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


Web Log - September, 2005


Bird flu situation in Indonesia remains clouded, as virus spreads

Meanwhile, the Dutch breathe sigh of relief as spread towards Europe appears to stall.

As many as 48 people may be infected with bird flu in Jakarta and nearby municipalities, raising the possibility of rapid spread to other regions.

The U.N. World Health Organization (WHO) says that these fears are exaggerated, that only four cases have been confirmed so far, and that the others "might be just old-fashioned flu."

The Recombinomics web site, on the other hand, says that it's "obvious to the most casual observer" that WHO is not treating the situation seriously enough, and that the rapid spread of bird flu clusters throughout the region means that the "resulting major pandemic appears to be accelerating in Indonesia at this time."

Certainly WHO wants to be as conservative as possible, for fear of prematurely causing a panic and then not be believed when a real pandemic finally occurs. However, even WHO's latest press release says that "the world is fast recognizing the risk of an imminent human influenza pandemic."

So the situation is confused, but the potential for an imminent human bird flu pandemic is certainly present.

Separately, the Netherlands has eased an order which had required that all commercial poultry be confined indoors. The order was causing a row because the products were labeled as "free range," and some people say that an indoor chicken just can't be called a "free range" chicken.

The revised order, which permits "low risk" birds to be allowed outside as long as they're protected by netting, was motivated by the fact that the spread of bird flu in western Asia seems to have slowed. It was moving quite rapidly through central Asia and Russia towards Europe last month, but there have been fewer cases this month. The spread could begin again any day as the winter bird migration continues.

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

Once again, I must recommend to my readers that if you've been planning to take reasonable precautions before any crisis occurs, then now is the time to do take them. A worldwide bird flu pandemic could well occur this fall, but that's not all. Economic news this week indicates that credit card and public debt continues to increase exponentially, to the point where a number of analysts, including many who are habitually much less gloomy than I am, are starting to talk about a serious recession this fall. With public debt and credit card debt continuing to increases exponentially, the country may be at an economic tipping point, just as Jakarta may be near a health tipping point. (30-Sep-05) Permanent Link
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In a new bizarre move, North Korea demands an end to U.N. food aid

The famine-stricken country officially told the UN World Food Program (WFP) to stop food aid within the next few months. They said that they expect good harvests of their own this year, and that private donations of food will make up any difference. They also accused the U.S. of politicizing food aid by linking it to human rights violations, a charge with the State Department denies. North Korea is asking that food aid be replaced with "development work" aid.

Food aid is actually a controversial issue in general. Food aid to a country lowers the price of food in that country, making it harder to encourage local farmers to do more. But there are other issues as well.

North Korea receives private donations of food from both South Korea and China. But there are big differences in implementation between them and the UN WFP. When the WFP distributes food aid, it has dozens of inspectors that do hundreds of spot checks to make sure that the food is being distributed honestly. But South Korea and China simply give the food aid with almost no spot checks at all. They feel that they have to, because otherwise their neighbor will destabilize and affect them.

So I hope you get this. North Korea doesn't like the WFP's meddling, so they cut off food aid, "knowing" that this will force China and South Korea to increase food aid without meddling, since they presumably have no choice.

This has generated political turmoil in South Korea. An opposition legislator in Seoul said the WFP now faces expulsion from Pyongyang because of what she called Seoul's "indiscreet" provision of food. If South Korea is pressured to substantially increase its food aid, then the political repercussions will increase.

From the point of view of Generational Dynamics, North and South Korea are headed for a violent war of reunification, and the most likely scenario is that it will be launched preemptively by North Korea, led by North Korean President Kim Jong-il. This might happen next month, next year, or soon thereafter.

In attempting to discern Kim's plans, all we can do is look at what Pyongyang says and does.

The problem is that Kim has been getting increasingly erratic for the last couple of years. Starting in 2003, Pyongyang has claimed that the U.S. was about to attack North Korea preemptively, and Kim has taken a number of hostile steps, including mobilizing for war. Starting a few months go, North Korea began blocking all international communications, confiscating 20,000 cell phones and shutting down the internet for most citizens.

In the last couple of months, Pyongyang seemed to be getting less confrontational, and even agreed, last weekend,to discontinue its nuclear weapons program. However, they repudiated that agreement the next day, and once again accused the U.S. of plotting a nuclear attack.

This new announcement, canceling UN food aid, adds to the country's isolation and instability.

According to the UN, the cancelation could cause the death by starvation of hundreds of thousands of people this winter, including 125,000 children.

As regular readers know, I've felt for some time that a preemptive attack by North Korea could occur at any time. This view is based simply on North Korea's statements and actions. The constant claims that the U.S. is planning a nuclear attack on North Korea prepares the population for a preemptive attack on South Korea or Japan; and the increasing isolation, which Kim is implementing in every way possible, permits military mobilization, including nuclear weapons development, to continue in secret.

A starving population is the most dangerous force in the world, especially during a generational crisis period, since it can lead to a violent uprising and civil war. South Korea and China know that, of course, and that's the reason why they've been providing unregulated food aid to North Korea; any problem in North Korea would create a massive refugee problem.

But food aid unregulated by the UN is going to mean increased politicization -- i.e., politically favored groups will get more food than others -- and once winter sets in, violent unrest among starving masses could increase. Kim can't prevent the unrest, but does have the power to deflect it somewhat by declaring war on Seoul and Tokyo -- and Washington. That's why I continue to believe that a preemptive war by North Korea could happen at any time. (26-Sep-05) Permanent Link
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Gaza violence spiking up as Israel launches "crushing response" to rocket attacks

Hamas promised to stop attacking Israel from Gaza, to prevent spiraling out of control.

On Sunday, Israel killed a senior member of the Islamic Jihad militia group on the second day of Israeli helicopter missile strikes at Gaza buildings used by Palestinian militants.

The attacks followed a barrage of militant rocket attacks from Gaza on Israel on Friday. Those rocket attacks were supposedly in retaliation for a massive explosion on Friday during a Hamas military parade, evidently caused by militants who mishandled explosives. Hamas blamed Israel anyway.

In the face of the escalating violence, Hamas promised to stop attacking Israel from Gaza. The statement, by a senior Hamas leader, said "The movement declares an end to its operations from the Gaza Strip against the Israeli occupation, which came ... in response to the assaults by the enemy." However, it remains to be seen whether that promise will be honored.

From the point of view of Generational Dynamics, the Arabs and Jews are heading for a new genocidal crisis war. The last crisis war between Jews and Arabs was the extremely violent, genocidal war of the late 1940s, when the United Nations partitioned Palestine and created the state of Israel. Generational Dynamics predicts that we're heading for a major new Mideast war, replaying that war, and engulfing the entire region. (26-Sep-05) Permanent Link
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Fed Chairman Alan Greenspan says that the deficit is out of control

France's Finance Minister Thierry Breton quoted Greenspan as saying on Saturday that the U.S. had "lost control" of the budget deficit.

"'We have lost control,' that was his expression," said Breton, after meeting with the outgoing chairman of the U.S. Federal Reserve.

"The United States has lost control of their budget at a time when racking up deficits has been authorized without any control (from Congress)," Breton said.

"We were both disappointed that the management of debt is not a political priority today," he added.

Greenspan was probably reacting to the plan for the Federal Government to pay two million dollars per family in aid for hurricane Katrina victims. Maybe that amount will increase, now that hurricane Rita has struck.

A senior US official suggested the French minister must have misunderstood Mr Greenspan’s remarks. “Things can get lost in translation,” the official said. (25-Sep-05) Permanent Link
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Indonesia nearing panic as bird flu spreads

There's mass confusion in Jakarta over possible human to human contamination.

According to yesterday's surveillance report by the United Nations World Health Organization (WHO), an 8 year old hospitalized boy has been confirmed positive for the bird flu. The WHO report downplays the likelihood of of human to human transmission, but leaves the question open.

News reports have not been nearly as sanguine. The boy is the nephew of a woman who died of bird flu on Sept. 16. He had contact with his aunt after she became ill, and developed symptoms shortly thereafter.

It seems pretty likely that the boy caught it from his aunt, indicating human to human transmission.

Jakarta, one of the most densely populated cities in the world, is beginning to panic. Five people in Jakarta have died recently of the bird flu. On Wednesday, a five year old girl died, having bird flu symptoms; a DNA analysis will reveal next week whether it was the actual bird flu.

Malaysia, Indonesia's neighbor, is beginning to close down the border between the two countries, in order to try to stop the spread.

So the question of whether there's human to human transmission in Jakarta is confusing, but that isn't the half of it.

A major Jakarta zoo was closed on Monday, after 19 birds tested positive for bird flu. A number of people who visited the zoo prior to its closing have been admitted to the hospital showing symptoms of bird flu. Test results will be available next week.

Even more serious, over 115 patients have developed mild bird flu symptions in the last couple of days, but were refused treatment because of lack of beds and because the symptoms were mild.

The Recombinomics web site, which posts analyses of current events in the progression of bird flu, has been wondering whether Jakarta and WHO have been hiding the seriousness of the situation.

According to Recombinomics, the bird flu has become a Phase 5 pandemic and appears to be close to Phase 6. WHO classifies it as Phase 4.

The phases have been defined to show how close a new virus is to a general pandemic. Here are the last few phases:

Until more testing is done, there's no way to tell whether something has changed in the last few days. It's possible that the current storm will pass, when all the tests are in, or it's possible that the tests will reveal the first stages of a real bird flu panemic.

As with most things in life, there's no way to tell what's going to happen now. That there'll be a pandemic is certain, but whether it will occur next week is far from certain. A lot will depend on what happens with those 115 patients who weren't treated. If it turns out that they all have bird flu, then we have an pandemic; if all they have is the sniffles, then the pandemic will be postponed for a while.

In my opinion, if you've been planning to make some sort of preparations in advance of a bird flu pandemic, such as purchasing face masks or something, now is the time to do it. (23-Sep-05) Permanent Link
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Abu Musab al-Zarqawi is very dangerous, but he's looking increasingly pathetic

It was just two weeks ago when he claimed credit for the weather, when he took credit for Hurricane Katrina, by saying, “If Muslims are powerless to defend their religion, God is on the lookout (to punish) the oppressors.”

That statement appeared rather desperate, because he had to admit that his attempts to trigger a civil war in Iraq, and al-Qaeda's failure to perpetrate another terrorist act on American soil, had all been failures.

Abu Musab al-Zarqawi, the well-funded leader of the group "al-Qaeda in Iraq," has been very successful in using suicide bombers to blow up some Americans and a huge number of Iraqis.

And it's the fact that he's blowing up devout Muslims that's causing enormous anger within the Muslim community itself.

This has led al-Zarqawi to issue a series of increasingly pathetic statements, starting last Wednesday, when he issued this statement:

"Al Qaeda Organisation in Iraq ... has declared war against Shi'ites in all of Iraq. As for the government, servants of the crusaders headed by (Iraqi Prime Minister) Ibrahim Jaafari, they have declared a war on Sunnis in Tal Afar. You have begun and started the attacks and you won't see mercy from us."

Now, al-Zarqawi is Sunni Muslim, and his declaration of war against the Shi'ites was not welcomed by the Shi'ites. Apparently the pressure has gotten to al-Zarqawi, because he issued this statement earlier this week:

"The al-Qaeda organisation in the country of the two rivers makes an exception for some Shiites. Not all Shiites are our target.

In a previous audio message issued by Sheikh Abu Musab al-Zarqawi, he declared total war on Shiites for the massacre perpetrated by the Shiite government of Ibraham al-Jafaari against the Sunnis of Tel Afar. Despite this, it should be stressed that in that speech, al-Zarqawi specified that 'all Shiites who condemn the crimes committed against the Sunnis at Tel Afar and who don't support the occupation will be excluded from attacks by the mujahadeen'. Those groups therefore include three Shiite movements: those of al-Sadr, al-Khalisi and al-Hussani. The following groups remain targets for al-Qaeda: Al-Jaafari's Dawa Party, the Supreme Council of the Islamic Revolution (SCIRI), Ahmad Chalabi's National Congress Party and Iyad Allawi's National Accord Party."

Well, that should make the Shi'ites happy, shouldn't it?

Well, one of the best known Shi'ite clerics in Iraq is imam Moqtada al-Sadr. You may recall that one year ago, he was trying foment an Iraqi uprising against the Americans. He failed utterly, as I had predicted he would, because Iraq is in a "generational awakening" period, just one generation past the genocidal Iran/Iraq war of the 1980s. Since then, al-Sadr has given up fomenting violence against Americans, and he's taken to denouncing al-Zarqawi.

In a statement issued on Wednesday by al-Sadr, he said,

"In Abu Musab al-Zarqawi making an exception in our case, the Jordanian terrorist is trying to force a split within the Shiite world. With yesterday's statement, in which our movement was excluded from al-Qaeda's total war on the Shiites, he is trying to divide the Shiite school, insinuating that there is a internal conflict between the groups."

The statement went on to call on Zarqawi and his followers to immediately leave Iraq and stressed that "for our movement, al-Zarqawi is nothing but an enemy, and if he falls into the hands of our militia he will be torn apart."

There's good news and there's bad news here.

The good news is that al-Zarqawi is embarassing and harming the cause of Islamic Jihadists and terrorists. It's possible that al-Zarqawi will be forced to end the Iraqi insurgency, simply because it's accomplishing little more than killing innocent Iraqis, without doing too much damage to the Americans.

The bad news is that al-Qaeda's worldwide war against Western civilization is going to continue, and gather momentum.

Generational Dynamics predicts that we're headed for a "clash of civilizations" world war. However, it's worth pointing out that this doesn't mean that all Muslim countries will be on one side, and all Western countries will be on the other side; there will undoubtedly be splits on both sides. But my expectation is that this world war will begin in earnest within the next 1-3 years, and that the American troops will still be stationed in Iraq when it begins. (22-Sep-05) Permanent Link
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North Korea plays a little joke on the world

North Korea's "no more nuclear" pledge startled the world, but now they say, "Ha, ha, fooled ya."

Much to everyone's surprise, North Korea appeared on Sunday to have backed down on its plans to continue development of nuclear weapons.

The news reports were ebullient. President Bush said, "Five nations have spoken and said it is not in the world's interests that North Korea have a nuclear weapon. And now there's a way forward. And part of the way forward is for the North Koreans to understand that we're serious about this and that we expect there to be a verifiable process. In other words they have said, in principle, that they will abandon their weapons programs."

North Korea didn't actual say they'd abandon their nuclear weapons program. What they said is that they'd talk about it. The next meeting to talk about it will be in November.

Well, it took only one day for North Korea to reverse itself. On Tuesday, North Korea's Foreign Ministry issued a statement: "The U.S. should not even dream of the issue of North Korea's dismantlement of its nuclear deterrent before providing light-water reactors. This is our just and consistent stand as solid as a deeply rooted rock."

What's going on with North Korea? Why are they up and down like a yoyo?

I have no way of knowing for sure, of course, but here's a possible explanation, better than some of the giddy explanations I've seen in the press:

The first factor is that North Korea is facing a major famine this winter. Furthermore, the country is in a generational crisis period, meaning that a "people's rebellion" against President Kim Jong-il's government is a good possibility if the famine is bad enough. There is no more powerful motivator for a crisis war than when men can't feed their families.

Incidentally, North Korea had a bad famine in the mid-1990s without any people's rebellion. But the country was in a generational unraveling era at that time, an era of compromise, not rebellion. It's different today.

Kim knows that, and knows that he has to be perceived to be cooperative if he's to get aid from the international community.

The second factor is that North Korea has absolutely no intention on earth of discontinuing its nuclear weapons development program.

Each of these factors has its own constituency in Pyongyang politics, and they're in conflict, and this conflict is showing up in the nuclear non-proliferation negotiations.

There is one thing that's changed in the last few weeks: Pyongyang has become less openly militaristic.

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

Throughout the last two years, it seems that Kim was making an ever-increasing series of threats, and making a series of justifications for a pre-emptive war against South Korea and Japan. That's why North Korea is at the highest conflict risk level in my conflict list graph.

But for the last 2-3 months, Kim has been less aggressively confrontative. This doesn't mean that Kim's plans have changed -- he's still planning pre-emptive war against South Korea and Japan. But it no longer seems that this will happen in the next few months.

If this trend continues for the next couple of weeks, then I will adjust the conflict graph and reduce North Korea's risk level from 3 to 2.

Some things haven't changed, though. A major stock market crash could certainly happen this fall, and a worldwide bird flu pandemic could also happen this fall. (21-Sep-05) Permanent Link
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Tony Blair and Bill Clinton blast BBC's anti-American coverage of Katrina

Blair described the BBC coverage as "gloating" and "full of hatred for America," in a conversation revealed last week by media baron Rupert Murdoch.

Speaking at a seminar in New York City on Friday, Murdoch said, "Tony Blair - perhaps I shouldn't repeat this conversation - told me yesterday [Thursday] that he was in Delhi last week, and he turned on the BBC World service to see what was happening in New Orleans; and he said it was just full of hate of America and gloating about our troubles."

I can vouch for this. I love the BBC World Service, but as I've previously said, the BBC coverage reeks of anti-Americanism.

This is nothing new. Just last year, in January, 2004, the BBC was reprimanded after a long investigation resulting in the Hutton Report. The investigation found that the BBC had purposely lied in news stories in order to make Tony Blair's administration look bad in pursuing the Iraq War.

The coverage of Katrina frequently was written to make the U.S. appear as bad as possible.

And they're not the only one. The European press has used Katrina as an opportunity to attack America for incompetence and racism in any angle it can. The adjoining cover of The Economist for September 10, 2005, illustrates the point.

Blair's criticisms were backed up by former President Bill Clinton, who said there was nothing factually inaccurate but reports were "stacked up" against the government. He said: "It was designed to be almost exclusively a hit on the federal response without showing what anybody at any level was doing."

Lord Tebbit, former chairman of the Britain's Conservative party, "They certainly seemed in their coverage to blame President Bush for just about everything short of the hurricane itself." (19-Sep-05) Permanent Link
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Pimco's Bill Gross recommends selling all, buying only short-term Treasuries

Meanwhile, Morgan Stanley's Stephen Roach says, "The world as we know it must come to an end."

In his September, 2005, investment newsletter, PIMCO's Bill Gross, head of the world's largest bond fund, advises investors to sell everything else off and move into short-term Treasury bonds.

Gross refers to Alan Greenspan's swan song speech, wherein he said: "Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums."

He indicates that the housing bubble will soon at level off, and possible burst completely. Either way, investors will become more cautious, and they will sell off any assets that carry the "low risk premiums" that Greenspan mentioned. "Those assets include real estate, equities, high yield, corporate, and some areas of emerging market debt," according to Gross. He includes long-term Treasury notes in this list.

This is the prescription for preparing for a major market correction, and Gross evidently believes that it's coming, and coming soon.

Stephen Roach, chief economist of Morgan Stanley, appearently feels the same. In "The Shoestring Economy," his September 9 commentary, he says that "the world's leading economic power is trying to do [too] much with [too] little."

America has too little money because of the historically low savings rate, and the historically enormous level of public debt. "But now Washington is upping the ante as it opens the fiscal spigot to cope with post-Katrina reconstruction at the same time it is funding the ongoing war in Iraq," he says. "Could this be a tipping point for America’s shoestring economy?"

If you've been reading this Web Log this week, then you know that I'm practically in a state of shock over what's happened. Led by President Bush, Washington is committing to spend $200 billion on aid for Katrina victims. That's $1-2 million for each family of five.

All three of us are saying the same thing: That the economy is close to a meltdown. If there's any disagreement among the three of us, it's about how bad the meltdown will be, with me being the gloomiest of the three. As both I and other analysts have computed, the true value of the market today is around Dow 4500, which means that the market is overvalued by more than 100%.

What about dates? In 2002, when I first realized that Generational Dynamics predicts that we're entering a 1930s style Great Depression, I predicted a stock market crash by the 2006-2007 time frame. Today, all three of us are saying something like 12-24 months.

But I think that what we're all saying is that things are getting sooooooooo bad, even before Katrina. And now and $200 billion for Katrina is an almost unbelievable impetus.

The 76th anniversary of the crash of 1929 is coming soon, on October 24. It's time to be very, very cautious. (18-Sep-05) Permanent Link
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Is TWO MILLION DOLLARS per family enough Katrina aid?

That's how much the federal government plans to spend.

When I wrote my previous article, I hadn't thought of this, but someone has pointed out that New Orleans has a population of 500,000, and so $200 billion in aid comes to $400,000 per person.

That's $2 million for a family of 5.

Now, it's true that the $200 billion is also for people in other Gulf coast regions, so maybe it's only a paltry $1 million per family of 5.

But that doesn't count the huge volume of private donations, so it'll be a bit more than that.

As I've said before, historians have often expressed perplexity at the giddy world of 1929, wondering how so many investors, politicians, journalists and analysts could have been so wrong and could have done one really dumb thing after another, leading to the huge stock market crash of 1929.

Well, now we know. During generational transition periods into full generational crisis, everyone becomes incredibly stupid. There's no one left in the generations that remember what happened the last time, so they just do anything that feels good. So we're going to spend $2 million in aid per family, and there's barely a peep being heard in protest.

Please note that I'm not singling any one person out, nor am I singling out either the Republicans or the Democrats. And I'm not singling out just politicians, since I'm including journalists, pundits, investors, financiers, and high-priced analysts. I'm saying that they've all turned into morons - the whole bunch of them. There's nothing so stupid that they won't support, as long as it involves spending money.

It's very hard to see that this can go on too much longer. (16-Sep-05) Permanent Link
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President Bush promises gargantuan aid program to Katrina victims

Those who hoped that the economy would "self-correct" are now demonstrably wrong.

As I've been talking about for a couple of years, the level of public debt has been increasing exponentially. The federal government's deficit continues to increase, the monthly trade deficit (indebtedness to other nations) continues to increase, individual credit card debt continues to increase, the amount of investor debt for hedge fund investments continues to increase, and the size of risky interest-only loans fueling the housing bubbles continues to increase.

Not only have all these debts been increasing, but they've been increasing exponentially.

And yesterday they took an enormous new leap - a $200 billion leap.

President Bush's Thursday evening speech from New Orleans promised huge amounts of aid to the victims of Hurricane Katrina. There will be direct aid to allow victims to rent apartments; there'll be medical aid; there'll be job training; and repairs will be made to bridges, schools, and water systems.

And everything will be done in a grand way. No expense will be spared.

It turns out that government spending on Katrina has already dwarfed previous spending on disasters -- $14 billion spent on last year's Florida hurricanes, $15.5 billion on the 1994 Los Angeles earthquake, and $10.8 billion spent on Hurricane Andrew in 1992.

Now, I'm certainly in favor of helping disaster victims, but do we really have to spend TEN TIMES AS MUCH as past disasters?

This is what Generational Dynamics is all about.

When I was growing up in the 1950s, my school teachers talked about the Great Depression all the time, because they had suffered through it. Those teachers must be spinning in their graves over the appalling things that are happening now, as a matter of course.

In the 1980s, the Republicans and the Democrats cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. And in 1996, Democratic President Bill Clinton cooperated with the Republican congress to eliminate the welfare entitlement.

Today, cooperation is impossible, except to spend money and more money and more money. Controlling anything is impossible.

Which brings us back to the "self-correcting" economy. The economy has been self-correcting for fifty years because people who lived through the Great Depression made sure it did. These people imposed disciplines and agreed to compromises to make sure that the economy had the flexibility to correct itself. It wasn't by chance that the economy was "self-correcting"; it was self-correcting because people who remembered what happened the last time made sure it wouldn't happen again.

That's not true today. Nobody in a leadership position today remembers the Great Depression. And that's true in government, in education, in journalism, in finance, and in other professions. These bubbleheads have been taken care of by their parents for decades, and now that their parents are gone and they're in charge, they think that things will still take care of themselves. These halfwits are so busy screaming at one another over their culture wars, that they never stop to think that they have to work with their political enemies to fix things by making sacrifices.

Generational Dynamics predicts that we're entering a new 1930s style Great Depression, with massive homelessnes, bankruptcies and starvation in America. The stock market, which is currently more than 100% overpriced, will fall to the Dow 3000 range. This might start to happen next week, next month or next year, but it will happen sooner rather than later. (16-Sep-05) Permanent Link
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Gaza strip descending into further chaos and lawlessness following Israeli withdrawal

Black market prices for weapons have been falling sharply in Gaza, in the clearest sign that weapons are pouring into Gaza, now that the Israelis have completely withdrawn.

According to an article by the Associated Press, the price of an AK-47 assault rifle has dropped from around £1,000 (€1,484) to around £650 (€965), and Egyptian-made pistols that were recently sold in Gaza for £700 (€1,039)can now be bought for as little as £90 (€133).

The weapons are evidently pouring into Gaza from Egypt. Egypt had promised to keep the border between Gaza and Egypt closed, once the Israeli border guards had withdrawn, but Egyptian border guards have been unable to secure the border.

Thousands of Palestinians immediately crossed the border into Egypt for shopping and recreation as soon as the Israelis withdrew. Egypt has promised to close the border again, but Palestinian militant group Hamas has thwarted such efforts by blowing a hole in the concrete barrier separating the two regions.

Looting and gunfights have become commonplace throughout the Gaza strip in the last few days. On Tuesday, Palestinian president Mahmoud Abbas promised to restore order, saying "We have one law for everyone and no one is above the law. We are not going to tolerate chaos after today."

However, Gaza has been getting increasingly violent and unstable for a while now, and it appears less and less likely that Abbas will be able to restore any semblance of order.

It's particularly ironic that Palestinian police have been unable to stop the looting of 4,000 greenhouses left behind by the Israelis. These greenhouses had been central to the plan to provide jobs and income to Gazans.

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

There are now multitudes of ways that miscalculations can lead to a regional war. Egypt has obligated itself to close the border with Gaza. It cannot do so without taking military action against Palestinians in general and Hamas in particular, but such military action against Arabs could trigger violence in both Gaza and Egypt.

If Egypt does not or cannot close the border, then Israel may feel it necessary to intervene. This would bring Egyptian and Israeli forces into contact with one another for the first time since the 1972 war.

From the point of view of Generational Dynamics, there would be a big difference between 1972 and today, if Egyptian and Israeli forces engage one another. In 1972, both countries were in a generational awakening period, and awakening wars have little energy. Thus, the 1972 war ended in just 7 days. Today, both countries are entering (or are in) a generational crisis period, where young people with no personal memories of the 1940s genocidal war between Jews and Arabs do not fear a new war.

Generational Dynamics predicts that the Mideast is headed for a new genocidal crisis war that will engulf the entire region. This war may begin next week, next month, next year or soon thereafter. (14-Sep-05) Permanent Link
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Pentagon proposes permitting preemptive use of nuclear weapons

The plan specifies several scenarios that would permit America to be the first to use nuclear weapons.

According to an article in Sunday's Washington Post, the proposal is under consideration, but hasn't yet received final approval.

Nuclear weapons could be used first against an using or stockpiling weapons of mass destruction, including nuclear, biological or chemical weapons.

From the point of view of Generational Dynamics, this is the next step in a pattern that's being repeated worldwide -- a willingness for countries that fought in World War II to be increasing combative and less compromising, to spend more resources preparing for war. China is rapidly militarizing, and so are the Koreas; Japanese Prime Minister Junichiro Koizumi, who sides with Taiwan against China, was reelected on Sunday in landslide; Pakistan's President Pervez Musharraf is serving as both civilian and military leader.

The political situation around the world has changed dramatically in the last few years as well. Here in America, our entire foreign policy has changed direction since 9/11, with relatively little public debate. Previously, our foreign policy was entire defensive; in 2002, the nation accepted, with little objection, a change to a "preemptive" policy, permitting attacks on foreign countries in pursuit of terrorists.

Prior to 9/11, any talk of a preemptive nuclear policy would have lead to a huge political fight; today it's not receiving even a murmur, as far as I can tell.

Two months ago, there was a scandal involving Presidential aide Karl Rove, and pundits were predicting an enormous political fight that would get Rove fired; today, it's forgotten.

Last month, pundits were predicting a massive resurgence of the antiwar movement, thanks to Cindy Sheehan. Today, I doubt that most people would even remember who Sheehan was, if you mentioned her name.

Today, the great political fight is over Administration incompetence in handling Hurricane Katrina. That fight will pass as well, though hopefully it will lead to real changes.

Today there's only one issue of importance: anxiety from fear of terror and war. 60 years have passed since World War II, and in all the countries that fought in that war, all the people who have any personal memories of that war's horrors are in their 70s or late 60s, and have little remaining influence. People today have no personal memory of those horrors, and are leading the world, in one country after another, into a new war, a "clash of civilizations" world war. (13-Sep-05) Permanent Link
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The world is shocked at America's bureaucratic fumbling over Hurricane Katrina

It's hard to get past the feeling that this disaster will turn out to be a blessing in disguise for the country as a whole, despite the terrible losses that people in the Gulf Coast suffered.

There was bureaucratic incompetence at all levels: The New Orleans Mayor didn't deploy hundreds of buses available to him; the Louisiana Governor blocked deployment of National Guard troops and Red Cross aid rather than give up political control; and, at the Federal level, FEMA stumbled over itself, led by an inexperienced leader whose previous tenure was as head of the International Arabian Horse Association.

There was no one in charge. Local, state and federal governments each waited for someone else to do something. There was no coordination. This was not a failure of one level of government or one political group. This was a total failure of the United States.

Even today, two weeks into the disaster, there's still infighting over the question of whether the remaining residents should be forced to evacuate.

The rest of the world has been fascinated by all this. During the week of the hurricane, through most of the Labor Day weekend, the hurricane was the lead story around the world. I would estimate that the BBC World Service, which is beamed to countries around the world, spent some 75% of its time on Katrina coverage during the weekend.

People in countries around the fascinated by such questions as: Why is the richest country in the world having such a problem dealing with this hurricane? How can a First World country turn into a Third World country so quickly? Not surprisingly, a lot of the coverage focused on America's failure. A typical "man on the street" remark was, "Hurricane Katrina has destroyed part of U.S. arrogance."

Anti-American journalists and politicians have been having a field day of wishful thinking . According to an article on an international Marxist web site:

"Now Katrina, a non-economic, non-political, non-social, non-military disaster will have vast economic, political, social, and military consequences. This force of nature has only just begun to send the whole decrepit system of U.S. capitalism reeling. ... Never has the ruling class’ contempt for human need been more clearly exposed. Now more than ever, we must end this brutal, decaying system once and for all. Only the final overthrow of the rotten profit system can lay the basis for a true flowering of human society. Another world is possible: join us in the struggle for a better world!"

As amusing as all this wishful thinking is, there's no doubt that massive bureaucrative failures at all levels of government have occurred. As one television talking head pointed out, a lot of the management systems were paper systems set up in the 1950s, right after World War II. Today, they're sadly out of ate.

From the point of view of Generational Dynamics, this bureaucratic ossification is typical of the country as a whole. The 1930s Great Depression put most businesses into bankruptcy, and forced other businesses to lay off people to survive. The same was true of government agencies, educational institutions, labor unions, and other organizations. The new organizations that sprang up were "lean and mean," but over the years they've become increasingly inefficient, encrusted with a bureaucracy of people set in their ways, protective of their turf, and only interested in preserving their pensions.

It will take a new Great Depression and a massive new war to renew all of America's organizations again, and Generational Dynamics predicts that all that will happen.

That's why the Hurricane Katrina might possibly be a blessing in disguise for the country as a whole. If this catastrophe forces changes at all levels of government, and guarantees that one person will be in charge of the entire effort the next time a disaster happens, then many lives will be saved. (13-Sep-05) Permanent Link
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Department of Defense increasingly sees China as a military foe

A front page article in today's Wall Street Journal says that, "most Americans have China all wrong. They think of the place as an inherently gentle country intent on economic prosperity."

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

According to the front page article, Pentagon advisor Michael Pillsbury says that, "Beijing sees the U.S. as an inevitable foe, and is planning accordingly."

This echoes what I've said on this web site repeatedly for over two years. In fact, from the point of view of Generational Dynamics, China's economy and society are rapidly unraveling into chaos, as the country heads for a certain civil war, a certain war with Japan, and a certain war with America over Taiwan. (8-Sep-05) Permanent Link
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Al-Qaeda claims credit for hurricane Katrina

"Congratulations to the Islamic nation ... for the destruction of America, which is at the forefront of evil," brags an internet statement from terrorist mastermind Abu Musab Al Zarqawi published on Sunday. The statement particularly congratulates Osama bin Ladin.

Both Zarqawi and bin Laden have been embarassed by repeated failures to accomplish their objectives, especially in two areas:

These failures and humiliations must be at least part of the justification for Zarqawi's taking the credit for a hurricane.

In fact, Zarqawi himself comes close to admitting his own failures, as he writes:

His statement claims that Katrina is "the beginning of the end" for the United States, and adds:

To me, Zarqawi's statements come across as being close to pathetic and desperate. That's not to say that al-Qaeda isn't dangerous -- they're responsible for the Madrid subway bombings on March 11, 2003, and the London subway bombings on July 7 of this year. And they're undoubtedly planning new terrorist attacks on American soil.

But when somebody starts taking credit for the weather, you know that something has to be wrong. (8-Sep-05) Permanent Link
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With Israelis almost gone, Gaza is becoming increasingly violent and unstable

Especially ominous is the planned intervention by Egypt as border guards.

There's almost constant violence now. Over the weekend, hundreds of unemployed Palestinian protesters threw missiles and fire bombs. In the subsequent confrontation with the police, at least ten people were injured.

Then on Monday, a mysterious explosion destroyed a house and killed four Hamas supporters, injuring 30 others. Apparently it was an accidental explosion occurring as Hamas was building a bomb.

The explosion came three days after Hamas publicly announced its leadership, in a kind of press release. Palestinian militia group Hamas has never agreed to seek peace with Israel, and their charter calls for the destruction of Israel.

Actually, Hamas appears poised to take full control of Gaza, as they're expected to do well in Parliamentary elections to be held on January 6, thus pushing aside Palestinian president Mahmoud Abbas's Palestinian Authority in Gaza.

Even within the Palestinian Authority, things are not well. Moussa Arafat, a cousin of the late PA President Yassir Arafat, was brutally murdered on Wednesday and his son was kidnapped. A PA splinter group took credit for the crime.

This increasing chaos is happening in the context of Israel's unilateral withdrawal from Gaza. All Jewish settlements in Gaza have been emptied, leaving behind only the IDF (the Israeli Defense Forces - the army). The IDF will start leaving on Saturday, and should be gone completely by Monday.

That leaves two problems. The first problem is that someone has to police the violent militia groups left behind in Gaza. In the original plan, the Palestinian Authority was supposed to do that, but the events of the last few days show that the PA is part of the problem, not part of the solution.

The other problem is this: Who's going to guard the boundary between Gaza and Egypt? The IDF has been controlling the border up until now, controlling the flow of weapons and terrorists from Egypt into Gaza. With the IDF leaving, who will take their place?

The answer is that, by previous agreement, Egyptian forces will be deployed along the Egypt - Gaza border, and this is extremely significant.

After the 1967 non-crisis war involving the Palestinians, Egypt and Israel, Egypt pulled out of the Palestine region completely. The reason was simple: With Egypt out of the region, there's less chance of a new war between Egypt and Israel. True, there was another non-crisis war in 1972 (the "seven day war"), but there's been no war since then. For the same reason, America has resisted putting any of its troops into the Palestine region, despite numerous requests from various international factions to do so over the decades.

This is typical of what happens during "generational awakening" and "generational unraveling" periods. People and nations try to avoid problems by compromise and containment. There's no desire for another crisis war, and any simple step that can be taken to prevent one is often adopted.

But now Israel and the Palestinians are into a new generational crisis period, and Egypt is entering one as well. There is much less interest in compromise and containment, and much less fear of confrontation.

I explained all this in a different way, in terms of "chaotic attractors," when I discussed the Jewish withdrawals from Gaza. These concepts explain why Gaza is headed for war, while a civil war in Iraq is impossible at this time, despite what the pundits say.

As an aside, there isn't a single other web site on the internet that's been getting it right, in both Palestine and Iraq. I've made hundreds of predictions on this web site in the past three years, and so far not a single one has been wrong. Other pundits, politicians, journalists, web sites, and high-priced analysts repeatedly predicted civil war in Iraq and also predicted peace in Palestine once Yassir Arafat died, but this web site's predictions are the only ones that are coming true, based on the Generational Dynamics forecasting methodology. If you want to know what's really going on in the world, then forget the various "forecasting" and "early warning" web sites -- they're based on guesswork -- and come to this web site.

So anyway, Egyptian forces are now being ejected into the mix, and now there are only a few short miles separating the IDF from the Egyptian forces, leaving the possibility of miscalculation that can bring the two sides to a small military confrontation that can quickly spiral into a major military confrontation.

The last crisis war between Jews and Arabs was the extremely violent, genocidal war of the late 1940s, when the United Nations partitioned Palestine and created the state of Israel. Generational Dynamics predicts that we're heading for a major new Mideast war, replaying the genocidal war between Jews and Arabs in the 1940s, and engulfing the entire region. (8-Sep-05) Permanent Link
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Stock market spikes upward in huge rally as oil prices ease

Volatility appears to be increasing as investors return from summer vacations.

The market's upward spike of 1.3% -- the Dow increased 141.87 points to 10,589 -- was caused, the pundits say, because the price of oil fell $65.96 a barrel. It was just a couple of weeks ago that the stock market fell because, the pundits said, the price of oil had reached a modern high of around $60 per barrel.

Now, how is that $65.96 a barrel is a "good" thing, while $60 a barrel is a "bad" thing?

It's because investors think they're playing a game of Las Vegas craps.

What makes Las Vegas craps so special is that each time you lay your money down and "roll dem bones," the dice have no memory. No matter how much money you've already won or lost, your chances of winning on the next roll are the same, time after time after time.

But that's not true of the stock market. Stocks have a true, intrisic value, determined by things like assets, revenue and expenses, and when the value of any stock goes way above or way below its true value, then it must soon return to its intrinsic value.

As both I and other analysts have computed, the true value of the market today is around Dow 4500. The market has not yet shaken out the stock market bubble of the late 1990s, and at 10,589, the market is overvalued by more than 100%. A stock market panic and major correction will occur with near certainty, next week, next month, next year, or shortly thereafter.

There's no way to predict exactly whan a panic will occur, but one of the signs that it's coming closer is increased volatility. These days, it's not unusual to see the Dow increase or increase by 100 points or more. And there's no reason for it, except that investors are playing Las Vegas craps.

The state of the market appears to be very ominous these days. There are wild swings, but price/earnings ratios are remaining mysteriously constant, indicating that investors and brokers are all following one another like sheep.

And that's why there's so much volatility. When investors take individual paths, betting on individual stocks, then one investor's gains are canceled out by another investor's losses, so the market as a whole remains steady; but when all investors are doing the same thing, essentially betting on the whole market rather than individual stocks, then the whole market becomes as volatile as an individual stock normally is, and it's just a matter of time before the right kind of trigger causes all investors to panic at once.

There's very little chance of making money in the stock market today, even in the short range, and there's a possibility of losing big, especially for those who have purchased stocks on credit. Any investor who owns stocks today might as well bet his entire bankroll on a roll of the dice. (7-Sep-05) Permanent Link
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Britons shocked by London subway suicide bomber video

"We are at war and I am a soldier," says Mohammad Sidique Khan in a clear Yorkshire accent.

Khan is the man who blew himself and dozens of other up in the July 7 London subway bombings, in a video played on al-Jazeera on Friday. He is believed to be the leader

Mohammad Sidique Khan video
Mohammad Sidique Khan video

The slickly produced al-Qaeda video is still being analyzed, but it's causing shock waves in the British public. There had always been a hope that while the London subway bombers were British citizens, they might have been somehow tricked or duped into doing what they did. But hearing Khan defend his murderous act, and promise more of the same, in his clear Yorkshire accent completely dashes those hopes.

Britain's Muslim community is especially disgusted by the video. Prior to July 7, Khan had been just a "quiet, pleasant young man" living with his wife and young daughter in West Yorkshire. Khan's former neighbors expressed anger and disbelief. One was quoted as saying, "We are all gutted here. It's devastating to see a young man like that talking about what he is going to do. It is a frightening thing for anybody to see."

Here is the complete text (transcript) of Khan's video statement:

"I'm going to keep this short and to the point because it's all been said before by far more eloquent people than me.

And our words have no impact upon you, therefore I'm going to talk to you in a language that you understand.

Our words are dead until we give them life with our blood.

I'm sure by now the media's painted a suitable picture of me, this predictable propaganda machine will naturally try to put a spin on things to suit the government and to scare the masses into conforming to their power and wealth-obsessed agendas.

I and thousands like me are forsaking everything for what we believe.

Our driving motivation doesn't come from tangible commodities that this world has to offer.

Our religion is Islam - obedience to the one true God, Allah, and following the footsteps of the final prophet and messenger Muhammad... This is how our ethical stances are dictated.

Your democratically elected governments continuously perpetuate atrocities against my people all over the world.

And your support of them makes you directly responsible, just as I am directly responsible for protecting and avenging my Muslim brothers and sisters.

Until we feel security, you will be our targets. And until you stop the bombing, gassing, imprisonment and torture of my people we will not stop this fight.

We are at war and I am a soldier. Now you too will taste the reality of this situation."

(4-Sep-05) Permanent Link
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Katrina / New Orleans disaster is first real test for new Department of Homeland Security

Resembling a theatre of war, a million desperate refugees have been evacuating New Orleans first to escape the hurricane, and then to escape starvation, disease and ravaging looters in what President Bush has called "one of the worst natural disasters in our nation's history."

If the disaster can be said to have any bright side at all, it's that it provides the first major test of the ability of the Department of Homeland Security to organize and coordinate the response to a national disaster.

This isn't an idle consideration. It just six weeks ago that 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."

This is the kind of war scenario that America is unprepared to handle, but the Katrina disaster is giving Americans a small taste of what to expect.

In response, President Bush and Secretary of Homeland Security Michael Chertoff announced a massive response, involving almost every agency of the federal government. The Federal Emergency Management Agency is focusing on emergency aid to victims. The Energy Department is working to restore electricity. The EPA is issuing waivers to make more gasoline available. The Department of Defense is moving 8 Navy ships into the area, with water, food, medicine, hospital facilities and berthing. The Department of Health and Human Services has declared a public health emergency, and is providing medical supplies.

But the massive effort has already run into a number of glitches:

The size of this disaster has awakened a lot of people, especially those in younger generations who are complacent about everything. Just Thursday afternoon, for example, the city of Boston has announced that it will do a thorough review and update of its disaster plan. As the "clash of civilizations" world war approaches, steps taken now in response to the Katrina disaster will serve America well later. (2-Sep-05) Permanent Link
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