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


Web Log - December, 2008


Israel declares "war to the bitter end" and "all-out war" against Hamas in Gaza

The rhetoric indicates an extremely dangerous situation.

There's never been much doubt that if Hamas had the ability to launch an "all-out war" against Israel, they would have done so. Such a war scenario might be, for example, a massive uprising of Gazans, breaking through the security wall to Israel, backed up by missiles supplied by Iran.

On the other side, there's never been much doubt that Israel could remove all restraints from its IDF (Israeli Defense Forces), and squash Gaza like a bug, in response to Hamas' missiles. That's why the world expects more restraint from Israel than it would from Hamas.

Gaza Strip - areas of conflict <font size=-2>(Source: Times Online)</font>
Gaza Strip - areas of conflict (Source: Times Online)

Thus, a lot of people are taken aback by the ferocity of Israel's attack on Gaza, with hundreds or perhaps thousands of bombs targeting Hamas leaders from one end of Gaza to the other. Hundreds of Gazans have been killed, and many more injured, though Israel claims that the vast majority are terrorists.

In reaction, thousands of Arabs and Greeks protested at the Israeli embassy in Athens. Similar demonstrations occurred in other European capitals, and in capitals in Arab countries, including Egypt, Iraq, Jordan, Lebanon, Syria, Yemen and the United Arab Emirates.

Undoubtedly, the Israelis fantasize that this attack will cripple Hamas' ability to attack Israel with rockets, or that it will cause the Palestinians to agree to a peace agreement. In a world that's so full of official fantasies these days, those aren't really surprising.

But Hamas terrorists were expecting this attack, and so their supply of rockets is well hidden away. And the median age of densely populated Gaza is 17, so there isn't a snowflake's chance in hell that these hormone-laden kids, running around with guns and rockets, are going to allow any peace agreement.

Hamas officials have their fantasies too. The kids see a life of glory following a heroic victory (or 72 virgins after a heroic death). The adults believe that Israel will be forced to back down.

Both sets of fantasies are undoubtedly fed by Israel's 2006 war with Hizbollah in Lebanon.

For Hamas, the 2006 war shows the way to humiliate the Israelis again, as they were humiliated in 2006.

For Israel, the new war applies lessons learned. The 2006 war was completely panic-driven. Israel went to war in four hours, with no plan, no objective, and no idea what was going on.

This new war is NOT panic-driven. The Israelis have planned this attack in detail. There will be no hesitation. We don't yet know what their objectives are, but we can be sure that, this time, there are firm objectives, and a plan to achieve them.

Thus, when Defense Minister Ehud Barak said, this was "all-out war," and that it was a "war to the bitter end," he was saying that the humiliations of the 2006 will be repeated, no matter what the cost.

From the point of view of Generational Dynamics, this is a very important time.

If this war had occurred ten years ago, when Israel was in a generational Unraveling era, then Israel would compromise and end the war as quickly as possible. And the Palestinians would simply compromise as well. There would still be plenty of survivors of the horrific, genocidal war of 1949, following the partitioning of Palestine and the creation of the state of Israel.

But now both populations are in generational Crisis eras, and those survivors are gone now, and we're left with new, young generations in Gaza and Israel, kids who have no memory of the horrors of the 1949 war, and who have no fear of death or war.

What we're seeing is very common throughout history. Each side expects the other to act as it would have during the Unraveling era. So each side risks brinkmanship, taking things farther than they would have dared ten years ago. But the other side doesn't back down, as they would have ten years ago; instead, the other side reacts with its own brinkmanship. This is how things escalate into a new genocidal crisis war.

Is that what's going to happen in this new war? Of course, it's impossible to predict. It's quite possible that some sort of truce will be reached.

But that will never be the end of it. The Hamas rockets have infuriated the Israelis. And the ferocity of Israel's attack has shocked kids throughout the Arab world. If there was a surprise from the Israeli side this time, then the next surprise will probably be from the Arab side. Perhaps it will come from Egypt, where the huge membership of the Muslim Brotherhood is sympathetic with Hamas, and furious not only at the Israelis, but at the Egyptian government, whom they see as siding too much with the Israelis.

Or perhaps it will come from Saudi Arabia, where al-Qaeda linked Islamist terrorists have been trying to stage a coup against the government for years.

Generational Dynamics predicts that, one way or another, there will be a new major war between Israelis and Palestinians, re-fighting the 1949 war, and this new war will engulf the entire region before it's over. It may happen now, or it may happen later, but it's coming with absolute certainty.

(Comments: For reader comments, questions and discussion, see the Mideast thread of the Generational Dynamics forum.) (30-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Is the world unraveling?

Some people believe that the world is better off every day.

BBC international correspondent Humphrey Hawksley wrote the following New Year's message on his blog:

"Great New Year

Best wishes to all who drop by this blog. Despite the demands for Breaking News crises from 24-hour-news channels, the world is in pretty good shape — far better than half or quarter of a century ago. Iraq was meant to collapse into civil war and partition. It didn’t. The summer was full of talk about a new Cold War, but no-one seemed to want it. In the economic downturn, China’s proved to be not a strategic threat but a global ally. And the dreadful famines and diseases that used to kill millions seem to be no more."

It's ironic that this message was posted just a couple of days before the new conflagration between the Israelis and the Palestinians, a conflagration that might settle into a new truce, or might escalate into a world war within a few weeks or months. There's no way to know.

One thing that people forget about Gaza is that the Gaza strip is densely populated, growing at 4.7% per year, and the median age in the Gaza strip is 17 years old. Thus, the Gaza strip is run by a generation of children with guns and missiles and with almost no adult supervision.

That's why there can never be a "peace" agreement, even if Hamas leaders wanted one. There's is absolutely nothing in the world that anyone, including Hamas leaders, could say that would convince the hormone-laden kids of Gaza that a tranquil peace agreement is the answer. These kids have a burning desire for revenge, with no fear of death and no fear of war.

In other news on Saturday, Pakistan is moving troops away from Afghanistan's border, where they were fighting Taliban terrorists, and towards the border with India. This is in response to fears that India is going to invade Pakistan, targeting the Lashkar-e-Taiba (LeT) terrorists who perpetrated the huge terrorist attack on Mumbai.

Relations between Pakistan and India have been in a state of crisis ever since the attacks. Many Indians are saying "This was our 9/11. And just as the U.S. attacked Afghanistan after 9/11, we have to attack Pakistan after our 9/11."

Saturday is the day that hundreds of thousands of Pakistanis are commemorating the assassination, exactly one year ago, of Benazir Bhutto, as she was campaigning to become Pakistan's president, replacing Pervez Musharraf.

Today, Pakistan's president is Asif Ali Zardari, Benazir's widowed husband. Zardari is young, and clearly in over his head, as he tries to deal with a recalcitrant army, with terrorist acts by Islamists around his own country, and with suspicions by Indians that Pakistan is responsible for terrorist acts in THEIR country.

This is yet one more situation that might go either way: Things might settle down in a few weeks, or someone might miscalculate, causing the situation to spiral into war -- and it would be nuclear war, since both are nuclear powers.

But it isn't just Gaza and Pakistan that make it difficult to support Hawksley's claim that the world is "far better" than it was 25 years ago.

There were crisis wars going on in Lebanon, Iran and Iraq in 1983, but there are crisis wars going on today in Sri Lanka and Darfur. But even that isn't the point.

Even if you accept the fact that the world seems to be in good shape today, I would compare it to a man who appears to be in excellent health, but has high blood pressure. As his blood pressure increases, one day some artery is going to burst, and he'll be gone.

Today it's hard to deny that the world's blood pressure is increasing dangerously. A lot has to do with overpopulation, the price of food, and the rise of young generations of kids like the ones in Gaza, with no fear of war, replacing the risk-averse survivors of World War II.

But now we have to add the current financial crisis. I've written how serious this situation is several times, and most recently in "World wide transportation and trade sink farther into deep freeze."

It's very hard to overestimate the seriousness of this problem. It's almost literally true to say that the world is grinding to a halt. The economies of America, China, and countries throughout Asia and around the world are in free fall into a deflationary spiral that still has years to go. The economic news from Japan this week has been absolutely devastating.

We hear on the news every day how much this is affecting ordinary Americans, but what we seldom hear is how it's affecting other populations. The collapse of the worldwide financial system is pushing millions and tens of millions more people into poverty and starvation, especially in densely crowded megacities around the world, increasing tensions.

That's how the world's blood pressure is increasing.

Yesterday we had a coronary aneurysm in Gaza. Next week, there might be a heart attack in Pakistan and India.

And yet, Hawkins' view seems to be correct. The world does seem to be better off than in the past. No two countries with nuclear weapons have ever gone to war with each other. Since 1990, the number of wars in the world has fallen sharply. War in places like the Caucasus (the war in Georgia this past summer) or the Mideast (the Israeli-Hizbollah war in Lebanon in 2006) seem to resolve themselves quickly without escalating. Why is that?

I actually addressed this issue in 2006, when I wrote, "A beautiful mind? The world is paralyzed into a 'Nash equlibrium.'"

The thing that's really changed in the last 25 years is this: 25 years ago, a small war was very unlikely to escalate into a large war; today, it is.

In the 1970s, India and Pakistan did have a major war, and there was a major war between Israel and Egypt. But they fizzled quickly. Why?

From the point of view of Generational Dynamics, the answer is that all of these countries were in generational Awakening eras, so any war was bound to fizzle. But even without invoking generational analysis, you can see that the Soviet Union and the United States would have cooperated to make sure that the war was contained and ended as quickly as possible.

But nothing like that is true today. Does anyone really doubt that a major regional war, since as the two from the 70s just mentioned, were to occur today, there would be any way of containing it? Certainly from the point of view of Generational Dynamics, the answer is no: All of these regions are in generational Crisis eras, and any regional war would surely escalate.

And I haven't even mentioned the interlocking international agreements. Since the end of World War II, when American became Policeman of the World, America has signed a large number of mutual defense treaties with other countries. These include agreements with Japan, South Korea, Israel, Taiwan, the ANZUS agreement with Australia and New Zealand, and the NATO agreement with all of Europe.

That's why a regional war in any of these regions would lead to a world war. And that's why so many countries around the world always being very careful, always stepping back from the brink. They understand as well as anyone that a miscalculation could mean world war, and no one wants to be responsible for that. Unfortunately, the world's "blood pressure" will never stop increasing, thanks to population growth and generational changes, and so the probability of an explosion will continue to increase.

When I read Hawkins' blog entry, I posted a comment containing the following response:

"Dear Humphrey,

Whenever someone writes something so bubbly and optimistic, I always answer the same way:

I hope you’re right.

Happy new year."

And I do hope he's right.

But Generational Dynamics tells me that this hope will be in vain.

(Comments: For reader comments, questions and discussion, see the Geopolitical topics thread of the Generational Dynamics forum.) (28-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Israel's rocket attack on Gaza opens continues a week of sharp escalation

Hundreds of Palestinians were killed or injured Saturday, when Israel launched a series of air strikes against Hamas targets in Gaza City and elsewhere in the Gaza strip.

Related Articles

Gaza war heads toward cease-fire, while violence surges in Sri Lanka: Thousands of civilians' lives are at risk by army attacking terrorists responsible for suicide bombings.... (19-Jan-2009)
In Gaza and Sri Lanka, war slides into genocide.: Both wars are getting increasingly meaner and nastier.... (6-Jan-2009)
Israel begins ground invasion into Gaza: The region appears to be teetering on the edge of wider war... (3-Jan-2009)
Israel declares "war to the bitter end" and "all-out war" against Hamas in Gaza: The rhetoric indicates an extremely dangerous situation.... (30-Dec-2008)
Israel's rocket attack on Gaza opens continues a week of sharp escalation: Hundreds of Palestinians were killed or injured Saturday,... (27-Dec-2008)
Palestinian opinion shifts toward greater confrontation with Israel: A Khalil Shikaki poll shows increasing acceptance of violence against Israel... (24-Mar-08)
Violence in Gaza escalates significantly as Israel contemplates an invasion: American warships are off the Lebanon coast to promote "regional stability."... (1-Mar-08)
Suicide bombing in Israel blamed on the Gaza border opening: Although Egypt finally closed the border on Sunday,... (5-Feb-08)
Egypt's failure to close the Gaza border further destabilizes the region.: Changing events brings Israelis, Palestinians and Egyptians into further confrontation and conflict.... (26-Jan-08)
In dramatic scene, 60,000 Gazans pour into Egypt through holes blasted through border wall: Euphoric Gazans go shopping, bring back food, fuel and fertilizer.... (24-Jan-08)
Israeli blockade of Gaza triggers protests against Egypt: Angry Gazans stormed the Rafah crossing into Egypt on Tuesday,... (22-Jan-08)
Violence continues in Gaza as Israel kills 18 to stop rocket attacks: President Bush's new Mideast peace initiative has a zero chance of success.... (17-Jan-08)
Tony Blair compares the Mideast peace process to the Northern Ireland peace process: Generational Dynamics illuminates when such historical comparisons are valid and when they are not.... (30-Nov-07)
Mideast summit in Annapolis has feel of act of desperation: No one appears to have any expectations whatsoever -- talking just to talk.... (27-Nov-07)
Hamas fires on civilian Palestinian crowd commemorating Yasser Arafat: Eight people were killed when Hamas gunmen fired into the crowd.... (13-Nov-07)
Pressure is building in Israel for a new invasion of Gaza: Surprisingly, many Palestinians are allying with Israel against Hamas.... (12-Sep-07)
Hamas' stunning Gaza victory shocks entire Mideast: A major realignment of unknown proportions is occurring throughout the Mideast.... (22-Jun-07)
Abbas dissolves the Palestinian Authority as Hamas overpowers Fatah in Gaza: There are now effectively two Palestinian Authorities,... (15-Jun-07)
Hamas presses for control in Gaza, Fatah gets revenge in West Bank: The U.N. is considering deployment of a multinational force in Gaza,... (14-Jun-07)
Palestinian road to civil war escalates another step: Gunfights escalated to larger military actions in northern Gaza... (13-Jun-07)
Jordan's King Abdullah renews stark warnings about Palestinian problem: Both Israelis and Palestinians are becoming increasingly furious at each other,... (22-May-07)
Gaza close to state of emergency as Israel tries to avoid getting pulled in: The streets of Gaza are clear except for gunmen today,... (16-May-07)
Palestinian Interior Minister resigns as escalated Gaza violence threatens civil war: Six people were killed and dozens wounded over the weekend... (15-May-07)
Palestinian "unity government" leading soon to new crisis with Israel: As the young generation of Palestinians become increasingly "lost and desperate,"... (14-Mar-07)
Jordan's King Abdullah tells Congress that Palestinian issue is the core issue: Unfortunately few in Congress know what he's talking about.... (8-Mar-07)
"Palestinians don't deserve a state": Even the most optimistic Palestinians are despairing that their dream is slipping away.... (4-Feb-07)
Fatah storms Hamas stronghold in Gaza: Palestinian President Mahmoud Abbas appears to be carrying out his ultimatum to Hamas,... (1-Feb-07)
Palestinian civil war between Hamas and Fatah now seems inevitable: Peace talks and ceasefires seem close to being over for good.... (29-Jan-07)
Palestinians' Fatah/Hamas crisis increases as Israeli government is close to anarchy: The possibility of a Hamas vs Fatah civil war in the Palestinian territories appears to be increasing by the day.... (7-Jan-07)
In desperation gamble, Mahmoud Abbas calls for new Palestinian elections: Hoping to end political deadlock and head off a Palestinian civil war,... (16-Dec-06)
Will Mohammed Dahlan trigger a Palestinian civil war?: Hamas blames the young Fatah terrorist for the near-assassination of Prime Minister Haniyeh.... (16-Dec-06)
Interviews with young Gazans spotlight road to war: For these young fighters, attacking Israel is an end, rather than a means to a political end.... (10-Dec-06)
Can we "Flip Syria" and solve all the Mideast problems?: Even by Washington standards, Wednesday was possibly the most bizarre day on record.... (7-Dec-06)
Jordan's King Abdullah warns of explosions in Palestine and Lebanon: Abdullah repeatedly chided the ABC News interviewer Stephanopolous, who remained completely oblivious... (26-Nov-06)
Level of loathing between Israelis and Palestinians increases: According to an online correspondent with contacts in the Israeli government,... (27-Sep-06)
Tony Blair commits the rest of his term to solving the Mideast problem: Meanwhile, the Palestinians announce a unity government -- with a condition.... (12-Sep-06)
Israel re-occupies Gaza and abandons West Bank "convergence": Lawlessness has gotten so bad in Gaza that even Hamas apologized... (8-Sep-06)
Aftermath of Lebanese war: The winners and losers: Everyone seemed to follow his generational archetype, as if hypnotized to do so.... (6-Sep-06)
Some random notes on the Mideast crisis: First off, dislodging Hizbollah from the Israeli border is almost impossible.... (21-Jul-06)
Mideast war now centers around Hizbollah's Hassan Nasrallah: Nasrallah splits the Arab world and draws international support for Israel... (17-Jul-06)
The European Union is "extremely concerned" about Mideast tensions: But guess what the EU politicians express "particular concern" about!... (3-Jul-06)
Israeli armed forces mass on Gaza border after soldier's kidnapping: Egyptian mediators are attempting to head off a "large scale military offensive"... (26-Jun-06)
Tensions reaching the boiling point among Palestinians and Israelis: So-called "pinpoint" Israeli missile strikes have killed several civilians, including children... (21-Jun-06)
Ex-CIA chief James Woolsey says Gaza pullout was "Worst result possible": Five bystanders, including a pregnant woman, were killed by Palestinian gunmen... (5-Jun-06)
Hamas and Fatah armies gearing up for major confrontation in Gaza Strip: Egypt and Lebanon are also being increasingly threatened by the escalating violence.... (23-May-06)
Palestinian Authority and Hamas deploy rival armies in Gaza: In open defiance of PA president Mahmoud Abbas, Hamas mounted an illegal 3,000 man militia force... (17-May-06)
Saudi and other Mideast stock markets appear to be crashing: While Wall Street is rocketing toward a historic new high,... (7-May-06)
International game of "chicken" leading to disaster in Gaza: Mideast envoy James Wolfensohn quits in disgust with all participants in the so-called "peace process."... (5-May-06)
Crunch time for Hamas, as American and European aid is cut off to Palestinians.: Will they "cry uncle" and recognize Israel in exchange for financial aid?... (10-Apr-06)
International political chaos grips Israel, Palestine, and everyone else, as Hamas takes over on Saturday: No one, not even Hamas itself, has any idea what to do next, except to let events play out as they will.... (18-Feb-06)
Hamas victory and cartoon controversy significantly affect chances of Mideast war: It's time to change to the world conflict risk graphic.... (10-Feb-06)
Hamas victory throws Mideast 'peace process' into disarray and turmoil: What struck me most, seeing the cheering Hamas supporters on TV yesterday,... (27-Jan-06)
Sudden generational shift puts Palestinian "Young Guard" threatening "Old Guard": Younger generations in control in Palestine and Israel bring war closer.... (16-Dec-05)
Gaza violence spiking up as Israel launches "crushing response" to rocket attacks: Hamas promised to stop attacking Israel from Gaza, to prevent spiraling out of control.... (26-Sep-05)
Gaza strip descending into further chaos and lawlessness following Israeli withdrawal: Black market prices for weapons have been falling sharply in Gaza,... (14-Sep-05)
With Israelis almost gone, Gaza is becoming increasingly violent and unstable: Especially ominous is the planned intervention by Egypt as border guards.... (8-Sep-05)
Israel withdraws from Gaza amid hopes for peace and fears of instability: Here's what you should watch for in the weeks ahead.... (16-Aug-05)
Ariel Sharon and Mahmoud Abbas meet as Mideast cease-fire unravels: Like Britain vs France, Israel vs Palestinian Authority meetings are becoming increasingly confrontational.... (22-Jun-05)
Abbas is increasingly losing control of Gaza and the West Bank: Palestinian militants are infuriated by Abbas' unilateral cancellation of parliamentary elections.... (6-Jun-05)
Some notes on current news in Darfur, Palestine and Ukraine: It appears that the genocidal crisis war in Darfur, Sudan, may be ending.... (24-Jan-05)
NY Post: "Arafat Dead - And he won't be missed.": I look at Arafat's life very, very differently.... (14-Nov-04)
Top Israeli aide says that Israel has abandoned the American-sponsored 'Road Map to Peace': The plan to create a Palestinian state has effectively been scuttled... (7-Oct-04)
Israel makes it official: The American-backed "road map to peace" is dead.: In fact, Israel itself is in enormous turmoil today because of Ariel Sharon's disengagement plan.... (16-Sep-04)
A dramatic shift in Palestinian opinion, as Arafat retains control: Major violence has not yet spread from Gaza to West Bank, but the question of whether things will "spiral out of control"... (1-Aug-04)
Beheadings part of increasing conflict level throughout Mideast: The level of conflict is increasing throughout the Mideast, from Gaza to Pakistan, from Saudi Arabia to Uzbekistan. (23-Jun-2004)
"Mideast Roadmap" - Will it bring peace?: Generational Dynamics predicts something quite different for the Mideast. (01-May-03)

A Hamas spokesman, speaking on a Gaza radio station, vowed revenge, and to "continue the resistance until the last drop of blood."

This attack followed a week of rapid escalation on both sides of the conflict.

Up until a week ago, both sides were showing restraint, thanks to a six-month truce. But when the truce expired on December 19, Hamas said it would not renew it, citing the Israeli blockade that Israel imposed when Hamas seized power 18 months ago. (See "Hamas' stunning Gaza victory shocks entire Mideast.")

At first, Israeli leaders said that they would continue to show restraint, but once the truce ended, hundreds of rockets from Gaza targeted Israeli towns near the Gaza border.

Israel's warnings became increasingly ominous each day, and by Friday an impending attack, including a ground invasion, had been clearly signaled. Thus, Saturday's attack was expected, although its intensity was not.

The Mideast situation is following a familiar pattern that's existed for years, especially since the death of Yasser Arafat: First, there's a surge in violence, not only between Israelis and Palestinians, but also within the Palestinian community between Hamas and Fatah.

Then, both sides step back from the brink, and calm returns for a while.

This, for example, is what happened in Sri Lanka, when both sides signed a cease-fire in 2002. The cease-fire was broken with low-level violence several times, but both sides always pulled back. Then, in January 2008, the Sri Lanka government announced that it would go for all-out victory against the Tamil rebels, and as I wrote yesterday, the Sri Lanka crisis war now appears close to a full-scale genocidal climax.

Of course, the Sri Lanka crisis war isn't on a lot of people's radars, since that war is not likely to spread into a world war. But a war in the Mideast may indeed spread into a world war.

So, in watching the Mideast situation in the next few days and weeks, the main thing to watch for is signs of either continuing escalation versus attempts at conciliation. It could literally go either way, and in fact is certain to escalate into a full-scale crisis war at some point, whether now or in the future.

We can expect efforts at mediation by several countries -- the US, UK and Europe in the west, and Egypt, Jordan and Saudi Arabia in the Mideast.

We can expect Iran to attempt to further destabilize the situation. Iran has already sold (or given) advanced weaponry to Hamas, in order to provoke a full-scale war, just as Iran provided thousands of rockets to Hizbollah for the 2006 war with Israel.

From the point of view of Generational Dynamics, a new all-out war between Arabs and Jews is an absolute certainty, refighting the bloody war of 1949 that followed the partitioning of Palestine and the creation of the state of Israel. Whether the current situation escalates into all out war, or ends in a new temporary truce, the end result is certain.

(Comments: For reader comments, questions and discussion, see the Mideast thread of the Generational Dynamics forum.)

(27-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Sri Lanka crisis war appears close to a genocidal climax.

There are two crisis wars in the world today: Darfur and Sri Lanka.

Related Articles

Darfur Genocide
Darfur war takes a major turn, as Sudan expels aid groups.: Oxfam, CARE, Save the Children, and numerous other aid groups... (11-Mar-2009)
Chad and Sudan may be close to a declaration of war: The peace agreement signed in March seems to be falling apart.... (18-Jun-2008)
Sudan's Darfur war expands as Khartoum comes under attack by rebels: What were they thinking? everyone's asking. But it DOES make sense.... (14-May-2008)
Ban Ki Moon blames Darfur genocide on global warming: Damn! He's blaming the Darfur crisis civil war on America!!... (19-Jun-07)
Senator Joe Biden wants to move troops from Iraq to Darfur civil war: Saying on Meet the Press that we should remove troops from Iraqi "civil war,"... (29-Apr-07)
President Bush gives Sudan "one last chance" to end Darfur genocide: But is Steven Spielberg aiding the genocide?... (19-Apr-07)
Women's groups protest rape as a weapon of war in Darfur: As the civil war in Darfur continues to grow more violent,... (11-Dec-06)
UN: Darfur became much worse "while we were watching Lebanon and Israel": Amnesty International reports that Sudan's new military buildup is precursor to a "catastrophe"... (29-Aug-06)
UN declares that Darfur war was "not genocide," in the most sickeningly cynical story of the year: If mass murders and rapes and forced relocation of millions of people isn't genocide, then what is?... (01-Feb-05)
Today's slow-motion genocide in Darfur recalls the lightning quick genocide in Rwanda in 1994: Why do these things always seem to happen in Africa? Understanding Africa's geography explains why. (22-Aug-2004)
Jesse Jackson calls for sending American troops to Darfur: You see how it works? Everyone has a war they like.... (27-Jul-04)
Darfur saga like depraved game of musical chairs: As I've said before, I've gotten good at turning off my own feelings of horror... (19-Jul-04)
Darfur genocide: The UN is completely irrelevant: It was just three months ago that Kofi Annan said "never again," referring to the 1994 Rwanda genocide.... (28-Jun-04)
Sri Lanka
14-Mar-10 News - Sri Lanka Tamils reject homeland: A German college student validates Generational Dynamics... (14-Mar-2010)
27-Jan-10 News - Sri Lanka elections, and Turkey returns to its roots: Higher tensions between North and South Korea.... (27-Jan-2010)
Tamil Tigers renounce violence, to join Sri Lanka political process: New photos show "genocidal fury" at climax of civil war.... (25-May-2009)
Jubilant Sri Lanka celebrates, as President reaches out to the Tamils: But President Rajapaksa will need to follow words with actions.... (20-May-2009)
Tamil Tigers surrender, ending the Sri Lanka crisis civil war: "We have decided to silence our guns. Our only regrets are... (17-May-2009)
Sri Lanka, Pakistan and Gaza are all following the same path.: But the end is in sight for Sri Lanka.... (11-May-2009)
Tens of thousands of Tamil civilians flee fighting, in last days of Sri Lanka war: A "human avalanche" of refugees threatens to overwhelm internment camps.... (22-Apr-2009)
Sri Lanka army ready for final assault on Tamil Tiger rebels: 1000 Tigers are trapped in a "safe zone" with 100,000 Tamil civilians.... (16-Apr-2009)
Cricketing world in shock after attack on Sri Lanka team in Pakistan: Lashkar-e-Taiba is suspected in the brutal attack in Lahore,... (4-Mar-2009)
International community asks Tamil Tigers to surrender in Sri Lanka civil war: In "nightmarish situation," hundreds of thousands of civilians are trapped in battle.... (3-Feb-2009)
Sri Lanka crisis civil war nears climax, as army captures Mullaittivu: An explosive battle among 300,000 civilians is feared.... (28-Jan-2009)
Gaza war heads toward cease-fire, while violence surges in Sri Lanka: Thousands of civilians' lives are at risk by army attacking terrorists responsible for suicide bombings.... (19-Jan-2009)
In Gaza and Sri Lanka, war slides into genocide.: Both wars are getting increasingly meaner and nastier.... (6-Jan-2009)
Sri Lanka crisis war appears close to a genocidal climax.: There are two crisis wars in the world today: Darfur and Sri Lanka.... (27-Dec-2008)
Sri Lanka government declares all out war against Tamil Tiger rebels: Sri Lanka has said it is formally withdrawing from a 2002 ceasefire agreement... (4-Jan-08)
Tamil Tiger rebel aircraft bomb government airfields, escalating Sri Lanka civil war: Sri Lanka may soon join Darfur as another generational crisis war.... (26-Mar-07)
Bird flu spreading rapidly in Asia during New Year's celebrations: This is the most dangerous time of the year for possible pandemic mutation.... (17-Feb-07)
Australian Govt. warns citizens to avoid Sri Lanka: The war between Tamil Tiger rebels and Sri Lanka government continues to escalate,... (20-Oct-06)
While world watches Lebanon, Sri Lanka goes to war: Tamil Tiger rebels have engaged Sri Lanka government forces in heavy fighting... (3-Aug-06)
Massacre of civilians in Sri Lanka leading the way to a crisis war: From the point of view of Generational Dynamics, the gratuitous murder of civilians in a war... (18-Jun-06)
Violence leading to Sri Lanka war is increasing: Tamil Tiger rebels are being blamed for a mine attack on a bus, killing 60 people including children.... (16-Jun-06)
Sri Lanka appears close to war: A naval attack by Tamil Tiger rebels and government retaliation by air may spiral into full-scale war.... (12-May-06)
Indian MP says that bird flu is a 'scam' to sell 'Tamil-flu': This sounds like a joke, but unfortunately it isn't.... (3-Dec-05)

The war in Darfur can't seem to reach a climax, and I believe that it's because of international intervention. The U.N. has failed to stop the genocide in Darfur, and can't possibly succeed at that. All it's done is prolonged the war. There's a big philosophical question here: Is it better to prolong a war in this way, and allow the killing to go on for years, or is it better to allow events to run their course, and get all the killing over in a brief period of time? In the case of Darfur, the former choice has been made.

Areas of conflict in Sri Lanka <font size=-2>(Source: The Economist)</font>
Areas of conflict in Sri Lanka (Source: The Economist)

But not in Sri Lanka. That war began as low-level violence in 1983, between two ethnic groups: The government/market dominant Sinhalese (Buddhist religion) and the separatist/rebel Tamils (Hindu religion). A truce was signed in 2002, but it fell apart in 2006, while the world was being distracted by Israel's summer war with Hizbollah in Lebanon. Then, at the beginning of 2008, government forces abandoned all pretense of aiming for a peaceful settlement, and declared all out war, promising to destroy the Tamil rebel forces (known as the LTTE or Tamil Tigers) by the end of 2008.

(For further details and analysis of this history, including additional maps, see "While world watches Lebanon, Sri Lanka goes to war," and "Sri Lanka government declares all out war against Tamil Tiger rebels.")

The war today is largely taking place in the north, as government forces overrun Tamil strongholds, especially around the Tamil stronghold of Kilinochchi.

Unfortunately, reporters are not allowed in the war region, so the only accounts of what's going on come from the combatants themselves.

And so we have mainstream media reporting what the Sri Lanka government tells them -- that 43 Tamil Tiger rebels were killed earlier this week by the Sri Lanka Army (SLA) and air force, and that an attempted Tamil counterattack was repelled.

Or, you can check with TamilNet, and learn that the SLA had only killed cows, not any rebel fighters, or that the SLA had only bombed hospitals, not military targets, and that the Tamils had killed 200 SLA forces.

So, not a lot of this reporting can be fully trusted, but there seems little doubt that the fighting is getting very seriious.

In a report by Human Rights Watch, it says:

"The 49-page report, "Besieged, Displaced, and Detained: The Plight of Civilians in Sri Lanka's Vanni Region," documents the Sri Lankan government's responsibility for the plight of the 230,000 to 300,000 displaced persons trapped in the Vanni conflict zone. They face severe shortages of food and other essentials because of government restrictions on humanitarian assistance. Individuals and families who have managed to flee areas controlled by the separatist Liberation Tigers of Tamil Eelam (LTTE) have been detained in poor conditions in army-controlled camps.

"Hundreds of thousands of civilians are trapped in a war zone with limited aid because the government ordered the UN and other aid workers out," said Brad Adams, Asia director at Human Rights Watch. "To add insult to injury, people who manage to flee the fighting end up being held indefinitely in army-run prison camps."

However, that's only one side of the story. In a second Human Rights Watch report, we have the following:

"Sri Lanka's separatist Tamil Tigers are subjecting ethnic Tamils in their northern stronghold, the Vanni, to forced recruitment, abusive forced labor, and restrictions on movement that place their lives at risk, Human Rights Watch said in a report released today.

The 17-page report, "Trapped and Mistreated: LTTE Abuses against Civilians in the Vanni," details how the Liberation Tigers of Tamil Eelam (LTTE), which have been fighting for an independent Tamil state for 25 years, are brutally abusing the Tamil population in areas under their control.

"The LTTE claims to be fighting for the Tamil people, but it is responsible for much of the suffering of civilians in the Vanni," said Brad Adams, Asia director for Human Rights Watch. "As the LTTE loses ground to advancing government forces, their treatment of the very people they say they are fighting for is getting worse."

From the point of view of Generational Dynamics, there are many strong signs here of an increasingly genocidal crisis war.

Recall that, as I've explained in the past, generational theory uses the word "genocide" in a way that differs from the strictly legal definition. The Generational Dynamics definition of "genocide" refers to any action that clearly gives little value to individual life. Generally this means that the society gives much higher priority to scoring a victory in war than it gives to the goal of preserving individual lives, especially civilian lives.

We see this going on now in Sri Lanka. Whereas in the past both sides tried for the most part not to target civilians, it appears that both sides are now doing just that (while denying that they're doing it).

In January, when the Sri Lanka government declared all out war against the rebels, and promised to beat them by the end of the year, they were signaling a fundamental change in attitude: That they had run out of patience, and were willing to take whatever steps are necessary to win. And that usually means that winning the war is more important than protecting the lives of civilians -- exactly the Generational Dynamics concept of genocide.

So what can we expect next year?

It's evident that the Sri Lanka forces did not accomplish their mission of beating the Tamil Tigers by the end of 2008. Does that mean that they'll back off next year? Hardly.

What it means is that they'll be determined to redouble their efforts next year. They'll be even less concerned about the lives of civilians, as they push as hard as possible to win.

And how will the Tamil Tigers behave? Will they decide to surrender? Hardly.

Trapped animals -- and trapped people -- become increasingly vicious when they're trapped. The Tigers will be facing destruction, and they will stop at nothing to prevent it.

This is how crisis wars always proceed.

I like to compare a crisis war to a ball rolling downhill. The ball may (or may not) need a push to start, and it may be temporarily stopped by trees and rocks and other obstacles on the way down the hill. But it keeps gathering energy, and at some point its momentum becomes so great that it's unstoppable, until it reaches the bottom of the hill in an explosive climax that forever changes the landscape.

That's what Sri Lanka appears to be headed for now.

A number of news articles on the Sri Lanka war have been saying that "there's no end in sight." Actually, there is. An explosive climax, killing hundreds or even thousands of civilians, will be so devastating that it will cause both sides to recoil in horror at what they've done. That moment will signal the end of the Crisis era. Blame will be assigned, and the Recovery Era will begin. People on both sides will vow to devote their lives to making sure that nothing like that ever happens again. Thus does a new saeculum begin.

(Comments: For reader comments, questions and discussion, see the Geopolitical topics thread of the Generational Dynamics forum.) (27-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Have yourself a merry little Christmas.

Some music from World War II.

The 1942 movie Holiday Inn was fairly typical escapist fare -- a musical romantic comedy for people still suffering from the Great Depression. America had hoped that the war after the attack on Pearl Harbor would end in quick victory, but the Bataan Death March, as well as other setbacks in the Pacific and Europe, taught them otherwise.

And so, the song "White Christmas" from the movie, sung by Bing Crosby, became a surprise hit among soldiers, evoking nostalgia for their families back home.

    I'm dreaming of a White Christmas, just like the ones I used to know.
    Where the treetops glisten, and children listen
    To hear sleigh bells in the snow.

I'm dreaming of a White Christmas, with every Christmas card I write. May your days be happy and bright, and may all your Christmases be white.

The following year, in 1943, loneliness was a way of life. Bing Crosby scored another big hit, "I'll be home for Christmas." Germans and Japanese used to torture American soldiers by playing this song all the time.

Bing Crosby -- autographed picture sent to Bob Hope
Bing Crosby -- autographed picture sent to Bob Hope

    I'll be home for Christmas.  You can plan on me.
    Please have snow and mistletoe and presents 'round the tree.
    Christmas eve will find me where the love life gleams.
    I'll be home for Christmas, if only in my dreams.

The song, "Have yourself a merry little Christmas," has been changed in the last few decades into a cheerful little ditty. But in the 1944 movie, Meet me in St. Louis, it was a bitter, sad, angry song.

The daughter, played by Judy Garland, had just learned that this was her last Christmas with her lifelong friends in St. Louis. After the New Year, she and her family would be moving to New York. Although the plot of the movie takes place in 1904, this song was definitely in the spirit of 1944, when despair over torn families was at its deepest.

    Have yourself a merry little Christmas. Let your heart be light.
    Next year all our troubles will be out of sight. 
    Have yourself a merry little Christmas. Make the Yule-tide gay.
    Next year all our troubles will be miles away. 

Once again as in olden days happy golden days of yore. Faithful friends who were dear to us will be near to us once more.

Someday soon we all will be together if the Fates allow. Until then we'll have to muddle through somehow. So have yourself a merry little Christmas now.

Merry Christmas and Happy Holidays to everyone! (25-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

The effects of massive fiscal stimulus.

A study comparing Japan's deflationary spiral with ours shows the way.

Nikkei 225 Index -- Tokyo Stock Exchange -- 1984-2007 and 1914-2007.
Nikkei 225 Index -- Tokyo Stock Exchange -- 1984-2007 and 1914-2007.

Japan seems to run 10-20 years ahead of the United States, at least in the area of stock market crashes.

Japan had a major stock market crash in 1919, leading to a new bubble 65 years later, beginning in 1984, and a new stock market crash in 1990.

The US had a major stock market crash in 1929, leading to a new bubble 66 years later, beginning in 1995, and a major financial crisis beginning in 2007, probably with a new stock market crash to come soon.

Related Articles

Fiscal stimulus
The current stock market bubble correlates with bailouts and stimulus: This is another refutation of Richard Koo's stimulus theories.... (14-Oct-2009)
Fiscal stimulus programs in 1930s and today: Did Hitler really do everything right?... (1-Apr-2009)
The effects of massive fiscal stimulus - Part II: President-elect Barack Obama is turning apocalyptic in his speeches.... (12-Jan-2009)
The economic outlook for 2009 : How we got to where we are today, who's to blame, and where we're going in 2009. (5-Jan-2009)
The effects of massive fiscal stimulus.: A study comparing Japan's deflationary spiral with ours shows the way.... (24-Dec-2008)
One, Two, Three ... Infinity: Watching the world spin out of control.... (25-Nov-2008)

Thus, for people trying to understand what's coming, we have two big examples to look at: America in the 1930s, and Japan in the 1990s.

Now, an October presentation by Richard C. Koo, Chief Economist at Nomura Research Institute, compares Japan's 1990s deflationary spiral with America's in the 1930s and today. (The web site has links to the presentation slides (PDF) and to a video of the 1½ hour presentation.)

Koo says that what has happened in Japan -- a "balance sheet recession" -- is not in any economics textbook, and he now sees the same thing happening not only in the US, but in Europe, in Asia, and around the world.

I watched the entire 1½ hour presentation, and I was transfixed. This comparison of Japan with the US provides a great deal of insight into where the American and world economies are going.

A "balance sheet recession" occurs as follows (this is my way of formulating Koo's description):

Koo points out that this violates much of mainstream macroeconomic theory, which assumes that people and businesses will want to borrow money when interest rates are nearly zero. But monetary policy simply stops working.

Since monetary policy stops working, a government has to resort to fiscal policy -- a huge fiscal stimulus package. The purpose of this is to keep the GDP from falling. The government does the opposite of what the private sector is doing. The private sector is paying down debt, refusing to borrow and spend. The government borrows and spends huge amounts of money.

Richard Koo's presentation, exhibit 6, shows Japan's GDP kept growing during the 1990s.
Richard Koo's presentation, exhibit 6, shows Japan's GDP kept growing during the 1990s.

Koo addressed several issues that arise:

Koo notes that Europe needs to do a similar massive fiscal stimulus, but won't be able to because individual countries are prevented by the 1992 Maastricht treaty from spending more than 3% of GDP on fiscal stimulus.

As long-time readers of this web site know, I've been saying since 2002 that we're headed for a 1930s style Great Depression. I've read and commented on millions of words of stuff by people like Ben Bernanke, Paul Krugman, and other mainstream economists, and, as I've said many times, it's all crap. (In fact, during the course of his presentation, Koo also said that Bernanke, Krugman and mainstream macroeconomists were wrong.)

Koo's presentation is the first thing I've heard in years that's causing me to reassess some conclusions. I'm going to have to think about this for a few days or weeks, but these are my first thoughts:

I have a feeling that I'm going to be commenting on these concepts quite a bit in the next few weeks and months. For now, everyone who's into economics is urged to invest 1½ hours in watching the video of Koo's presentation.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (24-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Growing Sunni-Shia cyberwar in Mideast defeats Ahmadinejad's agenda

Sunni scholar Sheikh Yousef Al-Qaradawi is leading the anti-Shia, anti-Iran drive in Egypt and Saudi Arabia, triggering hostility and an internet cyberwar between Sunnis and Shia.

According to numerous articles translated by MEMRI (the Middle East Media Research Insitute), the attack on Shia Islam and Iran is being led by Sunni scholar Sheikh Dr. Yusuf Al-Qaradawi (Yousef Al-Qaradhawi), Chairman of the Cairo-based International Union for Muslim Scholars.

According to a MEMRI summary:

"In an interview with the Saudi daily Al-Sharq Al-Awsat, Al-Qaradhawi stated that rapprochement between the Shi'a and Sunna was impossible and that the spreading of Shi'a in a Sunni country was tantamount to an invasion of that country and its society. He said: "If a [Sunni] society notices [attempts to] spread the Shi'a within it, it will react with opposition and hostility." About Iran, he said that it had imperialist aspirations which went back to the ancient Persian era and the Sassanid period, and that it spent millions or even billions on spreading the Shi'a. Consequently, he said, anyone who embraced the Shi'a became loyal to Iran rather than to his own country, like the Shi'ites in Lebanon, who felt closer to Iran than to their Lebanese brothers. ...

In an interview with Al-Watan, he reiterated that Shi'ite activities in Sunni countries were backed by "a country with strategic goals, which was enlisting the [Shi'ite] faith in order to realize its desire to expand and enlarge its sphere of influence..." He added: "I want to cry out and warn my people and nation about the raging fire they may face unless they wake from their drunken slumber... Anyone who doubts my words need only look at what is happening in Egypt, Sudan, Tunisia, Algeria, Morocco, and in other Muslim countries in Africa and Asia, including even Palestine..."

Al-Qaradawi's anti-Iran drive has drawn adherents in Egypt, in Saudi Arabia, and in other Arab countries, including support by hundreds of of other Sunni clerics.

The tension began in 2007, when a Saudi hackers group attacked Shia web sites. Shia hackers retaliated, starting a cyberwar over the internet. According to some press reports, the cyberwar was triggered by a contest by Iranian officials to award prizes for attacking Israeli web sites. The contest backfired when the hackers attacked Iranian web sites instead.

The cyberwar started in 2007, when groups of Saudi Sunni hackers started hacking Shia web sites. At first, Iran's reaction was simply legal -- representatives of the targeted web sites brought legal action against the hacker groups in Saudi Arabian courts. By May, 2008, Shia hackers were targeting Sunni web sites.

Hostility has extended well beyond web sites. In June, 2008, a statement by 22 Saudi clerics accused Shia of heresy and trying to take over the Muslim world. The latter claim is certainly true, as we'll discuss below.

"In their statement, the clerics wrote: "… Of all ethnic groups in the [Muslim] nation, the Shi'ite community is the nastiest - it is the most hostile and treacherous towards the Sunnis… Islam and the Muslims are still suffering on account [of the Shi'ites], who are constantly plotting to destroy [the Sunnis] and their religion. [Moreover, the Shi'ites] grab every opportunity to back the enemies of the Muslims, and if they have a state of their own, they subjugate its Sunni residents and rule over them, as is the case in Iran and Iraq. They sow internal strife among the Muslims, along with all kinds of corruption and destruction, and undermine the security of Muslim countries. This has happened during several pilgrimages to Mecca and also to the supporters of Badr Al-Din Al-Houthi in Yemen…"

In July, 85 Shia clerics responded by saying that those "who issued fatwas accusing others of heresy were responsible for the appalling bloodshed in Saudi Arabia and the Islamic world." The Shia clerics demanded that the Sunni clerics "engage in self-scrutiny and examine the current situation of the Shi'ites objectively and conscientiously."

Al-Qaradawi's statements became extremely strident in September, as described by this MEMRI translation:

"In his September 8-9, 2008 interview with Al-Masri Al-Yawm, Al-Qaradhawi was asked who posed a greater danger to Islam - the Wahhabis or the Shi'ites. He replied: "...The Shi'ites are Muslims, but they have strayed far [from the truth]. The danger they pose lies in their attempt to infiltrate Sunni society. They are [well] equipped for this [task], having great wealth, estimated in the billions [of dollars], as well as a legion of missionaries trained to spread the Shi'a in Sunni countries... I recently discovered to my sorrow [that there are] Shi'ite Egyptians. In past decades, the Shi'ites could not get even one Egyptian [to embrace the Shi'a]. From the days of Salah Al-Din Al-Ayyoubi [in the 12th century] to 20 years ago, there wasn't a single Shi'ite in Egypt. Today they write in the papers and appear on TV, and publicly profess their Shi'ism..."

In response to criticism evoked by his statements, Al-Qaradhawi only reiterated his position. In a communiqué, he wrote: "I stand by my statements about the Shi'ite attempts to infiltrate Sunni societies. It is the duty [of the ulama] to come out against this - for if we fail to do so, we betray the role that has been entrusted to us and our obligation to the Muslim nation. My warnings about this invasion are intended to open the eyes of the nation to the dangers it is facing..."

The cyberwar has intensified since September, following Al-Qaradawi's strident anti-Shia statements. The forms of hacking became more stident as well. Sunni hackers defaced the web sites of Iraq's Grand Ayatollah Ali al-Sistani and other prominent Shia leaders with messages maligning and deriding the Shia faith and its leaders.

In return, Shia hackers attacked dozens of Sunni Wahhabi sites, including those of prominent Sunni clerics, saying "this is only the beginning" of the Shia attack, and quoting a Koranic verse: "One who attacketh you, attack him in like manner as he attacked you... [Koran 2:194]."

Al-Qaradawi's statements have split the Muslim community along Sunni-Shia lines, but have also split the Muslim Sunni community itself. Many Sunni clerics have criticized Al-Qaradawi's stridency, and the leadership of Egypt's Muslim Brotherhood has even renounced Al-Qaradawi's views on Iran and the Shia.

However, ordinary Sunni Muslims seem to be joining with Al-Qaradawi. A group of 40 Egyptian Muslim Brotherhood members, all of them from the media and academia, issued a statement strongly supporting Al-Qaradawi's views. Human Rights Watch has accused Saudi authorities of systematically discriminating against Shia. Saudi authorities have been shutting Shia clerics out of Muslim conferences, and have even shut down Shia mosques.

The growing Sunni - Shia conflict

Iran's Ayatollah Khamenei, the Leader of the Islamic Revolution that began in 1979, has been warning against a Shia-Sunni rift. "We have intelligence that an institution, supported by the global arrogance funds, the publication of certain books which insult the beliefs of Sunnis or Shias." I don't know what institution he's referring to (possibly the United Nations), but I'm pretty sure that the "global arrogance" refers to the US and/or Israel.

As I've written in my analysis of Iran's strategy, Iran would like to gain hegemony over the entire Mideast. To this end, they've provided money to the Palestinians, armed Hizbollah to fight Israel, supplied Shia terrorists in Iran with materials for roadside bombs, and supplied Sunni terrorists in Afghanistan with materials for roadside bombs. In addition, Iran's president Mahmoud Ahmadinejad, who is a religious fanatic and believes that the Mahdi is coming soon to unite the world behind Shia Islam, has been making provocative statements about wiping Israel off the map.

Thus, the Sunni-Shia conflict is a major defeat for Iran's agenda. The hope that all Muslims will unite under Iranian hegemony is being shown for crazy idea that it always was.

What I found most interesting in researching this Sunni-Shia conflict is that the Sunni side is clearly offensive, while the Shia side is clearly defensive (or, at least, reactive).

This is consistent with the differences between Iranians versus Saudis and Egyptians from the point of view of Generational Dynamics.

Saudi Arabia and Egypt are in generational Crisis eras, and so are "attracted toward" war. Survivors of the previous crisis wars have almost all died, so the crisis wars' horrors are now forgotten. Iran is in a generational Awakening era, just one generation past the genocidal Iran/Iraq war of the 1980s, and so is "attracted away from" war today.

Mideast: Red=mostly Sunni, Green=mostly Shia, Yellow=conflict
Mideast: Red=mostly Sunni, Green=mostly Shia, Yellow=conflict

If you look at the above map, it will help you in understanding what's going on in the world if you realize that the strip of countries across the top -- Lebanon, Syria, Iraq, Iran and Afghanistan -- are in or entering generational Awakening eras, having had huge crisis wars in the 1970s-90s.

Most of the other countries, including Egypt, Israel, Saudi Arabia, Pakistan and India, are in generational Crisis eras.

We've seen the results of these differences time and again, as I've described many, many times on this web site, including some extremely dramatic examples:

Since that report was written, the situation in Afghanistan has worsened, largely because of the influx of hundreds (or thousands) of al-Qaeda linked terrorists from central Asia and the Arabian peninsula. This influx has substantially complicated the Afghan war, especially since al-Qaeda terrorists can use the FATA (Federally Administered Tribal Areas) along the border between Pakistan and Afghanistan, as safe havens and training grounds.

The Iranian model for Sunni Islamists

In the preceding paragraphs, I've described several examples of Sunni-Shia conflict, but there's a common thread that runs through all of it: It's really the Sunni Islamists, led by al-Qaeda, that are the most aggressive and warlike at the present time. This is because the Sunni countries in the region are largely in generational Crisis eras, while the Shia countries are not.

And there's a special irony in the fact that much of the Sunni Islamist strategy is inspired by the 1979 Islamic Revolution in Iran, and the Iran/Iraq war that followed immediately.

There's little memory or knowledge of these events among Americans, including (or especially) the politicians, analysts, journalists and experts in Washington, but these events were momentous in the Muslim world, as the latest chapter in the centuries-old wars between Sunnis and Shia, and between Persians and Arabs.

What the Sunni Islamists are hoping for is a repeat of the 1979 Islamic Revolution, but this time for Sunni Islam. This was al-Qaeda's goal in Iraq, but that goal has been largely defeated, as the Iraqis themselves expelled al-Qaeda.

It's also their goal in Somalia, which is currently under attack by Sunni Islamist extremists. Taking control of Somalia would be a major victory, since it would provide another safe haven, like the one in Pakistan's tribal regions. Control of Somalia would be a huge victory for Sunni Islamists, since they could launch attacks against the entire region, using Somalia as a base.

For Sunni Islamists, the big prize would be Pakistan itself. It's widely believed that the al-Qaeda linked terrorist group, Lashkar-e-Taiba (LeT), perpetrated the recent terrorist attack on Mumbai, India, with the goal of provoking a war between India and Pakistan. The fantasy hope would be a Sunni-based Islamic revolution that would spread throughout both countries. Even if it simply gave control of Pakistan to the Islamist extremists, that would put nuclear weapons into the hands of al-Qaeda.

From the point of view of Generational Dynamics, we're headed for a Clash of Civilizations world war, with many components, including India versus Pakistan and Israelis versus Palestinians.

What's really interesting is the question of how Iran will be aligned. I've pointed out in the past that while Iran's leaders are anti-American and anti-Israel, the Iranian people are very pro-Western. They may not like having Americans in Iraq, but right now Iranians, especially young Iranians, still like Americans more than they like their own leaders, and have no desire for war with Israel. As time goes on, it's becoming more and more apparent that Iran will be aligned with the India, Russia, American and the west, versus Pakistan, Sunni Muslims, China, and Bangladesh.

(Comments: For reader comments, questions and discussion, see the Geopolitical topics thread of the Generational Dynamics forum.) (22-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Ten "outrageous" predictions for 2009 from Saxo Bank

How many will come true?

Copenhagen-based Saxo Bank has provided the following list of "rare but high impact" predictions. Here they are, with my comments:

"Saxo Bank’s Outrageous Claims for 2009:

1) There will be severe social unrest in Iran as lower oil prices mean that the government will not be able to uphold the supply of basic necessities."

I agree, but this is hardly a big deal. Iran is facing a growing generation gap, as well as numerous internal problems. However, Iran's stock markets are doing much better than stock markets in other countries.

"2) Crude [oil] will trade at $25 [per barrel] as demand slows due to the worst global economic contraction since the great Depression."

I agree that it will at least be close. This is an interesting one.

Oil was selling for $147 per barrel just a few months ago, boosted by China's seemingly unending thirst for every drop of oil it could get. By the Law of Mean Reversion, the price of oil had to crash, and remain low for years, and that seems to be happening now.

There's an amusing twist to this situation. You may recall that last summer, many ideological pundits were blaming the high oil prices on "speculators." As I explained at the time, that was impossible, since there was no evidence of hoarding oil, and it would be necessary for millions of barrels of oil to be hoarded to make any real difference in price.

Well, the amusing twist is that speculators are trying to hoard oil today. Here's the story:

"Oil Tankers Camped Out in Hope of OPEC Slashing Production

According to Bermuda-based shipping company Frontline, owner of one of the world’s largest fleets of oil tankers, between 20 and 25 oil supertankers have been chartered for floating storage over the last few weeks – equivalent to something in the region of 50 million barrels of oil.

The host of very large crude carriers (VLCCs) are camped out at various locations across the globe including: the U.S. Gulf of Mexico, the North Sea, in India and also in Malaysia. Royal Dutch Shell, BP and Koch Industries are among the companies thought to be stock-piling reserves in hope of a Christmas bonus, if OPEC price cuts send prices rising once again.

More sensational – yet unconfirmed – reports have estimated that there are in the region of 300 vessels floating, like sitting ducks, outside of the port of Fujairah in the United Arab Emirates alone.

In addition several state oil companies, from countries such as Iran, are thought to be behind the surplus storage activity. The speculation has stemmed from three of Iran’s supertankers: Noah, Dena, and Manah, having all been at, or near, the country’s Kharg Island loading facility since before the beginning of December – according to AISLive ship-tracking data. ...

The increased activity in tanker markets, according to Jens Martin Jensen (acting Managing Director and Chief Executive Officer of Frontline), can be directly attributed to the oil market's contango structure –where near-term futures contracts are cheaper than contracts further into the future. Such an upward sloping forward curve provides producers with the incentive to sit upon crude supplies so to secure higher anticipated returns in the future."

So what the pundits were claiming the speculators were doing last spring is actually what the speculators are doing today, hoping that the price of oil will go back up. But the speculators are failing.

The real reason for the fall in the price of oil and other commodities is the collapse of world wide transportation and trade, and that's related to the rapid collapse of the Chinese economy.

The price of oil is still plummeting, and may reach $25 per barrel, as the Saxo Bank predicts.

Let's go on to the next prediction:

"3) S&P will hit 500 [roughly equivalent do a Dow Industrials index of 5000] in 2009 because of falling earnings, vaporizing housing equity and increased cost of funds in the corporate sector."

As I've been saying since 2002, Generational Dynamics predicts a stock market fall to the Dow 3000-4000 range, or lower, since the stock market has been overpriced by 200% until recently. However, the timing (end of 2009) cannot be predicted.

"4) The EU is likely to crack down on excessive government budget deficits in several member states, and Italy could live up to previous threats and leave the ERM [European Exchange Rate Mechanism] completely."

This is a political prediction, reflecting the weakness of Italy's economy.

In 2004, I posted an article on how euro zone countries could withdraw from the euro, and return to their national currencies, based on a report by JP Morgan. As far as I know, that mechanism still holds today.

"5) The AUDJPY [Australian dollar to Japanese yen exchange rate] will drop to 40. The decline in the commodities markets will affect the Australian economy."

For the last couple of years, the Australian dollar versus Japanese yen exchange rate was about AU$1 = 100 yen. Starting in August of this year, the Australian dollar started collapsing, and is now at 60 yen. The Saxo Bank prediction is 40 yen.

Australia's problems are related to the falling commodities prices and, once again, that's related to the collapse of worldwide transportation and trade. In particular, Australian firm Rio Tinto, the second largest mining firm in the world, is laying off 14,000 workers.

"6) EURUSD [euro to US dollar exchange rate] will fall to 0.95 [$0.95 per euro] and then go to 1.30 [$1.30 per euro] as European bank balances are under tremendous pressure because of exposure to the faltering Eastern European markets and intra-European economic tensions."

The exchange rate reached almost $1.60 per euro last year. Since then, the dollar strengthened to $1.25 per euro, and has weakened again to $1.40 per euro. The Saxo Bank prediction is that the dollar will strengthen further against the euro.

This is counter-intuitive to a lot of pundits, who have been predicting inflation or hyperinflation for the dollar.

Generational Dynamics is able to make broad predictions based on generational trends, but specific exchange rate predictions are not possible.

Several months ago, I wrote "What's coming next: Understanding the deflationary spiral," in which I explained what's going on with currencies, and why the dollar and the yen were getting stronger, while the euro was getting weaker.

Pundits have been predicting that the US dollar would experience inflation or even hyperinflation (like the Weimar republic experience,) but that has never made any sense, because of the collapse of the credit bubble.

The dollar and the yen have, in fact, been strengthening against other currencies (the yen more than the dollar), which is what we'd expect from the trend prediction. The Saxo Bank prediction says that the trend prediction will continue.

"7) Chinese GDP growth drops to zero. The export driven sectors in the Chinese economy will be hurt significantly by the free-fall economic activity in the Global Trade and especially of the US."

The rapid collapse of the Chinese economy makes this prediction almost a sure bet.

"8) Pre-In's First Out. Several of the Eastern European currencies currently pegged or semi-pegged to the EUR will be under increasing pressure due to capital outflows in 2009."

Eastern European countries are highly dependent on Russia for energy.

"9) Reuters/ Jefferies CRB Index to drop to 30% to 150. The Commodity bubble is bursting, with speculative excesses so large they have skewed the demand and supply statistics."

Commodities prices are falling rapidly.

"10) 2009 will see the first Asian currencies to be pegged to CNY. Asian economies will increasingly look towards China to find new trade partners and scale down their hitherto US-centric agenda."

Putting any long-term faith in China's economy is definitely counter-trend. China's economy is collapsing rapidly, and will continue to do so.

Furthermore, China is becoming increasingly politically unstable, and is approaching a civil war.

In the end, the ten "outrageous" Saxo Bank predictions aren't really all that outrageous (except for the last), since most of them generally follow trends predicted by Generational Dynamics for years.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.)

Also, for those interested in discussions of short-term technical analysis, led by an international investment expert, check out the Chartists Forum thread. (19-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Fed's desperation move may be prompted by $50 billion Madoff swindle

On Tuesday, the Fed lowered interest rates to 0% and promised a flood of money on Tuesday, in the face of continually worsening economic news.

Most shocking was the 1.7% fall of the seasonally adjusted Consumer Price Index (CPI), indicating that the process of deflation was accelerating, the biggest drop since 1947. On a non-seasonally adjusted basis, the CPI fell by the biggest decline since 1932, the heart of the Great Depression.

In response, the Fed lowered the Fed funds rate from 1% to an effective value of 0% (specifying a target of 0-¼%).

An interest rate decrease is not going to do much to change the current worldwide credit crisis, and so the Fed is promising more: To flood the financial system with as much money as possible.

Here's an excerpt from the Fed statement:

"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity."

These techniques, flooding the financial system with money, are called "quantitative easing." These are techniques that are used when interest rates have reached 0%, and can't go any longer.

I heard one pundit today say that there's no limit to the amount of money that the Fed can create -- even one quadrillion dollars ($1,000 trillion). (See "One, Two, Three ... Infinity.")

I admit right now to finding this whole concept absolutely stunning, but I'm also bemused because I can't see how it can possibly work. And that's because there's been a generational change of attitude that will not be reversed.

If quantitative easing is to work, then it has to use money that Fed creates to replace money that was created by the massive real estate and credit bubbles. How do you do that?

The credit bubble was created by massive fraud at all levels -- from people lying on loan applications to lenders providing predatory loans to banks creating worthless securities to ratings agencies and insurance agencies giving these securities AAA ratings in return for fat fees.

That fraudulent infrastructure is entirely gone now. There's no way to grant loans to people lying on loan applications; there's no way to provide predatory loans any more; no one would invest in worthless mortgage-backed securities; ratings agencies and insurance agencies have suddenly "gotten religion" for their own survival.

So the Fed can pour as much money into banks that it wants, but there's no place for the money to go.

As I've said many times, the crisis was caused by a lethal combination of stupid, greedy Boomers being led by destructive, greedy Gen-Xers. The generational change is that a lot of lessons have been learned, and the risk-seeking behavior that allowed the bubbles to grow has been replaced by risk-averse behavior that is now deeply embedded in both these generational groups.

The fond wish of policy makers is that if the Fed only puts enough money out there, then people will become risk-seeking again. But that's impossible: Are they really hoping for a lot of money to be lent in new subprime mortgages that will never be repaid? Of course not.

That's why quantitative easing will fail.

And incidentally, that's why Obama's massive stimulus package will fail as well. The plan is to pour hundreds of billions of dollars out into "shovel-ready" projects -- repairing roads and bridges, etc. But those jobs all take special skills and special equipment that can't be made available for months.

Law of Diminishing Returns

I've discussed the Law of Diminishing Returns several times in the past, and a year ago I had a lengthy discussion of it to explain the answer to the following question:

"If there's more than enough food in the world to feed twice the world's population, then why are people starving?"

Now I'm going to apply the same Law to the following question:

"Why do things like government stimulus packages and Fed interest reductions and quantitative easing become less and less effective as time goes on?"

The Law of Diminishing Returns says this: Suppose you have a process that requires multiple resources, A, B, C, ..., and produces an output X. Suppose that you keep adding more and more A to the process, without adding any more B, C, .... Then the law says each additional unit of A that you will be less and less effective in producing more X.

In this case, the resource that's being added is money.

When the credit crisis began in August, 2007, then the Fed lowered interest rates, and that seemed to solve the problem.

Each time the problem got worse, the Fed would do something more: More aggressive interest rate reductions, small bailouts, bigger bailouts, huge bailouts, etc., combined with a fiscal stimulus package last summer.

As I wrote last month in "One, Two, Three ... Infinity,") each of these bailouts was bigger than the last one, and seemed to be approaching infinity.

And now, as if to prove my point, we have the pundit that I quoted above saying that we could even have a one quadrillion dollar bailout if necessary.

But the Law of Diminishing Returns says that it won't do any good. Each time the bailout got bigger, the effect got smaller, and lasted less time. Now, as the bailout really does seem to be approaching infinity, the amount of benefit appears to be approaching zero.

You know, I'm always applying these laws that I talk about all the time:

A lot of people think these laws don't matter. But what you're seeing now is the Law of Diminishing Returns, in action, right before your eyes.

The $50 billion Bernard Madoff swindle

This is being called the biggest Ponzi scheme (or pyramid scheme) in history. Madoff was able to convince investors to let him invest as much as $50 billion of their money.

And why not? 70 year old Madoff has been a financial manager since 1960. For a while, he was chairman of the Nasdaq Stock Market. He had an unblemished record, and he always provided good returns to his investors.

At some point, he began using one investor's money to pay off the dividends of other investors. This worked fine, as long as he could use his charm to convince more and more investors to invest more and more money. Ponzi schemes always start falling apart when economic conditions deteriorate, and people start asking for their money back, and that's what happened to Madoff. Last week he was arrested for fraud.

Many big institutions were victimized. Banks around the world lost billions of dollars. Steven Spielberg, real estate mogul Mort Zuckerman, and New Jersey Senator Frank Lautenberg were victims.

But it's the small investors who are hurt the most. Many old people simply trusted Madoff with the all their money, and now they've lost everything and may be facing homelessness.

In fact, even when banks were hit, they won't be the ones to suffer: In many cases, it's the bank's clients who will lose instead.

Strangely, the Jewish community may have been the hardest hit. Madoff was a highly respected, leading Jewish financier and philanthropist, and so many Jews trusted their money to him. This included many friends who had known him for years.

The SEC gets blamed - boo hoo

One of the most pathetic organizations in Washington is the Securities and Exchange Commission (SEC). The SEC was created in the 1930s to prevent another stock market bubble like the one in the 1920s, and they completely failed at that mission with the dot-com bubble of the 1990s and the various more recent bubbles.

A few months ago, the SEC was blaming economic problems on "false rumors." What a pathetic agency, to put out such garbage. They particularly blamed the collapse Bear Stearns on such rumors. This, despite the fact that Bear Stearns had been an industry leader in 2007 in creating worthless securities and repeatedly lying to the public about their value.

Now, with the Madoff scheme, the SEC actually investigated Madoff a couple of years ago, but gave him a clean bill of health, even though there were numerous warning signs, and there had been some complaints filed with the SEC.

The lethal combination of incompetent Boomers and destructive Gen-Xers also applied to regulatory agencies like the SEC. Just as the investment banks that created the worthless mortgage-backed securities were guilty of financial fraud, the SEC could well be found guilty of commiting regulatory fraud, defrauding the public with their stupidity.

Expect a flood of swindlers

What you're seeing, Dear Reader, is just the beginning of the flood of swindles and fraud that will be exposed in the next couple of years.

There was a great deal of embezzlement and fraud leading to the Great Depression of the 1930s. I've quoted this passage before, but it's worth posting again. John Kenneth Galbraith described what happened -- and what will happen again -- in his 1954 book, The Great Crash - 1929, as follows:

"In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in -- or more precisely not in -- the country's businesses and banks. This inventory -- it should perhaps be called the bezzle -- amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.

The stock market boom and the ensuing crash caused a traumatic exaggeration of these normal relationships. To the normal needs for money, for home, family and dissipation, was added, during the boom, the new and overwhelming requirement for funds to play the market or to meet margin calls. Money was exceptionally plentiful. People were also exceptionally trusting. A bank president who was himself trusting Kreuger, Hopson, and Insull was obviously unlikely to suspect his lifelong friend the cashier. In the late twenties the bezzle grew apace.

Just as the boom accelerated the rate of growth, so the crash enormously advanced the rate of discovery. Within a few days, something close to universal trust turned into something akin to universal suspicion. Audits were ordered. Strained or preoccupied behavior was noticed. Most important, the collapse in stock values made irredeemable the position of the employee who had embezzled to play the market. He now confessed.

After the first week or so of the crash, reports of defaulting employees were a daily occurrence. They were far more common than the suicides. On some days comparatively brief accounts occupied a column or more in the Times. The amounts were large and small, and they were reported from far and wide. ...

Each week during the autumn more such unfortunates were reveled in their misery. Most of them were small men who had taken a flier in the market and then become more deeply involved. Later they had more impressive companions. It was the crash, and the subsequent ruthless contraction of values which, in the end, exposed the speculation by Kreuger, Hopson, and Insull with the moey of other people. Should the American economy ever achieve permanent full employment and prosperity, firms should look well to their auditors. One of the uses of depression is the exposure of what auditors fail to find. Bagehot once observed: "Every great crisis reveals the excessive speculations of many houses which no one before suspected." [pp. 132-35]

Galbraith's point was that there were many criminal activities going on before the 1929 crash, but nobody cared, as long as everyone was making money. But once the crash occurred, any irregularity was viewed with suspicion and led to an investigation. These investigations turned up many cases of embezzlement -- people who had "temporarily borrowed" money that wasn't theirs to invest in the stock market, and then got caught in the crash.

That's happening again. If you're one of the people who have committed embezzlement or fraud, then it's time to put your affairs in order, because you're going to get caught. A lot of others will be caught as well.

I heard a pundit today describe why so many people were taken in by Bernard Madoff:

"People didn't diversify their investments, there was a stunning lack of due diligence, and a willingness of people to suspend belief about consistent returns that others pointed out were almost statistically impossible -- too good to be true."

This raises a good point: Madoff's scheme was not the biggest swindle in history. Far from it.

The biggest swindle in history was perpetrated by Bear Stearns and other investment banks that created worthless mortgage-backed securities, and sold them to hapless investors. The swindle was also perpetrated by media like the Wall Street Journal and CNBC who, to paraphrase the above quote, "showed a stunning lack of due diligence, and a willingness to suspend belief about consistent returns that others -- including this web site -- have pointed out were almost statistically impossible -- too good to be true."

This swindle is still going on today.

Hedge funds and a financial crash

This brings us back to the Fed's interest rate cut to 0% on Tuesday. What was the source of the panic that led them to do this?

$50 billion is effectively gone - disappeared - and that's a hell of a lot money.

Hedge funds have been in a great deal of trouble anyway. They've been losing money this year, as the market fell, and investors have been getting nervous about losing their money. According to one estimate I've read, of the 10,000 hedge funds in the world, about 3,000 were going to collapse in the next few months anyway.

The Madoff swindle makes the situation much worse. The $50 billion loss will trigger other losses. A chain reaction has already begun whose full extent won't be known for some time.

That's the kind of thing that is panicking the Fed. It's exactly this kind of chain reaction that can cause a worldwide panic. In fact, the next-to-last international generational financial crisis, the Hamburg crisis of 1857 (panic of 1857), was triggered by a small event -- an employee of the New York branch of the Ohio Life Insurance and Trust Company was found to have embezzled money.

Generational Dynamics predicts that in fact there will be such a panic -- a worldwide panic that will be as memorable as the crash of 1929. There's no way to predict whether it will be triggered by the Madoff swindle or by something else, it's coming with absolute certainty.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (17-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

World wide transportation and trade sink farther into deep freeze

Chinese officials were shocked this week to learn that exports in November had fallen 10.4% from the previous month, and were down 2.2% from November of last year.

Even more dramatic, Chinese imports were down an astounding 18%.

These figures illuminate the rapid collapse of the Chinese economy. But more than that, they illuminate the rapid collapse of the entire worldwide trade and transportation mechanism.

Increasingly, for several years, the Chinese economy has been the epicenter of the world's transportation and trade, importing much of the world's mined copper, iron ore, lead and zinc. For example, until recently, China consumed a quarter of the world's copper. China would import parts and other intermediate goods from other Asian countries in the region, and would use all of these imported goods in their own factories, manufacturing finished products for export to America and Europe.

Baltic Dry Index and price of copper for 2004 to 14-Dec-2008 <font size=-2>(Source:</font>
Baltic Dry Index and price of copper for 2004 to 14-Dec-2008 (Source:

To many people, the biggest shock of all is the 90% collapse of the Baltic Dry Index in the last six months or so, as shown on the adjacent chart.

The Baltic Dry Index is a measure of shipping costs for cargoes in "capesize" vessels -- vessels that are too large to fit through the Suez or Panama canals, and so must go around the Cape of Good Hope or Cape Horn. These vessels transport the huge cargoes of copper, iron ore and other commodities that China has been importing.

Most analysts realized that the BDI was in a bubble, and that the bubble would have to fall, but none of these analysts were expecting the fall of over 90%, from a high of around 11,700 to it's current value of 691.

Analysts had expected it to fall to its previous average, around the 3,000 to 4,000 level. But what we're seeing is the Law of Mean Reversion in action. Some people have written to me, questioning whether the Law of Mean Reversion is a "real law." The 90%+ collapse of the BDI is an example. Instead of falling to its previous average, the BDI has fallen well below, and will probably not return to its previous average for several years.

Incidentally, the chart above contains a secret. It shows how the price of copper has also collapsed, but only to its previous average. By the Law of Mean Reversion, the price of copper is going to fall much farther.

The chain reaction spreads far and wide. Rio Tinto, the second largest mining firm in the world, will cut 14,000 jobs. As one company after another tanks and lays people off, more companies are forced to do the same.

Last month, I quoted an interview with Simon Rose, CEO Dahlman-Rose, an expert on international shipping and trade.

Singapore golf course <font face=Arial size=-2>(Source: Bloomberg tv)</font>
Singapore golf course (Source: Bloomberg tv)

On Thursday, Rose appeared again on Bloomberg tv, bringing with him a photo of a Singapore golf course. Here's my transcription of most of the interview, in which he explains that the importance of the picture is not the golf course, but what's in the background:

"In the background of every picture are a lot of ships, laying in anchor, riding high in the water, with no cargoes. And that's pretty much where we are. We've had a 4 day rally in the Baltic Dry Index, and we're still off over 90% for the year, so the relief of a 4-day rally is being seen in some of the equities. But it's incredibly painful. And it's [indicative] of what's going on in global trade.

There's an incredible amount of financial destruction and pain at every level of the supply chain, whether it's a mine worker whose digging a mineral out of the earth, or being laid off by Rio Tinto, which is a direct corollary. The trains that take it to the port. The ships that take it from the port to the smelter. The smelter workers. There's just an incredible amount of financial destruction right now, and no one could have foreseen that this global calamity in terms of credit availability would cause this.

There are two things to look at. There are letters of credit, which were a major problem the last time we spoke, a month ago, and they're starting to loosen up a little bit. You can more products slightly more readily.

But the larger issue is project finance -- big projects that require steel, require concrete. The financing just isn't there. The financing market is still frozen for these large projects. And until we see that start to loosen, these stimulus packages, the dollars being talked about have to be spent. ...

There's about $500 billion worth of new builds [of new ships] on order, $250 billion of capital roughly has been committed against those new builds. A lot of that capital is being taken off the table by banks, if they can -- they're just scrounging for the money themselves. The $250 [billion] that's not committed probably won't get committed.

Simon Rose, CEO, Dahlman Rose <font face=Arial size=-2>(Source: Bloomberg tv)</font>
Simon Rose, CEO, Dahlman Rose (Source: Bloomberg tv)

So it's a real mess right now, and the problem from a ship owner's perspective is, you thought you had a loan, a commitment from a bank, is it really a commitment, can they take delivery of a $150 million ship that might be worth a fraction of that today - does that stress the credit agreement that you have with the bank. It's just an absolute mess.

This is an industry that is in absolute chaos, and it's in chaos not because of anything that the ship owners or the mineral people or the steel mills could foresee. They were absolutely blindsided by this."

Companies around the world have been blindsided.

And the problems aren't just hurting Asia. The same things are happening to American domestic firms, as companies in industries ranging from trucking to railroads to ocean shipping are scaling back sharply. According to one analyst, 2008 "is going to be the worst year for transportation demand in 30 years."

Negative interest rates versus public debt

Beyond the transportation industry, a variety of economic indicators are showing results that haven't been seen in decades.

Most people believe that interest rates can never go below zero. Why would you ever pay someone to let him loan you some money?

But negative interest rates became a reality last week in the sale of Treasury bills.

When the Treasury Dept. auctions off Treasury bills, investors can bid on them, essentially as a very safe investment. When the T-bills expire (say, after 3 or 6 months), the investors redeem them to get their money back, plus interest. The amount of money they get back is always the same, and so the interest rate (or "yield") depends on the price they initially paid for them. The higher the price at auction, the lower the yield.

In "normal" times, the yield is a little higher than the overnight Fed Funds rate, which is currently set at 1%.

On Tuesday, interest rates went negative. Specifically, the Treasury sold $27 billion of 3-month T-bills with a negative yield: -0.01%. $30 billion of 4-week T-bills were sold at 0% yield. This is the first time that this has happened since 1929.

This is a measure of the increasing "risk aversion" of investors. People (like CNBC anchors) who are fantasizing that someone in Washington will wave a magic wand and make the credit crisis disappear should understand what's going on. Investors are so unwilling to invest or lend money that they're actually paying the US Treasury to hold their money for them. It's like putting your money into a safe deposit box, where you get no interest but also pay for the box.

As I've said many times, what's important to Generational Dynamics is changes in attitude and behavior of large masses of people. In the past year, we've seen enormous changes in risk aversion among investors, going from a willingness to invest in the stupidest things to a reluctance to invest in anything that carries any risk at all.

That's why it's interesting, from the point of view of Generational Dynamics, that we're seeing more and more speculation of the the possibility of a default by the US Government.

Public debt as percentage of GDP <font size=-2>(Source: Financial Times)</font>
Public debt as percentage of GDP (Source: Financial Times)

The reason for this increased concern is the exponential growth of public debt. I first posted an earlier version of the following graph in a 2004 article.

Here's an updated version of a graph that shows public debt as a percentage of GDP. (The vertical bars indicate times of recession.)

As you can see, public debt has been growing steadily since the early 1950s. But if you look closely, you'll see that public debt was beginning to level off in the early 1990s. But then, in 1995, it turned sharply upward, and has been increasing ever since.

Of course, 1995 was the beginning of the dot-com bubble, and it was also the point in time when the risk-averse survivors of the Great Depression all retired or died, leaving behind the Boomers to run things, and increase debt to uncontrolled levels. In the 2000s, the Gen-Xers joined in the fun, and now the public debt is streaking into the stratosphere, with no sign of stopping.

In the early days of this web site, I would get comments like the following: "How can you ever be wrong? If there's no stock market crash, then all you have to say is that it's still coming. You can never be wrong."

My response was: "I'll be happy to admit I was wrong when the exponential growth of balance of payments deficit and public debt begin to level off and start falling. Unless that happens, a stock market crash is coming with absolute certainty."

Now, many years later, the balance of payments deficit and public debt are still growing exponentially, with no sign of stopping, and no hope of stopping them.

A forum member has pointed out a a recent video interview of 80 year old former Goldman Sachs Chairman John Whitehead.

Whitehead lists a number of problems the country has, each of which will require multi-trillion dollars of expense: the social security and medicare bankruptcy, universal health insurance, infrastructure (all our bridges and roads were build 50+ years ago), energy independence, global warming, foreclosures, credit card defaults, etc.

Nobody's talking about cutting any of these programs or any expenses, which means that public debt will continue to grow exponentially, until something makes it stop.

Stein's Law: If something cannot go on forever, then it won't.

You can listen to the clowns in Washington, including President-elect Obama, and you won't hear a peep about cutting expenses to reduce the level of public debt. Just the opposite -- all they talk about is spending as much money as possible. (See "One, Two, Three ... Infinity.") I really have to laugh when I hear any of these clowns talk about this stuff.

In fact, my mind was totally boggled in one of the Sunday morning news shows when I heard one political pundit say -- and I'm not joking -- "This financial crisis presents a historic opportunity for Obama, because the ideological Republicans won't be able to stop him from spending money on a variety of new programs," referring to list of problems similar to Whitehead's above.

Can you believe this? This is what passes for "analysis" on these shows. These journalists, politicians and pundits are the stupidest bunch of clowns imaginable. And later, when the crisis comes, they'll all be saying, "Gawrsh -- nobody could have seen THAT coming."

Whitehead sees it coming. He was a teenager during the Great Depression, and in the video he concludes that the current financial crisis will be "a worse depression than the one in the 1930s." No kidding!"

As I'm writing this, there's a segment on CBS's 60 Minutes, with the title, "A Second Mortgage Disaster On The Horizon?"

Apparently the clever geniuses at CBS news have just discovered about adjustable rate mortgages (ARMs). These are mortgages that were approved at very low "teaser" interest rates, sometimes as low as 1%. The great mass of these ARMs are going to reset in 2009 and 2010, and a homeowner's $1000 a month mortgage will suddenly go to $4000 a month.

Well, I've writing about these mortgages for several years now, and so have a lot of bloggers.

When you listen to the 60 Minutes segment, you hear the anchor, Scott Pelley, use that gee-whiz tone of voice when he says stuff like, "Wow! I didn't know that was going to happen." Well, it's nice that the geniuses at CBS News finally caught on to what a lot of people were talking about years ago.

The beginning of a new world

The title of this article is "World wide transportation and trade sink farther into deep freeze." I started this article by painting a picture of increasing destitution around the world, as factories and stores close, and people become jobless and homeless.

During the last two years, many people were speculating about a US recession, and there was a big debate at all the big economics conferences and among television economists about "decoupling." According to this theory, other countries' economies had "decoupled" from America's economy, so that a US recession would have no noticeable effect on other economies.

This is one of those ideas that only a complete moron (or a mainstream economist) could possibly believe, or even consider.

What's actually happened is that America and China, two civilizations that have always been almost completely foreign to one another, are now locked together, arm in arm, in a death spiral downward that will leave both countries, and all of their neighbors, economically devastated.

From the point of view of Generational Dynamics, there is still one more "shoe to drop" -- a massive, worldwide generational panic and crash. I've described many times what I expect to see happen; here's a summary: An elemental force of nature, where millions or even tens of millions of Boomers and Generation-Xers in countries around the world, never having seen anything like this before, and not having believed it was even possible, suddenly try to sell everything in a mass panic. This will bring down computer systems for hours, perhaps even for a day or two, as people watch tv in glazed horror as their life savings disappear.

I sometimes laugh when I hear a Generation-Xer complain about how much his life sucks, or how miserable it's been. Most Xers have never had a tough day in their lives, or worked a hard day in their lives. They have no idea how easy their lives have been.

All of that is about to change. With transportation and trade going into a deep freeze around the world, the earth is grinding to a halt.

And from the point of view of Generational Dynamics, once the earth has ground to a halt, only one thing can get it moving again: A massive world war, a Clash of Civilizations, the greatest war in history.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (15-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Nouriel Roubini predicts recession will end in 2009

The magic elixer: President Obama's economic stimulus package

I've always had a mixed opinion of Nouriel Roubini and his RGE Monitor blog. Roubini is a professor of economics and international business at the Stern School of Business, New York University. He's world-renowned, not only because he's a professor, but also because he's been economics adviser to Presidents and other government officials.

He appears on television constantly, and is always portrayed as a "bear" who predicted what was coming before anyone else did. In particular, he bragged that he had predicted a housing recession in 2006, when it's been perfectly obvious since 2004 that "Real estate is in an overpriced bubble all over the world."

But OK, I've characterized Roubini's "12 steps to financial disaster" as brilliant, and I summarized Roubini's 12 steps in an article last April.

Roubini's 12 steps were REALLY grim. So what did Roubini say would be the outcome? "A 1987 style stock market crash could occur leading to further panic and severe financial and economic distress."

This totally absurd conclusion has always been completely baffling to me. His 12 steps predict something really horrible, but in the end he says that the result would only be a fairly mild recession.

Actually, when I saw different appearances on tv, he seems to change his mind every day. Will there be a recession, or not? Will it be V shaped or U shaped or L shaped? If you don't like his answer, then wait a minute.

However, whatever Roubini says on any particular day, the formula is always the same: "Unless the Administration does exactly what I say, then the world is going to suffer systemic financial crisis." He's got it both ways. If there's no crisis, then he can slide by; if there is a crisis, he can claim that he predicted it, because they didn't listen to him.

I finally ended up calling him the "Paris Hilton of economics:" He always knows exactly how much leg to show in order to keep himself in the headlines.

A new Roubini tv interview

Nouriel Roubini <font face=Arial size=-2>(Source: Bloomberg)</font>
Nouriel Roubini (Source: Bloomberg)

On Friday, Nouriel Roubini gave a lengthy interview on Bloomberg. I transcribed most of it, because I think it's important.

Roubini has become the most respected of the "bears." His opinions are viewed with great respect, and as things have gotten worse, he's increasingly viewed as the only analyst who got things right.

So this interview is very interesting because it provides a broad, definitive summary of his views, including specific numerical predictions.

If you don't feel like reading the entire interview, then skip to the summary at the end.

Text in brackets [...] are questions from the anchor.

"[You've already said we're heading for a severe recession. If the problems with the auto makers aren't resolved, how much worse can it be?]

It could become more severe, definitely. I think that these auto makers are systemically important. Directly and indirectly, a couple of million jobs are related to the auto sector. If they collapse, it's not just them. It's the auto dealers, the part makers, there's a whole economy in the midwest that's related.

The financial consequences on the CDS market could be severe.

Let's think about this. We're providing almost $2 trillion within TARP and liquidity support to financial institutions, some of which were nearly insolvent. So providing $15-30 billion of low-interest loans to auto makers seems to be fair, in my view. We need to do something for an important part of the real economy.

[what should be done for the real economy?]

Well, private demand is collapsing right now, consumption is falling. Residential investment is still in free fall, and capex [capital expenditure] spending by the corporate sector is falling. And then if there's no private demand, either we need to boost up demand coming from the public sector, through a major fiscal stimulus by the government of the order of $500-700 billion."

This is where he names the "$500-700 billion" figure. This figure has become the common wisdom, and it's apparently been accepted by President-elect Obama's team as the size of the stimulus package that will be passed by Congress and signed within a day or two after Obama takes office on January 20.

I don't believe that anyone has developed any real justification for this figure. It was probably chosen because it's as high as possible, while still being less than $1 trillion, which would frighten people.

Gosh, it was just a few months ago when we would have been talking about a stimulus package in the tens of billions, rather than the hundreds of billions, but these amounts have been growing exponentially. (See "One, Two, Three ... Infinity.")

Unemployment: downward trend is accelerating <font face=Arial size=-2>(Source: WSJ)</font>
Unemployment: downward trend is accelerating (Source: WSJ)

One thing's pretty sure: The $500-700 billion won't be enough. Obama has said that he wants to create 2½ million jobs through public works programs. But the economy lost over ½ million jobs in November, and the downward trend is accelerating.

Now let's return to Roubini's interview, where he gives some specific figures for his predictions:

"Otherwise, even if we help the financial system, if the economy's going to tank in a severe recession because there is no fiscal boost, whatever we do to help the financial system is going to be undone.

Make a more severe recession, where credit losses [garbled sound] so we need a major fiscal stimulus, like the one that the new administration is planning to have.

[And how would you differentiate between a severe recession and a depression? Is that off the table?]

I don't believe we're going to be in a severe depression, but this is going to be the worst recession we've had in 50 years. It started in December, 2007, and I expect it's not going to be over until December of 2009, 24 months, 3 times as long as the previous two."

Roubini has no idea how long the "recession" is going to be. Last April, Roubini predicted a "U-shaped" recession, lasting 12-18 months, with the following incredible reasoning: "The last two recessions – in 1990-91 and 2001 – lasted 8 months each and today the macro and financial conditions are worse – relative to those two previous recessions."

So his estimate in April was derived by doubling the length of the last two recessions.

Well, now he's increased his estimate to 24 months -- 3 times as long as the last two recessions. Obviously he has no idea, and he's just guessing.

Would anybody like to start a pool where we bet on the date when he changes his prediction to 4 times as long as the last two recessions?

"And even the recovery could be so shallow in 2010-11, it's going to feel like a recession, even if we're out of it.

So not a Great Depression, but you could have this global stag-deflation -- a global recession and deflationary forces in the economy 2009 into 2010. so it's severe, short of a Depression, but very severe, by any standard.

[How severe - drop in GDP and rise in unemployment rate in the US?]

I expect the GDP is going to be negative growth until the end of 2009, and the recovery in 2010 is going to be well below potential. I see the unemployment rate peaking about 9% sometime in the early part of 2010. And I see a cumulative falling output from the peak until the bottom of about 4% -- it is the worst we've had in the last 50 years. So by any standard, this is going to be the worst recession the US has experienced since the 1950s. ...

[How will the global markets behave?]

Well I'm still bearish about US and global equity for a variety of reasons. First of all, the macroeconomic news is going to be much worse than expected. People are not yet pricing in a severe global recession. Secondly, earning surprises are going to be on the down side. I see earnings per share of S&P 500 firms next year, [with earnings] between 50 and 60 [dollars per share], with multiples that could range between 10 to 12 in a severe recession. You could have the S&P [500 index] as low as 600, for example. So, I'm bearish."

In this last paragraph, he predicts that the S&P 500 price/earnings ratio will fall from its current level (around 18) to the 10-12 range, before it bottoms out.

This is just slightly less airheaded a prediction than the UBS AG analyst who predicts a huge 53% stock surge in 2009 based on a faulty reading of the P/E ratio.

As I've written many dozens of times on this web site, the historical average of the P/E ratio is 14, and it's been way above historical averages since 1995. By the Law of Mean Reversion, it must fall below 5 for roughly an equally long period of time -- probably a dozen years.

Another interesting thing is that Roubini is now saying that the S&P 500 index "could" fall to 600, which is roughly equivalent to 6000 in the Dow Industrials.

It was just two months ago, in October, that he predicted that the Dow Industrials could fall as low as 7000, some time next year. Now he's changing his prediction to 6000. Obviously he's just guessing, and has no idea.

Would anybody like to start a pool where we bet on the date when he changes his prediction to 5000 for the Dow Industrials?

"Also you're going to have a number of other financial shocks. There is still deleveraging by hedge funds and other highly leveraged institutions.

A number of emerging market economies could get into a financial crisis. So I think that the equities are going to fall another 20% before they're going to start to recover when there are stronger signs of a global economic recovery towards the end of 2009. ...

It is [an unprecedented period], but this has been the worst financial crisis since the Great Depression. The credit losses are going to be close to $2 trillion. There's also a huge bubble in housing and credit across the world in commodities and now we're seeing the deleveraging process, and it's a severe recession."

I can't imagine where he gets this $2 trillion for credit losses. The bursting of the real estate bubble accounts for $5-10 trillion in credit losses all by itself. My expectation is that there will be tens of trillions of dollars of credit losses.

A member of the Generational Dynamics forum posted a message pointing out a new video of Oppenheimer analyst Meredith Whitney.

I always enjoy watching Meredith Whitney, and I've quoted her a number of times.

One very interesting thing that Whitney says in the new video is something I hadn't heard before: The "natural rate" of home ownership is about 64%, but during the real estate bubble it shot up, and it's now at 69%.

She says it will drop back down to 64-66%, but if 64% is the average, then by the Law of Mean Reversion, it will actually drop down to 58-60% for a while. In fact, that's very likely to happen anyway, as we enter the new Great Depression and have massive homelessness.

This drop in home ownership, combined with another 20-30% fall in residential real estate prices, is huge, resulting in a credit loss that's many times larger than Roubini's $2 trillion.

"It's going to be globally, therefore I see still downside risk to a variety of risky assets -- equities, also commodities, even credit. ...

[what's the bright spot?]

Well, the bright spot is that the policy makers now, at least in the US, are realizing, this is very severe, and the monetary policy and the fiscal policy response is going to be very aggressive.

But it's not very aggressive all over the world. In Europe, the ECB is behind the curve, the fiscal stimulus is too weak. And therefore there's a concern that while the US may be stimulating the growth rate through monetary and fiscal policy, other countries are not doing as much."

This appears to be where he's leaving himself some wiggle room. When it turns out that all his predictions were wrong, he'll be able to say, "Well, other countries didn't do enough stimulus."

"I think the weakness in the dollar is going to continue. Severe recession, monetary easing by the fed, interest rates down to zero, quantitative easing, fiscal deficits -- still large current account deficits -- those are all going to be bearish for the dollar in 2009."

In other words, he's predicting an inflationary dollar in 2009, at the same time that's he's predicting a "stag-deflation" above. These predictions aren't necessarily contradictory, since he may be predicting deflation domestically, and a weaker (inflationary) dollar on the foreign exchange markets, but it really sounds as if he's trying to have it both ways -- deflation and inflation. That way, he can't be wrong.

"Well, in a scenario of a severe recession, in the US and globally, commodity prices have already fallen about 30% from their summer peak. But I see them falling by another 15-20% before they bottom out, because there's going to be further economic contraction in the US, slow down in the BRICs, in China, all over the world. [Note: BRIC = Brazil, Russia, India, China.]

[Is there something fundamental about the US economy that has to change that has made this cycle worse than others?]

Well, the excesses were really severe. Too much borrowing by the housing sector, too much leveraging by the financial system, easy money, easy credit, poor regulation and supervision.

We've gone through cycles of boom and bust in the US economy. And every time there is a boom, and there is a bust and there is easing, and there's another bubble in the economy. We have to start growing in a way that's more sustainable, and less based on asset and credit bubbles.

Could be manufacturing, it could be maybe investment in alternative energies in renewable resources, probably those are going to be growth sector for the US economy over time."

Once again, these final conclusions show that he's just guessing. He really has no idea what's going to happen.

Summary of Roubini's predictions

So, let's make a summary of all his predictions, in convenient list that we can easily quote later:

From the point of view of Generational Dynamics, this is all wrong.

As I showed in "How to compute the 'real value' of the stock market," the stock market has been substantially overpriced since 1995, and MUST fall to well below Dow 4000 (and probably much lower) for many years.

I used to think that Roubini knew what was going on, but was simply hiding his conclusions in order to remain a popular tv guest.

But this interview has changed my mind. Roubini has gotten some things right and other things wrong. He's changed his mind several times, especially as his predictions proved to be too optimistic. Most of his predictions, it now turns out, are guesses, with nothing really to back them up except comparing today's recession to the 1991 and 2001 recessions. I used to think that he had a system view of the global economy through time, but now it turns out that he's like everyone else, believing that "history always begins this morning."

(For a description of the problems with mainstream economics models, see "System Dynamics and the Failure of Macroeconomics Theory.")

Journalist/economist Paul Krugman has gotten just about everything wrong, and each mistake seems to make him even more popular, so much so that he recently won the Nobel Prize in Economists, based on his ideological hatred of George Bush.

Roubini seems to be following a similar path. Although he's less ideological, it's obvious that he thinks that President Bush got everything wrong, but that President Obama will get everything right.

Roubini himself has gotten a number of things wrong, and as he makes more and more mistakes, and changes his forecasts, we can expect him to become more and more popular, and more and more respected. By next year, he may well be the next winner of the Nobel Prize for Economics.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (13-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Neil Howe calls Early Gen-Xers the "dumbest generation"

I disagree - Boomers are the dumbest generation.

Neil Howe and his partner, the late William A. Strauss, were the founding fathers of generational theory. It's their work, documented in their books Generations and The Fourth Turning, on which Generational Dynamics is based.

With Strauss gone, it's always a treat to read something new from Howe, and his Sunday Washington Post article provides a fresh perspective on "early Generation-Xers," popularly known for many years as Generation Jones, based on a 2000 book with that title by author Jonathan Pontell.

Related Articles

The housing bubble began in 1995.: This means that the housing crisis will last for almost another decade.... (8-Sep-2009)
Laughable SEC report on Madoff absolves SEC management of blame: "Confusion" and "inexperience" of young SEC staff members are blamed.... (6-Sep-2009)
Stories of massive generational fraud and corruption continue to pour out: Long-time readers of this web site know how much my life... (14-Apr-2009)
The economy, the stimulus plan and the budget plan all continue to unravel: Markets keep falling as world economic trends continue to plunge.... (2-Mar-2009)
Neil Howe calls Early Gen-Xers the "dumbest generation": I disagree - Boomers are the dumbest generation.... (10-Dec-2008)
'Liberation Hero' Robert Mugabe now destroys Zimbabwe with cholera: Adding to his record of mass torture, slaughter and economic destruction,... (8-Dec-2008)
A generational view of China's growing melamine food disaster: On Thursday, the FDA issued a nationwide alert, banning Chinese dairy products... (17-Nov-2008)
How Boomers and Generation-Xers brought about the dumbing down of Information Technology (IT) : Software development has adopted a Java cookbook approach that leads to project failures. Also: How Digimarc Corp. self-destructed with management's cookbook programming mentality. (1-Jul-2008)
Questions for readers: Managing Boomers vs Generation-X in the workplace.: Also an ethics question: When do you tell the boss that the project is crashing and burning?... (5-Jun-2008)
Teen "emo subculture" creating violent fault line in Mexico City: The depressive 'emotive' music style is also being blamed for suicides in Europe.... (25-May-2008)
Software development projects for Moody's, Digimarc, Y2K, DEC further illuminate Gen-X nihilism: As Boomers and Gen-Xers have taken charge, software development standards have suffered.... (23-May-2008)
China and Taiwan: Understanding two different war paradigms: None of Obama, Clinton or McCain have any idea of this.... (23-Apr-08)
NY Governor Elliot Spitzer: A Generation-Xer gets his comeuppance: Rarely has someone's fall from grace been met with so much glee.... (12-Mar-08)
Reader comments on the Nihilism of Generation-X: Who's more at fault for our problems - Gen-Xers or Boomers?... (29-Jan-08)
The nihilism and self-destructiveness of Generation X: Who's more to blame for our troubles: The Boomer generation or Generation X?... (21-Jan-08)
Markets fall as investors are increasingly unsettled by bad economic news: Hopes for quick return to "normal" bubble growth are fading.... (21-Nov-07)

The people that we're talking about were born between the late 1950s to the mid 1960s. Although Howe (and I) refer to them as "early Gen-Xers," they actually include the last few birth years of the Boomer generation.

He gives the following reasons for calling them the "dumbest generation":

"Whatever you call them (I'll just call them early Xers), the numbers are clear: Compared with every other birth cohort, they have performed the worst on standardized exams, acquired the fewest educational degrees and been the least attracted to professional careers. In a word, they're the dumbest."

Howe goes on to explain how they got that way:

"So what explains the smartness deficit (and the related income gap) that has tracked these early Xers throughout their lives? Some say it's demographic pressure. Early Xers were born into large families at the tail end of the baby boom, with a relatively large share of higher-order siblings (just as first-wave boomers have a relatively large share of first-borns). As they grew up, they got crowded out in the competition for parental attention, good teachers and good colleges. Later on, by the 1980s, they arrived too late to enter the most lucrative professions and the cushiest corporations, by now glutted with boomer yuppies. Their only alternative was to pioneer the pragmatic, free-agent, low-credential lifestyle for which Generation X has since become famous.

Yet sheer numbers aren't the whole story. The early Xers' location in history also plays a large role. Quite simply, they were children at a uniquely unfavorable moment -- a time when the divorce rate accelerated, when the media image of children turned demonic and when the "latch-key" lesson for kids stressed self-reliance rather than trust in others. By the time they entered middle and high school, classrooms were opened, standards were lowered, and supervision had disappeared. Compared with earlier- or later-born students at the same age, these kids were assigned less homework, watched more TV and took more drugs."

He concludes by pointing out how much we all need early Gen-Xers:

"Does America need to worry that this group is taking over as our national leaders? Probably not. Early Xers have certain strengths that many more learned people lack: They're practical and resilient, they handle risk well, and they know how to improvise when even the experts don't know the answer. As the global economy craters, they won't keep leafing through a textbook. They may be a little rough around the edges, but their style usually gets the job done."

Now, long-time readers of this web site are very well aware that I have never called Gen-Xers stupid or dumb. I reserve those names mostly for Boomers.

No, I say that Gen-Xers (and I mostly mean Early Gen-Xers) are nihilistic, destructive, and self-destructive. Take a look at any of the articles in the "Related Articles" box above for more information.

I've been criticized for making these kinds of generalizations about Gen-Xers, although I've posted plenty of evidence to support it.

I don't feel that I need to apologize for criticizing Gen-Xers, or making these kinds of generalizations. For several years, I rarely criticized anyone but Boomers on this web site -- for the dot-com bubble, and for being unable to lead or govern, creating governmental paralysis.

I only started criticizing Gen-Xers when I saw what disasters they were causing.

Despicable ad implying that General Petraeus is a traitor. <font face=Arial size=-2>(Source:</font>
Despicable ad implying that General Petraeus is a traitor. (Source:

First were the leftist nutjobs in and These people, along with the NY Times, NBC news, and other such organizations, were committed to the defeat and humiliation of America in Iraq. If these people had been listened to, we would have an utter disaster on our hands. These people, who are overwhelmingly Gen-Xers, are still much more dangerous to the country and to the Barack Obama presidency than anyone on the right is. President-elect Obama has wisely been avoiding these leftist nutjobs in his cabinet appointments.

Then there's the worldwide financial crisis that we're experiencing. Although Boomers were greedy and stupid, the massive fraud that created the crisis was engineered by Gen-Xers, specifically the Gen-Xers who assumed middle and high level management positions in the 2000-2005 time frame -- i.e., the Early Gen-Xers.

None of this indicates the Gen-Xers are stupid. My personal impression of many Gen-Xers is that they're brilliant. The impending collapse of the entire world financial system was engineered by these people, and they couldn't have done that if they were stupid.

If they're "stupid," it's in a different sense -- and this is something I've seen in many Gen-Xers. Gen-Xers are so full of hatred for Boomers and Silents and Boomer and Silent values, that they become destructive and self-destructive.

For example, Howe points out the early Gen-Xers do poorly in standardized exams. Well, that wouldn't be because they're intellectually stupid. It's because they're so self-destructive that they're contemptuous of standardized tests, and either don't take them or don't prepare for them.

No, it's Boomers who are really stupid. Boomers spent their entire lives arguing with their parents -- starting with the massive demonstrations and riots in the 1960s and 1970s. Boomers don't know how to DO anything except argue. When a Boomer sees someone who has actually DONE something, the visceral Boomer reaction is criticize the accomplishment. (The visceral Gen-X reaction is to destroy the accomplishment.)

In particular, Boomers have no idea how to manage or lead. Their parents and grandparents took care of everything for them, and all they did was criticize. Their parents told them what to do, and they whined and argued, but in the end they did it.

Now that their parents are gone, Boomers are the senior managers in organizations across the country, and they STILL have no idea how to manage or lead. They're waiting for someone else to tell them what to do.

And that's where the Gen-Xers, especially the Early Gen-Xers, come in. A Gen-Xer may be subordinate to a Boomer, but the Boomer will look to the Xer to tell him what to do. Thus, Xers are fullfilling the role for Boomers that Silents used to fill.

And that brings us to the lethal combination that I keep talking about. You have nihilistic, contemptuous, greedy Gen-Xers working for stupid, compliant, greedy Boomers. The Xers reject all accomplishments that came before, and the Boomers go along with them.

Finally, let's generalize this to other times and other countries. Generation-X is the current American generation of the "Nomad" generational archetype. America's previous Nomad generation was the Lost Generation, born in the 1890s and 1900s decades.

(For information about generational eras and archetypes, see "Basics of Generational Dynamics.")

As I wrote a couple of days ago in "'Liberation Hero' Robert Mugabe now destroys Zimbabwe with cholera," some of the world's bloodiest and most violent dictators are Nomads -- in fact Early Nomads. These include Adolf Hitler, Josef Stalin, Leon Trotsky, Osama bin Laden, Abu Musab al-Zarqawi, Pol Pot, and Shamil Basayev (the guy who masterminded 2004's Beslan school massacre, killing hundreds of children), and Zimbabwe's Robert Mugabe.

On the other hand, some of these world's great heroes, such as Franklin D. Roosevelt, were also Early Nomads. Barack Obama is a Early Nomad, but we'll have to wait and see whether he becomes one of the world's heroes.

The destructiveness and self-destructiveness of Early Gen-Xers is what makes them the "dumbest generation," as Neil Howe says. However, they're "practical and resilient," as Howe says, and can be brilliant when they're properly motivated. And we're going to need all the brilliance we can get from them, as the country endures the greatest financial crisis in history, and the greatest world war in history.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Who's to blame -- Generation-Xers or Boomers? thread of the Generational Dynamics forum.) (10-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

'Liberation Hero' Robert Mugabe now destroys Zimbabwe with cholera

Adding to his record of mass torture, slaughter and economic destruction, Zimbabwe's President Robert Mugabe has permitted the deadly bacterial disease cholera to attain epidemic proportions, and spread throughout Zimbabwe, and to several neighbor countries, Botswana, Zambia and South Africa.

Related Articles

Southern Africa
'Liberation Hero' Robert Mugabe now destroys Zimbabwe with cholera: Adding to his record of mass torture, slaughter and economic destruction,... (8-Dec-2008)
South Africa will create "temporary shelters" for migrants, not "refugee camps": Tribal differences are reasserting themselves and destabilizing the country.... (31-May-2008)
Now it's South Africa's turn: ethnic violence spreads through Johannesburg: Mobs of mostly Zulu South Africans have attacked, raped and slaughtered mostly Zimbabweans... (21-May-2008)
Zimbabwe's "Liberation Hero" president Robert Mugabe continues to destroy his country: With a 150000% inflation rate, torture, and destruction of property,... (4-May-08)

Cholera is a disease that's easily controlled and prevented with proper sanitation measures, but over 600 people have died and some 13,000 have been infected. Mugabe has so destroyed Zimbabwe's health and sanitation infrastructure that people are forced to drink unsafe water and have no access to health care. Thousands of refugees are pouring into South Africa and other neighboring countries, carrying the disease with them.

As usual, Mugabe is blaming Britain, Europe and the US for the cholera outbreak, claiming that it's all a plot to drive him from power -- as if the world could be so lucky.

This is reminiscent of South Africa's former president, Thabo Mbeki, who refused to allow distribution of AZT, a drug that inhibits HIV/Aids, and claimed that AZT actually causes Aids, and is a weapon of the Western imperialist powers to control black African nations.

The cholera epidemic is only the latest of the savage, genocidal acts of Zimbabwe's dictatorial President.

As I described earlier this year in May, Mugabe's actions are mostly based on the historical enmity of two tribes -- Mugabe's Shona tribe, and his enemies, the Ndebele tribe. Genocidal warfare occurred between these two tribes in previous generational crisis wars -- the Mfecane war that climaxed in 1828, the Matabele Wars that climaxed in 1897, and the Rhodesia civil war, climaxing in 1979. It was the last war that gave Zimbabwe independence, making Mugabe the President.

In 1983, to consolidate his hold on power, Mugbage launched "Operation Gukurahundi" (The rain that washes away the chaff before the spring rain). 20,000 people, almost all of them from the Ndebele tribe, were tortured, raped and slaughtered.

As recently as the 1999, Zimbabwe was a breadbasket of Africa, exporting up to 500,000 metric tons of surplus food. By 2003, Zimbabwe was starving. What happened during those three years was a Marxist socialist "land reform" program by Robert Mugabe that confiscated 4,500 white-owned commercial farms and redistributed the property to his own Shona ethnic group.

Since 2003, more and more Zimbabweans have been dying of starvation, because Mugabe has destroyed the farm infrastructure.

And then there's inflation. Hyperinflation, to the tune of an official rate of inflation of 231 million percent. Zimbabwe is about start printing 200 million dollar bills.

How can any person be like that?

Robert Mugabe, born in 1924, is in the Nomad generational archetype. In America today, the generation in the Nomad archetype is the Generation-Xers.

(For information about generational eras and archetypes, see "Basics of Generational Dynamics.")

Remarkably, some of the world's worst dictators are early Nomads (born 16-25 years after the end of the last crisis war), including Adolf Hitler, Josef Stalin, Leon Trotsky, Osama bin Laden, Abu Musab al-Zarqawi, Pol Pot, and Shamil Basayev (the guy who masterminded 2004's Beslan school massacre, killing hundreds of children.) To this list, we can now add Zimbabwe's Robert Mugabe.

On the other hand, some of the greatest heros have also been early Nomads. Franklin D. Roosevelt, who led America to victory in WW II, is an example. And President-elect Barack Obama is also an early Nomad. The country will need his pragmatism and strength to lead us through the financial collapse and world war that's coming soon.

But Mugabe is not like Roosevelt or Obama. He's more like Hitler or Stalin or Pol Pot -- a leader with an almost psychotic willingness to torture and kill people. There is evidently no limit to the amount of destruction that he's willing to inflict on the people of his own country.

And there's an unfortunate generational split among the black leaders in southern Africa, as I described in May.

The older leaders, many of whom are early Nomads, have a shared experience -- the "anti-colonial liberation struggles" of the 1950s and 1960s that led to independence of nations that were formerly European colonies. These leaders share a virulent hatred of Europe, Britain and America -- a view that has also been expressed by Reverend Jeremiah A. Wright, Obama's former pastor.

People in this older generation of southern African leaders refuse to criticize Mugabe for just that reason -- that he's a "liberation hero."

I've frequently described Gen-Xers and other Nomad generations as being nihilistic, destructive and self-destructive. Just as in the past you could see that with people like Hitler, today you can see it with the policies of Robert Mugabe. And yes, I AM comparing Mugabe to Hitler, in case you're not clear on that.

Thus, we have British and American officials calling on African nations to bring about the end of Mugabe's rule, by military force if necessary. The African leaders have always refused to do so, because Mugabe is a "liberation hero."

This situation is REALLY serious, however. With cholera spreading to other countries, it remains to be seen whether other black leaders will actually take the necessary steps to get rid of Mugable. I won't be holding my breath.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the South Africa, Zimbabwe and southern Africa thread of the Generational Dynamics forum.) (8-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Disastrous employment figures cast a pall, but spur huge stock rally

In one of the worst job reports in history, 533,000 jobs disappeared in November, twice as many as analysts had predicted.

Unemployment: downward trend is accelerating <font face=Arial size=-2>(Source: WSJ)</font>
Unemployment: downward trend is accelerating (Source: WSJ)

Employment has been declining at an accelerating rate since last December, and there is no reason to believe that the accelerating trend is ending.

Even Canada was not spared, losing three times as many jobs as analysts had predicted.

In other disastrous news, car sales were down almost 40% last month, compared to the same month last year. Cars are piling up in car dealer lots around the country and in Detroit, and the inventory of unsold cars is growing more and more rapidly. One of the auto makers blamed the low demand for new cars on the fact that cars are more reliable than they used to be, and they last a lot longer.

I was very saddened on Thursday and Friday, watching the Congressional hearings on the proposed bailout of the Detroit auto makers, because it was clear that everyone was stunned and overwhelmed by what was happening. It was clear that a bailout is required to prevent a monumental disaster, putting hundreds of thousands of people out of work.

But it was also clear that nobody -- not the auto makers, not the Democrats, not the Republicans -- had any idea at all what can be done to improve the situation when the bailout runs out. Nobody said it explicitly, but it was obvious to everyone that there are too many car manufacturers, and too many car dealers. Whatever happens next, eventually there'll be a bloodbath. "There has to be a complete restructuring of the industry, or it's not going to survive," said one Republican opponent of the bailout.

There's a real "edge of the cliff" feeling in Congress and among the pundits. I could almost hear terror in some pundits' voices. I did hear an occasional Pollyannaish remark, like:

But these remarks were rare.

But then, in the early afternoon, something happened. Something that could only happen in that wonderful, wacky, fairy tale world of Wall Street.

Investors decided that the news was so disastrously bad that it must be good, and the stock markets surged. The reasoning was that now all the bailouts would have to be approved, and besides, Obama would take office on January 20, so it was time for the bubble to grow again. The Dow Industrials went from down 400 to up 260. I watch these things with the same fascination as if it were a massive traffic accident and 100 car pileup. It's so gory that I can't take my eyes off of it.

Nonetheless, there's now some talk of a compromise, and there may be a temporary bailout for the auto industry next week.

As regular readers know, for the last few quarters I've been posting the table of S&P 500 average corporate earnings estimates, based on figures from CNBC Earnings Central supplied by Thomson Reuters. These tables have shown sharp falls in corporate earnings estimates from week to week.

In my previous article, "UBS AG analyst predicts a huge 53% stock surge in 2009," I posted the table for the third quarter.

Now, the fourth quarter estimates are becoming available. Here's the table:

  Date    4Q Earnings growth estimate as of that date
  ------- -------------------------------------------
  Feb 6:               50.0%
  Jul 1:               59.3%   Start of previous (3rd) quarter
  Oct 1:               46.7%   Start of quarter
  Dec 5:               10.0%

Isn't it fun to see the same thing happen, quarter after quarter? Doesn't it give you confidence that the people at Thomson Reuters have a clue what they're doing?

In other significant news, China's situation looks just as desperate as America's. According to Zhou Tianyong, a leading Communist Party scholar in Beijing, rising unemployment and the economic slowdown could cause massive social turmoil in China. "The redistribution of wealth through theft and robbery could dramatically increase and menaces to social stability will grow," he said. "This is extremely likely to create a reactive situation of mass-scale social turmoil."

As we wrote in 2005 in "China approaches Civil War," China has been in an economic bubble for decades, and economic problems would trigger a massive civil war of a type that is common in China's history.

What appears to be happening is that the collapse of America's economy is accelerating and, as things get desperately worse in China, the collapse of China's economy is accelerating at the same time.

The accelerating collapse of these two major economies is sure to be destabilizing large populations throughout Asia in particular, as tens of millions of people are thrown into poverty.

From the point of view of Generational Dynamics, we're headed for a massive worldwide generational panic and financial crash, the first one since 1929. It could happen next week, next month or later, but with the accelerating collapse of these two economies, it appears to be close.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (6-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

UBS AG analyst predicts a huge 53% stock surge in 2009

This 'analysis' is breathtaking in its sheer stupidity.

According to a research note by UBS AG analyst David Bianco, reported by Bloomberg, the S&P 500 index will surge from its current 870 to 1300 by the end of 2009. Presumably this also means that the Dow Industrials index will surge from its current 8600 to 13,000.

According to Bianco, "The consensus outlook for 2009 is a full year of gloom. We believe 2009 will bring signs of a dawn in confidence with the first faint light appearing earlier than most investors expect."

Bianco opines further that the various bailouts will restore confidence in the markets, and then, "Once this happens, powerful positive underlying economic forces such as the worldwide proliferation of technology and globalization should make confidence shine again." Whoo!

Unfortunately, Bianco's actual research note is not available (at least to me), so I transcribed Bloomberg TV coverage of this story:

"A bullish call from UBS. Global stocks will be able to withstand a recession and rebound in 2009, according to the firm. Market strategist David Bianco says stocks will recover as cheap valuations and government and government efforts to restore confidence lure investors back into equities.

Top: Laura Lee, Bloomberg reporter; bottom: slide displaying values for price/earnings ratio <font face=Arial size=-2>(Source: Bloomberg)</font>
Top: Laura Lee, Bloomberg reporter; bottom: slide displaying values for price/earnings ratio (Source: Bloomberg)

The S&P 500 has taken a beating this year, down more than 40%, right around that 860 level.

UBS predicts the index will recover those losses, rising about 53% to (get this) 1300 by the end of 2009.

So how cheap are US stocks right now?

Well, the S&P 500 is valued at 11.3 times estimated earnings, on average over the past 5 years, the index has traded at more than 19 times earnings. So a discount there.

It's not just the US stocks that could be poised for a turnaround. UBS predicts the UK's FTSE 100 will rise almost 40% to the 5800 level next year.

Now we should note that UBS is a lot more bullish on stocks than a lot of Wall Street firms. Citigroup for one last month cut its 2009 forecast for the S&P 500 to 1000.

And UBS's prediction for the index this year hasn't fared so well. Bianco predicted a gain of 16%. So the jury is still out, but we are slowly hearing a bit more optimism, after what's been a very tough year for equities."

Notice the screen shot above, showing the current estimated P/E as 11.3, and the average for the last 5 years as 19.5.

Now first off, where the hell did that 11.3 figure for the current estimated P/E come from?

There's a price/earnings ratio chart at the bottom of this web site's home page, and it gets updated automatically every Friday. Here's last Friday's version of the chart:

S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 28-Nov-2008. <font face=Arial size=-2>(Source: MarketGauge ® by DataView, LLC)</font>
S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 28-Nov-2008. (Source: MarketGauge ® by DataView, LLC)

As you can see for yourself, the current P/E index is around 19, nowhere near 11.3. The average for the past 5 years is a little above 19.5, but let's say 19.5 for the sake of argument.

The P/E index is computed by dividing the price for a share of stock by the earnings per share for the stock. It's not rocket science. So where did the 11.3 come from?

Well, actually I know where he got 11.3 from. He got it from something called "forward earnings." He estimated that corporate earnings will increase by 25-50% next year, and used that hugely bloated figure to compute a P/E ratio of 11.3.

Now this guy probably earns a 6-figure salary, but he's a total moron. The Bloomberg story gives his age as 33, meaning that he's at the leading edge of the young Millennial generation. He works in New York for a Swiss bank, but I'm willing to bet he's too dumb to be able to pick out Switzerland on a map.

So let's make a list of all the mistakes he's made:

In fact, what's really incredible is that this genius used circular reasons:

Have you heard of "first-in, first out" or FIFO? Well, this analyst uses a different technique: Garbage-in, garbage-out, or GIGO.

I know, Dear Reader, that some of you criticize me for calling these people idiots, but I just can't get over this. This has got to be one of the stupidest analyses I've ever seen. How am I supposed to describe it?

But I shouldn't just pick on this one analyst, because he's no different from all the others.

Remember that UBS AG has lost the most of all the banks in Europe from investments in near-worthless mortgage-backed securities. These people aren't the sharpest knives in the drawer.

You may have noticed above that I said that the UBS must be assuming that earnings growth next year will be 25-50%. Where did I get that figure? It's been the same every quarter.

Here's an earnings growth estimate that I posted in February:

  Period  Earnings growth estimate (Thomson Financial)
  ------- --------------------------------------------
  Q1 2008       2.6%
  Q2 2008       3.5%
  Q3 2008      20.0%
  Q4 2008      50.0%

All of these turned out to be wrong. Q1 earnings fell 17.5%, and Q2 earnings fell 22.1%.

Long-time regular readers know that I tabulate these earnings estimates from week to week. Here's the table for the third quarter earnings growth estimates:

  Date    3Q Earnings growth estimate as of that date
  ------- -------------------------------------------
  Mar  3:              25.0%
  Apr  1:              17.3%   Start of previous (2nd) quarter
  Jul  1:              12.6%   Start of quarter
  Sep  5:               0.8%
  Sep 12:              -1.6%
  Sep 19:              -0.3%
  Sep 26:              -1.7%   End of quarter
  Oct  3:              -4.8%
  Oct 10:              -7.8%
  Oct 17:              -9.1%
  Oct 24:             -11.0%
  Oct 30:             -23.8%
  Nov  7:             -13.9%
  Nov 14:             -18.4%
  Nov 21:             -18.5%
  Nov 28:             -18.7%

As you can see, earnings are not expected to grow 25% this quarter; they're now expected to fall 18.7%, as actual earnings reports have been coming in.

Returning now to price/earnings ratios, here's a graph that I first posted a year ago in "How to compute the 'real value' of the stock market":

S&P 500 Price/Earnings Ratio (P/E1) 1871 to August 2007
S&P 500 Price/Earnings Ratio (P/E1) 1871 to August 2007

The historic average of the P/E1 (price divided by one-year trailing earnings) is about 14. From 1995 to the present, it's averaged around 25, creating a huge bubble. By the Law of Mean Reversion, the price/earnings ratio will fall well below 10 for a dozen years or so. You can see that it's poised to fall quickly in the near future, leading to a stock market crash. That's the correct analysis of P/E ratios, not the garbage from UBS.

(Comments: For reader comments, questions and discussion, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (4-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Thailand government collapses, ending crippling riots from class war

Bangkok's airports will open for the first time in a week on Friday, after tens of thousands of young anti-government demonstrators agreed to leave the airports, ending their occupation.

Top: PAD members camping out in the airport.  Middle: Protester getting a haircut at the airport. Bottom: Ebullient protesters cheering at the court verdict <font face=Arial size=-2>(Source: BBC, The Age, Al Jazeera)</font>
Top: PAD members camping out in the airport. Middle: Protester getting a haircut at the airport. Bottom: Ebullient protesters cheering at the court verdict (Source: BBC, The Age, Al Jazeera)

The protesters agreed to leave the airports after Thailand's constitutional court ruled that many government officials should should be banned from politics for five years. The banned politicians include Somchai Wongsawat, the prime minister, as well as numerous officials from the ruling People Power party (PPP). This gives the demonstrators, the so-called People's Alliance for Democracy (PAD), the political victory that they were seeking.

The occupation of the airports had a carnival atmosphere, with partying, food, and even people giving haircuts.

I've been following this situation as an outsider for several years now, and at times it's seemed almost hilarious.

Thaksin Shinawatra is a telecommunications mogul who was educated and earned a fortune in the United States. He won an election as Prime Minister in 2001. In office, he implemented a number of programs that were favored by the large mass of rural voters in the northeast of the country. Thaksin became very popular with the poor rural voters in the north and northeast, but he angered the wealthier, better educated elite population in the southern areas around Bangkok.


Since there are a lot more poor rural people than elite wealthy people, Thaksin won reelection in 2005.

The army, siding with Thailand's elite, staged a bloodless coup in 2006, overthrowing the government. By the end of 2007, there are new elections, and Thaksin's PPP easily won control of the Parliament, and named a Thaksin ally as the new Prime Minister.

Thaksin himself wasn't twiddling his thumbs. He fled to London, where he bought the Manchester City Football (soccer) Club, one of the major sports clubs in Britain, much to the disgust of many of the players and sports fans.

Eventually Thaksin was forced to give up the Club. He returned to Thailand this year, where he was to face corruption charges, but he was permitted to attend the Olympics games in Beijing, so he was able to escape prosecution. It's thought that he's hiding in Hong Kong right now.

Meanwhile, in December 2007, the PPP elected a new Prime Minister, Samak Sundaravej.

Well, it turns out that Samak is also quite a good amateur cook, and for many years he's hosted a televised cooking show. He kept on with the cooking show after he became Prime Minister, causing a court in September to remove him from office, because the cooking show represented a conflict of interest with his job as Prime Minister.

You just can't make this stuff up.

And so in September the Parliament, still controlled by the PPP, elected a new Prime Minister, Somchai Wongsawat.

That was about the time that the PAD started its organized protests, occupying government buildings, often shutting the government down completely. The kids demanded that Somchai resign as Prime Minister, and he refused.

So early last week, the kids in the PAD shut down Bangkok's two airports, also shutting down the country's tourist business, as well as much of its export business. The occupation was crippling the country's economy, but now the court has ruled that Somchai and other PPP officials are to be banned from holding office. The kids have decided to go home, so the airports can open again.

Thailand's Summer of Love?

News reports have been talking darkly of possible violence and revolution, but this is clearly an Awakening era protest, with no chance at all of sustained violence.

This situation has been going on for several months, and there's nothing about it that seems dangerous or destabilizing. The news reports describe these massive protests as having "a carnival atmosphere." There are no calls for revolution, just a new election to get rid of the current government leaders, who the demonstrators claim are Thaksin proxies.

This reminds me of nothing so much as the Summer of Love, where tens of thousands of young people poured into San Francisco in 1967 to protest the Vietnam War, and launch a "Flower Power" cultural revolution.

(For information about generational Awakening eras, see "Basics of Generational Dynamics." For information about America's Awakening era in the 1960s-70s, see "Iraq Today vs 1960s America." For information about the Summer of Love, see "Boomers commemorate the 40th anniversary of the Summer of Love.")

So Thailand's immediate crisis is finally resolved. But this isn't the end of the class war. Conflicts between the rural north and the elite south will continue, but they'll be political clashes during an Awakening era.

There'll certainly be some violence, but in order to put it into perspective, there was plenty of violence in America during the 1960s.

In August, 1963, Martin Luther King led a march on Washington in which over 200,000 people participated. Later, President Kennedy was assassinated, and so was King. There were numerous huge demonstrations and violent riots throughout the country. There were "long, hot summers," led by the Black Panthers, and there were bombings and declarations of war against the government, led by the Weather Underground. There was a huge violent battle at the Democratic convention in 1968, and college kids were shot by state troopers at Kent State in 1971. President Lyndon Johnson was driven from office, and President Richard Nixon was forced to resign.

Contrast what's going on today in Bangkok to the violence that occurred in Tibet last spring. Or contrast it to what's going on in Nigeria, with hundreds of bodies piled up on the streets.

Nothing like that is going on in Bangkok. You have kids frolicking with one another, and the police are "reluctant" to do more than ask nicely for the protestors to stop. This is the epitome of an Awakening era conflict.

Generational history of Thailand

In the "Thailand protests - will they escalate?" thread of the Generational Dynamics forum, we've been debating what's going on in Thailand.

One problem is that it's very hard to tell from history books when Thailand had its last generational crisis war. It's been thought that the last crisis war was World War II, since Thailand was occupied by Japanese forces during World War II.

But reading the descriptions of what happened, it seems clear that the Thai people did what they had to in order to keep from being overrun by the Japanese, and no more. There was no "genocidal energy" on the part of the Thai people in WW II, so that couldn't be the last crisis war.

Usually when we do a generational history of a country, we start with the crisis eras and crisis wars because they're so horrible that they're the easiest to identify in history books. But that's not a requirement. There are characteristics of other eras (Recovery Era, Awakening Era, Unraveling Era) that allow us to identify those eras first.

That's the case for Thailand today. Once we conclude that the recent protests are Awakening era protests, there's only one clear choice for Thailand's last crisis war: The Cambodian "killing fields" genocide in the 1970s.

This may seem strange, because the Cambodian genocide didn't take place on Thai soil. But that isn't a requirement for a crisis war; for example, WW II was a crisis war for both the US and Canada, but it didn't take place on North American soil at all, except for the Pearl Harbor attack.

The Cambodian genocide did not take place on Thai soil, but it took place on Thailand's doorstep. Thailand did not participate in the genocide, but they politically supported the perpetrators, the Khmer Rouge.

There's a great deal of shame in the aftermath of genocidal acts -- in fact, it's exactly this shame that unites survivors of a crisis war -- both winners and losers -- in their determination that nothing like that should ever happen again. This shame causes people in the inter-crisis period to "forget" about their own roles in the genocide.

The Cambodian genocide was one of the half dozen worst genocides of the 20th century, with millions of people tortured, enslaved, starved and killed. If the Thai people supported the perpetrators (Khmer Rouge), then today they may feel that they were perpetrators as well. Even without that, they may feel that they should have done something to stop the genocide. Either way, it's not something that they can be proud of. Thus, it's not surprising that it's almost impossible to find mention of the Cambodian civil war in writings about Thailand's history.

From the point of view of Generational Dynamics, it's necessary to do a lot more historical research to determine not only previous crisis wars in Thailand, but also the exact role of the Thai people in the Cambodian genocide of the 1970s. In particular, with respect to the current class war, it would be very interesting to understand whether there was also a split among the Thai people in dealing with the 1970s genocide.

What to watch for

Thaksin Shinawatra is a very colorful character, still alive and well somewhere in Asia. He's reviled by the PAD and disliked by the army, but he's considered a hero by the rural people who elected him. These people are absolutely furious at the court decision that removed the latest Prime Minister, Thaksin's ally. Thaksin's shadow hangs over all of Thai politics, and it would not be surprising some day soon to see his return to Thailand in some way.

The basic underlying class struggle is stronger than ever after the recent episode. With the collapse of the current government, there will have to be a new election. Thaksin's People Power Party has been banned from politics by the court decision, but there's little doubt that the same politicians will form a new party and win the next election.

News reports have been saying that the PAD will not tolerate such an event, and that they'll be back in full force if they see that coming. However, it seems likely to me that after several weeks of of occupying government buildings and airports, the kids are sick and tired of sleeping on blankets, and glad to be back in their soft beds.

The more important question is what the army will do in reaction to another election victory by a party allied to Thaksin.

There won't be a civil war in a generational Awakening era, so soon after the Cambodian genocide, but there have been plenty of "bloodless coups" in Thailand, and it's possible that the army will decide simply to abolish elections once and for all.

(Comments: For reader comments, questions and discussion, see the Thailand protests - will they escalate? thread of the Generational Dynamics forum.

Other topics being discussed in the forum include the following:

(3-Dec-2008) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Web Log Pages

Current Web Log

Web Log Summary - 2016
Web Log Summary - 2015
Web Log Summary - 2014
Web Log Summary - 2013
Web Log Summary - 2012
Web Log Summary - 2011
Web Log Summary - 2010
Web Log Summary - 2009
Web Log Summary - 2008
Web Log Summary - 2007
Web Log Summary - 2006
Web Log Summary - 2005
Web Log Summary - 2004

Web Log - December, 2016
Web Log - November, 2016
Web Log - October, 2016
Web Log - September, 2016
Web Log - August, 2016
Web Log - July, 2016
Web Log - June, 2016
Web Log - May, 2016
Web Log - April, 2016
Web Log - March, 2016
Web Log - February, 2016
Web Log - January, 2016
Web Log - December, 2015
Web Log - November, 2015
Web Log - October, 2015
Web Log - September, 2015
Web Log - August, 2015
Web Log - July, 2015
Web Log - June, 2015
Web Log - May, 2015
Web Log - April, 2015
Web Log - March, 2015
Web Log - February, 2015
Web Log - January, 2015
Web Log - December, 2014
Web Log - November, 2014
Web Log - October, 2014
Web Log - September, 2014
Web Log - August, 2014
Web Log - July, 2014
Web Log - June, 2014
Web Log - May, 2014
Web Log - April, 2014
Web Log - March, 2014
Web Log - February, 2014
Web Log - January, 2014
Web Log - December, 2013
Web Log - November, 2013
Web Log - October, 2013
Web Log - September, 2013
Web Log - August, 2013
Web Log - July, 2013
Web Log - June, 2013
Web Log - May, 2013
Web Log - April, 2013
Web Log - March, 2013
Web Log - February, 2013
Web Log - January, 2013
Web Log - December, 2012
Web Log - November, 2012
Web Log - October, 2012
Web Log - September, 2012
Web Log - August, 2012
Web Log - July, 2012
Web Log - June, 2012
Web Log - May, 2012
Web Log - April, 2012
Web Log - March, 2012
Web Log - February, 2012
Web Log - January, 2012
Web Log - December, 2011
Web Log - November, 2011
Web Log - October, 2011
Web Log - September, 2011
Web Log - August, 2011
Web Log - July, 2011
Web Log - June, 2011
Web Log - May, 2011
Web Log - April, 2011
Web Log - March, 2011
Web Log - February, 2011
Web Log - January, 2011
Web Log - December, 2010
Web Log - November, 2010
Web Log - October, 2010
Web Log - September, 2010
Web Log - August, 2010
Web Log - July, 2010
Web Log - June, 2010
Web Log - May, 2010
Web Log - April, 2010
Web Log - March, 2010
Web Log - February, 2010
Web Log - January, 2010
Web Log - December, 2009
Web Log - November, 2009
Web Log - October, 2009
Web Log - September, 2009
Web Log - August, 2009
Web Log - July, 2009
Web Log - June, 2009
Web Log - May, 2009
Web Log - April, 2009
Web Log - March, 2009
Web Log - February, 2009
Web Log - January, 2009
Web Log - December, 2008
Web Log - November, 2008
Web Log - October, 2008
Web Log - September, 2008
Web Log - August, 2008
Web Log - July, 2008
Web Log - June, 2008
Web Log - May, 2008
Web Log - April, 2008
Web Log - March, 2008
Web Log - February, 2008
Web Log - January, 2008
Web Log - December, 2007
Web Log - November, 2007
Web Log - October, 2007
Web Log - September, 2007
Web Log - August, 2007
Web Log - July, 2007
Web Log - June, 2007
Web Log - May, 2007
Web Log - April, 2007
Web Log - March, 2007
Web Log - February, 2007
Web Log - January, 2007
Web Log - December, 2006
Web Log - November, 2006
Web Log - October, 2006
Web Log - September, 2006
Web Log - August, 2006
Web Log - July, 2006
Web Log - June, 2006
Web Log - May, 2006
Web Log - April, 2006
Web Log - March, 2006
Web Log - February, 2006
Web Log - January, 2006
Web Log - December, 2005
Web Log - November, 2005
Web Log - October, 2005
Web Log - September, 2005
Web Log - August, 2005
Web Log - July, 2005
Web Log - June, 2005
Web Log - May, 2005
Web Log - April, 2005
Web Log - March, 2005
Web Log - February, 2005
Web Log - January, 2005
Web Log - December, 2004
Web Log - November, 2004
Web Log - October, 2004
Web Log - September, 2004
Web Log - August, 2004
Web Log - July, 2004
Web Log - June, 2004

Copyright © 2002-2016 by John J. Xenakis.