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


Web Log - February, 2010


28-Feb-10 News - China faces social unrest disaster

EU President is called a 'Damp rag,' and Russia blames Obama for its drug problem.

We have a bumper crop of news stories today.

8.8 Magnitude earthquake strikes Chile

A building in Talca, Chile, destroyed by Saturday's earthquake. <font size=-2>(Source: NY Times)</font>
A building in Talca, Chile, destroyed by Saturday's earthquake. (Source: NY Times)

Epicenter of Chile's earthquake <font size=-2>(Source: NY Times)</font>
Epicenter of Chile's earthquake (Source: NY Times)

Chile's President Michelle Bachelet declared a "state of catastrophe" in Chile, following the massive earthquake that's killed hundreds of people. NY Times.

British politician calls the EU President a 'Damp Rag'

Nigel Farage, one of the UK's representatives to the European Parliament, addressed European Union President Herman Van Rompuy as follows, earlier this week:

"I don't want to be rude.

But you know, really, you have the charisma of a damp rag and the appearance of a low grade bank clerk.

The question that I want to ask and that we are all going to ask is: who are you? I had never heard of you; nobody in Europe had ever heard of you. I would like to ask you, Mr President: who voted for you? And what mechanism - I know democracy is not popular with you lot - what mechanism do the peoples of Europe have to remove you? Is this European democracy?

Sir, you have no legitimacy in this job at all, and I can say with confidence that I can speak on behalf of the majority of the British people in saying: we do not know you, we do not want you, and the sooner you are put out to grass, the better.

I have no doubt that it is your intention to be the quiet assassin of European democracy and of the European nation states. You appear to have a loathing for the very concept of the existence of nation states; perhaps that is because you come from Belgium, which of course is pretty much a non-country."

Farage is facing a reprimand for his remarks, according to The Telegraph.

I listened to a BBC segment on this story. They went through a litany of parlianmentary insults from several countries in Europe, as well as Canada, Korea and Japan.

As for the U.S., the only thing they could come up with was the shouted "You lie!" during President Obama's State of the Union address.

The BBC segment then had a long discussion on why Americans were so much more civilized than the rest of the world. There were several deep psychological suggestions.

Actually, I believe that the answer is much simpler than that: America is not a parliamentary democracy. When Farage called van Rompuy a "damp rag," it may have been in the hope of getting some popular movement going that would drive him out of office quickly, perhaps through a vote of no confidence.

But that's not possible in the American system. If you hate George Bush, or you hate Barack Obama, you know that he's going to be around until the end of his term, so insulting him can only backfire.

China's top expert on social unrest predicts 'revolutionary turmoil'

In a speech described as "very significant," Professor Yu Jianrong, an expert close to China's President Hu Jintao and Premier Wen Jiabao, is predicting looming internal disaster, based on on-the-ground surveys and also the views of Chinese government ministers.

The speech was given on December 26. It was never publicly reported, but it's recently emerged on Chinese web sites. It's being recognized in the West now because of reporting by the Sydney Morning Herald.

That China is facing looming internal disaster due to social unrest is hardly news. I laid out all the reasons in 2005 in my article, "China approaches Civil War.")

The Chinese Communist Party (CCP) has been in a state of near-panic since 1991, which is when the Soviet Union collapsed. They've been afraid that if Communism could collapse in the Soviet Union, then it could collapse in China. The CCP are also well aware of China's history of massive rebellion -- the White Lotus rebellion of 1795, the Taiping Rebellion of 1852, and Communist Revolution that began with Mao's Long March in 1934. In 2007, Chinese premier Wen Jiabao said that China is "unsteady, unbalanced, uncoordinated and unsustainable."

Now, Wen Jiabao said on Friday that 2010 will be the "most complicated" year for the country's economy, according to the Taiwan News. "Two things can hurt social stability. One is corruption. The other is the price of products," Wen said, adding that the government should be able to regulate both.

Actually, corruption has been growing rapidly in China, and is the source of a great deal of unrest, as Wen suggests, and housing prices at least are completely out of control. (See "Corruption is increasing in China," and "Skyrocketing real estate prices in China alarm officials.")

Mass incidents

Some of the most remarkable things about China -- and I first wrote about this in 2004 (see "Up to 50,000 workers riot and clash with police in southeast China") -- are the "mass incidents." In a typical situation, there might be a busy shopping district. Someone accidentally bumps into somebody or, even worse, someone accidentally bumps into someone's wife. A fight ensues, and people start gathering around, taking sides. They use their cell phones to notify other people, and pretty soon there are dozens, hundreds, thousands or sometimes even tens of thousands of people fighting each other.

If even one incident like this occurred in the U.S., it would be international news. But there are thousands of "mass incidents" in China every year.

In his speech, Professor Yu cited statistics that show that the number of these mass incidents has been growing steadily, from a few thousand in the 1990s to over 90,000 in the last year. "More and more evidence shows that the situation is getting more and more tense, more and more serious," Professor Yu said.

China's 'Ant Tribes' face hard times

The "ants" are the hundreds of millions of interchangeable workers in Beijing and other big cities in China. The name comes from the book "Ants Tribe," according to the AFP.

Even though many of them are college graduates, it's getting harder and harder for them to find jobs. In 2009, move than 1/3 of the Beijing "ants" had no employment contracts, and many were unemployed or were changing jobs frequently.

This is the exactly the kind of problem that Professor Yu was talking about, and it's exactly the kind of atmosphere that can give rise to social unrest.

Terrorist bombing in Kabul, Afghanistan

This video is an AFP story of a terrorist bombing in Kabul on Friday.

Taliban suicide bombers targeted guesthouses in the heart of Kabul on Friday, killing at least 16 people. Nine Indian nationals, a French film-maker and an Italian diplomat were confirmed killed in the blast as well as several police.

Russia blames the U.S. for heroin addiction in Russia

Victor Ivanov, the head of Russia's federal drug control agency, is blaming the Nato coalition forces in Afghanistan for not doing enough to curb opium production in Afghanistan.

According to the BBC, he particularly blamed the Obama administration for ending a military drive to destroy opium poppy crops in Afghanistan. The US had abandoned that practice because it was alienating farmers and driving them to support the Taliban.

Russia has millions of heroin addicts, and Russian President Dmitry Medvedev has called Afghan heroin, which makes up 90% of Russia's narcotics trade, a threat to Russia's national security.

Additional Links

--- The Federal Trade Commision has notified almost 100 organizations that person information, including sensitive data bout customers or employees, has been hacked from the organizations' computers, and is available on file-sharing networks for identify theft. FTC Press Release.

--- I'm always being criticized for being too gloomy, so let me not omit mention of this NY Times story. It seems that there's a big silver lining to Greece's financial crisis. The crisis will force the European nations to finally cooperate with one another, especially in fiscal policy. "Greece was the birthplace of Europe," says the writer, Jacques Attali, "and the Greek crisis will, in the end, be the midwife of the completion of the European project." According to Generational Dynamics, Attali is absolutely right -- but not before the Clash of Civilizations World War has ended.

--- Greece is facing a major showdown next week, as it will try to sell 10-year bonds to finance its current interest payments. The WSJ reports that German and French officials have been discussing a 30 billion euro bailout of Greece, to be financed by state-owned French and German banks. The timing is unclear, and nothing has been approved.

--- Mirhossein Mousavi was the opposition leader who claims that last year's Iranian Presidential election was stolen from him by a corrupt Mahmoud Ahmadinejad last year. On Saturday, Mousavi's web site said that the legitimacy of Iran's clerical rulers were "a cult that has no respect for Iran's national interests," and has waning credibility. Reuters. It's amazing that Mousavi hasn't been arrested, or worse.

--- The potential political crisis in Kenya that we reported a couple of weeks ago (see "Kenya's political coalition may collapse and lead to tribal warfare") has been averted for now, according to AFP. Bitter political enemies, President Mwai Kibaki and Prime Minister Raila Odinga, from different ethnic tribes, have put differences aside to preserve the coalition government that was formed in the wake of the massive violence two years ago.

--- Sufism is a mystical tradition within both the Sunni and Shia sects of Islam. This NY Times article describes Sufism in Pakistan. For more information, you may enjoy this video of Whirling Dervishes in Turkey:

Just watching that video makes me dizzy.

(Comments: For reader comments, questions and discussion, see the 28-Feb-10 News - China faces social unrest disaster thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-Feb-2010) Permanent Link
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27-Feb-10 News - War in Darfur may be starting again

A major explosive battle has yet to occur.

Omar Al Bashir, the president of Sudan, is saying that the war in Darfur is completely over, according to the Sudan Daily.

Al-Bashir, who is running for reelection as President of Sudan, said at a campaign stop on Friday, "Darfur crisis and the battle of arms are over for good. All are now heading for the battle of development, progress, building and prosperity." Like any good politician, he pledged to transform all money that was being used in war into development and construction programs. This claim is based on a recent truce that was signed.

However, al-Bashir's statement is being contradicted by the AP, which reported on Friday that heavy fighting is going on between government forces and a "rebel group" that had refused to sign the truce.

The Darfur war has been a media circus since 2004, when the world "discovered" Darfur. The whole thing would be a hilarious joke if you ignored the tragedy of what's actually going on.

First off, the mainstream media reports are that the Darfar war began in 2004. Nothing could be farther from the truth. It actually began in the 1970s, as a series of low-level incidents between camel herders, whose camels sometimes destroyed farmers' crops, and farmer, who put fences around their land to keep the herders' camels from stomping on their crops. This kind of dispute happens in almost every country at some point, including the United States in the 1800s.

In the 1970s, it was just an occasional series of incidents that could be resolved by elders from the conflicted herder and farmer tribes. These elders were people who had survived the previous generational crisis war in Darfur, and who knew how to resolve conflicts before they got out of hand. As those survivors died off, the number of incidents increased throughout the 1980s and 1990s. In 2002-03, it escalated into a full scale crisis war, and it was discovered by the world in 2004. (See Ban Ki Moon blames Darfur genocide on global warming, for a complete generational analysis of the Darfur war.)

Since 2004, there has been a lot of international game playing with the Darfur war. In 2004, anti-war "peace activist" Jesse Jackson called for sending American troops to Darfur. In 2007, then-Senator (now Vice President) Joe Biden wanted to pull our troops out of Iraq and move them to Darfur. What these examples show is that these people never were "anti-war"; they just wanted to send troops into politically correct wars.

The United Nations was particularly playful. In 2005, the UN declared Darfur war was not genocide because UN members didn't want to have to deal with it in the Security Council. In 2007, the UN Secretary General Ban Ki Moon blames Darfur genocide on global warming, which he then blamed on the United States, making the entire Darfur war the fault of President Bush. There was just no end to the hilarity.

From the point of view of Generational Dynamics, this war has never reached a climax. It appeared in 2006-7 that a massive battle was building, but that battle never occurred, because the United Nations formed refugee camps with three million refugees in huge tent farms in the middle of the desert. Food, water and other needs were supplied by international care agencies. (See U.N. commander claims that the Darfur war is over.)

The new fighting has driving 1500 more people from their homes. Those three million refugees will be sitting ducks when the international forces are withdrawn, which may happen in any major emergency.

The climax of the Darfur crisis war is yet to come.

Additional Links

Iran is confounding international nuclear inspectors, according to the NY Times, because Iran has moved its entire stockpile of low-enriched fuel out into the open. One theory is that they're taunting the West, provoking Israel into a military strike. Another theory is that they simply ran out of underground storage.

(The Generational Dynamics forum will be unavailable for a few days due to technical problems.) (27-Feb-2010) Permanent Link
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26-Feb-10 News - Turkey debates Islam versus secularism

Consumer confidence plummets along with bank lending.

Operation Sledgehammer coup plot roils Turkey's politics

A major confrontation is developing between the Islamist AKP party, currently in power in Turkey, versus the pro-secular Army. 30 Army officers have been jailed after evidence has been found that they attempted a coup in 2003.

The coup plan, code named Operation Sledgehammer, involved bombing two Istanbul mosques and escalating tensions with Greece by forcing Greek jets to down a Turkish plane over the Aegean Sea, according to Al-Jazeera. The operation was planned after the Islamist AKP party first won parliamentary elections in 2002. This was the first non-secular government in power since the early 1920s, when Kemal Ataturk, the father of modern Turkey, declared Turkey to be a secular state.

A secular country?

Is Turkey now a Muslim state or a secular state? That's a question that's plagued the country for centuries, and it's rising as a major political issue again.

When Constantinople (now called Istanbul) fell in 1453 to the Muslim Ottomans, it marked the end of the Byzantine Empire, and even the end of the last vestiges of the Roman Empire. It was possibly the most important world event of the millennium, and an enormous victory for the Ottomans. The Ottoman Empire began scoring one victory after another, as it took on both Western Christians and Orthodox Christians in the following centuries.

However, the balance of power began to shift from the Muslims to the Christians in 1699, when the Ottomans were forced to sign the Treaty at Karlowitz after being defeated by the Germans and allies in the War with the Holy League. This war stunned the Muslim world, and even today is considered by many Muslim scholars to be the most calamitous defeat in Muslim history.

After that, the Ottomans began losing pieces of their empire, and they were particularly humiliated by the Crimean War in the 1850s, when they had to be saved from a Russian invasion by European forces.

In the generational Awakening era that followed this crisis war, there began a movement of young Muslims to develop a new Turkish (as opposed to Ottoman) culture, and this led to the "Young Turks" rebellion in 1908. The Ottoman Empire was finally destroyed completely in the aftermath of World War I.

WW I was not a crisis war for the West, but it was a generational crisis war for Turkey. After any generational crisis war, a country always goes through major political changes. For Turkey, led by Kemal Ataturk, it was a huge change: Turkey would abandon its position as Caliphate for Muslims worldwide, and would become a completely secular country.

(It's worthwhile noting that Russia went through a similar change at that time, when the Bolshevik Revolution turned the country from the head of worldwide Orthodox Christianity to an atheist nation. Today, Russia and Turkey are both questioning those decisions.)

The headscarf controversy

In 2007, I wrote a brief historical analysis of Turkey in the article More than a million of secularists rally in Turkey. As I pointed out in that article, a controvery over headscarves has been the focal point of a culture war between the Islamists and the secularists.

Turkey's current president, Abdullah Gul, is from the Islamist AKP party, and his wife wears a headscarf, according to some Muslim traditions. But in the secular Turkey established by Ataturk in 1924, wearing headscarves in public buildings is illegal.

I recall that my mother used to wear a headscarf at times, to keep her hair in place, and she isn't even Muslim! We have one Muslim country, Iran, where women who DON'T wear headscarves are swept up by the police and arrested, and we have a secular country, Turkey, where WEARING a headscarf is illegal is some circumstances. This shows how confusing this issue is for Muslims, and especially how confusing it is for Turkey.

The stakes are very high in Turkey now, with two large, powerful institutions fighting over the secularist vs Muslim issue. The Army has a history of enforcing Ataturk's laws about secularism, and it's widely known that the army has triggered coups in the past to keep the government secular. But Operation Sledgehammer really crossed the line, in the minds of many Turks.

Additional Links

US Consumer Confidence fell to its lowest level since last spring. According to Bloomberg, that this means that consumers may "hold back the spending needed to sustain the recovery." Once again, the dreams of those who are hoping that a full-fledged credit bubble will return again are dashed.

In fact, bank lending is falling at an "epic pace," according to WSJ. "Besides registering their biggest full-year decline in total loans outstanding in 67 years, U.S. banks set a number of grim milestones. According to the FDIC, the number of U.S. banks at risk of failing hit a 16-year high at 702. More than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data have been collected."

In the past two weeks, Iranian president Mahmoud Ahmadinejad has been stepping up his calls for the destruction of Israel. In one speech translated by Memri, he said, "A Middle East without Zionism is a divine promise... Time is on the side of the peoples of the region. The Zionist entity is nearing the threshold of nonexistence. Its raison d'être is finished, and its path is a dead end. If Israel wants to repeat the mistakes of the past, the death of the Zionist entity is certain... This time, all the nations of the region will stand fast in the face of the [Zionist regime], and will uproot it."

(Comments: For reader comments, questions and discussion, see the 26-Feb-10 News - Turkey debates Islam versus secularism thread of the Generational Dynamics forum. Comments may be posted anonymously.) (26-Feb-2010) Permanent Link
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25-Feb-10 News - Greeks call Germans 'Nazis' as strikes shut Greece down

YouTube links for 'Generation Zero' movie special coverage on Hannity

YouTube links for 'Generation Zero' special on Hannity

If you missed the 'Generation Zero' Hannity special on Fox News Channel on Tuesday evening, it's now available on YouTube.

You can go to, and search for "generation zero hannity". The links are as follows:

2/23/10 Hannity Special 'Generation Zero' Part 1
2/23/10 Hannity Special 'Generation Zero' Part 2
2/23/10 Hannity Special 'Generation Zero' Part 3
2/23/10 Hannity Special 'Generation Zero' Part 4

Each part shows clips from the movie. I appear in the clips in the first two parts.

A transcript of the full hour can be found here, on

Greeks call Germans 'Financial Nazis'

A Greek depiction of the Berlin statue of the goddess Victoria, shown holding a swastika <font face=Arial size=-2>(Source: Eleftheros Typos / WSJ)</font>
A Greek depiction of the Berlin statue of the goddess Victoria, shown holding a swastika (Source: Eleftheros Typos / WSJ)

The picture on the right, appearing Wednesday in the Athens newspaper Eleftheros Typos, depicts the statue of the goddess Victoria, atop the Siegessaeule in Berlin, showing it holding a swastika. According to the WSJ, the paper was reacting to the cover of this week’s German magazine Focus showing the Venus di Milo making an obscene gesture ("the finger") at Europe, with the headline “Swindlers in the European Family."

Both countries are showing increasing mutual acrimony in their public opinion, according to the article. The majority of Germans oppose bailing out Greece, while the Greeks refer to "financial naziism."

Bitter generational words from Greece's deputy prime minister

Even more bitter words came from Greece's Deputy Prime Minister Theodoros Pangalos, in an interview with the BBC. Pangalos' remarks were very wide-ranging. He accused Italy of lying about financial statistics even more than Greece had, and he said that Germans had no right to criticize the Greeks after the Nazi slaughter and occupation. "They took away the gold that was in the Bank of Greece, they took away Greek money, and they never gave it back. This is an issue that has to be faced sometime in the future," he said.

He also made a statement that was very interesting from the point of view of Generational Dynamics. He attacked the caliber of the EU's current political leaders, saying that those of the 1980s -- such as Margaret Thatcher, Helmut Kohl and Francois Mitterrand - would never have permitted the current economic crisis. "This is another level of leadership which we don't have today. The quality of leadership today in the union is very, very poor indeed."

From the point of view of Generational Dynamics, this is completely true. The leaders in the 1980s were survivors of the Great Depression and WW II. Even when they were from different countries, or in different political parties, they shared common horrors when they were children, and gave the highest priority to preventing anything like that from happening again. Today's politicians don't care about anything except getting votes.

However, the problem with Pangalos' statement is that it applies to Greek politicians as well, and he doesn't seem to have any inkling of that.

The Greek politicians are in a complete state of denial, according to Brussels-based financial analyst Fredrik Erixon. "We haven’t yet seen anything of the fiscal contraction that Greece has to go through if it wants to avoid a sovereign default," he said to Bloomberg. "The main problem is that the Greek government and the prime minister himself have not yet realized the depth of the mess."

So, now we can turn it around. Erixon correctly states that the Greek politicians are in a state of denial, but he apparently doesn't realize that the EU politicians in Brussels are also in a state of denial.

In fact, more and more analysts are reaching the conclusion that there IS no solution to the crisis. John Plender, writing in Financial Times,

"[T]o argue ... that the difficulties of the southern European countries [Greece, Italy, Spain, Portugal] can be solved by a stringent dose of fiscal austerity and the equivalent of an International Monetary Fund programme is plausible but utterly wrong.

All these countries suffer from poor cost competitiveness, exacerbated by the overvaluation of the euro. What they need is more external demand for their goods and services while they try to address problems of fiscal excess and overblown unit labour costs.

Yet much of northern Europe, with Germany in the lead, seems to think it can continue with its structural savings surplus and export-led growth model while Portugal, Italy, Greece and Spain are throttled."

Crippling strikes in Greece, protests in Spain

Another person who's in complete denial is Yiannis Panagopoulos, Head of GSEE private sector union. He's leading crippling public sector strikes that shut down the country on Wednesday. All flights in and out of the country have been canceled, while public schools, ministries, municipal offices, and public transportation are shut down. Many hospitals are operating only with emergency staffing.

Greece may be the euro country worst hit by labor union strikes right now, but it's far from the only one.

John Monks, secretary general of the European Trades Union Confederation, warned yesterday that unions across the EU were pushing back against austerity plans that were "socially unacceptable" and which would only exacerbate the recession by fuelling unemployment, according to The Independent.

In Spain, trade unionists led rallies in Madrid, Barcelona and Valencia against plans to raise the retirement age to 67, according to the article. Spain's economy was driven by a huge real estate bubble during the boom years, and the current slump, with 20% unemployment, is worse than even the Greek slump.

In France, where unemployment is at 10%, oil refinery workers and air-traffic controllers are threatening strikes.

To repeat what I've said before, there is no solution to this crisis. Everyone wants as much as possible for himself, and couldn't care less about anyone else. If someone suggests a compromise, it's immediately shot down by the other side. This crisis can only end up in war, as I've said before. Exactly how the countries will choose up sides cannot yet be predicted, but the bitter acrimony between Greece and Germany, invoking the Nazi ghosts of WW II, makes it pretty clear that those two countries will be on opposite sides.

Additional Links

According to the Asian Times, the Sunni terrorist group Jundallah is poised to regroup and become even stronger, after the capture of its leader, Abdulmalik Rigi, that we reported yesterday. It's believed that Pakistan intelligence helped Iran capture Rigi, but Jundallah is already dominated by anti-Shia terror organization Lashkar-e-Jhangvi, whose network spreads across Pakistan.

More trouble for Greece, as wealthy citizens are pulling money out of Greek banks and sending it abroad to Cyprus, Luxembourg and Switzerland, to escape anticipated punitive taxes. WSJ.

(Comments: For reader comments, questions and discussion, see the 25-Feb-10 News - Greeks call Germans 'Nazis' thread of the Generational Dynamics forum. Comments may be posted anonymously.) (25-Feb-2010) Permanent Link
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24-Feb-10 News - Iran captures Jundallah terrorist leader

'Generation Zero' movie appears on Hannity for the full hour

Some observations about 'Generation Zero' on Hannity

The new movie "Generation Zero" was the subject of the entire hour on Fox News Channel's Sean Hannity show. The guests were the movie's writer/director, Steve Bannon, and the executive producer, David N. Bossie. Several segments of the movie were screened, including a couple of segments in which I appear as commentator.

This movie is extremely exciting to me personally for obvious reasons. It's exciting that I'm in it, but it's even more exciting that Generational Dynamics and generational theory is receiving all this exposure. (See "New documentary movie 'Generation Zero' brings generational theory to the public.")

I can see why everyone who's seen the movie is really touched by it. It's very dramatic, and it forces everyone to focus on the generational causes of the financial crisis. It also makes it clear, to anyone who's paying attention, that there is no solution except a major meltdown far worse than we've already seen, leading inevitably to world war.

A disappointment to me is Hannity's stress on blaming Democrats for the crisis. That's really not a surprise, of course, since Hannity's show is always very pro-Republican party. As for myself, I would never blame the financial crisis on any politician or political party. As I say all the time on this web site, no politician could have either caused or prevented the financial crisis. The perpetrators exist in all organizations and all political parties, and the only possible explanation is that the "perpetrators" are entire generations.

However, to be fair, the heavy pro-Republican slant was Hannity's alone. Both Bannon and Bossie made the point that Republicans are just as much to blame.

Another interesting development is that the material on the relationshp between Boomers and Generation-Xers was omitted. The Boomers could not possibly have perpetrated the financial crisis by themselves, since everyone agrees that they're too dumb and incompetent to have done so. The only way this could have occurred is by the greed shared by Boomers and Xers, with Boomer bosses condoning and supporting the massive fraud being perpetrated by Gen-Xers.

I can see why Bannon decided to omit the criticism of Gen-Xers. By leaving that out, the movie will be a lot more popular with Gen-Xers, who really want to blame everyone on the Boomers anyway.

But those are just nitpicks. This is a fantastic movie, and it's going to make a lot of people aware of generational theory. Generational Dynamics is the most important professional thing that I've done in my life, and it will, I believe, be a boon to mankind.

Iran captures leader of Jundallah terrorists

Iran, Afghanistan, Pakistan, highlighting the region of September's Jundullah attack
Iran, Afghanistan, Pakistan, highlighting the region of September's Jundullah attack

In September, I wrote about a terrorist attack on Iranian soil that was extremely humiliating to Iran. (See "Furious Iran blames Pakistan, US and Britain for Sunday's terrorist attacks.")

The attack was conducted by Jundallah, a Sunni Islamist terrorist group with links to al-Qaeda and the Taliban. The attack targeted Iran's Revolutionary Guards. It was the biggest attack on the Revolutionary Guards since the Iran/Iraq war of the 1980s, and it killed 42 people, including 20 or so top commanders in the Revolutionary Guards.

Now Iran has finally gotten revenge. Iran's Press TV reports that Abdulmalek Rigi, the leader of Jundallah, has been captured, along with one of his deputies. It required detective work by the Iranians to learn that Riga was on a jet flight from United Arab Emirates to Kyrgyzstan, crossing Iran's air space. Iranian security forces forced the plane to land, and Riga was taken into custody.

The story is far from over, however. The Iranians have been claiming that Jundallah was an American and British funded terrorist organization. Now the Riga has been captured, they're claiming that they will soon have proof of Western funding and support.

The article quotes an Iranian official as saying, "Not only are we aware of the many crimes against humanity committed by [Rigi], but we also have more than enough evidence that this terrorist group was in fact acting on US orders. This is a disgrace for a country which tries to portray itself as an avid supporter of human rights."

An AFP report quotes an unnamed senior US official as saying, "This is of course a totally bogus accusation."

This accusation has never made much sense to me. We're fighting a war against al-Qaeda linked terrorists in Afghanistan, and American funding of an al-Qaeda linked terrorist group under any circumstances would almost be an act of treason. On the other side, an al-Qaeda linked terrorist group would not disgrace itself by "acting on US orders."

What makes much more sense is that Jundallah funding and support has come from Saudi Arabia, a Sunni Muslim country that's fighting Iran for hegemony in the Middle East. Saudi Arabia sees itself as the protector of the Sunnis (LA Times), and the Saudis have already been fighting the Iran-supported Houthi rebels in Yemen, and the Saudis and Iranians are fighting for politicial influence in Iraq.

There's little doubt that the Iranians are going to produce some kind of evidence to support their allegations that Jundallah is funded by the US and acting under US orders. How credible that evidence is remains to be seen.

Paul Krugman, the former economist, turned politician

I've described Paul Krugman as a man who used to be an economist, but now just plays one on TV (and in newspapers). He won the Nobel Prize in Economics because he possessed the main qualification that the Nobel committee was looking for: He hated George Bush.

A New Yorker magazine profile of Paul Krugman describes how he gave up economics and became a leftist political pundit. Apparently, it's the fault of Robin Wells, his wife!

According to the article, she edits all his articles to make them "angrier":

"Recently, he gave her a draft of an article he’d done for Rolling Stone. He had written, “As Obama tries to deal with the crisis, he will get no help from Republican leaders,” and after this she inserted the sentence “Worse yet, he’ll get obstruction and lies.”"

Hmmmmm. Maybe the Nobel Prize committee made a mistake after all. It's Robin Wells who really deserved to receive it.

Alan Greenspans calls it 'the greatest financial crisis -- ever'

Former Federal Reserve Chairman Alan Greenspan gave a speech to the Credit Union National Association conference. He's quoted by Reuters as saying that this is "by far the greatest financial crisis, globally, ever" -- including the 1930s Great Depression.

He added, "It's really an extraordinarily unbalanced system because we're dealing with small businesses who are doing badly, small banks in trouble, and of course there is an extraordinarily large proportion of the unemployed in this country who have been out of work for more than six months and many more than a year."

Kenneth Rogoff predicts sovereign defaults, collapse of the euro

I've been writing about this coming financial meltdown for years, but this year we're seeing something we really didn't see before -- there are a lot more commentators talking openly about it. Alan Greenspan is getting more realistic, as we've seen, and the "Generation Zero" movie really propels the crisis view forward.

Harvard Professor Kenneth Rogoff has always been realistic about the oncoming crisis, but at a forum in Tokyo on Monday, Rogoff predicted that "a bunch of sovereign defaults" are coming, as reported by Bloomberg.

According to Rogoff, the sovereign defaults are going to be triggered by the phasing out of fiscal stimulus that we've seen in the last year.

With regard to Europe, he was fairly specific, according to the article:

"Rogoff, 56, said he expects Greece will eventually be bailed out by the IMF rather than the European Union. Greece will probably announce an austerity program “in a few weeks” that will prompt the EU to provide a bridge loan which won’t be enough to save the country in the long run, he said.

“It’s like two people getting married and saying therefore they’re living happily ever after,” said Rogoff. “I don’t think Europe’s going to succeed.”

In the case of US Fed policy, When they start tightening monetary policy even a little bit, it’s going to send shockwaves through the system," Rogoff said.

A report by Morgan Stanley, quoted by Ambrose Evans-Pritchard writing in The Telegraph, agrees that Europe faces a worsening crisis.

The report points out that European banks need to roll over €1 trillion (£877bn) of debt over the next two years, at increasingly high interest rates. Thus, "Lenders will have to cope with a blizzard of problems."

Additional Links

A commentary in Der Spiegel talks about the "Arrogance of China's Leadership." "For a start," it says, "the Chinese government is brimming with a self-confidence bordering on arrogance. The Chinese see themselves as the winners of the global economic crisis." As we've said many times, China is going through the same kind of generational changes as the West, and is in the midst of even worse real estate and credit bubbles than America. Generational Dynamics predicts that China is headed for major financial disaster, an internal civil war, and world war with the West. The Spiegel article illustrates how acrimony is growing on both sides.

There seems to be no end to the ways that scammers work. Police in Utah have warned that crooks have installed credit card "skimming" devices in pay-at-the-pump gas pumps. So you fill up your tank, pay for it at the pump, and the crooks get your bank card and pin numbers.

I've been accused of all sorts of things since starting this web site in 2002, including "liking war." Believe me, if I liked war, I wouldn't have lost so much sleep the past few years. One of the most touching articles about the enormous pain of war is "Distant Wars, Constant Ghosts" by Army Captain Shannon P. Meehan (Ret.) in the NY Times. He recounts how he still has constant nightmares about the mothers and children in Iraq that his actions killed accidentally.

(Comments: For reader comments, questions and discussion, see the 24-Feb-10 News - Iran captures Jundallah terrorist leader thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Feb-2010) Permanent Link
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23-Feb-10 News - Is Burma poised for a new civil war?

'Generation Zero' writer/director Steve Bannon will appear on Hannity on Tuesday evening.

'Generation Zero' movie will be featured on Hannity on Tuesday evening

The writer/director of the movie, Steve Bannon, will be on Hannity (on Fox News Channel) on Tuesday evening from 9-10 pm ET, and the entire hour is going to be devoted to this movie. They're going to show several segments of the movie.

The movie itself is non-partisan, but it's being heavily promoted by the conservatives. (See "New documentary movie 'Generation Zero' brings generational theory to the public.")

In Burma (Myanmar), the ethnic Kachins prepare for a new civil war

The next generation of the Kachin Independence Army (KIA) are training to begin a new civil war, according to the BBC.

The Kachin state, the home of the ethnic Kachin population, occupies the northeast corner of Burma (Myanmar), on the border with China. The Kachins have a fair amount of autonomy. They have their own army, they trade briskly with China, and they levy taxes to provide roads and schools, according to the article.

The Kachin Independence Organization (KIO) was formed in 1961 to gain independence from Burma. There was intermittent violence between the Kachins and the Burmese army until a cease-fire was signed on February 24, 1994. As the anniversary of the ceasefire approaches, there is fear that full-scale civil war will break out.

The trigger would be a Burmese junta (government) demand that the KIA disband and merge into the Burmese army as border guards.

From the point of view of Generational Dynamics, a full-scale civil war at this time is impossible, and I'd like to repeat some themes that I've discussed recently with regard to other countries, such as Kenya.

There's a kind of dance that can go on for years or even decades when a country is approaching a civil war. There are spurts of violence that go on for a while and then fizzle, as some kind of ceasefire is agreed to. At some point, both sides get tired of ceasefires, and they launch full-scale civil war. Over the last few years, for example, I traced this dance in Sri Lanka, as it went from ceasefire to civil war and then, in 2009, to a civil war climax, and the war was over.

The transition from cease-fire to full-scale civil war occurs with the "regeneracy," some trigger that's so shocking that it ends political bickering and regenerates civic unity among both belligerents. (For information about the term "regeneracy" and about generational eras, see "Basics of Generational Dynamics.")

However, the regeneracy cannot occur before its time -- as long as the survivors of the last crisis civil war are still around. It's only when they begin to die off in great numbers that the younger generations have their way, and a full-scale civil war can begin. This usually happens around 58 years (or later) after the end of the preceding civil war.

Burma's last crisis civil war ended in 1958, and so it's too early for a new full-scale civil war to begin.

The BBC article itself gives a hint of this when it says, "It is a war the Kachin people do not want and one they cannot win." This is not the attitude of a people ready for slaughter.

According to an article by Mazzima, a Burmese news service operating in India, the KIA is one of three ethnic armed Kachin army groups in Kachin State, and the other two have already agreed to the terms laid down by Burma's junta. Once again, this is not the attitude of a people ready for a bloody civil war, despite the statements of the KIA generals.

In 2007, peaceful demonstrations by Buddhist monks in Burma were ended by massive slaughter and atrocities by the Burmese army. In "Burma: Growing demonstrations by the "88 Generation" raise fears of new slaughter," I summarized Burma's generational history, including the events that led to the 2007 confrontations.

An Amnesty International analysis (PDF) of the demonstrations and their aftermath was published last week. It goes into detail about the repression of the different Burmese ethnic groups, including the Kachins.

In summary, then, the current political situation may indeed lead to a new outbreak of violence, but the violence will fizzle, and not break into full-scale civil war at this time.

Additional Links

Another climate change scientific study is being withdrawn. The Guardian reports that claims that the sea levels would rise due to global warming was withdrawn, after mistakes were found, undermining the findings. The study had been published in 2009 in Nature Geoscience, one of the top journals in the climate change field.

Millions of unemployed people face years without jobs. NY Times.

A desperate Prime Minister Georgios Papandreou gives a interview to Der Spiegel, in which he says that the financial crisis is a "question of survival for Greece." According to EuroIntelligence, Spiegel is also reporting that the Germans have resigned themselves to a Greece bailout of about 20-25 billion euros, of which Germany will contribute 4-5 billion euros.

(Comments: For reader comments, questions and discussion, see the 23-Feb-10 News - Is Burma poised for a new civil war? thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Feb-2010) Permanent Link
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New documentary movie 'Generation Zero' brings generational theory to the public.

Written and directed by Steve Bannon, it will open nationwide on March 22.

Web site:

Ever since I started this web site in 2002, I've tried to find a way to convince people the country and indeed the world face an existential threat, as shown by generational theory. Although I've written thousands of articles, reports and analyses for this web site, I can't really say that I've succeeded at my major objective of convincing policymakers.

Steve Bannon may have succeeded where I've failed.

I haven't yet seen "Generation Zero - The Inconceivable Truth," but comments by the people who've seen it describe it as brilliant, powerful and frightening.

"Generation Zero" is generally based on the Generational Dynamics theory developed on this web site since 2002, which in turn is based on work by the founding fathers of generational theory, Neil Howe and the late William Strauss. Something I hadn't been aware of until recently is that Strauss and Howe's book Generations was well known to major Democratic and Republican politicians as early as the 1992 presidential election, and it played a part in their campaign strategy.

I got involved in this movie when Steve Bannon called me about a year ago. He said that he'd been spending many hours reading my web site, and that he wanted to take those ideas forward into a movie. He said that he wanted this movie to use some of the same techniques that Al Gore used in "An Inconvenient Truth." He ended up filming me for a total of about six hours in two different sessions, one in Washington and one in New York. Of the six hours, I understand that only a few minutes of what I said are in the 85 minute film.

Here's a snippet from the movie web site:

From Generation Zero movie web site <font face=Arial size=-2>(Source:</font>
From Generation Zero movie web site (Source:

"Generation Zero" is a non-partisan movie, in that, like this web site, it criticizes both Republicans and Democrats. It lays the blame for the financial crisis on Boomers, who are the "generation zero" of the title. I don't yet know whether my description of "the lethal combination of Boomers and Gen-Xers" made it into the final cut of the movie or not.

"Generation Zero" was originally screened at The National Tea Party Convention in Nashville a couple of weeks ago. Steve Bannon tells me that the Tea Party movement plans to make the movie a major unifying theme of their campaign leading up to November elections.

However, those who believe that this is a "pro-Republican" movie are going to be disappointed. It's true that the Republicans will do well in November, but that's not because they're Republicans. Anyone who's not a Democrat has a good shot at doing well in November. This movie makes it clear that neither the Democrats nor the Republicans could have caused or prevented the financial crisis. What this web site has repeatedly made clear is that the country is in the midst of a major political realignment that neither Republicans nor Democrats will like. Whatever form this realignment takes, it seems likely that the "Tea Party" will play an important role.

There are several video trailers that can be viewed on the movie web site. Here's a 75 second video that's much more dramatic than the others, called "The Abyss":

This movie is mainly about the Boomers, Generation Zero. It would be nice, with our knowledge of today, if we could go back in a time machine to study the "generation gap" of the 1960s, and the Boomers' attitudes and behaviors at the time they were occurring. We could learn a lot from that.

Well, in a sense we can. For a few years I've been writing about the "generation gap" today in Iran, and the continuing anti-government student riots and demonstrations that followed the June 12 presidential election. This is not a coincidence. From the point of view of Generational Dynamics theory, Iran is going through exactly the same kind of generational Awakening era today that America and Europe went through in the 1960s. The details are different, but the core generational behaviors are identical.

There are several countries that are in generational Awakening eras today. Iran is one of them, but so are Iraq, Lebanon, Syria, Thailand, Vietnam and Cambodia. Rwanda and Bosnia are just about to enter Awakening eras. A study of today's youth in all of these countries would give us a very deep picture of what makes a Boomer a Boomer.

As for me personally, I have mixed emotions. As long-time readers of this web site are aware, I've lost a lot of sleep over the years, because I could foresee what was coming for America and the world. But I was grateful that I had this web site where I could at least write about all of it. Being as cynical and beaten-down as I am, my gut tells me that the release of this movie is going to fizzle and mean nothing to me personally. However, I have to be realistic, and this movie has the potential to give me my "15 minutes" of fame. What effect that this will have on my life remains to be seen.

What I'm most excited about, though, is that this movie is going to put Generational Dynamics into the national and world spotlight. I've always known that generational theory is going to become a major new subject of scholarly study in universities throughout the world, but I've said that it wouldn't happen in my lifetime. Thanks to the movie "Generation Zero," I may begin to see the first signs of this in 2010.

(Comments: For reader comments, questions and discussion, see the Generation Zero - The Inconceivable Truth thread of the Generational Dynamics forum.) (22-Feb-2010) Permanent Link
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21-Feb-10 News - Dutch government collapses over Afghanistan

Fate of Holland's 1600 troops are in doubt.

Nato 'flabbergasted' at Netherlands government collapse

Nato officials are "flabbergasted" that their request that the Netherlands keep its troops in Afghanistan for another year caused the collapse of Holland's government, according to the Dutch newspaper NRC Handelsblad.

Holland's 1,600 troops are part of the Nato coalition forces in Afghanistan. They were scheduled for withdrawal later this year, but Nato requested that the withdrawal be delayed until the summer of 2011.

The request triggered a political crisis Friday when Holland's leftist Labor party threatened to withdraw from the governing coalition with the Christian Democrats. The negotiations lasted all night, and by Saturday morning, Prime Minister Jan Peter Balkenende was left with no choice except to submit his government's resignation to Queen Beatrix.

The VOA quotes one Dutch official as saying, "[The Dutch soldiers] were building hospitals, schools etc. It was not a military mission. So I think it is very good for the peace in Afghanistan that they should stay but now I think they don't stay."

According to the articles, this move by the far left could trigger a rise in power of the far-right party of anti-immigrant politician Geert Wilders, whose ranking in the polls rivals that of Mr. Balkenende's.

Additional Links

Michael "Mish" Shedlock strongly warns novice home buyers against bidding in foreclosure auctions. You're competing against pros who know all the ins and outs, and if you win the bid, you'll probably end up losing money, or closing a bad deal. Global Economic Analysis.

UK's retail sales plummeted in January to the lowest level in 1½ years, raising fears among even the Pollyannish economists of a "double-dip" recession. Independent.

Hitler's quick "blitzkrieg" invasion allowed Germany to conquer France, the Netherlands, and Belgium in just 44 days, though they lost the war later. But retired USAF lieutenant colonel and historian William J. Astore claims that this early success has caused American military leaders to have a fixation and fascination with the German military, even though they haven't won a war since 1871. Asian Times.

Credit card execs are looking for new ways to justify their million dollar bonuses. The WSJ reports that one way they're doing it is to impose a 3-5% fee on online purchases from foreign merchants, even if the purchase is charged in US dollars.

Swiss prostitutes are being trained to use defibrillators in brothels to prevent clients dying. Medicines like Viagra raise blood pressure and increase the chances of a heart attack. One sex club owner is quoted as saying, "Having customers die on us isn't exactly good publicity". Telegraph.

(Comments: For reader comments, questions and discussion, see the 21-Feb-10 News - Dutch government collapses over Afghanistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (21-Feb-2010) Permanent Link
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20-Feb-10 News - Russia 'alarmed' at Iran

Unsustainable budget deficits in US and UK.

Russia losing patience with Iran's "very alarming" nuclear non-cooperation

"We are very alarmed and we cannot accept this, that Iran is refusing to co-operate with the IAEA," said Sergei Lavrov, the Russian foreign minister, as quoted by The Telegraph.

"Some questions remain on the table and Iran has so far not reacted to them but they are rather serious and we need to understand how several documents concerning military nuclear technology found their way to Iran," Lavrov added. "Clear explanations are needed."

These are the strongest statements so far by a high-level Russian official about Iran's nuclear program.

An analysis by the Moscow Times quotes Russia's Security Council secretary, Nikolai Patrushev, as saying, "Everything has its limits, including patience." Accorindg to the article, Russian officials are increasingly willing to support "crippling UN sanctions" against Iran.

This is a significant change of position by Russia.

In order for the UN Security Council to approve new sanctions against Iran, both Russian and China would have to agree. Thus, Russia's change of position may simply be posturing, since no new sanctions are going to be imposed, since China is not going to agree.

The real game being played here is Iran's "Bring it on!" to Israel, with the desperate hope of provoking a military attack on Iran's nuclear installation in order to unite Iran behind the hardline government, and end the Green movement demonstrations and protests.

Israel, which is in a generational Crisis era, might, in fact, panic and launch such an attack. Everyone is aware of that possibility, including Russia. To the purpose of Russia's statement may well be to convince Israel to hold off.

Still, the level of international tension over Iran's nuclear program is growing and, in such circumstances, the possibility of misjudgment or miscalculation is great.

Unsustainable spending trends by Federal Government

Michael "Mish" Shedlock has a very interesting graph in his Global Economic Analysis blog, showing the receipts and outlays of the Federal government:

Receipts vs. Outlays by Quarter 1999 Q1 Thru 2009 Q4 <font face=Arial size=-2>(Source: Mish Shedlock)</font>
Receipts vs. Outlays by Quarter 1999 Q1 Thru 2009 Q4 (Source: Mish Shedlock)

Shedlock's article points out that the situation is unsustainable, and indeed it is. However, I'd like to discuss a number of interesting points about this graph.

First, the technical issue is that the receipts (shown by the blue lines) are highest each year around April 15, when people pay their income taxes. So ignore the annual spikes in the receipts, and just look at the overall trends.

From the point of view of Generational Dynamics, what's important about this graph is the long-term trend. Unfortunately, the above graph only goes back as far as 1999, but in a previous article I've posted a graph that goes back to 1971. (See "US tax revenues fall sharply, the most since 1932. " That graph is a little different: It's annual rather than monthly, and it shows values as a percentage of GDP, rather than as absolute values. But it illustrates the same long-term trend.)

The common wisdom these days is that the growing budget deficits over the last ben years were caused by the Iraq war. The fact that this is completely impossible (the deficit started growing in 2001, long before the 2003 invasion of Iraq) doesn't seem to have any effect on the "common wisdom."

This is a much more important point than just some fatuous political argument. This is crucial to understanding what's going on today.

If you look at the above graph, you can see that outlays follow a fairly steady growth path, not materially affected by the Iraq war. What changes are the receipts, which start to crash along with the Nasdaq dot-com bubble crash that began in 2000.

Receipts began to spike up in 2005 with the real estate and credit bubbles, but then crashed again severely after the credit crunch began in August, 2007.

So the point is that the variations in the budget deficit in the United States are almost entirely dependent on tax receipts, and tax receipts are almost entirely dependent on growing and bursting of bubbles. And growing and bursting of bubbles is caused by generational changes, as I've discussed many times before. (See "Markets fall as investors are increasingly unsettled by bad economic news.")

As you can see from the graph, there was a change last year. Receipts fell precipitously because of the credit crunch and the deflationary spiral, and outlays increase substantially, because of the stimulus packages.

The stimulus packages were supposed to "stimulate" growth, which would have once again increased receipts. But that isn't happening, and it won't happen because of a major generational change that's occurring. Today's Boomers, Gen-Xers and Millennials are becoming extremely risk-averse, just like their parents, grandparents and great-grandparents in the Great Depression. As Shedlock says, the resulting situation is "unsustainable."

And that's occurring even though we haven't even seen the worst yet. As I've said many times, the stock market has been in a bubble since 1995, substantially overpriced, compared to the long-term trend values. (See "How to compute the 'real value' of the stock market.")

By the Law of Mean Reversion, the stock market is going to have to fall well below Dow 4000, and stay there for a roughly comparable length of time (15 years). This is a mathematical certainty, despite the fact that your broker is telling you that the stock market can only go up.

Additional Links

The United Nations climate chief Yvo de Boer is resigning, after the failure of the Copenhage climate change conference. Der Spiegel says that his mediating skills are going to be hard to replace, as the climate change political movement continues to melt down.

Also melting down is Europe's economy. Economists have pretty much declared that the financial crisis is over, and they're expecting jobs to increase and deficits to disappear. So they were shocked to learn that UK's government had borrowed 4.3 billion pounds last month, when they had expected the economy to have a surpruls of 2.8 billion. (Times Online.)

An opinion column by HDS Greenway in the NY Times seems to say that the reason that there hasn't been a new al-Qaeda terrorist attack on American soil is because Osama bin Laden and Ayman al-Zawahiri are looking for something that will "alter the course of history." Thus, they called off an attack on the New York subway system, to hold off for "something better."

(Comments: For reader comments, questions and discussion, see the 20-Feb-10 News - Russia 'alarmed' at Iran thread of the Generational Dynamics forum. Comments may be posted anonymously.) (20-Feb-2010) Permanent Link
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19-Feb-10 News - IEAA: Iran developing nuclear missile

US fails test in 'Cyber Shockwave' war game simulation

New UN report says that Iran may be developing a nuclear warhead

The IAEA, the United Nations agency responsible for monitoring nuclear weapon development around the world, has issued a new report that considerably raises the alarm level for Iran's possible nuclear weapons development program. Reuters quotes the report as follows:

"The information available to the Agency in connection with these outstanding issues is extensive and has been collected from a variety of sources over time. It is also broadly consistent and credible in terms of the technical detail, the time frame in which the activities were conducted and the people and organizations involved," the report said.

"Altogether, this raises concerns about the possible existence in Iran of past or current undisclosed activities related to the development of a nuclear payload for a missile. These alleged activities consist of a number of projects and sub-projects, covering nuclear and missile-related aspects, run by military related organizations."

The report indicates, for the first time, that Iran has resumed working on nuclear missiles, or that Iran had never stopped doing so, although US intelligence had claimed they stopped in 2003.

This report will substantially raise the international heat over Iran's intentions, with the increased possibility that Israel will decide, of its own accord, to strike Iran's nuclear installations militarily. The range of a nuclear-tipped missile would include not only Israel, but parts of Europe and numerous other countries.

A Haaretz analysis by Israeli security journalists Amos Harel and Avi Issacharoff summarizes the situation as follows:

"If the international community's collision course with Tehran leads to harsh sanctions meant to halt its nuclear program, the spring and summer months will be especially sensitive. It would be impossible to rule out a scenario in which the increasing tension leads to all-out open war. Tehran and Jerusalem regularly exchange threatening messages via various channels, but with Beirut, Gaza and Damascus in the middle, the situation is liable to get out of control."

The analysis adds that Israel will only attack as a last resort, but that because of Iran's continued nuclear activities, "the military option becomes more relevant."

As I've said many times in the past, part of Iran's international strategy is to provoke a military attack on Iran's nuclear facilities. (See the analysis in "China 'betrays' Iran, as internal problems in both countries mount.")

The reason is that the hardline government is attempting a partial replay of the 1979 Islamic Revolution. At that time, the leader, Ayatollah Ruhollah Khomeini, was successful in unifying the entire country behind the Revolution by blaming everything on imperialism by the US and the West. The hope, by an increasingly desperate hardline government, is that the best way to end the Green movement would be to provoke a military action by Israel that would unify the country again.

This is their strategy of increasing desperation, but from the point of view of Generational Dynamics, it has no chance at all of succeeding, even if they succeed in provoking an attack by Israel. In 1979, Iran was in a generational Crisis era, and the anxious population (like America's population today) were ready to unify behind a strong leader. Today, Iran is in a generational Awakening era (like 1960s America), and if there were an Israeli attack on Iran's nuclear facilities, then the young people in the Green movement would blame it on Iran's government, not Israel's.

German anger grows at Greece and at Goldman Sachs

It's becoming increasingly clear that Goldman Sachs not only helped Greece hide its annual deficit from the EU, but also secretly profited from it.

According to French journalist Jean Quatremer, writing in Libération (translation), "The most shocking part of this affair is, without doubt, the role played by Goldman Sachs, which acted as advisor to the Greek government and, at the same time, in secret, took financial positions against Greece and the euro."

This appears to be a conflict of interest and securities fraud, though Goldman Sachs is saying that everything they did was legal. But as I'm always saying, what matters these days, as we go deeper and deeper into a generational Crisis era, are major political changes that are driven by large masses of anxious people, not by legalistic analyses. What appears to be increasingly the case is that many people are turning on Greece, and now increasingly on Goldman Sachs.

The narrative that Quatremer described fits perfectly into the view that big banks created the financial crisis, defrauded investors, paid themselves huge bonuses and fees, and are continuing to do so today. Quatremer's charges about Greece are that Goldman just did what it always does.

Thus, German Chancellor Angela Merkel is quoted as saying, "It would be a disgrace if it turned out to be true that banks that already pushed us to the edge of the abyss were also party to falsifying Greek statistics."

As I've reported in recent days, the German people are turning against Greece, to the extent that a recent poll says that two-thirds of the German people oppose any bailout of Greece, and 53% said that the Europe Union should, if necessary, expel Greece from the euro zone.

It would cost the EU $400 billion to bail out Greece and the other southern Europe PIIGS states, according to Bloomberg. This article has an interesting historical comparison between bailing out Greece today and saving East Germany after it was reunited with West Germany in 1991.

Merkel has made increasingly hostile statements about bailing out Greece, including the most recent one about Goldman Sachs. It's hard to see how she could ever reverse direction, assuming she ever wanted to.

US fails test in 'Cyber Shockwave' war game simulation

A large-scaled simulated cyberattack on the U.S. on Wednesday showed that the country is unprepared for a real attack. The "Cyber Shockwave" war game was organized by the Bipartisan Policy Center (BPC). The participants were former government officials, led by Former Secretary of Homeland Security Michael Chertoff,

The simulated attack takes place on a single day in July 2011, according to Dark Reading. 20 million of the nation's smartphones stop working immediately, and then the attack escalates, shutting down electrical power on the east coast. In the simulation, the participants were unable to prevent the attack from escalating further.

I'm not surprised that the U.S. is completely unprepared for such an attack, but I find myself a little relieved that at least there are people studying the problem, and hopefully the result will be some preparation. By contrast, the U.S. was totally unprepared for the attack on Pearl Harbor in 1941, leading to the greatest military disaster in the nation's history.

A new report by the NY Times says that last month's online attacks on Google and dozens of other American corporations apparently originated in two universities on China's east coast: Jiaotong University in Shanghai, which has one of China's top computer science programs, and Lanxiang Vocational School, a huge vocation schoil in China’s Shandong Province that trains computer scientists for the military. However, it has not been proven that the Chinese military itself is responsible for the attacks.

What is certain, however, is that cyberwar is going to be an important factor in the Clash of Civilizations world war, and that it would be worthwhile to prepare for it.

Ages of social network users

Social network users <font face=Arial size=-2>(Source: Royal Pingdom)</font>
Social network users (Source: Royal Pingdom)

According to a study by Royal Pingdom, the different social network services differ by age and generation. Here are some results:

Another study shows that most social network users are female, presumably because women like to "share" more than men do. However, it's also possible that the higher female statistics occur because most phony "spam" accounts impersonate females.

Additional Links

According to WSJ, more cities are considering Chapter 9 bankruptcy. Chapter 9 was created in the Great Depression, and has been rarely used, but may be used a lot more now.

Muhammad Iqbal is a poet and is considered to be Pakistan's ideological founder. He worked with Muhammad Ali Jinnah, who led the movement to create Pakistan in 1947 for Muslims on the Indian subcontinent. MEMRI has translated one of his articles from Urdu. According to Iqbal, The highest goal of a Muslim is not to fight by the sword, but Longing for Martyrdom and a Quest for Jihad. This contrasts to al-Qaeda's philosophy, which uses the sword quite a bit.

(Comments: For reader comments, questions and discussion, see the 19-Feb-10 News - IEAA: Iran developing nuclear missile thread of the Generational Dynamics forum. Comments may be posted anonymously.) (19-Feb-2010) Permanent Link
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Kenya's political coalition may collapse and lead to tribal warfare

Kenya is still reeling from the waves of gruesome ethnic violence that broke out late in December, 2007, amid accusations that the administration had rigged the election that won Mwai Kibaki a second 5-year term as President of Kenya. Hundreds of people were killed, and hundreds of thousands were displaced from their homes to escape the violence. (See "Post-election massacre in Kenya raises concerns of tribal war.")


Kibaki, the winner of the election, is from the market-dominant Kikuyu tribe. The losing candidate was Raila Odinga, from the disadvantaged Luo tribe. The Luos had hoped to see an Odinga victory, and felt cheated when he lost what appeared to be a rigged election. The ethnic violence was started, according to many sources, by youthful activists in the Orange Democratic Movement (ODM), an anti-government Luo ally supporting Odinga for President. There were many atrocities committed on both sides, and the violence was so great that many people feared that there would be full-scale tribal warfare.

I wrote, based on a generational analysis, that a full scale war was POSSIBLE but UNLIKELY. Briefly, Kenya's last generational crisis war was the Mau-Mau Rebellion, an independence war largely fought by the Kikuyus against the British colonial government, climaxing in 1956. 51 years had passed since the climax of the last crisis war, making a new crisis war unlikely. However, a new full-scale civil war becomes increasingly likely in the next few years. (See "Kenya settles into low-level violence on the way to Rwanda.")

As expected, civil war did NOT break out. An agreement between the two sides was mediated by former UN Secretary General Kofi Annan, involving a power sharing arrangement between Kibaki and Odinga.

The power-sharing arrangement was never very solid, inasmuch as it was between representatives of two separate tribes that really hate each other.

Power-sharing agreement in crisis

Now the power-sharing agreement appears to be breaking down, and once again there are fears of resumption of widespread tribal violence.

Kikaki and Odinga are supposed to have equal powers under the power-sharing arrangement, but as a practical matter, Kikaki has made the major decisions, and Odinga has had to accept them.

Last week, a bitter political dispute erupted over which government officials should be fired in a corruption scandal. Odinga's supporters were infuriated by the perceived hypocrisy of Kikaki's decision to favor his own party's officials, according to the Kenyan newspaper, The Nation.

In another article in the same newspaper, there's a political analysis of the question: What happens if Prime Minister Raila Odinga walks out of the power-sharing alliance?

The conclusion is that nothing would too alarming would occur:

"Constitutional scholar Githu Muigai agreed that if ODM decided to leave, the coalition would collapse but not the government.

"Constitutionally, a government would be in place conceivably until the next election or a new constitution is enacted," he said.

This means that if Mr Odinga walked out, President Kibaki would re-constitute government and finish his second term. According to Prof Muigai, the challenge will not be constitutional but political.

"There would be issues on whether it could resist a no-confidence vote and whether it would be effective, viable and legitimate," he said.

Formed after the 2008 political crisis, the coalition was meant to be a partnership with commitment on both sides to govern together and push reforms."

From the point of view of Generational Dynamics, this legalistic analysis has nothing to do with the situation. When massive violence broke out in 2007, it wasn't because they did a complete legal analysis of the constitutionality of the situation, reached a reasoned conclusion, and then decided to kill somebody.

Related Articles

Kenya's political coalition may collapse and lead to tribal warfare: Kenya is still reeling from the waves of gruesome ethnic violence... (18-Feb-2010)
In Kenya, Kofi Annan's mediation talks collapse: Condoleezza Rice promises to take action, but exactly what is she threatening?... (27-Feb-08)
Kenya settles into low-level violence on the way to Rwanda: So far, it's "ethnic cleansing," but not genocide,... (1-Feb-08)
Kenya is almost -- but not quite -- on the brink of genocidal ethnic war: There are hundreds of thousands of refugees displaced from their homes,... (8-Jan-08)
Post-election massacre in Kenya raises concerns of tribal war: Hundreds of people have been killed in ethnic violence since Monday,... (2-Jan-08)
Dept. of Treasury proposes national mortgage bailout as losses become more widespread: Florida state and local governments are in financial crisis this weekend,... (1-Dec-07)
Sunday news shows: What would we do if we captured Osama bin Laden?: And the Democrats refuse to commit to end Iraq war even by 2013.... (30-Sep-07)
Ethiopians crush Islamists in Somalia, forcing retreat to Kenya: The problem is that Somalia may still not have a stable government.... (2-Jan-07)
Somalia and Ethiopia close to full-scale war, according to leaked UN report: Thousands of refugees are fleeing Ethiopia into Kenya to escape war... (28-Oct-06)
Storks fall out of the sky in Lebanon: 500 million birds are migrating from Asia to Africa this week and next,... (28-Oct-05)

The violence was completely visceral, and was triggered by the election results and widespread view that the elections were rigged. If new violence occurs today, it won't depend on the constitutional interpretation of who can fire whom. Once again, it will be entirely visceral.

In fact, some large demonstrations are occurring, although they're non-violent so far. In one of the refugee camps in Rift Valley, containing refugees from the 2007 violence, thousands have staged a protest against the Kenyan government, and threatened to march to Nairobi (the capital). Armed police were able to stop the march without violence. Meanwhile, there have also been protests and demonstrations outside of President Kibaki's office in Nairobi.

It's now been 54 years since the climax of the Mau-Mau rebellion. From the point of view of Generational Dynamics, it's still a bit to early for a full-scale crisis civil war, although it's a possibility. The most likely time is 58 years after the climax, since that's the height of a major generational change: The time when the survivors of the preceding crisis war all disappear (retire or die), all at once, and the post-war generations assume senior roles in government and business organizations.

Typically what happens is that there's a kind of dance that goes on between the two sides, on the way to a crisis war. There's a brief spurt of violence, followed by mediated peace agreement that breaks down when the next spurt of violence occurs. After three or four dance cycles of this type, both sides get sick of pretending, and full-scale war breaks out.

Kenya is doing that dance right now. It's possible that the current political crisis will generate another spurt of violence, but it's likely to fizzle soon. But after a couple more such spurts, full-scale war will begin.

(Comments: For reader comments, questions and discussion, see the Kenya thread of the Generational Dynamics forum.) (18-Feb-2010) Permanent Link
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17-Feb-10 News - Clinton: Iran heads for military dictatorship

Questions raised about capture of Taliban leader Mullah Abdul Ghani Baradar

Revolutionary Guards in Iran's government - military dictatorship?

After Secretary of State Hillary Clinton said Monday that Iran is turning into a "military dictatorship," Der Spiegel did an article analyzing the power of Iran's Revolutionary Guards, also known as the Pasdaran.

Pasdaran - Iran's Revolutionary Guards is extended into all of Iran's key power centers <font size=-2>(Source: Spiegel)</font>
Pasdaran - Iran's Revolutionary Guards is extended into all of Iran's key power centers (Source: Spiegel)

According to the article, the organization is "both powerful and clouded in secrecy: the Sepah-e Pasdaran-e Enghelab-e Islami, or Army of the Guardians of the Islamic Revolution, which has defended the theocracy against its enemies -- including its domestic opponents -- for the past 30 years. Like an octopus, the Pasdaran, also know as the Revolutionary Guards, has its arms extended into all of Iran's key power centers. It controls important economic sectors, including the nuclear industry, and it is more effective than the regular army. Wherever it goes, it acts as the extended arm of the regime."

This raises a possibility that I hadn't considered before.

I've repeatedly said that Iran is in a generational Awakening era, pitting the young post-war generation (referring to the 1979 Islamic Revolution and the 1980s Iran/Iraq war) against their parents, the hardline survivors of that war. I've frequently pointed out that the young people had to win, simply because the older generation will die off.

However, the new possibility is that the winner of this confrontation will be the Pasdaran (the Revolutionary Guards), rather that what we now call the "opposition." The new analysis, still speculative, is as follows: The young generation is associated with the "Green movement" or "opposition movement," but the people in the same generation are also increasingly in control of the Pasdaran. The ultimate battle then would not be between the Greens and the government, as I'd previously assumed, but between the Greens and Pasdaran, with the old-line government becoming increasingly irrelevant.

What Hillary Clinton is saying is that the Pasdaran are going to win that war.

However, that doesn't change another major conclusion that I've discussed many times: That when Iran is forced to choose sides in the Clash of Civilizations world war, then Iran will choose the West over China.

The young people in Iran's post-revolution generation are very deeply wedded to Western culture, and this would be true of young people in the Green movement and young people in the Pasdaran.

Cash-strapped Utah may cut 12th grade from high school

Is 12th grade a waste of time? That's the question being asked in Utah, according to the LA Times.

Parents are against the proposal, students are against it, and teachers are against it. But the state faces a $700 million budget deficit, and cutting 12th grade would chip away at it.

Stories like this always remind me of a remark by one of my school teachers in the 1950s. Her name was Miss Shepherd, and she had a wooden leg -- I assume she lost her leg in the war, but I don't know. One day out of the blue she said, "People think that if you have a job as a schoolteacher, then your job is safe, because they always need schoolteachers. But that isn't what happened in the 1930s. They would put two or three classes together in a single room, and replace three teachers with just one teacher." That's all I remember, except that she was very emotional when she said it -- a combination of anger and sadness.

I guess that would be another solution for Utah, and other states. Instead of eliminating an entire grade, make the class sizes bigger in all grades. As the financial crisis worsens, states will have to make more and more painful decisions of this kind.

Was Mullah Baradar a friend or a foe?

The capture in Karachi of Taliban's second in command, Mullah Baradar, has been worldwide news in the last couple of days.

According to the Times Online:

"Known as a brilliant military commander, Mullah Abdul Ghani Baradar is the second most powerful figure in the Afghan Taleban. He is thought to have spearheaded their use of roadside bombs, the cause of a steep rise in Nato casualties over the past two years, and helped rebuild them as an effective guerrilla force."

Everyone seems to agree that this is a major victory for the West, and it probably is. He's the most senior Taliban leader arrested since 9/11, and the capture proves that Pakistan is willing to capture old friends in the Taliban, which Washington has been requesting for years. The capture was a joint effort by Pakistani Intelligence in cooperation with American special forces. The Pakistanis are now interrogating him, and it's hoped that he will provide a great deal of useful information.

But there's some confusion, because there appears to be another side to this story.

It has been an objective of some elements of Afghanistan war effort to talk to the Taliban in order to effect some kind of negotiated peace. In fact, there was a meeting in Dubai in January between the United Nations and Taliban officials, as reported by The Guardian.

There are rumors that it was Baradar who was in Dubai at that meeting, (Radio Netherlands), sent as an envoy by Afghan President Hamid Karzai, and that he was part of the negotiated peace effort.

This may or may not make the Pakistanis happy, as they don't get along with Karzai very well.

At any rate, it seems that there's a lot more to this story yet to come out.

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Ambrose Evans-Pritchard says in The Telegraph that "As of today, the British government must pay a higher interest rate to borrow money for ten years than either the Italian or the Spanish governments, despite the extraordinary ructions going on within the eurozone." He adds that "I have a very nasty feeling that markets are about to pounce on Britain. All they are waiting for is a trigger..." Interestingly enough, he blames the problems on both the Labour Party and the Conservatives (Tories), though the Telegraph tends to be a Tory newspaper. This is the same kind of political realignment we're seeing with America's Tea Party movement.

"The Tea Party movement defies easy definition, largely because there is no single Tea Party. At the grass-roots level, it consists of hundreds of autonomous Tea Party groups, widely varying in size and priorities, each influenced by the peculiarities of local history." This NY Times describes many of the different, often conflicting priorities, ranging from decent, genuinely concerned citizens to rightist loons. From the point of view of Generational Dynamics, once the real crisis begins, all of these conflicting priorities will be synthesized into a new direction, based on national survival.

The People's Republic of Cambridge, Massachusetts, where I now live, is planning to impose new laws to respond to a "climate emergency," according to Fox News. The plans are to eliminate curbside parking, a carbon tax "of some kind," taxes on plastic and paper bags, and advocating vegetarianism and veganism, complete with "Meatless or Vegan Mondays." I can hardly wait.

Credit card issuers are again beginning to increase the number of offers that they send out to American households. NY Times. However, credit card holders are being squeezed by the highest interest rates in more than a decade, according to Times Online.

(Comments: For reader comments, questions and discussion, see the 17-Feb-10 News - Clinton: Iran heads for military dictatorship thread of the Generational Dynamics forum. Comments may be posted anonymously.) (17-Feb-2010) Permanent Link
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16-Feb-10 News - A note from al-Qaeda takes credit for Pune India bombings

Acrimony grows in Europe, as finance managers delay again a decision on Greece

Al-Qaeda linked group claims credit for Pune, India, killings

Al-Qaeda note claiming credit for Pune, India, killings <font size=-2>(Source: Asian Times)</font>
Al-Qaeda note claiming credit for Pune, India, killings (Source: Asian Times)

The Asian Times in Islamabad says that it's received a note from Ilyas Kashmiri, top commander of the "313 Brigade." (See "Major terrorist attack strikes Pune, India.")

The perpetrators of last week's suicide attack were not immediately known, so this note, if confirmed, would settle the issue. The 313 Brigade is an arm of al-Qaeda, and comprises top former Lashkar-e-Toiba commanders.

The article gives a rough translation of the note:

"We warned the international community to play their role in getting the Kashmiris their right of self-determination and preventing India from committing brutalities in Kashmir, especially in Badipuar, raping the women and behaving inhumanly with Muslim prisoners.

We warn the international community not to send their people to the 2010 Hockey World Cup, IPL [Indian Premier League - a cricket competition involving international players] and Commonwealth Games [to be held in Delhi later this year]. Nor should their people visit India - if they do, they will be responsible for the consequences.

We, the mujahideen of 313 Brigade, vow to continue attacks all across India until the Indian Army leaves Kashmir and gives the Kashmiris their right of self-determination. We assure the Muslims of the subcontinent that we will never forget the massacre of the Muslims in Gujarat and the demolition of Babri Masjid [a Muslim mosque destroyed by Hindu militants in 1992]. The entire Muslim community is one body and we will take revenge for all injustices and tyranny. We again warn the Indian government to compensate for all its injustices, otherwise they will see our next action.

From 313 Brigade"

To many people who haven't been following this issue, it may be startling to see this issue as related to Kashmir, a disputed region that separates northeast Pakistan from northwest India.

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

This region was a major site of the extremely bloody war between Hindus and Muslims after Partition in 1947, and for decades since then, it's been the source of multiple terrorist attacks and military confrontation between the two countries.

In recent years, al-Qaeda's focus has shifted to Afghanistan, largely because of the American and Nato presence there. But Kashmir has always been the emotional driver of al-Qaeda linked terrorist attacks in Pakistan and India.

From the point of view of Generational Dynamics, India and Pakistan are headed for a major new war, re-fighting the war between Hindus and Muslims of 1947-48. Both countries have nuclear weapons. Pakistan will be supported by China, and India will be supported by the US and Russia, so this war will quickly spiral into world war.

Acrimony grows among European nations as financial crisis worsens

Quoting Spain's El Pais newspaper, Der Spiegel is reporting that Spain's intelligence agency is looking into "speculative attacks" on Spain, taking advantage of the debt crisis in Greece.

According to unnamed sources, the National Intelligence Center (CNI) was investigating "whether investors' attacks and the aggressiveness of some Anglo-Saxon media are driven by market forces and challenges facing the Spanish economy, or whether there is something more behind this campaign."

This echoed the remark by Greek prime minister George Papandreou complaining that his country had become "a guinea pig in a battle between Europe and the international markets." (See "15-Feb-10 News - Finance Ministers meet to decide Greece's fate.")

On the other side of the coin, the European Commission is promising to investigate irregularities by Greece. It's now generally accepted that Greece has been lying about the size of its budget deficits and debt levels.

Over the weekend, the NY Times published an investigative report showing how Goldman Sachs helped Greece lie about its debt levels, creating derivative securities that could transform debts into assets.

For example, Goldman and Greece packaged future lottery receipts and future landing fees as securities that could be exchanged for cash to write down debts, and the transaction was treated as a currency trade rather than a loan, so that it could be hidden from public view. This transaction in 2001 allowed Greece to meet the minimum requirements to join the European Union.

Now, European finance ministers are going to look "in detail" as these toxic securities, and the way they were used, according to Bloomberg. That investigation is sure to lead to nasty headlines for weeks, and possibly months.

For a number of years, I've been making the point on this web site that there's going to be a new European war as part of the Clash of Civilizations world war, and that one component will almost certainly be a new war between France and Britain.

Recall, for example, the bitterly acrimonious debate between the two countries over farm subsidies in 2005. (See "Acrimonious European Union summit ends in crisis.") That crisis only ended because Britain completely backed down and gave in to France. These two countries have been having regular wars at least since 1066, and there's absolutely no reason to assume that they won't again.

As the financial crisis worsens, my expectation is that we'll begin to see the sides line up against each other. I noted one trivial thing that might (or might not) mean something. Notice that the quote above from Spain refers to "Anglo-Saxon media." The phrase "Anglo-Saxon," when used by certain people, is used as an epithet. We'll see what happens.

There's one more bit of news along these lines. Ambrose Evans-Pritchard at The Telegraph reports that Germany's Bundestag has drafted an opinion deeming aid to Greece illegal. State bodies may not purchase the debt of another state, in whatever guise.

As the financial crisis worsens, expect to see a lot more of this acrimony.

European Commission postpones a decision until mid-March

The euro fell again on Monday, as Europe finance ministers meeting in Brussels again failed to come up with a solution to the financial problem in Greece.

According to Bloomberg, finance chief Jean-Claude Juncker said, "Greece will have to make sure it cuts its deficit by 4 percent of GDP for 2010. We have to check if that's possible or not." Whew! He's going to check something! What a threat!

Greece will have to submit a progress report on March 16 on reducing its deficit. The requirement is that Greece reduce its budget deficit from 13% of GDP to 9% of GDP, something that Greece's public service unions will do everything possible to prevent.

And what will happen to Greece if the report isn't satisfactory?

Well, according to the article, Juncker said if the Greek government wasn't "on track" to meet its goals in mid-March, then "additional measures would be requested." Whew! The Greeks must be quaking in their boots!

This is all desperation politics. There IS no solution to the Greece problem, and Portugal and Spain are not far behind.

As I've been saying recently, the European financial system, and hence the global financial system, is getting very close to total crisis.

From the point of view of Generational Dynamics, this will take the form of some kind of panic. What will trigger the panic, and what form the panic will take cannot be predicted, but a generational panic is overdue, and is coming with mathematical certainty. And when it happens, things will change overnight.

"Time is running out for Dubai," as stocks continue to sink

It's quite possible that the trigger for a major new global financial crisis won't come from Europe.

Dubai's stock market fell by 3.5% on Monday, as U.K. Business Secretary Peter Mandelson said that Dubai is running out of time to solve its financial crisis, according to The Telegraph.

Britain's banks have loaned billions of pounds to Dubai's real estate developers when the real estate bubble was in full swing. Now, they stand to lose that money, and Mandelson is urging Dubai to come up with some kind of bailout plan. Dubai's neighboring Emirate, Abu Dhabi, has promised to help in the past, but there are as few details forthcoming about that bailout as there are for the EU's bailout of Greece.

Thus, Mandelson is visiting Dubai, where he said, "Time is running out. The current uncertainty and the lack of agreement cannot go on indefinitely, even for much longer. ... Therefore, [Dubai] has to tread carefully, it has to tread openly, it mustn't tread for too long and it does need to reach an agreement with its creditors that everyone can say is demonstrably fair to those who have invested their money, undertaken jobs, done well for Dubai and require Dubai to act fairly to them."

Here's your quiz for the day, Dear Reader: Which will default first -- Greece or Dubai? And once one of them defaults, how many days (or hours or minutes) will it take for the other to default?

Long-term unemployed rolls continue to grow

Calculated Risk has a chart showing the number of workers who have been unemployed for over 26 weeks:

Workers unemployed for 27 weeks or more, 1969 to present <font face=Arial size=-2>(Source: Calculated Risk)</font>
Workers unemployed for 27 weeks or more, 1969 to present (Source: Calculated Risk)

Meanwhile, states are begging the government for more federal aid. CNN Money points out that states are looking at a combined budget gap of $180 billion, and since (unlike the federal government) state governments are required to balance their budgets, states will have to lay off 900,000 workers.

Scams from the web site

The web site is scamming people who come to get, well, a free credit report. A NY Times video report tells us that unless you read the fine print on the web site, that free credit report turns into a charge of $14.95 per month charged to your credit card.

I've previous described a Senate Commerce committee investigation that dozens of supposedly honest companies have tricked millions of online customers into paying billions of dollars in mysterious credit card charges. (See "How Priceline, Orbitz, FTD, 1-800-Flowers, Pizza Hut, and Continental Airlines are scamming you online.")

You are, in fact, entitled to free annual credit reports from each of the three agencies, and you can get them from a different government-sponsored web site, where you won't be scammed.

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Secretary of State Hillary Clinton said Monday that Iran is turning into a "military dictatorship." In a visit to Qatar, the Washington Post quotes her as saying that Iran's Revolutionary Guard Core is taking over Iran's civilian/clerical government.

In a recent TV interview in Iraq, liberal Shia cleric Ayad Jamal Al-Din calls Iraq a "beacon of democracy," made possibly solely through US efforts. In a translation by MEMRI, he said that the U.S. had planted "the seed of democracy... in a land alien to democracy" and that it would "continue to cultivate this seed, until the tree grows and offers shade to the region in its entirety."

The NY Times warns that there's a new kind of identity theft on the increase: Thieves steal your health insurance card to get health care coverage for surgery or other treatment.

(Comments: For reader comments, questions and discussion, see the 16-Feb-10 News - A note from al-Qaeda thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Feb-2010) Permanent Link
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15-Feb-10 News - Finance Ministers meet to decide Greece's fate

How soon will Greece's disease spread to America?

European finance ministers meet on Monday to discuss Greece

There's an article on the EuroIntelligence web site by Jacques Delpla, a well-respected French economist.

Titled "Greek Crisis: Ending (at last) the Trojan War," it ties the current financial crisis to three millennia of history of warfare between Greece and Turkey. According to the article,

"Despite markets' fears, Greece will not default on its debt. Why? Because, with some diplomatic impetus, Greece could easily reduce its military spending by at least 3 points of GDP, if a multilateral peace initiative is launched between Greece, Turkey and Cyprus, with the help of the US and of the Europeans. Unlike Portugal or Ireland, Greece could benefit from significant peace dividends to reduce its titanic fiscal deficits."

I kept reading through the article to see if I could find a "LOL" or a "Ha Ha," but no luck. This is an economist who seriously believes that the solution to Europe's Greece problem is simple: Just get Greece and Turkey to sign a peace agreement. Delpla then lays out how it would work. The EU and US would supply military forces to guarantee peace. The EU will fund both countries to compensate for displaced families on Cyprus. Both Turkey and Greece will permanently reduce their military spending, and the money saved can be used to pay off the debt. Easy.

Regular readers of this web site know how often I refer to the insanity that's going on in Washington and around the world, but this is the most bizarre thing I've seen in a while. Unfortunately, though it may be extreme, it represents the level of insanity that's common in France and throughout Europe. And let's not forget that it was France that Friedrich Nietzsche was thinking of when he wrote, "Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule."

Just to be clear, from the point of view of Generational Dynamics, such a peace agreement is about as absurd as you can get. The article is very interesting in how it lays out millennia of warfare between the two countries, beginning with Trojan War of Homer's Iliad. How could anyone who grasps that history possible even entertain the idea that this warfare is over? It boggles the mind.

Unfortunately, that's probably the kind of reasoning we can expect from the European finance ministers when they meet in Brussels on Monday to discuss what measures they'll take to rescue Greece. According to Bloomberg, investors will also be looking for clues on how they're going to rescue Portugal and Spain as well.

As we reported last week, the Europeans met and issued a statement saying, "Euro area member states will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole. The Greek government has not requested any financial support." This statement was laughable for its vagueness and obscurity.

Unfortunately, it didn't satisfy investors, and the euro has been under attack. Speculators have been taking short positions on the euro currency, which means that they're betting that the situation in Greece, Portugal and Spain is going to sink the euro.

The Guardian quotes Greek prime minister George Papandreou complaining that his country had become "a guinea pig in a battle between Europe and the international markets", as the euro ended the week at a fresh eight-month low of $1.35 against the dollar.

Thus, the finance ministers are under a tremendous amount of pressure to try again on Monday to come up with something that will convince the speculators that they will lose money betting against the euro.

Unfortunately, there is no REAL solution to the Greece bailout problem. A real solutions is, in fact, mathematically impossible. If Greece DID somehow convince its public sector unions to swallow the necessary budget cuts, then Greece's GDP would be lowered, and so the country would still have a large budget deficit.

And it's not just the Greek people who are blocking a solution. According to Reuters, a new poll published on Sunday says that two-thirds of the German people oppose any bailout of Greece, and 53% said that the Europe Union should, if necessary, expel Greece from the euro zone.

This is what happens in a deflationary spiral. During a bubble, everyone goes deeper and deeper into debt, and the debt is used for investments that boost everyone's budgets. When the bubble bursts, the opposite happens, since all those debts have to be paid back.

You can even see that in Delpla's "end the Trojan War" proposal. If Greece cut back on its military by 3% of GDP, then since military spending is part of the GDP, the GDP would go down, and the deficit would still be a large percentage of the smaller GDP.

Niall Ferguson: A Greek crisis is coming to America

An interesting change appears to be going on: Niall Ferguson appears to be replacing Nouriel Roubini as the favored "Dr. Doom" figure among financial pundits.

I've criticized Roubini in the past, at one point calling him the "Paris Hilton of economics," because always knows exactly how much leg to show in order to keep himself in the headlines. Some of the analyses he's published have been brilliant, but he's flip-flopped numerous times on what the eventual outcome is going to be. (See "Nouriel Roubini predicts recession will end in 2009.")

Ferguson has had a much more consistent message about the worsening financial crisis, including his acclaimed PBS documentary, The Ascent of Money, which puts it into a historical framework going back centuries.

Last week, he wrote an article for Financial Times that has received quite a bit of notice. It's called, "A Greek crisis is coming to America."

He begins by alluding to the "P.I.I.G.S." acronym for the European countries in trouble -- Portugal, Ireland, Italy, Greece and Spain:

"It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate."

He points out that "Because of the way the European Monetary Union was designed, there is in fact no mechanism for a bail-out of the Greek government by the European Union...." He then explains why any ad hoc bailout would be extremely unpopular, especially "because any decision about Greece will have implications for Portugal, Spain and possibly others."

He then makes a point that I love:

"Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes."

I love this application of fractal geometry to debt, because the entire Generational Dynamics theory has an underpinning of fractal geometry. Various financial and war crises occur in populations of all sizes -- from small tribes millennia ago to huge groups of nations today. The crises are, in fact, always the same, the only difference being in size and scale.

I saw Ferguson being interviewed on TV a couple of days ago. He pointed to the collapse of the Soviet Union in 1991, and pointed out that, prior to its collapse, almost no one in the world expected the entire Soviet Union to collapse completely. But once it started, he said, it happened very rapidly. Ferguson said that the collapse of global support for US Treasuries could occur overnight, with the right trigger.

That's the essence of generational change, of course. Massive changes come from generations of people, and all they need is the right trigger. Barack Obama triggered one change when he won the election in November, 2008, and Scott Brown triggered a different change when he won the election in January, 2010.

I hope some day that Niall Ferguson can spend a few moments familiarizing himself with Generational Dynamics. I believe that he'll find that it synergizes perfectly with his own view of history.

Ferguson's view is also supported by economics professor Carmen Reinhart, whom the AP quotes as saying, "One thing we can say with a fair amount of certainty. We never know when the wolf will be at our door. The wolf is very fickle and markets can turn very quickly. And a high debt level makes us very vulnerable to shifts in sentiment that we cannot predict."

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Fraud besets the EU carbon trade system, according to the NY Times. This doesn't surprise me in the least. As I've said many times, even if all of climate change science is true, the proposed "cap and trade" carbon trading systems are simply financial scams being promoted by the same bankers who defrauded the public with toxic mortgage-backed securities.

Another error by the UN climate panel: 26% of the Netherlands is below sea level, not 55%, as the UN report claimed. Reuters.

There's another side to the story of Chinese hackers breaching America's computer systems. They're also breaching China's computer systems, leaving "China alarmed by threat to security from cyberattacks." NY Times.

New Jersey is on "the edge of bankruptcy," according to Governor Christie. Asbury Park Press.

In his new book, Hank Paulsen says that Lehman Brothers entire balance sheet was bogus, prior to its collapse. And yet no has been arrested, or held accountable. How is that possible? My answer is that you have the same lethal combination of greedy, nihilistic Gen-Xers, managed by greedy, incompetent Boomers, running the regulator agencies as you have running the banks. (See, for example, "Laughable SEC report on Madoff absolves SEC management of blame.") Bloomberg.

Michael Panzer, in his latest Financial Armageddon blog entry, quotes two of his readers explaining why their small businesses will not be hiring. The bottom line is that no one wants to hire, for fear they'll have to fire them later because of the bad economy.

(Comments: For reader comments, questions and discussion, see the 15-Feb-10 News - Finance Ministers meet to decide Greece's fate thread of the Generational Dynamics forum. Comments may be posted anonymously.) (15-Feb-2010) Permanent Link
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14-Feb-10 News - Operation Moshtarak: Nato vs the Taliban in Afghanistan

Major terrorist attack in India

Nato launches a major military attack on Taliban in Helmand Province

In the biggest military offensive since the overthrow of the Taliban in 2001, NATO coalition forces have seized the town of Marjah from the Taliban in Helmand Province in southern Afghanistan.

The offensive in central Helmand is led by US Marines, and involves 15,000 Canadian, British, Danish and Estonian troops, working with Afghan forces, according to the BBC.

Battle in Marjar, in Helmand Province in Afghanistan <font face=Arial size=-2>(Source: BBC)</font>
Battle in Marjar, in Helmand Province in Afghanistan (Source: BBC)

There has been fierce fighting between coalition and Taliban forces, but special care has been taken to avoid civilian casualties, according to CNN.

Despite the fierce fighting, coalition forces easily won the early battles. However, it's thought that the Taliban insurgents have simply blended into the civilian population, and are waiting for the opportunity to strike back.

From the point of view of Generational Dynamics, this attempt to pacify Helmand province is very much like the "surge" strategy in Iraq, and will probably succeed for the same reason.

Afghanistan is in a generational Recovery era, having fought a Soviet invasion in the 1980s, and then a very bloody civil war from 1992 to 1996. Thus, the Afghan people have no desire for war, are repelled by war, and in most cases are perfectly happy to stay out of it and let Nato and the Taliban fight it out between themselves. This is particularly true in Helmand province, which is far from the Pakistan border.

Furthermore, Helmand province is the world's largest producer of heroin, and so a success there might cut off funds that the Taliban makes by trafficking drugs.

However, as far as the Afghanistan war is concerned, Helmand province will have little consequence.

The important battlefields are near the Pakistan border, around Kabul and Kandahar. These are the regions infiltrated by Pakistani Taliban, and Pakistan is in a generational Crisis era, ready, willing and able to get into a war. (For a complete analysis of the Afghan war, see my September, 2009, article, "American army general warns of imminent defeat in Afghanistan war.")

But war near the Pakistan border is for another day. For now, it will be nice to gain some ground in Helmand.

Major terrorist attack strikes Pune, India

Nine people were killed and 50 were injured when a high-intensity bomb exploded at a Germany Bakery in Pune, India, near Mumbai. The bakery was very popular with foreigners, according to the Hindustani Times, and many of the dead are foreigners.

The last major terrorist attack in India was the cataclysmic "26/11" Mumbai attack on November 26, 2008. (See "After Mumbai's '26/11' nightmare finally ends, India - Pakistan relations face crisis.")

The perpetrators were Lashkar-e-Toiba, the Pakistani terrorist group, committed to Pakistan's takeover of Indian-controlled Kashmir. After the Mumbai attack, Pakistan and India almost went to war, as India threatened to invade Pakistani soil to go after Lashkar-e-Toiba. War was only avoided by hard intervention from Condoleezza Rice.

Relations between India and Pakistan have been very tense since then, and it's only very recently that the two countries have begun peace talks again.

That's why Lashkar-e-Toiba is suspected as the perpetrators of the new bombing.

However, that's only one of two major possibilities. The other possibility is the Indian Mujahideen, a highly nationalistic Muslim terrorist group within India itself.

Either way, it's believed that the purpose of the terrorist attack was to effect the cancellation of the peace talks.

One of the bloodiest wars of the 20th century was the war between Hindus and Muslims that followed Partition, the 1947 partitioning of the Indian subcontinent into India and Pakistan. Generational Dynamics predicts that that war will be re-fought in the near future.

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Valentine's day is considered a heretical practice in Muslim Saudi Arabia, and everyone has been warned that anything colored red might be confiscated by the police. But AFP reports that red teddy bears are a big seller at this time of the year on the black market.

For another kind of commemoration, February 13-14 is the anniversary of the Allied firebombing of Dresden in 1945. Der Spiegel explains why marches are staged each year to commemorate.

The far-left Huffington Post is now bitterly criticizing President Obama. Do you think it'll get as bad as their criticism of President Bush?

(Comments: For reader comments, questions and discussion, see the 14-Feb-10 News - Operation Moshtarak: Nato vs the Taliban in Afghanistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (14-Feb-2010) Permanent Link
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13-Feb-10 News - China restrains lending, as euro crisis continues

European economic growth is much smaller than previously reported.

China surprises markets by announcing new lending restraints

The People's Bank of China surprised the world's financial markets on Friday by announcing new regulations raising reserve requirements for lending. These new regulations effectively curb the lending that's been a central part of China's stimulus package in the last year.

A report by the LA Times said that the move was meant to stem "growing fears of a real estate bubble" and to "put a lid on incipient inflation."

Housing prices in China are rising rapidly <font face=Arial size=-2>(Source: Xinhua)</font>
Housing prices in China are rising rapidly (Source: Xinhua)

An analyst, Jing Ulrich from J.P. Morgan, is quoted as saying, "The message coming out of China in recent weeks has been quite clear: Policymakers are becoming more concerned about containing inflationary expectations and managing the risk of asset price bubbles as a result of last year's aggressive expansion of credit."

There's little doubt that there's a housing bubble. As I wrote in December in "Skyrocketing real estate prices in China alarm officials," the housing bubble is almost astronomical in nature.

But in my opinion the situation is much more complicated then that. Recall that early in 2008, prior to the Beijing Olympics games in August, China's economy was roaring. Once the games ended, China's economic boom ended, but a lot more happened as well.

As I wrote at the time, there was a worldwide collapse in transportation and trade. (See, for example, "World wide transportation and trade sink farther into deep freeze.") I made a comparison to the old science fiction movie, "The Day the Earth Stood Still," except that it wasn't science fiction.

I believe that the Chinese are afraid that if they allow the current bubble to continue, then they'll suffer another crash, similar to the one at the end of 2008. Thus, they're trying to cool down the economy now, in the hope of having more steady growth into the future.

Early in 2009, China implemented a major new stimulus package -- as did the United States, Britain, Europe, and other countries. It's believed that it was the combined effects of these stimulus packages that created the new stock market bubble in 2009.

Now all of those stimulus packages are beginning to go in reverse. Friday's announcement was actually the second one this year from the People's Bank of China. The Bank of England's Mervyn King has hinted that the quantitative easing program may slow down. The Fed is ending its program of buying mortgage-backed securities.

Euroland growth much smaller than predicted

And then we have euroland, which is coming close to total chaos.

Reports continued on Friday that there are deep divisions among the European finance ministers about bailing out Greece.

And worse, there was a new economic report on Friday that indicates that last year's economic growth was a lot smaller than expected.

As The Independent reports:

"The Germany economy registered nil growth. Having experienced a sharp downturn and loss of output of about 7 per cent during the recession, Germany had bounced back strongly in the second and third quarters of last year, buoyed by the recovery in world trade and further boosted by generous car scrappage schemes around the world.

Ominously, that spurt of growth seems to have petered out, with the expiry of special measures such as those scrappage schemes, and the gradual reversal of monetary and fiscal boosts across the world. As one of the great trading nations and manufacturers, Germany is particularly sensitive to such trends. Job subsidies have so far helped to protect the labour market from more serious damage, but the programme of fiscal retrenchment being undertaken by Chancellor Angela Merkel's Christian Democrat/Free Democrat alliance may bring those to an end as well."

This explains why German chancellor Angela Merkel will almost certainly NOT agree to any bailout of Greece. Germany's own economy is faltering, and the German people are not going to be willing spend a lot of money to bail out the Greeks, who they believe are profligate spendthrifts who should be forced to bail themselves out.

It also explains why the Greek crisis is worse than expected, as well. If the euroland's growth is lower than expected, then Greece's budget deficit is going to be higher than predicted. And budget deficits will also be higher than expected in other borderline economies, such as those in Portugal and Spain.

As I've been saying recently, there's very much a feeling that the eurozone is spinning out of control. Friday's report adds to that feeling.

I'm not the only one with that feeling. According to Bloomberg, Société Générale's top-ranked strategist Albert Edwards is saying that "southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, a situation that will lead to the break-up of the euro bloc."

The end of stimulus

From the point of view of Generational Dynamics, the global financial system is in a deflationary spiral, as I've been saying for years. (See, for example, "What's coming next: Understanding the deflationary spiral.")

The massive stimulus injections by countries around the world have slowed the deflationary spiral, and frankly have succeeded better than I had expected them to -- although even with all that stimulus, we can still see euroland approaching collapse.

But now, the stimulus is being withdrawn. The "experts" that you hear on CNBC say that the worst is over, and there isn't even any need for more stimulus.

From the point of view of Generational Dynamics, nothing has changed, except that last year's stimulus bubble has only made things worse. As explained in "How to compute the 'real value' of the stock market," the stock market has been substantially overpriced since 1995, by historical standards. Applying the Law of Mean Reversion, the stock market will have to fall well below the Dow 4000 level, and stay there for a roughly equivalent period of time (15 years). That's exactly what happened after the 1929 crash, and the "natural laws of finance" have not changed at all since then, despite the fantasies of the "experts."

And just to be clear, I'm not the only person who thinks so. As I wrote in "Report from TARP Inspector: We're driving off a cliff in a faster car," the Obama administration's Special Inspector General finds that all the abusive practices that led to the financial crisis that began in August 2007 are still being used, and the abuses are much worse. The inevitable logic is that a much larger financial crisis is yet to come.

The 'experts' protect themselves

One thing that we can be sure of is that the "experts" that we see on CNBC or read in the Wall Street Journal are going to protect themselves. Right now, they're investing other people's money, and earning fat fees and commissions by declaring (again) that the stock market will only go up.

For example, we saw this with the real estate bubble.

Long-time readers of this web site knew that there was a real estate bubble as early as 2004. I even quoted Alan Greenspan in 2004 saying that credit card debt was at historically high levels, and that there had been an "exceptional run-up" in housing prices.

One thing that surprises me these days is that pundits and experts freely use the phrase "real estate bubble" in reference to the last few years. When did that become the common wisdom? I must have missed the memo. Early in 2008, Ben Bernanke was still saying the "subprime crisis" was "contained," so it couldn't have been the common wisdom then. Brokers and financial analysts were telling their clients in 2008 that the stock market would only go up, and that they should invest their money in more stocks, and pay more fees and commissions. That's why the subprime crisis was "contained."

Since then, the financial advisers have changed their tunes. "Oh, you lost money following my advice? Well, who knew that we were in a real estate bubble? Even Ben Bernanke was wrong about that. But all that's over now, and you can start buying stocks again, because the stock market can only go up."

They will ignore the generational deflationary spiral that's still ongoing, with the worst effects postponed by massive worldwide stimulus that's now ending. And they'll ignore the massive abuses of credit that are still occurring, and in fact they'll participate in those abuses.

So the rule followed by financial analysts and brokers is as follows: Make up any story you want to maximize your fees and commissions. You have no fiduciary duty to your clients. Your only duty is to maximize your income at the expense of your clients.

So you have people who used to say, "Of course housing prices can't go down - everyone has to live somewhere," and who are now freely saying that there used to be a "housing bubble." Those same people are ignoring the budget crisis in Greece and Portugal, and the massive real estate collapse in Spain, and saying, "Of course those countries won't go into default - the European Commission won't let them because it's bad for business."

After their clients lose a lot of money, you should expect to hear the new common wisdom in a couple of years: "It's not my fault. How was I to know that Spain would default on its debt?"

(Comments: For reader comments, questions and discussion, see the 13-Feb-10 News - China restrains lending, as euro crisis continues thread of the Generational Dynamics forum. Comments may be posted anonymously.) (13-Feb-2010) Permanent Link
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12-Feb-10 News - Destop PCs are still vulnerable to 'Aurora' Chinese hacker attacks

Loony investors surge stocks after non-bailout bailout promise by EU

'Operation Aurora' attack goes far beyond Google

Operation Aurora, the name for the coordinated cyber attack on Google and 30 other corporations in January, is now found to be a much larger attack than previously thought, and is still ongoing, according to Dark Reading.

Security experts at forensics firms are getting closer to identifying the specific individuals responsible for the Aurora attack. They've found no direct evidence implicating the Chinese government, but the attack code contains trails pointing to Chinese hackers.

Those interested in the specific technical details of the Aurora attack can download the HB Gary Threat Report: Operation Aurora (PDF) from the HB Gary web site.

Protect your computer from the Aurora attack

Corporations are updating their employees' computers to block the Aurora attack, and are strongly urging their employees to update their home computers. This is important because employees frequently infect their office computers with viruses they've brought from their home computers.

Here are instructions that one corporation has sent to all its employees:

"Employees who own and use Microsoft Windows operating systems at home (2000, XP, Vista, Windows 7), and have one or more versions of a Microsoft Internet Explorer web browser installed on their computer(s) are advised to take the steps listed below to protect themselves, and to protect Departmental systems and information.

Employees are also advised to review other software on their personal computer(s) and perform security related updates as recommended by the vendor in order to minimize potential exposure to a compromise via avenues other than Internet Explorer."

This stuff is worth paying attention to, because if someone attacks your home computer, you could lose your bank account, or worse.

Attack software packages battle each other for control of your computer

Aurora isn't the only attack spyware program that's going around these days.

Zeus is an attack spyware program that's been available for several years, though newer versions have been getting more dangerous. It installs itself on your computer when you visit a web site, usually a game or porn site, set up to infect as many computers as possible. Hundreds of thousands of computers around the world are infected with Zeus.

Now a new attack software package called SpyEye is just getting started. If you'd like to become a criminal and hack other people's computers, then you can purchase a SpyEye development kit for $500.

But SpyEye has a new twist, according to Dark Reading. SpyEye contains a module called "Kill Zeus," whose apparent purpose is to delete Zeus from an infected system, so that SpyEye has the computer all to itself.

Get ready for a war!

Germany blocks EU from a bailout of Greece

Typical of the Pollyannish headlines that came out early on Thursday was this from the NY Times: "Europe Commits to Action on Greek Debt."

The statement issued by the Europeans said, "Euro area member states will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole. The Greek government has not requested any financial support."

But no details were provided; in particular, there was no word where the money would come from.

This announcement of a non-bailout was enough to boost the serotonin levels of loony investors into pushing the Dow Industrials up over 100 points, well above the 10000 level again.

However, other reports indicate that there are deep divisions among European leaders whether Greece should be bailed out at all.

The Guardian reports that the leader of the opposition is German chancellor Angela Merkel. One senior EU diplomat is quoted as saying, "Germany is stepping totally on the brakes on financial assistance, on legal grounds, on constitutional grounds and on principle." Another senior diplomat said of the Germans: "They're not waving their checkbooks."

According to Ambrose Evans-Pritchard of The Telegraph, there is talk of a "coalition of the willing," countries acting outside the EU Treaty structure to help Greece.

It's not surprising that Germany is very reluctant to participate in a bailout. For one thing, as the wealthiest country in the eurozone, Germany would end up supplying most of the bailout money. And for another thing, Germans have a very strong national memory of the hyperinflation that occurred in the early 1920s, when it took a barrel of money to buy a loaf of bread. They're well aware that a bailout of Greece would lead to demands of similar treatment from Portugal and Spain, and things could very quickly get out of control.

In fact, there's a feeling in the air that things are already spinning out of control. Even if the Greece situation can somehow be quiesced, other countries are very close to similar or even greater crises. It's just a matter of time.

Dubai may be selling off the Queen Elizabeth 2

It wasn't so long ago that the biggest problem in the world was a threat of default by the tiny little emirate of Dubai. (See "World markets plunge 3-5% as Dubai bombshell sinks in," from November.)

At that time, it was decided that Abu Dhabi would bail out Dubai, and the crisis would end.

Unfortunately, it hasn't ended yet. Dubai is being forced to sell off many of its assets, in order to make its debt payments.

CNN Money reports that one of the assets on the table is the Queen Elizabeth 2 (or QE2) ocean liner, once the largest and grandest passenger ship in the world. Dubai purchased it in 2007 for $100 million, planning to turn it into a floating hotel.

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Times Online reports that Yemen authorities and the Houthi (Shia Muslim) rebels have agreed to the ceasefire that we described last week. From the point of view of Generational Dynamics, this ceasefire is part of the political dance that leads to a full-scale generational crisis war.

Vice President Biden recently told Larry King on CNN: "I am very optimistic about -- about Iraq. I mean, this could be one of the great achievements of this administration." This is really the limit. If we'd listened to Biden when he was in the Senate, then not only would we have left Iraq in chaos, but our troops would be embroiled in the middle of a bloody civil war in Sudan. (See "Senator Joe Biden wants to move troops from Iraq to Darfur civil war.")

A double suicide bombing near Peshawar in northwest Pakistan killed 15 people, and wounded 24 others, according to Pakistan's Daily Times. It's the third attack in the last 24 hours.

(Comments: For reader comments, questions and discussion, see the 12-Feb-10 News - Desktop PCs still vulnerable to Chinese 'Aurora' thread of the Generational Dynamics forum. Comments may be posted anonymously.) (12-Feb-2010) Permanent Link
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11-Feb-10 News - Lebanon worries about new war with Israel

Riots and demonstrations in Greece and Iran

Lebanon's Harari warns of military threats by Israel

In an interview with the BBC, Lebanon's Prime minister Saa Hariri said he is concerned about "escalating threats" posed by Israel toward Lebanon.

He referred to verbal threats, and said that Israeli planes were entering Lebanese airspace every day, and he feared the prospect of another war with Israel:

"We hear a lot of Israeli threats day in and day out, and not only threats. We see what's happening on the ground and in our airspace and what's happening all the time during the past two months - every day we have Israeli war planes entering Lebanese airspace. This is something that is escalating, and this is something that is really dangerous."

Lebanon's newspaper The Daily Star reported similar statements by President Michel Sleiman. "The world today knows that Israeli threats against Lebanon are no longer to be taken lightly," he said, and "No one in Lebanon has responded to these threats by saying they would attack Israel. Israel has no excuse to launch an attack."

The context of these remarks is the 2006 war between Israel and Hizbollah that took place mostly on Lebanon's soil. In that war, Israel panicked, miscalculated, and attacked Hizbollah and Lebanon within four hours after the kidnapping of two soldiers -- with no plan, no clear objectives. Once the war began, Israel blundered from one objective to another, one plan to another. The entire war was pursued through improvisation.

Hariri and Sleiman are expressing the fear that Israel might panic again and launch a new attack on Hizbollah.

From the point of view of Generational Dynamics, these remarks are most likely to be political posturing. Lebanon is in a generational Awakening era, and we've seen years of political chaos, typical of an Awakening era.

Hariri said something else interesting in the same interview: "I think they're betting that there might be some division in Lebanon, if there is a war against us. Well, there won't be a division in Lebanon. We will stand against Israel. We will stand with our own people."

Hariri's political party is being challenged by Hizbollah's political party, and Hariri is taking this opportunity to appeal for unity.

What's interesting about this is that it's similar to the strategy of Iran's hardline government leaders. Iran is also in a generational Awakening era, and the hardline politicians have accused the West of fomenting dissent within Iran, and have called for unity of the Iranian people.

There were also calls for unity in the US in the 1960s with respect to the Vietnam War demonstrations. This appeal to unity is an important theme in Awakening eras, as politicians attempt to recapture the national unity that characterized the preceding crisis war.

This brings us back to the question of whether a new war between Israel and Hizbollah is approaching.

Lebanon itself will do everything reasonable in its power to keep such a war from occurring, for two reasons:

So the question remains whether Israel might start a war.

Israel is in a generational Crisis era. Israel started the 2006 war with Hizbollah. If Israel is provoked by Hizbollah, they will not hesitate to attack Hizbollah again, although this time they'll be much more methodical.

It's important to remember that there have been three wars in the last five years. In addition to the 2006 war, there was the war between Palestinians Fatah and Hamas in Gaza in 2008, and Israelis vs Hamas in Gaza in 2009.

With the Israelis and the Palestinians all in generational Crisis eras, a new war could begin at any time. Thus, the concerns expressed by Hariri and Sleiman are legitimate, even if they are motivated by political posturing.

Where did the Green go in Iran's flag?

Iran's flag (top) and official recent picture of Mahmoud Ahmadinejad <font size=-2>(Source: CIA Fact Book and NY Times)</font>
Iran's flag (top) and official recent picture of Mahmoud Ahmadinejad (Source: CIA Fact Book and NY Times)

Take a look at the picture on the right. The top shows Iran's flag. The bottom shows a recent photo of Mahmoud Ahmadinejad, published by Iran's official Fars news agency. The NY Times points out that the green has been missing in official Iranian press photos.

The reason, of course, is that Iran's opposition movement call themselves the Green Movement. Green has long been an official color of the Islamic Revolution. Take a look, for example, at the the web site of Ayatollah Ali Khamanei, the spiritual leader of Iran and the Islamic Revolution.

There's surely an extreme irony in the fact that the Green Movement is forcing the hardline Iranians to abandon the red, white and green colors of their official flag, and adopt the official colors of the United States flag -- red, white and blue. You can tell how paranoid the Iranian leaders have become when they feel forced to adopt the colors of their hated enemy, the US.

Thursday is the 31st anniversary of the start of the Islamic Revolution. By the time you read this, there will probably already have been massive street demonstrations across the country. This is the Awakening era "generation gap" at its height, and as we've been reporting almost every day for the last few days, both sides have been building to a major confrontation that will almost surely include bloodshed.

Germany bitterly accepts bailout, as unions shut down Greece

The news from Europe has been growing steadily worse for several months now, and there's a real feeling now that the euro is on the edge of a cliff, needing only one small push to send it crashing.

In the last couple of weeks, European leaders have been flip-flopping on almost an hourly basis on whether Greece should be bailed out or allowed to default on its debt. As of Wednesday evening, it appears that a bailout is inevitable, and the NY Times reports that German leaders are bitter about being forced into it.

I heard a pundit on the BBC today -- I didn't get his name -- arguing that the huge budget deficit in Greece is just as much Germany's fault as it is Greece's fault. Germany has an economy built largely on exports, and for the last ten years, Germany has taken advantage of Greece's increasing debt by selling its manufactured goods to Greece. (Presumably this is not too different from the situation where China took advantage of America's increasing debt by selling its manufactured goods to America.)

So there's going to be plenty of blame and finger-pointing, no matter what path is taken.

And there's no good path, since all the "P.I.I.G.S." countries (Portugal, Ireland, Italy, Greece, Spain) are in trouble. If Germany bails out Greece, then Portugal will be next. "Where's my bailout?" is what you'll hear. It's going to get ugly.

And speaking of getting ugly, there was a massive public service union strike on Wednesday, practically shutting down the entire country. Thousands of teachers, doctors, nurses, train workers and air-traffic controllers are taking part in a 24-hour work stoppage.

VOA News says that they're protesting the austerity measures recently proposed by Greece's Prime Minister George Papandreou. The austerity measures include reductions in pensions, salary freezes, and tax reforms that close lucrative loopholes.

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The Mortgage Bankers Association, experts in real estate, just sold their Washington headquarters building for $41 million, according to the Washington Post. They purchased the building in 2008 for $90 million. Obviously they believed their own press releases that the "subprime crisis was contained." I wonder what they believe today?

Massive demonstrations are expected in Mumbai on Friday to protest the opening of the new film, "My Name is Kahn." What are they protesting? The WSJ reports that its star, Shah Rukh Khan recently said that top Pakistani cricket players should be welcomed into India's professional cricket league. Obviously, feelings between India and Pakistan are running very high.

The most evil country leader in the world today is probably Robert Mugabe of Zimbabwe. His corruption, greed, hatred and racism have turned Zimbabwe from the breadbasket of Africa into a starving nation, a nation consumed with cholera, and a nation of bloody ethnic killings. Now he plans to starve Zimbabwe even further by shutting down white-owned companies, according to VOA News.

(Comments: For reader comments, questions and discussion, see the 11-Feb-10 News - Lebanon worries about new war with Israel thread of the Generational Dynamics forum. Comments may be posted anonymously.) (11-Feb-2010) Permanent Link
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10-Feb-10 News - Iran prepares for riots, as Obama calls for harsh sanctions

Stocks surge on hopes that Europe will bail out Greece after all

Russia runs out of patience with Iran

On Tuesday, Iran confirmed that it has begun to manufacture high-grade uranium at its nuclear plant in Natanz. This is a highly provocative statement, because it firmly rejects compromises offered by the West last year. It also appears to confirm Iran's intention to stay on the path to developing nuclear weapons, although Iran denies that intention.

Russia is having heightened doubts about Iran's "sincerity," according to The Telegraph, which quotes Russian national security official Nikolai Patrushev as saying "Iran claims it is not trying to acquire nuclear weapons. But actions such as starting to enrich low-enriched uranium up to 20 per cent raise doubts in other countries and these doubts are fairly well-grounded."

However, Westerners still doubt that Russia will agree to sanctions, and Chinese agreement to sanctions is even less likely. Russia and China have veto power in the United Nations Security Council, so either of them could veto any proposed sanctions.

Nonetheless, in a press conference on Tuesday, Obama announced the intention to pursue new sanctions:

"I think that we have bent over backwards to say to the Islamic Republic of Iran that we are willing to have a constructive conversation about how they can align themselves with international norms and rules and reenter as full members of the international community.

The most obvious attempt was when we gave them an offer that said we are going to provide the conversion of some of the low-enriched uranium that they already have into the isotopes that they need for their medical research and for hospitals that would serve up to a million Iranian citizens. They rejected it -- although one of the difficulties in dealing with Iran over the last several months is it's not always clear who's speaking on behalf of the government, and we get a lot of different, mixed signals. But what's clear is, is that they have not said yes to an agreement that Russia, China, Germany, France, Great Britain and the United States all said was a good deal, and that the director of the IAEA said was the right thing to do and that Iran should accept.

That indicates to us that, despite their posturing that their nuclear power is only for civilian use, that they in fact continue to pursue a course that would lead to weaponization. And that is not acceptable to the international community, not just to the United States. So what we've said from the start was we're moving on dual tracks. If you want to accept the kinds of agreements with the international community that lead you down a path of being a member of good standing, then we welcome you. ...

And if not, then the next step is sanctions. They have made their choice so far, although the door is still open. And what we are going to be working on over the next several weeks is developing a significant regime of sanctions that will indicate to them how isolated they are from the international community as a whole. ...

We are going to be looking at a variety of ways in which countries indicate to Iran that their approach is unacceptable. And the U.N. will be one aspect of that broader effort. ...

[W]e are confident right now that the international community is unified around Iran's misbehavior in this area. How China operates at the Security Council as we pursue sanctions is something that we're going to have to see. One thing I'm pleased about is to see how forward-leaning the Russians have been on this issue. I think they clearly have seen that Iran hasn't been serious about solving what is a solvable dispute between Iran and the international community."

However, these are just words for now. Based on past experience, it seems unlikely that these words will turn into action.

Iran prepares for bloody street confrontations on Thursday

In a sense, the Iran's announcement about nuclear enrichment is just theatre, in preparation for the Thursday's commemoration of the beginning of the 1979 Islamic Revolution.

There is a massive confrontation building on both sides.

In order to head off street demonstrations, Iranian security officials have arrested hundreds of people, including artists, photographers, children’s rights advocates, women’s rights activists, students and scores of journalists, according to the NY Times

To prevent the opposition from organizing, authorities are slowing the internet and disrupting mobile phone service, according to VOA news.

On the opposition side, opposition supporters both inside and outside of Iran are working to bring out the largest number of young protestors possible for Thursday's demonstrations. According to the BBC, they're producing and posting Youtube videos that use scenes from action movies like X-Men and V for Vendetta as kinds of "trailer" ads to encourage protestors.

For what it's worth, I believe that President Obama has adopted the correct policy in dealing with Iran's student protests, following last year's June 12 elections. If Obama had followed the advice of those who wanted him to openly support the protestors, then he would have appeared to be intervening in Iran's affairs, and that would have played in to the hands of the hardline government.

As it is, Iran is at the height of its generational Awakening era, and the protests are going to continue and grow for years, as they did in America in the 1960s-70s.

Euro surges and stocks follow on hints of Greece bailout

Euro currency falling <font size=-2>(Source: Spiegel)</font>
Euro currency falling (Source: Spiegel)

Europeans are beginning to panic over a potential collapse of the euro currency, according to an analysis in Der Spiegel.

The immediate problem is the threat of a default on Greece's debt, with its annual budget deficit standing at an astronomical 12.7% of GDP (but with no ability to "print money" like the US).

But the article identifies serious structural problems with the euro currency, especially the differences among the various eurozone countries in terms of competitiveness. Thus, Germany, the Netherlands and Finland have current account surpluses, while Greece, Spain, Portugal and Ireland have high budget deficits.

The article implies that the second group of countries are taking advantage of the first group. "These countries' competitiveness has dropped steadily since the euro was introduced. They lived on credit for years, seduced by the unusually low interest rates within the euro zone, and imported far more than they exported. When demand collapsed in the wake of the global financial crisis, governments jumped in to fill the gap, with serious consequences -- debt skyrocketed."

The alarm at the falling euro is turning into panic, as Reuters reports that a senior German ruling coalition says that eurozone governments have decided in principle to help Greece. European Union leaders will hold a special summit on Thursday to discuss the matter.

This simple hint at a bailout of Greece was enough to cause the euro to stop falling, and rise on Tuesday from $1.369 per euro to $1.378.

This caused stocks on Wall Street to surge 1.5%, bring the Dow Industrials back above 10000 again.

However, it's far from clear that the Thursday meeting will produce concrete results.

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Der Spiegel also laments that President Obama is ignoring Europe, favoring instead countries like Australia and Indonesia. Spiegel blames it on lack of European leadership.

China has shut down the country's largest hacker training site, according to China Daily. The site trained thousands of students to write and use software that takes control of other people's computers.

Women, including single mothers and college students, are more frequently taking jobs in strip clubs to make ends meet, according to investigative reporting by The Atlanta Journal-Constitution. From the point of view of Generational Dynamics, this is to be expected in a generational Crisis era, as men and women return to stereotypical gender roles.

(Comments: For reader comments, questions and discussion, see the 10-Feb-10 News - Iran prepares for riots,Obama calls for sanctions thread of the Generational Dynamics forum. Comments may be posted anonymously.) (10-Feb-2010) Permanent Link
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9-Feb-10 News - Europeans say they won't bail out Greece

The Dow falls below 10000, as Greece's problems spread to Spain and Portugal.

Greece's financial problems appear to be spreading

European financial officials appear to be saying that they won't bail out Greece, according to Bloomberg. European Central Bank President Jean-Claude Trichet said the bank is "confident" the country will cut its budget gap from its current 12.7% of GDP to below 3% by 2012, and implied that this will happen without EU help.

If Greece is not bailed out, then Greece's debt may default, and the danger is that Greece's disease may spread to other countries.

You hear the twin words "contained" and "contagion" a lot these days, with respect to the situation in Greece. Are Greece's problems "contained"? Or is there "contagion," and the problems will spread elsewhere?

Hearing those words should make anyone hide under the bed. For example, Bernanke said early in 2008 that the "subprime mortgage crisis was completely contained," and would not affect the broader economy. That turned out to be very wrong.

According to MarketWatch, Greece's problems are spreading at least to Spain and Portugal. The cost of credit default swaps (CDSs) to insure Spanish and Portuguese government debt against default have risen to new record highs on Monday. High CDS rates mean that investors are betting that the debt will default.

Spain says it's a victim of a conspiracy by "financial speculators," according to FT Alphaville. The speculators are orchestrating a plot against the euro currency and the Spanish market, according to Spain's development minister, Jose Blanco. "Nothing is happening in the world, including editorializing by foreign newspapers, that is casual or innocent," he says.

In fact, Deutsche Bank AG is warning that the increasing CDS costs may be a "dress rehearsal" for the U.S. and U.K., which are also having budget deficit problems, according to Bloomberg.

Dow closes below 10000

The Dow Jones Industrial Average closed below 10000 on Monday, for the first time in months, and analysts are blaming it on the problems in Europe.

According to the NY Times, traders are skeptical of reassurances from officials that they'd keep an eye on the situation in Greece. One analyst is quoted as saying, "You can tell investors there’s no contagion, but it doesn’t matter, because people start to think there’s more than one cockroach. Right now, it’s still a little wait and see."

This is a good time to commemorate the first time that the Dow crossed 10000, in this 1999 15 second video:

From the point of view of Generational Dynamics, the situation hasn't changed. The stock market has been historically overpriced by substantial amounts since 1995, and by the Law of Mean Reversion, will have to fall sharply and stay down there for a comparable length of time (15 years). This is a mathematical certainty. (See "How to compute the 'real value' of the stock market.")

Additional Links

More people are paying their credit card bills before paying the mortgage, according to the Washington Post. This is a big behaviorial change from just a few years ago. They can always find a place to spend the night if they lose their homes, but without a credit card they won't be able to buy food.

There's a "new math" on campus, according to the NY Times: There are so many more girls than guys in college these days that girls can't find a boyfriend any more. Another famous victory for feminists.

(Comments: For reader comments, questions and discussion, see the 9-Feb-10 News - Europeans say they won't bail out Greece thread of the Generational Dynamics forum. Comments may be posted anonymously.) (9-Feb-2010) Permanent Link
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8-Feb-10 News - There are more self-identified independents

Will the 'Tea Party' become a real party?

Party affiliation decreases dramatically

All the talk on the Sunday morning news shows was about Sarah Palin and the Tea Party convention, and whether the Democrats or the Republicans are better off.

Party affiliation, 2004-2010. <font face=Arial size=-2>(Source: Rasmussen)</font>
Party affiliation, 2004-2010. (Source: Rasmussen)

From the point of view of Generational Dynamics, this kind of discussion is not the most important point. What's is important is that in this generational Crisis era, there's going to be a major political realignment of some kind.

According to a poll by Rasmussen, self-identified party affiliation has changed rapidly in the last year. Republicans have fallen slightly and Democrats have fallen sharply, while "Other" has risen sharply.

Other polls have identified a sharp increase in people saying that they belong to the "Tea Party," even though that party doesn't exist except as an informal movement. And those people have been drawn from both Republicans and Democrats.

However, the point is that the "Tea Party" is not the Republican party by any means, and it does not represent the views of Sarah Palin, despite her popularity. What the "Tea Party" represents is something new, even though it's not understood.

Approval of Congress by Party ID, Jan 2009 - Feb 2010 <font face=Arial size=-2>(Source: Gallup)</font>
Approval of Congress by Party ID, Jan 2009 - Feb 2010 (Source: Gallup)

Another sign is the dramatic fall in approval by Congress in 2009, according to Gallup.

My personal belief is that the obvious and loathsome corruption in Congress in pursuing the health care bill last year is the most important factor in driving both Democrats and Republicans to look for something new, something different from the debauched corruption that's filled Washington in the last year.

No one can predict what kind of realignment will occur, except that we can be sure that the realignment will be dramatic, and will not be pleasing to either party.

Here's a question for readers:

You'll recall that the "underwear bomber" failed to detonate his bomb in the airliner over Detroit on Christmas day. How would the political climate be different today if the bomb had detonated and the plane had crashed?

Would Scott Brown have still won in Massachusetts? Would the Republicans, Democrats and Tea Partiers be more or less popular today?

Readers are invited to post their thoughts in the "Comments" section.

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On Sunday, Iran's president Mahmoud Ahmadinejad ordered his country's atomic agency to begin production of higher enriched uranium, according to the NY Times. As the February 11 anniversary of the 1979 Islamic Revolution approaches, Ahmadinejad seems to do something every day to provoke international controversy.

Frank Sinatra's song "My Way" seems to be provoking fights and killings in the Philippines, according to the NY Times, causing speculation that there's something sinister about the song.

North Korea is becoming desperate, as the price of rice has risen many times in the last month, triggering fears of famine, according to reporting by the Asian Times. This has resulted in "an explosion of casualties" from anti-government demonstrations. As a result, South Korean officials are "tightening the screws" on North Korea, to take advantage of their desperation.

(Comments: For reader comments, questions and discussion, see the 8-Feb-10 News - There are more self-identified independents thread of the Generational Dynamics forum. Comments may be posted anonymously.) (8-Feb-2010) Permanent Link
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7-Feb-10 News - Iran threatens violence against Greens as Feb 11 protests approach

International tension grows over Iran's nuclear weapons development.

US and Germany scoff at Iran's nuclear claim

For years, the West has been looking for ways to convince Iran not to develop the technology for highly enriched weapons-grade uranium. Iran says that they need to develop enriched uranium to be used for medical isotopes and for generation of electricity in a nuclear-powered plant, and that they have no intention of using it for nuclear weapons.

Under a proposal made last year by Russia, France and the West, Iran would ship its low-enriched uranium to France. France would enrich it and return it to Iran a few months later. Iran rejected this proposal last year, but on Friday, Iran’s foreign minister, Manouchehr Mottaki, said that Iran might agree to the deal.

US Secretary of Defense Robert M. Gates scoffed at Iran's statement, according to the NY Times. According to Gates, Iran has done nothing to back up their words with action. "Based on the information that I have, I don’t have the sense we are close to an agreement," he said. Germany's foreign minister added that his discussions with the Iranian delegation had "not made me change my mind" about Iran’s intentions.

As I've described many times, Iran is a schizophrenic nation, with a government that virulently anti-American and anti-West, but with a young population that's pro-West, and generally with nothing against even Israel.

But one thing that Iran's government and young people agree on is Iran's nuclear development program.

During the Iran/Iraq war of the 1980s, Iran faced an enemy that used WMDs (weapons of mass destruction), and carried on various WMD development programs for many years. Furthermore, Iran is surrounded by countries, especially Pakistan and Israel, that have nuclear weapons. The Iranian people, young and old, feel that they need nuclear weapons to defend themselves. That's why, whatever else happens in the anti-government riots and demonstrations, Iran is going to continue its nuclear development program.

Tories would back war with Iran

As Iran's nuclear program continues, there's the possibility that some Western power will take military action. The Telegraph reports that Britain's opposition Conservative Party (the Tories) would support military action if Iran developed nuclear weapons.

According to the article, such an attack would like consist of a missile attack on nuclear and uranium enrichment sites, rather a ground invasion.

The Tories are out of power, and with an election approaching, we can be sure that this is just campaign rhetoric. Still, the statement highlights the fact that Israel or some other Western country might panic and make a military attack on Iran's nuclear sites.

Iran threatens arrests and violence on February 11

On December 27, hundreds people were arrested, and eight people were killed in violence perpetrated by Iran's security forces, after peaceful anti-government "Green movement" protests and demonstrations by young people in Iran.

Now new demonstrations are planned for Thursday, February 11, the 31st anniversary of the start of Iran's 1979 Islamic Revolution.

Iran's police are quoted as saying that they will show no tolerance whatsoever to anti-government demonstrators on Thursday, according to Reuters.

A police spokesman warned against using e-mail and text messages to spread word of protests, since police were monitoring those communications. "The new technologies allow us to identify conspirators and those who are violating the law, without having to control all people individually," he said.

Iran today is at the height of its generational Awakening era, 22 years after the end of its last crisis war, the Iran/Iraq war. The protests are similar to those in America's Awakening era in the 1960s and 1970s. (See my 2004 article, "Iraq Today vs 1960s America" for more information on Awakening eras.)

Additional Links

Russia's security forces are accusing Georgia of aiding al-Qaeda terrorists in Russia's Caucasus provinces (Chechnya, Dagestan, Ingushetia), according to a Jamestown Foundation analysis. Terrorist violence has been increasing in the Caucasus region, which historically has been the site of many wars between Muslims and Orthodox Christians, and Generational Dynamics predicts that a new war is approaching.

Most Chinese people believe that America and China are headed for a "cold war," while China's military is preparing for a military war within the ten years, according to a poll commissioned by the Times Online, and conducted by Global Times, a Chinese state-run newspaper.

(Comments: For reader comments, questions and discussion, see the 7-Feb-10 News - Iran threatens violence against Greens thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Feb-2010) Permanent Link
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6-Feb-10 News - Dual terrorist bombings in Karachi, Pakistan

Government is paralyzed by vitriolic arguments

Bombings target a Shia religious procession

On Friday, Shia worshippers in a religious procession in Karachi, Pakistan, were attacked by a motorcycle rigged with explosive, killing 12 people. The injured were taken to a nearby hospital. An hour later, a second explosion occurred, this time at the hospital where the injured were being treated. Dozens more were killed or injured. A third bomb was disarmed at the hospital before it could explode.

The perpetrators of the bombings have not yet been identified, but according to Dawn, the violence most likely comes from bitter relationships between two ethnic groups, represented by two political parties, the Awami National Party (ANP) and Muttahida Qaumi Movement (MQM).

Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley <font face=Arial size=-2>(Source:</font>
Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley (Source:

The bitterness stems from the one of the bloodiest genocidal wars of the 20th century, the war between Hindus and Muslims that followed Partition, the 1947 partitioning of the Indian subcontinent into Pakistan and India.

That war was fought between mainly between Sunni Muslim versus Hindu Punjabis, but the MQM represents large numbers of Muslims, known as Mohajirs, who migrated from India after the war, and settled mainly in the Karachi area.

On the other hand, the ANP represents Pashtuns who have fled from the FATA and Swat Valley regions of Pakistan. Islamist Pashtuns, known as the Taliban, have conducted a great deal of terrorist violence in northern Pakistan, but many have been forced to flee as the Pakistan army has driven them from their caves.

It's now been 62 years since that war, and younger generations have replaced the survivors. The survivors vowed that they would never let anything like that happen again, but now the younger generations are repeating the same kinds of mistakes that led to the 1947 war.

This is all part of a larger ethnic battle that's enveloped the entire region for centuries, pitting Sunni Muslims on one side versus Shia Muslims and Hindus on the other side. From the point of view of Generational Dynamics, this historic war will be fought again.

Vitriolic paralysis

An interesting editorial appeared in Dawn on Tuesday, after several days of violence, though before the most recent bombings. The editorial refers to two political parties. One is MQM, described above. The other is the PPP, the Pakistan Peoples Party, that runs the government of Sindh province in which Karachi is located. Here's an excerpt:

"So far the political parties — particularly those that are currently part of the Sindh government — have hardly played a role in controlling the situation. While matters are bad enough on the streets, the atmosphere in the Sindh Assembly has been nothing short of vitriolic. The Sindh home minister launched a thinly veiled critique of the MQM during Tuesday’s session, while the local government minister criticised the MQM-backed city nazim. When the Muttahida lawmakers felt that they were not being allowed to air their views in the house, the party struck back with an equally scathing press conference at its headquarters criticising the PPP ministers. As before, the president and prime minister had to step in to prevent the Sindh coalition from falling apart, taking the MQM chief on board. The respective heads of the PPP and MQM have asked party leaders to refrain from issuing provocative statements. But this is not enough. Words need to be backed by actions."

This opinion piece really struck me, because this vitriolic paralysis is so similar to what's been happening in Washington. Both Pakistan and the United States are well into generational Crisis eras, and this kind of political bickering is common to Crisis eras in general.

The bickering ends only with a "regeneracy event," an event so shocking that that civic unity is regenerated again for the first time in decades. (For information about the term "regeneracy" and about generational eras, see "Basics of Generational Dynamics.")

Additional Links

"Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal" says Ambrose Evans-Pritchard in The Telegraph.

(Comments: For reader comments, questions and discussion, see the 6-Feb-10 News - Dual terrorist bombings in Karachi, Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (6-Feb-2010) Permanent Link
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5-Feb-10 News - China's nationalism and real estate bubble grow

Problems in Greece and Portugal slam stocks around the globe

Lot's of news today.

"China hits back at Obama's statements on trade"
"James Chanos: China's real estate bubble is 'staggering'"
""The whole world is laughing at China being stupid""
"Greek virus spreads to Portugal and other European countries"
"The euro falls, the dollar rises, and stocks are slammed"
"Brother can you spare a dime?"
"Additional Links"

China hits back at Obama's statements on trade

It seems that US-China relations get worse every day.

At a meeting with Congressional Democrats on Thursday, President Obama took a hard line on China's trade policies:

"I would not be in favor of revoking the trade relationships that we’ve established with China.

I have shown myself during the course of this year more than willing to enforce our trade agreements in a much more serious way. And at times I’ve been criticized for it. There was a case involving foreign tires that were being sent in here [[by China -- JX]] and I said this was an example of where we have got to put our foot down and show that we’re serious about enforcement. And it caused the usual fuss at the international level, but it was the right thing to do.

Having said that, I also believe that our future is going to be tied up with our ability to sell products all around the world, and China is going to be one of our biggest markets, and Asia is going to be one of our biggest markets. For us to close ourselves off from that market would be a mistake.

Now the point you’re making, Arlen, which is the right one, is it’s got to be reciprocal. So, if we have established agreements in which both sides are supposed to open up their markets, we do so and then the other side is imposing a whole set of non-tariff barriers in place, that’s a problem and it has to be squarely confronted. So the approach that we’re taking is trying to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways.

One of the challenges that we’ve got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price. That puts us at a huge competitive disadvantage."

The last phrase about Chinese goods "artificially inflated in price" particularly angered the Chinese. This remark is related to an open US accusation that China is artificially weakening its renminbi currency, in order to make US goods more expensive.

According to the NY Times, Ma Zhaoxu, a Foreign Ministry spokesman, said:

"Trade cooperation between US and China is mutually beneficial. it is a genuine benefit to the people of both countries. We hope the american side sees the problem with in the trade cooperation objectively and reasonably and continues to negotiate on an equal basis and deal with the situation properly. Accusations and pressure do not help the problem. ... Judging from the international balance of payments and the currency market’s supply and demand, the value of the renminbi is getting to a reasonable and balanced level."

The BBC provides a very convenient list of the issues that are raising US-China tensions:

James Chanos: China's real estate bubble is 'staggering'

I've written before about the enormous real estate bubble in China. (See "Skyrocketing real estate prices in China alarm officials.")

Appearing on CNBC on Thursday morning, James Chanos, president of Kynikos Associates, added some more information. Here's what he said:

"The fun fact I'll give you is there is almost 70 billion sq. feet under construction right now in high rises, commercial, residential and light manufacturing. We estimate about 30 billion sq. feet is commercial, what we would consider is office space. And to put it in perspective, that's a 5x5 cubicle for every man woman and child in China. These are really staggering, staggering numbers. So we can argue a lot about takeup and absorption, but they're are building high rises in cities with already 15-20% vacancy rates, and those are the government's numbers. I think the real vacancy rates are higher...

They have hard currency at the government level, but the Chinese banking system is the problem. The banking system is loaded with bad debts. Remeber the government controls the banking system there, and the assets of the banking system are suspect.

Our geostrategic position is a lot better than China. Keep in mind China imports almost all its essential materials. ... They send us stuff, we send them pieces of paper. Who would you rather be?"

He made several points that are of interest.

First, there's enough commercial real estate under construction in China to give every man, woman and child a 5x5 cubicle. That's really mind-blowing, in a country of 1.4 billion people.

Second, contrary to popular belief, China is in a great deal of debt. Many people have suggested to me that China will do OK in the coming crisis because they're a creditor nation. My answer to that has always been to point to America in the 1930s, when America was a creditor nation. Being a creditor nation didn't do any good at all.

China is owed some $2 trillion by the US government, but that debt is never going to be repaid, so those are "toxic assets." Chanos makes the point that, even so, China owns the banks, and the banks are hugely in trouble. He doesn't say so explicitly, but I assume he's referring to the debt on 70 billion square feet of real estate under construction -- debt that will never be repaid.

So China may be owed a lot of money, but those debts are "toxic assets." China is just as bad off as America is, and probably a lot worse.

"The whole world is laughing at China being stupid"

Girls singing 'The whole world is laughing at China being stupid' <font face=Arial size=-2>(Source:</font>
Girls singing 'The whole world is laughing at China being stupid' (Source:

Correction:The following story contains several errors, according to "Sensei Michael" in the Generational Dynamics forum: "Uh...the video is a parody of another song by the 3 girls (S.H.E. - they're one of the hottest singing acts in the Chinese-speaking world). The parody uses their MTV, and changes the lyrics in the video. The singer is also untrained - her voice was already very strained when she sang the chorus. It has nothing to do with the 3 girls." I apologize for the confusion. (Correction posted 5-Feb-2010)

A year ago, I wrote about a a new best-selling book, called "Unhappy China - The Great Time, Grand Vision and Our Challenges." The book is highly nationalistic, and highly anti-American and anti-West.

A new music video named "The whole world is laughing at China being stupid" was circulating around the Chinese internet, according to China Hush. Here are some of the lyrics:

    How many years our state-owned enterprises have struggled and were ruined
    These years in exchange for their machinery, electronics,
             chemical industry and logistics to dominate the world
    Welcome foreign businesses
    Such hard working Chinese people and such cheap Chinese goods

The whole world is laughing at China being stupid We act foolishly and let the world praising us being so obedient

Various colored skins and hair Come here to trick and swindle For years the shoes, shirts and underwear we made These years in exchange for their dumping investigation and technology embargo to blackmail us To build the harmonious Chimerica Such charitable Chinese people and such cheap Chinese goods

According to the article, the Chinese government initially endorsed the video, but later reversed their endorsement because the lyrics are so bitterly nationalistic.

From the point of view of Generational Dynamics, it's not surprising that the singers are three young girls. Young people in China know as little about America as young people in America know about China.

As I've said many times before, generational theory tells us that US-China relations are going to continue to trend worse, thanks to younger generations replacing the survivors of the last crisis war (WW II and Mao's Communist Revolution, respectively). At some point, a misunderstanding or miscalculation will lead to war.

Greek virus spreads to Portugal and other European countries

The trigger was apparently a failed bond auction in Portugal on Wednesday.

The Portuguese government had attempted to borrow 500 million euros by selling Treasury bills at an auction on Wednesday, but they were unable to borrow more than 300 million euros. According to the Wall Street Journal, quoting Gavan Nolan of Markit, there was there was "panic buying" in the sovereign CDS (credit default swap) market. This means that investors were betting that Portugal was going to default on its debt.

A CDS is a kind of insurance policy that an investor can purchase for protection against debt default.

CNBC reported the following CDS rates as of Thursday afternoon:

    Country        CDS Rate     Change since yesterday
    ----------     --------     ----------------------
    Greece         422.00        +30.00
    Portugal       230.00        +34.00
    Spain          171.25        +18.75
    Italy          152.50        +21.25
    Ireland        172.50        +10.50

A CDS rate of 422.00 means that you have to pay $422,000 to insure $10 million of debt against default for 5 years. For comparison purposes, typical CDS rates prior to the financial crisis were in the range 10 to 30. (Paragraph corrected - 8-Feb)

I've mentioned these five countries before -- the Europeans call them the "P.I.I.G.S." All of these countries appear in the same kind of debt spiral as Greece.

If you listen to the pundits, then you frequently hear something like, "Greece cannot solve its fiscal problems by itself. The European Union HAS TO to bail out Greece, because if Greece defaults, then the other four countries will also default."

But then you hear the other set of pundits. They say, "Greece has to solve its fiscal problems by itself. The European Union CAN'T bail out Greece, because if it does, then it will have to bail out the other four countries as well."

Either prospect is very daunting. Greece and Portugal have small enough economies, but Spain has a very large economy, and either a bailout or default would bring down the euro currency.

The euro falls, the dollar rises, and stocks are slammed

The panic buying of CDSs caused investors to panic over the euro currency as well. Reuters reports that the euro plunged to a seven-month low against the dollar on Thursday on concerns over the debt levels of the eurozone countries.

Now, as we've explained several times in the past, last year's stock market bubble was caused by the "carry trade" -- traders borrowing dollars at zero percent interest rates, and investing them in stocks, commodities, and other assets. Now, with the dollar strengthening, traders are scrambling to sell their assets in order to pay back the borrowed dollars.

The result was that Asian, European and North American stock markets all fell around 2%.

From the point of view of Generational Dynamics, this trend toward financial crisis is unstoppable. The survivors of the 1930s Great Depression were so traumatized by the starvation and homelessness that surrounded them that they mostly avoided debt for the rest of their lives. As they disappeared, and were replaced by Boomers and Generation-Xers, all the abusive practices that led to the Great Depression were repeated, and are still going on today. This behavior will not change until the new generations are traumatized by starvation and homelessness.

Brother can you spare a dime?

To give you a better idea of where we're headed, spend a couple of minutes with this video of one of the iconic songs of the Great Depression, Bing Crosby singing the 1931 song, "Brother, Can You Spare A Dime?":

Additional Links

According to Reuters, Moody's rating service is saying that it might have to lower the AAA rating on America's debt.

(Comments: For reader comments, questions and discussion, see the 5-Feb-10 News - China's nationalism and real estate bubble grow thread of the Generational Dynamics forum. Comments may be posted anonymously.) (5-Feb-2010) Permanent Link
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4-Feb-10 News - Europe plays chicken, Iran poised for bloodbath

Iran plays "cat and mouse" with nuclear politics.

Europe and Greece's public sector labor unions play chicken

Wednesday was report card day for Greece, and apparently the grade was "Pass."

Greece's Prime Minister George Papandreou has proferred a deficit reduction program, and the European Commission has recommended that the EU finance ministers endorse it, according to Bloomberg. Papandreou's plan raises taxes, raises the retirement age, and freezes public sector wages, breaking his campaign promises last year.

On one side, you have the public sector unions that have vowed to stop Papandreou's plan by having a major strike and street demonstrations planned for February 10. Greece has a history of settling political issues in the streets.

On the other side, you have the other EU countries, who are very distrustful of Greece, because of alleged lying in years past about deficit figures. They're expressing willingness to bail out Greece, but only if Greece makes further concessions, and only if Greece agrees to a continuing third party audit of their books.

Each side thinks that the other will be forced to back down, because it's thought that a default by Greece's government would spread to other countries, and might be the end of the euro currency.

This is "Europe's big game of chicken," according to Mohamed El-Erian, CEO of Pimco, the world's largest bond fund, in a Bloomberg interview on Wednesday. In another interview, El-Erian said that stock prices should slump in 2010, because investors are too optimistic about sovereign debt in Greece and other countries, including the US.

"Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes," according to El-Erian. "The global financial crisis has undermined growth and job creation; it has clogged many of the pipes that allocate funds to productive uses; and it has rapidly taken public debt and the budget deficit to worrisome levels."

Iran is heading for a major confrontation on February 11

February 11 is the 31st anniversary of the start of Islamic Revolution of 1979, and it provides a fresh opportunity for Iran's "Green" opposition movement to protest against the hardline government. The NY Times reports that two opposition leaders, Mehdi Karroubi and Mir Hussein Moussavi, have both called for non-violent protests.

If the December protests are any guide, then the government's Basij militia will use teargas, beatings, arrests, and possibly gunfire in an attempt to stop the protests.

So, with protests planned for Greece on Wednesday, and in Iran on Thursday, next week ought to be interesting.

Iran plays "cat and mouse" on the nuclear issue

On Wednesday, Iran demonstrated an advanced ballistic missile program by sending a rocket into space carrying a mouse, a turtle and two worms. President Mahmoud Ahmadinejad claimed that the animals will return to earth unharmed.

This reminds everyone that if Iran can send animals into space, then they may be able to send nuclear weapons to London or New York.

So, on the same day, Ahmadinejad made a small concession on the nuclear issue, by agreeing to ship some of its uranium for processing abroad, in accordance with a deal discussed last year.

According to an analysis in Times Online, Ahmadinejad is playing a game of "cat and mouse," buying time by making a small concession in one area to hold off further Western sanctions.

Ahmadinejad is not making the same mistakes that Saddam Hussein made. In 1991, after Saddam had invaded Kuwait, the US-led coalition forces were lined up, ready to invade and take back Kuwait. All Saddam had to do was back down and offer to leave Kuwait, and the invasion wouldn't have taken place. But he was incredibly stubborn, so the invasion occurred. A similar stubborness occurred in 2003 with WMD inspectors.

Ahmadinejad learned that lesson. All he has to do is make a small, meaningless concession, and the West has to back off from whatever they've been threatening.

This difference between Saddam and Ahmadinejad even fits their generational archetypes. Saddam was of the same generational archetype as our Generation-X, so we'd expect him to be nihilistic. Ahmadinejad is in the same generational archetype as our Millennial Generation (Generation-Y), so we'd expect him to a realistic warrior. And both of them fit their profiles very well.

Additional Links

New research is beginning to show that when a home's value falls below 75% of the amount owed on the mortgage, owners start walking away and allowing the bank to foreclose, even if the owner has the money to keep on paying, according to the NY Times.

The Samsonadzes is the Georgian version of the American TV show, The Simpsons. According to the BBC, the show became controversial and popular when it started mocking Vladimir Putin.

(Comments: For reader comments, questions and discussion, see the 4-Feb-10 News - Europe plays chicken, Iran poised for bloodbath thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Feb-2010) Permanent Link
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3-Feb-10 News - China objects to Obama's meeting with Dalai Lama

Chess champion Garry Kasparov explains how computers and humans can work together.

China infuriated over Obama's planned visit with Dalai Lama

Tensions between the US and China continue to increase. First there was the bitter division at December's climate change conference in December, then there were the mutual recriminations over internet freedom following Google's accusations, and last week there was Washington's announcement of arms sales to Taiwan.

On Tuesday, an Obama administration official confirmed that the President plans to meet with the Dalai Lama in April, according to Bloomberg. Obama had put off a similar visit a few months ago to avoid antogonizing the Chinese, but now, in the current spirit of mutual brinksmanship, the meeting is on.

A Washington Post analysis of the rising tension between the two countries says that China is becoming "newly combative," simply because the US owes China so much money:

"Since the 2008 financial crisis, Beijing has concluded that the world's developed democracies "are badly wounded and therefore a healthy and growing China can now impose its will all over the world," said Edward Friedman, a China specialist at the University of Wisconsin, Madison.

"It therefore has become more assertive and uncompromising and self-confident, such that its actions seem arrogant to many," Friedman said. ...

"The fact that Beijing is Washington's banker is not lost on the Chinese government," said Oxford University China scholar Steve Tsang."

So, according to the article, China's government has become combative, assertive, uncompromising, self-confident and arrogant.

And yet, there's little doubt in my mind that if you were to ask a Chinese official, he would use exactly the same set of adjectives to describe the US government.

This rising level of confrontation could not have happened 5-10 years ago, because at that time senior officials in both countries had more survivors of the last generational crisis war (WW II and Mao's Communist Rebellion, respectively).

In America, the survivors of the Great Depression and WW II were originally called "Depression Babies," but in the 1950s, Time Magazine started calling them the Silent Generation, because they didn't complain about anything, they did their jobs professionally, and they were very conciliatory.

Now the Silent Generation is gone, and arrogant, incompetent Boomers are the senior officials, and most of the top-level managers are the nihilistic Generation-Xers.

The same kind of generational change is going on in China.

That's why both sides are increasingly combative, assertive, uncompromising, self-confident and arrogant. And that trend will continue until some kind of misunderstanding or miscalculation leads to war. That's what generational theory tells us.

Garry Kasparov: How humans and computers can help each other

Besides Bobby Fischer, Garry Kasparov has been the most colorful world chess champion in the last 80 years (since José Raúl Capablanca in the 1920s). Kasparov held the world chess championship in the 1980s and 1990s, and is considered by some to be the greatest chess player of all time.

Garry Kasparov is still in the news from time to time, but not necessarily for chess. He's known as a political opponent of Russian Prime Minister Vladimir Putin, and he heads several activist political organizations in Russia. When he gets into the news these days, it's sometimes because the Russian police have arrested him for his activism.

Now he's written a philosophical article for The New York Review of Books about computers and chess, including his own experiences in beating, and later losing to, the world's greatest chess-playing computers.

The most fascinating portion of his article has to do with experiments in chess tournaments where humans and computers collaborate.

Normally, chess players in tournaments are forbidden from using computers to help them, for obvious reasons. Then there are other tournaments where humans play against computers, or computers play against computers.

"In 2005, the online chess-playing site hosted what it called a "freestyle" chess tournament in which anyone could compete in teams with other players or computers. ...

Lured by the substantial prize money, several groups of strong grandmasters working with several computers at the same time entered the competition. At first, the results seemed predictable. The teams of human plus machine dominated even the strongest computers. The chess machine Hydra, which is a chess-specific supercomputer like Deep Blue, was no match for a strong human player using a relatively weak laptop. Human strategic guidance combined with the tactical acuity of a computer was overwhelming.

The surprise came at the conclusion of the event. The winner was revealed to be not a grandmaster with a state-of-the-art PC but a pair of amateur American chess players using three computers at the same time. Their skill at manipulating and "coaching" their computers to look very deeply into positions effectively counteracted the superior chess understanding of their grandmaster opponents and the greater computational power of other participants. Weak human + machine + better process was superior to a strong computer alone and, more remarkably, superior to a strong human + machine + inferior process."

The significance of this experiment is its application to computer-assisted warfare.

Labs in countries around the world are developing intelligent devices that will fight wars and kill people. You can be absolutely certain that the Chinese, the Japanese, the Koreans, the Indians, the Russians and the Europeans, and probably a lot of others are all doing their own development in this area. Our DoD has announced the first generation of intelligent battlefield computers for 2015. It seems all but certain that before the end of this decade, there will be battles, and possibly entire wars, fought where intelligent soldier robots of some kind will be killing enemy soldiers based on their own decision making.

Kasparov's description of human+computer decision making provides lessons for how intelligent computers will first be used in warfare.

At some point in the 2020s, super-intelligent computer soldiers will be able to work completely autonomously in war. But before that point can be reached, computers will still need guidance from humans.

In my lengthy book chapter, "Chapter 7 - The Singularity," I defined what computer intelligence is, and I described the software algorithms that will be necessary to implement computer intelligence. However, these algorithms will require very powerful computers, and those won't be fully available until the 2020s. In the meantime, my algorithms will have to be modified to make it easier for computers to make decisions based on guidance from humans. That will be the process that will be used for the next decade or two. After that, computers will be intelligent enough so that they won't need any more guidance from humans.

Additional Links

Oscar the cat works in a nursing home in Providence, Rhode Island, and has the uncanny ability to predict the death the imminent deaths of its patients, according to The Telegraph. If Oscar comes to cuddle with you, it means you probably won't wake up.

More charges of fraud by climate change scientists. An investigation by The Guardian reveals that these scientists purposely withheld flaws in their data about about 42 weather monitoring stations in parts of China. The data from these stations purportedly implied that temperatures were rising in rural China, but now it turns out that they may have been located in cities with large populations.

Mir Moussavi, the opposition leader who supporters claim was the real winner in last June's presidential elections in Iran, is becoming increasingly harsh in his criticism of Mahmoud Ahmadinejad and the hardline government, according to The NY Times. There are some real questions about how long he can keep this up before he's arrested for treason.

(Comments: For reader comments, questions and discussion, see the 3-Feb-10 News - China objects to Obama's meeting with Dalai Lama thread of the Generational Dynamics forum. Comments may be posted anonymously.) (3-Feb-2010) Permanent Link
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2-Feb-10 News - Budget deficits continue to infinity

Greece faces another crunch.

One, Two, Three ... Infinity -- Budget deficit explodes again

After the budget deficit tripled in 2009 to $1.4 trillion, the Obama administration has announced that the 2010 budget will increase even further, to $1.6 trillion. But don't worry, folks, they've promised to reduce it in 2011 to a mere $1.3 trillion.

Two years ago, I wrote the article, "One, Two, Three ... Infinity," in which I compared to the ever-increasing government spending plans to a book by George Gamow that I read in school in the 1950s. My use of that particular phrase was to convey the idea that American debt was on an exponential growth path that would not be stopped except by a major financial collapse and crisis.

That's exactly what's going on. The exponential growth of the budget deficit is generational, and cannot be stopped by politicians.

Thus, President Obama's speech on the budget on Monday had the makings of a macabre joke. First, there's this:

"The fact is, 10 years ago, we had a budget surplus of more than $200 billion, with projected surpluses stretching out toward the horizon. Yet over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy, and funded two wars without paying for any of it -– all of which was compounded by recession and by rising health care costs."

This is total nonsense. The budget surplus of the late 1990s occurred because of increased taxes collected from the dot-com bubble. The dot-com bubble collapsed in 2000, the last year of the Clinton administration, and that's when the deficits started growing. Since then, the deficit has barely been affected at all by spending; the main factor was tax income, as I explained several years ago.

And that brings us to the next point. President Obama's claim that the deficit will start coming down in 2011 is based on the assumption that the economy will start growing rapidly by then -- i.e., that the old credit and real estate bubbles will start to grow again. That's not going to happen. As I wrote recently in "Report from TARP Inspector: We're driving off a cliff in a faster car," the economy is going to plummet sharply.

So the $1.6 trillion deficit in 2010 and the $1.3 trillion deficit in 2011 are vast underestimates. The deficit is going to continue its exponential growth until there's a catastrophic financial crisis, which can't be too far off now.

Here's another paragraph from the President's speech:

"I've proposed a freeze in government spending for three years. This won't apply to the benefits folks get through Social Security, Medicaid, or Medicare. And it won't apply to our national security –- including benefits for veterans. But it will apply to all other discretionary government programs. And we're not simply photocopying last year's budget; freezing spending does not mean we won't cut what doesn't work to pay for what does."

Look at this paragraph, Dear Reader, and see for yourself how moronic it is. There's going to be a freeze in government spending -- after government spending was substantially increased last year, so the freeze is at last year's ridiculously high levels. And the freeze doesn't apply to the biggest portions of the budget; just to some discretionary programs.

Is there any proposal that's too ridiculous to be endorsed by President Obama?

I suppose that I shouldn't be unkind. After all, President Obama has almost no control over the budget deficit, any more than President Bush or President Clinton did. These things are caused by tax collections, by Congress, and especially by ups and downs of the economy. In recent years, that's meant that the growing and bursting of bubbles have been the main factors.

Financial deficit drama in Greece continues

Exactly the same kind of deficit song and dance is going on in Greece.

Wednesday is an important crunch day for Greece, according to EuroIntelligence, quoting FT. The EU is going to demand that Greece make big reductions in its public sector pay. There isn't a snowflake's chance in hell that Greece's public sector labor unions will ever let that happen.

The phrase "One, Two, Three ... Infinity" applies to Greece, as well as to America.

A very good overview of the Greek fiscal crisis can be found in a Reuters Factbox.

Additional Links

A fishing dispute between Canada and Denmark is heating up, according to the National Post. It turns out that Canada is complaining that Denmark is overfishing in Canadian waters.

49 Congressional websites were hacked over the weekend, according to Dark Reading.

The BBC is reporting that China is threatening sanctions against Boeing, since Boeing planes are included in the announced US arms sale to Taiwan.

Envoys from the Dalai Lama are in Beijing meeting with the Chinese government over the question of Tibet's autonomy. But The Hindu reports that the Chinese are unwilling to make any concessions at all. This isn't surprising, since China's government is becoming increasingly confrontational and less conciliatory, as younger generations take positions of power.

(Comments: For reader comments, questions and discussion, see the 2-Feb-10 News - Budget deficits continue to infinity thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Feb-2010) Permanent Link
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1-Feb-10 News - Trouble for Baltic Dry Index, Yemen ceasefire

TARP inspector reports to Congress

TARP inspector issues a quarterly report to Congress

The Quarterly Report to Congress by the Obama administration's Special Inspector General for the Troubled Asset Relief Program (SIGTARP), finds that all the abusive practices that led to the financial crisis that began in August 2007 are still being used. The inevitable logic is that a much larger financial crisis is yet to come.

See my complete analysis of this report in: "Report from TARP Inspector: We're driving off a cliff in a faster car."

Trouble Brewing for the Baltic Dry Index

The Baltic Dry Index is poised for another crash, according to an analysis on SeekingAlpha.

Recall that the Baltic Dry Index (BDI) 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.

The Baltic Dry Index surged to bubble levels in early 2008, thanks to enormous Chinese demand for commodities prior to the Beijing Olympics in August. Once the Olympics games ended, Chinese demand plummeted, creating a chain reaction that brought world wide trade and transportation almost to a standstill. The Baltic Dry Index plummeted an astounding 95%. (See "World wide transportation and trade sink farther into deep freeze.")

Dry Bulk carriers order book <font size=-2>(Source: SeekingAlpha)</font>
Dry Bulk carriers order book (Source: SeekingAlpha)

In the last year, the BDI regained about 20% of what it lost in the crash, but now a new analysis indicates that it's poised to collapse again.

During the boom of early 2008, everyone thought that the bubble would never burst, and orders were placed for 1400 dry bulk carrier vessels to be delivered in 2010. As the adjoining graphic shows, the rate of delivery for the vessels is many times higher than the normal trend rate in previous years.

This is just one more "thing" that's coming at us in the next few months. There's a huge, growing shadow inventory of unsold homes in the US, ready to trigger a housing panic. Large banks are taking enormous risks, counting on the belief that they'll be bailed out if there's trouble. China's bubble economy is close to bursting, and the "PIIGS" countries in Europe (Portugal, Ireland, Italy, Greece and Spain) are all nearing default on their bonds, also expecting to be bailed out.

Yemen government offers conditional ceasefire to Houthi rebels

Yemen government forces claim to have killed 20 Houthi rebels in a fight in the northern provinces.

The Houthi rebels have accepted the government's offer of a ceasefire, and have agreed to comply with the five conditions, according to a report by News Yemen.

The five conditions are "that the rebels disarm, withdraw from sites they control, reopen blocked roads in Sa'ada, hand over weapons and military equipment they have taken over, release captured troops and civilians and stop attacks on territories of neighboring Saudi Arabia," according to the article.

Well, actually that's six conditions, and according to an Al-Jazeera report, the Houthi rebels have not accepted the sixth condition, stopping attacks on Saudi Arabia.

Yemen is fighting on multiple fronts. There's a Houthi insurgency in the north, and al-Qaeda insurgency in the south, and a secessionist movement in the south. In order to keep the country from deteriorating into complete chaos, the US is becoming increasingly involved. (See "Yemen wars escalate rapidly, as US provides military support" and "US military 'deeply involved' in Yemen.")

This ceasefire offer is obviously a political dance being performed by the two sides. From the point of view of Generational Dynamics, this fight is in the approach to a generational crisis war, where short-term ceasefire agreements are typical, before the war bursts into full genocidal fury.

Additional Links

The biggest villain in today's financial crisis was the securitation of debt that created the "toxic assets" that were fraudulently sold to investors by Goldman Sachs and other banks. However, the securitization market is not new, according to the NY Times. Quoting a report by the National Bureau of Economic Research, the article says that the original wave of securitizations took place in the 1920s, when the United States went on the greatest building boom ever. The details were quite similar to what's happened in the 2000s.

Russia's southern province of Dagestan, in the Caucasus region, is moving towards a war of ethnic and religious violence, according to the NY Times.

Fear of Iranian missile attacks is spurring American sales of anti-missile systems to American allies in the Mideast, according to Times Online. Saudi Arabia, Qatar, Bahrain and Kuwait are the customers purchasing the system. The article says that the Obama administration sped up the sales after it became apparent that its conciliatory Iran strategy has failed.

Iranian President Mahmoud Ahmadinejad says the nation will deliver a harsh blow to the "global arrogance" on February 11, the anniversary of the Islamic Revolution, according to Press TV. Mark your calendars.

(Comments: For reader comments, questions and discussion, see the 1-Feb-10 News - Trouble for Baltic Dry Index, Yemen ceasefire thread of the Generational Dynamics forum. Comments may be posted anonymously.) (1-Feb-2010) Permanent Link
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