senior adviser Dov Weisglass in an interview.

In the interview, which will appear in full on Friday, Weisglass says the following: "The significance of the disengagement plan is the freezing of the peace process. ... And when you freeze that process, you prevent the establishment of a Palestinian state, and you prevent a discussion on the refugees, the borders and Jerusalem. Effectively, this whole package called the Palestinian state, with all that it entails, has been removed indefinitely from our agenda. And all this with authority and permission. All with a presidential blessing and the ratification of both houses of Congress."

This statement has caused furious repercussions in Israel, where opposition Labor Party chairman Shimon Peres said, "He who seeks half-peace will bring half-war."

More significantly, it's also caused great consternation in Washington, which is now demanding an explanation. As the election approaches, the Bush administration is not desirous of seeing any Israeli rejection of its key Mideast plan, the "Roadmap to Peace." We can expect Sharon to fully disavow Weisglass' remarks.

From the point of view of Generational Dynamics, Weisglass is obviously telling the truth. I predicted on the day the 'Roadmap' was announced that it could not possibly succeed, and that there wouldn't be a Palestinian state, at least not without first having a major, genocidal war between the Jews and the Arabs, like the one that occurred in the late 1940s.

By this time, 1 1/2 years later, it's hard to believe that there's anyone left who's in such a state of denial that he believes that the Roadmap is working. Weisglass reminds us how much fun it is to see a politician tell the truth, and then to see how much trouble it causes. (7-Oct-04) Permanent Link
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Iran's plans to build nuclear capability likely to destabilize Mideast

The question everyone's asking: Will Israel preemptively attack Iran?

Iran's new missle can reach past Israel into Egypt, and past Turkey into southeastern Europe <font size=-2>(Source: BBC)</font>
Iran's new missle can reach past Israel into Egypt, and past Turkey into southeastern Europe (Source: BBC)

For months, Iran has been openly moving ahead with a nuclear enrichment program. At the same time, Iran just announced that it's improved its missile capability so that it's missiles can reach Israel.

Putting these two capabilities together means that Iran will soon be able to deliver a nuclear weapon to the soil of its arch enemy, Israel.

Iran has openly flouted the United Nations International Atomic Energy Agency (IAEA), which passed a resolution last month demanding that Iran freeze all enrichment activities. Iran has also defied demands by the United States and the European community to cease such activities.

Iran has even rebuffed a proposal by Presidential candidate John Kerry to supply them with nuclear fuel if they agreed to give up their own fuel-making capacity.

Iran foreign ministry spokesman Hamid Reza Asefi said on Sunday it would be "irrational" to accept the proposal. "We have the technology (to make nuclear fuel) and there is no need for us to beg from others," he said.

Iran itself claims that it's all for purely peaceful, legal purposes, but most of the rest of the world is very skeptical.

So what is Israel going to do about this? Prime Minister Ariel Sharon doesn't have a reputation for sitting by and letting threats of this sort develop unchallenged.

People with long memories will recall that in 1981, Israel preemptively bombed Saddam Hussein's nuclear plant near Baghdad. Israel received almost universal international condemnation for having done so, but since that time many critics have acknowledged that Israel was right to have done so. And who was Israel's minister of defense in 1981? Yes, Ariel Sharon.

If Israel is now going to take preemptive action against Iran's nuclear plants, then it may do so very quickly.

Giora Eiland, Israel's national security adviser, said last week that Iran will reach the "point of no return" in its nuclear weapons program by November. Presumably that means that if Israel waits until December, then it will be too late to stop Iran.

This happened shortly after Sharon himself said that Israel is "taking measures to defend itself" in the Iran situation.

However, many people doubt that Israel would be successful with a preemptive strike. Iran has built its nuclear capability with Israel's 1981 strike in mind, and has spread the capability throughout the country in places that Israel would be unlikely to know about.

But to conclude that therefore Israel dares not strike assumes that the Israelis don't have good intelligence in Iran. Maybe they do, maybe they don't, but if they do then we can read Sharon's message that Israel is "taking measures to defend itself" to mean that a preemptive strike will occur before December, probably after the November 2 American election.

Finally, let me finish up by discussing a technical point in Generational Dynamics.

This issue was raised by a reader several months ago in response to another comment about Iran's nuclear intentions. He said, "Correct me if I'm wrong, but aren't you yourself claiming that they don't want a major war? Are you wrong about that?"

He was referring to my frequent statements that only one generation has passed since the genocidal Iran-Iraq war of the 1980s, and so the people of neither Iran or Iraq want another war.

The fact is that the Iranian people do not want another war. In fact, the Iraqis and Iranians are less desirous of war than many others in the Mideast.

As a forecasting methodology, Generational Dynamics applies to the beliefs and behaviors of large masses of people, not to the actions of individuals or small groups of politicians. You can predict how large masses of people are going to think and act, but you can never predict what any particular individual is going to do. The actions that we're talking about -- building nuclear missiles and threatening Israel -- are decisions of a small group of Islamic mullahs. I doubt very much that the Iranian people are happy today that their rulers are destabilizing the region and raising the threat of a nuclear war. (7-Oct-04) Permanent Link
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Last night, another vacuous, backward-looking debate.

The VP candidates talked about the past for 90 minutes, and about the future for zero minutes.

John Edwards said that George Bush said that there was a connection between 9/11 and Iraq, even though he never did.

Dick Cheney said that John Kerry said he voted for the $87 billion before he voted against it, even though that was an inconsequential legislative tactic.

I watched the entire debate, and even managed to avoid falling asleep, but I can't think of a single forward-looking statement that either candidate made. Every single statement was some inconsequential statement about the past.

Here are some questions that were never discussed:

It's fine to spend time talking about the past, but can't we spend just a little bit of time talking about the future?

From the point of view of Generational Dynamics, this explains why major crisis wars happen in 70-90 year cycles. Once the generation of people who remember the last crisis war disappear (retire or die), the people in the new generations lack the ability to even to discuss the real issues. (6-Oct-04) Permanent Link
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UN Secretary General Kofi Annan criticizes Sudan for no progress stopping Darfur genocide

I haven't been writing about Darfur on a regular basis because there's no point.

Several months ago, I wrote that the UN is completely irrelevant to the ongoing Darfur genocide. I said that this kind of genocide is a force of nature, and the UN can no more stop it than they can stop a typhoon.

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

Time has proven this prediction to be correct. The past few months have seen almost a comedy of buck-passing and name-calling in the UN and the European Union to do something to stop the genocide. And with almost two million displaced people, the worst is yet to come.

The latest remarks by Kofi Annan on Darfur came at the end of UN Security Council session today, during which several ministers condemned Sudan for appearing to support the genocide, and promised that they might, maybe, perchance, impose some sort sanctions some day if Sudan doesn't stop it.

None of this makes any difference to the actual genocide because there are deep-seated ethnic differences between the warring groups, just as there were in Rwanda in 1994 when the Hutus massacred close to a million Tutsis.

It's one of the principal discoveries of Generational Dynamics that these kinds of genocidal wars cannot be stopped by the United Nation any more than an earthquake can be stopped by the United Nations. And these genocidal wars are not unique to Africa, but occur at regular intervals in every society at every time in history.

You may find this hard to believe, dear reader, but some people actually tell me that they find this web site too gloomy and negative. That's why I like to point to the Darfur example. I could predict with almost 100% certainty that the genocide could not be stopped, despite enormous worldwide attention, and that prediction is, of course, coming true, despite the wishes of those who believe that with a positive attitude and a lot of hard work, such a genocide can be prevented or stopped. It can't.

There are fundamental patterns that the world has followed throughout history, whether in wars, in finance, and in technology.

It boggles the mind to think that we've entered another 1930s style depression, and that stocks will fall by more than 50% within the next few years, and yet the historical patterns show that it will happen, with almost 100% certainty. thanks to generational changes.

It boggles the mind to think that a massive genocidal war between Palestinians and Israelis that will engulf the entire region will occur and can't be stopped, but historical parallels throughout history prove that such a war will occur with almost 100% certainty, and will engulf the entire region, thanks to generational changes.

The same can be said of the Caucasus region, which is the most dangerous region on earth, thanks to generational changes. And the same can be said about an inevitable war between China and America in the Pacific, thanks to generational changes.

A regular reader recently sent me an e-mail message asking me, "I am having quite a difficult time getting others to understand the principles of Generational Dynamics. Most of the people I talk to about this seem to have a difficult time grasping the idea that a society (or region I should say) goes into a crisis period because the generations alive during the last crisis disappear, so there is no guidance from those generations to keep the younger ones from getting into the same trouble all over again.

"I was wondering if you are having the same level of difficulty I am in disseminating the information?

"Thanks again for the book. It really is interesting to know that I am ahead of the curve simply by reading this book and I know now where the country is heading in the upcoming years. Information like this is priceless."

I wrote back to him joking that being able to predict the future may be as much a curse as a blessing, and that information like this may be "priceless," but I haven't figured out a way to make money from it.

More seriously, I fundamentally believe that if at least American politicians could understand Darfur and why these fundamental generational forces, then we could make the world a better place. Unfortunately, the current political campaign proves that even this hope is completely in vain. (5-Oct-04) Permanent Link
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George Bush and John Kerry are both "delusional optimists" over Iraq

I just became aware of a column by George Will written prior to the last debate.

Although Will favors Bush, the first two paragraphs of his 9/29 column contain a good analysis of what's wrong with both candidates' views of the Iraq situation.

In other words, neither candidate knows what's going on, a claim that anyone would have difficulty finding a suitable refutation for.

The debate is over now, and we now know that neither candidate said anything sensible about Iraq.

But it's also worthwhile pointing out that neither of them said anything at all (let alone anything sensible) about the fact that the Israeli/Palestinian war has gotten considerably more violent.

Hamas rocket attacks are continuing to kill Israelis, and the Israeli army is continuing to kill dozens of Palestinians.

Israel has always been an important issue in American politics. So why has it utterly, totally, completely disappeared from the issues map?

The answer is that the situation is so hopeless that it's not worth even mentioning.

Tonight there'll be a debate between vice presidential candidates. Let's see if the subject comes up there. (5-Oct-04) Permanent Link
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After a month, the French hostage crisis is becoming a major humiliation.

If you enjoy schadenfreude, then you'll like this French farce, where French mediators tried to blame American forces for hostages' captivity.

The French, who have never missed an occasion to gloat over American difficulties in Iraq, are now learning a little more about the real world.

When the two French journalists were taken hostage in Iraq in early September, it appeared that France would turn this painful incident into an international diplomatic coup.

Today, the incident is even more painful, since the hostages' lives are still at stake, and because a month of failed diplomacy has been capped by a farcical scandal.

Last week, a private negotiating team led by a French MP went to Iraq to free the hostages. (It sounds like something that Jesse Jackson or Jimmy Carter would do here in America.) On Friday, they called and said that they were "with the hostages," that they were negotiating, and that release was imminent.

Then Europe was stunned when the MP called a press conference in Damascus and said that the negotiations had collapsed because a convoy carrying the hostages to freedom in Syria had come under attack from American armed forces. The only problem was that both French and US authorities said that there was no evidence to support the MP's claims. It was evidently a lie.

This is big news in France because it smells of a cover-up. President Jacques Chirac is distancing himself from the entire affair, claiming he didn't even know it was going on, even though the MP is in Chirac's own party. However, the lead story in Monday's Le Monde provides a detailed timeline of the entire effort, and purports to show that Chirac knew about the whole effort all along.

As is well-known, France has been the leading opponent to America's involvement in Iraq, and has opposed every American initiative to gain help and cooperation from the United Nations or the European Union to provide security and help rebuilding in Iraq. The French evidently believed that by opposing America they would be immune to attacks by Islamic terrorists.

Thus, this weekend's fiasco is a humiliation to the French not only because it highlights France's own exposure to Islamic terrorism, but also because of the heavy-handed attempt to blame America with the phony story.

But it's even worse than that for the French.

Last week, two Italian aid workers were freed after they had been captured in Iraq and held as hostages for three weeks. Italy, of course, is cooperating with America in Iraq, and so the freeing of the Italian hostages while the French hostages are still in captivity is a direct slap in the face to the French.

What the French don't understand -- and indeed, what Americans and most other people don't understand -- is that hostage-taking has nothing to do with support for Iraq in most cases. Islamic terrorist groups are determined to use hostage-taking and other terrorist acts to spark a new "clash of civilizations" world war, and those attempts will continue until they succeed. (4-Oct-04) Permanent Link
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Janet Leigh dies.

Not really relevant to this web site, but I love this photo of her in Psycho.

Janet Leigh in <i>Psycho</i>
Janet Leigh in Psycho

(4-Oct-04) Permanent Link
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After debate, there's still no end in sight in the Iraqi war

The Sunday morning news shows have focused on the candidates' demeanors -- John Kerry looked confident, George Bush looked annoyed -- but also made it clear that there's no substantial difference between the candidates on Iraq.

John Kerry followed the outline of his four-point plan that he described it in a September 20 speech:

  1. Obtain greater international support
  2. "Get serious" about training Iraqi security forces, so that fewer American forces will be required.
  3. Carry out a reconstruction plan that brings tangible benefits to the Iraqi people.
  4. Guarantee that the promised Iraqi elections can be held next year, with U.N. participation.

If you read through the above list, you'll see that it doesn't differ with anything that Bush is doing or planning, and doesn't provide any path for exiting from Iraq.

As we've said before, terrorism around the world is increasing significantly. We can be absolutely certain that even if Bush or Kerry had a plan for exiting from Iraq, the terrorists would make absolutely certain that any such plan would not succeed. (3-Oct-04) Permanent Link
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Palestinians and Israelis becoming more violent

Dozens of Palestinians were killed in a new Israeli offensive, as a new poll of Palestinians shows that they approve of increasing violence against Israel. According to the poll, conducted by Dr. Khalil Shikaki's Palestinian Center for Policy and Survey Research, found that Palestinians overwhelmingly support the following actions by Palestinians:

On the Israeli side, Prime Minister Ariel Sharon said Israel should expand its military offensive in the Gaza strip, in order to eliminate the launching of missles into Israel. The current offensive, which has killed over 60 Palestinians in the last five days, is expected to continue for weeks.

According to an Israeli analysis, the Palestinians are becoming increasingly audacious, and the Palestinian government refuses to address the problem.

Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries
Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries

If you start with those facts, and with the adjoining map which shows the Palestine region as a tiny red dot in a huge sea of Muslim countries, then you don't have to be an expert in Generational Dynamics to see that the Palestine region is heading toward all-out war, but the question is: What is the "tipping point"? When does this continuing form of low-level violence spiral out of control into all-out genocidal war, where Israelis and Palestinians try to destroy each other completely?

In my book, I compared the situation in the Palestine region to what happened leading up the extremely violent war in the late 1940s. Fighting between Jews and Arabs began with rock throwing in 1936, became more violent after World War II ended, and turned into a genocidal crisis war in 1948, when the UN partitioned Palestine, creating the state of Israel.

We've seen the same pattern in the last few years. Fighting began in 1989 with the first Intifada, and became more violent in 1999 when the second Intifada began.

Shikaki has been polling ever since the Intifada began in 1999, and each poll sows that the Palestinians are more and more supportive of violence, not only against the Israeli military, but also against Israeli families and children. Similarly, Israel has been willing to tolerate more violence against Palestinians, first against Hamas leaders, and later against residential neighborhoods where missiles and other weapons might be stored.

What will be the trigger for all-out war this time? I've speculated that it will be the departure of Yasser Arafat and what Shikaki has called the Palestinian Authority "old guard." As long as Yasser Arafat's generation is in control, and prevents the "young guard" from taking power, all-out genocidal war is unlikely. (3-Oct-04) Permanent Link
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US and world preparing for a deadly "bird flu" pandemic, including forced quarantines and isolation

The UN World Health Organization (WHO) is downplaying the fear of a widespread "bird flu" pandemic, after the flu was apparently transmitted from one person to another in several cases in Thailand. As far as is known, all such human to human transmissions so far have been contained.

The bird flu is a new, deadlier form of influenza. If there is a widespread global pandemic of the new flu strain, then tens or hundreds of millions of deaths are expected.

This is not farfetched. 20 million people died in the Spanish flu epidemic of 1918-1920. Such a worldwide flu epidemic has never occurred since then, but there is absolutely no reason to believe it couldn't, and many medical experts believe that it's overdue. The number of deaths might be much higher, since the earth's population is much greater.

If you want to know how serious the problem is being treated, consider this: 100 million (100,000,000) birds have been culled (killed) this year in Asia as a precaution, as 20 people have died from the bird flu, apparently after they caught it directly from birds.

These figures appeared in a WHO press release issued a month ago calling for studies on bird flu to assess its potential for becoming a global pandemic.

The American government is taking the situation very seriously.

The Dept. of Health and Human Services (HHS) has issued a draft Pandemic Influenza Response and Preparedness Plan.

According to the Executive Summary:

So far it's only a draft plan, so if these things interest you, consider commenting on it at (3-Oct-04) Permanent Link
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New Chinese military chief ratchets up talk of war.

When Hu Jintao (age 61) replaced Jiang Zemin (age 78) as Chairman of China's Central Military Commission on Sept. 19, many observers hoped that that relations with Taiwan would thaw.

"[T]here will be a more flexible approach to Taiwan," according to one Taiwanese military analyst, adding that "Hu Jintao is a much more pragmatic person."

However, just the opposite is happening.

Hu has now told the People's Liberation Army to prepare for war.

He did this in response to recent remarks by Taiwanese officials.

First, Taiwan's president, Chen Sui-bian, warned that China is building up an arsenal of missiles pointed at the island, and that 800 of them would be in place by 2006.

Then the Taiwanese prime minister, Yu Shyi-kun, amplified Chen's remarks by calling for the development of an offensive missile system. "You fire 100 missiles at me, I fire 50 at you. You hit Taipei and Kaohsiung. I at least hit Shanghai. If we have such counter-strike capability today, Taiwan is safe."

Why would he ever think that would make Taiwan safe?

Anyway, that infuriated the Chinese, leading to Hu's remarks about preparing for war.

Why would anyone have expected Hu Jintao to be a much more pragmatic person? For some reason, people seem to automatically believe that younger people are more pragmatic and flexible than younger people, despite the fact that it's the angry young men who start most of the wars.

From the point of view of Generational Dynamics, the difference between Hu and his predecessor is very clear.

Jiam Zemin, at age 78, grew up during the genocidal civil war between armies led by Mao Zedong and Chiang Kai-shek that ended in 1949. People who grow up during crisis wars suffer a kind of generational child abuse, and the people in the entire generation grow up to be indecisive, risk-averse leaders -- more flexible and pragmatic in the sense that they're much more willing to compromise to avoid another war.

Hu Jintao, at age 61, grew up after the civil war. People in these post-war generations (like America's Baby Boomers) grow up to be arrogant and risk-seeking, much more likely to risk war.

Thus it's not surprising to see that Hu is preparing for war, while Jiang might have been more circumspect.

On the Taiwanese side of of the straits, President Chen is in the rebellious younger generation in Taiwan's 1990 Wild Lily Rebellion, a student separatist movement that began as a reaction to the 1989 Tiananmen Square crackdown in China.

Chen has promised to amend the Taiwanese constitution by 2008 to make Taiwan more independent. Jiang has already said that this would lead to war, and Hu is obviously following the same policy with even more vigor. (1-Oct-04) Permanent Link
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