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


Web Log - January, 2005


US dollar weakness and China's growing economic strength dominate World Economic Forum

There's always craziness when world political leaders talk about economics (the same is true of any politicians), and the crazy ideas were flowing like wine last week, as 2,250 representatives of the world's leading economies spent 5 days in a ski resort in Davos, Switzerland, discussed "Taking Responsibility for Tough Choices."

Many "tough choices" were discussed -- combatting poverty and disease, especially in Africa, reducing oil and commodity prices, and fixing global warming. But there was no taking of responsibility, however, except that most of the participants meant that someone else -- usually either America or China -- should be taking responsibility.

However, the weakness of the dollar, and China's growing political and economic strength were the two related issues overshadowing all of the meetings.

The continuing dollar weakness is caused by the American public debt, which is astromically high by historical standards, and continues to grow rapidly, with no end in sight.

Many politicians, including some in the Bush administration, have been blaming the problem on China's "fixed rate" policy, which fixes the yuan at 8.2 to the dollar. The argument is that this has given Chinese exports an unfair advantage on global markets, and Washington's position has been that the Chinese should allow the yuan's value to float against the dollar. Banking officials in Europe, which is a major trading partner with China, have also blamed Europe's troubles on the fixed peg, and are asking China to float the yuan.

The Chinese agreed this week that something had to change, but signaled that a different kind of change was in the works.

"The U.S. dollar in our opinion is no longer a stable currency, and is devaluing all the time, causing [continuing troubles]," said Fan Gang, director of the National Economic Research Institute at the China Reform Foundation. His talk attracted a large standing-room only crowd, and his remarks attracted a great deal of attention, as well as questions about whether it represented official Chinese policy.

"The real issue," he continued, "is how to change the regime from a U.S. dollar pegging to a more manageable reference, say, [a combination of] euros, yen and dollars -- a more diversified system. [In the beginning, this would cause] some kind of initial shock. You'd have to deal with some devaluation pressures."

Thus, the Chinese are signaling that they won't freely float the yuan, but they're consider revaluing the yuan upward to a new fixed value pegged to a combination of the euro, yen and dollar.

As Fan Gang indicated, any revaluation of the yuan is liable to cause a shock in the U.S. A substantial number of consumer goods in American stores were manufactured in China, and a revaluation of the yuan would increase their prices substantially.

Last year, a number of analysts predicted that there would be a recession in America this year, thanks to oil prices above $40 a barrel, so there are many factors that will be pressuring the American economy in the next few months. These factors include: oil prices that remain close to $50 a barrel; an aggressive policy by Alan Greenspan and the Fed to raise interest rates; and a potential devaluation shock for the dollar. With the stock market overvalued by 50% or more according to traditional price/earnings ratio measures, these factors could cause a substantial fall in stock prices.

Generational Dynamics predicts that America is in a generational crisis period and that we're entering a new 1930s style Great Depression. When I first predicted this in 2002, I was expecting a gradual collapse in stock prices between then and 2007, as happened in 1929. But as I wrote a few days ago, I've changed my view. The change is based on the fact many investors are expecting some kind of stock market correction, but believe that they can get out in time. Because only a few can get out in time, the logic of the situation implies that some unexpected event will a stock market collapse very quickly, with a huge fall in a day or two, too fast for almost anyone to get out in time.

Last week at Davos, Fred Bergsten of the Washington-based Institute of International Economics said that, “The US deficits are unsustainable in domestic-political and trade-policy terms, as well as in international financial terms.”

Bergsten sees the possibility of a dollar crisis "within weeks". The European Central Bank, the Bank of Japan, and the People's Bank of China have all been purchasing huge volumes of American dollars and American debt.

Bergsten sees this changing soon. Smaller Asian banks, including those in Malaysia, Thailand and Indonesia, have evidently already begun selling dollars and buying euros. Bergsten sees the larger central banks starting to do the same thing, resulting in a sudden collapse of the dollar by 20-40%. That might (or might not) be the trigger that causes the stock market collapse predicted by Generational Dynamics. (31-Jan-05) Permanent Link
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The chaotic Iraq election is only two days away

The election is on Sunday, January 30, and no one has a clue what's going to happen.

Journalists, pundits, and high-priced analysts are strangely silent in their predictions about what's going to happen on Sunday, and thereafter.

The reason that's very strange is that they've had no trouble predicting things up till now. On January 9, as I wrote at the time, pundits were making all kinds of predictions. One pundit said the Sunnis won't come out to vote because they're a minority. Another said the Shi'ites won't come out to vote because they're anti-American. Another says that everyone will be too terrorized to vote. Etc., etc., etc. These predictions by pundits were completely hot air, based on nothing but wishful thinking and demented logic.

We used the word "chaotic" in the title of this article for a reason. We mean "chaotic" in the sense of Chaos Theory.

Most readers have probably heard of the "Butterfly Effect" in weather forecasting: if a butterfly in China flaps its wings, then it can start a chain reaction that leads to a hurricane in America a week or two later.

What this means is that we'll never be able to forecast the weather any better than we can today. No matter how good the science is, no matter how fast the computers are, it's mathematically impossible to predict the weather accurately for more than a few days in advance.

Exactly the same principle is true in political forecasting. Your political forecasts will never be accurate for more than a few days, no matter how good your reporting is.

That doesn't stop the journalists, pundits and high-priced analysts from making predictions anyway. After all, it's easy to get a million predictions right. Just make two million predictions. That's what the pundits do.

The Generational Dynamics methodology very carefully avoids making predictions about chaotic events. On this web site, I'm very careful never to make such predictions. Yes, it's true that I sometimes can't resist the urge to state an opinion on an upcoming chaotic event, but I always (try to remember to) use words to indicate that it isn't a prediction; so I might say that it's "likely" or "possible," or "probable."

In one article, on the six most dangerous regions of the world, I even went to the trouble of computing a specific probability (that, under certain assumptions, the probability of the "clash of civilizations" world war beginning in 2005 was about 21%, and would be slightly higher in 2006 and every year thereafter until it happened).

A little while ago, I was having an e-mail discussion with someone who runs a news web site that specifically claims to be making predictions. I finally got to the point where I pointed out to him that "what you're trying to do is impossible -- not just difficult, but mathematically impossible." He didn't bother to write back after that, so I have to assume that he just didn't want to hear that.

I gave him a couple of examples. In September, they had predicted that an American invasion of Iran to stop nuclear weapons development was "not an option." That prediction is, of course, completely ill-founded. Any of a number of "butterfly" events could turn that around. Israel might receive some specific intelligence, leading to a pinpoint bombing or an invasion with a small force. Or there might be an Iranian defector, or something suspicious in a spy satellite photo, or a drunken admission by a mullah, or a sex scandal involving an Iranian nuclear scientist.

That's what we mean by predicting chaotic political events. It's not just difficult - it's actually mathematically impossible. That's one of the things that Chaos Theory proves.

Now, contrast that prediction with a prediction that I've made repeatedly for over two years: That there wouldn't be a civil war in Iraq. What's the difference between their prediction of no invasion of Iran, and my prediction of no civil war in Iraq?

The difference is that an invasion of Iran would be a decision made by politicians, and decisions made by politicians are chaotic events.

But a civil war in Iraq is a "decision" that would come from the people, not from politicians. This distinction between decisions coming from politicians versus the people is a fundamental distinction used throughout Generational Dynamics.

When you're talking about large masses of people, behaviors and attitudes change over the generations in predictable ways that have been identified by Generational Dynamics. This means that only certain things can be predicted, but those predictions can be made with near certainty.

For over two years, this web site has been a "real-time laboratory experiment" to see if this kind of prediction works. Every prediction I've made is still on this web site, accessible from either the front page or the archives. It's been extremely successful - far more successful than any journalist, pundit or high-priced analyst that I'm aware of. (On the other hand, I don't seem to be able to make any money doing this, and they make lots of money, so compared to them, my very real victory is quite Pyrrhic.)

Incidentally, I had promised that my new book, Generational Dynamics for Historians, would be finished by now, but it's taking a little longer than expected. If you're interested in this stuff about Chaos Theory, the new book will explain how it works in detail. I've made a lot of progress in the last few weeks, and I'm hoping to have the first draft completed and posted on this web site in just one or two more weekends' work. Incidentally, if you're wondering why I've been posting in this web log a little less frequently, that's the reason - I spend every spare minute I have finishing up the book. It's taken me a little bit longer to sort out all the details and get them all written down, but with luck it shouldn't be more than a couple more weeks. (I can't predict the exact date, because it's a chaotic event, in almost every sense of the word.) (28-Jan-05) Permanent Link
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World figures marking Auschwitz liberation overemphasize Hitler's uniqueness

The atrocities in the Holocaust were horrific almost beyond belief, but they were hardly unique.

Jewish leaders, Holocaust survivors and world political figures commemorated the liberation of the Auschwitz-Birkenau death camp on January 27, 1945.

Heads of state, Jewish leaders, Nazi death camp survivors and a handful of their liberators gathered here on Thursday to commemorate the freeing of thousands of people from the Auschwitz-Birkenau site 60 years ago.

Most of the speakers described the Holocaust as uniquely evil, and Hitler as a unique monster, but there have been a number of genocides in the twentieth century -- the Turks of the Armenians in the 1910s, Stalin's Russia of the Ukrainians in the 1930s, Mao of his own people in the 1950s, the Cambodians in the 1970s, the former Yugoslavia in the 1990s, Rwanda in 1994. In this century, we've already had the Darfur genocide.

I think that Jewish leaders do themselves a disservice by insisting that the Holocaust was uniquely horrific or evil. By essentially denying the credibility of other genocide victims' stories, they only encourage and give indirect credibility to the Holocaust deniers.

One Jewish Holocaust survivor said how important it is to educate young people about the Holocaust, so that the world will never forget. "It's difficult for young people to distinguish between an Auschwitz and Rwanda," he said.

It's difficult for me, too. In the Holocaust, the Germans tried to exterminate the Jews by sending 1.5 million to their deaths in Auschwitz and other concentration camps over a four-year period. In Rwanda, one race mass-murdered, raped, and dismembered one million members of another race, all in at three-month period.

From the point of view of Generational Dynamics, no genocide is unique, genocide is commonplace, and genocide is neither good nor evil. It's as much a part of being human as sex is -- both are needed for "survival of the fittest" among different human societies, nations, ethnic groups and religions.

The world today is vastly over-populated. Poverty, homelessness and starvation are increasing around the world, because population grows significantly faster than the food supply. History has shown, over and over and over and over, that there is only one way to "correct" this problem, and it will be corrected in the next decade in the "clash of civilizations" world war. (28-Jan-05) Permanent Link
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A change in thinking about the economy

Stocks fell again yesterday, as they have steadily since December 31.

Stocks fell despite generally good earnings reports in the last few days, but as one commentator described the situation, "Investors are looking for reasons to sell, not for reasons to buy."

If you're looking for reasons to sell, you won't have any trouble finding some. Oil prices are back up, reaching $50 a barrel today. Alan Greenspan and the Fed are on a tear, planning to raise interest rates steadily throughout the year. Stocks are still overpriced by a factor of two, according to perfectly standard price/earning ratios. American public debt is so high, and growing exponentially, that Japan and China are in a trap: They buying huge amounts of America's debt, for fear that if they don't, all three economies could collapse.

And the collapse is coming, according to more and more analysts. A lengthy 10-year analysis of the economy by Chris P. Dialynas, Managing Director of PIMCO, begins, "Today, the global economy is on the threshold of upheaval."

Peter Schiff, CEO and chief global strategist of Euro Pacific Capital, says in an interview with Forbes, "We are going to go through one of the most trying financial times in U.S. history, including the Great Depression." He says that, "We are a society that has lived beyond its means for a long time," adding that while the trend has been evident for two or three decades, "in the last five years, it has gone off the deep end." Americans are relying on foreigners more and more to produce goods, rather than producing them themselves.

And Stephen Roach, the Chief Economist at Morgan Stanley was privately telling clients that America has no better than a 10 percent chance of avoiding "economic Armageddon," according to a Boston Herald news report.

I personally have had a change of thinking in the last year in the nature of the coming financial crisis. I alluded to this change of thinking a few weeks ago when I wrote that the stock market might lose 50-75% of its value, possibly in a single day.

This change has been bubbling in my mind for many months, but what really firmed it up was the tsunami disaster in the Indian Ocean, for reasons that will soon be clear.

Dow Jones Industrial Average -- 1896 to 1940
Dow Jones Industrial Average -- 1896 to 1940

Early in 2002, when I was first developing Generational Dynamics, I concluded that it implied that we would have to be entering a new 1930s style depression. At that time, I speculated that the path of the depression would be similar to the 1930s, as shown in the adjoining graph.

Notice that stock prices fell gradually from 1929 to 1933. I've been assuming that something similar would happen now, following the 2000 Nasdaq crash.

However, the path since the 1990s bubble has been quite different:

S&P 500 index, 1950 to present
S&P 500 index, 1950 to present

This graph shows the explosive bubble that began in 1995 followed roughly the same upward path as the 1920s bubble. But the downward paths have different. A lot of the reason for this is the near-zero interest rate policy that the Fed has followed; this prevented massive bankruptcies and homelessness in 2000 and 2001, but it transformed the stock market bubble into a more unstable credit bubble.

So what's going to happen when the bubble bursts?

Now, here's an important change. I speak to a lot of people, and I've learned something remarkable: Evidently many, many investors are aware that "something is wrong" with the stock market, and they plan to sell "soon," but they think that they can get out in time.

Even those who've already lost money in the 2000 Nasdaq crash seem to have no fear. They're certain that they'll be "smarter" this time around, and get out fast when they see the warning signs.

I just spoke to an investor today who said, "I can't sell now with the market down. I'll sell in a couple of months when the market is up again." Gulp. What if the market doesn't come up again?

DJIA, Jan 24 2004-2005
DJIA, Jan 24 2004-2005

Look at the graph on the right of the DJIA for the last year. It's as addicting as a roller coaster ride. It even looks like a roller coaster ride.

This leads to an obvious apparent logical contradiction. We know that "getting out in time" is a zero-sum game, and that only a few people will actually succeed at doing that. Therefore we know that most of the people who believe they can get out in time will not be able to do so. It therefore follows that the next collapse won't take four years, as it did in 1929-1933, but will occur so quickly that almost all investors will be unable to react in time.

Thus, I see two possible scenarios:

Either way, we're going to return to the bankruptcies and the homelessness of the 1930s.

Things have gotten so bad in the world economy, that it's only a matter of time before something triggers a collapse. The trigger could be almost anything -- a word from Japan or China that they won't purchase as much American debt, an unexpected bankruptcy, a terrorist act, or any of a million other possible random, chaotic events that can cause a panic.

There's no way to predict this with any certainty. Maybe the stock market will continue its wild roller coaster ride for another year, and will go up and down five times before then. But with price/earnings rations so high, and with public debt so astronomically high and growing quickly, there is no possibility that the current situation can continue.

The depressed economy will be with us for a long time, since we'll be seeing a "reverse bubble" effect. That is, people in the 1990s were irrationally exuberant in making unwise investment decisions, while people after the next crisis will be irrationally subdued, and will be overly cautious in making new investment decisions.

Expect a severely depressed economy until the 2015-2020, when the new biotechnology revolution will begin to take hold.

A lot of people ask me about investing in gold. My view is this: The economy is in a long-term deflationary period right now, which means that gold is more likely to fall than rise. But if it falls, it won't fall much, and there's a good chance that gold will spike upward for a while. So gold is a good bet, since the worst that will happen is that you'll lose very little.

Another choice is Treasury bonds. Ten-year bonds are paying a little over 4% a year, which is pretty good these days, especially since you might lost 50-75% in the stock market.

You could put your money into banks, because your money will be insured -- but if you have a large bank account, make sure that you don't exceed the bank's insured amount. Or stuff your money into the mattress. It'll be safer there than in the stock market. (25-Jan-05) Permanent Link
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Some notes on current news in Darfur, Palestine and Ukraine

It appears that the genocidal crisis war in Darfur, Sudan, may be ending.

There are many wars going on in the world today, but the only crisis war has been the Darfur war in Sudan.

Now, a peace treaty signed last week appears to be holding, although some fighting and atrocities are continuing, according to some news stories.

Crisis wars are genocidal, meaning that the extermination becomes an objection, usually for the purpose of gaining access to land, wealth and even women. All of these elements were seen in this war, as pro-government Arab milities conducted ethnic cleansing against the regions black African population. Crisis wars cannot be stopped until they reach their explosive conclusion, which, in this case, resulting killing 70,000 people and forcing some two million people to flee their homes for camps. However, the fact that some fighting is continuing may mean that a resurgence is still possible.


After winning last week's election for leader of the Palestinian Authority (PA), Mahmoud Abbas, also known as Abu Mazen, is taking bold steps to advance the peace process. He's deployed PA forces throughout Gaza to stop further attacks on Israel, thus meeting a major demand of the Israelis.

Now the spotlight is on Israel. Israel has promised a cease-fire for at least a month, meaning that it will not attack Palestinian militias for that period. After that, pressure will be on Israel to commit to a date to tear down the security wall.

Generational Dynamics predicts that the peace will not hold, and that there will be a new genocidal crisis war between Jews and Palestinians within the next few years.

As I've described, Palestine/Israel is one of the six most dangerous regions of the world, in that a regional war is almost certain to explan quickly into a world war.


Viktor Yushchenko took the oath of office as President on Sunday. Russia sent only a low-level aide to represent Russian president Vladimir Putin at the inauguration. That's not too surprising, since Putin openly opposed Yushchenko during the campaign, and said many, many offensive things about him and his followers.

But not to worry -- on Monday, Yushchenko takes a trip to Moscow to meet with Putin personally. Yushchenko has already said that he plans to establish close relations with the EU, which Putin would hate, and now Yushchenko is going to Moscow to make friends with Russia again. The steely Putin will skillfully force himself to smile, all the while hoping for a legitimate opportunity to slip a shiv into his ribs.

Although everyone's playing nice right now, there's a lot of unfinished business to be played out as well. This is a huge humiliation for Putin, and he will get revenge.

Generational Dynamics predicts that the 1932 Russian genocide of Ukraine is a battle that will be re-fought. The entire Caucasus region is close to being aflame, thanks to the ten-year-old Chechen war, and the terrorist acts like the Beslan school massacre. It's very unlikely that things will settle down soon. (24-Jan-05) Permanent Link
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After 38 deaths from bird flu, Thailand declares state of emergency

A World Health Organization (WHO) alert says that a worldwide pandemic of the bird flu "may be imminent."

As we wrote earlier this week, officials at WHO are increasingly concerned that the deadly virus, so far confined almost exclusively to chickens and ducks, may mutate into a form that can be passed from human to human.

With new bird flu deaths occurring in Vietnam and Thailand, Thailand has declared a state of emergency. So far, people infected with the bird flu stand a 75% chance of dying, but those infections were contracted from direct contact with chickens and ducks.

If some human being contracts both bird flu and ordinary human flu at the same time, that would probably be enough to create a bird flu virus that could be transmitted from human to human. Such a virus would probably have a lower death rate, but even if the death rate lowers to 10%, a worldwide pandemic would still kill hundreds of millions of people. The 1918 worldwide Spanish flu epidemic killed 40 million people.

The bird flu virus is clearly mutating, according to WHO officials. It now appears capable of infecting additional animals (tigers and cats), and it's become "hardier," able to survive longer in the environment.

Another issue is that infected ducks don't show any symptoms, but during migrations they can spread the virus through their droppings.

Because there are so many different ways now that the virus can mutate, WHO officials believe that a worldwide pandemic is increasingly likely. A particularly plausible time is next month, during Vietnam's lunar new year (Tet) celebrations, when many people will be travelling, and more poultry is transported, slaughtered and consumed.

Incidentally, in response to a reader question, a potential bird flu pandemic has no major connection with Generational Dynamics, but I'm covering it on this web site because most people are ignorant of what's going on, and the media is doing little to publicize it. However, there is one indirect connection: A bird flu pandemic might trigger a major worldwide financial crisis, and might trigger a major civil war in China. (21-Jan-05) Permanent Link
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Bush's inaugural address speaks to America's destiny

In a stirring speech, President Bush said that "The great objective of ending tyranny is the concentrated work of generations. The difficulty of the task is no excuse for avoiding it." And indeed, "We go forward with complete confidence in the eventual triumph of freedom."

In a speech that used the words "liberty" and "freedom" in almost every sentence, he said that if liberty and freedom are goals, then America must play an important part. "We are led, by events and common sense, to one conclusion: The survival of liberty in our land increasingly depends on the success of liberty in other lands. The best hope for peace in our world is the expansion of freedom in all the world. America's vital interests and our deepest beliefs are now one."

He issued a warning to dictatorships by saying, "We will persistently clarify the choice before every ruler and every nation: The moral choice between oppression, which is always wrong, and freedom, which is eternally right. America will not pretend that jailed dissidents prefer their chains, or that women welcome humiliation and servitude, or that any human being aspires to live at the mercy of bullies."

And he said that America will not stand passively by: "All who live in tyranny and hopelessness can know: the United States will not ignore your oppression, or excuse your oppressors. When you stand for your liberty, we will stand with you."

I thought it was a great speech, but it's going raise a lot of hackles in some countries. North Korea and Iran will feel especially targeted. We're at a time in history where positions harden. Everybody likes freedom and liberty, but Islamic terrorists will say, "See? He's going to treat all Muslim countries like Iraq."

For me personally, there's a very eerie connection.

Here's what appears on the back cover of my book:

It's not just a coincidence that Bush's inaugural address echoes the theme of America's manifest destiny. The past 60 years have been America's Golden Age. At the end of World War II, America took on the idealistic role of "Policeman of the World," defending freedom and democracy wherever it could.

We really are seeing the climax of America's Golden Age. Since WW II, America became the world's only remaining superpower and now, since 9/11, America's policeman role has gone from being defensive to being preemptive.

Bush's speech captured the sentiment of the moment. But as we head toward the "clash of civilizations" world war, which will be much worse than WW II, the greatest danger facing America is stronger than ever: The danger of hubris, the belief that America can easily win against any opponent. This hubris is all around us, and it will cause us to overextend ourselves, to the point where the entire nation is in danger.

A millennium of Anglo-American history have been leading inevitably to this decisive crisis. Every American will be tested, and we won't know until it's over whether America will even survive, or whether America will enter a another, brand new Golden Age. (21-Jan-05) Permanent Link
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A look at President Kennedy's 1961 inaugural address

On President Bush's inauguration day, it's well to remember that life is what happens while you're making other plans.

President George W. Bush will be making his second inaugural address later today. One of the best remembered inaugural addresses is that given by President John F. Kennedy on Friday, January 20, 1961. It began as follows:

And here's how it ended:

When reading President Kennedy's address, in which he describes how much the world had changed, it's well to remember how much the world has changed since then.

Kennedy was leading a nation that had beaten the Great Depression and had beaten the Nazis in World War II, a world which had tested both America's existence and America's way of life. For Kennedy, the world was a very dangerous place, and the hard-won peace following WW II could be destroyed at any time the Soviet Union and Communism, which he considered to be as evil and dangerous and Naziism.

Kennedy himself was a WW II hero, and like all heroes, his goal was to prevent anything like that from ever happening again, and that meant not appeasing the Communists the way that those in the West had initially appeased the Nazis. That led to the Vietnam War, which confounded Kennedy's words:

In fact, the 1960s were in a "generational awakening" period. During generational awakening periods, there's always a "generation gap," a major political clash between the hero generation from the previous crisis war, and the new generation born after the war, having no personal memories of the horrors of that war, and unwilling to support the austere compromises and rules that the hero generation has devised to prevent any such war from ever happening again. The result is that America was not willing to "pay any price, bear any burden, meet any hardship," and America lost that war.

Today, the generational awakening period is long behind us, and we're in a new generational crisis period, approaching a new "clash of civilizations" world war that will be far worse than WW II. Ironically, Kennedy's words are much more relevant today than they were in 1961.

As we wait to hear what President Bush will say in his inaugural address, it's well to remember that things may not go according to Bush's plans, just as they didn't go according to Kennedy's plans.

It's also worthwhile to remember what I predicted last year. When polled on who the greatest Presidents have been, historians' top choices are from America's previous generational crisis periods: Abraham Lincoln from the Civil War, inaugurated in 1861, and Franklin Delano Roosevelt from WW II, inaugurated in 1933, 72 years later. Great events make great Presidents, not vice-versa. Today, in 2005, 72 years have passed again, and we're on the verge of many new great events. Last year I said that whoever won the election (Bush or Kerry) would be America's next great President, and I have no reason today to doubt that prediction. (20-Jan-05) Permanent Link
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Public backlash forces Putin to increase pension benefit payments

Former Putin allies are calling for a vote of no-confidence, thanks to thousands publicly protesting a new law that removes "in kind benefits," such as free medicine, transportation and housing for pensioners and disadvantaged groups, and replaces them with an increase in cash benefit payments.

With the protests spreading across the country in their second week, Russian President Vladimir Putin announced that the amount of the cash benefit increase will be more than doubled.

As [[**Error** Macro '=inc' is illegal **]] the protests so far seem far from being a serious threat to Putin's political strength, though the payment increase has the smell of desperation. His former allies in the Communist Party are agitating for a vote of no confidence in the Duma, and the worst of the protests should come at the beginning of February, when pensioners will receive substantially higher housing bills, and we should know by then what impact the protests will have.

The interesting question is this: How will Putin react if the protests grow and the no-confidence vote shows signs of succeeding.

As I've said in the case of the nationalization of Yukos assets, Putin appears to be following in the steps of Nicolai Lenin prior to the 1917 Bolshevik Revolution. Putin does not appear to me to be the kind of guy who'd step down easily if threatened with a vote of no confidence.

Putin is not heavy handed. His nationalization of Yukos was very crafty, and he's trod carefully in problems with Ukraine and Georgia. If the pension reform protests blossom into a major crisis next month, we'll see how deep Putin's steely determination goes. (19-Jan-05) Permanent Link
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Bird flu is causing panic in Asia -- as well as in Geneva and Atlanta

Bird flu is spreading across Vietnam, forcing the culling (killing) of thousands of birds, severely harming the Vietnamese economy, and raising widespread fears of a possible human bird flu epidemic.

Under the direction of the World Health Organization (WHO), hundreds of thousands of birds have been culled in the last year. Last March, when Vietnam announced that the bird flu had been completely eradicated, it had been hoped that further culling wouldn't be necessary. But it turns out that the virus is capable of living dormant in ducks through the summer, and then start spreading again when it turns cold in the fall. So the virus has reappeared in Vietnam, Thailand and China, and culling began again last month.

This is having a devastating effect on the Vietnamese economy. Chicken production is big business in Southeast Asia, and culling chickens has cost a lot of money. Small peasant farmers, who have only a few birds as their main source of income, have had to cull them all.

These huge sacrifices are all being motivated by a very real fear. The World Health Organization in Geneva and the National Institutes of Health in Atlanta are expressing concerns greater than for SARS or any other recent world health issue.

The bird flu is spreading wildly among chickens and ducks. It's also spread to a few humans -- almost 40 people have died from it in the last year.

However, the people who have gotten the flu have caught it by rubbing against an infected bird. If the flu mutates so that it can be spread from human to human, then there'll be a major worldwide pandemic.

How many people will die? The following figures tell the story. The last major flu pandemic was the Spanish flu in 1918-19. Most people in the world became infected, and about 3-5% of those infected died, for a total of about 40 million deaths.

So far, among those who have been infected by bird flu, the death rate has been around 75%. If the flu mutates, then that percentage may drop, but even a death rate of 10% could mean hundreds of millions of deaths.

What does it take to cause a mutation? No one is sure, and no one is even sure that the bird flu is capable of mutating into a form that can be transmitted from human to human. However, some scientists believe that it could happen very easily if the some person become simultaneously infected with the bird flu and an ordinary human flu at the same time; the two flu viruses could recombine within a single human body into a new, mutated variant.

When will it happen? It could happen any year, and it could even being next month. That's because it's already spreading quickly, and next month's Lunar New Year celebration will vastly increase the marketing, transportation and consumption of poultry for a brief period.

According to one official from WHO, speaking to the BBC World Service, the disease is spreading so fast among birds that there's a good chance that we'll know the answer in 2005. "It could turn to the left, and create a pandemic; or it could turn to the right, and prove to us that it can't mutate." Either way, we should know the answer soon. (18-Jan-05) Permanent Link
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Tens of thousands protesting benefit reductions in cities across Russia

Putin may be facing a serious political crisis, thanks to a restructuring of federal benefits that affect the vast majority of families in the country.

The benefit structure was set up during the Soviet area, following the Communist maxim: From each according to his ability, to each according to his need.

There were many, many people with a need: the elderly pensioners, war veterans, the handicapped, low-income families, and other groups considered socially vulnerable. In fact, about half of Russia's 145 million people were receiving a variety of benefits, including free public transportation, free medicines, free treatment a health resorts, free local telephone service, and discounts on housing and residential utilities.

Almost all these benefits were canceled on December 31, and replaced with payments of $15 to $100 per month, way too little to replaced the lost benefits, according to the protesters.

And the protests may be only just beginning. On February 1, the pensioners will receive their first communal housing services bills -- bills for such things as heat, electricity, gas and water. These bills alone may exceed the monthly payments, and will certainly lead to even more mass protests.

It's ironic that Russian President Vladimir Putin will be held directly responsible for these changes, thanks to a law that Putin signed last month scrapping direct regional elections, giving himself the right to nominate governors with the approval of regional parliaments, along with the right to dismiss them.

Prior to this law, people might have held the regional governors responsible for the pension reductions, but since Putin now controls the governors, Putin is the man to blame.

In fact, Putin is being blamed for several things these days. While still popular, his leadership is being questioned more and more, thanks to last September's Beslan school hostage massacre and his humliating failure in openly supporting the losing candidate in the recent Ukraine election.

Ever since the Kremlin began legal moves to take over the oil giant Yukos, I've been saying that Putin is following in Lenin's footsteps, by appearing to be nationalizing businesses and appropriating their assets for the Kremlin. Lenin led the 1917 Bolshevik Revolution which was followed by a decade of massive civil war that killed tens of millions of Russians, a civil war that Generational Dynamics predicts will be refought.

Yesterday I posted an analysis indicating that China appears to be approaching a major civil war. This conclusion was based on a variety of factors, including the increasing number of mass riots, a huge migrant worker population, big income disparities, and an unraveling of the social structure.

My reading is that Russia's social unrest from these pensioner protests is not anywhere nearly as bad as the social unrest from the Chinese riots. China is much closer to a civil war, in my opinion, than Russia is, though of course that could change rapidly if the protests greatly expand next month.

That's not to say that Russia is free from conflict - far from it. In the Caucasus, the war with Chechnya is in its tenth year, and the level of tension with the Republic of Georgia has been increasing, especially since Putin vetoed continuation of the international peacekeeping force along the border.

Generational Dynamics predicts that there will be a new major war in the Caucasus, and that the Russian civil war of the 1920s will be refought. One possible scenario is that a larger Caucasus war will spiral out of control into a full-scale Russian civil war. One way or another, the Caucasus is still possibly the most dangerous region in the world today. (17-Jan-05) Permanent Link
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Sharp increase in trade deficit surprises economists

Mainstream economists had expected the trade deficit to level off, and were surprised by the sharp 7.7% increase in November to $60.3 billion, announced yesterday.

Monthly trade deficit, 2002-present <font size=-2>(Source: WSJ)</font>
Monthly trade deficit, 2002-present (Source: WSJ)

As you can see from the adjoining graph, the monthly trade deficit rose substantially in 2002 through early 2004, but then appeared to be leveling off for several months, until the November up-spike.

On this web site, we've emphasized long term structural fundamentals in the economy, such as astronomically high public debt, and astronomically high stock valuations.

Mainstream economists downplay the importance of these problems because they consider the economy to be "self-correcting." In the case of the trade deficit, this should work as follows:

But this hasn't been working in today's economy. With the dollar falling so precipitously in the last few years, the trade deficit should be falling as well; instead, the above graph makes it clear that it's increasing. The only we can't tell for sure is whether the increase is linear or exponential, but either way it means the economy is not correcting himself.

From the point of view of Generational Dynamics, here's what's going on: During the 1930s Great Depression, most old businesses went bankrupt, and every new business was "lean and mean," with every employee required to pull his full weight.

In the intervening 70 years, these businesses have all been getting calcified with bureaucracies, older employees who are waiting around for retirement, middle aged employees whose job skills are obsolete, or whole departments or divisions producing products and services that people no longer want. Therefore, the average American business today is producing too many overpriced products that nobody really wants. The same calcification process has also happened with government agencies, universities, and all other organizations.

So the economy will "correct itself," but will do so by a major adjustment like the crash of 1929. This will force all the existing businesses into bankruptcy, and the cycle will repeat with the creation of new "lean and mean" businesses. Unfortunately, the side effects of massive homelessness and even starvation will also occur.

As I say all the time, Generational Dynamics tells us what our final destination is, but doesn't tell us how we'll get there, so we can only guess at the scenario. We know that we're headed for a major stock market collapse that will cause the stock market to lose 50-75% of its value, possibly in a single day. We don't know what will trigger that event, and we don't know whether the trigger will come tomorrow, next month, next year, or in a couple of years. We just know it's coming.

Since we don't know when it's coming, we have to be on guard every day. It's possible that this trade deficit surprise will cause the rapid adjustment, as international investors and foreign banks frantically race with each other to pull out of the stock market. I just want my readers to know that both the economy and the world security situation is much worse today than it was a year ago, and that unless things start to settle down again, you should be very wary. (13-Jan-05) Permanent Link
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Russia ejects international patrols from Russia-Georgia border

As an act of defiance, Russia has vetoed continuation of an international peacekeeping force that's been stationed since 1999 on the mountainous border between the Russian province of Chechnya and the Republic of Georgia. The Organization for Security and Cooperation in Europe (OSCE) had performed the monitoring.

Troubled areas in Caucasus region - including North Ossetia, Ingushetia and Chechnya.  Ukraine is above the Black Sea just to the left of the map's left edge
Troubled areas in Caucasus region - including North Ossetia, Ingushetia and Chechnya. Ukraine is above the Black Sea just to the left of the map's left edge

European and Georgian officials have condemned ending the mission, saying that doing so reduces the region's stability.

This is a move of defiance by Russian President Vladimir Putin, who has vigorously condemned the West ignoring the danger of terrorism to Russia in favor of politically correct human rights. Putin has also condemned the OSCE as ineffectual

Russia has been the victims of terrorist attacks by Shamil Basayev, a Muslim warlord from Chechnya, who has taken credit for the series of terrorist acts which brought down two passenger planes, and killed hundreds of children and adults in a massacre in Beslan.

Following this series of attacks, Putin has promised preemptive revenge against international terrorists. Russia's threats have alarmed the entire Eastern Asian region, including Georgia, Turkey, and Roumania. Many Western countries have called on Putin to negotiate with the Chechen terrorists; Putin angrily rejected these suggestions, and suggested sarcastically that America should start negotiating with Osama bin Laden.

Ejecting the OSCE is seen as a follow-on to Putin's promise of pre-emptive revenge against international terrorists in other countries, especially Georgia. Putin has accused Georgia of harboring Chechen terrorists fleeing across the border from Chechnya into Georgia. Georgia has denied this, and the OSCE has said that it hasn't detected any such fleeing terrorists, which is why Putin has called the OSCE ineffectual.

By removing the OSCE monitors, Putin will now feel free to make preemptive strikes on alleged Chechen targets on Georgian soil. This could inflame the Chechen war even further, to the point where it might engulf the entire region.

The Caucasus region is one of the six most dangerous regions of the world right now. From the point of view of Generational Dynamics, it's even more dangerous than the Palestine region, since it's farther into a generational crisis period. It's a major front line in the centuries old war between Orthodox Christians and Muslims, and it's a breeding ground for major Russian rebellions and civil wars that have occurred in the past. (12-Jan-05) Permanent Link
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Brent Scowcroft predicts an "incipient civil war" for Iraq

Pundits are returning to wishful thinking as the January 30 election approaches

Listening to the journalists, pundits and high-priced analysts on today's Sunday morning news shows can make your head spin, as one pundit after another predicts disaster in Iraq in a different way.

One pundit says the Sunnis won't come out to vote because they're a minority. Another says the Shi'ites won't come out to vote because they're anti-American. Another says that everyone will be too terrorized to vote. Another says that even if everyone votes, the election will still be defective, because Iraq is an "occupied land." And finally, the election will be a disaster because the insurgents will stage a series of huge, "spectacular" terrorist attacks on election day.

Every one of these predictions is complete hot air. The pundits don't have any idea what they're talking about, but they'll say any dumb thing that pops into their minds to get on television. There isn't a single one of the above predictions that's based on any sustainable evidence. If any one of these predictions comes true, it'll be by chance.

Most of the discussions centered around Thursday speech by former national security adviser Brent Scowcroft, who served under the former President Bush, and a friend of the Bush family. In the speech, delivered at a luncheon hosted by the New America Foundation.

According to the Washington Post article,

"The Iraqi elections, rather than turning out to be a promising turning point, have the great potential for deepening the conflict," Scowcroft said. He said he expects increased divisions between Shiite and Sunni Muslims after the Jan. 30 elections, when experts believe the government will be dominated by the majority Shiites.

Scowcroft predicted "an incipient civil war" would grip Iraq and said the best hope for pulling the country from chaos would be to turn the U.S. operation over to NATO or the United Nations -- which, he said, would not be so hostilely viewed by Iraqis.

Looking at this text, you have to wonder at the level of total nonsense spoken by supposedly intelligent people. His "solution," turning the operation over to NATO or the U.N., is impossible because neither organization would ever accept it, and even if one did, why would that stop the insurgencies? You'd have to be a high-priced analyst to say anything as dumb as that.

But the heart of Scowcroft's argument is that of an "incipient civil war" in Iraq. I have to laugh at the word "incipient," which the dictionary defines as "beginning to come into being or to become apparent."

Pundits have been predicting an Iraqi civil war for two years, so I guess you'd have to say that a civil war has been "incipient" for at least that long.

I keep wondering what they're talking about. There has been a car bombing every day or so for the last few months. Now these car bombings are horrible. But a car bombing is not a war.

We know what a civil war would be. It would be masses of Sunnis picking up guns, going into Shi'ite strongholds, and killing the people there. Or it would mean the opposite - Shi'ites going out and killing Sunnis. Or it would mean a Kurdish army marching south to capture Baghdad. You'd think that the journalists, pundits and high-priced analysts would understand the difference between that and a car bombing, but those morons don't seem to have a clue.

As we've been saying repeatedly for two years, a civil war in Iraq is literally IMPOSSIBLE. It can't happen, because only one generation has passed since the end of the genocidal Iran/Iraq war of the 1980s, and it has never happened in history that a civil war has begun so soon after a crisis war.

That's not to say that there won't be a great deal of trouble in Iraq. Iraq is currently at the beginning of a generational awakening period. Awakening periods are characterized by enormous political turmoil, and we should expect a lot of political conflict between Sunnis, Shi'ites and Kurds after the election. Hopes for an American withdrawal in 2005 won't happen, but there won't be any civil war. (09-Jan-05) Permanent Link
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Morgan Stanley's chief economist Stephen Roach predicts a "sharp adjustment" ahead

In an article that's sharply critical of Fed Chairman Alan Greenspan, Roach blames Greenspan for today's historically astronomical levels of public debt and foreign deficit, and concludes: "Asia and Europe are increasingly dependent on overly indebted U.S. consumers, while those consumers are increasingly dependent on Asia's interest-rate subsidy. The longer these imbalances persist, the greater the likelihood of a sharp adjustment. A safer world? Not on your life."

The article will appear soon in Foreign Policy Magazine, according to an item in Forbes Magazine online entitled, "World On Brink Of Ruin."

Roach blames Greenspan for today's historically astronomical levels of public debt and foreign deficit, and concludes: "Asia and Europe are increasingly dependent on overly indebted U.S. consumers, while those consumers are increasingly dependent on Asia's interest-rate subsidy. The longer these imbalances persist, the greater the likelihood of a sharp adjustment. A safer world? Not on your life."

As I've previously written here, I've been highly critical of Greenspan myself, especially his disastrous conclusion in 1996 that the stock market bubble was being caused by productivity improvements in the computer industry.

And I've been highly critical of speeches and papers by Greenspan's colleague, Fed Governor Ben Bernanke, that claim that the Fed has stabilized the economy for the next ten years simply by publishing the FOMC minutes! No one can blame the Fed for having too little hubris.

But Roach's article raises the question: Once the "sharp adjustment" occurs, what will the general public think of Greenspan's legacy after that? Roach makes it pretty clear that Greenspan will be blamed for it.

But the fact is that an argument can easily be made that Greenspan and the Fed are not at fault.

The stock market bubble was caused by a massive generational change in the early 1990s, when the generation of risk-averse "depression babies" disappeared (retired or died) all at once, and were replaced as senior financial managers by risk-seeking Baby Boomers, who made one dumb investment after another. Greenspan's "irrational exuberance" remark didn't stop the bubble, and nothing else would have done so either.

Once the bubble burst in 2000, the Fed had no choice but to lower interest rates to near-zero, in order to prevent massive bankruptcies, unemployment and homelessness, and allow people to survive by incurring low-cost debts. Those debts created the foreign imbalance that Roach is rightly concerned about, but Greenspan can't be blamed for it.

Stephen Roach, whom journalists regularly tag with the "bearish" putdown, is one of the few high-profile analysts who is serving as an "early warning" system for the upcoming economic "sharp adjustment" tsunami. His negative treatment by the press shows that an early warning system wouldn't have done any good in Asia either.

I believe that a majority of investors today believe that "something" is coming, but they don't know when, and they believe that they'll be smarter than they were in 2000: This time they'll see the early warning signs, and they'll get out early before they're hurt.

Unfortunately, everyone is thinking that way, and "getting out early" is a zero-sum game.

So what form will the "sharp adjustment" take? My expectation is that the adjustment is likely to be a very rapid fall in stock prices, perhaps 50-75% in a single day, as international investors and foreign banks frantically race each other to pull out. It might be triggered by anything from a Palestinian war to a recession in China or Japan. This is based on a historical analysis of secular adjustments that come every 70 years or so (Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash).

Today, Greenspan, Bernanke, and the other Fed Governors are basking in the hubris of believing that they're responsible for the DJIA being close to 11,000 today, just as Icarus' hubris let him fly too close to the sun. But hubris exacts a big price. Icarus drowned when the crash came, and Greenspan's legacy is liable to drown as well. (09-Jan-05) Permanent Link
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How do unrealistically high expectations affect the world?

Hopes are sky-high as Palestinians go to the polls on Sunday to choose a new leader to replace the late Yasser Arafat as leader of the Palestinian Authority.

If the pre-election polls are correct, the winner will be Arafat's former aide, Mahmoud Abbas, also known as Abu Mazen.

Abbas has been doing what politicians do -- flip-flopping from day to day, depending on his audience. One day, he's referring to Israel as the "Zionist enemy," and promising the Palestinians the "right of return" -- that Palestinians will be able to return to the land that they lost in 1949 and 1967 wars. And he's promising a Palestinian nation next to Israel, with Jerusalem as its capital.

The next day, he's more moderate (in Western eyes). He's promising to rid Palestine of terrorists, and even punish Palestinians who are caught carrying an unlicensed handgun. He's also promising the withdrawal of Israeli forces from Palestinian lands.

He can't carry out any of these promises of course. If he seriously tries to stop the terrorists, then he'll be killed. And Israel will never agree to a "right of return" for many reasons -- including the fact that Israel is already turning into a country with a majority of Arabs and a minority of Jews.

So hopes are astronomically high - among the Palestinians and Israelis, and in London and Washington.

What will happen in the months to come, when it turns out that expectations won't be met -- when Hamas, the militia group which refuses to endorse the election or any ceasefire with Israel -- continues its terrorist attacks and is not stopped by Abbas, or when Israel fails to eject all the Jewish settlers from Gaza as promised? What will happen then?

We're in the midst of a number of significant elections, and people's expectations are an important issue surrounding all of them.

Prior to the American Presidential election, I described how unrealistic expectations were worldwide that things would change under a Kerry administration, and would even change under a second Bush administration, because of changes in the cabinet. It turns out that all major crisis-era catastrophes (Panic of 1857, 1861 Civil War, crash of 1929, 1941 Pearl Harbor, and 9/11/2001) have occurred in the year following a Presidential election. The hypothesis is these events were reactions to widespread disappointment from high expectations that were built up during the election campaign, and that "something big" may happen in 2005.

The same sort of speculation applies to other elections:

Let's give an example. We now know that North Korea has been mobilizing for war since April. There have been some news reports that indicate that George Bush's re-election has been a big disappointment to President Kim Jong-il. He had been hoping for a John Kerry victory in November, and then a lot more more monetary support from America. Such support obviously will not be provided by a second Bush administration (and, incidentally, would not have been provided under a Kerry administration), and the result may be a decision to continue the mobilization. (08-Jan-05) Permanent Link
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North Korea is mobilizing for a long, drawn-out war

On a day when the United Nations said that the nuclear weapons problem is getting worse in North Korea, it was revealed that North Korea has been mobilized for war since April.

North and South Korea
North and South Korea

North Korea, which is believed to posess several nuclear weapons, poses the greatest nuclear threat to the world, according to Mohamed ElBaradei, the head of the United Nations International Atomic Energy Agency (IAEA).

"I hope we can start to move on the Korean issue, which is the number one proliferation threat we are facing," he said.

In that context, a South Korean newspaper has published a leaked 31-page law, published on April 7, signed by President Kim Jong-il, ordering the Workers' Party, the military, and all officials to assume wartime readiness. The document is entitled, "Central Military Committee of the Workers' Party Order 002."

The police and intelligence authorities were ordered to install command centers in underground tunnels around the nation. North Korea is konwn to have an extended network of underground tunnels dating back to the Korean War of the 1950s, and they're believed to have around 8,200 underground facilities, including 180 munitions factories. The new command centers would be hidden from American spy satellites and reconnaisance planes.

In addition, the directive also calls for the recruitment of spies living in South Korea from "revolutionary organizations" that sympathize with Stalinist North Korea and believe that South Korea should be "liberated."

This part of the directive is causing some debate among South Koreans, as to whether the document was leaked on purpose for propaganda purposes. However, South Korea's National Intelligence Service said in a one-sentence statement: "We believe the document reflects North Korea's wartime preparations."

From the point of view of Generational Dynamics, North Korea's actions are consistent with what's going on in the rest of the world. There is a worldwide mobilization for war going on, in preparation for the coming "Clash of Civilizations" world war. In Japan, China, Russia, Pakistan, America, and other countries, laws are being passed and directives are being issued that give additional powers to the country's leaders to defend against threats of terrorism or invasion.

These countries are all moving in the direction of asserting national rights over individual rights. The reason that all of these countries are moving in this direction at the same time is because we're at a unique time in history, about 60 years after the end of World War II, when every country is experiencing the same generational change at the same time: The people in the generation that fought in WW II are all disappearing (retiring or dying) all at once, and are being replaced by the people in the generation born after WW II.

As I've described in the discussion of the six most dangerous regions of the world, the time may not be too far off when a regional war in one of these regions will trigger a much wider war that will engulf America and the world. (06-Jan-05) Permanent Link
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Jewish extremists clash violently with Israeli soldiers over settlements

Jewish settlers protested violently on Tuesday against soldiers who had been ordered to tear down structures that were part of Jewish settlements in the Gaza strip.

Israeli Prime Minister Ariel Sharon is going ahead with plans for "unilateral disengagement," pulling the Israeli army and Jewish settlers from the Gaza strip, leaving security in the hands of the Palestinians and the Egyptians.

This plan requires 8,000 settlers to be removed from Gaza in the next few months. Although they will be compensated, and many are expected to go peacefully, a small group of extremists are threatening both legal and armed resistance,

Ariel Sharon has for several months been expressing concerns about an Israeli civil war, and he's still expressing those concerns.

As we've repeatedly said, Generational Dynamics predicts that we're headed for a major crisis war in the Mideast, re-fighting the genocidal 1940s war between Arabs and Jews. However, it's worth remembering that there's no way to predict the chain of events that will lead to that war, and an internal Israeli conflict, however unlikely, is on one possible path. (05-Jan-05) Permanent Link
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Israeli forces kill 8 Palestinians, and Abbas calls Israel the "Zionist enemy"

Things appear quickly to be returning to "normal" in post-Arafat Palestine, as the level of violence, both verbal and missile, has escalated in the last few days.

Israeli tanks on Tuesday fired missiles at Palestinians suspected of being the militants who had fired mortars at Israelis. The Israeli missiles ended up killing 7 Palestine children.

Mahmoud Abbas, who is campaigning for Palestinian President and is expected to win the election on Sunday, said, "We are praying for the souls of the martyrs who were killed today by the shells of the Zionist enemy."

The killing of Palestinian children is extremely infuriating to the Palestinians, and the "Zionist enemy" rhetoric is extremely offensive to the Israelis.

This kind of violence was common before the November 11 death of Yasser Arafat, but had been less common since then.

They hadn't ended entirely, of course. Just 3 weeks ago, I called a major Hamas terrorist attack on Israelis a "turning point" for the peace process, but it was up to the Palestinians, not the Israelis, to stop such violence. I predicted that the violence would not be stopped, and I'm not surprised that it hasn't been.

Israeli Prime Minister Ariel Sharon complained about the same thing in a press conference with Tony Blair on December 22. In response to a question about peace process, Sharon said, "[It] depends very much on the Palestinians. By now we don't see even the slightest step taken by the Palestinians. ... [T]hey are not doing even the slightest effort, because it is not a problem of forces, they have in the Gaza district 30,000 armed security people, under the control of the Palestinian Authority. We would have expected that it is not to start now, it is a dismantling of those terrorist organisations, at least they will make an effort to prevent deploying of those mortars and rockets that attack our towns and settlements on both sides of the border, I would have expected they will do that. But after the elections I believe that they have to start to take all the necessary steps ... that they committed themselves in the past to, and then we will be able to move forward. It depends upon them."

When Sharon says that "we don't see even the slightest step" and "it depends on them," he's saying that we shouldn't expect any further concessions from Israel.

When Abbas uses the emotionally laded words "Zionist enemy," the strongest language he's used since Arafat's death, he's saying, "Don't expect me to do anything about the Palestinian militias."

Recent American policy in the Mideast has always been based on the assumption that it was Yasser Arafat who was the terrorist-in-chief who refused to accept peace. Politicians in Washington, London, and elsewhere have the conceit that it's politicians like them that determine policy. Generational Dynamics says that such policies come from the people, not from the politician. If the Palestinian people had wanted peace under the terms that have been offered, then they would have forced Arafat to accept those terms.

Instead, we're seeing the opposite right before our eyes: The Palestinian people are forcing Abbas to move to the positions that Arafat took.

Generational Dynamics predicts that there will be a major new genocidal crisis war in the next few years between Israelis and Palestinians, and that it will engulf the whole region. I've speculated, since 2002, that it would be the death of Arafat that would trigger the chain of events that would lead to such a war, within one to two years following Arafat's death.

We're now watching those steps take place. Indeed, once Sunday's election is over, things might very well become worse very quickly, within a few weeks or months. The reason is that hopes and expectations are unreasonably high right now, among the Israelis and Palestinians, and also in Washington. After Sunday, it will become clear very quickly that things are not going to change.

There is one thing that might postpone such a war: A lot of money. Well, it seems that the Bush administration is considering a plan to double American aid to Palestinians, from $200 million per year to $400 million. I'm not sure how much time $200 million can buy you in a situation like this, but it should buy a little. (04-Jan-05) Permanent Link
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Pakistan "Black Day" protests fail

Continuing a worldwide trend of increased militarization and police power, President Pervez Musharraf of Pakistan reneged yesterday on a promise that he made in 2003 to relinguish some of the power he obtained by force in 1999.


Musharraf seized power in 1999 in Pakistan through a bloodless coup, and was highly criticized by America and the West for doing so. But everything changed on 9/11/2001, when his cooperation became an essential part of America's war to remove the Taliban in Afghanistan. Musharraf provided that cooperation, but in doing so, he angered hard-core Islamic extremists in Pakistan.

Musharraf was both the civilian head of government, and was also head of the military. Things came to a head in November, 2003, when political opposition forced Musharraf to promise to give up one role or the other in January, 2005.

Now Musharraf has reneged on that promised. In a televised speech to the nation on Thursday, he accused his opponents of "threatening democracy," and said, "I have decided to retain both offices... any change in internal or external policies can be extremely dangerous for Pakistan."

In other words, Musharraf is keeping his extraordinary powers, and he's giving national security as the reason.

This is what's going on in a number of other countries. It's happened in America (Patriot Act and Homeland Security), and it's happened in Russia (Putin has seized control of local governments). There are calls for additional police powers in countries around the world, including the Netherlands, Germany, France, Spain, China and Japan. This is typical of the approach to a major war during a generational crisis period.

These moves toward centralized power are not being opposed by the people of the countries in which it's occurring. The "antiwar" movement in America has failed to materialize, although many pundits predicted it would, and Russia's Putin still has the support of most Russians as he assumes greater power.

The same is happening in Pakistan, as was shown on Saturday. Musharraf's opponents, An alliance of Islamic parties and other groups, called for massive anti-Musharraf rallies on New Year's Day.

It's not surprising that most Pakistanis continue to support Musharraf through his continuing aggregation of power. Musharraf has survived three recent assassination attempts, and the Pakistan government ordered a ban on all public gatherings in October, following a series of bombings in a conflict between Pakistan's majority Sunni Muslim population versus its minority Shi'a population.

That's why the rallies were a failure, drawing only hundreds of protestors, instead of the thousands that organizers had hoped for.

The rallies were held to mark the anniversary of "black day," 57 years ago (October 27, 1947), when India invaded Kashmir, giving as a reason need to prevent an invasion by Kashmir. The Kashmir region has been the subject of continuing conflict between Muslim Pakistan and Hindu India.

Generational Dynamics predicts that there will be a new major war between India and Pakistan over the Kashmir region. We'll be watching in 2005 to see how the situation develops. (02-Jan-05) Permanent Link
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