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


Web Log - July, 2005


Vatican and Israel exchange angry words on terrorism

Some Jews are pointedly recalling that the new Pope used to be in the Hitler youth.

On Sunday, the day after the massive bombing at the Egyptian Red Sea resort of Sharm el-Sheikh, Pope Benedict XVI issued the following statement:

"The days of serenity and rest have been upset by the news of the abominable terrorist attacks, the death, destruction and widespread suffering in Egypt, Turkey, Iraq and Great Britain. While we entrust to God the victims and their families, and offer heartfelt condolences, we ask God to stay the murderous hand of those who are driven by fanaticism and hatred, and may He convert their hearts to thoughts of reconciliation and peace."

So what's the problem? The problem was that Israel wasn't mentioned in the list of countries targeted by terrorism, especially in view of of a July 12 suicide bombing against Israelis in the coastal city of Netanya.

When the Israeli Foreign Ministry complained that Benedict "deliberately" omitted the Netanya bombing, a Vatican press statement said,

"It's not always possible to immediately follow every attack against Israel with a public statement of condemnation, and for various reasons, among them the fact that the attacks against Israel sometimes were followed by immediate Israeli reactions not always compatible with the rules of international law. It would thus be impossible to condemn the first (the terror strikes) and let the second (Israeli retaliation) pass in silence."

Let's face it: The Jews and the Catholics have never really gotten along, and it was only in 1994 that the Vatican recognized the state of Israel. Still, diplomats on both sides have been trying to calm the waters, and it's not known at this time whether this spat will settle down or spiral into a major confrontation.

From the point of view of Generational Dynamics, a major confrontation would be highly significant.

As we've indicated several times on this web site, Europe is descending into chaos and heading for a new major war, just as it has time after time for centuries. What we've been seeing in the step-by-step collapse of European Union on the road to war, as part of the major "clash of civilizations" world war.

A possible scenario for such a European war may be as follows: When there's a new Mideast war, it seems pretty clear that Britain will side with Israel, and France will side with the Arabs. With France supplying arms to Arabs, it won't be long before British and American bombers are bombing French factories and supply lines, and the French are making strategic strikes on England.

A split between the Vatican and Israel will be quite consistent with the above scenario, as a Catholic France sides with Arabs, and a Protestant England sides with Israel.

The split does not shed light on which side Germany will choose, however; Benedict is German, of course, but Germany is mostly Protestant.

This situation at least marks a change in tone in the Vatican, since the ascension of Pope Benedict XVI.

The Inquisition was created in 1233 by Pope Gregory IX as a means to curb heresy, and especially targeted Jews and Muslims. It was just a little over a year ago, on June 15, 2004, that Pope John Paul II, before his death, asked forgiveness "for errors committed in the service of truth." He added that the request for forgiveness was for "both the dramas connected to the Inquisition as well as for the wounds to the [collective] memory that followed." (30-Jul-05) Permanent Link
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Russia infuriated over ABC "Nightline" interview of Shamil Basayev

"How many more bombs must hit New York before the American media learns to differentiate terrorists from normal people?" asks political commentator Pyotr Romanov.

It's a good question. Americans have been very critical of al-Jazeera for airing tapes by Osama bin Laden, but obviously ABC considers an interview with notorious Chechen terrorist Shamil Basayev to be just a news story.

Chechen warlord / terrorist Shamil Basayev <font size=-2>(Source: Itar-Tass)</font>
Chechen warlord / terrorist Shamil Basayev (Source: Itar-Tass)

The Russian embassy in Washington issued this statement:

"The fact that the television company ABC News has decided to ignore the arguments of the Russian embassy against the broadcasting of the interview with international terrorist Shamil Basayev causes indignation,” the embassy said in its statement to ABC.

“By doing so ABC News has shown apparent disregard of all standards of responsibility of journalism, as well as of human values. At issue is providing a forum to one of Al Qaeda’s zealots responsible for slaughtering innocent victims during many major terrorist attacks that he masterminded and personally perpetrated.”

“The most shocking and deadliest of them was the cold-blooded killing of hundreds of children a year ago in the southern Russian city of Beslan."

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Shamil Basayev
Shamil Basayev is dead: The Chechen terrorist responsible for the Beslan school massacre... (11-Jul-06)
Shamil Basayev gains in stature and power as pan-Caucasus terror leader: He claims credit for leading Nalchik attack, but blames a traitor for leaking advance information.... (19-Oct-05)
Chechnya terrorists attack Russian town (Nalchik) massively: Coordinated attack by 300 Chechen gunmen raises Caucusus violence to new level.... (14-Oct-05)
Russia is barring ABC News reporters from working in Russia: Still infuriated over ABC Nightline's airing of interview with Chechen terrorist warlord Shamil Basayev,... (2-Aug-05)
Russia infuriated over ABC "Nightline" interview of Shamil Basayev: "How many more bombs must hit New York before the American media learns... (29-Jul-05)
Passenger train bombed in Dagestan, following Putin's visit: This is the 70'th terrorist attach this year in Dagestan,... (25-Jul-05)
Massive bomb blasts in Egypt vacation resort: This follows new blasts in London and Chechnya.... (23-Jul-05)
Chechnya: Russian killing of rebel leader returns world's focus back to Caucasus: Terrorist Shamil Basayev may gain, as rebels select an obscure Islamic cleric... (11-Mar-05)
Russia ejects international patrols from Russia-Georgia border: As an act of defiance, Russia has vetoed continuation of an international peacekeeping force... (12-Jan-05)
Chechen terrorist Shamil Basayev now has the same stature as Osama bin Laden: Putin's ploy of blaming "international terrorists" for the Beslan terrorism was demolished... (19-Sep-04)
Russian President Vladimir Putin appears to be calling for revenge: Putin said that Russian "weakness in the face of danger" has caused Russia to be "beaten up" in the face of "a total and full-blown war."... (4-Sept-04)

During the interview of ABC's Nightline on Thursday evening, The interview can currently be seen online by launching it from the ABC News video page, where a fee is required. As of noon ET today, the ABC News Nightline site publicizes the interview and acknowledges the controversy, but gives neither an explanation or an apology.

In the interview, Basayev admits that he's a terrorist, and takes credit for numerous terrorist acts, including the September, 2004, Beslan school massacre, in which 330 hostages, half of them children, died.

In the interview, Basayev promised many more similar attacks. “It’s not the children [of Beslan] who are responsible,” Basayev said. “Responsibility is with the whole Russian nation... If the war doesn’t come to each of them individually, it will never stop in Chechnya.” Asked if a Beslan-type attack could occur again, Basayev said: “Of course ... As long as the genocide of the Chechen nation continues, as long as this mess continues, anything can happen.”

It was just last month that Russia commemorated the tenth anniversary of Basayev's first major terrorist attack. In June 1995, Basayev-led terrorists entered Budyonnovsk, a small town in southern Russia, where they captured a large hospital and took over 1,800 people hostage. In the end, more than 100 hostages were killed, and Basayev and his men were allowed to retreat safely back to Chechnya, using hostages as human shields.

Ironically, a recent report reveals that Basayev's original plan, which they had been forced to revise, had been to hijack a plane and fly it into the Kremlin. This would have been six years before exactly that kind of incident took place in New York and Washington on 9/11/2001.

News of the ABC interview has caused outrage throughout Russia.

"Do ABC journalists dislike Russians and the Russian government? asked political commentator Pyotr Romanov. "That is their problem. But do they like their fellow Americans who were killed in the horrendous terrorist attacks of September 11, 2001? Do they like the British citizens who died as a result of the bombing of the London Underground? And what about those killed in Spain and Egypt? Or do my colleagues still naïvely think that Chechens alone are fighting in Chechnya? I would like to tell them that foreign mercenaries have already outnumbered Chechen terrorists in the Caucasus."

An envoy of Russian president Vladimir Putin said that America is encouraging terrorism by employing "dual standards." "It is not the signal we need today, not a signal toward cooperation, toward improving understanding or making it more effective," said Anatoly Safonov. "On the contrary, it signals that dual standards and dual approaches remain. No doubt such instances cast a shadow on cooperation and encourage terrorist operations."

Chechen President Alu Alkhanov said, "I was startled by how they allowed this person, who openly claimed responsibility for dozens of terrorist attacks in Russia, which claimed hundreds of human lives, to voice new threats against Russia and the Russian people. My opinion is that those who gave the floor to Basayev, have not fully realized what threat this person and other terrorists like him pose to the whole world. We will never succeed in the fight against terrorism if such an approach is adopted toward terrorists. Virtually no peaceful place remains on the planet. The world should present a united front against terrorism and refrain from dividing terrorists into good ones and bad ones." (29-Jul-05) Permanent Link
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Historic labor split will mean near-extinction of AFL-CIO and rise of service unions

As General Motors and Ford themselves approach near-extinction, their historic "enemy/collaborators" in the labor union are going the same way.

At the 50th anniversary celebration of the AFL-CIO at its convention that opened in Chicago on Monday, two major labor unions, the 3.2 million members of the International Brotherhood of Teamsters and the Service Employees International Union left the AFL-CIO's 13 million former members, and joined a dissident group, the Change to Win Coalition.

Four other unions are expected to defect as well.

Just two months ago, S&P changed its ratings of General Motors and Ford bonds to "junk" status, briefly threatening an international financial crisis as international hedge fund positions started to unravel.

Things appear to have settled down now in the hedge fund world, but the long-term decline of both American manufacturing, including GM and Ford, and American labor unions.

These are both examples of what I've been calling the "Crusty Old Bureaucracy" pheonomenon. During the 1930s Great Depression, the vast majority of the old businesses went bankrupt, and were eventually replaced by new businesses.

When a new business starts out, especially when it's trying to survive after the Depression, it has a "lean and mean" corporate culture, where every employee scrambles to work hard to make the business succeed. As time goes on, many employees become stale in their jobs, and the business develops an entrenched "crusty old bureaucracy."

This has been happening to the country as a whole since the 1930s. All the "lean and mean" new 1930s and 1940s new businesses are today, for the most part, sluggish and crippled from bureaucracy.

And not just businesses. The same thing has happened to government agencies, educational institutions, non-profit institutions, and, of course labor unions.

The symptoms of this are the massive outsourcing of manufacturing jobs to China and service jobs to India that's occurred in the last few years.

The collapse of the AFL-CIO also signals continued change for the national political parties, since the AFL-CIO has been among the party's largest fund-raisers. Both political parties will be blown apart just as much as businesses and other institutions will.

That's why Generational Dynamics predicts that we're entering a new 1930s style Great Depression that will force a similar massive round of business closings.

The AFL-CIO has been losing membership steadily for decades. In 1955, at its peak membership, one out of three workers belong to a labor union. As recently as 1983, 20% of American workers belonged to labor unions. Today, that figure is 12.5%. Money always talks, and the loss of membership has meant loss of dues, and then the loss of political power for the AFL-CIO.

Howevr, not all labor unions have been losing members. The leader of the defection is Andrew L. Stern, president of the Service Employees International Union, one of the two unions that walked out on Monday.

"We're not trying to divide the labor movement - we're trying to rebuild it," he says. "We have to do everything in our power to help workers. But when you're going down a road and it's headed in the wrong direction, and you know where the road ends, you got to get off the road and walk in a new direction where there is hope."

Stern can afford to take a different road because, more and more, he's the man with the money. The SEIU is also one of the few labor unions that's been growing in size. Thus, not only did the AFL-CIO lose 25% of its membership on Monday, it lost the portion of its membership that's growing in size. That's why the AFL-CIO may not be long for this world, at least in its current form.

It's been well-publicized that the cost of building a General Motors car today includes $1,500 just to pay the pensions for retired GM workers. That $1,500 per car has frozen everyone in place. GM promised to pay those pensions when times were better, and can't afford to do the research and development necessary to develop new car models to replace the increasingly unpopular SUVs. The AFL-CIO also depends on the $1,500 per car for its own credibility and income. (I need to fact-check this, but I believe that the AFL-CIO manages its members' pension funds and depends heavily on the derived income.)

The point is that innovations are out of the question, thanks to the heavy bureaucracy created around that $1,500 per car.

But Stern's SEIU is not nearly so bound up. Service industries are, for the most part, much younger than heavy manufacturing industries, and so the pension burden is much smaller. Furthermore, Stern has vowed to make "fundamental changes," including integration with global industries and a positive approach to outsourcing.

It's impossible to predict what the new "lean and mean" businesses will be formed during this coming crisis period, and it's impossible to predict what kinds of "lean and mean" labor unions will arise. But Stern's appears to be willing to adapt the SEIU to the rapidly changing world, while the AFL-CIO does not. (27-Jul-05) Permanent Link
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Passenger train bombed in Dagestan, following Putin's visit

This is the 70'th terrorist attach this year in Dagestan,

After a week of bombings in Chechnya, Turkey, London, Spain, Iraq, Lebanon, a passenger train was bombed on Sunday morning at 5:30 am near Makhachkala, the capital of Dagestan. The train car derailed, and a crater was left in the track bed. The bomb had been set off by remote control.

Russian President Vladimir Putin made an emergency visit to Dagestan in secret last week, indicating the seriousness of the situation.

Dagestan has over 2 million inhabitants from 37 different ethnic groups. The increasing rate of terrorist attacks is being ascribed to some 2000 insurgents, masterminded by Chechen warlord Shamil Basayev, the same person who masterminded a series of spectacular terrorist acts last August and September, including the bombing of two airplanes in flight, a subway bombing in Moscow, and the Beslan, North Ossetia, school massacre that killed 340 people, more than half of them children.

Commentators are blaming the situation in Dagestan on the increasing level of corruption, fed by the 60% unemployment rate. According to columnist Yulia Latynina:

"Terrorism in Dagestan is the result of total corruption. The only business in Dagestan is the sale of government jobs, not the production of goods. Residents of the republic can therefore be divided into four categories: those who were given a job based on family ties; those who bought a job; the armed guards who protect people in the first two categories; and the unemployed young people with no money or prospects who are recruited by the Wahhabis and paid to kill cops."

This should not be surprising, because Russia has something in common with its huge neighbor China: Both countries' economies are unraveling rapidly, and both countries are headed for civil war. In the case of the coming major civil war in China, you can see it developing from the tens of thousands of regional rebellions each year, migrant workers, high food prices, high rust belt unemployment, addiction to a bubble economy, unraveling of Mao's social structure and secessionist provinces.

In the case of Russia it can be seen by the exponentially growing level of corruption, as reported last week by last week's widely publicized research report by the thinktank The Indem Foundation.

Indem surveyed 1,000 business people and 3,000 private systems and found that the size of an average bribe paid by companies has gone up 13-fold from $10,000 to $136,000 in four years, mostly to health, fire and safety inspectors, tax police and law enforcement agencies. Indem calculated that the volume of bribes extracted by various Russian fiscal inspections, police and licensing authorities had reached $316bn (€260bn, £180bn), or 10 times the figure four years ago. The report highlighted the failure of the government to tackle corruption despite Mr Putin's promise to make it a priority.

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

Last year, after the Beslan school massacre, I considered the Caucasus region to be the most dangerous region of the world, because it was farthest into a generational crisis period, and because the Beslan massacre seemed likely to make things spin out of control. Since then, Putin has been bending over backwards to reduce tension, and the region has simmered more quietly.

But the quiet simmering cannot last forever. What's happening in Dagestan is what's been happening in London, Egypt, Pakistan, and elsewhere: Older generation Muslims do not wish to risk a major war, and so are willing to compromise on many issues, and suffer poverty, bigotry and humiliation. But the younger Muslim generations have no such fear of war, and are increasingly impatient their parents' hesitation. The radical younger Muslims have discovered that suicide bombings get huge amounts of publicity, and it's the best way for the perpetrators to become heroes to their friends. As the younger generations swell in size, while the older generations retired and die, the use of suicide bombings is expected to continue to grow. (25-Jul-05) Permanent Link
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Massive bomb blasts in Egypt vacation resort

This follows new blasts in London and Chechnya.

There was a state of panic in the Egyptian Red Sea resort of Sharm el-Sheikh when a series of huge explosions early Saturday morning killed at least 49 vacationers. Details are still being released.

In the village of Znamenskaya in Chechnya, a car bomb killed 14 on Tuesday.

This bombing was masterminded by Chechen warlord Shamil Basayev, the same person who masterminded a series of spectacular terrorist acts last August and September, including the bombing of two airplanes in flight, a subway bombing in Moscow, and the Beslan, North Ossetia, school massacre that killed 340 people, more than half of them children.

On Thursday there were four new subway/bus bombings in London, on the two-week anniversary of the July 7 London bombings.

Londoners were stunned on Friday, when police shot dead a fleeing man. They pushed him down onto the ground, and although he did not appear to be a threat, they fired five bullets into his head and shot him. Police have not released any details, but such a killing would only be justified if the victim was suspected of being a suicide bomber who might detonate his bomb at any time. A statement from the police should come over the weekend.

From the point of view of Generational Dynamics, the rate of terrorist acts and suicide bombings is expected to increase, as we head for the "clash of civilizations" world war. (23-Jul-05) Permanent Link
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Tony Blair calls for calm after another round of subway bombings.

New York City will inspect bags and backpacks, starting today.

Today's bombings appeared to be a bungled follow-up on the day of the two-week anniversary of the July 7 bombings.

According to London's police chief, "Clearly the intention must have been to kill. The intention of the terrorists has not been fulfilled." Although details haven't been fully released, it appears that all four bombs failed to detonate. The bombs' detonators themselves exploded, causing only one non-fatal casualty.

British Prime Minister Tony Blair said at a press conference, "We know why these things are done. They are done to scare people. Fortunately in this instance there appear to have been no casualties...We've got to react calmly."

Indeed, Londoners have been reacting calmly since the July 7 bombings, keeping the famous British "stiff upper lip," developed during the daily bombings of the 1940s Nazi "blitz."

But everyone realizes that you can't run a subway system if it's vulnerable to regular bombings. One idea is to use the same kind of apparatus for subway passengers as are currently used in airports, but with 3 million passengers a day in London, that idea is simply impossible.

However, New York Mayor Bloomberg announced that, starting today, New York City will begin making random checks of bags and backpacks at subway stations, commuter railways and on buses.

Boston transit authorities conducted random baggage checks at major rail stations during the Democratic National Convention in July 2004, following the terrorist bombings of 10 commuter trains in Madrid four months earlier. The city, which has about one million daily subway riders, was the first in the nation to enact such a policy.

As we've said many times on this web site, countries around the world are cutting back on individual civil rights in favor of giving new laws and powers to government. This will continue through the "clash of civilizations" world war, after which individual rights will again slowly be restored. (22-Jul-05) Permanent Link
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Tensions build as Pakistan cracks down on extremists after London bombings

In Kashmir, a car bomb that kills and wounds dozens, including children, highlights a week of increasing tension and violence.

The London bombings are ironic for those Muslims who have lived in Kashmir, Pakistan, the homeland of the London bombers' parents, since they've seen much similar violence, which they blame on the Indian Hindus. Murtaza Shibli, a Kashmiri Muslim wrote the following:

"I am no stranger to killing and chaos in my surroundings, for I have lived most of my life witnessing, dodging and reporting such events. As a journalist in Kashmir, I have filled columns of newspapers counting the dead in dozens, collecting the pain and suffering in lifeless words, and watching, the ‘paradise on earth’ – that old designation of Kashmir – burned to a wasteland of sadness by the violence kindled by Indian rule....

By the time I went to college in Kashmir, everyone was talking about holding a gun to fight for freedom. In no time, I saw friends, teachers, neighbors, relatives exalting freedom and the gun. The first blast I witnessed occurred in 1998, and I was standing just yards away from where an old man died.

After six months in London, I returned to Kashmir. I felt I had been thrown out of life. I felt like an evictee form my own country. I came back to London and settled here. But all the time I was hiding from myself. I could no longer write. For a time, I even stopped reading about Kashmir and its killing fields. I denied everything that had formed me – my life, my background, my feelings, even my friends. For a long time, my family thought I had gone missing. My mother had become resigned to the possibility that I had been just one more name added to the thousands missing in Kashmir."

The picture is much different from the Indian side, though just as violent. What Murtaza Shibli called "the violence kindled by Indian rule," is seen by General J J Singh, head of India's army, as necessary to control violence from thousands of Pakistan Muslim militants in Kashmir:

"Previously, there were 2,000 militants in Kashmir. The number has fallen to 1,600 because in January, we eliminated 400 terrorists. ... We are likely to face the situation for some time because terrorism infrastructure is yet to be dismantled across the borders. In light of the situation, we have to continue efforts at achieving our objectives in Kashmir, which is to 'bring down the level of violence to such a degree that the other organs of the state and central governments can deliver on governance'."

The seething "Line of Control" in Kashmir, separating the Indian-held territory from the Pakistan-held terrority is the site of continuing violence. The LoC was established by the United Nations in 1947, following an extremely bloody genocidal crisis war between Pakistan and India that "settled" the Kashmir problem by partitioning the region and giving part of it to each. The U.N. mandated that an election be held in Kashmir within five years to decide which country they wanted to belong to, but India has always blocked any such election, knowing that it would lose in the majority Muslim population.

So, radical Muslim forces vow to continue the "sacred struggle" involving martyrdom and strikes against the "Indian occupational forces."

This is the environment that the families of the London bombers came from. Young men often look for ways to make something of their lives, to become heroes if they can. And if the young men are disaffected and bitter, they may look for extreme ways. What better way is there to become a hero than an "altruistic suicide," killing as many civilians as possible in England, the supporter and long-time ally of India.

Pakistan has become almost as electrified by the London bombings as England has.

One Pakistani journalist, Mumtaz Hamid Rao, says in an editorial that Pakistan is becoming hostage to the extremists:

"With a vow that enough is enough, we would like to point-out that the nation can and would, in no way tolerate extremists in any mode or manner—may they be locals or the ones who have their ancestral abodes, somewhere else—perceptibly onto the land of the antagonistic neighbour(s)—and have penetrated into the dazzling soils of Pakistan to create discomfiture for us."

Pakistan the country has been changing rapidly since July 7. Under orders of President Pervez Musharraf, hundreds of suspected militants have been rounded up and jailed, and new laws will be passed to give the police even greater power. The new laws are being called "Taliban-style public morality laws," since they will force all citizens to observe the call to prayer, singing and dancing will be banned and unrelated men and women will be forbidden from walking together in public.

Politicians around the world are calling on Musharraf to do more to keep Pakistan from exporting more terrorism, and he does seem to be trying.

Conflict risk level for next 6-12 months as of: 30-May-2005
W. Europe 1 Arab Israeli 2
Russia Caucasus 2 Kashmir 1
China 2 North Korea 3
Financial 3 Bird flu 3
Key: 1=green 1=Low risk 2=yellow 2=Med 3=red 3=High 4=black 4=Active

But Generational Dynamics tells us that it's a losing battle. It's the older generation, the generation that lived through the genocidal crisis war of the 1940s, that's willing to do anything, endure any compromise, to avoid another such war. It's the younger generations that know only the violence they see, the hopelessness they feel, who can't believe that a war would make their lives any worse than it already is.

Kashmir has appeared on my conflict risk graphic at a "low risk" level because it seems that the even with the violence at the Line of Control, a war was unlikely at this time. This rating is currently under review. An increase to "medium risk" seems to be in order. An increase to "high risk" would not be warranted unless an attempt on Musharraf's life, of which there have been many, finally succeeds.

Generational Dynamics predicts there will indeed be a new genocidal crisis war between India and Pakistan, and since both countries possess nuclear weapons, there's little doubt that they will be used. The war may begin next month, next year, or soon after, but it will happen with near 100% certainty. (21-Jul-05) Permanent Link
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China and Japan head for military confrontation over disputed islands.

Meanwhile, a Chinese general threatens America with nuclear war over Taiwan.

In a move which could not have done anything besides infuriate the Chinese, Japan's government has awarded test drilling rights to a private Japanese company in an area of the East China Sea claimed by both Japan and China.

For centuries Japan and China have disputed the ownership of a small island chain called the Senkaku Islands by the Japanese and the Diaoyu Islands by the Chinese. The islands are little more than rocks in the middle of the sea, but they are valuable because of a potential oil field there.

In the past few months, Chinese rage at Japan has been growing over a variety of issues, leading to a series of anti-Japan riots and demonstrations in China in April.

The United Nations had planned to arbitrate the dispute by 2009, but Japanese is going ahead with test drilling anyway, in order to gain leverage in the discussions.

As a separate issue, General Zhu Chenghu, a top-level officer in China's People's Liberation Army (PLA) threatened America with nuclear war if America interfered with Taiwan.

Speaking to a group of foreign journalists, General Zhu said,

"If the Americans are determined to interfere [then] we will be determined to respond. We ... will prepare ourselves for the destruction of all of the cities east of Xian. Of course the Americans will have to be prepared that hundreds ... of cities will be destroyed by the Chinese."

China has long promised never to be the first to use nuclear weapons, but General Zhu's remarks, if confirmed by Beijing, would represent a reversal of that policy. (Xian is an ancient city in central China.)

As I've said many times before on this web site, China has the largest army in the world, and is quickly militarizing and arming itself to the teeth with high technology weapons. China has repeatedly vowed to capture Taiwan by force, if necessary, and the conflict over the East China Sea islands will provide them with an excuse to attack Japan as well. Meanwhile, China is internally coming apart at the seams, and any external conflict could be the trigger that launches a major civil war in China.

Generational Dynamics predicts that these wars will occur with 100% certainly. These wars will occur sooner or later, and with the level of verbal conflict rising constantly, it's sure to be sooner. (16-Jul-05) Permanent Link
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Israel strikes at Hamas in Gaza, after Hamas launches massive rocket attack against Israel

The Palestinian Authority declared a state of emergency in Gaza on Friday, after a series of violent escalations.

Israel and the United States have called on Palestinian leader Mahmoud Abbas to crack down on the Palestinian militants, who killed six Israelis this week - five in a suicide bombing in Netanya and one in a rocket attack near Gaza.

The suicide bombing occurred in Tuesday, when an 18-year-old Palestinian approached a West Bank shopping mall and blew himself up.

On the Gaza side, Hamas-led militias launched at least 53 missiles against Israeli targets on Thursday and Friday afternoons. according to Israeli sources.

The Palestinian Authority tried to use force to restrain Hamas, but they were outnumbered by the Hamas forces. After that, Israel took matters into its own hands, and launched air strikes that killed militans from the Hamas organization.

Israel is fulfilling it's promise, made in mid-June, to resume targeting Hamas militants, if the Palestinian Authority can't control them.

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

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

Since 2002, I've been predicting that the genocidal 1940s Arab-Jewish war will be refought, and will engulf the entire region. Generational Dynamics predicts that such a war will occur again, with near 100% certainty. What will trigger the renewed war is not yet known, but it could happen tomorrow, next month, next year, or in two or three years. Since 2002 I've been saying that I consider the most likely time to be within two years following the disappearance (through death or retirement) of Yasser Arafat.

Following Arafat's death on Nov 14, 2004, the entire world, in a "state of denial" as usual, heralded the new era of Mideast peace and tranquility, especially after Mahmoud Abbas, also known as Abu Mazen, took "bold steps" to bring peace, after being elected Palestinian Authority president. As I said at the time, nothing has changed: Generational Dynamics still predicts a new Mideast crisis war, with 100% uncertainty.

Conflict risk level for next 6-12 months as of: 30-May-2005
W. Europe 1 Arab Israeli 2
Russia Caucasus 2 Kashmir 1
China 2 North Korea 3
Financial 3 Bird flu 3
Key: 1=green 1=Low risk 2=yellow 2=Med 3=red 3=High 4=black 4=Active

For me, only one question remains: Has the situation in the Mideast now gotten so bad that it's time to raise the risk level in my risk level graphic from 2=yellow to 3=red ?

Right now I'm leaving it where it is, because Mahmoud Abbas is still making a grand effort to bring peace to the region. But when the violence worsens, or if Abbas is "eliminated," then the graphic will be changed. (15-Jul-05) Permanent Link
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Defiant Britons join people around the world in two minutes of silence

The revelation that the subway suicide bombers were young native-born Britons has thrown Western Europe into alarm

Crowds at the vigil in London's Trafalgar Square <font size=-2>(Source: BBC)</font>
Crowds at the vigil in London's Trafalgar Square (Source: BBC)

At 12 noon on Thursday in London, cars and busses pulled to the side of the road, people poured out of buildings onto the sidewalk to bow their heads, the government shut down, sporting events paused, stores closed, and radio and television statements went silent, to pay two minutes of respect to the victims of last week's subway bombing.

One Muslim man told CNN that he was worried about the attitudes of his own children. "The bombers were just like us. And if they're just us, then more of them could be anywhere, couldn't they?"

They were all native-born young men whose parents had emigrated from Pakistan. One was a 22-year-old cricket lover whose parents ran a fish and chip shop; another was a 30-year-old married primary school teacher with an eight-month-old daughter; another was an 18 year old boy.

Last Thursday, they traveled together on a train from Luton, arriving at King's Cross subway station a little before 8:30. They left separately in four different directions (north, south, east and west) and exploded their bombs, killing themselves and dozens of others.

Since then, at least four mosques have been fire-bombed, and others have seen their windows smashed and their doors damaged. Some have had racist graffiti scrawled on their walls and, in one case, a mosque was hit by bloody pig parts, a particular offense in a religion that eschews eating pork. A Muslim man in London was beaten by passers-by, and some women have had their hijabs pulled from their heads.

Prime Minister Tony Blair, trying to reduce people's anxieties and at the same time head off further public backlash against Muslims, is planning to meet with Muslim leaders around Britain, and at the same time he's recommending the passage of new laws: It's already illegal to commit a terror attack, of course, but one new law will make it illegal to "prepare for" such an attack; and the other new law will permit the deportation of anyone who "incites hatred."

These laws don't mention Muslims, of course, but no one doubts that they're targeted specifically at Muslims.

French Premiere Jacques Chirac observed the two-minute period of silence, and said that "no country in the world is safe from attacks" like the ones in London last week.

And yet, Chirac, who last week expressed his contempt for British food, did not hesitate at the same time to express his contempt for England in other ways, saying that the French are better than the British in many ways: They have more children, they spend more on research and they live longer.

Those who had hoped that the London bombings would re-unify Britain and France after last month's acrimonious European Union summit that has put EU into crisis were disappointed by Chirac's additional comments: "I am not disposed to making the least concession on agriculture," he said.

From the point of view of Generational Dynamics, we're seeing a continuing hardening of many attitudes that are unique to "generational crisis" periods. Most of the world is in a generational crisis period because it's 60 years past the end of World War II, and today's leaders have no personal memory of the horrors of that war, and lack the personal experience necessary to govern.

On this web site I've often said that what's important in generation trends are the behaviors and attitudes of large masses of people. Each individual, each politician is an individual who can do what he wants, and his actions cannot be predicted. But it is possible to predict certain attitudes and behaviors of large masses of people as generations change, and we're seeing that now.

The British people are in a state of shock over the bombings, because the same thing could happen again at any time. If something like this had happened ten years ago, it wouldn't have had nearly the same impact. Ten years ago, the country's leaders were people who had lived through the daily "blitz" bombing of London by German bombers. A single subway bombing is nothing compared to what those living through the blitz had to go through every day, and they could have shrugged it off. But everyone in active life today in Britain -- and in Western Europe and in America and in Pakistan -- have never experienced anything like the subway bombing, and are scared to death of it.

What made these four young men decide to bomb the subway? Generational Dynamics provides some partial answers.

Children who are born right after a crisis war (the "baby boomer" generation after World War II) grow up in a very structured environment with parents who are determined to protect them from ever having to go through such a war again. When these kids come of age, the kids rebel against their parents' world view and harsh rules, in a "generation gap" like the generational awakening period that America experienced in the 1960s. Kids born during an awakening period ("Generation X" in the 1960s case) have a very different childhood from the preceding generation. Kids born during an awakening become disaffected, unhappy, cynical, and they consider the earlier generation (the Boomers) to be extremely arrogant and narcissistic.

The kids who turned into suicide bombers were from the tail end of the disaffected Generation X. This might have taken them in any direction, but these kids decided to bomb the London subways.

There are 700,000 Britons who came from Pakistan. Because of their high birth rate, their mean age is around 16. They have a high crime rate, and a very high unemployment rate.

Why target England? That's easy to explain. Their parents had immigrated from Pakistan, but not just anywhere in Pakistan: They had come from the Kashmir region.

India and Pakistan had fought a very bloody crisis war in the mid-1940s, Kashmir became the major, most bitter geogrphical fault line. Kashmir is an overwhelmingly Muslim area, and when the United Nations partitioned Kashmir in 1947, into Indian and Pakistani regions, it was supposed to be temporary, since the UN Security Council mandated an election in 1951 to permit Kashmiri self-determination. That election has never been held because India has blocked it, since Pakistan would probably win. India is allied with England, and used to be part of the British empire. So, to a disaffected young man whose parents came from Kashmir, who is suffering bias and unemployment and poverty, and who is looking for a way to make his life meaningful, might well see the suicide bombing of a subway as the way to make himself a hero (not to mention getting 72 virgins).

Once you've established the patterns of history, and once you understand that what's happening today has happened many times before, for exactly the same sorts of reasons that it's happened before, you can't be surprised.

The result is inevitable: Muslims are already becoming increasingly isolated and radicalized throughout Europe, and non-Muslims are becoming increasingly suspicious and anxious. Desperate politicians will pass new laws that restrict civil rights, hoping that these new laws will prevent a new terrorist attack. And related issues, such as the contemptuous attitude of the French toward the English, are not affected at all. (15-Jul-05) Permanent Link
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Kofi Annan tells UN General Assembly to "calm down"

In a very heated debate over expanding the UN Security Council, opposing factions adopted some harsh language about each other.

Pakistan called the four countries which submitted one resolution "seekers of special privileges and power," while Brazil called arguments to delay "beguiling."

The African Union has one proposal, Brazil has put forth a second proposal, and there's even a third proposal floating around.

As things got heated, Kofi Annan said, "We are at a very early stage, and I think we should calm down and better not get all excited about it. ... These are mature men and women who are dealing with a very serious issue. And I hope no one is going to want to play a "spoiler,' to be blamed for lack of progress."

In Kofi Annan's dream world, where he decides whether a war is a "good war" or a "bad war," anything is possible as long as Kofi Annan wants it.

United Nations
United Nations

Over two years ago, in March 2003, I wrote that the UN is self-destructing. That was because the United Nations was debating the war in Iraq, and the debate was extremely bitter and divisive.

That was a major crisis for the UN, and nothing like it has happened since then, but that doesn't change the conclusion.

The UN today is practically incapable of accomplishing anything but empty words. It's a forum for world leaders to talk absolute and utter nonsense.

The UN will survive as long as there isn't a real issue that they have to deal with. But there are many such issues coming up, and the UN will not reach any satisfying conclusion on any of them.

Generational Dynamics predicts that we're headed for a new "clash of civilizations" world war, and you can see it happening. It was just a couple of weeks ago that an acrimonious European Union summit ends in total crisis and chaos, putting the entire "European project" on hold.

We're at a unique time in history, 60 years after the end of WW II, when all the countries that fought in that war are in generational crisis periods, because all the leaders and senior managers in these countries are from the generations born after WW II, and none of them have any personal memory of the horrors of that war. (12-Jul-05) Permanent Link
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Survivors commemorate the genocidal 1995 Srebrenica massacre

After Rwanda, Srebrenica and Darfur, United Nations says "Never again" - again.

When I was growing up in the 1950s, I used to hear the words "never again" in reference to the Jewish holocaust in 1930-40s Germany.

Since then, we've had several genocides which were just as bad as the Jewish holocaust, and we seem to hear the words "never again" again and again and again.

On Monday, world leaders gather with tens of thousands of survivors and neighbors to say "never again" again and to commemorate the tenth anniversary of the Srebrenica massacre, where thousands of boys and men, who had been separated out from the women, were massively slaughtered and buried in mass graves -- all right under the nose of a United Nations "peacekeeping force."

The Balkan states (formerly Yugoslavia) is the meeting place of three great civilizations: the Western (Judeo-Christian) civilization, the Orthodox Christian civilization, and the Muslim civilization. Great genocidal inter-civilization wars have occurred in this region with regularity for centuries. One of the greatest of these wars was World War I, the Great War, that began in 1912. When it was settled, the Balkans were united as the Kingdom of Yugoslavia.

Regular readers of this web site know that genocidal crisis wars occur in every tribe, society, nation and region, and that they occur roughly every 70-90 years, the maximum length of a human lifetime. And so it's no surprise that Yugoslavia survived only 74 years from the time it was formed, and then dissolved into a new genocidal crisis war.

When Yugoslavia collapsed in the 1980s, it split into largely Catholic Croatia, largely Orthodox Christian Serbia, and largely Muslim Bosnia and Albania.

Remarkably, these three groups lived together peacefully for decades in the Balkans. In many cases, they were friends and neighbors, living near each other, babysitting for each other's children, often intermarrying - just like any suburban neighborhood in America. That's why it was so remarkable to see how brutal and violent the Balkans war of the 1990s was. It was as strange and unexpected as if the citizens of Stamford, Connecticut, decided one day to rise up and start killing each other.

The war was extremely brutal, with atrocities committed on both sides. However, the better-armed Serbs gained the upper hand, and developed a policy of mass-murdering all the men and mass-raping all the women.

With the Serbs achieving victories, the United Nations tried to stop the war. In 1993, the UN Security Council passed Resolution 819, declaring that the town of Srebrenica and a 30 square mile area around the town is now the first "United Nations Safe Area."

There's always a big problem with "safe areas," in that they're usually protected from attack by some political prohibition, but nothing stops them from being used as bases for counterattacks. (For example, the Muslims in Iraq often used mosques as "safe areas," feeling free to store weapons there and launch missiles from there.) Thus, the Muslims were "safe" in Srebrenica, but could store weapons and launch counterattacks from Srebrenica, thus further infuriating the Serbs.

By December, 1994, the war had resulted in some 200,000 or more deaths, millions of refugees, and tens of thousands of rapes.

In January, 1995, a battalion of Dutch Peacekeepers arrived on the scene to Keep the Peace in Srebrenica. Unfortunately, the Serbs didn't comply, and took 350 of the Dutch Peacekeepers as hostages.

An angry United Nations decided to bomb the Serb positions, but there were some mixups, and the request for bombers was filled out on the wrong form (I'm not joking!!!), then it was too late because the bombers were running out of fuel, so the whole thing got delayed. Finally, two Dutch F-16 Fighters drop two bombs on Serb positions. The Serbs threatened to kill Dutch hostages and shell refugees, so the bombing campaign was called off.

Later the same day, July 11, 1995, the Serbs entered Srebrenica and issued an ultimatum: The Muslims must hand over their weapons to guarantee their lives. Some men fled into the mountains; they were shelled, captured and killed. But most Muslims complied. Thus did the Serbs acquire most of the Muslim weapons in Srebrenica.

On July 12, the Serbs demanded that the men and boys be separated from the women; the Serbs insisted that men must be questioned to identify Muslim War Criminals.

The women were sent away on busses, and the men and boys were slaughtered. Between July 12 and July 16, 1995, the Bosnian Serb Army killed over 7,000 Muslim men. It was the greatest European atrocity since World War II.

So yesterday, 50,000 people rallied in Srebernica to commemorate the massacre.

Officials from all over the world spoke utter nonsense.

British foreign secretary, Jack Straw, said it was "a shame on the international community that this evil took place under our noses. I particularly regret this. And I am deeply sorry for it."

Similar sentiments came from Richard Holbrooke, who eventually engineered a peace treaty. He said, "Srebrenica was the failure of NATO, of the West, of peacekeeping and of the United Nations It was the tragedy that should never be allowed to happen again."

How was it a failure of Nato, the west, peacekeeping and the UN? What else could have been done? We didn't do anything about the Rwanda genocide, and the Darfur genocide. And we've gotten nothing but grief from intervening in Iraq. Straw and Holbrooke don't say what could have been done, and indeed, nothing could have been done.

UN Secretary General Kofi Annan put out a press release and sent an envoy, Shashi Tharoor, to the rally. Tharoor said, "Ten years after those tragic events, they continue to haunt us and serve as a reminder that such atrocities must be met with all necessary means and that there must be the political will to carry the policy through."

Annan must be getting exhausted from all the haunting he's suffering, with all the genocide going on. And there's never any political will. Annan forgot to mention that after the massacre, when American-led forces intervened and forced an end to the war, we did so without UN approval. But nine years later, when American-led forces intervened in Iraq, Annan called the war illegal.

One thing I've discovered is that everyone has their favorite wars.

Last year, I was startled to hear the great peacenik Jesse Jackson call for sending American troops to Darfur. Kofi Annan has also called for intervention in Darfur.

So an intervention in Iraq is a "bad intervention" to these guys, but an intervention in Darfur and Sudan is a "good intervention." Do you get the feeling that we're dealing with political twits?

The problem, as I've said many times on this web site, is that these massacres and genocides all take place in the context of crisis wars, and are "acts of nature," which cannot be stopped any more than a tsunami can be stopped.

A year ago, when I first wrote about the crisis war in Darfur, I predicted that the UN would be helpless to stop the crisis war until it had run its course. And I was absolutely right. Crisis wars happen regularly, and they can't be stopped.

There are many reasons why they can't be stopped, but one of the main reasons is that there are many people around who don't want to stop whatever war you're talking about. The UN couldn't intervene further to prevent the Srebrenica massacre because Russia and China opposed intervention.

One columnist, William Montgomery, wrote a column entitled, "There's plenty of blame for us all," which contained these paragraphs:

"The fault for this lies equally with the United Nations and the powerful countries like the United States and others in the Contact Group that provided much of its policy direction. Instead of demanding a cease-fire and backing it up with sufficient force, Unprofor had to beg, cajole and offer a variety of carrots or empty threats with totally predictable results....

If we are going to move this region away from the idea of collective guilt, the first and necessary step is to acknowledge individual guilt and to indicate remorse that war crimes were committed. At the same time, though, where are the leaders of the international community who also helped to bring events in the Balkans about? Have we ever heard one word of apology or acknowledgement of failure or responsibility from anyone in leadership positions of Unprofor, the United Nations or the major governments that they got it wrong?"

Well, of course it's all America's fault, but I'm particularly struck by his claim that the massacre was "totally predictable." Really? There was nobody predicting a Srebrenica massacre at the time, to my knowledge.

But OK, why don't we turn away from the past, and look at some things that I've discussed on this web site, things that are "totally predictable" today:

  1. We're headed for a major stock market crash with 100% certainty, but no one's talking about it or preparing for it. I never understood how people didn't see the crash of 1929 coming, but I sure see it now.
  2. China has the largest army in the world, and is quickly militarizing and arming itself to the teeth with high technology weapons. Their plan is to capture Taiwan, go to war with Japan and get revenge for WW II atrocities, and gain hegemony over all of the Pacific region, including all of southeast Asia, taking the place of America as the world's largest superpower. What are we doing about that, inasmuch as it will cause a new world war? I never understood how Neville Chamberlain could have been so completely fooled by Hitler (and why Winston Churchill was mocked and scorned at the time), but I sure do now.
(12-Jul-05) Permanent Link
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S&P 500 stock index nears four-year high

Unfortunately, that's not good news.

A couple of years ago, oil sold for $25-30 a barrel. Today the price exceeds $60 a barrel. It seems that the worse the economic news is, the higher the stock market goes, and today the S&P 500 index neared a four-year high.

"On balance, things are going well, but the mood is still very, very guarded," Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors, said of stocks. "Confidence in the market is improving, but it's improving in very small steps because there's still risks out there, like oil prices."

As I've been writing on this web site since 2002, we're entering a new 1930s style Great Depression, as payment for the 1990s stock market bubble.

This view was supported last weekend by an article in Barron's, as I wrote about yesterday. That article confirms that the stock market is overvalued by 100%, from which one can only conclude that a major stock market crash is in the offing.

In 2002, when the stock market was around Dow 8000, I had hoped that stocks would keep falling gradually to the Dow 4000 level, since that would do the least damage to the US and world economy. However, that hasn't happened, and stocks have returned to extremely high bubble levels. The crash is coming with 100% certainty, and when it does, it will do enormous damage. (11-Jul-05) Permanent Link
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North Korea agrees to resume nuclear non-proliferation talks

The six-party talks will start the week of July 25, thirteen months after the last round, after which North Korea canceled all further talks.

The six parties include South Korea, China, Japan and Russia, as well as North Korea and the U.S.

North Korea has used the 13 month hiatus to make substantial progress in its nuclear weapon development program, and is now believed to have several nuclear weapons in its inventory. As I wrote in my Feb. 10 analysis, North Korea has been mobilizing for war since last April, and appeared to be manipulating the nuclear non-proliferation talks to gain time for its nuclear weapons program. North Korea's behavior since 2002, when it first announced its intention to develop nuclear technology, follows a typical historical pattern of countries that are about launch a pre-emptive crisis war. The only thing we don't know is President Kim Jong-il's timing.

The possibility that North Korea may be close to conducting a nuclear test has caused a high level of nervousness and panic around the world.

However, this all comes at a time when North Korea has been facing a severe food shortages in years.

According to news reports, North Korea wants the U.S. to provide fuel and food, sign a non-aggression pact, build a nuclear reactor and open diplomatic relations. North Korea may thus see a return to the talks at this time as a way to gain substantial financial benefit. The U.S. is going to ask North Korea to destroy it's nuclear arsenal, but pigs will fly before that happens.

It may be that North Korea plans to use the talks to get food, fuel and money in return for not conducting a nuclear test in the near future. (9-Jul-05) Permanent Link
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British political parties uniting around Prime Minister as death toll mounts

Proposed laws to require identity cards and allow detention without trial are given new impetus, as death toll mounts into the dozens following the subway bombings in London earlier today.

The Conservative and Labor parties united with Tony Blair's Labor party to insist that terrorists would not succeed.

Conservative leader Michael Howard said, "What is important is to make it absolutely clear that this country is united as one in our determination to defeat terrorism and to deal with those who are responsible for the dreadful acts that have taken place in London".

Analysts are now recalling Blair's words on February 23, 2005:

"Were there to be a serious terrorist act in this country and afterwards it was thought that we had not taken the measures necessary, believe me, no one would be talking about civil liberties; they would be talking about why we had not done more to protect the security of this country"

Those words now appear to have been prophetic. British citizens today, almost all in the generations born after WW II, are undoubtedly thinking about their parents' horror stories of the "blitz" - the daily bombing of London during WW II. It was 9/11 every day for Londoners during WW II, and now it's happening again. As always happens during a "generational crisis" era like today, the generations born after the previous crisis war will not tolerate acts of terrorism and similar surprises and, as Tony Blair indicated, will not hesitate to curtail civil liberties if they perceive that to be required. (7-Jul-05) Permanent Link
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G-8 leaders react to "particularly barbaric" London subway bomb blasts

England and France are unified once more -- against terrorism.

An Islamist website has posted a statement - purportedly from al-Qaeda - claiming that it was behind the simultaneous bombing attacks on London's subways and busses this morning.

The terrorist bombings all went off simultaneously at about 8:50 am local time -- the same time of day that the Madrid subway bombing occurred on March 11, 2004, and the time of day that the first plane flew into the World Trade Center on 9/11/2001.

British Prime Minister Tony Blair spoke as follows:

"It's important, however, that those engaged in terrorism realize that our determination to defend our values and our way of life is greater than their determination to cause death and destruction to innocent people in a desire to impose extremism on the world.

Whatever they do, it is our determination that they will never succeed in destroying what we hold dear in this country and in other civilized nations throughout the world."

French President Jacques Chirac, also present at the G-8 meeting, announced his solidarity with Blair, as did George Bush and all the other leaders present.

Back in France, Prime Minister Dominique de Villepin said,

"Faced with these odious acts, I must express my most profound solidarity, my friendship and my support for the British people, and in particular for the people of London. ...

More than ever, democracies must rally together and show unity in the face of the terrorist threat. More than ever, we must show vigilance and determination."

We must now wait to see what the reaction will be to these terrorist acts. During a "generational crisis" period, like the current one, a terrorist act like this one can trigger retaliation and further crises in the months to come.

Here are some things to watch for:

During the last year, talk of war has become increasingly political, especially over the war with Iraq. I've corresponded with several people in the last few weeks who appear to claim the world's troubles are all George Bush's fault. One said that people in so-called "red states" want to "write off" New York and Washington. Those statements seem ironic today, unless red state people also want to write off London.

If you want to understand what's going on today, you have to realize that no politician has anything to do with it. The roots of these terrorist acts were laid decades ago, especially in decisions that were made after WW I and WW II. It could even be said that these events were caused by events that occurred centuries ago -- the Crusades, the Norman conquest of England, the fall of Constantinople, the French Revolution, and so forth.

All we can really do today is watch what happens, and look for ways to protect ourselves, our families, our communities and our nation, as we head for the inevitable "clash of civilizations" world war. (7-Jul-05) Permanent Link
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Bird flu poised to spread to birds world wide

Migratory geese are now infected and spreading bird flu, and thousands have died.

Thousands of dead bird have been found at Lake Qinghaihu, a protected nature reserve in western China, according to Chinese scientists.

"The occurrence of highly pathogenic H5N1 avian influenza virus infection in migrant waterfowl indicates that this virus has the potential to be a global threat," Jinhua Liu of China Agricultural University, George Gao of the Chinese Academy of Sciences and colleagues wrote in their report in Science.

"Lake Qinghaihu is a breeding center for migrant birds that congregate from Southeast Asia, Siberia, Australia and New Zealand."

DNA analysis reveals that virus is a slight mutation of the virus that killed a few dozen people in Vietnam, and that all of the birds were infected by a single bird that flew in, presumably from Vietnam. This means that the virus is now poised to spread to birds in other countries, and then worldwide.

The original virus killed only chickens. A later mutation also infected ducks, though with little harm to the ducks, who showed no symptoms but were carriers of the disease.

This is the first time that the virus has infected and killed wild migratory birds, indicating that the lethal virus is jumping to new species.

Conflict risk level for next 6-12 months as of: 30-May-2005
W. Europe 1 Arab Israeli 2
Russia Caucasus 2 Kashmir 1
China 2 North Korea 3
Financial 3 Bird flu 3
Key: 1=green 1=Low risk 2=yellow 2=Med 3=red 3=High 4=black 4=Active

Although the virus has infected and killed humans, humans have only been infected by birds, as far as scientists know. This will change when the virus mutates again so that humans be infected by other humans. At that point, it will quickly spread worldwide, and probably kill hundreds of millions of people worldwide over the next two or three years. This is the worst case mutation, and will occur when one human being gets the bird flu and the ordinary human flu at the same time. The two flu viruses could recombine within a single human body into a new, mutated variant that could have almost the virulence of the bird flu, but with the easy human to human transmission of ordinary human flu. (7-Jul-05) Permanent Link
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The mysterious Baltic Dry Index reveals a great deal about the Chinese economy

China is causing wild volatility and turmoil in shipping, iron ore and steel prices, and it's anybody's guess how long this can last.

Last month I wrote an article on the Baltic Dry Index (BDI) and its sharp, rapid fall in the last six months. I said that it indicated a possible global economic slowdown in the fall. I've now been able to put together a more complete picture.

The Baltic Dry Index (BDI) measures the shipments of "dry-bulk cargos," commodities like iron ore, grain, cement and coal, shipped in bulk on huge freighters traveling the seas around the world.

Baltic Dry Index, 1996-present <font size=-2>(Source: FinData)</font>
Baltic Dry Index, 1996-present (Source: FinData)

The adjoining graph (from the FinData web site) shows the BDI for the last ten years,

The BDI has a colorful history since it was established in 1744 by merchants and ships' captains chitchatting at the Virginia and Baltick Coffee House in Threadneedle Street in London.

The BDI is considered to be a reliable leading economic indicator for manufacturing, since it measures commodities that will eventually be used in the manufacture of finished goods.

As you can see, the BDI followed a fairly steady pattern for many years, until mid-2003. Since then, it's become extremely volatile, and is currently plummeting very rapidly, with sharp decreases almost every day. This means that the cost of shipping dry goods is falling sharply, which means that demand for shipping services is falling. Such a sharp decrease in worldwide shipping demand is a harbinger of a fall in manufacturing in the fall.

The suddenly volatility has been caused by variability in Chinese imports of iron ore. China's economy has been growing at the rate of 9-10% per year for 20 years, and any such exponential growth pattern cannot last long without causing severe market distortions.

By the early 2000s, China's steel production was beginning to be felt around the world. China was importing iron ore and coal for its steel production, but the world price of iron ore was still around a stable $200 per ton.

However, China has needed more and more steel to maintain its explosive growth, to build more and more new factories, to feed its quickly expanding shipyards, and to manufacture goods including cars, household appliances and buildings, many for export shipment to America, Japan and Europe.

Starting in 2003, China's steel output really began to take off, and iron ore prices were rising, so numerous factories began importing iron ore in order to lock in prices. These imports reached a peak early in 2004, which explains the first tall peak in the BDI graph shown above.

The panicky purchase of iron ore created an iron ore glut within the country, and imports fell. This explains the sharp fall in shipping rates in mid-2004, as shown in the above graph.

Soon the glut became a shortage, triggering a boom in the worldwide price of steel, and a revived increased demand for iron ore. By early 2005, the worldwide price of both iron ore and steel had tripled, with steel selling for $750-800 per ton - a three to fourfold increase since 2001. That explains the second peak on the graph above, occurring at the end of 2004. (Paragraph corrected on 4-Nov-2008)

Once again, there was another glut, and shipments fell.

To add to it, China announced a 17% tax on high-end steel products made for processing and sale overseas — such as metal for containers and ships. This has substantially reduced China's demand for iron ore, and that's why worldwide shipping costs began to fall sharply in May, as the above BDI graph shows.

At the present time, there's no way to describe the current situation as anything else but massive turmoil. This volatility has caused huge swings in prices of shipping, iron ore, steel, and related commodities, services and products.

Nobody knows for sure whether the BDI is going to keep falling or is going to level off.

Baltic Dry Index, Feb-July, 2005 <font size=-2>(Source: FinData)</font>
Baltic Dry Index, Feb-July, 2005 (Source: FinData)

For a few days last month, the BDI began to increase, and some people were predicting that the index would continue to rise again. But at the end of last week, the BDI fell once more, as shown by the adjoining graph.

The turmoil is extending a number of other countries.

India has been building up its steel-making capacity, but now has more capacity that it can use. Instead, India has been shipping huge amounts of iron ore to China, but now analysts are trying to discourage that, because they've discovered that India is going to run out of iron ore in 10-20 years at current rates.

Other countries have been rapidly expanding their steelmaking capacity as well. Brazil's capacity has also been growing rapidly, making it clear that the world can produce more steel that it can use.

The three largest miners of iron ore are Cia. Vale do Rio Doce in Brazil, London-based Rio Tinto, and Melbourne-based BHP Billiton. (Paragraph corrected on 4-Nov-2008)

China's rise as a global steel power has been led by Shanghai Baosteel Group, a state-owned steel manufacturer. China's government has been pushing Baosteel since 1978 to be the world's leading steel producer, so a further dramatic fall in both steel prices and the BDI would not be a surprise.

Indeed, one analyst is predicting that steel prices have already peaked, and are falling.

From the point of view of Generational Dynamics, this kind of volatility and turmoil is typical of an "unraveling" situation that precedes a crisis. China's economy is in a price bubble; America's economy is overwhelmed with debt, and is in a stock market and real estate bubble; Japan's economy is still in a monetary deflationary state, 13 years after its stock market collapse; and Europe is strapped with very high unemployment and decreasing GDP.

Generational Dynamics predicts that we're entering a new 1930s style Great Depression that will cause a stock market correction of 50% or more, and a deflation of American currency by 30% or more. All that's required is some kind of "shock," and that could happen next week, next month or next year. But it's going to happen with 100% certainty, and sooner rather than later. (5-Jul-05) Permanent Link
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Paul McCartney and a Pink Floyd reunion at Live 8! London's the place to be today.

Meanwhile, tens of thousands march in Scotland, to end poverty in Africa.

Why not march to end cancer and traffic accidents at the same time?

Oh, I shouldn't be such a curmudgeon, since this is big news.

Pink Floyd
Pink Floyd

Ex-Beatle Paul McCartney and U2's Bono were the warm-up acts for the must-see Live 8 reunion of all four members of 70s rock bank Pink Floyd, for the first time in 24 years.

And that's just the London concert. The complete lineup for all Live 8 concerts taking place today in London, Cornwall, Versailles, Ontario, Berlin, Rome, Moscow, Tokyo, Johannesburg, and Philadelphia, and in Edinburgh on 6 July reveals some of the greatest musical artists of our time.

The purpose of the concerts is to call attention to the G-8 meeting to be held in Edinburgh, Scotland, next weekend. G-8 stands for the "Group of eight" major industrialised states, whose members are US, UK, Canada, France, Germany, Italy, Japan, Russia. The major agenda item for that meeting will to end poverty in Africa.

To that end, tens of thousands of protesters are marching today in Edinburgh to demand action.

According to the UN, more than 300 million Africans live on less than $1 a day, and less than half of children on the continent complete primary school. In the last 50 years, there have been 186 coups and 26 wars in Africa, with more than 7 million people killed, the United Nations says. Africa is the only continent to have become poorer in the last 25 years, according to the UN.

Africa is larger than Europe, America, Alaska, China, and New Zealand (not shown) combined. <font size=-2>(Source: Boston Univ)</font>
Africa is larger than Europe, America, Alaska, China, and New Zealand (not shown) combined. (Source: Boston Univ)

As I wrote in an article last month, just the sheer size of Africa makes any attempt to cure African poverty impossible. Africa is huge -- bigger than China, America, Alaska, Europe and New Zealand combined. If all the so-called "rich nations" of the world gave every penny they had to Africa, it still wouldn't be enough.

But at the meeting next week they won't give every penny they have to Africa, and so the crowds attending Live 8 concerts and marching on Edinburgh this week are going to be very disappointed next week. It'll be interesting to see how it all falls out.

Africa is no different from the rest of the world. It's true that they've had a lot of wars recently, but that's just because they're on a different timeline. The other countries of the world had their major wars in World Wars I and II, and are now headed for a "clash of civilizations" world war with 100% certainty.

And it's true that HIV/AIDS is widespread in Africa, but Asia is facing an AIDS explosion, with India leading the way. And a UCLA study reveals that US teens with AIDS are taking greater risks, indicating that AIDS will be increasing in America as well.

And this week, reports of two new research studies by the International Monetary Fund (IMF) reveal that increased aid will not solve Africa's problems.

One of the working papers, What Undermines Aid’s Impact on Growth? by IMF researchers Raghuram G. Rajan and Arvind Subramanian, does the following:

"We examine one of the most important and intriguing puzzles in economics: why it is so hard to find a robust effect of aid on the long-term growth of poor countries, even those with good policies. We look for a possible offset to the beneficial effects of aid, using a methodology that exploits both cross-country and within-country variation. We find that aid inflows have systematic adverse effects on a country’s competitiveness, as reflected in a decline in the share of labor intensive and tradable industries in the manufacturing sector. We find evidence suggesting that these effects stem from the real exchange rate overvaluation caused by aid inflows. By contrast, private-to-private flows like remittances do not seem to create these adverse effects. We offer an explanation why and conclude with a discussion of the policy implications of these findings."

The paper concludes that foreign aid pours money into a poor country and has many adverse effects, usually involving a great deal of corruption. But even if corruption is avoided, foreign aid usually makes the country worse off that it was because the influx of money inflates the country's currency, and increases wages in the industries favored by the aid, making the country less competitive on the world market and more and more dependent on continued aid.

An interesting finding is that the negative effects of foreign aid don't occur with an equal amount of money provided as remittances. The word 'remittances' refers to "Money earned or acquired by immigrants that is sent back to their country of origin. For some developing countries, remittances can form a sizeable chunk of their economy."

The IMF has found that money from remittances amounted to $100 billion of capital inflows of 90 developing countries, about 50% of total capital inflows.

"For a number of developing countries, remittances are the single largest source of foreign exchange, exceeding export revenues, official aid, FBI and other private capital inflows. As an example, Mexico receives about $15 million in remittances per year, and this is probably an underestimate because we don't measure remittances that well.

The United States still remains the main source of remittances, over $30 billion in 2003, and the outflows from the U.S. have almost quadrupled in the last 15 years. So this is a big and growing source of external financing for a number of countries.

What is most important about remittances which the essay highlights is their stability. They're sent in good times as well as bad times and so they play a role in cushioning adverse shocks such as wars and natural disasters. In fact, they lower the volatility of GDP growth which I just told you from the other essay was so harmful.

They also are very well targeted at the poorest people, so in that sense they contribute significantly to reducing poverty which again the essay demonstrates.

So given these benefits, we need to find ways to encourage remittances. For example, by reducing the cost of sending them as well as to impediments to their flow, and the essay makes clear what kinds of policies might make sense."

In the working paper, the IMF researchers contrast the results of remittances with an equal amount of foreign aid:

"We now turn to the question of whether the effects of aid are unique or are shared by other unrequited transfers such as remittances....

[A] large body of micro-evidence suggests that remittances can have a positive effect on entrepreneurship, supply of labor, and increased investment.... Even so, it is somewhat puzzling that remittances do not give rise to the kinds of adverse competitiveness effects resulting from aid inflows.

One possible explanation is that remittances are spent on items like adding a room to a house, which in turn increases the demand for plentiful unskilled labor or for imported cement, and thus does not lead to real exchange rate appreciation....

However, a more compelling explanation comes from examining the pattern of remittance inflows and exchange rate overvaluation.... [C]ountries that had overvalued exchange rates in the 1990s received significantly lower remittances. The same pattern is seen when we plot remittances in the 1990s against exchange rate overvaluation in the 1980s..., suggesting that causality runs from exchange rates to remittances.

It is plausible that emigrants stop sending funds as they see an overvalued exchange rate, and as they find it cheaper to send goods directly. It is also likely that overvalued exchange rates in many of these countries were accompanied by exchange controls and dual exchange rates, which IMF 2005 finds are deterrents to remittances.

Whatever the reason, we may have an explanation of the apparent puzzle. The reason that remittances do not lead to a significant loss of competitiveness is that they tend to dry up if an exchange rate starts getting overvalued. Thus, it is only countries that through astute macroeconomic policies manage to keep the real exchange rate competitive in the face of remittances that continue to attract them. The endogeneity of remittances offers one explanation of why we do not see remittances adversely affecting the growth of tradable industries. Aid, by contrast, might even increase if exchange rate overvaluation leads to poor economic performance, thus further exacerbating the problem."

So the thrust of the IMF report is that foreign aid is counter-productive, while remittances not only improve the lives of the people in the countries that receive them, they even encourage "astute macroeconomic policies," which in turn encourages good government and discourages corruption.

This means, according to the IMF report, that we ought to be looking for ways to make remittances easier -- programs that encourage people to help people. For example, instead of giving $1 billion to a country's government ages, which will harm the country and make life worse, we should spend that same $1 billion in a program that somehow matches up Americans with ordinary people in another country, and then pays the aid to the foreign individuals, based on recommendations by the matching Americans. I'll bet that a way could be found to make that work, but anything is better than destroying a country by pouring money into it so that all the politicians can pat themselves on the back for being such deeply caring people.

Such a matching program might do some actual good, but it won't happen because politicians really don't care much about doing good, except for themselves.

Incidentally, Generational Dynamics explains why there's so much poverty in the world, and why it continues to increase. The reason is that the population grows much faster than the food supply. According to my own computations, food production increases by at most 0.96% per year, while population grows at 1.72%. Therefore, the amount of food per person keeps decreasing, and so food becomes scarcer and, by the law of supply and demand, the price of food keeps going up. In fact, the worldwide price of food has been skyrocketing in the last couple of years, thanks to massive feeding programs in China. As the price of food goes up, poverty increases in large marginal populations around the world.

There is no solution to this problem except the ones provided by nature.

Nature has three ways of reducing the population in order to match the food supply: famine, disease and war. Famines are actually quite rare, so throughout history the major method for reducing population to match the food supply has been genocidal crisis wars (such as World War I and World War II). The problem has been exacerbated in the last 150 years by advances in medicine which have significantly reduced the rate of infant mortality -- from almost 50% to about 2%. This has created a huge pool of young men ready to kill and be killed in new genocidal crisis wars, such as the impending "clash of civilizations" world war, which is expected to kill some 2-3 billion people out of the current world population of 6.5 billion.

However, today we can also expect disease to reduce the world's population. A bird flu pandemic will kill hundreds of millions of people, and will bring international commerce to a standstill. There is some good news, however: After the pandemic and world war end, there'll be plenty of food for the survivors. (2-Jul-05) Permanent Link
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Sandra Day O'Connor steps down from Supreme Court

It's a crisis moment that could ignite a "political civil war"

In announcing on Friday O'Connor's decision to step down, President Bush said: "The nation deserves and I will select a supreme court justice that Americans can be proud of. The nation also deserves a dignified process of confirmation in the United States Senate, characterised by fair treatment, a fair hearing and a fair vote."

This statement by the President was a political warning to the Senate Democrats not to use the weapon of filibusters to prevent his nomination to receive a vote.

Democrats responded immediately. Massachusetts Sen. Edward Kennedy and Connecticut Sen. Chris Dodd, held a joint news conference minutes later saying they reserve the right to use the filibuster to block a nominee from ever getting a confirmation vote. “If the president abuses his power and nominates someone who threatens to roll back the rights and freedoms of the American people, then the American people will insist that we oppose that nominee and we intend to do so,” Kennedy said.

As I've said many times on this website, when a country enters a "generational crisis" period, the great mass of people become increasingly confrontational and less willing to compromise. This unwillingness to compromise occurs in international politics, as we've seen in the European Union, and in national politics. Generational Dynamics predicts that American politics will become increasingly bilious and conflicted, reaching what might be called a "political civil war."

This is what happens during crisis periods. In the case of the Civil War, the political civil war became a real civil war.

During the 1930s crisis period, the political bitterness created a major Constitutional crisis, and it occurred when the President tried to "pack" the Supreme Court.

President Franklin D. Roosevelt was furious at the Supreme Court for finding many of his New Deal laws unconstitutional, mostly on 5-4 votes. Most of the Justices had been appointed by Republicans, and FDR was furious at them. He came up with a complex scheme to increase the size of the Court, allowing him to appoint additional justices who would support his policies. The attempt failed, and in fact turned out to be a political fiasco, but it illustrates how vitriolic the politics can get during generational crisis periods.

Today, many Democrats are furious at the Supreme Court for its decisions in the 2000 Presidential election which led to George Bush becoming President instead of Al Gore.

The vitriol over replacing Justice O'Connor will center on four big issues: abortion, the death penalty, religious expression, and legal protections for gays and lesbians.

Now, take a look at that list of four issues, and think of how irrelevant they are. We have China mobilizing for war with the goals of reuniting with Taiwan and to challenge American military capabilities throughout the Pacific, leading to an inevitable world war. We have a mutating bird flu virus which could turn into a worldwide pandemic with a day or two, killing tens or hundreds of millions of people worldwide.

So instead of uniting the country and preparing people for what's coming. the important Washington politicians are going to spend their time arguing whether it's ok to post the Ten Commandments in a government building. When I was a kid in the 50s, we used to think of Washington politicians as buffoons. More and more, I'm beginning to remember why. (2-Jul-05) Permanent Link
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After President Bush's speech: What next for Iraq?

With growing insurgency violence and flagging public support, what's America's "end strategy" in Iraq?

The relentless stream of car bombings and suiciding bombings is having its impact on American public opinion. Recent polls show that Americans are slightly in favor of setting a withdrawal deadling.

I heard some college professor discussing the situation in Iraq on WBUR, a PBS station in Boston. He was saying that the anti-war movement is finally growing. He said that we know from the Vietnam and Korean wars that once the anti-war movement picks up, it keeps getting bigger. I had to laugh at this wishful thinking. The political conflict during the 1960s was caused by a "generation gap," with anti-war students rebelling against their pro-war parents. Today there's absolutely no "generation gap" whatsoever; any political disagreement is red-state versus blue state (vertical) rather than generational (horizontal). So there's no growing antiwar movement.

Still, there's a lot of political pressure these days for a strategy to withdraw our troops from Iraq within one or two years.

However, this isn't the first time we're heard this.

Last year, syndicated columnist Robert Novak, wrote a column (September 20), which said that the Bush administration is planning a quick exit from Iraq in 2005. At that time, just prior to the Presidential election, there was much discussion of this option.

According to Novak, his Bush administration sources had told him confidentially that President Bush plans to begin withdrawing from Iraq after the January, 2005, elections in Iraq. He explained this view further on Meet the Press by saying that the Bush administration has concluded that the American public cannot stand the continued terrorist beheadings and armed forces casualties.

Novak claimed that his contacts in the John Kerry election team had reached the same conclusion, if Kerry wins the election. The result, according to Novak, was that American troops would withdraw from Iraq in 2005 no matter who wins.

Well, here it is June, 2005, the January elections are over, and there's no withdrawal, no withdrawal in the works, no public demand for a withdrawal, and no outrage over President Bush's clear refusal to set a withdrawal deadline. There are no riots on college campuses, as there were in the 60s, no "Summer of love," and no "days of rage."

Last year, I wrote an analysis of the option of withdrawing from Iraq, and that analysis has held up pretty well - I'd barely change a word.

Bringing that analysis up to date, here are the major points:

So when will we withdraw from Iraq? As time goes on it becomes more and more likely that we'll remain in Iraq until the "clash of civilizations" world war begins, probably in the next 2-4 years. At that point, 9/11, Afghanistan and Iraq will turn out in retrospect to have been the opening rounds of the new world war. (1-Jul-05) Permanent Link
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