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


Web Log - November, 2004


East Ukraine threatens secession, splitting the country in two

Government forces threatened "disaster," but it may have been just a political ploy as the Ukrainian officials supporting pro-Russian Viktor Yanukovich called for a referendum to split East Ukraine off as a separate country.

East/West Ukraine split in Presidential vote. <font size=-2>(Source: BBC)</font>
East/West Ukraine split in Presidential vote. (Source: BBC)

Presumably, the proposal would be to split the country along the line that separates the mostly pro-Yanukovich provinces (see adjoining map) from the mostly pro-Yushchenko provinces.

However, even Viktor Yanukovich appears to oppose such a solution. He said: "Today we are on the brink of catastrophe. There is one step to the edge. Do not take any radical steps. When the first drop of blood is spilled, we will not be able to stop it."

Yanukovich supporters have been extremely frustrated by the crowds supporting the opposition candidate Viktor Yushchenko, and indeed there were still hundreds of thousands of pro-Yushchenko supporters out in Kiev on Sunday. The call for East Ukrainian autonomy may simply be a political ploy by the other side to gain some traction.

But the East Ukrainians are becoming just as passionate and infuriated as the West Ukrainians are, and so the autonomy proposal may gather momentum. If it does, then it may lead to violence and the civil war that everyone fears.

The Ukrainian Supreme Court will be meeting later today. It will be their job to thread the needle through the conflicting desires and claims of the opposing sides, in an effort to find a solution that everyone will live with. In that sense, their job won't be dissimilar to the job of the U.S. Supreme Court in 2000, when America was faced with a potential political battle that might have deprived the country of a President for months. In the end, the Supreme Court sees itself as the last resort in keeping the country together.

But as we described yesterday, Ukraine itself may not be the master of its own fate. Russian President Vladimir Putin cannot afford a hostile Ukrainian neighbor, rich in resources and providing an overland route to the Black Sea. Putin will not accept any solution that doesn't give him what he needs.

From the point of view of Generational Dynamics, the violent atrocities of the 1920s and 1930s occurred across a fault line between ethnic Ukrainians, mostly in Western Ukraine, and ethnic Russians, mostly in Eastern Ukraine. That fault line that is now being reopened. Generational Dynamics predicts that a new war will be fought across that fault line in the next few years, no matter who is finally selected to be President. (29-Nov-04) Permanent Link
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How much farther is the dollar going to fall?

With a euro selling for over $1.33 yesterday, the dollar is the weakest it's been in years.

Euro vs Dollar - 11/26/2002 - 11/26-2004
Euro vs Dollar - 11/26/2002 - 11/26-2004

The adjoining graph shows the price of the euro in dollars. The higher the price of the euro, the weaker the dollar is. As you can see, from this graph, the dollar has been falling (euro has been rising) fairly steadily for over two years, and the fall has become rapid since the presidential election, and has fallen further almost every day.

Most analysts hd been predicting that the dollar might fall to $1.40 or $1.50 per euro, but one analyst, Julian Jessop of Capital Economics, said on television Thursday that he's revised his opinion because of the rapid momentum of the fall, and that now he expects a price of $1.60 to $1.70 per euro, possibly by the end of the year.

The fall has been caused by the Fed's near-zero interest rate policy for the last few years. At near-zero interest rates, many more people borrow money, so the supply of money increases, and by the law of supply and demand, the value of the dollar goes down. If Greenspan and the Fed had not lowered interest rate, then the Nasdaq crash in 2000 would have resulted in massive bankruptcies and homelessness, like the 1930s Great Depression, but now we see that the low interest has had a different cost.

You would think that a weak dollar and a strong euro would be good news for Europe, but if you think that then you would be wrong. Euroland's economy has been very weak anyway, especially in market leaders France and Germany, but its one strength has been marketing products to America. But with the rapid rise of the euro, Europe's exports are becoming much more expensive in America, and that will reduce exports.

That's wy European Central Bank chief Jean-Claude Trichet said that the fall of the dollar has been "brutal."

Generational Dynamics predicts that we're entering a new 1930s style Great Depression, and that stock prices will fall by at least 50% in the next few years. There's no way to predict an exact time frame, but history shows that these things always begin with an unexpected downward cascade that catches even the experts by surprise. (27-Nov-04) Permanent Link
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Ukraine: Police in Kiev holding fire as opposition candidate tells hundreds of thousands of demonstrators to hold nationwide strike

The 1919 civil war could be repeated today, according to outgoing President Leonid Kuchma.

"The civil war at the beginning of the last century which we know about, thank goodness only from films, could well become a reality at the present time," he said.

Kuchma is referring to the atrocities and mass executions that Russia used to force Ukraine into the Soviet Union in 1921. Tens of millions died at the time.

These are the atrocities that I described a few days ago. Generational Dynamics predicts that they will indeed become a reality again, if not right away then at some time in the near future.

The supporters of opposition leader Viktor Yushchenko were enraged yesterday, when Ukraine's election commission declared the establishment candidate Viktor Yanukovich as the winner of Sunday's election.

Russian President Vladimir Putin immediately congratulated Yanukovich, but he's about the only one who did.

Secretary of State Colin Powell bluntly called the election a "fraud" at a State Department briefing yesterday. "We cannot accept this result as legitimate because it does not meet international standards and because there has not been an investigation of the numerous and credible reports of fraud and abuse," he said. "We have been following developments very closely and are deeply disturbed by the extensive and credible reports of fraud in the election."

Powell indicated that some unnamed action will be taken if the election fraud isn't investigated and corrected. (He's an interesting aside: It turns out that it's American taxpayers who are paying for dismantling old Soviet nuclear weapons located in Ukraine. Isn't that special?) It's unlikely that America will reduce aid to Ukraine, so the exact nature of the threatened consequences is unknown.

Similar declarations were made by Canada and Europe.

Speaking to a crowd of hundreds of thousands of demonstrators, opposition leader Viktor Yushchenko is calling for an "all-Ukrainian political strike" to protest the election.

Kiev's riot police are wary, but are holding fire against the massive crowd of demonstrators. If violence spirals out of control, then it may well spread into southern Russia dn the Caucausus region, which I've previously described as one of the six most dangerous regions of the world. (25-Nov-04) Permanent Link
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Stephen Roach predicts an "economic Armegeddon"

The Chief Economist at Morgan Stanley is privately telling clients that America has no better than a 10 percent chance of avoiding "economic Armageddon," according to a Boston Herald news report, based on leaks from attendees.

"In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants. ...

To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day. That is an amazing 80 percent of the entire world's net savings. Sustainable? Hardly.

Meanwhile, he notes that household debt is at record levels. Twenty years ago the total debt of U.S. households was equal to half the size of the economy. Today the figure is 85 percent. Nearly half of new mortgage borrowing is at flexible interest rates, leaving borrowers much more vulnerable to rate hikes. Americans are already spending a record share of disposable income paying their interest bills. And interest rates haven't even risen much yet."

Readers of my book or my web site already know that the only thing I would disagree with is that the probability of avoiding a severe financial crisis as high as 10%. Generational Dynamics predicts that we're entering a new 1930s style depression with almost 100% certainty.

What strikes me is that there seems to be some sort of verbal cascade going on. Last week, Alan Greenspan made a blunt warning that there would be harsh "adjustments" in store for America unless spending were cut back, just after Treasury Secretary John Snow indicated that the weak dollar would not be supported. This was at the top of the business news around the world.

Today we have Roach's statement, followed by the news that Russia's central bank says that it plans to shift its dollar holdings to euros. Obviously the Russians believe that the dollar will be getting weaker against the euro.

Meanwhile, Asian central banks are hoarding $2.3 trillion in American currency reserves. If the dollar keeps weakening, then those reserves will be worth less and less. But if Japan and China try to do what Russia is doing, then Roach's economic Armageddon may well occur in the short run. (24-Nov-04) Permanent Link
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Why did stock prices suddenly turn sharply upward in 1995?

A Wall Street Journal series on Alan Greenspan's legacy not only doesn't answer that question, but shows that Greenspan made some fundamental errors at the time.

The front-page two-part article (Part I and Part II) examines Greenspan's record in detail since he took over the Federal Reserve 17 years ago.

One of the most remarkable aspects of the article, something I've never heard before, is that Greenspan's reasoning in 1996 was based on his belief that the bubble was caused by increased productivity from hi-tech investments.

I've been in the computer industry my whole life, and I can tell you that is about the dumbest thing I've ever heard. Only someone who knew little about computer technology could possibly believe hi-tech investments were increasing productivity.

In the 1980s and 1990s, IT (information technology) was a monetary black hole. A typical development project was one or two years late -- if it didn't fail completely.

It's true that productivity was improved in some ways; for example, managers used PCs to type their own memos with word processors and their own budgets with spreadsheets. But those savings were no more spectacular than the productivity improvements from electric typewriters and Xerox machines in earlier decades.

So it turns out that Greenspan's reasoning about the 1990s bubble was partially caused by this crazy belief. In the article it says that Greenspan asked two economists to do a study, and they came back with what the boss wanted to hear. Incredible!

Here are the relevant paragraphs from the WSJ article:

The remainder of this article is the contents of the message that I posted on the WSJ user message board:

Greenspan's analysis of the 1990s bubble simply doesn't make sense.

<b>S&P 500 Index with long-term trend line</b>
S&P 500 Index with long-term trend line

Why did the S&P index turn sharply upward in 1995? Why not 1990 or 2000? What was different about 1995?

Greenspan provides an explanation having to do with increased productivity from computer technology, but that doesn't make sense. For every little island of increased business productivity in the 1980s and 1990s, there were enormous training and development costs that wiped the productivity savings out. Greenspan ignored the data that said that productivity was decreasing, but in fact those data values were correct, and Greenspan was wrong. Productivity has only increased in the 2000s, when IT budgets were frozen.

There's only one plausible explanation for the 1995 upturn: Prior to 1995, all the senior financial managers throughout the country were from the generation of "depression babies." These risk-averse people didn't part with a cent unless they were sure they would get it back, with interest.

During the 1990s, those people all disappeared (retired or died), all at once. The new senior financial managers were from the risk-seeking Baby Boomer generation who believed that the world owed them a living. The result was an explosion of unsafe investments, causing the bubble, which was nothing more than a pyramid scheme that the widespread use of derivatives has simply prolonged

You can trace this generational pattern throughout history. There have been many stock market falls, but the ones with major international impact were: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. Throughout history, these follow the pattern that when the generation of senior financiers who lived through the previous crash all disappear (retire or die), all at the same time, then the next bubble occurs.

Greenspan's fundamental error was that he didn't understand that technology patterns and generational bubbles are TOTALLY SEPARATE SERIES that have to be analyzed separately, as this graph shows:

<b>S&P 500 Index with long-term trend line and technology curve</b>
S&P 500 Index with long-term trend line and technology curve

The green technology curve matches the S&P index almost precisely, provided that you ignore the generational bubbles. Once you understand that separation, then you understand what really happened in 1995, and you also see that the full impact of the 1990s bubble has not yet been felt, but only postponed.

John J. Xenakis (24-Nov-04) Permanent Link
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Hundreds of thousands of people in Kiev street protest against rigged Ukraine presidential election

A growing international confrontation is pitting America and Europe against Russia, over charges of massive electoral fraud in a close election that appears to have been won by the candidate favored by Russian President Vladimir Putin.

Ukraine's opposition presidential candidate Viktor Yushchenko addresses supporters during a rally in Kiev <font size=-2>(Source: Reuters)</font>
Ukraine's opposition presidential candidate Viktor Yushchenko addresses supporters during a rally in Kiev (Source: Reuters)

At first, exit polls showed that the "rebel" candidate, Viktor Yushchenko, would win, but actual vote counts gave the win to the Russian-backed "establishment" candidate Viktor Yanukovych. (Yes, both candidates' first names are Viktor, and their last names begin with 'Y'. Sorry.)

After the results were announced, Yushchenko asked his supporters to hold street protests to pressure the government, and as many as half a million complied on Monday. Both America and the EU are refusing to recognize the results until an investigation has been completed.


Ukraine is located just above the Black Sea, and has been a theatre for wars between Europe and Russia.

Ukraine became an independent nation in 1918, just after the Russian Revolution. The independence was brief, as Ukraine was forcibly incorporated into Soviet Russia by 1921. The country was subject to repeated atrocities, mass executions and deportations, throughout the 1920s and 1930s, the worst being Stalin's man-made genocidal famine that killed millions of peasants in 1932.

One of the principles of Generational Dynamics is that nobody ever remembers the atrocities they commit on others, but no one ever forgets the atrocities that others commit on them. So one can be certain that Stalin's atrocities are playing a part today.

The "rebel" Viktor Yushchenko represents the Ukranian-speaking 75% majority ethnic Ukranians living mostly in rural areas, especially in the west. Yushchenko would like to move Ukraine closer to Europe.

The "establishment" Viktor Yanukovych represents the Russian-speaking 25% minority ethnic Russians living mostly in large cities, especially in the east. Yanukovych has been heavily and openly supported by Putin, and would like to move Ukraine closer to Russia.

Now, you don't have to be a rocket scientist to see the problem here. Ukraine regained its indpendence with the Soviet breakup in 1991, and a lot of Ukrainians must feel in their gut that Putin would like to take over Ukraine again, the way Stalin did in 1921.

Generational Dynamics predicts that the atrocities committed by Stalin will be revisited in the form of a major new conflict, possibly a major civil war. When this will happen cannot be predicted, of course, but the current scandal is opening up this fault line wound today. (23-Nov-04) Permanent Link
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Alan Greenspan's blunt warning raising international concern

Newspapers around the world are headlining their business sections with the news that Greenspan has come closer than ever before to predicting that the American economy is possibly close to suffering a painful "adjustment."

This followed on the heels of November 17 statements by Treasury Secretary John Snow in London that America would not attempt to strength the dollar in international markets, at a time when the dollar is already at historically weak levels.

In his speech Friday to the European Banking Congress in Frankfurt, that the "current accounts deficit" (American debt level to other countries) has "risen to more than 5 percent of GDP," and "cannot continue to increase forever in international portfolios at their recent pace."

The current accounts deficit continues to widen because the American economy imports far more goods than it exports, forcing the U.S. to borrow heavily from other countries, especially Asian economies. This has weakened the dollar relative to other currencies, and encouraged widespread currency speculation, especially in China. Greenspan's warning is that these countries will not continue to loan money forever, and that an adjustment may come sooner than expected.

The French news agency Agence France-Presse (AFP) says, "Snow, Greenspan dash hopes for relief from weak dollar."

The UK Guardian headline reads, "US risks a downhill dollar disaster." The BBC says much the same thing, though adds, "[Greenspan] is not predicting certain catastrophe now or indeed at any stage in the future. But the implication is clear, that the inevitable adjustment might come in a disruptive form."

What's new is this level of negative comment.

As I wrote before the Presidential election, many negative comments were being muted until after the election. For example, Greenspan's and Snow's statements would both have been impossible before the election, since either would have become a campaign issue. Now that the election is over, it's possible to report a drop in the value of the dollar as if it were a weather report.

However, it's not just comments but also actions that are changing following the election. China's President Hu Jintao has promised to revaluate the Yuan, albeit slowly, a move which would accelerate the fall of the dollar.

However, Monday's Wall Street Journal reports that a wave of revaluation is spreading around Asia.

According to the article,

"Asia appears to be in the early stages of a regionwide currency revaluation, partly in anticipation that China will let its own currency float higher over the next year.

From Tokyo to Seoul to Singapore, some investors are buying up large volumes of Asian currencies, a strategy that assumes Asian countries will tolerate somewhat stronger currencies in the year ahead. The won is trading near its highest level against the dollar in seven years, while the yen is up nearly 7% since the beginning of October.

Investors also are pouring capital into Asia's equity and bond markets -- a bet that appreciating currencies will boost the value of their assets over time. Meanwhile, a number of Asia's largest companies are drafting strategies to deal with current and anticipated adjustments in Asian currencies, including cutting costs and changing the amount of business they do in dollars."

A large revaluation of Asian currencies would have a big impact in America, since imported products would become much more expensive, forcing Americans to cut back. Since many analysts are predicting a recession next year anyway, thanks to high oil prices, this kind of revaluation would make a recession even worse, and force a harsh "adjustment" of the kind that Greenspan is raising warnings about.

From the point of view of Generational Dynamics, an "adjustment" could be quite severe. Stocks are overpriced by a factor of 100%, according to standard price/earning ratio measures that were commonly used by financial managers two decades ago. Investors stopped using price/earnings ratios when these measures stopped giving answers that the investors wanted to hear.

The purpose of Greenspan's warning was to shock the Administration and the Congress into reducing spending. In earlier warnings, Greenspan warned about "abrupt and painful adjustments" unless changes were made to reduce Social Security and Medicare benefits quickly.

All of this is politically impossible of course. The Republicans will never agree to roll back the tax cuts, and the Democrats will never agree to reducing Social Security or Medicare benefits. Any attempt to bring about these changes will trigger a bitter political battle, as the nation undergoes a major cultural and political restructuring.

Generational Dynamics predicts that America has entered a 1930s style Great Depression, and that stock prices will fall by 50% or more, when something happens to trigger a loss of confidence. Based on the current accounts deficit, and high level of dangerous international conflict, Greenspan's warning about a serious "adjustment" may be well on its way to coming to pass. (22-Nov-04) Permanent Link
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Inflation is back, according to analysts.

Both wholesale and consumer prices are sharply up - but not if you don't count oil and food.

The Producer Price Index (PPI - for wholesale prices) jumped 1.7%, and the Consumer Price Index (CPI - for retail prices) jumped 0.6% in October. Both increases were much higher than they've been for a while.

As a result, analysts are talking about the return of inflation. That's not all. The value of a dollar has been falling internationally, with the euro going over $1.30 for the first time.

The return of serious inflation would have a significant impact on policy at Alan Greenspan's Fed, forcing him to be more aggressive in raising interest rates. That could cause other problems, however, with a number of analysts predicting a recession next year.

So what's going on? 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  Oct
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1   .1  1.7
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1   .3   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1   .2   .6
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1   .3   .2
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----

In each case, the "core index" is the index without food and energy prices factored in.

Now, the price of oil has increased over 40% this year, and it topped $50 per barrel in October. That's why the PPI jumped so high.

When you look at it that way, the question isn't "Why did the PPI go up?" The relevant question is, "Why did it take so long to go up?"

And there's a second relevant question: "Why are the two core index values still so low?"

These figures indicate that both businesses and consumers are being forced to pay very high prices for energy and food items, but that businesses are unable to pass high energy prices through to finished goods.

From the point of view of Generational Dynamics, what's happening is this: The Great Depression of the 1930s forced many inefficient businesses to close, and forced others to completely change course to survive. By the time it was over, almost every business, university, government agency, labor union and non-profit organization was "lean and mean," getting everything done with a few highly motivated employees.

Over the years, all of these organizations have become increasingly inefficient, until today they're so inefficient that they're producing products and services that people don't really want at prices much higher than people are willing to pay.

When you combine that with the great bubble of the late 1990s, that's why we're entering a new 1930s style great depression again. We would already have had massive bankruptcies and homelessness, except that Alan Greenspan's Fed poured money into the economy by pushing interest rates down to near-zero, allowing people to borrow enormous amounts of money at lower interest rates to avoid bankruptcy.

The result is that inefficient businesses have continued to survive on credit, pushing public debt to astronomically high levels. Thus, the Fed policy has not prevented the financial crisis, but only postponed it.

Furthermore, 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, and we actually expect prices to fall by 30% in the next few years. That's why huge spurts in oil prices are causing temporary spikes in the PPI, but aren't having much effect on the the core values, and won't have any long-term effect. (19-Nov-04) Permanent Link
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Dutch vote murdered anti-Islamic polemicist as "Greatest Dutchman of all time."

Alarmed politicians, led by Queen Beatrix, are considering repeal of freedom of speech by reviving a 1932 law that forbids dangerous speech.

As we described recently, Holland almost seems to be melting down, following the November 2 murder of filmmaker Theo van Gogh by a Muslim extremist. Since then, arson attacks have burned over a dozen mosques and Muslim schools, and the new law is meant to curb incitement of such attacks.

1 - Pim Fortuyn - politician
2 - William of Orange - royalty
3 - William Drees - politician
4 - Antony van Leeuwenhoek - scientist
5 - Erasmus - humanist
6 - Johan Cruyff - footballer
7 - Michael de Ruyter - admiral
8 - Anne Frank - diarist
9 - Rembrandt van Rijn - artist
10 - Vincent van Gogh - artist
Source: BBC

The man voted the "Greatest Dutchman of all time" is Pim Fortuyn, the harshly anti-immigrant politician who was becoming increasingly popular two years ago, until his murder shocked the nation just before the elections. Fortuyn's murderer was an animal rights activist.

Fortuyn's political organization split up after his murder, but since the assassination of van Gogh, one of Fortuyn's political heirs, Geert Wilders, has been gaining political power with anti-Islamic and anti-immigration rhetoric.

The new dangerous speech law, if passed, would be used against Wilders' rhetoric, and also against inflammatory rhetoric of Islamic clerics in mosques.

From the point of view of Generational Dynamics, what's amazing about the Netherlands situation is the evident rapidity with which the country seems to be melting down.

First, notice that these rapid changes in Dutch attitudes are coming from the people, not from the the politicians. This is an important principle of Generational Dynamics, and I've emphasized many times on this web site with respect to American politics -- American adoption of the Patriot Act, American's naming "moral values" as the most important issue of the recent election -- George Bush had nothing to do with these things, and these would have been the same if Al Gore had been President these last four years.

Second, notice the complete irrationality of the Dutch public naming Fortuyn as the greatest Dutchman of all time, since he was clearly just a minor politician whose greatest claim to fame was being assassinated. I commented frequently during the American election campaign, and especially after the debates, how completely irrational the campaign was, especially since there was almost no discernable difference between the policies of the two candidates, except in the fantasies of partisans.

Third, this is the kind of rapid movement of opinion that can lead to revolution. I'm not saying that will happen in Holland, but I'm making the point that some event just like this can in fact trigger a revolution. There was nothing particularly rational about the mobs' storming the Bastille in 1789 to launch the French Revolution, and there was certainly nothing rational about the Reign of Terror that followed, but it can happen, does happen, and has happened in every nation throughout history. Another example is the Rwanda genocide of 1994: A plane crash triggered a massive attack by Hutus on Tutsis, killing them, raping them, and hacking their bodies apart, with almost a million casualties. These events are like sex acts that have to be consummated every 80 years or so.

We're in a unique time in history, when all the nations who fought in World War II are now rapidly making generational changes, all at the same time. In each nation, all the people who have personal memories of the genocidal horrors of WW II are all disappearing (retiring or dying), all at once, and history tells us that that's when the next world war is likely to begin.

There are several "pressure cooker" regions of the world, all of them entering or well into a "generational crisis" period. These include Western Europe, Israel/Palestine, India / Pakistan / Kashmir, Russia / the Caucasus, China/Taiwan, and North/South Korea. We'll see periods of rapidly changing public opinions in each of these regions, just as we've seen them in America, and now Holland. Sooner or later, one of them will trigger a revolution or a genocide, and then the "clash of civilizations" world war will not be far off. (17-Nov-04) Permanent Link
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World Bank calls world economic growth "strongest in three decades"

In a "bubble-headed" analysis, the World Bank called 2004 a "fabulous year" for developing countries.

Richard Newfarmer, lead author of the World Bank report, says, "This year we expect growth rates to be on the order of 6.1 percent with growth having increased in virtually every region, every one of the six major regions around the world."

According to the World Bank report (

"World growth accelerated sharply in 2004, with GDP advancing an estimated 4 percent.... All developing regions are now growing faster than their average growth rates of the 1980s and 1990s. The ongoing economic boom in China was a major factor, as were the surges in activity registered in Japan and the United States. The economic recovery was slower to take hold among European high-income countries, which contributed to the less marked increase in growth rates there. Meanwhile, very strong import demand -- because of the torrid expansion in China and the continued tendency for domestic demand in the United States to substantially exceed production -- contributed to an exceptional 10.2 percent increase in world trade volumes."

The problem with statements like this is that they don't examine the real underlying fundamentals of the economies involved.

When the report refers to "the torrid expansion in China," it's referring not to strong economic growth but to an economic bubble that's going to burst sooner or later. And since it's the primary engine for the "world growth" that report mentions, when the bubble bursts, as it must, it's going to have a severe domino through several countries.

Japan's economic bubble occurred in the 1980s, and burst in 1990. The country still hasn't recovered; in fact, the Japanese economy suffered a sharp, unexpected slowdown in the third quarter.

And when the report refers to "the continued tendency for domestic demand in the United States to substantially exceed production," it's alluding to the fact that American public debt is historically astronomical. (17-Nov-04) Permanent Link
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How France screwed Secretary of State Colin Powell

Powell's worst day as Secretary of State was undoubtedly January 20, 2003, at a joint press conference with French foreign minister Dominique de Villepin.

Powell and de Villepin had had a close working relationship at the UN, developing a final resolution to use force in Iraq. They spoke a a minute or two before the press conference, and agreed on what they would say.

At the press conference, Powell was shocked to hear de Villepin announce that France would veto any any resolution that explicitly authorized the use of force against Saddam Hussein.

After that, the whole effort with the United Nations fell apart, and the UN itself was almost torn apart. It later turned out that the whole thing had been planned for weeks by French President Jacques Chirac and de Villepin. They purposely led Powell on, strung him along, with the intention of ambushing him and humiliating both him and America.

We now know the reason as well -- that France was making billions of dollars in kickbacks from Saddam's oil-for-food fraud, which was enriching France, Russia and Saddam, but leaving millions of Iraqi citizens to starve.

From the point of view of Generational Dynamics the importance of this episode is with regard to France itself. By planning in secret to humliate Powell and America, France is establishing a pattern typical of pre-war activities throughout history.

Another pattern that France is establishing is a closer and closer relationship with the Muslim "side" in conflicts between the West and Muslim nations. These include

No one of these items is determinative by itself, but the group taken together indicates an increasing trend.

There have been crisis wars in Western Europe for centuries, the last one being World War II, and Generational Dynamics tells us that there'll be another one in the next few years with near 100% certainty. However, Generational Dynamics doesn't tell us which countries will be on each side. Indeed, France was allied with England in World War II, but was defeated by England in the Napoleonic Wars. In fact, England is considered to have been founded when the French conquered the native Saxons in London in 1066.

The growing entente between France and the Muslim world, combined with the growing hostility between France and England indicates that there will be a major new war between France and England, and that France will be on the side of the Muslim civilization in the "clash of civilizations" world War.

When I tell people that there's going to be a new war between England and France they often express emotions varying from simple disbelief to total contempt, but it's appearing more and more certain. Here's a scenario that shows how it can occur:

As unrest increases in the Mideast, international forces, including French and English forces, are called in to keep the peace. As the war escalates, both the French and England are forced to choose sides. When Jordan and Egypt declare war against Israel, France sides with Jordan and Egypt, and England sides with Israel. England bombs French facilities in France, leading to a new West European war.

This is speculation of course, but one way or another, expect a new war between England and France in the next few years.

Colin Powell himself may understand some of this, and it might even be one of the reasons why he felt it necessary to resign yesterday as Secretary of State. (16-Nov-04) Permanent Link
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Dutch Mosques and Churches burning after terrorist murder of author

The November 2 murder of Dutch author Theo Van Gogh is stirring religious violence and political repercussions throughout the Netherlands, and is raising concerns throughout Western Europe.

It all started on November 2 with the murder of Dutch filmmaker Theo van Gogh last Tuesday by a suspected Islamist militant. Van Gogh, the great-grandnephew of famous Dutch artist Vincent van Gogh, had made a short film, called Submission, that portrays and criticizes Muslim treatment of women. You can view the 11-minute film online on the web site.

I saw this news story the day it happened, but didn't think much of it. It was a horrible crime, but I figured that they'd catch the guy who did it, and that would be the end of it.

We're pretty used to murder here in America. People will give you different reasons for the murder rate - liberals will tell you it's because of poverty and lack of gun control, and conservatives will tell you it's because criminals are coddled and schools aren't teaching kids to read. And we're used to dealing with racial or ethnic crimes as well, even though we hate them.

But not so the Netherlands. The capital city, the Hague, calls itself "the international city of peace," and points to various peace conferences and international courts of justice to back up its claim. The entire country considers itself to be the most tolerant in Europe of other religions and races.

People with such a smug attitude are bound to be humiliated sooner or later, and the first major blow came in February, 2002, when an "intolerant, right wing" politician, Pim Fortuyn, suddenly became very popular after expressing harshly anti-Muslim views. This was a matter of debate throughout Holland and Europe, as Fortuyn gained popularity, and formed a new political party that was poised to score well in the May, 2002, national elections. But shortly before the elections, the country was shocked to hear that Pim Fortuyn was murdered, in a country where politicians are never murdered.

Now, the murder of Van Gogh appears to have set off a wave of religious violence throughout Holland, including the firebombing of a Muslim school and attacks on a dozen Mosques. Reprisals have included molotov cocktail attacks on several churches. So far, no further injuries have been reported.

However, the same can't be said of the arrest of two terror suspects in the Hague last week. Dutch police arrested two suspected terrorists after a 14-hour siege of their apartment that required the evacuation of five city streets after the terrorists exploded a grenade that injured three policemen, two seriously.

The murder of one man, Theo Van Gogh, has exposed deep fissures in the Dutch, and has caused reactions that appear to exceed those of Americans after 9/11.

The Dutch, normally considered to be docile, tolerant people, were treated very harshly by Nazi occupation during World War II, and there is still a feeling of betrayal by Nazi collaborators.

So with a population of 16 million containing 1 million Muslims, it's not surprising that some Dutch are calling Muslims the "new Nazi occupiers."

The fallout isn't limited to Holland.

With 3.4 million Muslims comprising 4 percent of Germany's population, centuries-old fault lines between the Christian Habsburg Empire and the Muslim Ottoman Empire has been re-opening in recent years, even before the current crisis.

Germany's interior minister, Otto Schily, said earlier this year, said to Islamic fundamentalists: "If you love death so much, then it can be yours."

Just a few weeks ago, Neo-Nazis and Communists made significant gains in regional elections, on a platform blaming foreigners, including Jews and Muslims, for the country's high unemployment. "It's a great day for Germans who still want to be German," said Holger Apfel, a spokesman for the neo-Nazi National Democratic Party.

Now the remarks are getting even more pointed. "The feelings of hatred against the majority Christian society are growing," said the left-leaning Berliner Zeitung.

These feelings between Germans and Muslims may well be mutual. A TV station secretly filmed the following speech by a cleric at the Mevlana Mosque in Berlin: "These Germans, these atheists, these Europeans don't shave under their arms and their sweat collects under their hair with a revolting smell and they stink. ...Hell lives for the infidels! Down with all democracies and all democrats!"

Both Dutch and German legislators are now considering legislation which will be even harsher than America's Patriot Act, even including banning speeches in Arabic in mosques.

From the point of view of Generational Dynamics, this is developing into a hardening of attitudes that was predicted. West Europe has had numerous wars for centuries, and a new one is "scheduled" in the next few years.

The startling and suddent transformation of normally placid Netherlands into a zone of conflict between Christians and Muslims is a step along that path. (15-Nov-04) Permanent Link
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European and Japanese economy show sharp, unexpected slowdowns, as do American factory orders

High oil prices, weakness of the dollar, and slowdown in exports are blamed for third quarter slowdowns in both the European and Japanese economies.

Growth in euroland was only 0.3% in the third quarter, below economists' expectations of 0.4%, and well below second quarter growth of 0.5%. Growth was likewise only 0.3% in Japan's third quarter.

In America, the economy has had mixed results recently. Retail sales have risen slightly, but in September factory orders fell unexpectedly. Orders fell 0.4%, which was the biggest decline since April, while analysts had been expected a 0.3% rise.

From the point of view of Generational Dynamics, America is entering a 1930s style depression. I've written this many times before on this web site, but one thing I haven't emphasized too much in the past is that Europe is on the same generational timeline. The huge 1990s stock market bubble occurred at exactly the time that the senior financial advisors from the generation of people who grew up during the Great Depression all disappeared (retired or died), all at the same time, in the early 1990s, and the same is true of Europe.

Japan's Nikkei Stock Market Index, 1973 to 2003
Japan's Nikkei Stock Market Index, 1973 to 2003

Japan is on an earlier timeline, having had its major bubble in the 1980s. As you can see from the adjoining graph, the Nikkei stock market index was at around 40,000 in 1989, following a large bubble that began in 1985. Recently, the Nikkei has recovered to the 11,000 range. But even so, the economy is still slowing, and inflation has actually been negative (deflation) now for six years.

As had been the case repeatedly for 2-3 years, economists have no plausible explanation for any of these unexpected results. (15-Nov-04) Permanent Link
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Iran agrees to suspend uranium enrichment

Today, Iran sent a letter to the International Atomic Energy Agency of the UN, agreeing to a full nuclear enrichment freeze.

This evidently defuses a potential crisis with the Israeli government, which had claimed that Iran would reach the "point of no return" in its nuclear weapons program by November.

It also heads off threatened UN sanctions, and, in addition, it enables incentives promised by the European Union, including providing free nuclear technology.

The White House reacted cautiously to Iran's announcement, saying: "We look forward to a briefing by our European friends." (14-Nov-04) Permanent Link
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NY Post: "Arafat Dead - And he won't be missed."

I look at Arafat's life very, very differently.

Was he a terrorist? Yes. Was he a hero to the Palestinian people? Yes - just ask them.

<i>New York Post</i> front page, 11-Nov-2004
New York Post front page, 11-Nov-2004

The front page of the 11-Nov Post captures a sentiment that has been repeatedly stated by Western analysts and politicians. One pundit even called Arafat "a truly evil man." These people believe that Arafat, and only Arafat, stood in the way of Mideast peace.

That's obviously what President Bush believes. In a joint press conference with British Prime Minister Tony Blair, the President said that with Arafat out of the way, his goal is to establish a peaceful, democratic Palestinian state alongside Israel before he leaves office in 2009.

All this is based on the silly assumption that the Palestinian demand that Jerusalem return to Palestinian control and that the Palestinian people have a "right of return" to lands lost in the 1948 Arab/Jewish war came from Arafat, rather than from the people he led.

Both Generational Dynamics and history tell us that those kinds of demands are buried deep in the DNA of the people. The pattern is always the same after a genocidal crisis war like the Arab/Jewish war of the late 1940s: There are numerous atrocities and genocidal rage on both sides, along with a desire on each side to exterminate the other side. Such a war is resolved only with painful compromises, in order to end the atrocities. When the generation of people who lived through the atrocities disappear (retire or die), all at once, then the younger generations left behind retain the old demands, and the painful compromises unravel.

In fact, many commentators are expressing a kind of perverse appreciation of Arafat, worrying that Arafat's departure will cause a civil war among the Palestinians.

As well they might. Arafat was hardly a high-flying playboy. He lived in a filthy uncomfortable bunker in Ramallah when he could have had a luxury suite in Paris. He was a driven desperate man, obsessed with doing anything, willing to sacrifice his own comfort and livelihood, if it meant finding a way to prevent a new genocidal war between the Arabs and Jews.

Only a "terrorist" who had actually survived the atrocities of the 1940s Arab/Jewish war would be obsessed enough to make these sacrifices, because he considers his own life less important than the lives of his fellow Palestinians, and yes, even the Jews in Israel.

Yasser Arafat in 2000
Yasser Arafat in 2000

Yes, he was a brutal, vicious terrorist. Yes he was a liar and maybe even a crook. Yes, he approved suicide bombings that killed Jewish children.

But for a man in his position, approving suicide bombings was the lesser of two evils. The greater evil was unleashing a new genocidal war, one that would kill many more Jewish and Arab children than suicide bombings do.

Arafat surely saw what's coming, and that's why he lived his tortured life in his Ramallah bunker.

He leaves behind Israeli Prime Minister Ariel Sharon, who was about the same age (born in 1928) as Arafat (1929). Sharon is also a deeply desperate man, since he's also a survivor of the 1940s Arab/Jewish war. He orders the killing of Hamas leaders, and he builds a 12 foot high barrier around Israel, infuriating the Palestinians and the Europeans, once again because it's the lesser of two evils.

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

Generational Dynamics predicts that there'll be a new Arab/Israeli crisis war, with almost 100% probability, in the next few years. When it occurs, Jews and Palestinians will once again try to exterminate each other completely, but since there are so many more Muslims in the region, the continued existence of Israel is in question. No one who looks at the adjoining map can realistically doubt that conclusion.

The Palestinians will mourn Yasser Arafat and miss him. But despite what the New York Post says, a lot of other people are going to miss Yasser Arafat as well, and I suspect that the man who will miss him most of all will be Ariel Sharon. (14-Nov-04) Permanent Link
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Hizbollah sends unmanned Iranian drone over Israel

In an escalation of the hostility between Iran and Israel, Iran has humiliated Israel by overflying Israel with a drone that was not detected by the Israeli air force. The drone was launched from Lebanon last Sunday jointly by experts from the Iranian Revolutionary Guards and the Lebanese militia group Hizbollah. It took pictures with a built-in camera and transmitted them back to Hizbollah, and then crashed into the sea, where fishermen recovered it and returned to Hizbollah operatives. The drone was one of eight that Iran has supplied to Hizbollah.

This comes after a month when Iran has made it clear to the UN and the international community that it plans to go ahead with its nuclear enrichment program. Enriched petroleum is the first step in developing nuclear weapons, although Iran insists it plans only peaceful uses.

We're now near mid-November, a period of time which has previously been identified as critical by the Israeli government, who have said that Iran will reach the "point of no return in its nuclear weapons program by November. At the same time, Israeli Prime Minister Ariel Sharon said that Israel is "taking measures to defend itself" in the Iran situation.

Whenever a politician makes a threat and sets a deadline, it always makes me nervous. Is Israel going to take military action against Iran's nuclear development facilities before December 1? If so, Iran has said it is ready, and will retaliate. If not, then what happens on December 1, when the "point of no return" will have passed?

It's hard to escape the feeling that Iran's drone flight over Israel was meant to stick a thumb into Israel's eye. Iran seems to be saying, "Not only are we ready for you if you take military action, but we're getting ready to take military action against you some day no matter what you do." (11-Nov-04) Permanent Link
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Iraq: Fallujah resistance light so far

As has happened repeatedly - in the war itself, and in Moqtada al-Sadr's insurgency - resistance is quickly collapsing in Fallujah, at least so far. American-led coalition forces have had a "stunningly swift" advance, and have taken control of 70% of Fallujah.

The reason was revealed in a BBC World Service interview on Tuesday of an Iraqi journalist from Fallujah, someone who was evidently sympathetic to the insurgents.

When the journalist was asked what the insurgents hoped to accomplish, he said (paraphrasing), "There's a difference between the Iraqi insurgents and the insurgents from other countries. The Iraqis just want to end the American occupation. Those from other countries are Jihadists wanting to defeat the Americans and are willing to die fighting the Americans."

This contrast is consistent with what we've been saying for many months on this web site. Iraq itself is in a "generational awakening" period, since just one generation has passed since the genocidal Iran/Iraq war of the 1980s. That means that the Iraqis themselves simply do not want a war, and are experiencing a political battle between older and younger generations.

We've repeatedly had fun pointing out that a civil war or anti-American uprising from the Iraqis was IMPOSSIBLE, even though journalists, pundits and high-priced analysts have repeatedly warned of that possibility. We've even taking the liberty of mocking journalists who make such repeated warnings, evidently out of wishful thinking. This was particularly appearent during the brief insurgency of young Shi'ite cleric Moqtada al-Sadr, which collapsed shortly after it started, as we predicted.

We've also noted that Fallujans are getting angry with insurgents. and that foreign-born Abu Musab al-Zarqawi's most formidable enemy may be the 40-50 year old mothers of Fallujah, who have already lost husbands, fathers and brothers in war, and see no point in losing their sons as well.

By contrast, the foreign-born insurgents, including al-Zarqawi himself, are from Lebanon and Palestine, which is in a "generational crisis" period. That's why they're "willing to die" fighting the Americans, and why the Palestine region is so much more dangerous than Iraq itself ever could be.

That's not to say that the recapture of Fallujah is a cakewalk. Abu Musab al-Zarqawi is very dedicated and resourceful and has enormous sums of money at his disposal. But he's trying to stir up a population that simply doesn't want to be stirred up. (10-Nov-04) Permanent Link
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Palestinian rage and dissension grows as Arafat nears death

Plans for peaceful transition of Palestinian power are progressing within the Palestinian Authority, as wary observers look for signs of possible violence following the death of Yasser Arafat, which now appears to be only hours away.

"Hell hath no fury like a woman scorned" was the watchphrase yesterday, when Arafat's wife, Suha, called the Arabic cable network al-Jazeera and screamed that Arafat's aides in the Palestinian Authority (PA) were trying to usurp her husband's role in traveling to Paris to see him.

"Let it be known to the honest Palestinian people that a bunch of those who want to inherit are coming to Paris," she shouted. "I tell you they are trying to bury Abu Ammar [Yasser Arafat] alive. He is all right and he is going home."

Suha is 41 years old, 34 years younger than Yasser. When they got married in 1991, Palestinians reacted with as much disdain and hostility as any society does when an older man marries a much younger woman. Suha was repeatedly rebuffed and humiliated by Arafat's PA aides, the same men who have now traveled to Paris to gain a vengeful Suha's permission to visit Arafat's bedside.

By 1995, when their daughter was born, Suha was spending most of her time in Paris, and now lives in a $5 million penthouse apartment in Paris, where she has control of a great deal more money. She has not seen her husband since 2000.

As Arafat's death approaches, the situation has been further inflamed by the question of where Arafat will be buried. He's expressed the wish to be buried in Jerusalem, but Israeli Prime Minister Ariel Sharon has forbidden a Jerusalem burial.

Now a new inflammatory medical statement is complicating the situation even further, as French doctors are implying that Arafat's poor health was caused by the Israelis' confining him by force to the West Bank town of Ramallah since 2000. Palestinians will honor Arafat as a martyr who stood up against Israel and America and died for his people.

Americans and Israelis criticize Yasser Arafat because he didn't accept a deal in 1999 which would have created a Palestinian state side by side with Israel. Palestinians honor and revere Arafat because he didn't give in to Israel by accepting that deal, which would have required Palestinians to give up the "right of return" to the lands they lost in 1947. This feeling has become only stronger, as Ariel Sharon directs the building of a barrier around Israel that takes even more land that the Palestinians believe belongs to them.

Americans and Israelis have a dream that with Arafat gone, another leader will step into his place and accept the peace deal that Arafat rejected. It's nice to have dreams. I once had a dream that I got to spend the night with Julia Roberts. Their dream has less chance of coming true than mine did. (9-Nov-04) Permanent Link
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Poll: Taiwanese see themselves as a sovereign nation

The survey results, which are highly significant for China - U.S. relations, indicate that 71% of Taiwanese citizens already consider Taiwan to be "sovereign and independent."

The survey was prompted by a speech last month by President Chen Shui-bian on Taiwan's National Day, with the statement, "the Republic of China is Taiwan, and Taiwan is the Republic of China," a statement with which 63% of the survey respondents agreed.

Chen's remarks prompted a late October rebuke by US Secretary of State Colin Powell, who said that "Taiwan is not independent. It does not enjoy sovereignty as a nation," and that Taiwan and China will eventually reach a "peaceful unification" under the US "one China" policy.

The poll results show what a fantasy Powell's rebuke is. What the survey clearly shows is that it's the people of Taiwan who are demanding that the country move toward independence. Most people believe that politicians determine the overall direction of a country, but it's a basic principle of Generational Dynamics that it's large masses of people who determine a country's directions, and that those directions are driven by generational changes.

So Chen couldn't stop the country from moving in the direction of independence if he wanted to; if he tried, he'd be thrown out of office. But of course Chen doesn't want to stop, as I described in my discussion of Operation Summer Pulse 04, and Taiwan's Wild Election Battle. Chen was actually one of the leaders of Taiwan's 1990 Wild Lily student rebellion that demanded Taiwan independence, following Beijing's Tiananmen Square massacre in 1989.

Chen has announced he will amend the Constitution in 2008 to move towards independence, and China has announced that such a move would amount to a declaration of war.

However, Taiwan is only one of China's problems. China is already facing increased violence between its majority Han population and its wealthier Muslim Hui minority, and violence may be spreading.

From the point of view of Generational Dynamics, China is going through a frantic "unraveling" period. Financially, the country is in an economic bubble, similar to Japan in the 1980s and America in the 1990s, and the bubble will burst at some point, creating a recession and loss of jobs.

On top of that, the structured economy balancing farms and factories that Mao Zedong set up in the 1950s is unraveling, as small farms are merging into giant agricultural units, leaving peasants in poverty. In response, young rural peasants are flocking to the factories in the cities, where they receive the relatively high wages of the bubble economy. In fact, China has 114 million migrant workers, the largest migration in human history.

China is teetering on the brink in many ways. An internal rebellion, possibly led by Muslim/non-Muslim violence or by followers of the Falun Gong, or a move by Taiwan for independence, could tip China over. Indeed, if an American recession occurs next year, that could burst the Chinese economic bubble, and create chaos.

The new Taiwanese survey shows that generational changes are causing China and Taiwan to hurtle towards a confrontation; other generational changes are making an internal rebellion and an economic failure increasingly likely as well. All we ordinary people here in America can do is watch it happen and hope that there won't be too much fallout. (9-Nov-04) Permanent Link
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Ivory Coast appears close to major civil war between Muslim and Catholic ethnic groups

France's Ivory Coast intervention is far more dangerous than America's Iraq intervention, since Ivory Coast is in a generational crisis period, and Iraq is not.

American-led coalition forces today are launching an attack to recapture Fallujah from the Iraqi insurgents. Although this is expected to be a violent battle, it will not spiral out of control into a larger war or a civil war. This is true because Iraq is in a generational awakening period, and as I've discussed on the web site a couple of dozen times, a massive civil war or uprising during an awakening period is impossible, since only a single generation has passed since the country's last crisis war, the Iran/Iraq war of the 1980s.

Ivory Coast
Ivory Coast

France does indeed appear to be getting drawn into a war which is spiraling out of control, after the French destroyed the Ivory Coast government's entire air force in retaliation for killing of nine French peacekeepers. This generated a backlash of anti-French violence by thousands of machete-waving rioters around Abidjan, the nation's capital. French President Jacques Chirac is now sending several hundred more troops to bolster the 4600 French peacekeepers already there.

Africa, with Ivory Coast and Darfur highlighted
Africa, with Ivory Coast and Darfur highlighted

France colonized portions of Western Africa in the late 1800s. When France was defeated by the Nazis in World War II, the region was thrown into turmoil, but remained largely loyal to France, despite Nazi provocations. This was a crisis war for France's colonies, as well as for France.

Côte d'Ivoire (Ivory Coast) became independent of France in 1960, although France continued to retain influence.

Today, the World War II fault lines are being revived in a new civil war between the largely Muslim rebel population in the north and the largely Catholic population in the south.

The civil war began in 2002, but it was brought under control by French and United Nations peacekeepers, and both sides were scheduled begin an extensive disarmament program three weeks ago. But the rebels withdrew from the transitional government ten days ago, leading to low-level violence that's currently escalating.

This is following a familiar pattern of crisis wars throughout history. When World War II ended, all sides were forced to accept painful compromises in order to keep the peace. No war broke out in 1960 because civil wars don't happen in generational awakening periods, one generation after the end of the last crisis war. Instead there was a "bloodless coup," a "velvet revolution," an internal revolution that brings about a peaceful change in government, but doesn't really resolve the underlying problems.

Today, the last generation of people who lived through World War II are disappearing (retiring or dying), and all the compromises are unravelling. Powerful "survival of the fittest" emotions are taking over, and there is little fear of another major genocidal crisis war.

Like many crisis wars throughout history, this one is starting off slowly. The 2002 flare up was brought under control by outside forces, the peacekeepers. But when the peacekeepers tried to impose a "peace plan," requiring disarmament by a scheduled date, both the peace and the peace plan fell apart. (This is similar to what's happening in the Palestine region.)

It's possible that the French will be able to bring the government and rebel forces under control once more, but if it does so, then it will be only temporary. Côte d'Ivoire is headed for a crisis war and, if it comes, it will probably engulf the entire west African region. (I've always assumed that the "clash of civilizations" world war would be triggered in Palestine or in the Caucasus, but there's no reason why it couldn't be triggered here.)

According to one newspaper story yesterday, the "clash was in the classic West African mould, with all the potential for madness and disorder that peacemakers fear." The phrase "madness and disorder" alludes to the Darfur genocide going on today, as well as the Rwanda genocide of 1994. Because of this view, it's worthwhile pointing out that this kind of "madness and disorder" is hardly unique to Africa, and occurs throughout the world at all times in history, for reasons that I've previously described.

Nonetheless, it's true that there are many wars going on in the world today, but there's only one crisis war, the Darfur genocide.

If the Côte d'Ivoire situation continues to spiral out of control, it will be the second one, for the time being. (8-Nov-04) Permanent Link
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German papers criticize British hatred of Germany and demand an apology from Queen Elizabeth.

On the occasion of a state visit by Queen Elizabeth to Germany, German tabloids are demanding that she apologize for British hatred of Germans and for the massive bombing of Dresden and other German cities during World War II.

Queen Elizabeth <font size=-2>(Source: Telegraph)</font>
Queen Elizabeth (Source: Telegraph)

In the end, the Queen chose not to apologize, but she acknowledged that both sides had suffered. "And in remembering the appalling suffering of war on both sides," she said, "we recognise how precious is the peace we have built in Europe since 1945."

And she added, "It is difficult for someone of my generation to over-emphasise this."

This remark is at the heart of Generational Dynamics. Having lived through the "appalling suffering" of World War II, people in her generation are willing to make any possible compromises to prevent anything like that from happening again.

The Queen pays her respects at the Stahnsdorf cemetery <font size=-2>(Source: Telegraph)</font>
The Queen pays her respects at the Stahnsdorf cemetery (Source: Telegraph)

Queen Elizabeth also paid tribute to British war dead buried in Germany.

We're now at a unique time in history where all the countries that fought in World War II are now going into a new generational crisis period, as Queen Elizabeth and other people of her generation that remember the horror of World War II all disappear (retire or die). As that generation continues to disappear, the desire for compromise and containment of problems disappears, leading to a new crisis war. (5-Nov-04) Permanent Link
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Palestinian violence looms as Arafat seems close to death

The Israeli military has gone on high alert, and the Palestinian Authority is scrambling to establish new leadership, as both governments scrambled to prepare to control expected rioting and violence that will occur if Arafat's death is announced.

Yasser Arafat is a revered figure among the Palestinians. He's considered the father of the Palestinians, and he's the one leader who's been able to hold all the competing factions together. As one Palestinian woman said today to explain why Palestinians respect him: "He's made mistakes, but you could always count on him to be there for the Palestinians. He did not ever give in to the Israelis."

Arafat, born in 1929, and his Jewish counterpart, Israeli Prime Minister Ariel Sharon, are part of their respective "hero generations" from the genocidal crisis war fought between the Arabs and the Jews in the 1940s, after the UN partitioned Palestine and created the state of Israel. Both men, having lived through war, are willing to take any reasonable steps to create a new genocidal crisis war.

From the point of view of Generational Dynamics the disappearance of either of these men could destabilize the Mideast, but the death of Arafat will be especially significant. His death will be met with open mourning, demonstrations and rioting, and his funeral will attract worldwide attention. Do you remember this past summer how the nation and even the world mourned at the death of Ronald Reagan? That level of emotion will be repeated and exceeded.

However, the greater problem is that the power vacuum left by Arafat's disappearance attract many younger men who will want to fill it. These men will have no personal memory of the 1940s wars, and will be far less inclined to compromise and avoid war.

As I've been saying for two years, the Mideast is entering a generational crisis period, and there will be a major Mideast crisis war in the next few years, with 100% certainty. It will engulf the entire region, and the survival of Israel is not guaranteed. The war might begin tomorrow, next week, next year, or in a few years, but it must occur. In my book, I speculated that it was likely to begin in the months following the disappearance of Yasser Arafat.

And yet, we're hearing from journalists, pundits and high-priced analysts who actually believe that the disappearance of Arafat is what's needed to make peace possible. For example, an official in the Bush administration said that Arafat's death "will encourage resolution of the political uncertainty on the Palestinian side and it will make the prime minister and his government emerge as the only capable institutions,"

This kind of naïve, wishful thinking statement always amazes me. Ever since the second Intifada began in 2000, it's been official Israeli and American policy to isolate Arafat, and to plan for his disappearance so that a peace plan can take hold.

Now we're going to see if those policies make sense after all. (5-Nov-04) Permanent Link
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United Nations: Darfur falling into anarchy

The Sudan government is losing control of areas of Darfur, according to Jan Pronk, the U.N. envoy for Darfur.

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

"Darfur may easily enter a state of anarchy -- a total collapse of law and order," he said. "The progress is slow and the regression is alarming."

When the Darfur story first broke, back in June, I predicted that the United Nations would be unable to prevent the genocide from occurring. Since then, weeks and months have gone by, and nothing's happened but meetings, speeches, condemnations, resolutions and hand-wringing.

There are many wars going on in the world right now, but only one of them is a generational crisis war: The war in Darfur and Sudan.

A major finding of Generational Dynamics is that there are two kinds of wars: crisis and non-crisis wars. Non-crisis wars can start any time for political reasons, and can stop at any time for political reasons. Crisis wars happen at roughly 80 year cycles in any society, and they can't be stopped, any more than an earthquake or a raging typhoon can be stopped.

That's why I was able to predict last June that the Darfur genocide would not be stopped until it had run its course. (4-Nov-04) Permanent Link
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European press expresses fury at Bush victory, while leaders promise to mend fences

The left-wing British Daily Mirror tabloid's front page headline was: "How can 59,017,382 people be so DUMB?"

On the other hand, another British daily, The Sun, hailed Bush's victory as "bad news for terrorists everywhere."

<i>Daily Mirror</i> front page, November 4, 2004
Daily Mirror front page, November 4, 2004

Similar differences were displayed in newspapers throughout western Europe.

These views illustrate that the American Presidential election has exposed deep cultural differences in the European population. Yesterday, we described how such differences in America will lead to a major political and social restructuring in America in the next few years. The European newspaper headlines show how those countries are also heading for the same kinds of political and social restructuring.

We're at a unique time in history, when all the countries that fought in World War II are now entering a new generational crisis period, all at roughly the same time. That's certainly true of America, Britain, and Western Europe, as well as many other countries.

During generational crisis periods, there is less and less motivation for compromise. Old fault lines that people thought had disappeared resurface again, and positions harden, until eventually a new crisis war begins. The American Presidential election gives us an opportunity to see how far these social and political divisions have advanced.

However, foreign positions have not become so hardened that leaders are also expressing extreme views. Most national leaders around the world congratulated Bush on his reelection victory, although some of these messages were guarded. French President Jacques Chirac, for example, expressed the hope that the second Bush term would "reinforce Franco-American friendship." (4-Nov-04) Permanent Link
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Mixed emotions in Europe as Kerry may be victorious.

Most Europeans favor Kerry, but a Kerry victory will cause new strains with America, according to pundits and journalists discussing the American election on the BBC World Service today.

With exit polls this evening showing that John Kerry will be the next President, Europeans are saying that a John Kerry presidency would have a better relationship with Europe than with a second term George Bush presidency. [Late evening update: The vote count and exit polls now appear to show that Bush is leading.]

But they also warn that a Kerry presidency would raise issues that would cause new frictions between America and Europe:

From the point of view of Generational Dynamics, in the long run it will make no difference whether Bush or Kerry is elected, since we're headed for conflicts that have been in the cards for decades. Indeed, Kerry's policies on Iraq, Israel and other foreign policy areas are identical to Bush's, and there really isn't any opportunity for flexibility anyway.

As we've previously written, much of the non-American world favors Kerry, but many of these opinions are based on unrealistic expectations of a Kerry presidency. This view is supported by an article in today's New York Times which describes how the residents of Falluja view a possible Kerry presidency:

Sheik Khalid al-Jumaili, the chief negotiator representing the people of Falluja in talks aimed at averting an imminent American-led invasion, at first said the elections would change nothing for the town either way. But then he warmed to the topic.

"If there is the slightest possibility of a change in the policy in Iraq," he said, "then we pray to God that Kerry wins. We have suffered enough and we need a change in policies."

He is far from the only resident of Falluja to feel that way. Of eight men at a recent gathering of former soldiers, tribal leaders and intellectuals at a home in Falluja, six said they hoped Mr. Kerry would win.

"The policy of Bush was one of violence and war, and we don't think Bush will change that," said a former officer in the Iraqi Army. "Maybe Kerry will be wiser. Even if he doesn't withdraw the American forces, maybe he'll reduce the violence. Even people in America now think that because of Bush's policy, others in the world have taken an aggressive view against America."

Now, there is absolutely no difference in policy on Falluja between Bush and Kerry. Bush has received moderate criticism from conservatives because last spring's offensive against Falluja was postponed for peace talks.

Kerry cannot be less aggressive in Iraq, or in Falluja in particular, or the moderate criticism will become a roar.

Whether Kerry wins or Bush wins, lots of people are going to be furious, and that's going to have an important effect on the world next year. (2-Nov-04) Permanent Link
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Muslim / non-Muslim violence emerges in central China

A traffic accident spurred rioting and violence, killing possibly dozens of people in Henan, a province in central China, although reports of the exact number are conflicting.

The violence cannot be called "inter-ethnic," since both groups, the minority Hui and the majority Han, are ethnic Chinese. The Han Chinese make up more than 90% of the the country's 1.3 billion people.

The Hui minority consists of ethnic Chinese whose ancestors converted to Islam. Although the Hui and the Han live in the same region, the Hui live in separate communities, attend mosques in those communities, and have separate customs, especially as regards eating pork, which is a common Chinese food, but is forbidden by Islam.

According to the BBC World Service, the Hui minority have been successful in trucking and restaurants, and are wealthier than the Hans, most of whom are poor farmers.

This is a typical description of a "market-dominant minority," a structure that appears frequently around the world and generates enormous fury. (I like to remind people of the Enron scandal in America in 2001; after it occurred, the infuriated American public was calling for all corporate CEOs to be jailed, even those who had nothing to do with scandal.)

So far, this appears to be a classic local rebellion, of a kind that is very common in Chinese history. Prior to the 1800s, all such local rebellions were handled by armed forces troops.

China and adjoining countries (modern names and boundaries), showing the origins of the White Lotus Rebellion and the Taiping Rebellion.
China and adjoining countries (modern names and boundaries), showing the origins of the White Lotus Rebellion and the Taiping Rebellion.

The first rebellion for which this approach failed was the White Lotus Rebellion, which occurred in the same central China region from 1796 to 1805, and proved too large for the regular army to handle.

That was a precursor to the massive Taiping Rebellion of 1851-64, which killed tens of millions of people. It started in southeastern China and killed tens of millions of people - 15% of the entire Chinese population.

The next round of massive bloodletting began in 1934 with Mao Zedong's Long March from the same region where the Taiping rebellion began. The resulting civil war between the Communist Mao and the Nationalist Chiang Kai-shek continued until 1949, with only a brief pause during World War II when the two leaders joined forces to defeat the Japanese invaders.

From the point of view of Generational Dynamics, these rebellions and civil wars have occurred with clocklike regularity in Chinese history, and we're now approaching the "scheduled" time for the next one. The fact that a mere traffic accident could trigger such massive violence in central China is a sure sign that the necessary generational changes have already occurred.

China has imposed martial law on the region, and has sent thousands of security forces personnel to the region to bring it under control.

It's possible that the Chinese security forces will succeed in restoring control, but Generational Dynamics predicts that there'll be a new massive rebellion (civil war) in China within the next decade.

One possible agent of this rebellion may be the followers of the Falun Gong, a form of meditation that grew out of reaction to the 1989 Tiananmen Square massacre. Indeed, the leaders of the Falun Gong movement have said that they consider themselves to be the spiritual descendants of those who started the Taiping Rebellion. China has outlawed practice of the Falun Gong, using massacres and jailing of practitioners (which is like jailing someone for exercising to Richard Simmons tapes), but has been unsuccessful in doing so.

Today, China is in a "generational unraveling" period, where all the strict societal rules imposed by Mao during the 1950s are unraveling, and there is little social structure to replace them. In particular, China is experiencing an economic bubble similar to Japan in the 1980s and America in the 1990s.

Generational Dynamics predicts that China is very close to chaos, and that there are three possible triggers of this chaos:

Any one of these triggers could occur at any time -- next week, next month, or two or three years from now.

Generational Dynamics predicts that all three of these will occur in the next decade or so. The Henan rioting and violence going on today is a precursor of much more to come. (1-Nov-04) Permanent Link
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