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


Web Log - May, 2007


Chavez threatens further harsh reprisals against the "fascist assault" by the media

In Venezuela, the student anti-government demonstrations appear to headed for a violent climax, as President Hugo Chávez threatened further harsh government actions against reporters and students.

Do you remember the pictures of rioting students that were in the the article that I posted yesterday?

Well, some of those pictures came from a Venezuelan television news station called Globovisión.

Chávez went on television on Wednesday in a very bellicose, threatening mood, and blamed the media, especially Globovisión, for "creating chaos" in the streets.

"Greetings, Globovisión, you will see where you will go. You may move forward, and you may continue to call people to disobedience and encouraging my assassination, like you did openly late Sunday (May 27), if you want to. But I am warning you in front of the country, take my advice, take a sedative and cool down. Otherwise, I will take care of Globovisión myself."

For students, he provided the following warning:

"Be careful, you are being used as a tool by some people who want you to get killed."

Anyone who remembers America in the 60s will immediately realize that this is EXACTLY the wrong thing to do in response to student protests. Threatening students only infuriates them. Threatening reporters only makes them more arrogant.

This is beginning to look very bad.

My belief is that if Chávez simply backed off, then the demonstrations would just peter out. This opinion is based on the reasons I gave yesterday -- Venezuela is well into its generational Unraveling period, and the generation gap that drives demonstrations in the Awakening era is now pretty much in the past.

But Chávez is not backing off. Instead, he's raising the stakes for everyone. He'd have to be crazy to think that everyone is going to back down just because he threatens them -- but then again he is a nutcase, isn't he.

Yesterday I identified two recent historical events that might be comparable: China's 1989 Tiananmen Square massacre, and South Korea's 1980 Kwangju massacre. Both of these massacres occurred during the Unraveling era, so they would have similar characteristics. If Chávez continues as he has, then someone is going to get killed, and the word "massacre" will apply.

Incidentally, massive demonstrations in Unraveling eras don't have to end in massacres. For example, there were several large demonstrations in America in the 1990s Unraveling era -- the Million Man march and civil rights demonstrations come to mind. These didn't end in massacres because, after all, nobody shot at the demonstrators. The demonstrations were just allowed to peter out by themselves.

However, Chávez doesn't appear to be heading in that direction. The next few weeks in Venezuela should be interesting. (31-May-07) Permanent Link
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Students riot against Hugo Chavez in Venezuela

Finally we can see what America in the sixties was like.

If you're old enough to remember America in the 60s and 70s, the pictures below will bring a tear to your eye and a lump to your throat.

These pictures are amazing. I could swear that I remember seeing all these pictures before -- they're so eerily familiar -- but I saw them as a student in the 60s and 70s.

But the pictures aren't from America in the 60s; they're from Venezuela, and they're captured from video taken in the last two days.

Now you can really see why I say that the so-called "antiwar movement" of today so anemic and pathetic that there really isn't an antiwar movement. I'll come back to that later, but let's get to the pictures.

At left, policemen fire tear gas and rubber bullets at students. At right, a student demonstrator, face draped in a Venezuelan flag, throws a rock at the police. <font size=-2>(Source: Der Spiegel)</font>
At left, policemen fire tear gas and rubber bullets at students. At right, a student demonstrator, face draped in a Venezuelan flag, throws a rock at the police. (Source: Der Spiegel)

Text messaging devices are <i>de rigeur</i> for the smart, chic rioter. The students text one another on the whereabouts of riot police. <font size=-2>(Source: CNN)</font>
Text messaging devices are de rigeur for the smart, chic rioter. The students text one another on the whereabouts of riot police. (Source: CNN)

Monica Herrero is a good-looking journalism student close to graduation.  She says, "I think while Chavez is here in Venezuela, we can do our war."  She wears a bandage over her mouth to protest censorship. <font size=-2>(Source: CNN)</font>
Monica Herrero is a good-looking journalism student close to graduation. She says, "I think while Chavez is here in Venezuela, we can do our war." She wears a bandage over her mouth to protest censorship. (Source: CNN)

On the left we see students demonstrating early Tuesday evening. The camera pans to the right, where we see riot police on top of the bridge.  Police have been shooting rubber bullets. <font size=-2>(Source: Fox)</font>
On the left we see students demonstrating early Tuesday evening. The camera pans to the right, where we see riot police on top of the bridge. Police have been shooting rubber bullets. (Source: Fox)

Here's a variety of scenes shown live around noon Tuesday on Venezuela television. <font size=-2>(Source: CNN)</font>
Here's a variety of scenes shown live around noon Tuesday on Venezuela television. (Source: CNN)

Venezuela and Colombia
Venezuela and Colombia

Venezuela's last crisis war was shared with Colombia, where most of the genocide and destruction took place. It took place from 1948-58, and was known as "La Violencia," or the Colombian Revolt. More than 200,000 persons lost their lives and more than a billion dollars of property damage was done.

The kinds of political demonstrations you're seeing in Venezuela are performed by the generation born after the end of the last crisis war. I've explained what happens many times, so I'll only summarize it.

The survivors of a generational crisis war are so traumatized by the war that they vow to do everything they can to make sure that their children and grandchildren never have to go through the same thing. They create institutions and rules designed to make sure of this.

The generation born after the end of the war grow up feeling oppressed by these institutions and rules. When they grow up, around 20 years past the end of the crisis war, they rebel against their parents and the onerous institutions and rules. This is known as a generational "Awakening era," like America in the 1960s-70s. The young kids in the post-war generation and rebel against them, creating a "generation gap" with their parents.

America's last crisis war was World War II, so you saw massive student demonstrations in the 1960s and 1970s. What people have so much difficulty understanding is that it's ONLY THE ONE POST-WAR GENERATION, the Boomers in the case of America, and NO OTHER GENERATION, that perform these massive demonstrations. See my article, Why aren't college students protesting against the Iraq war?

For the past five years, politicians and journalists have been scratching their heads, wondering why college kids are aren't protesting against the Iraq war. The reason is: THEY AREN'T BOOMERS. In fact, you sometimes see something demonstrators like "Grannies against the war." These grannies are exactly the same women who were burning their bras and protesting against the Vietnam war when they were 40 years younger.

So now let's turn to Venezuela. 49 years have passed since the end of the last crisis war, so that Venezuela is past the end of its generational Awakening era, and in its generational Unraveling era.

I mention 49 years particularly because of something I heard several times in the news coverage of the Venezuela protests: Several reporters made the point that there were more than students participating in the demonstrations -- that older people in their thirties and forties were also demonstrating. The conclusion they drew from this was that the demonstrations were more serious than if just students were demonstrating. I heard this same thing several times.

But that's not necessarily the case. Of course some of the demonstrators were older -- they're in the post-war generation born after 1958, so some of the demonstrators are going to be older. From the point of view of generational theory, the older demonstrators will only want to pursue a political struggle; however, some of the younger demonstrators -- that is, the students (who correspond to America's Generation-X) -- may be more inclined to low level violence. We'll have to wait and seen how it rolls out.

The event that triggered the demonstrations was the decision by nutcake President Hugo Chávez to shut down a popular TV station which has supported Chávez' opposition. This has prompted cries of censorship, and angered a lot of people.

The best thing that Chávez could do is to allow the opposition TV station to continue broadcasting, and then try to close it down again in a year or so, when the demonstrations might well be much smaller.

However, if Chávez overreacts, as it appears he's already doing, then the demonstrations are likely to grow.

There are two recent historical examples that the current situation can be compared with, because they're demonstrations that occurred roughly at the end of the Awakening era.

One is the 1989 Tiananmen Square massacre in China. In that case, a violent overreaction by the Chinese authorities did succeed in dispersing the crowd, but was an enormous shock to China, and resulted in the Falun Gong dissident movement that threatens the stability of China at the present time.

The second comparable example is the Kwangju massacre of 1980 in South Korea. In the case of China, the "old generation" won; in South Korea, the "young generation" won, and it's that younger generation that's in power today in a scandal-ridden administration that's way over its head in dealing with the North Korean threat.

These two examples -- China's Tiananmen Square massacre and South Korea's Kwangju massacre -- illustrate some of the range of possible scenarios that can follow a harsh crackdown by Hugo Chávez. We'll have to watch in the next few weeks to see what happens.

One of the things that I mention from time to time on this web site is Schadenfreude: taking pleasure from someone else's misfortune. For those of us who don't like Hugo Chávez, it's a joy to watch his chagrin as he looks out his window and sees his "revolution" being challenged by thousands of counter-revolutionary students. (30-May-07) Permanent Link
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Some thoughts on Memorial Day

Today is a good day to think about our nation's history and what the United States has meant to the world.

It's a good day to forget, at least temporarily, that we have so many Washington politicians and journalists who have committed their careers to America's defeat and humiliation overseas.

It's a good day to remember that, for better or worse, we've taken on an enormous commitment and responsibility by becoming policemen of the world. This happened after World War II with the "Truman Doctrine" of 1947. Under this doctrine, we promised the world that we would do everything in our power to prevent a new world war, by stopping the spread of destructive doctrines, like Fascism, Naziism and Communism. Today, it's radical Islamist extremism. Truman's justification was that, whatever being policemen of the world cost us in lives and money, it would minuscule compared to the cost of World War II. Soon we're going to have to learn that lesson again.

It's a good day to re-read President John F. Kennedy's 1961 inauguration speech:

"In the long history of the world, only a few generations have been granted the role of defending freedom in its hour of maximum danger. I do not shrink from this responsibility -- I welcome it. I do not believe that any of us would exchange places with any other people or any other generation. The energy, the faith, the devotion which we bring to this endeavor will light our country and all who serve it -- and the glow from that fire can truly light the world. And so, my fellow Americans: ask not what your country can do for you -— ask what you can do for your country."

It's a good day to understand that, once again, our country is facing a time of maximum danger, and that, for better or worse, it's America's manifest destiny to lead the world in defending democracy and freedom.

It's a good day to thank all those young men and women who have personally taken on the role of defending freedom in its hour of maximum danger. This is the new generation of Heroes, our young darlings, the new "greatest generation." When the time comes and the nation is facing its greatest danger, these Heroes will go off to war fearlessly and do their duty. Without any thought for themselves, they'll go proudly and valiantly into battle, and they won't even be sad about it. It's their parents in the Generation X and Boomer generations who'll be standing on the shore in tears, waving goodbye as their ships disappear over the horizon, knowing that we'll never see many of them again, but also knowing that there's no choice.

It's a good day to think about the inevitability of history. Whatever is coming is coming, and it can't stopped any more than a tsunami can be stopped. We can't stop it, but we can prepare for it.

It's a good day to treasure the time you have left, and to use the time to prepare yourself, your family, your community and your nation. (28-May-07) Permanent Link
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The "Anbar Awakening" may be good news in Iraq.

But you would never know it from the Sunday morning news talk shows.

Several sources are reporting that al-Qaeda is being driven from Anbar Province in Iraq. This is consistent with the article that I wrote two months ago entitled "Iraqi Sunnis are turning against al-Qaeda in Iraq."

Iraq's al-Anbar province <font size=-2>(Source: PBS)</font>
Iraq's al-Anbar province (Source: PBS)

Iraq is in a generational Awakening era, just one generation past its last crisis war, the genocidal Iran/Iraq war of the 1980s. The survivors of a crisis war are so traumatized by the war that they vow to spend their whole lives keeping anything like that from happening to their children and grandchildren. That's why pundits and politicians who are calling the Iraqi war a "civil war" are wrong, as I've been saying for four years. A crisis civil war is impossible in a country in a generational Awakening era.

More and more, we're seeing the Iraqis turn against al-Qaeda, and putting their Iraqi nationalism ahead of their religious (Sunni vs Shia) differences. This is quite consistent with Iraq's history, as I showed in the referenced article: Iraqis have always united when faced with an external enemy.

And that's certainly happening now as the the Iraqis in Anbar Province, formerly almost totally controlled by external al-Qaeda forces, are close to driving al-Qaeda out completely.

What surprised me this week is what the Iraqis are calling it: "Sahwa al-Anbar" or the "Anbar Awakening."

Here's how Joe Klein described it in an article in Time Magazine:

"Some 30 tribes in Al Anbar formed an alliance, the "Anbar Awakening," in September and pledged to fight Al Qaeda militants in the insurgency-plagued province by forming their own paramilitary units and sending recruits to the local police force.

There is good news from Iraq, believe it or not. It comes from the most unlikely place: Anbar province, home of the Sunni insurgency. The level of violence has plummeted in recent weeks. An alliance of U.S. troops and local tribes has been very effective in moving against the al-Qaeda foreign fighters. A senior U.S. military official told me—confirming reports from several other sources—that there have been "a couple of days recently during which there were zero effective attacks and less than 10 attacks overall in the province (keep in mind that an attack can be as little as one round fired). This is a result of sheiks stepping up and opposing AQI [al-Qaeda in Iraq] and volunteering their young men to serve in the police and army units there." The success in Anbar has led sheiks in at least two other Sunni-dominated provinces, Nineveh and Salahaddin, to ask for similar alliances against the foreign fighters. And, as TIME's Bobby Ghosh has reported, an influential leader of the Sunni insurgency, Harith al-Dari, has turned against al-Qaeda as well. It is possible that al-Qaeda is being rejected like a mismatched liver transplant by the body of the Iraqi insurgency."

Here's another report, based on information from an Arab source:

"Baghdad, 23 May (AKI) - A delegation of Sahwa al-Anbar, (Anbar Awakening) the tribal alliance in the restive Sunni province of Al Anbar, has made an unprecedented visit to Sadr City, the Baghdad stronghold of radical Shiite imam Moqtada al-Sadr, according to pan Arab daily al-Sharq al-Awsat. "We have taken this step to place national interest ahead of any differences" said the head of the US-endorsed Sunni alliance Hamid al-Hayas. "This is an effort to bring closer together the Sunni and Shiite Iraqi points of view. We want to deliver a message to all the political groups to put aside their differences and act for the common good" he said.

The whereabouts of Moqtada al-Sadr remain undisclosed, but he was represented in the meeting by three MPs from the 30-strong bloc in Parliament loyal to him and prominent individuals from the Sadr City area.

At the end of the meeting the two sides signs a joint document in which they vowed to fight the terrorism of al-Qaeda. The group has become increasingly isolated within the Sunni insurgency because of its indiscriminate targeting of civilians.

Al-Qaeda in Iraq has been seeking to impose its fierce Salafite philosophies and strategies and consolidate its power over the many resistance groups in the Sunni Arab galaxy, some of whom view foreign fighters and Wahhabis with suspicion.

In recent months the heads of the powerful al-Anbar tribes have coalesced in a big to counteract al-Qaeda in Iraq and have begun a tentative dialogue with some elements in the al-Maliki government about entering the political process.

As well as coming under increasing pressure from US and Iraqi forces in Baquba and elsewhere, the al-Qaeda in Iraq fighters have been increasingly in clashes with other insurgent formations."

Regular readers will be aware that this is exactly the kind of thing that I've been saying ever since I first wrote about it on August 19, 2003, just after al-Qaeda had bombed U.N. headquarters in Iraq:

And in 2004, when some papers were actually claiming that the Iraq civil war had already begun between Moqtada al-Sadr's militias and the Sunnis, I pointed out that this was nonsense. I've made a number of predictions about Iraq, and they've all turned out to be right. You will not find a web site anywhere in the world with predictive success of this one. You will find that every journalist, analyst and pundit who has made predictions has turned out to be almost consistently wrong, and you will find that every prediction that I've made, based on the Generational Dynamics methodology, has turned out to be right.

The fact that the Iraqis are calling this the "Anbar Awakening" is more than just a coincidence. Unless some of them have seen my web site (very unlikely), they have no idea that Iraq is in a generational Awakening era. But the word "Awakening" is a very compelling one to describe what happens. Those old enough to remember America in the 1950s will recall how different the country became in the 1960s, when America's Awakening began: boys grew their hair, girls burned their bras, Martin Luther King led equal rights marches, etc. An Awakening era REALLY is an "awakening," both in America in the 1960s and in Iraq today.

This brings us to the Sunday news talk shows, where nothing about an "Anbar Awakening" was ever mentioned. The Republicans pretty much avoided the subject, and the Democrats described the Iraq war as a disastrous loss.

Actually, nobody that I heard even cares how the Iraq war is going.

All they care about is whether the Republicans or the Democrats are going to gain or lose votes.

Can you believe this? We're in the middle of a war, and we're being governed by a bunch or narcissistic clowns that can't talk about anyone but themselves. "I have the best withdrawal plan," says one. "No you don't, I do. Nyah, nyah, nyan." How did we get stuck with this pathetic bunch of losers?

The big news, of course, is that the Congress voted to fund the Iraq war without deadlines, but that Hilary Clinton and Barack Obama BOTH voted not to fund the troops.

Did anyone ask what effect all this had on the war and the troops. Nooooooo. It was all, Who did better, Republicans or Democrats? Yuk.

But despite all the nonsense, something important did happen this week, because so many leading Democrats voted not to fund the troops and the war.

Here's how George Will, a conservative commentator from the Silent Generation (i.e, he grew up during World War II), summarized the situation:

George Will, speaking angrily about the Democrats' statements, and stopping abruptly at the bottom frame. <font size=-2>(Source: ABC)</font>
George Will, speaking angrily about the Democrats' statements, and stopping abruptly at the bottom frame. (Source: ABC)

"The tail wagging this dog is and all that it represents. happens to be right. That's not a sentence that I use often.

They're right, and I mean they're correct as a matter of constitutional fact -- that the Democrats could stop the war if they chose. They choose not to.

But, a majority of House Democrats, including the Speaker, are now against funding the war in Iraq. That means that they are heavily invested in Petraeus' failing.

Will stopped talking abruptly right there, but you could tell from his face how angry he is. Will is absolutely right in what he says, but if he had continued, he would have said some things that are unacceptable in polite Washington circles or on TV. So I'll finish George Will's thought for him: Having our Democratic leaders heavily invested in General Petraeus' failing in Iraq is something that infuriates me and a lot of other people. This is ABSOLUTELY DISGRACEFUL behavior by Congressional politicians, and, in my opinion, it borders right on the edge of treason. These people have no right to commit their careers on American failure in war.

Senator Carl Levin <font size=-2>(Source: CBS)</font>
Senator Carl Levin (Source: CBS)

There are lots of ways to to oppose the Bush administration without this kind of disgraceful behavior. Carl Levin, a Democrat who is also from the Silent generation, has shown the way in this. He's about as liberal and anti-Bush and antiwar as anyone can imagine, but he expresses his opposition responsibly.

Democratic members of Congress have a professional and ethical obligation to act in America's best interest. So, for example, when Senator Joe Biden goes on Meet the Press and spends the better part of an hour saying one unbelievably stupid thing after another, and says things that imply that he's betting his career on America's loss and humiliation in Iraq, it really infuriates me.

(Incidentally, on Sunday morning's Meet the Press, Bill Richardson was the guest, and Tim Russert challenged almost everything he said. This is in stark contrast to Russert's automatically accepting every stupid, moronic thing that Biden said. Why is that?)

It's worth saying again that many responsible Democrats are not happy with this situation either. Lawrence Kaplan, a senior editor at the liberal, pro-Democratic opinion magazine, The New Republic, wrote an article entitled "Congressional leaders are illiterate on Iraq," in which he basically reached the following conclusions about the Democrats in Congress: They're morons; they go out of their way to avoid learning anyting; they make up any "fact" they want as they go along, since they don't know anything; and they couldn't care less what happens in Iraq, since they just want votes.

I think America deserves better than that.

Ron Brownstein, a liberal Los Angeles Times columnist, made the following remarks in response to George Will's comments, reported above:

Columnist Ron Brownstein <font size=-2>(Source: ABC)</font>
Columnist Ron Brownstein (Source: ABC)

"The war is already very unpopular. It is an extraordinary statement how the world has changed since 2004.

John Kerry voted against funding after he voted to authorize the war. Here are the two leading presidential candidates making the same vote, after voting to authorize the war voting against funding, and yet feeling very comfortable essentially because the country HAS turned against the war in a way that is very difficult to imagine turning back.

Whatever Petraeus comes back with, it's very hard to see that the level of improvement in Iraq is going to be such to meaningfully change public opinion, and I think Democrats still feel that no matter how vulnerable they may be to Republicans' attacks, on not funding the troops, Republicans are going to be more vulnerable for standing with Bush."

What Brownstein's remarks tell us is that no matter how the war effort under General Petraeus goes, the Democrats are going to call it a failure. Words cannot describe how sickening this attitude makes me, when there's so much at stake for our country.

The "Anbar Awakening" development shows how stupidly the Democrats are acting. Failure in Iraq is far from the certainty that the irresponsible Democrats are claiming, and if there is failure in Iraq, then their actions are liable to earn them the blame for the failure.

I will not attempt to predict what's going to happen politically, since Generational Dynamics does not make political predictions, and I dislike them, but I will say this: It is my personal hope that the responsible Democrats do OK, but that the irresponsible Democrats get totally screwed in the next election.

In the meantime, for those of us who are still hoping for America's success rather than failure, let's watch the "Anbar Awakening," and see if it leads to an even better outcome. (28-May-07) Permanent Link
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China confirms that a soldier has contracted bird flu

Leaders of China's Central Committee are "highly concerned" about the case, according to the Xinhua report, which also quotes China's Ministry of Health.

The soldier is 19 years old, and is now receiving treatment at an army hospital. He developed symptoms of pneumonia on May 9, and has been hospitalized since May 14.

This story reminds us that, although another flu season has gone by, the danger has not passed.

The deadly H5N1 Bird flu was virtually unknown three years ago, but during the winter of 2005-2006 it spread like wildfire across Asia, into Europe and Africa.

New infestations of H5N1 again spread rapidly this past winter, especially during the Tet and Chinese New Year celebrations.

According to a posting on the controversial Recombonomics web site by researcher Henry J. Niman, analysis of the gene sequences in cases around the world show that mutations are being spread by migrating birds, and then combined with one another. This analysis is especially revealing when examining the mutations that first were discovered at the huge Lake Qinghai nature preserve in western China in 2005:

"The recent H5N1 sequence data out of the Middle East and Western Africa further support a paradigm shift in the understanding of evolution. The recent data strongly indicate that single nucleotide changes, previously thought to be due to random mutations, are really genetic changes acquired by recombination and are not due to de novo mutations resulting from copy errors. The selection of copy errors represents the previous understanding of genetic evolution and drug resistance, but the current data indicates that rapid change is through selection of recombinants.

H5N1 evolution provides a model for rapid evolution in a natural setting. The growing sequence database provides examples of how influenza genes evolve over time, and the recently discovered Qinghai strain (clade 2.2) firmly ties this evolution to migratory birds.

Sequence data provide the initial evidence against the role of de novo random mutations in influenza evolution. Genetic drift allows the virus to escape immune responses. H5N1 is the fastest evolving influenza serotype and has created the greatest concern because of the associated high case fatality rate in infected hosts, which is coupled with rapid change into an expanding geographical reach and a growing host range. Recent sequence data identified clear cut recombination in H5N1 isolates in China, and recent swine sequences identified sequences copied with absolute fidelity for over 25 years. These two observations raised serious questions about the role of random mutations in the rapid changes seen in both seasonal and pandemic influenza genes.

Similarly, polymorphism tracing identified the rapid movement of polymorphism from one genetic background to another, which followed identifiable pathways that coincided with the movement of migratory birds.

The role of migratory birds became increasingly clear after the H5N1 Qinghai outbreak, almost exactly two years ago. On May 9, 2005, 178 dead bar-headed geese were reported at Qinghai Lake in central China. Although H5N1 involvement was initially denied, a novel strain was identified in five species of long range migratory birds. Eventually the number of dead birds at Qinghai Lake exceeded 5000. Most were bar headed geese that could travel 1000 miles in 24 hours. The establishment of H5N1 in such long range migratory birds set the stage for a rapid expansion of the H5N1 global reach.

A few months later, H5N1 was reported for the first time in Russia, Kazakhstan, and Mongolia. When sequence data indicated that all three outbreaks were due to the Qinghai strain of H5N1 in long range migratory birds, it was clear that a dramatic increase in the H5N1 reach had begun.

The regions in Siberia and Mongolia were linked to migratory pathways that would move H5N1 into Europe, the Middle East, and Africa. Within 12 months H5N1 had been reported for the first time in almost 50 countries west of China and all outbreaks involved the Qinghai strain.

This rapid spread created an experiment of nature for the study of influenza evolution in a natural environment. H5N1 had not been reported in any of these countries previously, and the newly reported sequences included newly acquired polymorphisms that were regionally specific. The polymorphisms could be traced to determine the origins of the changes to confirm the role of recombination in the acquisitions. As expected, the vast majority of the newly acquired polymorphisms were already present in the sequence database. Most could be found in other H5N1 isolates, although contributions from low path polymorphism were also seen.

However, the greatest insight came from closely monitoring changes in a large number of isolates from the same region over a limited time frame. This opportunity was presented by the sequences generated by US NAMRU-3 in Egypt. Like most of the countries in Europe, the Middle East, and Africa, Egypt reported its first case of H5N1 in poultry in February, 2006. However subsequent analysis of an isolate from a healthy teal indicated that Qinghai H5N1 was already in the Nile Delta in December, 2005. Egypt also lies under overlapping migratory bird flyways, allowing for multiple introductions and significant genetic mixing via recombination.

After the outbreaks in the winter / spring of 2006, detection of H5N1 decreased. New infections in poultry and humans were reported in the fall of 2006 signaling a new season and a new set of H5N1 sequences. The new sequences were more genetically complex and the newly acquired polymorphisms were frequently found in earlier Qinghai isolates, although the regional markers seen in early 2006 were also present in 2007. The recently released sequences from 2006 H5N1 isolates in Israel and Gaza indicated that the regional markers seen in Egypt extended to Israel and Gaza, as had been seen earlier in a human isolate from Djibouti. The 2006 isolates from Egypt, Djibouti, Israel, and Gaza formed a genetic baseline for H5N1 polymorphisms in the region, so newly acquired polymorphisms in the 2006/2007 season were easily identified. The large number of poultry and human samples collected by NAMRU-3 provided a real time view of the H5N1 evolution.

The newly acquired sequences were readily found in H5N1 isolates in eastern Asia, including changes in the receptor binding domain as well as oseltamivir (Tamiflu) resistance, providing further evidence for acquisitions via recombination. The donor sequences in eastern Asia were on H5N1 isolates, but these isolates were genetically distinct from the recent isolates in Egypt, which had the regional markers from the prior season.

Similarly, as more sequences from Qinghai isolates from other countries were released, it became increasingly easy to find the newly acquired polymorphism in Egypt in other locations, but the polymorphism was being acquired individually. One of the changes in Egypt was M230I which was encoded two different ways. One matched H5N1 in Asia, while the other matched H7N3 in Europe. However, recent sequences showed that the Asia version of M230I was in a Qinghai isolate in a German eagle owl, indicating both versions that appeared in the Nile Delta in Egypt in the 2006/2007 season were in wild birds in northern Europe in the 2005/2006 season. ...

The evolution by acquisitions of single nucleotide changes via recombination represents a paradigm shift creating an evolution revolution."

The bottom line of all this is that, although bird flu hasn't been in the news much lately, the situation is as threatening as ever.

As I always do, I once again remind the reader that it's impossible to predict when a particular mutation will permit easy human-to-human transmission, which would result in a worldwide pandemic. This could happen next week, next month, next year, or thereafter.

Once again, as I always say, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food.

I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. (27-May-07) Permanent Link
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Chinese peasants use fertility drugs to get around "one-child" policy

How did this family get four kids?

Parents has quintuplets after taking fertility drugs.  They gave one child away to a relative because they couldn't afford to raise all five children. <font size=-2>(Source: BBC)</font>
Parents has quintuplets after taking fertility drugs. They gave one child away to a relative because they couldn't afford to raise all five children. (Source: BBC)

The number of families with twins has been skyrocketing in Henan Province in central China, according to a report by the BBC.

The adjoining picture is of a family with four children. The mother took fertility drugs hoping to have twins, and ended up with quintuplets. They gave one child away to a relative because they couldn't afford to raise all five of them.

A Chinese woman is not allowed to get pregnant more than once. Violating this rule is treated harshly by government officials - the family could face a huge fine, or the woman could be sterilized. The intent of the "one-child" policy, since it was adopted in the late 1970s, was to reduce the growth of China's population.

However, the peasants are becoming increasingly angry at having this kind of government control. On May 19, in Bobai, a town in China's southern Guanxi province, there was a large regional rebellion, involving thousands of peasants attacking government officials, overturning cars and setting fire to government buildings. China has tens of thousands of regional riots and demonstrations each year.

The use of fertility drugs is a loophole in China's harsh "one-child" laws. They're widely available in China without a prescription, according to the BBC report, and many women take them in the hope of having multiple births. A woman whose pregnancy leads to multiple births is permitted to keep the children without any fines.

Typical Chinese maternity ward: Five boys (white) and three girls (pink) <font face=Arial size=-2>(Source: CNN)</font>
Typical Chinese maternity ward: Five boys (white) and three girls (pink) (Source: CNN)

China has had plenty of other problems with its one-child policy. A typical maternity ward has many more boys than girls, since many parents want a son who will support them in their old age, rather than a daughter who will marry someone else and move away. Mothers use ultrasound, followed by abortion or infanticide, to guarantee that their one child will be a boy. As a result, there are 130 boys born for every 100 girls in rural areas.

This whole policy is just one more example of how China's society is coming apart at the seams. China has a population so huge, 1.5 billion people, that it can barely be governed anyway. (As a mathematician, I like to joke that 1.5 billion equals infinity, for all practical purposes.) The one-child policy is merely a stopgap measure that can't possible succeed for long, and today it appears to be unraveling completely.

In March, Chinese premier Wen Jiabao said that China is "unsteady, unbalanced, uncoordinated and unsustainable." As I wrote in January, 2005, China is becoming increasingly unstable and approaching a civil war, and a resulting world financial and war crisis. (26-May-07) Permanent Link
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Congress votes to fund Iraq war without deadlines

The result shows conflicting anxieties during America's Crisis era.

As I've said repeatedly on this web site, the Iraq war could not be avoided. Even if Al Gore had been President after 9/11, he would have pursued the Iraq war.

Thursday's passage of a bill to fund the Iraq war without specifying any deadlines shows how little control politicians have over what's coming.

I've been saying for five years that there will be no "antiwar movement" over the Iraq war, the way there was for the Vietnam War, and there hasn't been. There have been almost no demonstrations, and there have been few if any college students against the war. Most of the so-called "antiwar Democrats" haven't been against the war so much as against the President.

Democrats say that Americans are "against the war," but what does that mean? It means that they don't "like" the war, but does it mean that Americans should withdraw the troops from Iraq?

The results of a new Harris poll show that, in fact, Americans are quite fearful of the outcome of withdrawing from Iraq.

The poll asked the following two questions:

Here are the results of the poll:

    |     Assuming that the United States withdraws its troops from Iraq    |
    |                                                                       |
    |  Possible      | Which of these outcomes are   ||Would this outcome be|
    |   outcome      |     likely to happen?         || damaging to the US? |
    |                |-------------------------------||---------------------|
    |                |               |               ||          |          |
    |                | Probably will | Probably will ||          |   Not    |
    |                |    Happen     |  not Happen   || Damaging | Damaging |
    |                |---------------|---------------||----------|----------|
    |There will be a |               |               ||          |          |
    |major civil war |               |               ||          |          |
    |in Iraq         | 70%           | 10%           || 78%      | 11%      |
    |                |               |               ||          |          |
    |A new Iraqi     |               |               ||          |          |
    |dictator will   |               |               ||          |          |
    |emerge          | 58%           | 16%           || 62%      | 24%      |
    |                |               |               ||          |          |
    |It will be seen |               |               ||          |          |
    |as a major      |               |               ||          |          |
    |defeat for the  |               |               ||          |          |
    |United States   | 54%           | 23%           || 59%      | 25%      |
    |                |               |               ||          |          |
    |It will lead to |               |               ||          |          |
    |an increase in  |               |               ||          |          |
    |international   |               |               ||          |          |
    |terrorism       | 48%           | 27%           || 59%      | 27%      |
    |                |               |               ||          |          |
    |It will put     |               |               ||          |          |
    |Israel in       |               |               ||          |          |
    |danger          | 40%           | 25%           || 57%      | 31%      |

America today is in a generational Crisis era, and we're seeing two different things that are characteristic of a crisis era.

First, we're seeing how contentious politics is. Politicians in Congress do not know how to govern. All they know how to do is argue.

Second, we're seeing how anxious Americans are. They're enormously anxious about the war, but they're even more fearful of the result of ending the war.

The fact is that President Bush and America have almost no choices about many things. Events in the world are taking their own course, and nothing can be done to change the course of events. I like to use the comparison to a tsunami: It's going to do whatever it's going to do, and nothing can be done to stop it. You can prepare for it, but you can't stop it.

My own expectations haven't changed. My expectation is that American troops will remain in Iraq until the Clash of Civilizations world war begins. At the time, the troops will be withdrawn because they'll be urgently needed elsewhere. (24-May-07) Permanent Link
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Multiple bubbles bursting in China as peasants riot over "one child" policy

Government officials are expressing increasing concern over China's stock market bubble, which can't seem to stop growing.

Zhou Xiaochuan, the head of China's central bank, the People's Bank of China (PBoC), has said repeatedly in the last few months that the stock market was in a dangerous bubble.

Last week, the PBoC raised interest rates, a move that should have dampened investors' ardor. Stocks did fall briefly, but then jumped back even higher. There seems to be nothing that the Beijing government can do to let a little bit of air seep out of the bubble.

That really shouldn't surprise anyone, I suppose, since America's stock market is also well into bubble territory, overpriced by a factor of over 250%. No matter how much bigger the bubble grows, the more exuberant investors become.

To show how crazy things are, there's one company, Yardeni Research, that's saying publicly that stocks are cheap. They say that valuations (price/earnings ratios) are low right now -- even though they're far above historical averages -- because you can make more money in the stock market today than in the bond market.

I disposed of this argument several months ago in an essay that I wrote on "A conundrum: How increases in 'risk aversion' lead to higher stock prices." This essay, based on work by Harvard economist named Robert J. Barro was very exciting to me personally, because it connected a lot of dots in integrating macroeconomic theory with generational theory, and explained how the global economy goes from one major crash to the next one, 70-90 years later. Briefly, the people in the generations that survive the previous crash (in this case, the 1929 crash) become extremely risk-averse, and refuse credit. As those generations disappear (retire or die), the younger generations become risk-seeking, and increasingly use debt and credit abusively. The abusive use of credit actually increases the total amount of money in circulation, so that money is poured into BOTH stocks and bonds, so that they both participate in the bubble.

Well, exactly the same thing has been happening in China. At a time like this, there's so much money (liquidity) is available, that people are willing to invest in almost anything.

Even graveyards.

Yes, there's been a graveyard bubble in China.

It's actually very much like the worldwide real estate bubble. People purchase real estate with no intention of living there, but simply to "flip" the property and sell it again when the price go up.

In China ten years ago, you could have purchased an austere burial tomb for about $25. Today you'd have to pay more like $250, and some go for as much as $2500. In recent years, people have been purchasing graveyards, and then selling the tombs at bubble prices. The bubble has also dramatically pushed up funeral prices.

People have been getting scammed.

One man bought 24 empty graveyard plots in a cemetery called Spiritual Spring. He spent his family's entire life savings -- around $20,000. But the company never delivered the plots, and all he has to show for his investment is 20 certificates -- worthless pieces of paper.

The story of what's been happening in China reminds me of the last days of the Tulipomania bubble of the 1630s, as described in Edward Chancellor's 1999 book, Devil Take the Hindmost, a history of financial speculation:

"No actual delivery of tulips took place during the height of the boom in late 1636 and early 1637 as the bulbs remained snug in the ground. A market in tulip futures appeared, known as the windhandel (the wind trade): sellers promised to deliver a bulb of a certain type and weight the following spring, buyers took the right to delivery -- in the meantime, cash settlement could be made for any difference in market price. Most transactions were expedited with personal credit notes which also fell due in the spring when the bulbs would be dug up and delivered. Gaergoedt boasts of having made 60,000 guilders from his tulip speculations but admits that he has only received "other people's writing." By the later stages of the mania the fusion of the windhandel with paper credit created a perfect symmetry of insubstantiality: most transactions were for tulip bulbs that could never be delivered because they didn't exist and were paid for with credit notes that could never be honoured because the money wasn't there." (pp. 16-18)

Perhaps it's easier to understand how China could be having a graveyard bubble if you realize that it was just like Europe's own Tulipomania bubble.

As all these examples show, once the market is in the middle of a bubble, investors are totally blinded. They just pour more and more money into the market until the bubble bursts and they lose everything. In every bubble, when you point out to investors that it's bubble, they always say, "This time it's different."

That's what investors are saying today, worldwide, according to a page one article in Wednesday's Wall Street Journal.

"[A] small group of seasoned investors -- including some with no vested interest in selling stock -- believe the U.S. market is in the midst of another long period of gains," according to the article. "This group of extreme optimists believes that global economic strength will keep shares rising for much longer than has been common in previous eras. Not only China and India, but also Japan, Western Europe, Latin America and other parts of Asia are feeding on one another."

You really have to laugh at some of the reasoning. "This adds up to a special time in market history, says [Louise] Yamada, the former head of technical research at Citigroup's brokerage arm, who now runs Louise Yamada Technical Research Advisors. Comparing the market's behavior with historical patterns -- the number of advancers and decliners, for example, or the duration and magnitude of gains -- she says that in April 2006, the market looked like it was primed to fall heavily. Instead, it bounced back before it fell as much as 10%, which she attributes to the breadth of global economic strength. 'That is why I say it really is different this time,' she says."

This is so ridiculous that it's laughable. Do people really pay money to this "advisor?" She's a moron. I should give all the reasons but it would take several paragraphs. Just read my 2005 article, The 11% Solution, or, for those into macroeconomics theory, my 2006 article, "System Dynamics and Macroeconomics."

So anyway, this "group of seasoned investors" believes that the bubble is just going to keep growing and growing and growing -- even in China!!! -- for another ten years.

Even officials in China don't believe that. As we said, the PBoC is looking very hard at ways to stop the bubble.

In an article in Wednesday's Wall Street Journal, they've quoted a song that's circulating on the internet in China. Here's the translation:


Lyrics to a song meant to be sung to the tune of China's national anthem, "The March of the Volunteers," are circulating on the Internet.

"The Song of the Stock Market" Author unknown

Arise Ye who haven't got stock accounts! Invest all your money in the bull market; The Chinese people have reached the most crazy moment, Everyone with enthusiasm shouts the shout of buying. "Arise, Arise, Arise!" Our millions of people are of one mind, cherishing the dream of overnight wealth. March on! March on! March on!

Arise, Ye who do not want to be poor, To build our Great Wall of stock with our blood money The Chinese people are experiencing the most crazy market, Everyone with jealousy shouts the crazy shout. March on! March on! March on! United we buy, without considering the risk of being trapped. March on! March on! March on!

So, some people in China "get it."

China may indeed be in the last days of its bubble.

Former Fed chairman Alan Greenspan was quoted as saying, on Wednesday, that China's bubble is getting too large.

"It is clearly unsustainable," he said "There's going to be a dramatic contraction at some point."

Greenspan also said a correction could cause problems for Chinese personal wealth. Some analysts have speculated that the Chinese government could be tempted to dip into its reserves to bail out any stung investors and avoid social unrest.

Greenspan, who stood down as Fed governor last year, said cheap Chinese imports were one of the elements stoking world growth, along with Eastern European workers and the knock-on effects on lower inflation and rates.

"In the last five years, the world as a whole is a growing faster than at any time in the world's history," he said. "It can't last and it won't last because it's a one-shot adjustment."

So how, Dr. Greenspan, will this "dramatic contraction" in China affect the rest of the world?

"Greenspan said asset prices around the world could fall but that the economy may escape unscathed if it were flexible enough to absorb asset price shocks.

"We will get major declines in certain levels but it need not feed back significantly to levels of employment or the real economy," he said."

So the rest of the world is just going to shrug off the collapse of China's economy? That's funny.

Actually, China is coming apart at the seams, and even China's leaders know it. In March, Chinese premier Wen Jiabao said that China is "unsteady, unbalanced, uncoordinated and unsustainable." What I wrote in January, 2005, is that China is becoming increasingly unstable and approaching a civil war.

China has tens of thousands of regional riots and demonstrations every year, and there was a big one that made international news just this past week. Thousands of peasants in south-west China have attacked family planning officials, overturned cars and set fire to government buildings in a riot sparked by the state's "one-child" policy. The "one-child" policy was adopted in the late 1970s as a means of controlling population; it forbids any woman from having more than one child, on pain of fine or forced abortion.

According to the news stories, local "family planning" officials have been acting like The Sopranos in enforcing the policy, forcing them to pay thousands of dollars in fine, or having their homes destroyed, possessions taken, face smashed, and fingers broken.

What I read into this situation is that China's family planning officials are over their head in debt in some way, and they're using the kind of desperate measures that Tony Soprano might use to generate some income. That's why the peasants were revolting.

From the point of view of Generational Dynamics, China is destabilizing and headed for civil war, as I wrote in January, 2005, replaying the violent civil war that ended in 1949. This conclusion was based on a variety of factors, including the increasing number of mass riots, a huge migrant worker population, big income disparities, and an unraveling of the social structure. Once that happens, world war will not be far off. (23-May-07) Permanent Link
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Jordan's King Abdullah renews stark warnings about Palestinian problem

Both Israelis and Palestinians are becoming increasingly furious at each other, as both sides carried out deadly attacks on Monday.

Palestinian militias continued launching numerous rockets from Gaza into Israel. Most did no harm, but one killed a woman driving a car.

The Israeli Air Force continued striking in Gaza, targeting members of Palestinian militias accused of launching the rockets.

Both sides are threatening to escalate further: Israel is threatening to target the Hamas leadership, and Hamas is threatening to renew its suicide bomber attacks on Israeli civilians.

The escalated fighting with Israel has, for the time being at least, quelled the internecine fighting between the Fatah and Hamas factions of the Palestinians.

All of this happened as heavy fighting continued in the Palestinian refugee camp in northern Lebanon, home to about 40,000 Palestinians. Dozens have been killed in the crossfile between the Lebanese army and the new al-Qaeda linked terrorist group, Fatah al-Islam, led by Palestinian terrorist Shakir al-Abssi. Evidently, Palestinians are not supporting Fatah al-Islam and feel no connection to the group, but they are appalled that it's Palestinian refugees that are being killed as collateral damage. (There are 13 Palestinian refugee camps in Lebanon, set up in the 1960s to house the Palestinians displaced by wars with Israel.)

At the same time, there was another bomb blast in the capital, Beirut. Sunday's bomb blast was in a Christian neighborhood, and Monday's was in a Muslim neighborhood.

With the Palestinian situation seeming increasingly out of control, Jordan's King Abdullah has appealed once more for international help to bring the situation under control, in an interview with the BBC.

The interview was very interesting because of his analysis of the situation, and where Generational Dynamics agrees with him and where it disagrees with him.

Jordan's King Abdullah II, addressing a joint session of Congress on March 7 <font size=-2>(Source: CNN)</font>
Jordan's King Abdullah II, addressing a joint session of Congress on March 7 (Source: CNN)

You may recall that on March 7, King Abdullah addressed a joint session of Congress, at which he made a desperate plea for help with the Palestinian situation.

Abdullah's central point is that the Israeli/Palestinian problem is the core problem, the heart of all problems in the Mideast. In an interview with ABC's George Stephanopoulos in November, he explained this to Stephanopolous five times, but Stephanopolous remained clueless.

There is absolutely no question that Abdullah is 100% correct in this appraisal, as I've been saying on this web site for five years. And yet, none of these journalists, politicians and pundits seem to get it. They constantly focus on the Iraq war as the cause of all problems, as if the Arab/Jewish conflicts began in 2003 instead of eons ago.

Abdullah repeated this point in Monday's interview, but he made a number of other interesting points as well. Here's my transcript of some excerpts, with my comments interspersed. The first question had to with the reasons for the Palestinian civil war:

Abdullah: "I think it's an issue that's just erupted between both parties. But I do know from all our accounts that both sides, Fatah and Hamas, are trying to maintain calm as quickly as possible, because I think they realize that it's very easy for this issue to spill out of control." ...

Q: "Is this about a power struggle between Hamas and Fatah, or is it street level power?"

Abdullah: "I think it's a bit of both. I would say that at least the leaders are being very responsible on both sides now because whatever is happening on the street now can get out of control. Our reports indicate that the leadership on either side are trying to bring calm as quickly as possible. ..

I think that there are quite wide ideological differences between both groups and that's one of the challenges that the Palestinians have. They have to keep in mind that overshadowing their difficulties is really this final opportunity for peace, and the final opportunity for a Palestinian state, and my concern is that this infighting, or this civil disorder at the moment, will affect the future of Palestine."

These comments go to the heart of what I've been saying about this conflict. The Gaza strip is densely populated and the median age in the Gaza strip is 15.8. Thus, the Gaza strip is run by a generation of children with guns and missiles.

It certainly is true that there are differences between Fatah and Hamas at the leadership level, but those differences are nuances, not really of interest to the children running Gaza. My reading of the situation is that it's much more a "street level" struggle than a leadership struggle. And as the generational changes continue, the conflict at the "street level" will continue to grow, not lessen, no matter what the leadership does.

Q: "Are Israel's attacks on Gaza mean a return to the battles of the last year?"

Abdullah: "No, I don't think so. I think the leaders realize on all sides -- the Israeli leadership is keeping themselves mindful of the peace proposal. I don't think it is back to the drawing board. We see a spike of tension and crises, and I think this is why everyone is scrambling to try and restore calm as quickly as possible because we don't want to lose the next month or two due to the instability that allows the extremists to call victory against the peace process."

Q: "What do you think -- what's been your reaction when you've heard of Israeli warplanes targeting very specifically hamas headquarters?"

Abdullah: "We want all sides to be a positive element to bring stability back. so our reaching out as Arab countries to fight Hamas also Jordan and Egypt are reaching out to Israel.

We need cooler heads to prevail at the moment because if one element is involved in targeting or violence then it's very easy for the other elements to get into it. We just need everybody to back off -- understanding that Israel has some major of having rockets fired at their country."

Abdullah calls it "a spike in tension and crises," but this is not what's going on at all. It's a TREND of increasing tension and crises.

As regular readers will recall, I first said in 2003, that the Jews and the Arabs are headed for a new genocidal war, replaying the genocidal war of the late 1940s, when Palestine was partitioned and the state of Israel was created, and that this new war will pull in countries in the entire region, including Europe and the United States eventually. These conclusions were based on a Generational Dynamics analysis.

Since then, especially since the death of Yasser Arafat, the trend in the region has been almost straight downhill, with worsening tension, crises and chaos, almost on a daily basis, as I've documented frequently on this web site.

So "a spike in tension" doesn't the describe the situation at all.

Q: "But do you fear what some might consider an impetuous move by the Israelis to assert themselves in Gaza, given what's happening internally but for domestic Israeli political reasons?"

Abdullah: "That is always a concern and again, we keep reminding all the players to keep their eye on the prize, the larger picture, which is trying to launch a peace process.

By the way, whenever we come close to launching a process, this is when extremists on all sides want to destabilize the issue, and create arguments not to move forward. So whenever we come closer to getting the parties to resolve their differences and take that step forward, these things happen. We just need to keep our eye on the bigger prize."

This is an interesting point that's not made often enough: That there are groups of people, like Osama bin Laden but especially in younger generations, who WANT to provoke full-scale war.

An example came out yesterday. There were 140 rockets launched from Gaza into Israel last week, and according to an analysis by one columnist, Hamas times "the lethal Qassam [rocket] salvo to occur just before the 8 P.M. television news after keeping a low profile all day. The purpose is to create maximum terror and maximum news coverage.

The same thing is true in Iraq, incidentally. The al-Qaeda insurgents set off one or two car bombs in marketplaces each morning, so that they'll make the BBC morning newscast, and then the American newscast later in the day. Terrorist can be just PR.

Q: "I'm tempted therefore to put to you the remarkable progress that was made in Northern Ireland two weeks ago. Now, you could have said there were equal moments of despair over many years, including the last decade, when people thought it was impossible to get any kind of deal. Do you think there's something in what we've seen in Northern Ireland which will be applicable to what we have here, which will end what we're seeing in Gaza at the moment."

Abdullah: "Having studied in England for many years, I always see many comparisons of the complications of Northern Ireland and the difficulties that the British and the Irish face to what we have here. There's a lot of similarities. But what it comes down to, what history shows, is that people with the right conscience do not give up. As difficult and as dark as it gets, we have to keep trying. And this is what we're saying."

It's the technique of journalists who really don't think very much to think that two situations that have some cosmetic similarities are completely similar, and that some magic solution that worked in one case worked in the other. What matters is the generational timeline, and journalists never have any concept of that.

I've never done an in-depth analysis of what's happened in Northern Ireland. There had been centuries of fights between the Protestants and Catholics, and they seemed to be tapering off, until the 1840s when the Irish potato famine occurred. This triggered new waves of violence, most recently in the 1970s. It's not surprising that the violence is tapering off, just as some of the European "religious wars" of the 1500s and 1600s have tapered off. But there's absolutely no connection between those situations and the Arab/Palestinian struggle, with the latter going much, much deeper. Fortunately, King Abdullah didn't swallow the bait.

"Specifically on the Palestinian issue, because physically in a year or two, we may not have much left of a Palestinian state to talk about, and therefore if we don't have a Palestinian state, can we ever have peace between the Arabs and Israelis?

This is why we're trying our hardest to launch the process now, knowing that this is not the right time, but really it's the only time we have left to us."

Here he puts forth an idea that I don't understand, and neither did the pundit who followed the interview.

What does he mean that "physically in a year or two" there won't be "much left of a Palestinian state to talk about"?

Is he saying that the region is on the verge of total war? Or does he mean that the Palestinian government is falling apart, and won't be able to govern at all in two years?

Enquiring minds want to know, but unfortunately he didn't explain it.

Q: "Can I finally ask you about the implications of what's happening in Iran. Because you're trying to keep the crisis here focused on the Palestinian question. And there are those who say that Iran is creating enormous challenges."

Abdullah: "We have always understood in this part of the world that everything in this part of the world is interconnected. That's a difficulty I think that the West has of connecting the dots. We're looking at all these regional issues as big pieces of a puzzle. And what I'm saying is that the most critical piece of that puzzle for the future of the Mideast is the Israeli/Palestinian one."

Q: "So Iran does not broaden the issue. Iraq does not broaden the issue."

Abdullah: "They're all interconnected, but if we want to start pushing them at least back into the light, we need to start getting some winds. I keep saying that the core issue, of all the issues we have in the Middle East, the central issue, the heart and the center of all Arabs and Muslims IS the Israeli/Palestinian one. If we can move that in the opposite direction, it allows us much more flexibility in dealing with the others."

Q: "Your majesty, thank you very much indeed."

In these last questions, the BBC interviewer goes completely off the rails.

Conflict risk level for next 6-12 months as of: 9-Feb-2006
W. Europe 1 Arab Israeli 3
Russia Caucasus 2 Kashmir 2
China 2 North Korea 2
Financial 3 Bird flu 3
Key: 1=green 1=Low risk 2=yellow 2=Med 3=red 3=High 4=black 4=Active

As I said earlier, people just don't seem to get it that the conflict between Arabs and Jews overshadows everything in the Mideast. I get that because Generational Dynamics tells me, and King Abdullah understands it intuitively, because he's at the center of everything.

On my little conflict risk graphic, Iran and Iraq don't even appear. There's a very good reason for that. Both countries are in a generational Awakening era, just one generation past the genocidal Iran/Iraq war of the 1980s. Therefore, Generational Dynamics tells us quite clearly that it's very unlikely that either country will spark a major war. That's just how it is, and how it's been throughout history. The same is true of Lebanon and Syria.

But Saudi Arabia, Jordan, Israel, and the Palestinian territories are all in generational Crisis eras. Saudi Arabia's last crisis war was the Ibn Saud conquest that ended in 1925; and as for the others, the last crisis war was the extremely genocidal war between Arabs and Jews that occurred in the late 1940s, after Palestine was partitioned and the state of Israel was created. And incidentally, the reason that so many suicide bombers come from Saudi Arabia is because that country is so deep into a Crisis era, farther even than the Palestinians or Israelis.

So that's where the real war is going to begin -- not in Awakening era countries like Iran or Iraq, but in Crisis era regions like Israel, Gaza and the West Bank.

In fact, the reason that there's still any major insurgency at all in Iraq is because it's being driven by al-Qaeda Sunnis from Crisis era countries. I detailed this in an article in April.

King Abdullah's desperate plea has fallen largely on deaf ears. It was perfectly obvious that the BBC journalist didn't believe Abdullah that the major problem in the region was the Arab/Jewish conflict. It's simply too abstract a concept for him and most journalists to understand.

From the point of view of Generational Dynamics, the Arabs and Jews are headed for a new genocidal crisis war, replaying the genocidal crisis war of the late 1940s. This war will pull in other countries, including America, and will trigger the Clash of Civilizations world war if it hasn't already begun. (22-May-07) Permanent Link
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New al-Qaeda linked terrorist group provokes heavy gun battle in northern Lebanon

Islamist militants in Fatah al-Islam, led by Shakir al-Abssi, battled Lebanese troops on Sunday, killing 25 soldiers and 15 militants. The fighting took place in a Palestinian refugee camp in Nahr al-Bared, near the Sunni Muslim city of Tripoli in north Lebanon.

In a separate incident, a bomb exploded in a Christian neighborhood of the capital city, Beirut. It's not known whether the two incidents are connected.

Pundits claimed that the violence, which was the worst in a long time, threatened the stability of Lebanon, and raised fears of a new Lebanese civil war.

Fatah al-Islam is a new Sunni Islamist terrorist group, led by Palestinian Shakir al-Abssi. Al-Abssi was interviewed by the NY Times in mid-March.

In that interview, he claimed not to be part of al-Qaeda, but admitted that he had worked closely with Abu Musab al-Zarqawi. Al-Zarqawi was the head of al-Qaeda in Iraq before he was killed in June of last year.

According to American and Middle Eastern intelligence officials, al-Abssi is a new kind of al-Qaeda terrorist who is being seen more often. Osama bin Laden's organization was shattered by the invasion of Afghanistan after 9/11, but now it's reforming itself with small groups around the world like Fatah al-Islam.

Intelligence officials say that he's trying to establish himself as a terror leader like al-Zarqawi. They estimate that he's imported 50 militants from Saudia Arabia and other Arab countries, after training with the insurgency in Iraq.

From the point of view of Generational Dynamics, we can reach some likely conclusions about what's going on:

Lebanese officials are accusing Syria of having sponsored and aided al-Abssi, which Syria denies. However, al-Abssi's home base is in Syria.

The emergence of the new group Fatah al-Islam and Shakir al-Abssi in Lebanon comes at a time when intelligence sources have established a new connection between Hamas and al-Qaeda on the Gaza Strip.

A connection with al-Qaeda was suspected last year when a terrorist confessed to Egyptian authorities that he had been trained in Gaza by an organization called al-Tawhid wal-Jihad, which was also an earlier name for Abu Musab al-Zarqawi's organization before it became al-Qaeda Iraq.

Two weeks ago, a new organization Jaish al-Islam ("Army of Islam") identified itself as the group that kidnapped BBC journalist Alan Johnston, and demanded the release from British jails of a major ideologue of al-Qaeda in Europe.

These two new al-Qaeda organizations indicate that al-Qaeda is gaining strength as an international terrorist organization, with known associations stretching from Jemaah Islamiah in Indonesia to the GSPC (Salafist Group for Preaching and Combat) in Northern Africa, the latter having recently renamed itself "al-Qaeda in Maghreb," and perpetrated bombings in Algiers and Casablanca last month.

This comes at a time when the level of violence in the Gaza Strip is escalating significantly, because of Israeli air strikes, responding to a barrage of missiles fired on Israeli cities. (21-May-07) Permanent Link
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Sarkozy begins term as activist President of France

The pundits' comparison of Sarkozy to Margaret Thatcher is a dangerous one.

Nicolas Sarkozy took office as President of France on Wednesday.

Pundits have been comparing him to Margaret Thatcher, who served as Prime Minister of Britain from 1979-1990, but the comparison is a dangerous one.

One pundit writes:

"It is "Marianne" Thatcher in a red cap of liberty... this is Revolution indeed. Sarko is poised to storm the Bastille of French dirigisme and liberate the economy. He will guillotine the privileged orders in industry and the civil service. Bliss is it in this dawn to be alive...

Or possibly not. Is Nicolas Sarkozy France's Thatcher? Is he truly the great reforming president who will drag France, kicking and screaming, from its three-hour déjeuner into the competitive slipstream of the globalised free market? Either we live in more than interesting times, or it is business as usual. The clever money is on the latter. Sarkozy promises change? Oh, that kind of change - plus ça change.

Washington pundit George Will writes:

"Sarkozy wants to lower taxes, including inheritance taxes, and eliminate the tax on overtime work. That tax, along with government snoops patrolling companies' parking lots to detect antisocial industriousness, enforces the 35-hour workweek. He wants to do what Margaret Thatcher did after she was elected in 1979 because Britain was weary of being governed less by parliament than by unions. Even before Sarkozy was elected, public-sector unions -- government organized to pressure itself to fatten itself -- threatened a paralyzing national strike because he opposes allowing 500,000 employees of government-controlled companies to retire earlier than private-sector employees and with larger pensions."

And here's another pundit, Anatole Kaletsky:

"Mr Sarkozy Has Obvious Parallels With Mrs Thatcher: The Abrasive And Radical Image And The Promises To Break With The Past, Liberate Private Enterprise, Cut Taxes And Curb Trade Unions. Even More Reminiscent Of Mrs Thatcher Is The Venomous Hatred That Mr Sarkozy Inspires In The French Left."

Indeed, Sarkozy has been rushing to a quick start.

As soon as his inauguration ended on Wednesday, he hurried off to the airport and to Berlin to meet with German Chancellor Angela Merkel.

His objective is to quickly fulfill one of his campaign promises. Since France was humiliated by the 2005 referendum that rejected the EU Constitution, Sarkozy wants to lead the effort to develop a "mini-treaty" that will provide some of the changes that Constitution would have provided, but few enough changes so that a new referendum can be avoided altogether. He wants to have this mini-treaty signed by June, a month from now.

However, as controversial as this mini-treaty will turn out to be, it's nothing compared to the economic changes that Sarkozy wants to make, especially to eliminate the 35-hour work week.

Labor unions are warning Sarkozy, "We'll take to the streets." Here's how Bernard Thibault, head of the General Confederation of Labour union, with 711,000 members, describes the Sarkozy-Thatcher comparison:

"Do I think he wants to crush the unions? Yes, I do. Mr Sarkozy's plan is comparable to Mrs Thatcher's: he will try to attack union rights, especially the right to strike, to make it easier to push through his policies. If he does what he said he would do, we could have a battle and strikes against his proposals. ... Mr Sarkozy and his entourage are wrong to imagine the influence of unions is based just on the number of members. We can mobilise. We can organise many big strikes and enormous demonstrations, as we have shown."

So pundits, as well as Sarkozy's supporters and opponents, are all making the comparison with Thatcher. Sarkozy himself has referred to a technique of Thatcher's -- taming the labor unions by making "small changes," rather than large dramatic changes.

In order to understand what Nicolas Sarkozy has in common with Margaret Thatcher, it's best to start with what Margaret Thatcher had in common with Ronald Reagan.

Margaret Thatcher served the UK as Prime Minister from 1979 to 1990, around the same time as Ronald Reagan, who was President from 1981-89.

Both Thatcher and Reagan were very confrontational with the labor unions, and those confrontations were successful, as will be remembered by those old enough to recall Reagan's confrontation with PATCO, the Professional Air Traffic Controller's Organization.

This coincidence should give readers a clue that there was something going on in the 1980s that was more significant than just firm policies by Thatcher or Reagan.

The 1960s-70s were tumultuous generational Awakening eras for America and for Western Europe, filled with riots, demonstrations and actions by labor unions. By 1980, people were generally sick and tired of the chaos, and were ready to support anything that brought consensus and compromise.

Thus, the actions by Reagan and Thatcher to control labor unions were what the times demanded. As I've said many times, Generational Dynamics predicts and explains the attitudes and behaviors of large masses of people, entire generations of people. The actions of individual politicians are of interest only insofar as they reflect that attitudes of large masses of constituents.

So, contrary to the assumptions of today's pundits, politicians and journalists, it wasn't Reagan and Thatcher that confronted the labor unions; they were just doing what the people wanted at that time.

Similar remarks can be made about the general economy at that time. As I wrote about last year, economists call that era "The Great Inflation of the 1970s," a play on words from "The Great Depression of the 1930s."

In the United States, as I described, Paul Volcker at the Fed adopted a "monetarist" approach, using interest rates to control inflation rather than unemployment. There was a recession in the early 1980s, but the Fed stuck to the new policy and inflation fell sharply.

Margaret Thatcher's government followed the same policy in Britain. Unemployment spiked in 1981, and pundits began to predict that Thatcher make a "U-Turn" and back down from her policy. Her response: "To those waiting with bated breath for that favourite media catch-phrase -- the U-turn -- I have only one thing to say: you turn if you want to; the Lady's not for turning."

The unemployment spike had fallen by 1983, along with inflation, and Thatcher was credited with the successful outcome.

So all of those things happened because they were appropriate for that time in the secular generational cycle. Reagan and Thatcher really didn't have much to do with it.

That brings us to the present, with America, Britain and France in generational Crisis eras.

Anyone who knows anything about generational theory will automatically know that what works at the end of an Awakening era will not work very well in a Crisis era. You can take that to the bank, even if you don't know the facts of the situation.

But in Sarkozy's case, the facts are that he is going to move quickly and be confrontational -- just like Margaret Thatcher. And there are huge differences in the social and financial climate today.

In the 1980s, stocks were underpriced; today they're overpriced by a factor of more than 250%. In the 1980s, people were confidently looking for compromise and reconciliation, and were even willing to make economic sacrifices to achieve it; today, people are anxious and scared, and are afraid of losing what they have, so they're unwilling to make any economic sacrifices at all. Instead of compromise and reconciliation, people today are prepared for conflict and confrontation to protect what they have.

And so, Thatcher's confrontational approach is not going to work for Sarkozy. Union leader Bernard Thibault, quoted above, is right: There will be massive demonstrations and strike actions to prevent anything from changing in France's economy, and either Sarkozy will back down, or the demonstrations will get larger. But a major backdown by the labor unions, as happened to Reagan and Thatcher in the early 1980s, is very unlikely in a crisis era like today.

We already saw such demonstrations under Sarko's predecessor. When Jacques Chirac supported a law that would permit French employers to fire an employee under 26 years of age, provided that he's worked less than 2 years, a million people, mostly students, took to the streets to protest in April 2006, and Chirac backed down.

Pundits express the hope that Sarkozy will be more successful because he's received a kind of "mandate" from his election, and because he's "stronger" (or more "fascist," depending on your point of view) than Chirac, and because he's following Thatcher's model. However, in a generational Crisis era, this kind of confrontation leads to MORE confrontation, not compromise.

That's why I've characterized the comparison of Sarkozy to Margaret Thatcher as "dangerous." What Thatcher did was NOT dangerous, since it was appropriate for her time, for her place along the generational timeline. Today, at Sarkozy's place along the generational timeline, exactly the same actions produce different results, and those results can be dangerous.

June 2005: Jean-Claude Juncker, Tony Blair, Jacques Chirac
June 2005: Jean-Claude Juncker, Tony Blair, Jacques Chirac

Sarkozy's plans for a European "mini-treaty" will meet with strong opposition from those who would stand to lose something from the treaty. It's even possible that things will get as bad as in the acrimonious European Union summit meeting in June 2005, where British Prime Minister Tony Blair, Luxembourg Prime Minister Jean-Claude Juncker and French President Jacques Chirac exchanged vitriolic accusations over how the EU budget, especially the agricultural subsidies, were to be divided among the EU members. Incidentally, Sarkozy has already indicated that he will not compromise on the agricultural subsidies to France.

From the point of view of Generational Dynamics, this situation is really exciting, because there are so many players, so many possibilities and so many interactions, especially with Britain and with the European Union as a whole. It provides the opportunity to further develop the theoretical model of how governments act during a generational crisis era, 62 years after the end of World War II.

Unfortunately, Generational Dynamics predicts that the end result will be a new world war, the Clash of Civilizations world war. There are many possible scenarios leading to that result, and some of them may involve the new activist President of France, Nicolas Sarkozy. (19-May-07) Permanent Link
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Russian Orthodox Church reunites 80 years after Bolshevik Revolution

In a historic ceremony in Moscow on Thursday, televised around the world, two elderly clerics signed an agreement and bent to kiss each other's cheeks. With that, a schism that split the Russian Orthodox Church in the early 1920s was ended, though not entirely healed.

Reuniting the Russian Orthodox Church <font size=-2>(Source:</font>
Reuniting the Russian Orthodox Church (Source:

The schism occurred after the bloody Bolshevik Revolution and subsequent civil wars and purges that killed tens of millions of Russians. It was caused by deliberate acts of the two victors, first Nicolai Lenin and later Josef Stalin, who plundered the Church's gold, destroyed its buildings, and murdered its clerics.

The wars caused a flood of Russian refugees to Europe and America.

The result was that the true Russian Orthodox Church was forced to operate outside of Russia, and a splinter group was formed, later known as the Russian Orthodox Church Outside of Russia or the Russian Church Abroad.

For several years, Russian President Vladimir Putin has been leading the negotiations that led to Thursday's agreement. Some people in the Russian Church Abroad, remembering Stalin's atrocities, have been opposed to the reunion, and the involvement by Putin has only made them more suspicious.

They might well be suspicious, in view of this 1922 letter from Lenin to the Politburo:

"We must pursue the removal of church property by any means necessary in order to secure for ourselves a fund of several hundred million gold rubles (do not forget the immense wealth of some monasteries and lauras). Without this fund any government work in general, any economic build-up in particular, and any upholding of soviet principles in Genoa especially is completely unthinkable. In order to get our hands on this fund of several hundred million gold rubles (and perhaps even several hundred billion), we must do whatever is necessary. But to do this successfully is possible only now. All considerations indicate that later on we will fail to do this, for no other time, besides that of desperate famine, will give us such a mood among the general mass of peasants that would ensure us the sympathy of this group, or, at least, would ensure us the neutralization of this group in the sense that victory in the struggle for the removal of church property unquestionably and completely will be on our side."

This letter reveals Lenin's principle motive as the acquisition of gold, but the destruction of the Church went much deeper than that, and represented a fundamental change to Russian society.

You may recall that in mid-April I posted an article about the coming election in Turkey, and I summarized the history of Turkey since the fall of Constantinople in 1453.

The fall of Constantinople to the Ottoman Turks is (arguably) the most important worldwide event of the last millennium. It catapulted the Ottoman Empire into a series of successful wars that spread Islam across much of the world.

But the effect on Russia was also enormous, because the fall of Constantinople also meant the end of the Byzantine Empire, which had originally been the Eastern Roman Empire. In 1472, Russia's Ivan the Great declared that Moscow was the third Rome (with Rome and Constantinople being the first two), and was the head of the "true" or "Orthodox" Christian Church. Ivan immediately took the title of Tsar, and thus became the first Tsar of the new Tsarist Russia. ("Tsar," or "Czar," was derived from the name of the Roman Emperor Caesar, as is the German word "Kaiser.")

So the year 1453 was not the date of a war, it was the date of an event that profoundly affected the fate of two countries -- countries that were repeatedly at war since then.

After that time, religion and state were closely intertwined in both countries. Russia was a Russian Orthodox nation, and Turkey was a Muslim nation.

But what was begun in 1453 ended with World War I, for both countries. The Ottoman Empire collapsed, and Turkey became a secular state; the Bolshevik Revolution ended Tsarist Russia, and Russia became an atheist state. Both nations turned their backs on centuries of religion that had defined their respective cultures.

From the point of view of Generational Dynamics, such major changes often only last one generational saeculum (the period of time from one crisis war to the next, normally about 70-90 years, the length of a human lifetime). A crisis war forces a country to build new institutions and make drastic changes that aren't necessarily consistent with the long-range visceral desires of the people.

As we approach the next crisis war for both countries, the Clash of Civilizations world war, we see that these changes are unraveling, and that both countries are moving back, at least partially, to being their "old selves." Turkey is dealing with the possibility of an Islamist government, and Russia is reuniting its Church again.

In fact, one of the major factors leading to the current reconciliation occurred in 2000 when the Moscow Church canonized Tsar Nicholas II, Russia's last Tsar, and his family, as well as others in the faith.

From the point of view of Generational Dynamics, there's good news and there's bad news in the religious revival occurring in both Turkey and Russia.

The good news is the possibility of a cultural renaissance in both countries, as old values and customs are revived and taught to new generations.

The bad news is that this kind of religious revival doesn't happen in a vacuum. For Turks and Russians, one way that these two peoples expressed their hatred for one another is through their religion, and the rise of these religious feelings again probably means that their feelings of enmity are rising again as well. (17-May-07) Permanent Link
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Gaza close to state of emergency as Israel tries to avoid getting pulled in

The streets of Gaza are clear except for gunmen today, as gun violence has been increasing throughout the Gaza strip.

The "unity government" between Fatah (Mahmoud Abbas) and Hamas is close to collapse, according to reports on CNN International.

Monday's resignation of Interior Minister Hani Kawasmeh has shattered, for the time being, any chance of peace between Fatah's and Hamas's security forces. Kawasmeh had been chosen as a compromise by Fatah and Hamas because he was trusted by both sides; his resignation sent the respective security forces out of control, resulting in increasing gun violence between the two security forces.

There are thousands of armed men in each of the two "security forces" involved in the street battles in Gaza, and hundreds more in militias not affiliated with either Fatah or Hamas.

As of noon ET, CNN International reports that a large group of journalists are trapped inside a 15-story building in Ramattan, with violence all around. CNN is showing live pictures from the building of journalists crouched down to avoid bullets occasionally coming through windows.

Alan Johnston, the BBC Gaza reporter who was kidnapped several weeks ago, still hasn't been heard from in a long time, and concern for his fate is high.

The growing civil war between Fatah and Hamas is a blow to the plans of the Hamas military wing to have a war with Israel. The situation with Palestinians shooting at each other has not only destroyed almost all remaining international sympathy for the Palestinians, but is also frustrating to Hamas terrorists who want the war to be focused on Israel.

The result is that Hamas has been shooting dozens of missiles over Ariel Sharon's "security wall" into Israeli terrority, resulting in serious injury for one woman. The likely objective is to cause an overreaction by the IDF (Israeli Defense Forces) that would, once again, unify the Palestinians against Israel, rather than against each other.

However, the enormous humiliation suffered by Israeli Prime Minister Ehud Olmert and Defense Minister Amir Peretz in their panicked pursuit of the summer, 2006, war with Hizbollah in Lebanon, with no plan and no objective, as documented in the Winograd Committee report, has had an ironic effect.

Israel's government is now much more careful, and new procedures have been put in place to prevent any rash actions.

What you're beginning to see in Israel is the first signs of the "regeneracy." In generational theory, the regeneracy occurs in a Crisis era. It's the point where the unity and identity of the nation finally "regenerates." The people put aside their internal political disagreements and unify to utilize any means necessary to defeat the enemy. Once the regeneracy is reached, the war becomes a full-scale genocidal crisis war. The fighting will continue to escalate until an explosive climax occurs, and a resolution is reached.

However, that point in Israel is still far away, although we're seeing the first signs. The Israeli government is approaching the Gaza situation much more carefully.

The real question is: What's happening in Gaza?

I've been watching the situation in Gaza (and the West Bank) very carefully since the death of Yasser Arafat. In particular, I've been watching for the hostility of the Palestinians to rise to the point where they're willing to rise up and smash through the "security wall" and engage the Israelis in total war. I was especially watching for it during last summer's Lebanon war.

And I haven't seen it, and still don't see it. Despite warnings of a new "summer 2007 war" with Israel, I haven't seen the genocidal fury among the Palestinians towards Israel among the people in general. Everything I've read is just enormous sadness among the Palestinians that they can't get their own act together enough to deserve a Palestinian state.

But now I'm really beginning to see signs of "genocidal fury" among Gazans toward each other. If/when these gunfights really spiral out of control, then outsiders will be forced to intervene. This will be particularly true if the violence appears to be spreading to the West Bank. These outsiders will probably first be the Israelis, and later the Egyptians.

From the point of view of Generational Dynamics, as I first said in 2003, the Jews and the Arabs are headed for a new genocidal war, replaying the genocidal war of the late 1940s, when Palestine was partitioned and the state of Israel was created. This new war will pull in countries in the entire region, including Europe and the United States eventually.

Although Israel's government is proceeding cautiously, keep in mind the following very important point: Generational Dynamics explains and predicts the behaviors and actions of large groups of people, entire generations of people, not the actions of a small group of politicians. The actions of politicians are important insofar as they reflect the attitudes of the people that the politicians represent.

And we're seeing the Israeli people getting very impatient with the current situation in Gaza, especially as hundreds of rockets pour over the security wall into Israel. The people don't trust Olmert and Peretz, after the failure of the Lebanon war. They're increasingly demanding that "decisive" action be taken by the IDF to destroy the Hamas militias in Gaza. That, or course, would be a major operation, and would bring Israel fully into the war, which is what Hamas wants.

So Olmert is trying to remain cautious, but if the situation in Gaza continues to deteriorate, then the IDF will be forced to undertake a major military action in Gaza, and a war between Jews and Arabs will begin again in earnest. (16-May-07) Permanent Link
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Palestinian Interior Minister resigns as escalated Gaza violence threatens civil war

Six people were killed and dozens wounded over the weekend in violence between Hamas and Fatah militias in Gaza.

Frustrated Palestinian Authority Interior Minister Hani Kawasmeh announces his resignation. <font size=-2>(Source:</font>
Frustrated Palestinian Authority Interior Minister Hani Kawasmeh announces his resignation. (Source:

It was just two months ago when Gazans were jubilantly dancing in the streets because a peace agreement had been signed in Mecca, laying the groundwork for a unity government. With Hamas and Fatah unified, then the Palestinians' growing civil war would end, it was hoped.

The ceasefire had been shaky at best, but now the entire Palestinian government is in danger, with the resignation of Interior Minister Hani Kawassmeh from the Palestinian Authority unity government. His job was to supervise the security forces in Gaza, but in Monday's press conference, he expressed enormous frustration over the lack of cooperation from both sides.

Do you know, dear reader, what we're celebrating this month? It's the fourth anniversary of the Mideast Roadmap to Peace, released by the US and EU. By this time, there should have been a Palestinian state existing side by side with Israel, in peace, love and harmony.

I said at the time that it would never succeed, because it can't succeed. Forget all this crap about the unity government. The important point about Gaza, which no one ever seems to mention except me, is that the Gaza strip is densely populated and the median age in the Gaza strip is 15.8. Thus, the Gaza strip is run by a generation of children with guns and missiles.

So, it doesn't matter what the old men in the "unity government" do or don't do. Those people are just ancient dinosaurs to the kids in Gaza. The fate of the Mideast is in the hands of a generation of children with guns and missiles, children who couldn't care less about the nuances of international diplomacy. At some point they'll decide that there'll be war, and then there'll be war.

It's amazing to me that nobody else seems to understand this. I've often said here that politicians, pundits, high-priced analysts and journalists can't recognize any generational concept, no matter how obvious. It's just too abstract for them to understand.

As I've described in the past, random political events in the Mideast are "attracted" (in the sense of a chaotic attractor in Chaos Theory) in the direction of war, and for the last several years I've been describing on this web site the many political events moving the Mideast closer and closer to war.

As I've explained many times on this web site, day to day political events are chaotic events that fall like snowflakes in random ways. But just as millions of snowflakes get "attracted" to large snow drifts, millions of individual political events get attracted to the impending Mideast war, since war is a "chaotic attractor" at this time, 58 years after the end of the 1940s genocidal war between Arabs and Jews.

It's true that there have been occasional brief intervals of jubilation, when it looked there might be peace. But those brief intervals are like a heat wave in New York City in November -- just because the weather gets warm for a few days doesn't mean that winter isn't coming. Once the heat wave is over, the weather starts getting much colder again. Similarly, there are brief periods when things seem to get better, but they pass quickly, and then political events move back towards war.

You know, it's interesting that the Gaza situation is rarely in the news any more. When the Israelis occupied Gaza, it was an important news story every day. But now, it's hardly ever covered even on the BBC. Today was the first day in quite a while. There's been a BBC story every day about Alan Johnston, the BBC Gaza correspondent who was kidnapped several weeks ago, but rarely about the Palestinian government any more.

I think that most of the world has simply given up on Gaza. No one believes that the Roadmap to Peace is even relevant any more. In fact, as I wrote about in February, interviews with Palestinians show that even they have given up on Gaza. Interviews with young Gazans show that they see no hope for the future.

Nobody seems to care any more what happens in Gaza. But the situation continues to degrade as the generational changes continue to occur. No one knows what will trigger a conflagration, but something will.

I can't resist mentioning one story that came online on Monday on the Time Magazine site, but you'd better check it out fast before they change it. The headline on the story reads "Gaza on the Verge of Civil War," and it's a pretty decent story by Andrew Lee Butters, Time's Jerusalem correspondent.

But accompanying the story is a picture of American soldier Sgt. Tierney Nowland pointing a gun at someone. The caption reads: "A U.S. soldier patrols the Ghazaliya neighborhood of Baghdad, March 2007." Apparently some editor thinks that Gaza is in Iraq. See what I mean about most journalists being incredibly stupid, not to mention incredibly sloppy? I mean, this is an editor at a leading news magazine. How incredibly stupid do you have to be, working for a major news magazine, and think that the Gaza Strip is in Iraq. Geez.

Well, getting back to the subject, from the point of view of Generational Dynamics, the prediction hasn't changed since I first stated it in 2003: The Jews and the Arabs are headed for a new genocidal war, replaying the genocidal war of the late 1940s, when Palestine was partitioned and the state of Israel was created. This new war will pull in the entire region, including the United States. As usual, Generational Dynamics tells you what your final destination is, but not how you get there; but it looks more and more that a likely scenario is that the war will begin with a civil war among the Palestinians. (15-May-07) Permanent Link
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More than a million secularists rally in Turkey

The army may intervene in an approaching major confrontation between secularists and Islamists, as an Islamist President appears certain to be elected in elections to be held on July 22.

Over a million secularist demonstrators wave national flags during anti-Islamist rally in Izmir <font size=-2>(Source: IHT)</font>
Over a million secularist demonstrators wave national flags during anti-Islamist rally in Izmir (Source: IHT)

You may recall, from the last time I wrote about this subject, a month ago, that there was supposed to be a May 16 Parliamentary election for President in Turkey.

Well, that election isn't going to happen.

The Islamist AK Party holds most of the seats in Parliament, and its leader, Recep Tayip Erdogan, is Prime Minister. The only major office still held by one of the secular (non-Islamist) parties is the Presidency. It appeared that Erdogan would become President, and another person from AK would become Premier, leaving AK in complete control of the government.

Because of widespread opposition to a totally AKP-controlled government, Erdogan agreed that he would not run for President, and that the AK Party would put up a "compromise" candidate -- Foreign Minister Abdullah Gul.

However, the people who opposed Erdogan also opposed Gul, so nothing was really changed.

You may recall that one of the issues that secularists raised about Erdogan is that his wife wears a headscarf; Erdogan's opponents took that as a signal of a secret Islamist agenda.

Well, it turns out that Gul's wife and daughter also wear headscarves, so the secularists aren't happy.

And then a top Army official made a statement that the Army would not tolerate a non-secular government. The army has overthrown civilian governments before, but they have the respect of many Turks because the army always turned the government back to civilian control fairly quickly. But the threat of a new army coup is not pleasant.

And so, secularist MPs boycotted sessions of Parliament holding preliminary elections, so there were no preliminary elections. And without preliminary elections, there can't be a final election on May 16.

On Thursday, the Parliament voted to change all the rules. The Parliament will no longer elect the President. Instead, there will be a nationwide election on July 22 that will elect the entire Parliament AND the new President.

During the last month, there have been three mass protests against the threat of an AKP-headed government. The latest occurred in Izmir, as the picture at the beginning of this article shows. By some estimates, 1.5 million people traveled to Izmir to take part in the demonstrations. That number of people certainly captures my attention since, if they got angry, a major civil war could result.

The AK Party is not very popular in the big cities, but it is very popular in the countryside, and polls show that AKP is likely to win BOTH the Parliament and Presidency on July 22.

What will happen then? How will those millions of secularist demonstrators react when their worst fears are realized? Will the Army intervene? This all remains to be seen in the next couple of months.


You may think that all this stuff about headscarves is something of a joke, but this is a REALLY BIG DEAL in Turkey.

As I discussed last time, Turkey's last crisis war was the destruction of the (Muslim) Ottoman Empire immediately following World War I. The country's direction for decades had been to develop a new Turkish culture that was distinctly different from the previous Ottoman/Muslim culture.

When Kemal Ataturk, founded the Turkish republic in the 1920s, he ended the Caliphate in Istanbul, and discarded all vestiges of Islamic identity. Thus, it became illegal to wear headscarves in public buildings, and this continues to be the case today.

As the generations pass after the resolution of a crisis war, all the rules and compromises that were set up begin to unravel. This unraveling can take many forms; some things are simply forgotten, and other things become sources of conflict.

There are many examples of these kinds of conflicts in the world today:

In all of these countries, the unraveling of the rules adopted after the last crisis war, designed to prevent a new crisis war, create political conflicts, and sometimes violent conflicts. People want a set of rules that work, and when all the old rules stop working, people get anxious and scared.

In Turkey, the old rules called for creation of secular state -- separating shrine from state -- and discarding all vestiges of the old relationships that intertwined Turkey's government with the Muslim religion. Headscarves were forbidden in schools and public buildings for the same reason that American courts sometimes forbid Christian symbols in American schools and public buildings. The appearance of such symbols is considered a violation of the separation of Church and State.

But just as Christians object to what they see as discrimination against Christians, Muslims in Turkey see the laws against headscarves in public buildings as discrimination against Muslims.

But while the level of conflict is still fairly mild in America, it's really heating up in Turkey, as shown by Sunday's demonstration with over a million people.

What Turkey is dealing with right now is not just another election; it's an issue that goes to the core of what Turkey is.

From the point of view of Generational Dynamics, Turkey is overdue for a new crisis war. Turkey's traditional enemies have mostly been with the Orthodox Christians, especially the Armenians and the Russians. We may have an idea within the next couple of months what direction that crisis war is going to take. (14-May-07) Permanent Link
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Riots in Karachi, Pakistan, threaten Musharraf's presidency

Thirty people were killed and hundreds were injured on Saturday in riots pitting the supporters of Pakistan's President Pervez Musharraf, running for re-election as President in the fall, against supporters of the opposing parties.

Top: Riots in Karachi on Saturday. Bottom: President Pervez Musharraf and Chief Justice of Pakistan (CJP) Iftikhar Muhammad Chaudhry <font size=-2>(Source: CNN)</font>
Top: Riots in Karachi on Saturday. Bottom: President Pervez Musharraf and Chief Justice of Pakistan (CJP) Iftikhar Muhammad Chaudhry (Source: CNN)

The riots have been recurring, starting from the days following Musharraf's March 9 suspension of the country's Chief Justice Iftikhar Muhammad Chaudhry. Chaudhry has now become the symbolic leader of the opposition.

As I explained at that time, Musharraf's position in Pakistan is a major stabilizing factor in the region, and this is strongly affected by the fact that Musharraf was born in 1943, and has personal memory of World War II and the violent genocidal war between India and Pakistan over the disputed Kashmir and Jammu regions. (Musharraf's year of birth corrected on 20-May. Sorry for the error.)

Indian subcontinent, showing the disputed regions of Kashmir and Jammu.
Indian subcontinent, showing the disputed regions of Kashmir and Jammu.

If Musharraf disappears, for whatever reason, then he will be replaced by someone from a younger generation who will be much more militant towards India, and the short-term probability of nuclear war between India and Pakistan will increase substantially.

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. It's impossible to predict when such a war would begin, but if Musharraf disappears and is replaced by someone from a younger generation, things will certainly start moving along. (13-May-07) Permanent Link
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China's skyrocketing trade surplus causing compulsive xenophobia in Congress

China's February trade surplus soared nearly tenfold compared to the same month last year, hitting $23.76 billion, according to China's General Administration of Customs. The trade surplus for February was nearly 50 percent higher than in January. Much of China's trade surplus represents exports to the United States.

This kind of situation is one of the reasons why Chinese premier Wen Jiabao said that China is "unsteady, unbalanced, uncoordinated and unsustainable."

The fact that China's economy continues to grow explosively is not considered to be a good sign by many policymakers, even within China, who recognize that the economy is becoming dangerously overheated. China has been trying for five years to slow down the economy's growth, and to engineer a "soft landing" for the economy, rather than risk a "hard landing" that would throw millions out of work and create massive social unrest.

Howeve, China's attempts to slow down its economy have been a total failure. To the contrary, the economy's growth has been accelerating dangerously.

Manic Shanghai Stock Market investors

The wild growth in exports represents a mania in China's internal economy that isn't really visible to the West. However, there's one place where the height of the mania is glaringly visible: In the Shanhai Stock Market.

You may recall that on February 26, I posted an article describing that the Shanghai stock market bubble appeared close to bursting. Manic Chinese day-traders would sell their homes and borrow money to invest in the stock market. Then the Shanghai stock market fell 8.8% in one day, causing a brief worldwide panic.

Shanghai stock market index, past 5 years, as of 11-May-2007 <font size=-2>(Source: MarketWatch)</font>
Shanghai stock market index, past 5 years, as of 11-May-2007 (Source: MarketWatch)

Now, just look at the adjoining graph of the past 5 years' performance of the Shanghai stock market. It's mind-boggling. The February 27 collapse of 8.8% has had no effect whatsoever.

This week, the Shanghai stock exchange index hit the 4,000 mark - just three weeks after passing 3,000 and up more than three times from a low of 1,200 less than two years ago.

Already this year, more than 10 million Chinese small investors have opened broking accounts allowing them to trade shares on the Shanghai stock exchange, compared to 3 million during the whole of 2006. Ordinary people continue to borrow money, and to sell their homes and assets, and put everything they have into the stock market bubble.

You know, I hear the financial gurus talk about this on TV. One says, "It looks like a bubble." Another says, "Well maybe it isn't a bubble, and it has a long way to go." Another says, "The Chinese people have so few places to invest money that they put all their savings into this one place, and there's plenty more money to invest, so it'll keep going up, so it's not a bubble."

And these idiots are supposed to be experts. Yes, it is a bubble, and yes, the Chinese are putting all their money into it -- that's why it's a bubble. And bubbles burst.

Here's a quote from Brent Baker, a conservative media watcher:

"On Tuesday's Good Morning America, Diane Sawyer made an absurd comparison when she linked the current rising stock markets with the period of time before the historic 1929 market crash. The GMA host, talking to ABC analyst Mellody Hobson, fearfully wondered: "Did you know that the stock market has hit a milestone reminiscent of what happened before the big crash?"

He supports his "absurd" evaluation by making some computations that indicate that he doesn't understand compound interest.

But the reason I'm quoting this is to make the point that Americans do have some kind of national memory of the 1929 crash and the Great Depression of the 1930s, even though some people don't believe it could happen again.

But China is different. The Chinese people apparently have NO IDEA what's about to happen to them.

And any kind of bad news could be the trigger that will cause people to panic and pull their money out of the Shanghai stock market, causing a fall possibly much larger than the 8.8% collapse last time. What would, say, a 20-30% collapse in Shanghai do to the the New York Stock Exchange? Only time will tell.

Congressional xenophobia

On this web site, I keep illustrating how people around the world are following their generational scripts, almost as if they were robots. We see this in the Mideast, in Darfur, in Europe, and in global finance. No one can predict what one individual or a group of politicians will do, but Generational Dynamics can and does explain and predict the actions and behaviors of large masses, entire generations of people. The actions of politicians are important insofar as they reflect the behaviors and attitudes or large groups of constituents.

Even so, it's astounding to watch Congress repeating history in the worst possible way. Congress is "losing patience" with China, and is close to imposing punitive trade tariffs on China in retaliation for its large trade surplus.

Now, anyone with common sense will tell you that if China is going to self-destruct, we shouldn't help it along, if only so that we won't get blamed. But we never have to worry about common sense when we talk about Congress, do we?

In 1931, Congress passed the Smoot-Hawley tariff law, supposed to prevent American jobs from being taken by foreigners. As I described last month, this law ended up seriously harming Japan, and was a major factor leading to the bombing of Pearl Harbor.

Now we're apparently going to be doing exactly the same thing, this time targeting China. Plus ça change, plus c'est la même chose.

According to Stephen Roach, chief economist at Morgan Stanley, we're already past the point of no return:

"Even the old timers in the Congress had never seen anything like it. On May 9, the US House of Representatives held what was billed as a tripartite hearing of three subcommittees on “Currency Manipulation and Its Effects on US Businesses and Workers.” I was one of the “expert witnesses” at this hearing – invited to submit a written statement and then, along with the other six members of the witness panel, to present a five-minute oral summary in front of the assembled legislators.... The hearing concluded with an extensive question and answer session. It was an experience I will never forget. My worst fears were realized. At the end of over three hours of grueling give and take, I left Capitol Hill more convinced than ever that the protectionist train has left the station. ...

I suspect this hearing could well mark a major turning point in America’s mounting resistance to trade liberalization and globalization. ... The opening comments of Sander Levin (Democrat from Michigan), who chaired this session, underscored the determination of Congress to take its long-standing concerns over US trade policy to a different level. In his words, "This is an exceptional issue and an exceptional problem that hasn’t been resolved. We need to consider the next steps. This is the real thing." ...

In terms of the substance of the debate, three things surprised me about this hearing: First, while the bulk of the discussion was about China, anti-Japan sentiment was formally brought into the picture for the first time. The issue was the yen – characterized by the Congress as the world’s most undervalued major currency. While the absence of explicit intervention by Japanese authorities over the past three years was duly noted, many representatives took the position that there has been unmistakable "implicit manipulation" of the yen. Second, the case against China was framed mainly around the concept of the "illegal subsidy" – WTO-compliant jargon that frees up Congress to impose sweeping countervailing duties on Chinese exporters. ... Third, the congressmen present at this hearing were highly critical of the US Treasury’s bi-annual foreign exchange review process and its failure to cite China for currency manipulation....

Notwithstanding these new developments, the most important message is that Congress remains unwavering in its determined approach to move from rhetoric to action in 2007 on matters of trade policy. Contrary to what most believe, this is not a case of anti-trade Democrats now taking over Congress. I continue to stress that there is broad bipartisan support for anti-China "remedies." While the Democrats are now in charge of the Congress, on matters of trade policy they have been joined by many Republicans in their crusade. ...

I didn’t go to this hearing with the naïve expectation that I would be able to change any minds. And there was no surprise on that count. There was little sympathy on the part of the Congress for linking trade deficits to domestic saving shortfalls. To the contrary, there was a broad consensus that bilateral pieces of the massive multilateral US trade deficit are fair game – in essence, an opportunity to whittle away at the US external gap one country at a time. The consensus of congressman at the hearing was that China was the problem – even though the non-Chinese piece of the overall US trade deficit slightly exceeded $600 billion in 2006, over two and a half times the size of the Chinese bilateral deficit with the US. Many congressmen were especially upset with my characterization of "China bashing." One gentleman asked me to strike any such references from my testimony, claiming that, "We’re not China bashers. We are just trying to seek the truth." At the same time, literally no once responded to the concerns I voiced over the unintended consequences of protectionism – namely that China bashing could backfire in the US, the rest of Asia, and the broader global economy. The bottom line here is very clear: The US Congress just doesn’t do [macroeconomics]."

Reading this is very discouraging, but not at all surprising. History makes it clear that Congress enacted the Smoot-Hawley law in 1931, during America's last generational Crisis era, against the advice of many economists, and that the law had incredibly destructive results.

Now America is a new generational Crisis era, and we're exhibiting exactly the same destructive xenophobia.

For readers of this web site who are still skeptical about its conclusions, here you have a specific, glaring example. The countries around the world that fought World War II as a crisis war are now in a new Crisis era, and xenophobia has been increasing around the world: between Anglos and Latinos in America, between Europeans and Muslims, between Jews and Arabs, between Pakistanis and Indians, between Chinese and Japanese, between Koreans and Japanese, between Chinese and Americans.

It's always the same in every cycle. The generations of people who survive a crisis war like WW II come out of it believing that "hate" is the cause of war, and that if we can only eliminate "hate," then we can prevent a new crisis war. And actually they stick to that belief throughout their lives. But when those generations are replaced by new generations, "hate" returns. In the previous paragraph, you can replace the word "xenophobia" by the word "hate," and you'll see what I mean.

A lot of people don't understand this. I received an e-mail message from a web site reader last year, in which he mentioned that his European girlfriend "hates / loathes Moroccans." Several months later, he wrote to me on a different subject, and said that today's young people can't understand why blacks and whites used to hate each other, since they get along so well now. Fortunately, I save old e-mail messages, so I was able to write back and remind him about his girlfriend (who, it turns out, is now a former girlfriend).

The point is that people don't see themselves as having "hate." The people in Congress who are going to pass punitive measures against the Japanese don't see them as "hate" laws; they see them as justified by the facts.

Here's how the "respected" Newsweek economist, Robert J. Samuelson, defends the punitive tariffs:

"It is not "protectionist" (I am a longstanding free trader) to complain about policies that are predatory; China's are just that. The logic of free trade is that comparative advantage ultimately benefits everyone. Countries specialize in what they do best. Production and living standards rise. But the logic does not allow for one country's trade systematically to depress its trading partners' production and employment. Down that path lies resentment and political backlash.

Everyone complains about America's trade deficits, but they actually symbolize global leadership. Access to the U.S. market has promoted trade by enabling other countries to export. But the deficits cannot grow indefinitely. Imagine now a trading system whose largest member seems intent on accumulating permanently large surpluses. Nor, it might be added, are these ultimately in China's interests. They drain too much of its production from its citizens and contribute to growing domestic economic inequality. What everyone needs is more balanced Chinese economic growth, less dependent on exports."

This may well be quoted as "hate speech" in some future era, just as supposedly "fact-based" ancient articles about blacks are regarded as hate speech today. He says, "Down that path lies resentment and political backlash," without noting that the resentment comes from people like him.

I also have to laugh at the moronic statement, "Everyone complains about America's trade deficits, but they actually symbolize global leadership." This is like Fed chairman Ben Bernanke's idiotic 2005 statement that America’s exponentially increasing rate of public debt is everybody’s fault but ours, because other nations are guilty of a "global savings glut."

But of course it takes that kind of warped reasoning to justify something like the punitive tariff actions: "I'm over my head in debt, but it's not because there's anything wrong with me; it's because there's something wrong with everyone else. So let's punish the guilty party - the one who keeps lending us so much money."

Now, that's "hate speech."

Conflict risk level for next 6-12 months as of: 9-Feb-2006
W. Europe 1 Arab Israeli 3
Russia Caucasus 2 Kashmir 2
China 2 North Korea 2
Financial 3 Bird flu 3
Key: 1=green 1=Low risk 2=yellow 2=Med 3=red 3=High 4=black 4=Active

Now we're once again headed for a new world war, the Clash of Civilizations world war, as predicted by Generational Dynamics. The question is, what will trigger that war?

I've identified several possible triggers, and shown by the adjoining graphic.

Whatever triggers the war, it would be nice if America weren't blamed for it.

But if we pass punitive legislation targeting China, and that punitive legislation is viewed in some future time as triggering the inevitable financial crisis, which then leads to a world war, then America will be blamed for the world war. That isn't good. But that's what's happening.

Are we just weeks away from a crisis?

As I always say, Generational Dynamics tells you what your destination is, but it doesn't tell you what path you'll take or how long it will take to get there. For that you have to look at day-to-day signals, and make probabilistic assessments.

This gives rise to the question: Has the Chinese economy bubble gotten so huge that a crisis is now imminent?

As far as I personally is concerned, I'll quite honestly tell you I don't know. I've said many times that I don't see how the financial crisis hasn't begun already, in view of how the global financial bubble has gotten as big as it is now. There's just no way to predict timing, even when the facts indicating a crisis seem overwhelming.

But a web site reader has referred me to an intriguing article by "Chan Akya" in Asia Times.

The article makes the following argument: China's stock market bubble and international trade surpluses have gotten so large that the Beijing government is now politically forced to do something about it. (The word "forced" is in a similar sense to the way Congress is "forced" to pass xenophobic tariff laws.)

One reason is to head off action by the American Congress. If China can do something reasonably forceful, then the Congress may be convinced to wait a while. Another reason is that the danger of the bubble bursting is too great, and something has to be done to let some air out of the bubble.

Here are some excerpts:

"Six months ago, total transaction volumes on the Shanghai and Shenzhen exchanges were less than US$5 billion per day. That figure now stands 10 times as high, at $50 billion per day. This volume is something China can be proud of, barring one minor detail, namely that the central bank and various policymakers would much rather not see it happening.

Even as central bankers exhort the country's citizens to beware of bubble-like conditions in the stock markets, investors appear unruffled, reversing the policy impact of any announcement. Be they students, farmers or construction workers, every Chinese living in the two big cities of Shanghai and Shenzhen appears now to have a brokerage account. Conversations in the normally noisy dai pai dongs in Guangdong province and Hong Kong drop to a quick hush whenever the subject of stock tips comes up. In short, the stock market today represents a revolution against the diktat of the PBoC [People's Bank of China], questioning its very authority.

Experience from the rest of the world shows that stock-market bubbles are neither infrequent nor unpredictable; in most cases, they are compounded by the mistakes of policymakers. ...

The US housing and stock bubbles positively pale in comparison to the ones being observed in many other markets, including property and stock markets across Asia. There are some notable exceptions such as Thailand, where a combination of policy missteps has left markets relatively stable rather than rising, but in most other places the boom is all too apparent. Even in straitlaced Singapore, house prices have risen broadly over the past two years, wiping out pent-up equity losses from the previous 10 or so years. ...

More than India, it is China that faces the threat from investors chasing too few stocks. India's markets have a much longer history and, more important, many investors still remember the stock-market scandal of the early 1990s that wiped out the nest eggs of a few thousand people. China's problem is also one of magnitude: with more than 100 million investors directly participating in the markets, the impact of any downturn will be broad, and politically suicidal. ... Chinese investors have shrugged off recent [interest] rate rises, and banks have circumvented restrictions on lending through other means. ...

China will have to choose between the lesser of two evils, namely the protection of employment in its export-dominated industries or the safety net being created by investments in property and stocks by millions of its citizens. I believe it will choose to protect people's wealth more than lower-end manufacturing jobs; therefore a sharp revaluation of the Chinese currency, the yuan, is certain in the next few weeks."

According to Chan Akya's argument, China is trapped between two choices -- doing nothing, or sharply revaluing the yuan, which would make China's exports so much more expensive in other countries that the trade surplus would be cut.

If China does nothing, then sooner or later there'll be a downturn, causing stock market crashes whose impact "will be broad, and politically suicidal."

If China decides to revalue the yuan in order to reduce exports, it will protect the stock and real estate bubbles (according to Chan), but will only result in the loss of "lower-end manufacturing jobs."

Now of course he's wrong about this choice; a bubble is a bubble, and the bubbles will burst no matter what Beijing does. And when it does, huge masses of people will lose their investments AND their jobs.

What's intriguing about this argument though is the prediction that a sharp revaluation of the yuan "is certain in the next few weeks."

Who is this guy? Does he have some inside information?

The author, whoever he is, has taken as a pseudonym the name of a famous Indian philosopher from antiquity, Chanakya Pandit, someone who was fighting the Greeks (Alexander the Great), no less.

If Chan's argument turns out to be correct, and China sharply revalues the yuan in the next few weeks, then there will certainly be a major reaction in markets around the world, and this may cause the generational panic which is now well overdue. Or if he's wrong, then we might go on as we have, although I can't see how the Shanghai stock market bubble can go on much longer. But who knows.

It's not possible to predict when a panic will occur, but from the point of view of Generational Dynamics, we're now overdue for a generational panic and crisis. It could happen next week, next month or next year, but it's coming with certainty. It will destabilize densely packed populations in China, India and around the world, and will lead to the Clash of Civilizations world war. As usual, Generational Dynamics tells us our final destination, but not how we'll get there. (13-May-07) Permanent Link
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Israel's Olmert blames the army for being unprepared for Lebanon war

Released transcripts show how completely oblivious the Israeli government was to what they had to do.

Last week we discussed the conclusions of the Winograd Committee report on Israel's conduct in last summer's war against Hizbollah in Lebanon.

With the release of additional information -- specifically, some of the transcripts of the testimony of Prime Minister Ehud Olmert and Defense Minister Amir Peretz -- it becomes increasingly clear that the Lebanon war is a prototype of a typical war in a generational Crisis era.

According to the transcripts, here's what Prime Minister Olmert said:

"I think the army let itself down. [There was] something faulty in the commanding philosophy, in the commanding perception ... they all proved their courage in battle … but something in the forces' operational perception, something in the perception of control over the forces, wasn’t what we expected – and there is no doubt that was what caused the gap between our ability to achieve, and what we actually did achieve."

And here's what Defense Minister Peretz said:

"On July 12 [the first day of the war], I was not presented with a situation that the army had not trained enough or that there was any problem with the army's preparedness.

I assumed that the international community would not give us any longer than that, although I thought that the longer we give our forces to operate, the more we will weaken Hizbullah."

These are the two men most responsible for the decision to go to war, and they were the two men most responsible for making decisions about prosecuting the war as time went on.

Their statements are quite remarkable in that they show that the two men had no idea what was going on. They thought that all they'd have to do is give the order to destroy Hizbollah, and it would be done.

This is how people in the Baby Boomer generation think. They actually believe that all you have to do is given an order, and what they order will take place.

This is exactly what distinguishes those who lived through World War II from those born afterwards. People who lived through the horror of WW II remember how panicked, anxious and desperate everyone was, and how many mistakes were made. The greatest mistake of all, of course, was allowing almost the entire Pacific fleet to be destroyed in one single day with the attack on Pearl Harbor.

People who lived through that experience understand that nothing can be taken for granted, and that every detail has to be managed. Former Prime Minister Ariel Sharon would not have made the mistakes that Olmert made. Sharon would have provided a precise set of attainable goals and plans for the armed forces to follow. He would not simply have given an order, and waited for it to be followed.

The Boomers in Congress are exactly the same. One of the reasons that I call all their proposals moronic is that they're impossible. They think that if the President gave the order to pull the troops out of Iraq, then the order would simply be pulled out.

Quite the opposite, pulling out of Iraq is impossible. This may surprise you too, dear reader, because you may assume that it would be easy for the troops to leave Iraq, if only President Bush gave the order. But if that order were given, it would immediately become apparent what a disaster would follow, and the American public would become so anxious that the order to leave would be reversed.

Israel's Lebanon war is the prototype of what's to come. Generally speaking, postwar generations, like Boomers and Generation-X, are not capable of governing. They don't understand how to do it. As a result, they'll stumble into war, and the survivors of the war will be able to govern in the aftermath. (11-May-07) Permanent Link
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Euphoric Nicolas Sarkozy supporters celebrate victory over Ségolène Royal

First 100 days: Put France back to work, stop illegal immigration, and make France a great nation again.

Election results: Nicolas Sarkozy 53%, Ségolène Royal 47%. <font size=-2>(Source:</font>
Election results: Nicolas Sarkozy 53%, Ségolène Royal 47%. (Source:

Sarkozy supporters are predicting huge social and political changes, following his decisive victory over Socialist candidate Ségolène Royal. The victory was all the more decisive because 75% of registered voters cast ballots -- the highest percentage in 40 years.

I want to explain why Sarkozy won, and what problems he will soon face.

The best place to start is to read some of his victory speech, which is unlike anything you hear these days from any politician in any country -- since it exhibits his patriotism and his love for his country:

"My dear compatriots, as I speak to you this evening, at this time which, as everyone understands, is exceptional in a man's life, I feel enormous, sincere, deep emotion. From a very young age I have felt incredible pride at belonging to a great, an old, a beautiful nation, that of France.

I love France as you love someone dear, someone that has given me everything. Now it is my turn to give back to France what France has given me...

My thoughts therefore go to all of the French who did not vote for me. I want to tell them that beyond the political battle, beyond the differences of opinion, for me there is only one France. I want to tell them that I will be the president of all the French people, that I will speak for each one of them. I want to tell them that this evening it is not the victory of one kind of France against another...

The French people have spoken and have chosen to make a break with the ideas, the customs and the behaviour of the past. I am thus going to restore the status of work, authority, standards, respect, merit. I am going to give the place of honour back to the nation and national identity. I am going to give back to the French people pride in France...

The French people have opted for change. I shall be implementing this change because this is the mandate I have received from the people and because France needs it - but I shall do this with all of the French people. I shall do it in a spirit of unity and in a spirit of fraternity. I shall do it in such a way that no one is left with the feeling of being excluded, of being left to one side.

I call on all the French, irrespective of their party, their beliefs, their origins, to join with me to ensure that France gets moving again. I call on each person not to allow himself or herself to be enveloped in intolerance and sectarianism, but to open up to others, to those who have different ideas, to those who hold other beliefs. ...

I want to issue an appeal to our American friends, to tell them that they can count on our friendship, which has been forged in the tragedies of history which we have faced together.

I want to tell them that France will always be by their side when they need it, but I also want to tell them that friendship means accepting that your friends may think differently and that a great nation such as the United States has a duty not to put obstacles in the way of the fight against global warming, but on the contrary to take the lead in this fight, because what is at stake is the fate of humanity as a whole. France will make this battle its primary battle. ..."

Can you imagine any American politician today (with the possible exception of the President) making such an emotionally patriotic speech? No one could, nor could Sarko's opponent, Ségolène Royal. That makes Sarkozy a very different politician.

From the American point of view, it's absolutely wonderful to have a French president whose automatic attitude toward America isn't knee-jerk contempt.

But the mere fact that he's different did not cause him to win. Nor just the fact that he's patriotic and loves his country. And being "pro-American" couldn't have been much help either.

Sarko won because the French people are overwhelmingly anxious over the nation's seemingly insoluble problems, and Sarko appealed to the irrational emotions of the people who are grasping for any possible solution.

One mother of three who voted for Sarkozy was quoted as saying, "We can't go on like this, something needs to happen. [Voting for Sarkozy] is a bit scary, but we have to try something new."

What we're seeing in France is exactly the same kind of manic-depressive behavior that we've described so often in the American people. American's entered the manic phase last November, when the Democrats won the Congressional elections and Secretary of Defense Donald Rumsfeld was replaced by Robert Gates.

In February, I explained how "cognitive dissonance" had turned Democrats into fanatics, as they entered the depressive phase, realizing that in November they had merely been experiencing something close to a sex fantasy. Now, Democrats and Republicans alike have become pathetic ghosts, and have become completely paralyzed and incompetent.

As I've said, the root cause is that the generations of survivors of World War II are all gone. The survivors of World War II did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II. Now all those survivors are gone, and the people (Boomers and Xers) who are left behind don't know how to run those organizations, how to accomplish anything similar. Where governments could accomplish great things in the 50s and 60s, today they can't lay claim to even the smallest achievement.

The French people realize that France is beleaguered with problems: Unemployment is high, illegal immigration is growing, terrorism is a threat, and the country has become increasingly insignificant. Perhaps the greatest humiliation came in 2005, when a French referendum rejected the proposed EU Constitution.

So along comes Nicolas Sarkozy, saying some new things -- he loves his country and his country will be great again -- with some specific proposals:

After that, he'll turn water into wine for the nationwide party.

Sarkozy's supporters are talking about getting as much of this done as possible in the first 100 days after he takes office on May 16. That's similar to the promises that Democrats made, and they've accomplished nothing. They're too incompetent even to vote themselves a pay raise.

Boomers today, whether in America or France, are scared to death of losing what they have, through bad investments or through terrorism or through disgrace. The generations that survived World War II were willing to give up many things to guarantee that nothing so horrible could ever happen again. The Boomers have based their entire lives on assumptions they developed during their halcyon days, in the 1960s and 1970s. Now, they see that all those assumptions are wrong, and the cognitive dissonance is driving them to a fanatical refusal to give up anything at all.

And so, for example, Sarkozy may well claim that his election victory gives him a mandate for labor reform, but the very powerful labor unions will not agree.

France has a heritage of rioting and demonstrations that dates back to the French Revolution. During France's last Awakening era, riots and demonstrations were even more violent than they were in America. In May 1968, student protests and labor strikes brought France to the brink of anarchy.

Those riots were relived twice in the last two years. In November 2005, violent racial rioting occurred in Paris's Muslim ghetto suburbs, and many people blamed Sarkozy, because Sarkozy responded to the rioting by saying that he had a "zero tolerance policy" for violence, and he referred to the troublemakers as "scum" and "riffraff," and vowed to "clean out" the suburbs.

Ethnic French students responded in April of last year, after French President Jacques Chirac supported a law that would permit French employers to fire an employee under 26 years of age, provided that he's worked less than 2 years. A million people, mostly students, took to the streets to protest in April 2006, and Chirac backed down. As this web site's analysis pointed out, these street protests were a reaction to the November 2005 riots by Muslim youth. Muslims had demanded jobs, and the April rioters knew that jobs for Muslims meant fewer jobs for them.

Whether it's the Muslim students or the French students or the labor unions, or any of a wide variety of special interest groups, no one is going to be willing to give anything up.

In fact, there's already been scattered violence across France, and several hundred people were arrested on Sunday and Monday evenings.

However, appraising the situation is complicated by the fact that, several days before the election, Ségolène Royal said that a Sarkozy victory would lead to street violence. This was an incredibly stupid thing to say because voters get angry at candidates who appear to be pandering to violence. Furthermore, a prediction of violence may become a self-fulfilling prophecy, and it's impossible to tell whether the violence would have occurred if Royal hadn't made her remarks. In fact, there are some signs that the violence is petering out.

But the fact that violence is occurring at all is, at the least, a warning to Sarkozy to go slow. So it's going to be impossible for Sarkozy to achieve many of his goals, and it's quite possible that he'll accomplish none of them.

What will happen then? If he follows the example of his predecessor, Jacques Chirac, or of the Congressional Democrats, then he'll just back down and become completely impotent and spout nonsense all day long. In that case, the French people will become as angry with Sarkozy as the American people are with President Bush.

But the other possibility is that campaign predictions made by Royal's supporters that Sarko will turn into a fascist will turn out to be a something of a self-fulfilling prophecy as well -- or at least that's what his opponents will claim.

If Sarko refuses to back down and instead becomes extremely confrontational with demonstrators and labor unions, then things could spiral into violence pretty quickly. Large riots and demonstrations could force Sarkozy to bring out the army, and could lead to confrontations between those with Muslim and those with French ancestry.

Sarko has already indicated that he plans to move in that direction. In the last days of the campaign, he said: "I will not be a referee, a monarch sheltering in the Elysée Palace. I will govern and take responsibility," indicating that he won't be like Jacques Chirac. "From day one, I am going to start putting my promises into action and make sure they are carried out."

As for the objections already raised by a Communist-led labor union: "I’m sorry if they don’t like change, but they are not the ones being elected."

It's been almost 62 years since the end of World War II. France, like America, like Israel, like the UK, and like other countries that fought in World War II as a crisis war, is now in a generational Crisis era. A country in a generational Crisis era has two choices: become increasingly paralyzed and dysfunctional, or become increasingly confrontational. The first choice usually becomes completely unbearable after a while, so that it's always the second choice, and the second choice leads to war.

From the point of view of Generational Dynamics, a new West European war is coming with absolutely certainty; the only question is how the sides will line up. I've speculated that there would be a new war between Britain and France, as there have been so many times in the last millennium; however, Sarkozy's victory appears to fly in the face of that speculation, as Sarkozy is openly "pro-American." Well, that remains to be seen.

One thing's for sure: When Sarkozy takes office on May 16, he's going to have move quickly to try to get something done. It's quite possible that he'll get nothing done, and when that sinks in, France could go in any direction. (8-May-07) Permanent Link
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A Canadian financial columnist illustrates the 'Principle of Maximum Ruin'

By contrast, Warren Buffett repeated his warnings of "very unpleasant things" coming, in a marathon six-hour question and answer session in Saturday's annual meeting of shareholders, attended by 27,000 people.

He discounted the effects of the subprime mortgage situation alone on the overall economy, saying that they would cause "plenty of misery" for individual homeowners and lenders. "It will be a very big problem for those involved, but I think it is unlikely that factor alone triggers anything in the larger economy," he said.

Instead, Buffett indicate that the widespread use of derivatives will be the trigger. Buffett once called derivatives "financial weapons of mass destruction." On Saturday he said:

"The introduction of derivatives has totally made any regulation of margin requirements a joke. I believe we may not know where exactly the danger begins and at what point it becomes a super danger. We don't know when it will end precisely, but ... at some point some very unpleasant things will happen in markets."

Buffett's partner, Charlie Munger, made a technical point when he said that accounting rules for derivatives were a big problem: "The accounting being deficient enormously contributes to the risk," allowing executives and shareholders to get paid on "profits that don't exist."

Buffett added that existing accounting conventions allow parties involved in derivative transactions to value the same contract differently, leading to an inadequate or incomplete picture of the contract's risk. "I will guarantee you, if you add up the marks on both sides, they don't add up to zero," Mr. Buffett said, referring to the accounting of a single derivative contract. "There is an electronic herd of people around the world managing an amazing amount of money" who make decisions based on minute-by-minute stimuli, he said, adding, "I think it's a fool's game."

By contrast, take a look at what the Canadian columnist, Avner Mandelman of the Toronto Globe and Mail says.

He's not worried about any bubbles bursting, or any financial panics. Quite the opposite. Based on his vast 25 years of investing experience, he provides a set of rules for you to follow so that you can MAKE MONEY out of a panic.

Here's the key to wealth and riches:

"Panics and manias: Sure signs of market opportunities

The market is balanced between fear and greed. But occasionally one of these emotions goes wild and grips everyone around you. If you learn to recognize such moments and act against the herd, you can make a lot of money. To help you identify such profitable gut-wrenchers and withstand the emotional pitfalls, here is a sample related from my own experience – plus an example of a current mania.

My first experience of massive market fear was in August, 1982, when the then TSE [Toronto Stock Exchange] 300 plunged to about 1,300, interest rates soared to 20 per cent and a famed Bay Street restaurant was boarded with plywood. But stocks were incredibly cheap, and so I gave a bullish talk to a Toronto civic group that had expected to hear me talk about bank certificates of deposit. In that audience was also one Tom Stanley of today's Resolute Performance Fund, who was then just starting out.

Next day he invited me to lunch to hear why I thought it prudent to buy in selling panics, and we have remained friends ever since. In those days I was starting out myself, so I couldn't buy much. But next time when panic-selling hit, on October 19, 1987, I was primed.

I still recall how my partners at Gordon Capital stood around the trading desk, faces white as the screens flashed red. Luckily Gordon had gone into cash the month before, based on the research department's warning, so the traders had the cash to buy – which they did the following two days.

The next panic, in January, 1991, the first Gulf war, was already my third. So the moment the first cruise missile left, I was already writing my buy tickets. When yet a fourth panic occurred on 9/11, in the midst of the horror I recalled my previous three selling panics, and was ready to buy the moment the markets reopened.

How about a more recent selling panic? In July last year, as the Lebanon war erupted, this column pointed out that it was a good time to buy. Look back and you'd see that this was the market's bottom.

How can you use this new skill? At present, a large American armada is gathering in the Mideast. I make no forecasts, mind, but if another conflict breaks out and the markets tumble, pull out a list of your favourite stocks, look up what had just gotten cheaper, clench your stomach, and buy more. ...

Hold on to [your] strong feelings. They are the surest sign of being gripped in a mania. Next time you feel them about any stock or industry or trend, sell and go look for a cheap stock – preferably during a selling panic."

So, Avner Mandelman has it all figured out. When everyone else panics, get ready to start buying, because the panic ends in a few days, and the worst is over. Then there are plenty of cheap stocks available, and the stock market will recover soon.

And why does he believe this? Because that's the way it's always happened before. Well, not "always always," since he's only been investing for 25 years. But at least, "always for Avner."

I've reproduced several paragraphs of his column because it's fascinating how it fits with the Principle of Maximum Ruin. The Principle of Maximum Ruin says that the maximum number of people will be ruined to the maximum extent possible, because of attitudes like those expressed by Avner Mandelman.

I've discussed the Principle of Maximum Ruin several times. The last time was two months ago, just after the brief February 27 panic.

Or better yet, go back and read last year's article on "System Dynamics and Macroeconomics," which shows how mainstream macroeconomics has failed to predict or explain anything, especially since 1995, and how this failure can cause similar results as in 1929.

The Principle of Maximum Ruin was developed based on a description of what happened in 1929 in the book The Great Crash - 1929, by John Kenneth Galbraith.

Galbraith summarized the situation as follows, noting that economists and analysts of the day gave advice based on the relative painlessness of previous recent stock market panics:

Galbraith showed how, after the initial crash on October 24, 1929, "In the first week the slaughter had been of the innocents," in the second week it was "the well-to-do and the wealthy" who were slaughtered (p. 113), and then more and more people were sucked into ruin during the years that followed.

Galbraith particularly describes the doings of the Harvard Economic Society, a group of economists on the Harvard University faculty, possibly the most highly regarded economists in the world. This group kept predicting that the worst was over -- and repeated that prediction over and over for two years -- and they were proven wrong every time.

Exactly the same thing is happening today. This is the "generational" concept in action. People assume that nothing that's happened in their own lifetime can ever happen again, and yet the huge bubbles of the 1920s have already happened again. As soon as enough of the people with personal memory of those past disasters die off, then the disasters happen again. It's happened over and over again throughout history, and it's happening again.

Why will the next panic be like a 1929 panic, and not like a 1980s panic? Because the stock market is far overpriced by historical standards, as shown using both exponential growth forecasting methods and mean reversion techniques with price/earnings ratios. The stock market today is overpriced by a factor of 250%, same as in 1929; in the 1980s, the stock market was actually underpriced, and so a panic was not likely to be severe.

There are many other signs as well that I've discussed on this web site, and now Warren Buffet has said, "I believe we may not know where exactly the danger begins and at what point it becomes a super danger. We don't know when it will end precisely, but ... at some point some very unpleasant things will happen in markets."

It's not possible to predict when a panic will occur, but from the point of view of Generational Dynamics, we're now overdue for a generational panic and crisis. It could happen next week, next month or next year, but it's coming with certainty. It will destabilize densely packed populations in China, India and around the world, and will lead to the Clash of Civilizations world war. As usual, Generational Dynamics tells us our final destination, but not how we'll get there. (7-May-07) Permanent Link
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Scottish National Party (SNP) victory threatens divorce from England

Scotland and England were united on May 1, 1707, 300 years ago, and winner of Scotland's midterm elections wants to end the Union in 2010.

Scotland may be part of the United Kingdom, but the relationship between the Scots and the English hasn't always been smooth sailing.

Like many other things, sex and money are heavily involved in the history.

If you've been watching the HBO TV series, The Tudors, then you know that King Henry VIII wanted to dump his wife, a Spanish princess, for the lovely Anne Boleyn. But the Catholic Pope refused to grant the divorce, so Henry made himself head of the Church (later known as the Anglican Church) in England, and granted himself the divorce. He married the lovely Anne Boleyn in 1533 (and later beheaded her, but that's another story). After six wives, Henry finally died in 1547, leaving no male heir.

After much intrigue, by the 1560s we had Henry's daughter, Elizabeth I, as the Protestant (Anglican) Queen of England, and Henry's grand-niece, Mary Stuart, as the Catholic Queen of Scotland. So you had two chicks running two different countries, favoring two different religions, ruling peoples that didn't like each other. There's no way that this could have ended well.

Mary, Queen of Scots, ended up in Elizabeth's dungeon for many years, and was finally executed in 1587. The death of a Scottish Catholic Queen at the hands of an English Protestant Queen triggered one of the most memorable crisis wars of the last millennium: The attack of Spain's huge Invincible Armada, an attack whose failure has been commemorated for centuries in mythic rhyme and song.

The fault line between the English and the Scots simmered for decades until 1638, when a war between the English and the Scots triggered the English Civil war of the 1640s. Relations between the two remained completely unsettled, and in 1701 when King Louis of France began a major war of conquest (known as the War of the Spanish Succession). Scotland was allied with France in this war, and it looked as if England's entire empire, including the American colonies, was in danger, and that a new English Civil War was about to begin.

England miraculously and unexpectedly defeated the French army in the Battle of Blenheim in 1704, slowing Louis' plans. (Louis' final defeat came in August 1709, at the battle of Malplaquet, the bloodiest battle in Europe for the entire eighteenth century.)

However, having lost its ally, Scotland was finally forced to unify with England, and on May 1, 1707, almost exactly 300 years ago, to the day, the Act of Union was signed.

The idea of returning to pre-1707 status with an independent Scotland has never died. The Scottish National Party (SNP) was formed in 1934, but never did very well until the generational Awakening era of the 1960s, when it began to grow. It gained its first real victory in 1997, with a "devolved" Scottish Parliament (Holyrood), meaning that Scotland had a Parliament with some independent powers for the first time since 1707.

The recent election gave the SNP a plurality in the Scottish Parliament for the first time, beating out the Labour party by one seat.

SNP leader Alex Salmond immediately said, "It is very clear indeed which party has lost this election, and the Labour party no longer has any moral authority left to govern Scotland. Scotland has changed for ever and for good. Never again will we say that the Labour party assumes it has a divine right to rule Scotland."

Salmond can't get what he wants without allying with other parties, and it's far from clear that the other parties are as interested in Scottish independence as he is. It seems fairly certain that, even though international leaders are fearing a period of political chaos, chaos is inevitable.

From the point of view of Generational Dynamics, what's interesting about this whole thing is how it illustrates that differences across fault lines almost never seem to heal.

I saw a feel-good news story a few days ago about two women, one Palestinian and one Israeli, who had gone on a diet together, and "learned that they had much more in common than they had thought." A while ago I saw a similar story about Israelis and Palestinians playing basketball together. The moral is that just a few more basketball games and diet programs, and all the differences will be resolved.

Here in North America, it's been centuries since the invasions by Spain and France. European settlers have been intermarrying with indigenous peoples for all these centuries, and they all speak the same language. And yet, there's still a major simmering fault line between descendants of Europeans and indigenous people (Aztecs and Mayans) in Mexico. The bloody Mexican Revolution of the 1910s was fought along that fault line, and the level of political conflict still exists today. A similar fault line between European and indigenous Amerindian peoples exists throughout Latin America.

Although not as severe any more, the fault line between Europeans and native American Indians still exists today, and is maintained with Indian reservations.

June 2005: Jean-Claude Juncker, Tony Blair, Jacques Chirac
June 2005: Jean-Claude Juncker, Tony Blair, Jacques Chirac

So, some fault lines eventually disappear, but many continue for centuries and even millennia, resulting in one crisis war after another.

Generational Dynamics predicts that there'll be a new West European war, as has happened so many times in the last millennium, and it looks as if a component will be a new war between England and France.

German Chancellor Angela Merkel
German Chancellor Angela Merkel

The bitter feelings between the French and "Anglo-Saxon society" became apparent in June, 2005, at a bitter EU summit meeting, reminding everyone of the 1066 war when the Norman French conquered the Saxons in England. In March of this year, Europe commemorated its 50'th birthday, but a renewal of the vitriolic arguments was prevented only by means of the feminine touch of Germany's Chancellor, Angela Merkel.

So what does the fault line between the Scots and the English mean today? Assuming that the war between the Normans and the Saxons is re-fought once more, which side will Scotland be on? The sudden success of the Scottish National Party at least raises the question. (6-May-07) Permanent Link
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Israeli government in crisis after report on war with Hizbollah

Tens of thousands rallied in Tel Aviv to call for Olmert's resignation.

Thousands rally in Tel Aviv to demand Olmert's resignation <font size=-2>(Source: BBC)</font>
Thousands rally in Tel Aviv to demand Olmert's resignation (Source: BBC)

Israeli Prime Minister Ehud Olmert refused to resign in defiance of tens of thousands of demonstrators in Tel Aviv on Thursday. According to one pundit I heard, a recent poll gives Olmert a 0% (zero percent) rating. President Bush doesn't know how well off he is.

The demonstrators were calling for his resignation, in the wake of the release of the "Winograd Committee Report" on Israel's conduct in last summer's war against Hizbollah in Lebanon.

Actually, the major conclusions have been known for some time, and we described then in detail in December. In summary, Israel panicked and launched the Lebanon war within four hours, with no plan and no objectives.

Here are some of the conclusions of the report:

The above is very interesting for the following reason: Israel is in a generational Crisis era, as I've explained many times, and during such times, the public reacts to a threat through sheer panic. The report never uses the word "panic," but the above two paragraphs show it. Israel could have continued its policy of "containment," and that would have been a deliberate response. It wasn't even considered. Instead, the immediate response was a military strike.

Once again, very interesting. As I've pointed out numerous times, politicians and journalists in Washington have no idea what's going on in the world. Politicians like Pelosi, Biden and others don't know that al-Qaeda is in Iraq, don't know the difference between Sunni and Shia, or that al-Qaeda is a Sunni organization, don't know that the Darfur genocide is a civil war that began decades ago. New Republic senior editor Lawrence Kaplan finds that 'Congressional leaders are illiterate,' that they're morons, they avoid learning anything, they make up any "facts" they want, and they couldn't care less what happens in Iraq, as long as they get votes. Journalists are the same.

The consequence of this is that our politicians are completely unprepared for emergencies. It's as if you're on an airplane, everyone else passes out, and you have to fly the plane. You've spent your life bashing pilots, and you've fastidiously avoided learning anything that pilots do. So how do you fly the plane? You push a few levers and hope something works. That's what Olmert's government did.

If you've spent your whole life bashing pilots, thinking their job was easy, you're going to be shocked when you discover that, now that you're in charge, you can't do their job. Olmert's government had no idea what to do. It simply stabbed out with any policy at hand, hoping something would work, and were undoubtedly shocked when nothing did.

Today's senior generation of politicians and journalists have a feeling that things should take care of themselves automatically, because they always have. What they just don't understand is that it's the World War II survivors who took care of everything, and they're gone now.

The survivors of World War II did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II.

Now all those survivors are gone, and the people who are left behind don't know how to run those organizations.

Olmert simply assumed that all he had to do was order the IDF to smash Hizbollah, and it would be done. What he never understood is that he would have to be the one to tell the IDF how to do it, just as Ariel Sharon, his predecessor, would have done.

The report now turns to Israel's Defense Minister Amir Peretz:

Israel's Defense Minister Amir Peretz (right) looks through binoculars with the lens cap on. On the left is the army's new Chief of Staff, Lt. Gen. Gabi Ashkenazi. They're reviewing a military drill in the Golan Heights. <font size=-2>(Source:</font>
Israel's Defense Minister Amir Peretz (right) looks through binoculars with the lens cap on. On the left is the army's new Chief of Staff, Lt. Gen. Gabi Ashkenazi. They're reviewing a military drill in the Golan Heights. (Source:

I won't comment on this except to remind readers that in February I named Peretz as the idiot of the week.

Look at this picture, and remember that this guy is the MINISTER OF DEFENSE. This is the guy who was running the war, and he's soooooooooooooooo stupid, he's afraid to tell anyone that he doesn't know how to remove the lens cap. How can this guy still be in office three months later??? Still, politicians like Senator Biden and journalists like Thomas Friedman are just as stupid and incompetent as Amir Peretz, so why should we expect Israeli politicians to be any different?

Here are some additional conclusions from the report:

This is the most frightening conclusion of all, because it applies so intensely to the United States. Recall that in our last Crisis era, our armed forces were totally unprepared for the attack on Pearl Harbor.

We had plenty of aircraft to defend ourselves from the Japanese, but they remained on the ground, while their pilots were lounging in bed with their girlfriends. We had plenty of anti-aircraft weaponry on the ships, but the sailors who were supposed to be manning them were sleeping off last night's party. Incredibly, there was an experimental radar installation on Pearl that actually spotted the Japanese aircraft long before they arrived, but no one actually believed that it was possible, so the sightings were ignored.

The result was the greatest disaster in American military history -- the loss of our entire Pacific fleet in the space of just a few hours. Today, could we afford to lose half our military capability to a surprise attack by China?

Now we're headed for a massive war that China has been preparing for over ten years, with huge and increasing expenditures on missiles, submarines, aircraft, and other sophisticated military hardware specifically designed to defeat America. Just as Olmert was totally unprepared for Hizbollah's response, just as America was totally unprepared for the Pearl Harbor, I am not confident that our armed forces today are prepared for the inevitable attack by China.

When Donald Rumsfeld was Secretary of Defense, he was restructuring the armed forces for the coming war with China. Rumsfeld was born in 1932, and he's seen all this before with Japan and Germany. He's well aware of the very real danger the country faces from an attack by China. But since Rumsfeld was replaced by Robert Gates, I haven't heard anything more about the continuance of the restructuring. If our armed forces are not preparing the for the next war, then our nation is going to be as shocked as Israel was by last summer's war with Hizbollah.

In trying to understand what's going on today, it's worthwhile to see what was predicted by William Strauss and Neil Howe, the fathers of modern generational theory. In their 1996 book, The Fourth Turning, they described the decade of the "Oh-Ohs," and how it would be different from what was "today" to them, the early 1990s, America's last Unraveling era. And as you read this, remember that they knew nothing of 9/11 at the time, so their description of the "early Oh-Ohs" really applies to today:

"The mood of the early Oh-Ohs will be much like today's except a lot more jittery. These will be years of the reality check, of worries about a looming national payback as Americans of all ages begin focusing on how poorly they and their government have prepared for the future. People will no longer deny that the Unraveling's individual empowerment has led to antisocial behavior and a dangerous degree of institutional decay. The harms (especially to youth) will now be perceived to have accumulated to such a grievous extent that truly fundamental change will be required to get the nation back on course. Today's talk about America's inability to mobilize except for emergencies -- what some call the "Pearl Harbor syndrome" -- will have become a tired cliché. More people will start rooting for something big to happen, something bad enough the shock the society out of its civic ennui. The political party in power will stress the ample good news and insist that things have never been better -- but the party out of power (and any niche group that senses it is losing the Culture Wars) will warn against, and show signs of welcoming, a catastrophe on the horizon.

[Nothing fits this description more closely than the moronic worldwide focus on "global warming."]

The late Unraveling mood will feel much the opposite of the [late 1950s]. Back then, institutions were at their point of maximum strength. Whether curing poverty or landing men on the moon, the nation's grandest conceptions felt entirely achievable. Yet circa-1960 Americans, in the shadow of their Establishment, were starting to chafe at the staleness of their culture. By the middle Oh-Ohs, institutions will reach a point of maximum weakness, individualism of maximum strength, and even the simplest public task will feel beyond the ability of government. As niche walls rise ever higher, people will complain endlessly about how bad all the other niches are. Wide chasms will separate rich from poor, whites from blacks, immigrants from native borns, seculars from born-agains, technophiles from technophobes. America will feel more tribal. Indeed, many will be asking whether fifty states and so many dozens of ethnic cultures make sense any more as a nation -- and, if they do, whether that nation has a future.

In the early Oh-Ohs, institutions will seem hypercomplex and fastidiously interconnected at the periphery, but empty at the core. Individuals will feel exquisitely exempt from the day-to-day random vagaries of nature and civil authority, yet rawly vulnerable to the greatest disaster fate can mete out. With soft finger strokes from their home-based tech-centers, millions of people will be commanding pizza deliveries, masterminding financial transactions, and securing hard-disk secrets. But they will be acutely aware that the Unraveling era's "empowered invididual" survives on the flimsiest of foundations -- that, with just one tsunami, the whole archipelago of little human islands could sink into a sea of social chaos. The better the economy performs, the more people will feel they have to lose, and the worse will be the national case of nerves. ...

People young and old will puzzle over what it felt like for their parents and grandparents, in a distantly remembered era, to have lived in a society and felt like one national community. They will yearn to recreate this, to put America back together again. But no one will know how. ...

By the early Oh-Ohs, when the four generational archetypes fully occupy these life-cycle phases, they will be poised to assert new social roles. Their Unraveling-era behavior cannot and will not continue. The public mood will feel stale, used up, primed for something else. Americans will have had quite enough of glitz and roar, of celebrity circuses, of living as thugh there were no tomrrow. Forebodings will deepen, and spiritual currents will darken. Whether we realize it or not, we will be ready for a dramatic event to shock the nation out of its complacency and decay.

The Fourth Turning will be at hand." [pp. 251-53]

This is what Strauss and Howe wrote in the early 1990s, and we see it happening today. Whether the subject is the stock market, the war in Iraq, or our relations with China, Americans are in a state of almost total denial. And like Israeli Prime Minister Olmert, Americans are going to be completely shocked and surprised what will happens. Unfortunately, the stakes are infinitely higher for us than they were for Israel last summer.

That's why I keep telling everyone who reads this web site: Nobody can stop what's coming, but you can prepare for it. Treasure the time you have left, and use it to prepare yourself, your family, your community and your nation. (4-May-07) Permanent Link
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The Democrats are just as incompetent as the Republicans.

And now, "The New Republic" magazine says that they're stupid on purpose.

This year's Democratic-controlled Congress has spent four months looking exactly like last year's Republic-controlled Congress -- like a bunch of idiot clowns.

A year ago, when the Republicans controlled Congress, I pointed out that the Congressional calendar was just 97 days for all of 2006, because the Congress was going to do nothing.

This year, the Democrats took control of Congress, and it's been nothing but a circus. It started out that the new Congress was so incompetent that they couldn't even vote themselves a pay raise.

House leader Nancy Pelosi bragged that the Democrats would get more done in the first 100 hours than the Republicans had gotten done in all of 2006. They rushed six popular bills through the House in what party leaders calculated was 42 hours, 13 minutes and 28 seconds.

Those included a federal minimum wage increase, a cut in student loan interest rates, repeal of oil industry tax breaks, and lower Medicare drug prices.

But it's a waste of time since those bills never had a real chance of getting through the Senate, and indeed they haven't.

Instead, the Democrats spent over three months, arguing and screaming about one moronic "antiwar" provision after another.

Finally, on Tuesday, Congress did pass a bill -- one that they knew that the President would veto immediately.

It's worthwhile reminding everyone again just how paralyzed this country is -- as are most of the countries that fought in World War II.

The survivors of World War II did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II.

Now all those survivors are gone, and the people who are left behind -- mostly the Boomer generation -- don't know how to run those organizations. That's true at the international level, as well as at the national level.

Boomers are almost completely incompetent at governing. Generation-Xers are even worse; they can't govern either, but they know that Boomers are incompetent, they hate Boomers and they make decisions by doing everything possible to make Boomers miserable.

So this lethal combination is what's paralyzing the government. The Boomer Democrats and Republicans might theoretically be able to get something done cooperatively, but if you take a look around and see who are the most vocal people pushing Democrats to the loony left side, they all seem to be Xers. There aren't very many of them, but they've been pushing the Democrats to waste all this time on the "antiwar" bill, so the result is that nothing has gotten done.

And now, the liberal, pro-Democratic opinion magazine, The New Republic, has published an article by senior editor Lawrence F. Kaplan with the title "Congressional leaders are illiterate on Iraq."

The article lists many of the things I've frequently mentioned, such as Nancy Pelosi and Harry Reid not knowing that al-Qaeda is operating in Iraq, and many, many more examples.

But "you don't need to cherry-pick quotes to prove the point: Nearly every time a senator's mouth opens, something wrong comes out."

But Kaplan goes a lot farther than I do. I merely say that they're stupid, with the implication that they don't have the time or ability to learn what's going on in the world.

But Kaplan says that they say stupid things to get more votes, like Woody Woodpecker might say stupid things to get laughs.

"More than that, congressional leaders often seem loath even to hear about events on the ground. During General Petraeus's visit to Washington last week, for example, House Democrats at first denied the Iraq commander an opportunity to brief them, citing "scheduling conflicts." And, when he finally did brief Congress, the evidence of progress that Petraeus was expected to present was dismissed before he even offered it. ...

But, then, expertise may be beside the point. Obliviousness, after all, has its uses. It comforts the sensibilities of politicians whose varying levels of awareness allow them to favor certain facts and not others. Obliviousness testifies to the virtue and good intentions of members of Congress who, in truth, couldn't care less what comes next in Iraq. It invites Americans to indulge in the conceit that what happens in Washington obviates the need to think seriously about what happens in Baghdad.

Most of all, illiteracy makes for good politics. There is the conviction, to paraphrase McCain, that winning a war takes precedence over winning an election. But it isn't so clear that this conviction guides a partisan brawl in which the Senate majority leader can gush, "We're going to pick up Senate seats as a result of this war." In such an environment, the subordination of facts to politics inform matters small and large, from the relatively trivial question of whether U.S. troops still operate in Tal Afar to enormous questions regarding the future of the U.S. enterprise in Iraq. ...

Where all this leads is clear. Piece together a string of demonstrably false "facts on the ground" from a suitably safe remove, and you're left with a scenario where we can walk away from Iraq without condition and regardless of consequence. You don't need to watch terrified Iraqis pleading for American forces to stay put in their neighborhoods. You don't need to read the latest National Intelligence Estimate on Iraq, which anticipates that a precipitous U.S. withdrawal will end in catastrophe. Why, in the serene conviction that things are the other way around, you don't even need to read at all. Chances are, your congressman doesn't either."

Wow! And people criticize me for calling these politicians morons! Kaplan goes much farther.

Kaplan says:

Before today I wouldn't have put it this strongly, but this makes sense.

When I wrote about what Senator Joe Biden said Sunday on Meet the Press, what was remarkable was how Biden got everything wrong. I mean, everything. Everything he said was incredibly stupid. But now, thanks to Kaplan, we know that he's lying on purpose, because all he cares about is getting votes.

But Kaplan's article is very self-serving, because he doesn't address the question about why journalists are so stupid.

When Biden was saying one incredibly dumb thing after another in answer to Tim Russert's questions on Meet the Press, Russert never challenged him. Is that because Russert wants to help Democrats get votes? Are Russert and other journalists as purposely stupid as the politicians are? Do they avoid learning anything, so they can make up "facts" as they go along? Do they just want to get votes for Democrats?

An even more glaring example occurred the previous Sunday, when New York Times columnist Thomas Friedman showed himself to be just as stupid as Biden, and even implied that Biden was his soul-mate. Is Friedman purposely stupid too, so that he can make up "facts" as he goes along?

I wish that Kaplan had addressed those questions as well. (2-May-07) Permanent Link
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Wall Street Journal describes "fears of reckoning" over use of credit

Comparing today to 1929, even the normally oblivious WSJ is sensing danger.

According to a page one article by Randall Smith and Susan Pulliam,

"Thanks to advances in financial engineering, investors have never had so many different ways to make commitments that exceed their bankrolls. And never before has leverage wormed its way into so many nooks of the financial world.

We're living on planet leverage, and regulators and market gurus are growing nervous.

How did this happen? For starters, hedge funds and leveraged-buyout funds have proliferated. They're pioneers in boosting returns using borrowed money, the most traditional form of leverage. Also, investment banks are pumping out newfangled leveraging tools such as derivatives, complex securities that allow hedge funds and other investors to add leverage without borrowing money.

Finally, mainstream America has gotten into the act. Once-conservative institutions are copying hedge-fund tactics. The Pennsylvania State Employees' Retirement System has begun dabbling in derivatives. Mutual-fund companies such as Easton Vance Corp. and Federated Investors Inc. have launched funds that rely heavily on derivatives. Garden-products maker Scotts Miracle-Gro Co. and other public companies have loaded up on debt to improve returns."

What's being described today is the same manic credit debauchery that I've described many times.

People today look back at the Tulipomania bubble of the 1630s, when investors borrowed money to pay astronomical prices for tulips. And even worse, an investor would sell his home and tap his friends to pay an astronomical price in the fall for a certificate giving him the right to a certain tulip to be grown the following spring. When the tulip market crashed on February 3, 1637, investors lost everything. How could they have been so stupid as to think that the price of tulips would keep going up forever?

Well, they're just as stupid today. I've been saying it for years, but now it's gotten so bad that even the Wall Street Journal is expressing concern in a front page article.

We're seeing the same abuse of credit that was seen just before the crash of 1929, just before the 1637 crash of the Tulipomania bubble, just before the South Sea bubble of the 1710s-20s, just before the bankruptcy of the French monarchy in the 1789, and just before the Panic of 1857.

And notice this sentence in the first paragraph above: "And never before has leverage wormed its way into so many nooks of the financial world."

This is an interesting sentence, because it captures part of the generational concept. Generational Dynamics does not analyze the attitudes and behaviors of one person or a group of politicians. Generational Dynamics analyzes the attitudes and behaviors of large masses of people, entire generations of people.

The fact that leverage has "wormed its way into so many nooks of the financial world" makes it clear that what's going on today is not being caused by one crook or one category of financier. What's going on today is endemic, throughout the population, throughout the world. There is no fear today of borrowing, of credit, of unlimited credit.

Let's read some more of the WSJ article to see how far the "leveraging binge" has progressed:

"This leveraging binge has regulators and others worried. In the first place, no one knows how much leverage there is. Much of it is hidden, because investors aren't just juicing returns with borrowed money, but with derivatives, which are harder for regulators to track.

No one is sure what will happen to this complex brew in the event of a serious market downturn. When markets turn bad, leverage can create a snowball effect. Lenders and derivatives dealers demand that investors provide them with more collateral -- the stocks, cash or other assets they pledge to cover potential losses. Sometimes, investors dump stocks and bonds to raise cash. Prices drop more, losses accelerate, and more selling ensues. Some Wall Street analysts have taken to referring to a nightmare version of this scenario as "The Great Unwind."

That's where the mania is today. It's not just borrowed money that's messed up; it's the interlocking use of derivatives, using one kind of overpriced derivative as collateral to pay for more overpriced derivatives.

As bad as it is in America, it's much, much worse in China, where they don't have the vaguest idea what's going to hit them. "College students are putting their tuition money into the market...stroke-stricken retirees get wheeled into branches of securities firms to trade." This is from star economist Andy Xie, formerly of Morgan Stanley investment firm, in warning of a coming crash in China.

(This shows why well-known economists can't tell the truth even if they know it -- they get fired. Fortunately, you have me, dear reader, because I'll never fire myself.)

We're at the height of the bubble mania, as I discussed in my article based on research by Harvard economist Robert J. Barro. It's a giant worldwide pyramid scheme (or Ponzi scheme), and every pyramid scheme must come to an end.

Compare this to what John Kenneth Galbraith describes in his 1954 book, The Great Crash - 1929:

"[The] amount of speculation was rising very fast in 1928. Early in the twenties the volume of brokers' loans -- because of their liquidity they are often referred to as call loans or loans in the call market -- varied from a billion to a billion and a half dollars. ... Brokers' loans reached four billion on the first of June 1928, five billion on the first of November, and by the end of the year they were well along to six billion. Never had there been anything like it before. ...

People were swarming to buy stocks on margin -- in other words, to have the increase in price without the costs of ownership. This cost was being assumed, in the first instance, by the New York banks, but they, in turn, were rapidly becoming the agents for lenders the country over the and even the world around. There is no mystery as to why so many wished to lend so much in New York. One of the paradoxes of speculation in securities is that the loans that underwrite it are among the safest of all investments. They are protected by stocks which under all ordinary circumstances are instantly salable, and by a cash margin as well. The money, as noted, can be retrieved on demand. ...

However, there were many ways of making money in 1928. Never had there been a better time to get rich, and people knew it. 1928, indeed, was the last year in which Americans were buoyant, uninhibited, and utterly happy. It wasn't that 1928 was too good to last; it was only that it didn't last. [pp. 20-22]"

The WSJ article compares leveraging in 1929 to leveraging today:

"America has been a nation of debtors for years. Prior to the 1929 stock-market crash, brokers allowed customers to buy stocks with as much as 90% borrowed money -- called margin debt. When the market began sliding, investors had to dump shares to keep their debt levels below 90%, igniting market panic. Nowadays, the SEC limits margin borrowing by most investors to 50% of a stock's purchase price. ...

But those limits don't apply to all of the derivatives and other financial instruments that now pack the portfolios of hedge funds and other big investors. Estimates by analysts of leverage at major securities firms, borrowing by hedge funds and margin loans to individuals added up to $4.9 trillion in 2006, compared with $1.8 trillion in 2002. Hedge-fund borrowing and other financing tools were valued at $1.46 trillion last year, up from $177 billion in 2002, according to estimates by Bridgewater Associates Inc., a Westport, Conn., hedge-fund company."

Galbraith's book also provides the response to those nutcakes who still think that the wide use of hedge funds and derivatives will save the market because they'll spread the risk so that people will only get hurt a little. In fact, former Fed Chairman Alan Greenspan often spoke of how great derivatives are, because they spread the risk. What we're going to see is that hedge funds and derivatives and will make things MUCH worse.

In 1929, the instrument corresponding to hedge funds was the "investment trust." Here's how Galbraith describes what happened to them:

"The stablizing effects of the huge cash resources of the investment trusts had also proved a mirage. In the early autumn the cash and liquid resources of the investment trusts were large. Many trusts had been attracted by the handsome returns in the call market. (The speculative circle had been closed. People who speculated in the stock of investment trusts were in effect investing in comnpanies which provided the funds to finance their own speculation.) But now, as reverse leverage did its work, investment trust managements were much more concerned over the collapse in the value of their own stock than in the adverse movements in the stock list as a whole. The investment trusts had invested heavily in each other. As a result the fall in Blue Ridge hit Shenandoah, and the resulting collapse in Shenandoah was even more horrible for the Goldman Sachs Trading Corporation." (p. 124)

This kind of chain reaction continued. Thus, said Galbraith, "The great investment trust boom had ended in a unique manifestation of Gresham's Law in which the bad stocks were driving out the good."

Warren Buffett says that leveraging in derivative trading today "makes a mockery of margin requirements," and that it the leverage that preceded the 1929 crash "look like a Sunday-school picnic," according to the article.

La Valse à Mille Temps

Writing for this web site for five years has made me acutely aware of the utter craziness going on, as the world appears increasingly to be spinning out of control. And I even mean "spinning" literally, in the sense that leveraging goes around in circles, with investors using hedge fund A as collateral for B, and another investor uses B as collateral for A. In the end they're both worth nothing.

Last year I suggested a comparison to the Jacques Brel song "La Valse à Mille Temps" or "Carousel" in the English version. Play the MP3 version of the song and sing along:

    We're on a ferris wheel
    A crazy ferris wheel
    A wheel within a wheel
    That suddenly reveals
    The stars begin to reel
    And down again around
    And up again around
    And up again around
    So high above the ground
    We feel we gotta yell
    We're on a carousel
    A crazy carousel.

I nominate "La Valse à Mille Temps" as the theme song for these times, as the crazy carousel goes spinning out of control, and we head for the greatest financial disaster in the history of the world. LAH luh LAH luh. (1-May-07) Permanent Link
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