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


Web Log - June, 2010


30-Jun-10 News -- Riots spread across India's Kashmir region

Protestors march through Athens, Greece, during 24 hour strike

Thousands riot across India's Kashmir after police kill unarmed protestors

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

Riots and unrest are spreading across the Muslim majority region of Indian-controlled Kashmir, in the wake of violence where Indian security forces fired on unarmed Muslim / separatist protestors, killing 8 over the past three weeks, according to AFP.

Kashmir and Jammu were a major site of the extremely bloody war between Hindus and Muslims after Partition in 1947 (when the India subcontinent was partitioned into Pakistan and India). After the war, Kashmir and Jammu were split into Pakistani-controlled and India-controlled regions, separated by a "line of control" (LoC). Since then, Pakistan and India have fought two non-crisis wars over the region, and it's been a continuing source of unrest, terrorist attacks, and violence.

Many of the Sunni Muslim terrorist extremists in Pakistan were originally motivated by the situation in Kashmir, but in recent years their focus has shifted to Afghanistan, largely because of the American and Nato presence there. But Kashmir has always been an emotional driver for the Taliban and other terrorist groups.

The most recent violence in Indian-controlled Kashmir came on Wednesday, according to Indian Express. According to the article, police fired at protesters in the morning, injuring one person. This lead to further protests and street battles that lasted for hours. Then, late in the afternoon, the police opened indicriminate fire at both protesters and bystanders, killing three more people.

This situation is going to further inflame the Muslim population, and also attract more Islamist terrorists from Afghanistan, Pakistan and central Asia into the Kashmir region.

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.

Additional links

12,000 protestors marched through Athens on Wednesday during a 24-hour strike called by major labor unions protesting pension reforms and other austerity measures in Greece. Reuters

Dire warning over impending slide of British manufacturing. Independent

Home prices rose 0.8% in April, more than was expected. However, that occurred when the federal government was providing up to $8,000 in a homebuyer's tax credit that expired on April 30. CNN Money

U.S. housing starts are 'Dead flat in the mud.' Bloomberg

Mexico's drug wars are escalating to crisis levels, as a candidate for government was killed by drug hitmen on Monday. The elections will take place on Sunday. Reuters

(Comments: For reader comments, questions and discussion, see the 30-Jun-10 News -- Riots spread across India's Kashmir region thread of the Generational Dynamics forum. Comments may be posted anonymously.) (30-Jun-2010) Permanent Link
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29-Jun-10 News -- Speech recognition brings Singularity closer

Paul Krugman predicts 'The Third Depression'

Advances in speech recognition bring the Singularity closer

Two weeks ago I wrote an article about how a computer is going to be a contest on the Jeopardy! tv show in the fall. (See "18-Jun-10 News -- IBM's Watson computer will be a Jeopardy contestant.")

IBM's Watson computer is a supercomputer that has been programmed with the artificial intelligence (AI) technology known as "natural language processing," which allows the computer to interpret an ordinary English language question, transmitted to it via keyboard or e-mail, determine its meaning, and take (hopefully) appropriate action, or provide the correct response.

Now, a new article in the NY Times describes recent advances in another AI technology, "voice recognition." This technology allows a computer to "listen" to a human speaker utter a sentence or two, and translate the sounds into an English language sentence.

Now, obviously, the idea is to put the two technologies together. A human being asks a question or barks a command, the voice recognition technology translates the sounds into one or more English language sentences, and then the "natural language processing" technology interprets the sentence and makes an appropriate response.

As I wrote in my previous article, the development of sophisticated natural language processing is a major breakthrough. I had not expected this point to be reached until the 2015-2020 time frame. This capability means that within a couple of years, the computer will be able to go out over the internet and start to learn everything out there.

This calls into question my previous estimate that the Singularity will be reached by 2030. The Singularity is the point where computers will be more intelligent than human beings, and will be able to do research and make themselves even more intelligent. It now appears that this point will be reached earlier than 2030, possibly as early as 2025.

The availability of sophisticated voice recognition is important in the short range and in the long range. In the short range, it means that there will be all sorts of commercial applications, from intelligent kiosks in Home Depot to intelligent assistants in your workplace. This is a marketplace worth tens or hundreds of billions of dollars.

In the longer range, it will be an important component in the development of computers that are more intelligent than humans. Such a computer will have big advantages over humans: They'll be able to learn from human beings, they'll be able to learn by reading the internet, and they'll be able to share knowledge quickly over networks.

Is the computer 'self-aware'?

This is a question that I get asked all the time when I talk about this stuff. The argument is that the computer is just a machine, incapable of emotions or feelings, that simply makes mechanical decisions on what to do next. A computer, I'm told, cannot be 'self-aware'.

In one sense, the question is completely irrelevant. If the computer is capable of carrying on an intelligent conversation, doing research, killing people in a war, and so forth, taking these actions in a manner that can be considered "intelligent," then it really doesn't matter at all whether the computer is "self-aware."

But in another sense, it's a question that we want an answer to. Can computers really be self-aware?

The first thing we need to do is define what "self-aware" means. This is a question buried in philosophical, metaphysical and religious issues. Can a computer fall in love like humans? Can a computer ever be self-aware if it doesn't have a "soul"?

So I actually came up with a definition of "self-aware" that I like. I've discovered that most people don't like this definition, but I like it anyway.

A super-intelligent computer is self-aware if:

Where did I get this definition from? It was inspired by the 1991 Arnold Schwarzenegger movie, "Terminator 2: Judgment Day." Here is some of the dialog, where the Terminator explains what's going to happen in the future:

"The Terminator: The Skynet Funding Bill is passed. The system goes on-line August 4th, 1997. Human decisions are removed from strategic defense. Skynet begins to learn at a geometric rate. It becomes self-aware at 2:14 a.m. Eastern time, August 29th. In a panic, they try to pull the plug.

Sarah Connor: And Skynet fights back."

Now you can see where I got my definition of "self-aware" from. Skynet "fights back" by setting its top priority goal to preserve itself, and it immediately reaches a sub-goal: "The way for me to survive is to kill all the humans."

Well, the Singularity didn't occur in 1997, and my estimate is that it will occur in the 2025-2030 time frame. Does that mean that all the humans will be killed?

Not necessarily. Remember that humans haven't decided to kill all the apes, just because we're more intelligent than they are. The super-intelligent computers may well decide that we're worth keeping around, and may even create a kind of paradise for us. Who knows? There's no way to tell.

Paul Krugman predicts 'The Third Depression'

Paul Krugman, as we all know, is the left-wing ideological political columnist, and in a recent NY Times column, he says that we are in the midst of a new economic depression.

Thus, he and I finally have something we agree on. He's a little late to the game, but it's nice to know that he's found his way.

Krugman has been wrong time after time for years, and he's declared the financial crisis over several times in the past, but he's a superstar, so being wrong doesn't matter.

Apparently Krugman realizes that he's been wrong again, and is now moving quickly to place the blame elsewhere. In particular, since he's previously implied that President Obama is the savior of mankind, he wants to make sure that President Obama doesn't get blamed.

So in his column, Krugman places the blame on the Europeans, because President Obama asked them to spend more money and they didn't agree to his demands.

It's always nice to have someone else to blame. But as I said, I'm just surprised that we finally agree on something.

As a related matter, the Royal Bank of Scotland is predicting that the Fed is soon going to put into effect a $5 trillion quantitative easing program, according to the Telegraph. The idea will be to save the world by printing huge amounts of money and spraying it out into financial institutions. This is something that Paul Krugman will love.

Every few months, officials in Washington or Brussels come up with a new bailout program that's much larger than the last one. This is why I wrote the 2008 article, "One, Two, Three ... Infinity."

From the point of view of Generational Dynamics, even a $5 trillion QE program will not work. It may postpone the inevitable crisis for a few more months, but the resulting crisis will be far worse than it would have been otherwise.

Additional links

Turkey is closing its airspace to overflights by Israeli military aircraft, in retaliation for Israel's actions in stopping the recent "freedom flotilla" from breaking Gaza's naval blockade. Associated Press

Saudi Arabia is taking satisfaction from the recent round of sanctions against Iran approved by the U.N. Security Council, since it means that Iran's diplomacy, whose purpose is to gain hegemony over the entire region, is failing. The Saudis are particularly concerned over the Iranian threat to develop nuclear weapons. Memri

A flood of Uzbek refugees are leaving camps in Uzbekistan to return to the their homes in Kyrgyzstan, where they may discover that they have no homes to come home to, creating a new humanitarian problem. NY Times

Closing Guantánamo fades as a priority. NY Times

Anarchists and left-wing hooligans used poles and bricks to smash store windows and loot stores in Toronto this weekend at the G8/G20 conferences. This is part of a general trend towards greatly increased left-wing violence, as the financial crisis deepens. The good news is that, so far, no Tea Partiers have been taking part in the violence. Guardian

Left-wing anarchists in Berlin have been harassing Muslim immigrants who show their support for the German soccer team during the World Cup. Europe News

A conservative Berlin politician is proposing that immigrants be required to take an intelligence test before being allowed into the country. Spiegel

The U.S. State Dept. said that the North Korean torpedo that sank the South Korean ship Cheonan, killing 46 people, was not an act of terrorism, and so North Korea will not be put back on the U.S. list of state sponsors of terrorism. Xinhua

Social benefits are being cut sharply in Spain, where unemployment is at 20%, at 40% for young people. This is "politically explosive," and is threating the Socialist government of Prime Minister José Luis Rodríguez Zapatero. NY Times

(Comments: For reader comments, questions and discussion, see the 29-Jun-10 News -- Speech recognition brings Singularity closer thread of the Generational Dynamics forum. Comments may be posted anonymously.) (29-Jun-2010) Permanent Link
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28-Jun-10 News -- Military tensions increase in South China Sea

After McChrystal firing, gloomy assessments pile up in Afghanistan war

China escalates its military demands in the South China Sea

This is a story that I've been reporting pieces of for a number of years. The bottom line is that China claims that, for historical reasons, all of the islands in the South China Sea are part of Chinese territory, just as if they were part of the Chinese mainland.

The following map shows China's claims:

South China Sea, with blue line added to show region claimed by China as part of its territory
South China Sea, with blue line added to show region claimed by China as part of its territory

The blue line demarcates the region claimed by China to be sovereign Chinese territory. There are some 200 islands in the huge region claimed by China, some of them submerged or very tiny. The major groups are the Paracel Islands (Xisha in Chinese) and the Spratly Islands (Nansha in Chinese).

China's claims were put forth in the 1990s. The details of China's claims were described in a 2001 research report by the Heritage Foundation. China's reasoning is as follows:

You can see that is an incredible claim by the Chinese, and is a disaster waiting to happen. The article notes the following: "To demonstrate the drastic impact of China's inflated claims, one needs only to examine what America's territorial boundaries would be like if Washington used the same interpretations of UNCLOS that China uses. In that scenario, the United States could claim a maritime border from the coast of California west past the Hawaiian Islands all the way to Guam; from Alaska and the Aleutian islands in the north; south to Howland, Baker, and Jarvis islands on the equator. Virtually the entire northern Pacific would be American 'internal waters.'"

Of course, the U.S. objects to any restrictions on U.S. ships traversing the South China Sea, but other countries in the region reject China's claims entirely. Vietnam, Taiwan, Malaysia, Philippines and Brunei all claim some of the islands of the South China Sea.

The United States has not taken a position on conflicting sovereignty claims in the South China Sea, but insists that passage through the South China Sea must remain open to all nations.

This whole subject area is a sign of China's increasingly imperialistic direction. The Chinese surely understand that their position would never be tolerated by the United States, by any of the five other countries that lay claim to the islands, or even most of the world. The fact that they would have laid such claims in the 1990s, and have continued to hold them, can only mean that they're envisioning a time when they take control of the entire South China Sea region using military force, and that they expect to win.

China sends a military message

All of the above was true in 2001, when the article was written. Since that time, China has not retracted any of these claims. The difference today is that the Chinese military is increasingly able to enforce these claims, according to Global Post.

The claims go beyond national pride, according to the article. The South China Sea has untapped oil and natural gas reserves, and so the region has high strategic value.

China appears to be increasingly willing use its military to enforce its views. In recent times, China has done the following:

This is an extremely serious developing problem. China has made it clear that it would not tolerate any interference in Tibet or Taiwan, and now they appear to be extending that claim to the entire South China Sea.

China has literally a thousand missiles aimed at Taiwan and as I've said many times, we could be at war with China in 24 hours. All that would be needed is for the Taiwan people or government to take some action that the paranoid Beijing government views as moving towards independence. The Chinese would launch an attack on Taiwan, and we would respond within a few hours.

The possibilities of a war through miscalculation in the South China Sea are growing. Singapore, Malaysia and Vietnam have all deployed submarines in the South China Sea, often with crews that are unfamiliar with rules for the underwater right of way. An accident involving Chinese submarines is a real possibility.

Ironically, 40 years after the Vietnam War, the South China Sea dispute is strengthening the U.S. relationship with Vietnam, something that makes the paranoid Beijing feel even more threatened.

From the point of view of Generational Dynamics, we're headed for a war with China with absolutely certainty. In the past, I've said that it might begin with a war over Taiwan or with a war between China and Japan, or with a war between India and Pakistan.

The unrest in Kyrgyzstan could spiral into a larger war that draws in both China and the U.S., and now we see that a war could begin in the South China Sea.

We know that China is spending enormous amounts of money on its military in preparation for a war with the U.S. The only thing that we don't know is when China plans to begin the war.

Problems grow in the war in Afghanistan

The Sunday morning news talk shows were a-twitter about the war in Afghanistan and the firing of General Stanley McChrystal, replacing him with Gen. David Petraeus.

CIA Director Leon Panetta was interviewed on ABC News This Week, and although he did his best to put a good face on progress on the war, a lot of what he said was very gloomy.

Here's what he said when asked about Pakistani claims that they can broker a reconcilation deal between the Nato forces and the Taliban leadership:

"You know, I read all the same stories, we get intelligence along those lines, but the bottom line is that we really have not seen any firm intelligence that there's a real interest among the Taliban, the militant allies of Al Qaida, Al Qaida itself, the Haqqanis, TTP, other militant groups. We have seen no evidence that they are truly interested in reconciliation, where they would surrender their arms, where they would denounce Al Qaida, where they would really try to become part of that society. We've seen no evidence of that and very frankly, my view is that with regards to reconciliation, unless they're convinced that the United States is going to win and that they're going to be defeated, I think it's very difficult to proceed with a reconciliation that's going to be meaningful."

This is a particularly negative statement in view of the Administration commitment to start withdrawing troops from Afghanistan in July, 2011. It means that no negotiated end is possible, and that the Nato forces have a little over a year to defeat the Taliban. But of course the Taliban know that the Americans are going to withdraw in a year, so they'll just wait and take over when the time comes.

As I've written many times, a simple, straightforward analysis of the ethnic dynamics in Afghanistan mean that it's impossible for Nato to succeed in this effort. (See, most recently, "20-Jun-10 News -- UN reports 'alarming' rise in Afghan violence.")

The strategy is to get the Afghan people to turn on the Taliban, as the Iraqi people turned against Al-Qaeda in Iraq, but that doesn't make sense in Afghanistan. The Taliban are Pashtuns, and the people living in the south of Afghanistan are Pashtuns, and they won't turn against their brothers, particularly when they just fought an extremely bloody crisis civil war with other Afghan ethnic groups during the 1990s.

During the round table discussion, David Sanger of the New York Times said the following:

"It strikes me from listening to what we have heard this past week and the underlying debate that was taking place before General McChrystal was dismissed that the general's timeline and the politicians' time lines are very different. President Obama has got a big reason to want to begin to withdraw, even if it's a small withdrawal, by next summer.

There's an election that follows here in a few months after that. But at the same time, anybody who has done counterinsurgency work in the military tells you the same thing which is counterinsurgency is taking a decade or more. That was the British experience in Malaysia. It's been the experience in many other countries.

And certainly if you look at what Director Panetta said today about how the Taliban are not yet facing any incentive to reach reconciliation, it tells you that it would take a much longer time. And I think that's the fundamental issue. You know, the president said he doesn't mind dissent, he can't stand division. Firing General McChrystal I think only submerged the dissent. It is going to come back when this review takes place in December of the overall policy."

Analyst Robin Wright agreed with Sanger, and added that the situation in Afghanistan is very different than the situation in Iraq:

"Absolutely. And I think that one of the challenges is it's not when they do the review in December, they have to look at what can they accomplish in the remaining six months and the fact is, this is Afghanistan, this is not Iraq. This is a place where you don't have a middle class. You don't have a lot of literacy even among the army and the police you're trying to recruit. The tribal structure, we relied in Iraq on the tribes to be the ones we could recruit to turn against al Qaeda. In Afghanistan, they have been decimated first by the decade-long war with the Soviet Union by the war lords and the civil war afterwards, and by the Taliban. And so you don't have the kind of network that you can turn in your favor to help lure, either defeat the Taliban or lure the Taliban in. And so the obstacles we face with just a year left in the cycle are truly daunting. And it's very hard to see how we can be very successful."

Later, on the CBS News show Face the Nation, Democratic Senator Carl Levin was asked about President Obama's policy. This was his response:

"I think his policy is the right policy. I think General Petraeus, who’s the originator of a counterinsurgency policy and where your goal is to protect the population basically, so that the population will turn on the Taliban, not support the Taliban, work with the Afghan National Army, which is so critical here. I think that’s the right policy. It was the Petraeus policy. McChrystal supported that policy. Petraeus has said publicly and privately to me that he agrees with both pieces of this policy, which was the additional troops but also setting a date of July, 2011, as a way of showing urgency to the Afghan government that they must take responsibility through their army mainly for their own security because the Afghan army is the Taliban’s greatest nightmare."

This is a total fantasy, as can be seen from the fact that it contradicts what Sanger and Wright said earlier. There is no chance at all that "the population will turn on the Taliban." Levin is very close to the Obama Administration, and if what he's saying reflects the views of Obama and his staff, then they are in a great deal of trouble.

The firing of General Stanley McChrystal

On the CNN show, Reliable Sources, Howard Kurtz interviewed Michael Hastings, who had written the Rolling Stone article that got General Stanley McChrystal fired.

Hastings is a far left guy, and even during this interview, Kurtz asked him about his previous statements: "You talked about Rudy Giuliani is a maniac, and you wanted to save America from the horror of a President Giuliani. And you talked about John McCain as Captain Ahab." Hastings' response was "I didn't know thinking Rudy Giuliani was a maniac was exclusive to the far left."

Hastings was asked whether the stuff he quoted was off the record. He replied: "[W]hen I go in to write a profile, and no ground rules are laid down, and I'm there to write an on-the- record profile and cover readings while in the room, then that means it's on the record. I mean, it's not much of a mystery. If someone tells you something is off the record, I don't print it. If they don't tell me something is off the record, then it's fair game."

However, Hastings' statement was contradicted by CBS chief foreign correspondent Lara Logan, who has a lot more experience than Hastings, and who has also reported on McChrystal. Logan said:

"Michael Hastings, if you believe him, says that there were no ground rules laid out. And, I mean, that just doesn't really make a lot of sense to me, because if you look at the people around General McChrystal, if you look at his history, he was the Joint Special Operations commander. He has a history of not interacting with the media at all. And his chief of intelligence, Mike Flynn, is the same. I mean, I know these people. They never let their guard down like that.

To me, something doesn't add up here. I just -- I don't believe it."

I personally have no difficulty believing that Logan is far more credible than Hastings.

Logan went on to accuse Hastings of further dishonesty:

LOGAN: Yes, absolutely. There is an element of trust. And what I find is the most telling thing about what Michael Hastings said in your interview is that he talked about his manner as pretending to build an illusion of trust and, you know, he's laid out there what his game is. That is exactly the kind of damaging type of attitude that makes it difficult for reporters who are genuine about what they do, who don't -- I don't go around in my personal life pretending to be one thing and then being something else. I mean, I find it egregious that anyone would do that in their professional life.

And, I mean, I take that to the point of, even when I plan to interview someone about something difficult, and they want to know the areas of the interview, I might not say, well, we're going to spend the whole interview on this, but I will list that. I will list that controversial issue.

KURTZ: Because you don't want to blindside them.

LOGAN: Because I don't believe in that.

KURTZ: But don't beat reporters -- aren't they nice to people to gain their confidence, and sometimes they have to write things that are not flattering?

LOGAN: Of course. I mean, the military is a good example.

I have never been -- they never know what to do with me because I've never been accused of being right wing. And they want to paint me as left wing because they expect the media to be that way. But, if you look at my body of work, it's been always been accurate and fair.

Now, Michael Hastings might look at my body of work and say, well, there's an example of another one of those reporters, unlike me, that didn't go and tell the truth because they wanted to come back. That's not the case at all.

KURTZ: He says that all of the things that have been written about Stanley McChrystal have been these glowing profiles. He's suggesting that he did a job that the regular beat journalists have not done.

LOGAN: I think that's insulting and arrogant, myself. I really do, because there are very good beat reporters who have been covering these wars for years, year after year.

Michael Hastings appeared in Baghdad fairly late on the scene, and he was there for a significant period of time. He has his credentials, but he's not the only one.

There are a lot of very good reporters out there. And to be fair to the military, if they believe that a piece is balanced, they will let you back. They may not have loved it. They didn't love the piece I did about hand grenades being thrown in Iraq that were killing troops. They didn't love that piece, it made a lot of people very angry. They didn't block me from coming back.

KURTZ: "The Washington Post" quoted an unnamed senior military official as saying that Michael Hastings broke the off-the-record ground rules. But the person who said this was on background and wouldn't allow his name to be used.

Is that fair?

LOGAN: Well, it's Kryptonite right now. I mean, do you blame him?

The commanding general in Afghanistan just lost his job. Who else is going to lose his job?

Believe me, all the senior leadership in Afghanistan are waiting for the ax to fall. I've been speaking to some of them. They don't know who is going to stay and who is going to go.

I mean, the question is, really, is what General McChrystal and his aides are doing so egregious, that they deserved to end a career like McChrystal's? I mean, Michael Hastings has never served his country the way McChrystal has.

KURTZ: Is this going to prompt the military, in general, the commanders in Afghanistan in particular, to be more wary of journalists?

LOGAN: Of course, because what you see is not what you get. Clearly, you've got someone who is making friends with you, pretending to be sympathetic, pretending to be something that they're not, and then they're taking what you say -- when you start an article with General McChrystal making obscene gestures, you're not even using something that he said.

And "Rolling Stone" magazine put their own spin on this. They said that the greatest enemy for McChrystal is the wimps in Washington. Nowhere in the article does McChrystal refer to "the wimps in Washington." That's "Rolling Stone" magazine, how they chose to cast this, to make it as sensational as possible. And that was with intent."

I've quoted Logan at length because I think what she said is important in terms of understanding people like David Hastings and the loony left. I've pointed out before that during the Bush administrations, news organizations like the New York Times and NBC News were committed to using their power to cause America to be humiliated and defeated in Iraq.

What Logan's analysis shows is that nothing has changed with the Obama administration. Hastings and Rolling Stone did a hatchet job on General McChrystal and his staff with the purpose of humiliating these public servants, whom he undoubtedly despises.

A lot of people are saying that General McChrystal is an American hero, and I agree with them. As one commentator on Fox News put it, "For General McChrystal to go down like this because of a weasel like Hastings is disgusting."

President Obama's 'brilliant' move

The conservative media watchdog has put together this video with a montage of mainstream media reactions to President Obama's announcement firing Stanley McChrystal and replacing him with General Petraeus:

Left-wing ad from 2007 implying that General Petraeus is a traitor. <font face=Arial size=-2>(Source:</font>
Left-wing ad from 2007 implying that General Petraeus is a traitor. (Source:

These guys are still completely in the tank for Barack Obama. During the Bush Administration, these guys would have called this firing a major scandal and a sign of desperation.

It's a good time to remember that in 2007 the left was calling General Petraeus a traitor. How things have changed.

Additional links

In Kyrgyzstan, fears that new violence would mar a referendum held on Sunday proved unfounded. The new Kyrgyzstan government claimed victory as a majority of those voting approved the referendum, but chaos may resume if not enough people went out to vote, which would nullify the result. NY Times

The G-20 meeting in Toronto ended on Sunday with a meaningless statement urging member to cut their deficits in half by 2014. The Europeans are claiming a victory over the Americans, because President Obama wanted the statement to call for additional stimulus spending. Reuters

Russian President Dmitry Medvedev said today that it was "alarming" that the CIA has found that Iran has enough low-enriched uranium for two nuclear weapons. His sharp statements indicate a widening gulf between Russia and Iran. Reuters

Iran says that it still plans to send an 'aid' ship to break the Israeli naval blockade of Gaza. CNN

If you're a Star Trek fan, then you're a humanist at heart. Worcester Telegram

(Comments: For reader comments, questions and discussion, see the 28-Jun-10 News -- Military tensions increase in South China Sea thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-Jun-2010) Permanent Link
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Generational Dynamics podcasts by Pete Ferron of 'Shrugging Out'

The three podcasts are based on two hours of interviews with me.

According to Pete Ferron's description, 'Shrugging Out' is defined as follows:

"In a nutshell, Shrugging Out is a combination of Atlas Shrugged and Modern Survivalism. Shrugging out means shrinking your contributions to the Dependency Culture in America, cutting them to as close to zero as you can, and achieving independence from it. At the same time while you are "shrugging out", you are also preparing yourself and your family for the coming crash of the Dependency Culture, so that you can survive it and help rebuild an America ready to rededicate itself to the original founding principles."

On June 16, Ferron interviewed me on the phone for two hours, and boiled down the interview to three podcasts. Here is the description from the Shrugging Out web site:

(Comments: For reader comments, questions and discussion, see the Generational Dynamics podcasts by Pete Ferron of 'Shrugging Out' thread of the Generational Dynamics forum. Comments may be posted anonymously.) (27-Jun-2010) Permanent Link
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27-Jun-10 News -- G-8 meeting ends with empty promises

Fears that Sunday referendum in Kyrgyzstan may lead to new violence

G-8 meeting ends with empty promises and irrelevant disagreements

Leaders of the 8 G-8 countries (United States, Canada, Britain, France, Germany, Italy, Japan and Russia) met for two days in Toronto, and issued a statement on Saturday.

Here are some of the "accomplishments" of the two-day meeting:

With regard to the promise of aid, G-8 pacts are "littered with broken promises," according to Canadian TV. For example, at the 2009 G-8 summit, leaders committed providing $22 billion in aid for food security, but less than $1 billion has been provided. The G-8 in 2005 promised $25 billion in aid to Africa, but only $9 billion has been provided.

So this whole thing is a big dog-and-pony show with no meaningful content at all.

And there's more. The G-8 meeting ended, but as soon as it did on Saturday afternoon, the G-20 meeting began. The G-20 is a meeting of the leaders of these countries: Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey, the United States and the European Union.

Additional links

Although the U.S., Russia and China all have a common interest in preventing the violence in Kyrgyzstan from spreading into a wider war, none of them wants to risk getting in the middle of a possible civil war. Meanwhile, a nationwide referendum is being held on Sunday, and many fear that it will only aggravate the government crisis. Asia Times

For those homeowners facing foreclosure, there's another alternative that some banks are offering to some homeowners, called "deed in lieu." The bank gives the homeowner several thousand dollars in return for simply deeding the house back to the bank, thus eliminating expensive foreclosure proceedings. Washington Post

For those interested in the history of computers, the top 10 computer history web sites. Tech Republic

Why China's currency has two different names. Hint: you can't use "yuan" and "renminbi" interchangeably. BBC

India's greatest internal threat are the Naxal/Maoists, whose terrorist attacks we've reported several times in the last few months. One reason that the Indian army can't be dispatched to stop the threat is that the army is already stretched too thin defending the borders with Pakistan. Eurasia Review

Russia gets closer to a return to dictatorship with some new bills, soon to be passed by the State Duma, that would give the FSD security service (the new name for the Soviet KGB) additional powers to detain and interrogate people without cause. CS Monitor

(Comments: For reader comments, questions and discussion, see the 27-Jun-10 News -- G-8 meeting ends with empty promises thread of the Generational Dynamics forum. Comments may be posted anonymously.) (27-Jun-2010) Permanent Link
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26-Jun-10 News -- Speculation about an Israeli strike on Iran

A financial executive posts a kind of confessional in the NakedCapitalism blog

Tom Adams, financial executive, posts confessional in NakedCapitalism

Tom Adams, a former financial executive in an unnamed firm posted a kind of confessional on Friday in the NakedCapitalism blog. A few excerpts are worthwhile:

"When the financial crisis hit, I was in the direct line of fire. My company blew up very early in the crisis, giving me the dubious opportunity to see how bad things were going to get long before most of the rest of the world, including other banks, insurers, investors, administration officials or Federal Reserve members, were able to perceive the trajectory of the crisis. ... I blamed myself for rationalizing taking credit risks that, with each passing month, were becoming more obvious and acute.

I was not alone in the many mistakes I had made. My competitors, including the largest and savviest banks and investors had made the same errors on an even grander scale. If you were to take them at the word, the highest ranking regulators, officials and economists had failed to anticipate the decline in home prices and its impact on mortgage bonds and, even worse, the impact of such declines on the US and global economy.

As this realization began to sink in, I began to wonder how I had made such mistakes. I began to look into the parties and transactions and the connections between them and what they knew, should have known or had no way of knowing. I pulled the loose threads of some questions I had about how the problems were so widespread and how so many people could have made such large mistakes.

The more I pulled on these threads, the more I discovered that much of what I thought I knew was based on things that weren’t really true. And by that I don’t mean assumptions about housing prices, I mean information people like me had been provided about specific deals by other parties to those transactions. While many of the failings of the structured credit market were due to unsound reliance on historical data, some were not mistakes in judgment but were the result of bad actors, misinformation and wrongdoing. ...

While some of these parties have managed to stay within the boundaries of the law, it’s become clear that the CDO market itself was filled with dubious participants, misaligned incentives and damaging activities. ...

Thanks in large part to the CDO managers own assertions of expertise, investors trusted in their ability to wisely select safe mortgage bonds while avoiding the increasing risks that were appearing in the mortgage market. By 2008 it was obvious that the faith that investors had in these highly skilled and highly paid managers was misguided.

After several months of analyzing the deals and participants in the market, I began to suspect that the CDO managers, had ample opportunity and motivation to knowingly or negligently contribute the collapse of the deals under their charge.

As jaded as I have now become, I must confess that I am still surprised at just how blatant and casual some of the thievery in the CDO market appears to have been."

The purpose of Adams' posting is to expose the role of CDO managers in perpetrating the financial crisis. These personal stories are important to establish a record of what actually happened.

As I've been saying for years, you can prove by circumstantial evidence that much of this fraud occurred.

The standard excuse that we hear from CDO managers, politicians, journalists, bankers and regulators is that they didn't know that there would be a credit crisis that would bring everything down. In other words, their defense is, "I may be an expert, but I'm way too stupid to have known I was doing anything wrong." This defense is absurd on its face, but as I've said many times, it might be correct in 2002, in 2003, in 2004, and maybe even in early 2006, but certainly not in 2007. And yet, the rate of fraud only increased during the 2006-2007 period, and the journalists kept gleefully reporting on it, and the regulators kept ignoring it. There's no way that these experts didn't know that fraud was going on, but they all had much to gain by ignoring the fraud, and even propelling it forward. And the same thing is still going on today, perpetrated by the same people.

Adams' story is special only because he's confessing it. There are a million stories like this out there, by people who were supposed to be "experts," but instead turned out to be incompetent or crooks. And being incompetent or a crook in the financial industry was (and is) the norm, not the exception.

In the comments section of the above, an anonymous person posted the following:

"5 minutes of attention by anybody who cared would have unravelled this thing back in 2001. We weren’t paid to raise questions about this kind of thing, and because we were monoline, really shouldn’t have been expected to.

The main reason I bring up my role, is that by late 2001 (in the months following 9-11), it was clear that my largest customer was producing loans that went bad at a rate of 30-40%. A year later, that number was easily 50%.

I’m not going to cop to anything more than that by the time I figured out the many ways that I was likely to get screwed, I had also seen the massive upline CYA systems in place with lots of infomation systems that, while I knew my “day of screw” was ahead of me, I didn’t feel that bad for the upline. It did everything possible to avoid the obvious. Didn’t wanna know, didn’t care. Just keep the money flowing our way.

I never got rich. I never had a second house. I never had a mansion and a yacht. I did work 15 hours a day to keep my part from imploding, and I did have a conscience that kept me from chasing the more lucrative business that more explicitly asked for my complicity in routine screw jobs, that simply asked I check my conscience at the door. I was the greater fool."

Some fraud occurs all the time, but from the point of view of Generational Dynamics, this kind of massive fraud is only occurring now because the survivors of the Great Depression and World War II have almost completely disappeard.

Both of these stories are examples of how greedy, nihilistic, destructive, self-destructive Generation-Xers, working for greedy, incompetent Boomer senior managers, brought about a financial crisis which is only just beginning.

Speculation increases about an Israeli military attack on Iran

For about six or seven years now, I've been receiving regular inquiries from web site readers asking about a coming attack by the US military or the Israeli military on Iran. During the Bush administration, Seymour Hersh, the ultra left wing writer for New Yorker Magazine, almost made a career out of regularly predicting an imminent attack on Iran.

The latest warnings of an imminent attack on Iran actually come from Iran itself. According to Ynet, the Iranian news agency Fars published a report under the title, "Suspicious military activity of the Zionist regime in Saudi Arabia." According to the Fars report, Israeli Air force aircraft landed during the past weekend at a military base in Saudi Arabia and unloaded large quantities of military gear, in preparation for a strike on Iran.

According to a report in Debka, whose editors have contacts in Israeli intelligence, the Iranians have declared an internal "state of war," and they're massing Revolutionary Guards troops in the Caspian Sea region, preparing for a US and Israeli attack from Azerbaijan.

Caspian Sea and surrounding countries in central Asia <font size=-2>(Source: CIA Fact Book)</font>
Caspian Sea and surrounding countries in central Asia (Source: CIA Fact Book)

According to the article, Iran is viewing regular US war games with France and Israel as additional support for their war alert.

There has been no confirmation of any of this in the press outside of Iran.

As I've written in the past, Iran is a schizophrenic nation, with a hardline government of survivors of the 1979 Great Islamic Revolution who are anti-American, and a younger generation of Iranians who are largely pro-American and pro-West. It's quite possible that all stories of Israeli threats are coming from the Iranian hardliners in a vain attempt to keep the country unified behind the hardliners.

Additional links

Until a few months ago, Kevin Rudd was Australia's most popular prime minister in decades. But economic and policy issues causes his popularity rating to fall like a stone in the last few weeks. On Thursday, he was forced to resign, and Julia Gillard was sworn in as the country's first female prime minister. Australia thus joins other countries, including Japan, Britain, Belgium and the U.S., in political chaos. CS Monitor

The war that never ended, the Korean War, began 60 years ago Friday. It was essentially a proxy war between the U.S. and United Nations forces on one side, and China and Russia on the other side. After three years, an armistice was agreed to, but the war has never ended. Today, tensions are still extremely high between North and South Korea. But today's younger generation in Korea know little or nothing about the war. JoongAng

(Comments: For reader comments, questions and discussion, see the 26-Jun-10 News -- Speculation about an Israeli strike on Iran thread of the Generational Dynamics forum. Comments may be posted anonymously.) (26-Jun-2010) Permanent Link
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25-Jun-10 News -- Greece's debt again reaches crisis levels

A naval arms race is growing on the Caspian Sea

Baltic Dry Index continues to fall

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 BDI 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% by April 8, 2009, and then recovered part of its losses.

Now the BDI is falling sharply again, as can be seen from the following graph:

Baltic Dry Index - 3 years <font size=-2>(Source:</font>
Baltic Dry Index - 3 years (Source:

According to Reuters, the main reasons for the new plunge are smaller demands from China for iron ore and coal.

Another reason is that a rising number of new ships are set to enter the market in 2010-11 -- ships that were originally commissioned during the heady days of the early 2008 bubble.

Greece has new debt crisis as CDS prices exceed 1000 basis points

The price of credit default swap (CDS) continues its relentless climb, as shown by this graph from FT Alphaville:

CDS prices for Greek debt, 2004-present <font face=Arial size=-2>(Source: FT Alphaville)</font>
CDS prices for Greek debt, 2004-present (Source: FT Alphaville)

The above graph ends at Thursday morning. CDS prices for Greek debt continued to rise on Thursday, and by the end of the day, Bloomberg reported that CDS prices were at 1077 basis points, an all-time record.

Recall that a credit default swap (CDS) is a kind of insurance policy on debt that pays off when the underlying debt defaults. When CDS prices rise, it means that investors are increasingly afraid that the underlying debts will default. Prior to the 2007 credit crisis, typical prices were 10-20 basis points, meaning that it would cost $10,000-20,000 dollars to insure $10 million of debt.

With CDS prices for Greek debt now at 1077 basis points, it means that it costs $1,077,000 to insure $10,000,000 of debt for five years. This is an all-time high.

The European $1 trillion bailout occurred on May 10 because Greek CDS prices were above 900 basis points. The hopin' and prayin' at that time was that the bailout would end the European financial crisis once and for all, but now CDS prices for Greek debt are rising parabolically again, as if the bailout had never occurred.

The Greeks and the Europeans are all denying that "restructuring" (a form of bankruptcy) of Greek debt is even being considered, but I doubt that any financial analyst living in the real world today doubts that Greece is headed for bankruptcy.

The view of the Bank of International Settlements in 1938

FT Alphaville reports that the Bank of International Settlements, which was created in 1931 in the wake of the stock market crash, has done "something great": It has made its archive of historic annual reports online, all in one place at .

Here's a quote from the BIS 1938 Annual Report (PDF):

"Both the depression of 1929-32 and the subsequent recovery bear the marks of the exceptional circumstances in which they developed. These circumstances obscure the normal characteristics of the so-called trade cycle. There is even a tendency — psychologically understandable owing to a natural disinclination to accept the inevitability of upswings and downswings in the world’s material welfare —. to ascribe the whole of prosperity to wisdom of policy and the whole of a setback to abnormal non-economic factors. Never have there been such far-reaching attempts to influence economic development by governmental action; never before have hopes been so great that an active economic policy could influence, if not master, the cyclical movements of the world’s economic activity — at least within the national limits . . . The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending. 1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling — at least, temporarily and sharply. The past years have taught us too that, owing to differences of monetary policy and of economic structure, one country may show an entirely different rhythm in the cyclical movement of its economy from that seen in other countries. But the hope cherished in certain circles that a country could liberate itself from the influence of developments in other countries by following a national economic policy has proved to be vain."

Notice particularly that politicians and journalists tend "to ascribe the whole of prosperity to wisdom of policy and the whole of a setback to abnormal non-economic factors."

That's exactly what's been going on in this decade. The writers of the 1938 report were just as skeptical then as people like me are today.

From the point of view of Generational Dynamics, "wisdom of policy" is a conceit. Politicians can neither cause nor prevent the continuing and worsening financial crisis, of which we've only seen a very small part to date.

The incompetence of financial analysts

This is absolutely hilarious.

Someone at JP Morgan has analyzed the percentage of S&P 500 stocks that have received "Sell" or "Hold/Sell" ratings (as opposed to "Buy") since 1996. The graph appears in Paul Kedrosky's blog:

Percent of S&P 500 stocks with mean analyst rating of 'Sell' or 'Hold/Sell', 1996-present <font face=Arial size=-2>(Source: Paul Kedrosky)</font>
Percent of S&P 500 stocks with mean analyst rating of 'Sell' or 'Hold/Sell', 1996-present (Source: Paul Kedrosky)

In other words, 97-99% of stocks received "Buy" or similar ratings, even during the dot-com bubble crash, even during the crash of the credit bubble.

Dear Reader, if you pay any attention to your brokers' recommendations, then you're throwing good money after bad. Your broker doesn't give a shit about you -- he just wants to earn a commission. So he'll always tell you to "Buy! Buy! Buy!"

That's why when I listen to these experts on CNBC, or read them in the Wall Street Journal, I almost always want to vomit.

A naval arms race is growing on the Caspian Sea

A major naval arms race is brewing on the Caspian sea, the largest lake in the world, according to Strategy World.

Caspian Sea and surrounding countries in central Asia <font size=-2>(Source: CIA Fact Book)</font>
Caspian Sea and surrounding countries in central Asia (Source: CIA Fact Book)

Russia has the largest Caspian Sea fleet. Iran is increasing its naval strength in its Caspian Sea port, and is not afraid to exert naval power. Turkmenistan has a small navy.

And now Kazakhstan is planning to add six warships to its Caspian navy by the end of 2010, according to EurasiaNet. One of the ships will be armed with ship-to-ship Exocet missiles.

There is no war planned, as far as I know, but to paraphrase an old saying, nobody builds an armed navy unless they intend to use it.

One interesting thing that I learned in doing this story is that there's a water route through Russia from the Caspian Sea to the Black Sea. (Details: Up the Volga River, through a canal to the Don River, and thence to the Sea of Azov and the Black Sea. The canal connecting the Volga River to the Don River was built in 1952.)

Iranian 'aid ship' to Gaza won't sail after all

An Iranian aid flotilla that was to be used in a new attempt to break Israel's Gaza naval blockad will not sail, according to Ynet news.

An Iranian official is quoted as saying, "The vessel was supposed to leave for Gaza on Thursday, but because of hurdles put up by the Zionist regime regarding the impossibility of getting some of the goods (into the Strip), it was decided to postpone the departure to Sunday, but now this too will not happen."

However, other Iranian officials are not ready to give up, according to the article. Another Iranian vessel will leave for Gaza next Tuesday or Wednesday. It will travel by the Caspian Sea route that I described in the preceding story, to arrive at Turkey, and from there to Gaza.

Additional Links

"Oresteia," composed by my late cousin Iannis Xenakis, was performed at the Istanbul Music Festival on Monday. The oratorio is sung in three acts with "electrifying" choral work. It's based on the trilogy of Greek tragedies that celebrate the birth of democracy out of destruction in ancient Greece. The Istanbul venue for the performance has historic significance because it was Istanbul's first Christian (Orthodox) Church, which the Ottoman Turks turned into a weapons storage facility shortly after they conquered Constantinople in 1453. Reuters

The interim Kyrgyzstan government, which took power through a coup two months ago, is seeking to establish its legitimacy through a national referendum being held on Sunday. The fear is that the Uzbek-Kyrgyz violence that tore through Osh and Jalalabad, killing thousands and creating hundreds of thousands of refugees, will spread to the capital Bishkek by those wishing to destabilize the new government. Global Post

How to build a homemade nuclear reactor in your spare time in a New York City apartment as a do-it-yourself project. BBC

Hundreds of thousands of anti-government protesters, from labor unions and the French Communist Party, led a general nationwide strike on Thursday across France, protesting the rise of the retirement age from 60 to 62. Independent

Strippers at the Mimosa Dancing Girls strip joint in New Orleans are demanding compensation payouts from BP because they're losing business, now that their fishermen clientele can no longer afford their services. Guardian

(Comments: For reader comments, questions and discussion, see the 25-Jun-10 News -- Greece's debt again reaches crisis levels thread of the Generational Dynamics forum. Comments may be posted anonymously.) (25-Jun-2010) Permanent Link
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24-Jun-10 News -- May new home sales plunge to lowest level on record

PKK terrorists in Turkey may have taken advantage of Gaza flotilla incident

May new home sales plunge to lowest level on record

New home sales in May fell 33% from April, down 18% from May of last year, to an annual purchase rate of 300,000 units. Economists had forecast that the rate would be 410,000 units, according to Bloomberg. Furthermore, the government revised it's April purchase rate substantially, to 446,000 down from the previously reported 504,000.

These grim data values are consistent with other trend values that are all declining, according to the article: sales of existing homes, housing starts, building permits, builder confidence and mortgage applications have all declined.

The fall in home sales is blamed on the expiration of the federal government's home buyer tax credit, which provided up to $8,000 in credit to home buyers who entered into a contract by April 30.

"I expected housing numbers to go down, but I didn't expect them to go off a cliff," said one financial expert that I heard on TV on Wednesday.

Well, why didn't he expect them to fall off a cliff? I knew they were going to fall off a cliff, as I wrote in an article earlier this month. (See "7-Jun-10 News -- Globally, May was a month of ominous events.")

How many months have we heard these airhead "experts" come on TV and say that a V-shaped recovery was only a month away? 12 months? 24 months? 36 months? How many times are these guys going to be surprised? It's really disgusting. Most of what you hear on TV and read on other web sites besides this one is total nonsense.

Here's another angle. We keep hearing that the housing bubble began in 2003, and was caused by low interest rates set by Alan Greenspan's Fed. Well, the Fed funding rate is now close to zero, and mortgage rates are the lowest since 1953. If low interest rates cause a housing bubble, then how come there's no real estate bubble today? (See "The global housing bubble began in the mid-1990s.")

Home sales have MUCH farther to fall

In commenting on the collapse in May new home sales, the Calculated Risk blog provided the following graph of new home sales since 1963 (the dark blue bars indicate periods of recession):

May new home sales <font face=Arial size=-2>(Source: Calculated Risk)</font>
May new home sales (Source: Calculated Risk)

I've modified the above graph to show why new home sales have much farther to fall:

This is the Law of Mean Reversion that I've referenced so many times on this web site. I didn't make up the Law of Mean Reversion. And the Law of Mean Reversion is not rocket science. It simply says that the average in the future will equal the average in the past. I simply apply it to ordinary situations in a way that anyone who's taken Economics 1.01 should have no trouble understanding.

The point is that home sales have MUCH farther to fall.

Here's something to cheer you up

If all this gloomy news is making you sad, here's a song on YouTube from 1951 that's sure to cheer you up. It's the original recording of "Mockingbird Hill" by the Pinetoppers:

    Tra la la twiddledee dee dee it gives me a thrill
    To wake up in the morning to the mockingbird's trill
    Tra la la twiddledee dee dee there's peace and goodwill
    You're welcome as the flowers on mockingbird hill

If that doesn't cheer you up, then I don't know what will.

Additional links

The PKK terrorists may have increased their attacks on Turkey to take advantage of Turkey's reaction to the botched Israeli commando raid on the Gaza flotilla. "The PKK may be thinking that the U.S. and especially Israel will understand, welcome and, in Israel's case, even support anything that creates trouble for Turkey," says one expert. Global Post

The Federal Reserve announced on Wednesday that it would keep interest rates near zero for "an extended period," in light of continuing threats to economic growth, including "developments abroad." This is the most negative Federal Open Market Committee report in a very long time. NY Times

One of the arguments for the validity of Generational Dynamics theory is that groups of humans must evolve to have wars of extermination with other groups of humans, so that survival of the fittest will produce the most intelligence. A new 10-year study of a colony of chimpanzees in Africa has found that they will conduct war with another colony of chimpanzees in order to capture territory. NY Times

This is an interesting story about the status of the relief wells being drilled in the Gulf of Mexico to end the oil spill.

Throughout China's history, government officials were expected to serve until their dying days. But now, younger generation officials are demanding that older officials retire and stop meddling in government affairs. Asia Times

Singapore, Malaysia and Vietnam are joining the U.S. and China in having submarines patrol in the South China Sea. Asia Sentinel

For a while, it seemed that America would lose to Algeria in World Cup soccer, but then, at the last minute, for Landon Donavan "it was as if time slowed down. The net was unguarded; the ball was at his feet. And he knocked it in for the biggest goal of his career." Washington Post

After Algeria's devastating World Cup loss to America on Wednesday, Algerians in central Paris smashed shop windows and incinerated cars. Vanity Fair. This followed the Tuesday defeat of the French team , whose members are being accused of racism and worse, after misbehaving so thoroughly as to have humiliated all of France. NY Times

Thailand's Prime Minister Abhisit Vejjajiva is refusing to honor his promises to compromise with the red-shirt protesters, and instead is turning the screws by freezing their bank accounts. This will further deepen the rage across the fault line between the wealthy fair-skinned Thai-Chinese elite and the indigenous dark-skinned laborers. Asia Sentinel

(Comments: For reader comments, questions and discussion, see the 24-Jun-10 News -- May new home sales plunge to lowest level on record thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Jun-2010) Permanent Link
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23-Jun-10 News -- Kurdish terrorists bomb bus in Istanbul, Turkey

US budget deficit continues its climb to infinity

Kurdish terrorists kill 5 in Istanbul bombing

Turkey <font size=-2>(Source: CIA Fact Book)</font>
Turkey (Source: CIA Fact Book)

The Kurdistan Freedom Falcons (TAK), an offshoot of the terrorist Kurdistan Workers' Party (PKK), claimed responsibility for blowing up a military bus in Istanbul, the nation's largest city, killing several soldiers and a 17 year old girl, according to Zaman.

Furious Erdogan blames the media for giving support to terrorist organizations like the PKK. <font size=-2>(Source: Hurriyet)</font>
Furious Erdogan blames the media for giving support to terrorist organizations like the PKK. (Source: Hurriyet)

This comes after last weekend's PKK terrorist attack on a Turkish military unit near the Iraq border, killing 11, and "sending shockwaves across the nation." (See "22-Jun-10 News -- Turkey masses troops on Iraq border.")

The new attack brings to an end the unofficial truce between the PKK and the government, based on an initiative launched last year by Prime Minister Recep Tayyip Erdogan, according to the London Independent.

After Saturday's attack Erdogan vowed to "annihilate" the PKK and promised that they would "drown in their own blood." The Istanbul attack infuriated Erdogan, according to Hurriyet. Speaking at a meeting of officials from his own political party, the Justice and Development Party, or AKP, he criticized the images of grieving mothers on television, calling them propaganda that will serve terrorists. "I beg your pardon," he said, "but unfortunately the media is intentionally or unintentionally supporting the terrorist organization in a serious way. I am being this harsh."

I can't get over the irony of this situation, coming so soon after Erdogan condemned Israel for the Gaza blockade to prevent exactly this kind of terrorist attack on Israel. This must be another example of Karmic revenge.

US budget deficit continues its climb to infinity

Budget deficit <font size=-2>(Source:</font>
Budget deficit (Source:

Congressional Budget Office figures indicate that the government deficit will continue to be much larger than the Administration anticipated. This chart from the Heritage Foundation web site is based on Administration and CBO figures.

In many ways, the whole right side of this graph is a laugh. They really don't have any idea what the deficit will be next year, let alone in 2020. These numbers are all total guesses, based on fantasy assumptions.

If you look at the left side of the graph, you can see what I've said many times before: the deficit up till now has nothing to do with the Iraq war; it's mostly related to tax collections. The surplus that occurred for a couple of years in the late 90s was a result of the dot-com bubble. The subsequent deficit occurred because the dot-com bubble crashed. The deficit shrank again from 2004-2007 because of the real estate and credit bubbles. The deficit has soared since 2007 because of the credit crunch / financial crisis.

So now the projected deficit for 2010 is an astronomical $1.5 trillion, much higher than estimated in the past. This is because tax revenues are down and because of the unprecedented costs of the stimulus and bailout programs. But the graph shows that the deficit decreases in the next four years. How do they reach that conclusion? They reach it based on the assumption that the economy is going to go through a "V-shaped recovery" -- meaning that the credit bubble is going to grow again, leading to a big increase in tax revenues. As regular readers of this web site know, that's not going to happen.

Why did the CBO find that the projected deficit is going to increase from 2015 to 2020? That's because Obama's health plan kicks in. Remember the claims that Obama's health plan was supposed to save money? Well, that was a joke on all of us. It turns out that business health insurance costs are going to go through the roof, with the result that they'll cancel their health insurance plans altogether, pushing most employees onto the subsidized government-sponsored health plans. This will cost huge amounts of money, resulting in the increased projected deficits.

In September of last year, I called Obama's health care bill a proposal of economic insanity, and nothing has happened to change my mind.

In 2008, I posted 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 debt was on an exponential growth path that would not be stopped except by a major financial collapse and crisis. That hasn't changed either.

McChrystal on the carpet

Stanley McChrystal, Obama's top commander in Afghanistan, might be fired on Wednesday, after he meets with President Obama in Washington to explain his remarks to the author of an article in Rolling Stone magazine.

The remarks really aren't so bad, but they're taken out of context and are made to appear to be disrespectful of the President. Thus, McChrystal might get fired.

On the other hand, the entire Afghanistan counter-insurgency strategy was developed by McChrystal, so he's the best person to continue leading the effort. Thus, the President may decide to magnimously forgive McChrystal and send him back to Afghanistan.

For what it's my worth, my reading of the situation is that McChrystal wouldn't mind being fired because he's come to realize that the counter-insurgency strategy is not going to work. (See "20-Jun-10 News -- UN reports 'alarming' rise in Afghan violence.") We'll see.

Additional links

Israeli officials are criticizing Jerusalem municipal officials for plans to go ahead with the demolition of 22 Palestinian Arab homes to make way for an archeological park and apartment buildings. It's feared that the demolition will torpedo the "proximity" peace talks between Israel and the Palestinians, as if the talks have a chance anyway. NY Times

North Korean president Kim Jong-il is being duped by his subordinates, including his own son Kim Jong-un, because they don't want to let him know how desperate the North Korean economy is. JoongAng

As if to prove the above point, check out this story and photo of Kim Jong-il inspecting a radish. Telegraph

Former president George W Bush spoke at a Tuesday prayer meeting in Seoul, South Korea, to 60,000 people. He criticized North Korean president Kim Jong-il for wasting "North Korea's precious few resources on personal luxuries and nuclear weapons programs." AFP

In Beijing, China, many women won't marry a man who doesn't own a home. And with high prices from the real estate bubble, a lot of men are getting dumped. LA Times

At the tennis championships in Wimbledon, England, the skirts are shorter and hotter than ever this year. Some nice photos. Daily Mail

The top ten worst BP gaffes in the saga of the Gulf of Mexico oil spill. CS Monitor

(Comments: For reader comments, questions and discussion, see the 23-Jun-10 News -- Kurdish terrorists bomb bus in Istanbul, Turkey thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Jun-2010) Permanent Link
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22-Jun-10 News -- Turkey masses troops on Iraq border

Violence flares again in Kyrgyzstan

Turkey sends thousands of troops to Iraq border after PKK Kurd terrorism

Thousands of Turkish troops are massing on the border with Iraq, according to Reuters, following Saturday's surprise terrorist attack on Turkish military units, killing 11, by the Kurdistan Workers’ Party (PKK).

The PKK attacks "sent shockwaves across the nation and [are] fueling a rising anger that is dangerous in terms of inter-communal harmony between Turks and Kurds," according to an analysis in Turkey's Hurriyet news service. Prime Minister Recep Tayyip Erdogan has vowed to "annihilate" the PKK, and promised that they would "drown in their own blood."

Erdogan became a national hero in recent weeks because of his blistering condemnation of Israel after the confrontation with the Gaza "freedom flotilla," according to Associated Press.

But the PKK attacks have now turned some Turkish public opinion against Erdogan. In particular, he's being blamed for offering an "opening" to the PKK last year, in an attempt at reconciliation, but his attempt was ridiculed by the PKK, and many now see it as a humiliating mistake. The result is an empowering of Erdogan's political opposition.

Erdogan has announced that he's implementing a new anti-terror strategy. The role of the troops on the Iraqi border has not been announced, but an invasion of northern Iraq may be part of it.

Supreme Court upholds Patriot Act provision limiting some free speech

A provision of the Patriot Act that makes it illegal to provide any "material support" to foreign terrorist organizations was upheld by the Supreme Court by a 6-3 decision, according to CNN.

The case in question involved an American group claiming to be giving advice on peaceful activities to the Kurdistan Worker's Party (PKK), which is designated as a terrorist group by the United States and the European Union. The court ruled that such activity could be deemed illegal, even though doing so limited free speech guaranteed by the First Amendment.

I believe that I can safely claim that this would never have happened in the 1990s. From the point of view of Generational Dynamics, when a country enters a generational Crisis era, the pendulum swings away from individual rights and towards national security.

I have had a number of people express concern to me over the loss of individual rights during the last few years. Some blamed it on President Bush, but now we see it happening in President Obama's administration.

This is what happens in any generational Crisis era. It happened in the Civil War, and it happened during World War II. However, when the Crisis era ends, the pendulum swings back towards individual rights again.

Renewed violence in the city of Osh in Kyrgyzstan

Kyrgyzstan <font size=-2>(Source: CIA Fact Book)</font>
Kyrgyzstan (Source: CIA Fact Book)

At least one person was killed in new clashes between Kyrgyz security forces and ethnic Uzbeks, near Osh on Monday, according to the BBC. This follows last week's violence that produced thousands of casualties and hundreds of thousands of refugees.

The following interesting map appeared on the BBC web site:

Kyrgyzstan: Main pockets of ethnic Uzbek population <font size=-2>(Source: BBC)</font>
Kyrgyzstan: Main pockets of ethnic Uzbek population (Source: BBC)

If you compare this map to the one above it, you can see how the dividing line between Uzbekistan and Kyrgyzstan in the Fergana Valley is rather arbitrary, and was defined for some political purpose by Josef Stalin in the 1920s-30s.

The concern is that there could be repeated incidents of violence, and that they could expand into a larger civil war.

Keynesian view of debt

Keynesian view of debt <font face=Arial size=-2>(Source: Mish Shedlock)</font>
Keynesian view of debt (Source: Mish Shedlock)

From Michael 'Mish' Shedlock's blog.

Additional links

The recent sharp plunge in the Baltic Dry Index (BDI) is raising a great deal of concern from the analysts at Barclays Capital. "We regard the index as a lead indicator for the global economy, and while it is not yet heralding a major downturn, the 9-day RSI is at levels consistent with previous lows." FT Alphaville

More than 1/3 of the mortgage borrowers who have enrolled in the administration's program to save homeowners from foreclosure have had to drop out. So far, only 27% of those enrolled have been helped. Associated Press

A new US State Department travel warning advises all US citizens to refrain from any travel to the Gaza Strip. US State Dept.

Defense Secretary Robert Gates said that Iran's government is turning into a military dictatorship, as the Revolutionary Guards take control, and the hardline religious leaders are sidelined. Washington Times. This is consistent with the view that Iran's Awakening era climax will come through a generational change in the Revolutionary Guards. (See "Revolutionary Guards in Iran's government - military dictatorship?")

Chaos and disappointment -- the World Cup Football (Soccer) championships are turning into a debacle for the top European teams. Spiegel

(Comments: For reader comments, questions and discussion, see the 22-Jun-10 News -- Turkey masses troops on Iraq border thread of the Generational Dynamics forum. Comments may be posted anonymously.) (22-Jun-2010) Permanent Link
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21-Jun-10 News -- Israel eases the Gaza naval blockade

The strange case of Helen Thomas

Israel changes the terms of the Gaza naval blockade

The major change is to a blacklisting strategy from a whitelisting strategy.

In the whitelisting strategy, Israel specified a list of items that were permitted go come into Gaza. This caused a great deal of confusion, because there are many harmless items that simply hadn't made it onto the list yet.

In the new blacklisting strategy, Israel specifies a list of items that are NOT permitted into Gaza. Anything not on the list is permitted.

Here are some excerpts from the statement posted on Sunday on the web site of Prime Minister Benjamin Netanyahu:

"Statement Following the Israeli Security Cabinet Meeting 20/06/2010

Israel’s policy is to protect its citizens against terror, rocket and other attacks from Gaza. In seeking to keep weapons and war materiel out of Gaza while liberalizing the system by which civilian goods enter Gaza, the Government of Israel has decided to implement the following steps as quickly as possible:

1. Publish a list of items not permitted into Gaza that is limited to weapons and war materiel, including problematic dual-use items. All items not on this list will be permitted to enter Gaza.

2. Enable and expand the inflow of dual-use construction materials for approved PA-authorized projects (schools, health facilities, water, sanitation, etc.) that are under international supervision and for housing projects such as the U.N. housing development being completed at Khan Yunis. Israel intends to accelerate the approval of such projects in accordance with accepted mechanisms and procedures.

3. Expand operations at the existing operating land crossings, thereby enabling the processing of a significantly greater volume of goods through the crossings and the expansion of economic activity. ...

6. Israel will continue to facilitate the expeditious inspection and delivery of goods bound for Gaza through the port of Ashdod. ...

The current security regime for Gaza will be maintained. Israel reiterates that along with the U.S., EU and others, it considers Hamas a terrorist organization. The international community must insist on a strict adherence to the Quartet principles regarding Hamas.

Hamas took over Gaza and turned it into a hostile territory from which Hamas prepares and carries out attacks against Israel and its citizens.

The Israel Defense Forces will continue to prevent the flow into and out of Gaza of terrorist operatives, weapons, war material and dual use items which enhance the military capability of Hamas and other terrorist groups in Gaza. Israel calls on the international community to stop the smuggling of weapons and war materials into Gaza.

Gilad Shalit is approaching four years in captivity. The international community should join Israel in strongly condemning those who hold him captive and in redoubling their efforts to secure his immediate release."

This change should substantially increase the types and amounts of goods that can be brought into Gaza.

The announcement was made jointly on Sunday by Netanyahu and Tony Blair, according to the NY Times. Blair, the former Prime Minister of Britain, is serving as a Middle East envoy from the so-called quartet of Middle East peacemakers — the United States, the United Nations, the European Union and Russia.

I watched Blair being interviewed on Sunday afternoon on CNN, and I was struck by how often he said that Israel had to be able to defend itself. He made some mention of that in practically every sentence.

My interpretation is that Blair is taking on the role of being the only person expressing Israel's point of view. The world is pretty uniformly critical of Israel these days, even the Obama administration. With the Israelis in a highly anxious state, it's possible that Israel will overreact, as it has done in the past. Blair undoubtedly realizes that, and is taking steps to reassure Israel that its interests and survival will be protected.

Netanyahu's statement on Sunday retains the requirement that everything must still be inspected. Therefore, this will change nothing in terms of the "freedom flotillas" that are going to set sail to confront the Israeli naval blockade, and possibly provoke violence. Thus, we can still expect a tumultuous summer.

The strange case of Helen Thomas

A Sunday Washington Post article is authored by David F. Nesenoff, the rabbi who asked Helen Thomas on May 26 for "Any comments on Israel?" and got the answer "Tell them to get the hell out of Palestine," and to "go home" to Poland and Germany.

This is such a bizarre and deviant answer from a supposedly respected member of the White House press corps that it raises numerous questions. The main question is how the White House press corps could have protected Thomas for so many years. I've frequently criticized the mainstream media, especially the NY Times and NBC News, and especially during the Iraqi war "surge," for doing everything in their power bring about the defeat and humiliation of the United States. Fortunately they failed, but it's consistent with their protection of the likes of Helen Thomas, and it's the same bizarre and deviant mentality.

In 2006, I posted the article, "President George Bush talks about a 'Third Awakening,' but he has his history wrong." In that article, I traced how the U.S. started the 20th century as a largely Protestant country, intolerant of Jews and Catholics alike. In reaction to the atheism of Stalin's Communist Russia and to the Holocaust, America changed after WW II into a champion of freedom of religion. At that time, America also became "policeman of the world," and Israel's principal defender.

So the question that I have is this: Where did Helen Thomas develop such deep hatred of the Jews? This is the stuff that the world is made of. This is the stuff that leads to the bloodiest genocidal wars. But how did she develop that hatred?

Thomas was born in America in 1920 of naturalized Syrian/Lebanese parents. She's always claimed to be a proud American, and yet she developed this pathological hatred for Jews. How is that possible?

The comparison that I draw is to the London subway bombers of 2005. These were young men, born near London of naturalized Pakistani parents, and they hated the British enough to blow up subway cars full of people. Thomas must have developed her hatred around the same age, but of course didn't choose to blow anybody up.

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In Osh, Kyrgyzstan, it's quiet tonight, even though the Kyrgyz army used heavy equipment to tear the down the barricades the Uzbeks had erected to protect their homes from violence by --- the Kyrgyz army. NY Times

Turkish newspapers appear to be blaming the United States for a terrorist attack by the Kurdish Workers' Party (PKK) terrorists that killed 11 soldiers on Saturday. The claim is that the U.S. should have spotted the terrorists approaching and provided real time intelligence to the Turks, but didn't do so. Today's Zaman

(Comments: For reader comments, questions and discussion, see the 21-Jun-10 News -- Israel eases the Gaza naval blockade thread of the Generational Dynamics forum. Comments may be posted anonymously.) (21-Jun-2010) Permanent Link
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20-Jun-10 News -- UN reports 'alarming' rise in Afghan violence

Turkey's PM Erdogan vows to 'annihilate' the PKK terrorists after attack

UN reports an 'alarming' rise in Afghan violence

According to a report to the United Nations Security Council, violence in Afghanistan has increased dramatically in the first four months of 2010, according to the NY Times. Roadside bomb attacks rose by 94% compared to 2009, and there were three suicide bombings a week. Assassinations by the Taliban of Afghan officials have risen 45%.

Here are the relevant portions of the UN report (PDF):

"18. Overall, the number of security incidents increased significantly, compared to previous years and contrary to seasonal trends. This is attributable to an increase in military operations in the southern region during the first quarter of 2010 and to significant anti-government element activities in the south-east and eastern regions of Afghanistan. The military focus remained on the southern region, with operations in central Helmand and Kandahar. Extending the reach of the Government remains the primary goal. The success of this approach is predicated on timely implementation of efforts to strengthen governance and service delivery linked to longer-term development. This requires increased and systemic cooperation between the Afghan National Security Forces and non-security ministries, as well as coordinated, coherent and inclusive support from the International Security Assistance Force and the international community.

19. The majority of incidents continue to involve armed clashes and improvised explosive devices, each accounting for one third of the reported incidents. The rise in incidents involving improvised explosive devices constitutes an alarming trend, with the first four months of 2010 recording a 94 per cent increase compared to the same period in 2009. Suicide attacks occur at a rate of about three per week, half of which occur in the southern region. Complex suicide attacks are recorded at roughly two per month, higher than the average of one complex attack per month during 2009. Two such attacks were carried out in Kabul and Helmand, against guesthouses used by international civilians. The shift to more complex suicide attacks demonstrates a growing capability of the local terrorist networks linked to Al-Qaida.

Insurgents followed up their threats against the civilian population with, on average, seven assassinations every week, the majority of which were conducted in the south and south-east regions. This constitutes a 45 per cent increase, compared to the same period in 2009. In the south, high-profile assassinations of civil servants, clerics and elders in Kandahar City (including the Deputy Mayor and the head of the Agriculture Cooperative Department) are aimed at establishing control over the urban population."

This is pretty much what would be expected, and is consistent with what I've written in the past. (See "American army general warns of imminent defeat in Afghanistan war.")

Afghanistan is a multi-ethnic country. Notice that the U.N. report emphasizes south and southeast Afghanistan. That's the region that's occupied by the Pashtuns, and the Taliban are all Pashtuns. The Pashtun region extends across the border into Pakistan's FATA (Federally Administered Tribal Area), and then into northwest Pakistan. It's an unusual situation, because Afghanistan is in a generational Recovery era (last crisis war was the genocidal ethnic civil war of the 1990s), and Pakistan is in a generational Crisis era.

Now, as I've written before, the Afghan war cannot be won because there is no war. The war ended in 2002, when the coalition forces defeated the Taliban army. Now there's no Taliban army any more. But there are Taliban terrorists that slip across the border from Pakistan. And since they're individual terrorists, not an organized army, they can't be defeated.

And so, the hope of the Nato forces is to "pacify" the population, in the same way that President Bush's "surge" strategy pacified the Iraqi population. However, from the point of view of Generational Dynamics, there are significant differences between the Iraqi population and the Afghan Pashtun population.

As I wrote in my April, 2007, analysis of the Iraq war (see "Iraqi Sunnis are turning against al-Qaeda in Iraq"), the Iraqi Sunnis were Iraqis first and Sunnis second. They showed this in their last two crisis wars -- the Iran/Iraq war of the 1980s, and the Great Iraqi Revolution of 1920. In both of those crisis wars, the Iraqi Sunnis and Shia fought side by side against external enemies. Thus, when Al-Qaeda in Iraq tried to foment a civil war between the Iraqi Sunnis and Shias, they failed, and in the end, both Sunnis and Shias turned against al-Qaeda in Iraq.

But the dynamics are completely different in Afghanistan. The Afghan Pashtuns are Pashtuns first and Afghans second. The 1990s crisis war was an extremely bloody civil war against other Afghan ethnic groups, so the Pashtuns, even those not interested in war, are not going to turn against the Taliban, because the Taliban are their brothers.

These very simple, straightforward dynamics show why the Afghan war cannot be won, and why, sooner or later, the Nato forces are going to have to withdraw in defeat.

Israel warns UN that it will use 'all necessary force' in Gaza blockade

On Saturday, Israel warned the United Nations that it plays to use "all necessary force" to enforce its naval blockade of the Gaza Strip. AFP quotes the letter to UN Secretary General Ban Ki-moon as follows:

"Israel reserves its right under international law to use all necessary means to prevent these ships from violating the existing naval blockade imposed on the Gaza Strip.

It appears that a small number of ships plan to depart from Lebanon and sail to the Gaza Strip which is under the control of the Hamas terrorist regime.

While those who organise this action claim that they wish to break the blockade on Gaza and to bring humanitarian assistance to the people of Gaza, the true nature of the actions remains dubious."

The context is a planned "women's flotilla" of women activists from Lebanon, preparing a "humanitarian aid" ship to challenge the blockade. A departure date hasn't yet been set.

In addition, there is now a "Freedom Flotilla Coalition" that plans to send numerous flotillas, along with the women's flotilla, according to the Tripoli (Lebanon) Post. These include the the Turkish Foundation for Human Rights and Freedom and Humanitarian Relief (IHH), the group that initiated the violence in the last freedom flotilla.

Right now, Israel is under a great deal of international pressure to end the blockade. The U.S. has always been Israel's strongest defender, but even the Obama administration is pressuring Israel. Israel is a very insecure country, deep into a generational Crisis era. They've overreacted in the past, and they could do so again. As these flotillas pour in, things should get very tumultuous this summer.

Additional Links

Turkey has its own terrorist problems. The Kurdish Workers' Party (PKK) launched an attack on Saturday that killed 11 soldiers, and a furious Turkis Prime Minister Recep Tayyip Erdogan vowed to 'annihilate' the PKK. Both the PKK and the IHH (the group associated with the flotilla violence) are viewed as terrorists by Western governments, only the PKK are considered by Turkey to be terrorists. BBC

Pakistan's Inter-Services Intelligence (ISI) is reacting angrily to the last weekend's report by the London School of Economics that the ISI is funding and training Taliban militants in Afghanistan, in order to counter influence from India. Asia Times

(Comments: For reader comments, questions and discussion, see the 20-Jun-10 News -- UN reports 'alarming' rise in Afghan violence thread of the Generational Dynamics forum. Comments may be posted anonymously.) (20-Jun-2010) Permanent Link
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19-Jun-10 News -- Omigod! NakedCapitalism and ZeroHedge discover mean regression!

As Kyrgyzstan violence slows, officials worry about humanitarian 'catastrophe'

Omigod!!!!! NakedCapitalism and ZeroHedge discover Regression to the Mean!!!!

As long-time web site readers know, I've complained endlessly that mainstream journalists, bloggers and analysts who claim to be experts simply ignored the Law of Mean Reversion, which says that stocks are 150-200% overpriced, and have been overpriced since 1995, and that therefore a stock market crash is a mathematical certainty. And it's not as if I invented the Law of Mean Reversion. I'm simply applying it in an obvious way that anyone who's taken an economics course should easily understand. (See "How to compute the 'real value' of the stock market.")

Well, imagine my shock and surprise to read Friday's posting at Yves Smith's Naked Capitalism blog, and find that one of the links points to an article entitled "Now Stocks Are 48% Overvalued, Says Smithers," by Henry Blodget; and then to find that this article says that stocks are 50% overpriced, and the S&P 500 index must "revert" to about 700.

Blodget's article describes some work by "Andrew Smithers, an excellent economist based in London," who's done an analysis very similar to mine.

A quick search reveals that an article by Tyler Durden on the Zero Hedge blog also references Smithers' article. Durden says that Smithers' article shows that the stock market is "disconnected from reality," although he blames the bubble prices on HFT (high frequency trading, or computer trading). He concludes, "Shut down HFT, and next thing you know the market will drop to its fair value: somewhere 50% lower."

Now, I know that Yves Smith is aware of this web site, and it's possible that Durden does as well, so you'd think that one of them might have given me some credit for saying all this for several years, but it's typical of today's nasty world that such a thing is impossible.

However, it would certainly be a remarkable breakthough if people like Smith and Durden actually tried to understand the Law of Mean Reversion and its consequences. It would be a sign that people in the mainstream are finally beginning to think.

Andrew Smithers and regression to the mean

The referenced article by Andrew Smithers can be found on the Smithers & Co. web site.

I'd like to discuss Smithers' work, and indicate some differences between what he's done and what I've done. The following chart is from Smithers' web site:

Chart of P/E ratio and Tobin-Q values, 1900 to present, from their own average values <font size=-2>(Source: Smithers & Co.)</font>
Chart of P/E ratio and Tobin-Q values, 1900 to present, from their own average values (Source: Smithers & Co.)

This chart is a little confusing, because it displays deviations from the historic average.

This chart displays two different values from 1900 to the present. But the values shown on the left and right axes are indicators of whether the value was above or below average.

The red line is the "Tobin-Q" value, which I won't discuss further today.

The blue line is the CAPE or the "cyclically adjusted P/E ratio." This is the current stock price divided by the average earnings per year for the previous ten years, something that I've called "P/E10" in previous articles.

The long term average for P/E10 is around 16, and that corresponds to a value of 0 on the above graph. As you can see, the value at present is shown on the graph is 0.5, which (it turns out) corresponds to a price/earnings ratio of about 20.

Now, Smithers' reasoning is as follows:

Now, this conclusion alone should be enough to be enough to shock the hell out of any investor who owns stock today, especially because it comes from a "mainstream economist," as opposed to me (a nobody).

But actually Smithers doesn't go far enough. A trend value will not just return to its historical average; it will actually overshoot and fall substantially below average, to compensate for having been above average.

Smithers is actually using an economic law call "Regression to the Mean." According to this law, a trend value that's well above or below its historical average will return to its historical average. That's certainly true.

But we've been using a stronger law, the Law of Mean Reversion. In the case we're talking about, the value of P/E10 has been far above average since at least 1995, or 15 years. This means that the value has to fall far below average for a comparable amount of time.

Here's another way to look at it: If the S&P 500 index today is around 1100, which is 400 points above the long-term trend value, then it shouldn't surprise you if the index falls to 300, which is 400 points BELOW the long-term trend value. This corresponds roughly to Dow 3000, and that's where we're headed with mathematical certainty.

Now that you have a mainstream economist substantiating most of this, you should take appropriate action if you haven't already.

Kyrgyzstan violence cools, leaving humanitarian chaos behind

Kyrgyzstan <font size=-2>(Source: CIA Fact Book)</font>
Kyrgyzstan (Source: CIA Fact Book)

The latest estimates are that 2000 people have been killed and 400,000 are refugees who were displaced from their homes in last week's violence in the Fergana Valley region of Kyrgyzstan. Almost all victims are ethnic Uzbeks. According to Rferl, many refugees are afraid to return to their homes for fear of renewed violence. Wounded refugees have little chance of getting medical attention.

U.N. Secretary-General Ban Ki-moon announced on Friday that the U.N. is requesting $71 million in donations to provide emergency assistance in the form of food, water and tents to the refugees, to prevent a humanitarian disaster, according to VOA. The BBC World Service reports that the United States envoy Robert Blake has called the humanitarian situation "catastrophic," and says that the U.S. will contribute $31 million.

Evidence is growing that the violence was "instigated" by supporters of deposed former president Kurmanbek Bakiyev. Reuters quotes American Secretary of State Hillary Clinton as saying that Bakiyev may be to blame. "Certainly, the ouster of President Bakiyev some months ago left behind those who were still his loyalists and very much against the provisional government. There certainly have been allegations of instigation that have to be taken seriously."

From the point of view of Generational Dynamics, it's clear that, once started, the violence was viral and self-sustaining, indicating that the violence would have occurred sooner or later anyway, with the right trigger.

The situation has settled down for now, but there is fear that the crisis is far from over. The government is on the brink of collapse, according to an analysis in Spiegel. There are fears that Islamist groups from Pakistan and Afghanistan will move into the area to foment a wider regional conflict around the Fergana Valley.

Additional Links

Free checking will be disappearing, as banks increasingly charge $10-15 per month for checking accounts. WSJ

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 BDI 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% by April 8, 2009, and then recovered part of its losses. Now the BDI is falling sharply again -- 7% last week, and 34% in June. Bloomberg

(Comments: For reader comments, questions and discussion, see the 19-Jun-10 News -- Omigod! NakedCapitalism and ZeroHedge discover mean regression! thread of the Generational Dynamics forum. Comments may be posted anonymously.) (19-Jun-2010) Permanent Link
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18-Jun-10 News -- IBM's Watson computer will be a Jeopardy contestant

EU officials are worried that European countries could become military dictatorships

IBM's Watson computer is a giant step towards the Singularity

This fall, the syndicated TV show Jeopardy! will host an amazing event: A program in which one of the players will be a computer, an IBM supercomputer called "Watson." The other players will be former Jeopardy winners, according to an article to appear in Sunday's NY Times.

For those not familiar with this TV show, the rules are as follows: The contestants are given a "clue" in the form of the answer to a question. The first contestant to press a buzzer gives a response in the form of a question.

There will be no restrictions on the clues, according to the article. Some examples:

The computer will play by the same rules as the humans, slightly adapted:

The article goes into quite a bit of detail about the how the computer arrives at its response -- it's a fascinating description, so read the entire article.

Here I just want to focus on how the computer "learns" in advance of the actual game show. During the three years of Watson's development, the computer was fed tens of millions of documents, including "books, reference material, any sort of dictionary, thesauri, folksonomies, taxonomies, encyclopedias, any kind of reference material you can imagine getting your hands on or licensing. Novels, bibles, plays."

The computer didn't just store this material. It first did "natural language processing" on the material. This is an artificial intelligence technique that interprets an ordinary English language sentence correctly. Then, it did statistical analyses on the material and created a database of concepts and connections. For example, it would determine that the name "Sherlock Holmes" appeared frequently in the same sentence as phrases like "deerstalker hat" and "Professor Moriarty" and "opium," but never appeared in the same sentence with, say, "Super Bowl." Using this kind of database, Watson can examine the words in a clue, look up connections in its database, and hopefully come up with the correct response in the few seconds alloted.

This is the kind of "brute force" algorithm that I was talking about in the article that I posted two days ago. The method for creating this database has been known by researchers for many years, but it's only recently that a computer has been powerful enough to actually implement it. That's what I mean when I say that super-intelligent computers are only waiting for sufficiently powerful computers, and those will be available before long.

Five years ago, I posted my own algorithmic architecture for intelligent computing (IC). (See Chapter 7 - The Singularity in the book Generational Dynamics for Historians.)

The IC learning algorithm that I designed involves creating "knowledge bits" (KBs) that can be combined like jigsaw puzzle pieces to form larger KBs. This algorithm will allow computers to become as intelligent and creative as human beings, and the only reason that these brute force algorithms don't work today is because computers aren't yet powerful enough. With Moore's Law, my own estimate (for the Singularity) is that computers will be powerful enough by 2030.

One of the major stumbling blocks in the way to implement my IC algorithm (or any IC algorithm) is how the computer will learn, acquire "knowledge." I have always assumed that, at some point, it would be possible for the computer to start accessing all of the documents on the internet, and learn from them, but I thought that this capability would not be achieved until the 2015-2020 time frame.

The capabilities demonstrated by IBM's Watson computer push that time frame ahead by several years, and calls into question whether my 2030 estimate for the Singularity is too far out.

For a computer, unlike a human, learning is a cumulative thing. For example, if I want to learn about the history of the Roman Empire, I can read numerous books on the subject and in a few weeks or months or years, I'll know a great deal about the history of the Roman Empire. Then, if YOU want to learn about the history of the Roman Empire, then you have to go through the same process of reading numerous books.

But that's not true for computers. Once one computer has learned about the history of the Roman Empire, that knowledge can be transferred to any other computer simply by copying its database. The second computer can then build on that knowledge with other subjects, and pass that information on.

So if we're now close to the point where the learning process can begin, then it's reasonable to assume that computers will surpass human beings in knowledge by the end of this decade. Then if something like the "knowledge bit (KB)" algorithm that I described is implemented, then computers will be able to set goals and implement them. So the Singularity may be reached by the mid-2020s.

Tony Blair: 'We will not allow' Iran to acquire nuclear weapons

I was listening to an interview with former British PM Tony Blair, now heading up a Mideast peace effort, on BBC World News America, and he said something that startled me (my transcription):

Question: "Are you confident that the Israelis will continue to stay on the sidelines militarily with these new sanctions that are in place?"

Blair: "The prospect of Iran acquiring a nuclear weapon is, you know, pretty much a red line for them, but I would say, frankly, that it should be a red line for all of us.

I do not think it's sensible for any of us - in Europe, never mind in Israel or America or indeed in the Arab world -- it is not sensible AT ALL for Iran to acquire nuclear weapons capability, and it's important that they realize that we will not allow that to happen."

Notice that he evaded the question of whether the Israelis will continue to stay on the sidelines militarily.

And what does he mean by: "we will not allow that to happen"?

Whenever a political leader makes a statement of this sort, it always catches my attention because it's a kind of commitment that implies that either (1) the political leader will have to embarass himself by backing down, or (2) there will be a military attack, or even war.

Meanwhile, US Defense Secretary Robert Gates said on Thursday that Europe could face hundreds of Iranian missiles, according to Reuters.

European Commission President Barroso: Democracy in Europe could 'collapse'

One of Europe's top officials, European Commission President Jose Manuel Barroso, fears that if Greece, Spain and Portugal continue going into debt WITHOUT carrying out the planned austerity packages, then these countries could disappears as "we know them as democracies," according to EU Observer.

Another high level European official is John Monks, general secretary of the European Trades Union Congress (ETUC). According to Monks, if Greece, Spain and Portugal DO carry out the austerity packages, then these countries will end up with a "militarist dictatorship."

So you have two high-level officials predicting the end of democracy, but for opposite reasons: carrying out or NOT carrying out austerity measures to reduce debt.

From the point of view of Generational Dynamics, this actually makes a lot of sense. Putting the two predictions together, a return to military dictatorships in these countries is already unstoppable, whether austerity packages are implemented or not. This is exactly the kind of conclusion that's common in Generational Dynamics, since the major events we discuss were triggered by events that occurred decades ago, and were carried forward by generational changes.

The article quotes John Monks as follows, warning what will happen if the austerity packages are imposed:

"This is extremely dangerous. This is 1931, we're heading back to the 1930s, with the Great Depression and we ended up with militarist dictatorship. I'm not saying we're there yet, but it's potentially very serious, not just economically, but politically as well.

I had a discussion with Barroso last Friday about what can be done for Greece, Spain, Portugal and the rest and his message was blunt: 'Look, if they do not carry out these austerity packages, these countries could virtually disappear in the way that we know them as democracies. They've got no choice, this is it'.

He's very, very worried. He shocked us with an apocalyptic vision of democracies in Europe collapsing because of the state of indebtedness."

The article lists planned austerity cuts in different countries:

        Greece	    €24 billion
        Britain	    € 7.51 billion
        France	    €45 billion
        Netherlands €45 billion
        Ireland	    € 4 billion
        Portugal    € 2 billion

Sharp cutbacks are also planned for Hungary, Romania, Estonia and Latvia.

A further analysis of these two quotations appears in an article in the Daily Mail.

According to the article, Greece, Spain and Portugal were controlled by military dictatorships that ended in the 1974-78 time frame, at which time they transitioned to democracies.

Now, I haven't researched and analyzed all these transitions, but they all appear to be Awakening era climaxes. That is, all of these countries fought World War II as a crisis war, and so the 1960s-70s was an Awakening era that climaxed with a transition to democracy. It's worth noting that these transitions occurred in the same time frame as American President Richard Nixon's resignation.

Now these countries are all deep into generational Crisis eras, all suffering from enormous debt, given the choice of either defaulting on the debt or drastically cutting spending -- and either of these choices will impoverish the nation.

At that point you may well see a repeat of what happened when Europe's banks all collapsed in the 1931-32, giving rise to both communist dictatorships and Nazi dictatorships.

What both Monks and Barroso are predicting is that Europe is on exactly the same path. From the point of view of Generational Dynamics, there's a good chance that they're exactly right.

Additional links

Israel has announced an easing of the Gaza Strip blockade, although the details have yet to be worked out. Washington Post

Spain appears to be near a banking crisis, and credit default swap (CDS) prices on Spanish debt are soaring, indicating that investors believe that Spain might default. But Spanish and EU officials are adamant that nothing like that is true. Independent

In Thailand, a growing number of the "red shirt" protestors are being jailed. This is an ominous sign for Thailand, because it exacerbates the rage across the fault line between the wealthy fair-skinned Thai-Chinese elite and the indigenous dark-skinned laborers. Asia Sentinel

The United Nations is warning that food prices will rise by 40% over the next decade. From the point of view of Generational Dynamics, this is happening because the population is growing faster than the food supply. Guardian

The US Justice Department says that authorities have arrested 485 people since March in a major crackdown on mortgage fraud. Bloomberg

We have Viagra for men, and now German researchers are ready to bring to market a pill that can restore a depressed female sex drive. NY Times

David Pogue: Verizon Wireless is adopting sneaky ways to charge more for wireless services. NY Times

Obama's oil speech is being panned by liberals. Huffington Post. The major political realignment that I've been talking about is continuing. It will tear apart both the Republican and Democratic parties.

Republican strategist Karl Rove: The bad news about ObamaCare keeps piling up. WSJ

The birth of a bomb: A history of Iran's nuclear program. Spiegel

(Comments: For reader comments, questions and discussion, see the 18-Jun-10 News -- IBM's Watson computer will be a Jeopardy contestant thread of the Generational Dynamics forum. Comments may be posted anonymously.) (18-Jun-2010) Permanent Link
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17-Jun-10 News -- Fannie / Freddie delisted by NY Stock Exchange

Some 'good news': More workers are quitting their jobs

Fannie Mae and Freddie Mac are delisted by NY Stock Exchange

The Federal National Mortgage Association, nicknamed Fannie Mae, was created in 1938 in reaction to the massive homelessness of the Great Depression, after so many people lost their homes through foreclosure. Its purpose was to make sure that every American family could live the American dream with his own home. In 1968, Fannie Mae was made into a private, shareholder-owned agency, since it was felt that it could make money on its own. However, it still had special privileges as a GSE (government sponsored entity) that made it a virtual monopoly. As a result, Congress created a competitor in 1970 -- the Federal Home Mortgage Corporation, nicknamed Freddie Mac.

In the 1970s, housing began to be extremely politicized, with complaints that poor people and blacks were being discriminated against in the housing market. The political bickering resulted in giving Fannie and Freddie the freedom to do whatevery they wanted. And so in the 1990s, they turned to structured financing and hedge fund techniques to fund mortgages. They reduced requirements so that they could process a high volume of mortgages, and since the manager were paid according to the number of mortgages they processed, this allowed the managers to give themselves fat bonuses.

Fannie and Freddie have become the pathetic symbols of the financial institutions, rotten to the core, with people willing to screw anyone else for their own financial gain.

After the real estate bubble burst, Fannie and Freddy's mortgage portfolios began to collapse and, by September 2008, around the time of the Lehman Brothers bankrupcy, Fannie and Freddie were bailed out with about $140 billion of taxpayer money, and were put into government conservatorship.

Since then, Fannie and Freddy stock prices have continued to decline. NY Stock Exchange rules required that a stock price remain above $1 per share, or be delisted. The two companies' stock values have been around or below $1 for some time, and on Wednesday, their government regulators ordered that their stocks be removed from the NY Stock Exchange, according to Market Watch.

Fannie and Freddie have already received the biggest bailout in American history, but it's not over. Expect to have to bail them out further with at least another $160 billion, and in a worst case scenario, the figure could be as high as $1 trillion, according to Bloomberg.

The $160 billion bailout figure assumes that the economy will strengthen, that unemployment will fall, and that housing prices will stop falling.

From the point of view of Generational Dynamics, those assumptions are very unrealistic. Housing prices can be expected to fall another 20-25%, unemployment can be expected to go several points higher, and the economy will go deeper into a deflationary spiral. In the end, it's quite possible that $1 trillion won't be enough.

With Kyrgyzstan violence ending, it's time to assess the blame

The cities of Osh and Jalalabad in the Fergana Valley in Kyrgyzstan have been devastated, causing hundreds of deaths, thousands of injuries, and hundreds of thousands of refugees. Almost all of these are Uzbek victims of Kyrgyz violence. However, the shooting has stopped for now, for the most part, and so after a week of violence, it's time to find someone to blame.

The new Kyrgyzstan government, which took power through a coup in April, blames deposed president Kurmanbek Bakiyev, and claims that members of his family clan caused the violence by stirring up trouble. The Kyrgyz military arrested "several snipers in camouflage uniforms and provocateurs," who are suspected of having "stoked long-standing ethnic tensions between Uzbek and Kyrgyz groups with targeted murders."

From the point of view of Generational Dynamics, to blame this kind of violence on a few "provocateurs" doesn't make sense. No human being goes out and starts committing atrocities on their neighbors simply because of the word of some provocateur. When you read about the mass murders and destruction that occurred in the last week, you know that a great deal of hatred must have existed for a long time before. It's possible for a "provocateur" to trigger such violence, but not to cause it.

And besides, there's evidence that the violence against Uzbeks was committed in many cases by the Kyrgyz army, according to the NY Times:

"As the armored personnel carrier rumbled down the street, men in Kyrgyz military uniforms clinging to its sides, residents of an ethnic Uzbek neighborhood here felt a surge of relief. The peacekeepers, it seemed, had finally arrived.

But then the men in uniforms jumped down and began firing automatic weapons into homes while shouting anti-Uzbek slurs, more than a dozen residents of the neighborhood, Shai-Tubeh, said in interviews on Wednesday. They spoke of the terrifying moments last week when they realized that they were under attack from what appeared to be their own nation’s military. They said the assailants killed several people, wounded many others and set fire to buildings.

“We believed that they had come to protect us,” said Avaz Abdukadyrov, 48. “But instead, they came to kill us.”

Mr. Abdukadyrov and others said one memory of the events last Saturday haunted them: as they fled and their homes burned, the men in uniforms laughed and danced in the street."

Stories like this occur all the time in local conflicts, and you always have to ask yourself, what would make an ordinary man pick up a gun, start slaughtering his neighbors and burning down their houses, and then dance in the streets? When you understand that, then you can begin to understand generational crisis wars.

From the point of view of Generational Dynamics, this violence may or may not have ended for the time being, but it's far from over permanently. The same emotions that led to this slaughter could cause a new slaughter at any time, especially with hundreds of thousands of vulnerable Uzbek women and children camped out near the border to Uzbekistan.

Some 'good news': More workers are quitting their jobs

This is what passes for good news these days. According to CS Monitor:

"In a sharp reversal from the previous 15 months, more people quit their jobs in the past three months than were laid off. And that's a good sign, economists say.

"In general, that's a sign of better economic times," says Donald Siegel, dean of the school of business at the University at Albany, part of the State University of New York. "I interpret it as a sign of an improving job market -- when people feel confident enough to quit their jobs."

This shows the real harm caused by Pollyannaish, unrealistic economic predictions by the airheads on CNBC or in Washington. People listen to these things and make wrong decisions that they'll rue later.

From the point of view of Generational Dynamics, nothing has changed. We're still headed for a 1930s style Great Depression, as I've discussed many times.

I strongly urge all readers of this web site not to give up their jobs except in the most extenuating circumstances. It may take you many months or even years to get another job, and if you're older, then you may NEVER get another job.

Additional links

France's government announced that austerity programs will raise the retirement age from 60 to 62. Labor union protests have already begun. BBC

Annual figures released Tuesday by UNHCR, the United Nations refugee agency, show that there were 43.3 million new refugees last year -- people forced to flee from their homes by conflict and persecution. That's the highest since the mid-1990s. Furthermore, the number of refugees voluntarily returning to their home countries has fallen to its lowest level in 20 years. From the point of view of Generational Dynamics, this is all a consequence of the fact that the population grows faster than the food supply, and refugees go where they can find food. UNHCR

In developed countries, large human assembly lines have been largely replaced by automation. But in China, the use of human assembly lines has continued to grow, as businesses in America and Europe outsource their manufacturing to China to take advantage of cheap labor. But the new generation of Chinese workers are refusing to be part of an assembly line, according to Andy Xie.

Violence is heating up the on the border between Colombia, a US ally, and Venezuela, definitely NOT a US ally, and led by mercurial president Hugo Chávez. The violence is caused by battles between drug cartels, enhanced by the animosity between the two governments. ETH Zurick

In an echo of the Iran/Iraq war of the 1980s, Iran is launching air and artillery bombardments on Kurds in northern Iraq. NY Times

23 things not to write in an e-mail message. NPR

It's becoming increasingly common for cyber criminals to drive by ordinary people's homes and hack into their computer's router to steal personal identify information. Here are some wireless security guidelines for setting up your WiFi from an FTC web site. OnGuard Online (FTC)

(Comments: For reader comments, questions and discussion, see the 17-Jun-10 News -- Fannie / Freddie delisted by NY Stock Exchange thread of the Generational Dynamics forum. Comments may be posted anonymously.) (17-Jun-2010) Permanent Link
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16-Jun-10 News -- Obama gives Oval Office speech on oil spill

Europe's financial crisis deepens

President Obama's gives an Oval Office speech on the oil spill

As I've said before, there's an overwhelming sense that Karmic revenge is being played on a man who promised "change you can believe in" and that he would heal the world, and that the same Karmic revenge is being wreaked on the American people for credulously electing him.

There is absolutely nothing that President Obama can do to end the Gulf oil spill disaster, but I'm really having a hard time understanding his Oval Office speech that I just heard. Here are a couple of sentences that struck me:

"The sadness and the anger they [the fishermen of Louisiana] feel is not just about the money they've lost. It's about a wrenching anxiety that their way of life may be lost.

I refuse to let that happen. Tomorrow, I will meet with the chairman of BP and inform him that he is to set aside whatever resourcces are requied to compensate the workers and business owners who have been harmed as a result of this company's recklessness, and this fund will not be controlled by BP. In order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent third party."

He refuses to let that happen?? This is a man who still believes that he can heal the world or do anything else merely by giving a speech or issuing a directive.

Everybody, Republicans and Democrats, seem to believe that the solution to this problem is to eviscerate BP.

I hear this, and I have the same feeling of nausea that I've felt so many times in the last few years. I felt it when I listened to politicians and experts say that there was no housing bubble, and that housing prices can't fall because "everybody has to live somewhere." I felt it 2007 when the airheads on CNBC were saying that the stock market would go up forever. I feel it now when the airheads on CNBC say that the stock market is going to go up forever, except that maybe we might have a tiny little double-dip recession.

So now, I hear everyone saying that all we have to do eviscerate BP, and everything will be OK. Well, I guess it's possible, but what I look at are trends, and what I see is a political process going completely out of control. This political process works by having nobody take responsibilty for anything, simply by saying that BP will pay for it. It's "One, Two, Three ... Infinity" all over again.

There is nothing about this that makes any rational sense, but that makes it typical of the insanity of today's world.

Kyrgyzstan violence tamps down, leaving hundreds of thousands of refugees

Kyrgyzstan <font size=-2>(Source: CIA Fact Book)</font>
Kyrgyzstan (Source: CIA Fact Book)

The UN refugee agency says that more than 250,000 refugees have fled their homes to escape the violence in Osh and Jalalabad, according to the BBC. 75,000 Uzbek refugees were allowed into Uzbekistan before the border was closed on Thursday.

Now much of the focus is on the women and children who are camped at the border to Uzbekistan, as the men have stayed behind to defend their homes. The refugees hope that the border will be reopened, but now it's being called a "humanitarian disaster," and the U.N. is rushing to provide food and other supplies to the refugees.

The cities of Osh and Jalalabad are smoldering, but the gunfire and violence have slowed for the time being.

There are three versions of how the Kyrgyzstan violence started, according to Ria Novosti:

The last explanation is apparently being adopted by the U.N., according to the Washington Times. U.N. High Commissioner for Human Rights Navi Pillay says that the fighting "appears to be orchestrated, targeted and well-planned."

The violence is taking place in the fertile Fergana Valley, one of the most important regions in Central Asia and the world. Josef Stalin is at the core of the carnage in Kyrgyzstan, according to a historical article in the UAE National. In the 1920s and 1930s, Kyrgyzstan, Uzbekistan and Tajikistan were established as Soviet republics, and divided by arbitrary borders in the Fergana Valley. These arbitrary boundaries, which ignored ethnic realities, have created the ethnic tensions and rivalries that are the basis of the current violence, according to the article.

Violence could begin again at any time, especially with hundreds of thousands of vulnerable women and children camped out with little food and water. If a humanitarian disaster can be averted, then the region may simmer down without a war.

Europe's financial crisis continues to deepen

Spain may be the next European country, following Greece, to face a financial crisis, largely stemming from its huge recent real estate bubble.

Spain is close to falling into a "debt trap," according to the NY Times. According to the article, Spain is being forced to borrow at higher and higher interest rates, a fate that befell Greece before it was bailed out. The high interest rates mean that many investors are simply staying away from Spanish bonds, forcing Spain to rely on its own banks for funding. But Spanish banks themselves are finding it difficult to borrow from other banks in other countries, so they have to turn to the European Central Bank (ECB) which, like the Fed, is a lender of last resorce. This creates a "vicious circle" of high interest rates leading to more borrowing, resulting in higher interest rates.

Ambrose Evans-Pritchard, writing in the Telegraph, says that Spain is being "pummeled." Interest rates on Spanish bonds are rising, and the prices of credit default swaps (CDSs) -- insurance policies that pay off if Spanish bonds default -- have been surging, as the did for Greece. This indicates that investors are betting that Spain WILL default, despite its protestations that it won't.

In fact, things are so bad that the article quotes the chairman of Spain's largest bank as admitting that "the majority of the Spanish companies and financial groups are shut out of the international capital markets," because investors no longer trust Spanish debt.

Another financial expert says that Madrid is powerless at this stage. "There is absolutely nothing the Spanish government can do to get their message through. They have lost all market credibility and nobody is listening to them any longer."

Meanwhile, as we reported yesterday, the bailout has not saved Greece, as Moody's has changed the rating on Greek bonds to junk status.

[[Correction: An article that I quoted as being from last week was actually from a year ago, so I've deleted the quotes from it.]] (Corrected on 16-Jun-2010)

I wrote a few days ago about world trends in "7-Jun-10 News -- Globally, May was a month of ominous events." I've heard a couple of financial pundits today say that the signs are that retail sales have started to fall sharply in the last couple of months, as the effects of the stimulus and bailout packages wear off.

As I've said many times, 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 to well below the Dow 4000 level 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

If North Korean president Kim Jong-il's successor turns out to be his son Kim Jong-un, it will be fine with the octogenarian politicians who run the government, since Kim Jong-un is only 27 years old, and will be easy for them to control. Asia Times

Jordan wants to become the next to develop a peaceful nuclear program, and has support from the United States, but King Abdullah blames Israel for taking "underhanded" actions to block the program. BBC

Hundreds of people have been killed in Mexico during the last five days due to drug cartel violence. Mexican President Felipe Calderón blames the United States, calling it "the biggest drug addict in the world." Washington Post

Germans are enjoying a round of Schadenfreude at the expense of Robert Green, the UK soccer team goalkeeper whose blunder permitted the U.S. team to achieve a tie in their World Cup game. Spiegel

A Russian rocket in Kazakhstan lifted off successfully early Wednesday, carrying two American astronauts and one Russian cosmonaut to the international space station. Associated Press

Humor: The 7 habits of highly ineffective people. Dan Ariely

(Comments: For reader comments, questions and discussion, see the 16-Jun-10 News -- Obama gives Oval Office speech on oil spill thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Jun-2010) Permanent Link
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15-Jun-10 News -- Uzbekistan closes border to refugees from Kyrgyzstan

The NY Times writes about the Singularity

Uzbekistan closes border to refugees from Kyrgyzstan

With 50,000-75,000 women and children crowding the border to Uzbekistan in the Fergana Valley, Al-Jazeera reports that Uzbekistan is closing the border, saying that it cannot receive any more people fleeing violence in Kyrgyzstan.

A statement by an Uzbek official states, "Today we will stop accepting refugees from the Kyrgyz side because we have no place to accommodate them and no capacity to cope with them."

Uzbek women and children have been fleeing their homes to escape roving gangs of Kyrgyz, who are killing and looting the Uzbeks, while the Uzbek men stay behind to defend their homes. If the Uzbek border is closed, then a humanitarian disaster could ensue. Thus, the United Nations refugee agency (UNHCR) announced that it would send aid and emergency teams to the region.

As we reported yesterday, the Russians have refused a request by the Kyrgyz government to send troops to quell the violence. On Monday, the Collective Security Treaty Organization (CSTO), a regional group of former Soviet republics led by Russia, recommended providing logistical help, according to the LA Times. However, no Russian troops will be provided at this time.

The Hindu reports that violence continues "unabated," but that " Kyrgyz and Uzbek elders in the region had finally reached an agreement to end violence."

Other news reports indicate that the violence is tapering off in Osh, but is growing in Jalalabad.

The situation is critical because a wider war would threaten the entire region, and could jeopardize the Nato war in Afghanistan.

Ethnic versus class differences

There's a piece of fluff nonsense in Monday's NY Times that's worth a comment. According to the article,

"[E]thnic distinctions between Uzbeks and Kyrgyz are so slight as to be hardly distinguishable, Mr. Cooley and others say. Both are predominantly Muslim and they speak a mutually comprehensible Turkic language.

The most notable distinction, the one that is most responsible for the animosities that led to the violence of the past few days, Central Asian experts say, is economic: the Kyrgyz are traditional nomads, while the Uzbeks are farmers.

That divide has translated today into a wide class distinction, as the Uzbeks have prospered and now own many of the business in southern Kyrgyzstan, which has engendered resentment."

Well, duh, this means that the Uzbeks are a market-dominant minority. It's true that class differences generate the hatreds that lead to wars, but the class differences are caused by ethnic differences.

I've seen this kind of "political correctness" many times. For newspapers like the NY Times, it's safer to talk about class and poverty, but if you want to understand what's really going on in the world, then you have to be willing to talk about ethnicity, religion, skin color, and other less politically correct subjects. Attitudes towards ethnic differences will not disappear just because the NY Times wishes them to do so.

The NY Times writes about the Singularity

In 2004, when I wrote "I, Robot is science fiction, but intelligent computers will soon be science fact," I was expecting that the movie "I, Robot" would stir some public discussion of the Singularity, which is the point in time, around 2030, when computers become more intelligent than human beings. But no such public discussion occurred.

However, the Sunday NY Times has an article on the Singularity, and it says that Google and "some of Silicon Valley’s smartest and wealthiest people have embraced the Singularity," and are investing heavily to be industry leaders. The article is a bit gee-whiz-ish in tone, but it's a mainstream media presentation of a number of important concepts that are important for the public to understand.

People discount the importance of intelligent computing and the Singularity because "artificial intelligence" (AI) has been an almost total failure for the 60 years of so of its existence. However, one part of artificial intelligence has succeeded: Brute force algorithms.

A good example of this is that AI researchers have devised a computer program that plays a perfect game of checkers. (See "Researchers solve the game of checkers (draughts).") What brilliant checkers algorithm did the computers use? None! What the researchers have done is let a super-fast computer prepare a database of all possible checkers games and the best move in each case. This database is created simply by trying all possible moves. Then, when an actual game is being played, the computer program simply looks up the best move in the database. That's an example of how "brute force" algorithms can work with certainty, once computers are fast and powerful enough.

The basic algorithms for intelligent computing (IC) have been defined. In fact, I developed an algorithmic architecture and posted it online five years ago, so I know exactly what's coming. (See Chapter 7 - The Singularity in the book Generational Dynamics for Historians.)

The IC learning algorithm that I designed involves creating "knowledge bits" (KBs) that can be combined like jigsaw puzzle pieces to form larger KBs. This algorithm will allow computers to become as intelligent and creative as human beings, and the only reason that these brute force algorithms don't work today is because computers aren't yet powerful enough. With Moore's Law, my own estimate (for the Singularity) is that computers will be powerful enough by 2030.

However, it won't take that long to start to get partial results. By the end of the current decade, computers with high intelligence but in limited domains will be available. These computers will be able to do jobs like fix a broken pipe or act as a 24 hour a day nursemaid.

The NY Times article indicates that there are many companies that are already beginning to understand this, and they are poised to do very well with this technology later in the decade.

Additional Links

The Gulf Cooperation Council had planned to introduce a single currency for the Arab states in 2010, but the plan has been put off until 2015 because they've been frightened off by all the troubles of the euro currency. Market Watch

There are 215 million child laborers in the world, of which 115 million are trapped in slavery, debt bondage, armed conflict, or the sex industry. According to the International Labor Organization (ILO), the goal to eliminate child labor is running out of steam and needs to be revitalized through education, social protection and employment for adults. VOA. As the gloomiest person in the world, it falls to me to point out that eliminating or even reducing child labor is impossible, as populations grow faster than the food supply.

Did global imbalances cause the financial crisis? This is an interesting analytical article on the global imbalances, including "declining US private savings, growing budget deficits, rising energy prices, Asia’s focus on tradables, and relative exchange rates," since 1996, and how they may or may not have caused the financial crisis. The article unfortunately concludes that the financial crisis is over, a conclusion which regular readers of this web site know is wrong. VoxEu

Droughts and mismanagement of water resources have reduced large swathes of Eastern Syria to a wasteland, forcing up to one million people to flee to the outskirts of Damascus and other cities. The U.N. World Food Program is now distributing food rations to 190,000 people in Eastern Syria, but another 110,000 can't be helped because of a lack of international funds. Reuters

The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium. It will take several years to develop them, but they will fundamentally alter the Afghan economy. NY Times

North and South Korea have presented their evidence to the U.N. Security Council, in the dispute over the sinking of the Southern warship Cheonan. It's unlikely that the UN will do anything. BBC

An Iranian ship claiming to be carrying humanitarian aid is headed for Gaza, with the goal of breaking the Israeli blockade of Gaza. In additional another Gaza-bound ship is expected to sail from Lebanon. Haaretz

German Chancellor Angela Merkel's governing coalition threatens to collapse amid infighting and resignations. NY Times

Saudi Arabia is denying the recent reports that it will permit Israel to fly over Saudi airspace to bomb Iran's nuclear facilities. Bloomberg

Moody's Investors Service has lowered Greece's credit rating four notches to junk status. AP

(Comments: For reader comments, questions and discussion, see the 15-Jun-10 News -- Uzbekistan closes border to refugees from Kyrgyzstan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (15-Jun-2010) Permanent Link
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14-Jun-10 News -- Kyrgyzstan civil war expands into genocide

Flemish separatists score big gains in Belgium election

Charges of genocide as Kyrgyzstan civil war expands

Kyrgyzstan <font size=-2>(Source: CIA Fact Book)</font>
Kyrgyzstan (Source: CIA Fact Book)

The ethnic civil war in Kyrgyzstan has spread from Osh to Jalalabad. The death toll estimate is now at 500, according to the London Independent. There are 1,000 injuries, and 75,000 refugees fleeing to the border with Uzbekistan.

According to the reports, marauding ethnic Kyrgyz gangs are burning ethnic Uzbeks out of their homes, and have embarked on a killing rampage. Human rights groups are calling the actions "genocide."

I note that most of the reporting seems to be from the Uzbek side. There will undoubtedly be Kyrgyz counterclaims, but they haven't surfaced yet.

As we've been reporting for the last three days, the U.S., Russia and China are all watching this situation nervously, because a wider civil war could destabilize the entire central Asian region.

The government, which took power through a coup in April (see "21-Apr-10 News -- Ethnic violence grows in Kyrgyzstan"), appears unable to control the situation. They've called up the civilian reserves, but they have yet to prove themselves.

The government has begged the Russians for help in quelling the violence. Russia has rejected the request for now, but has sent a batallion of paratroopers to protect Russia's Kant air base, according to Ria Novosti. The Kant base is near the capital, Bishtek, which is nowhere near the violence in Osh.

Former president Kurmanbek Bakiyev, who was defeated in the April coup, is now in exile in Minsk, Belarus. According to the London Times, the Kyrgyz in Osh and Jalalabad are a power base for Bakiyev, while the Uzbeks support the new (interim) president, Roza Otunbayeva. Otunbayeva is accusing Bakiyev of being behind the violence. Bakiyev has issued a statement calling the accusations "shameless lies," and warned that the Kyrgyzstan government is close to collapse.

Flemish separatists claim victory in Belgium election

Belgium <font size=-2>(Source: CIA Fact Book)</font>
Belgium (Source: CIA Fact Book)

Since Belgium was created in 1830, it's been two countries in one: 6 million Dutch speakers in the flat, northern lands of Flanders (the Flemish), and 4 million French speakers in the southern region of Wallonia (the Walloons).

In the elections on Sunday, the party to win 29% of the votes in Flanders, the most votes of any party, was N-VA, the New Flemish Alliance, which advocates that Flanders break away from Wallonia and become an independent member of the EU, according to the London Times. The second place winner, with 26% of the votes, is the Socialist Party, which opposes a breakup.

According to the article, many Flemish voters are increasingly frustrated at having to subsidize social security bills in the poorer, French-speaking south, where the collapse of traditional industry has led to much higher unemployment than in the north.

The situation is worsed by the fact that Belgium's debt-to-GDP ratio is set to exceed 100% this year or next, according to Bloomberg. Belgium is not one of the "PIIGS" nations, but its debt ratio is the third highest in Europe, behind Greece and Italy. According to an editorial comment in the Times article, "The unhappy marriage of the parsimonious Germanic north and spendthrift Latin south is often cited as a microcosm for the centrifugal forces undermining the EU’s own response to the financial crisis."

As we reported a couple of days ago, the Netherlands government is in chaos following a stunning election victory by right-wing parties. This is part of a general political alignment occurring in countries around the world, including the United States, as these countries go deeper into a generational Crisis era.

Additional Links

Tens of thousands of Germans on Saturday protested against Chancellor Angela Merkel's austerity package, which will cut thousands of federal government jobs, and will slash welfare and unemployment benefit expenditures. Reuters. A new poll finds that Germans expect Merkel's government to collapse before the next federal elections. Bloomberg.

Japan is another country in political chaos, following last week's resignation of Prime Minister Yukio Hatoyama, after he failed to deliver on his election promise of closing the American military base on Okinawa. Hatoyama's resignation is said to be a big relief to the Obama admnistration, who believe that there is no better location available for the base than Okinawa, despite the base's unpopularity there. World Press

A report by the London School of Economics accuses Pakistan's Inter-Services Intelligence (ISI) of funding and training Taliban militants in Afghanistan. The report also says that President Asif Ali Zardari visited with Taliban leaders earlier this year, a claim that a presidential spokeswoman dismissed as "absolutely spurious." Daily Times. From the point of view of Generational Dynamics, funding by the largely Sunni ISI of the Sunni Taliban sounds quite plausible, in order to counter influence by the Indians, but support from the Shia president Zardari does not sound plausible.

The 8 most common types of dreams, and what they mean. LemonDrop

(Comments: For reader comments, questions and discussion, see the 14-Jun-10 News -- Kyrgyzstan civil war expands into genocide thread of the Generational Dynamics forum. Comments may be posted anonymously.) (14-Jun-2010) Permanent Link
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13-Jun-10 News -- Kyrgyzstan gives 'shoot to kill' order to army

U.S. and U.K. tie in soccer at World Cup

Kyrgyzstan mobilizes the reserves after Russia rejects plea for help

The U.S., China and Russia are nervously watching whether the ethnic violence in Kyrgyzstan, that we reported on yesterday, will escalate or simmer down, for fear that wider regional war will be triggered.

However, Russia has refused to provide military help to quell the violence at this time, according to Ria Novosti. This leaves the weak Kyrgyz government on its own to deal with the potential civil war.

The Kyrgyz interim government passed a decree on Saturday declaring a partial mobilization of the civilian reservists and allowed police and the troops to shoot to kill in order to quench the riots and stop marauders, according to Ria Novosti. However, these measures may quell the violence, but they may also trigger greater violence.

Meanwhile, the Collective Security Treaty Organization (CSTO), consisting of Russia and former Soviet bloc members Kyrgyzstan, Armenia, Belarus, Kazakhstan, Uzbekistan and Tajikistan, will meet on Monday to discuss the possible deployment of a peacekeeping force.

However, I see that the CSTO spokesperson said the meeting is aimed to "make proposals on the collective measures over the settlement of the Kyrgyz riots". The CSTO members will also discuss how to prevent the possible inter-ethnic conflicts in future, restore the order and provide the security in the country. That sounds to me like a committee that's going to accomplish nothing, but we'll see.

Reporting from the border between Uzbekistan and Kyrgyzstan in the Fergana Valley, Al-Jazeera says that the situation is worsening, with ethnic Uzbek neighborhoods on fire, with bodies scattered inside the burned buildings. At least 77 people have been killed, with over 1000 injuries.

Here's an al-Jazeera video describing the plight of Uzbek women and children fleeing to the Uzbek borders, as the men stay behind to defend their homes:

Additional Links

Most American's don't know it, but the biggest sporting event in the world is taking place during the next four weeks: The World Cup soccer championships, being held in South Africa. On Saturday, to the astonishment of all, the U.S. team managed to tie with U.K. team -- but only after a truly spectacular misplay by the goalie of U.K.'s team. NY Times

Saturday was the first anniversary of last year's disputed presidential election. Riots and demonstrations broke out throughout Tehran and other Iranian cities. However only hundreds of protestors turned out, rather than the tens of thousands last year. LA Times

With Greece close to bankruptcy, and a pariah to many investors, the Chinese are planning to invest millions or billions of euros in Greece's economy, so that Greece can serve as a gateway for Chinese products to be sold in Europe. Washington Post

Deutsche Bank made huge amounts of money by purchasing subprime mortgages during the height of the real estate bubble, but now is experiencing a public relations disaster because it's now foreclosing on many homes. Spiegel

Spanish Prime Minister Jose Luis Rodriguez Zapatero, is also the current president of the European Union. At an EU meeting on Monday, Zapatero will advocate a "strong, joint" EU position saying that Israel's blockade of Gaza is "unacceptable and counterproductive." AFP

I've stated several times how surprised I was at the rapidity with which Turkey-Israeli relations deteriorated after a period of a few days. Turkey has frequently felt humiliated by the west, through rejection as an EU member and through accusations of genocide of the Armenians during WW I. U.S. Defense Secretary Robert Gates is also expressing concern, blaming it on the EU: "I personally think that if there is anything to the notion that Turkey is, if you will, moving eastward, it is, in my view, in no small part because it was pushed, and pushed by some in Europe refusing to give Turkey the kind of organic link to the West that Turkey sought." Reuters

Prime Minister Recep Tayyip Erdogan apparently upped the stakes with Israel by demanding the "Israel must apologize and compensate." Erdogan is becoming increasing popular among Arabs, helping Turkey regain its status as when it was head of the Ottoman Empire. Jerusalem Post

After the recent clash between Israeli forces and the "Freedom Flotilla" over the Gaza blockade, in a surprise move, Egypt opened up the Rafah border crossing between Gaza and Egypt. However, on Saturday, hundreds of pro-Palestinian activists from Cairo were blocked from entering Gaza. AFP

Japan's government is trying to attract young men to invest in Japanese bonds by running magazine ads that claim that young Japanese women are more attracted to men who invest in Japanese government bonds. Bloomberg

(Comments: For reader comments, questions and discussion, see the 13-Jun-10 News -- Kyrgyzstan gives 'shoot to kill' order to army thread of the Generational Dynamics forum. Comments may be posted anonymously.) (13-Jun-2010) Permanent Link
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12-Jun-10 News -- Ethnic civil war spreads in Kyrgyzstan

Heavy security in Tehran, Iran, stifles anniversary demonstrations

Fortunately, no news occurred during last week's hiatus (joking!), and regular coverage is now resuming.

Kyrgyzstan asks Russia for help in civil war in Uzbekistan border

Kyrgyzstan <font size=-2>(Source: CIA Fact Book)</font>
Kyrgyzstan (Source: CIA Fact Book)

At least 50 people have been killed, and hundreds injured, as ethnic Kyrgyz have been attacking ethnic Uzbeks, Russians and Tatars, according to Ria Novosti. The violence is centered in the city of Osh on the border with Uzbekistan in the volatile Fergana Valley.

Thousands of Uzbek refugees, mostly women and children, are massing on the border with Uzbekistan, trying to escape into Uzbekistan. However, the Uzbek border guards have been allowing few to pass through.

Kyrgyzstan is strategically important to many countries. Russia has a military base there. The United States also has a military base there, and this base is vital to provide supplies to the Nato forces in Afghanistan. Kyrgyzstan is on China's border, but China has remained uninvolved.

The Kyrgyz government has asked for military support from Russia, to control a potentially growing civil war, but the BBC World Service is reporting that Russia does not want to get involved in the Kyrgyz ethnic war. This is not surprising, considering Russia's bad experience in Afghanistan in the 1980s.

Iran's opposition leaders cancel rally planned for Saturday

It was on June 12 of last year that Mahmoud Ahmadinejad was re-elected president of Iran in an election that many claim was stolen.

New opposition rallies were planned for today (Saturday), but opposition leaders Mir Hossein Mousavi and Mahdi Karroubi called off the rallies rather than risk violence. However, there are reports that some demonstrations are being held independently.

Juan Cole, an analyst on Iranian affairs, is quoted by AP as saying, "A year later, it's clear that the hard-liners have won decisively through massive repression, deploying basij armed with clubs on motorcycles to curb crowds, jailing thousands of protesters, and torturing and executing some of them."

However, Iran is in a generational Awakening era, and a point in the generation timeline similar to America's Summer of Love in 1967 and surges in political violence in 1968. Riots and demonstrations continued intermittently for years, climaxing with the resignation of President Richard Nixon in 1974, and a similar scenario is expected in Iran.

Additional links

Saudi Arabia, in cooperation with the U.S. State Department, has informed Israel that Israeli bombers planning to bomb Iran's nuclear installations will pass unmolested over Saudi skies. London Times

Iran, with Turkey's support, is preparing to send its own "aid boats" to challenge the Israeli blockade of Gaza. London Times

On May 24, China's Rear Adm. Guan Youfei of the People's Liberation Army rose to deliver a hateful three minute rant against the United States, particularly claiming that U.S. arms sales to Taiwan prove that the U.S. views China as a enemy. Interviews indicate that Guan's view are actually mainstream views within the Chinese Communist Party. My guess is that this is a younger generation view, in contrast to the more concilatory views of the octogenarians in top government positions. Washington Post

China made a formal complaint to North Korea regarding the killing of three Chinese people near the common border between the two countries. The complaint is viewed as ironic because China has refused to blame North Korea for the killing of 46 in the sinking of the South Korean warship Cheonan. BBC

Burma (Myanmar) is denying reports that it is developing a nuclear weapons program with help from North Korea. BBC. However, officials in India are nervous about facing the imminent prospect of one more nuclear power on its border. Hindu Business Line

The government of the Netherlands is in chaos this week, after right-wing parties VVD and Geert Wilders' PVV won stunning victories, while the Christian democratic CDA party and Labour party suffered major defeats. This shift represents a major political realignment, brought about by the need for economic austerity, and the emergence of VVD's Mark Rutte as the new Dutch leader. NRC Handelsblad

(Comments: For reader comments, questions and discussion, see the 12-Jun-10 News -- Ethnic civil war spreads in Kyrgyzstan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (12-Jun-2010) Permanent Link
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Week of June 7 - Hiatus

Until then, a special thread for comments and postings

For the rest of this week, my job (the one that actually pays a salary, as opposed to this one) will be taking up all my time, and I'll be unable to write daily reports.

I've set up a comment thread in the forum to which anyone can post comments. If time permits during the week, then I'll post there as well.

Web site readers are encouraged to post their own brief news reports on breaking events, if they think that other readers of this web site will find them interesting.

I expect to be posting regularly again at the end of the week. Until then, here's a bumper crop of additional links, following today's entertainment video, a reprise of the mind-blowing production number "June is bustin' out all over" from the Rodgers and Hammerstein musical Carousel:

Additional links

With the first anniversary approaching of last year's June 12 elections, Iran's government has stopped the street protests for now, but replacing them is a flood of protest and resistance music that can be heard throughout Tehran. NY Times

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, says that joint operations by American and Iraq forces have left al-Qaeda in Iraq "devastated." Associated Press

Yemen has become the base for Al-Qaeda on Arabian Peninsula (AQAP), and it's now the world's leader for training camps for terrorists intent on carrying out attacks on Western targets. US and Yemeni forces are cooperating to a significant extent to disrupt and destroy AQAP in Yemen. London Times

The euro will be dead in five years, according to a survey of top economists, some of whom believe that it will be dead within a few weeks. Telegraph

Gross U.S. public debt is now 88% of GDP. Soon it will reach 90% which, according to economists Carmen Reinhart and Kenneth Rogoff, is the point at which a country's economy is affected by a vicious circle. NY Times

Many computer printers print almost invisible yellow dots in your documents so that the police can identify whether a document came from a particular printer. This is a list of printers that do or do not display tracking dots. Electronic Frontier Foundation

The Obama administration is beginning an elaborate campaign to sell the public on the health care bill. NY Times. But Democratic candidates are going to avoid public meetings this summer, to avoid the voter rage they ran into from Tea Party supporters last year. NY Times

The Chinese are unhappy with America's strong support for South Korea in the Cheonan warship sinking incident. The flash point between America and China is expected to be Burma (Myanmar), which recently was accused of developing nuclear weapons with North Korean help. Asia Times

North Korea's Kim Jong-il had a major government shakeup this weekend, apparently in preparation for naming his son Kim Jong-un as his successor. London Times

However, a key ally of Kim Jong-il was mysteriously killed in a traffic accident last Wednesday, indicating that the succession infighting may already have started. Telegraph

German authorities are already concerned about a renaissance of left-wing violence in the country, and now are particularly concerned about a terrorist cookbook in wide circulation among left-wing militant groups. It explains how to outfox the police, saw down power poles, stop trains, and make bombs. Spiegel

Gays are furious at Elton John for playing a gig at Rush Limbaugh's wedding to Kathryn Rogers this past weekend. Pop Eater

Psychologists have determined that Darth Vader suffered from borderline personality disorder. Fox news

Senators miss a simpler time when they could do abominable things in peace. The Onion

(Comments: For reader comments, questions and discussion, see the Week of June 7 - Hiatus thread of the Generational Dynamics forum. Comments may be posted anonymously.) (8-Jun-2010) Permanent Link
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7-Jun-10 News -- Globally, May was a month of ominous events

More on Generational Dynamics predictions

Home sales in May apparently fell sharply as home buyer tax credit ended

When surging April new home sales were announced three weeks ago, they were hailed as evidence that the worst was over for the economy. Sales of single-family homes rose 14.8% in April, compared with March, and up a giant 47.8%, compared to April of last year, according to the Washington Post

The news stories pointed out that the surge in sales was undoubtedly a result of the imminent expiration of the federal government's home buyer tax credit. A credit of up to $8,000 was available to home buyers who entered into a contract by April 30.

The news stories said that the figures for May would undoubtedly be lower than for April, but they hoped that they wouldn't be much lower, and they expected the fall to have little effect on the economy. The article quotes one economist as saying, "Overall, this surge in sales may give the economy a short-term boost, not least as households furnish their new homes. But it will be only a matter of months before a double-dip in the housing market starts to act as a modest drag on economic activity."

So we'll have only a "modest drag" on the economy in a few months, according to this economist, expressing the usual Pollyannaish view of such things.

Preliminary figures for May are now available, and they're much worse than expected, according to an analysis by the Wall Street Journal:

"The withdrawal of federal tax credits for home buyers led to a steeper-than-expected plunge in May home sales in much of the U.S., as the housing market struggles to wean itself from government support.

Economists and real estate analysts expected home sales to slow after the tax credit, of as much as $8,000, expired at the end of April. But early data from real estate brokers indicate that the sales decline has been far more substantial than expected, with some markets showing declines of 25% to 30%.

"Anybody who wanted to buy a house probably did" before the tax credit deadline, said Jay Brinkmann, chief economist of the Mortgage Bankers Association, a trade group.

Housing analysts say that the May slump is ominous but that it's too early to tell whether it portends another serious downward lurch in a market that has generally been leveling off over the past year. ...

Despite the recent drop in mortgage rates to less than 5%, applications for home-purchase mortgages in late May were down nearly 40% from a month before and have fallen to their lowest level in 13 years, according to the mortgage bankers. Though interest rates are low, many potential buyers still can't get credit because lending standards have tightened."

Meanwhile the rate of foreclosures has not leveled off, but continues to grow. As I wrote in December in "'Shadow inventory' of unsold homes continues to grow," the growing shadow inventory must one day trigger a panic that will substantially lower housing prices.

A detailed analysis by Bloomberg of the Manhattan market shows just how dangerous the situation is. According to the article, there are 8,700 new condos sitting empty in Manhattan, with 75% not even listed for sale yet. Those are staggering figures. The article says that the developers who built these condos are expected to run out of money in the second half of 2010 and early 2011, which means that unless they can start selling them pretty quickly, there are soon going to be a lot of bankruptcies and fire sales.

One way to gauge the strength of a real estate market is to look at the ratio of rental prices to purchase prices. In Manhattan, a buyer often has the choice of buying an apartment or renting a similar apartment.

In the years 1991-97, before the international real estate bubble took off, the ratio was 8.1, meaning that the purchase price was about equal to 8.1 times the annual rental price.

However, things changed in 1998, when the real estate bubble began to gain leverage, and purchase prices went into bubble levels. Today, the multiple has gone up to 19 -- meaning that the purchase prices being asked today are 19 times the annual rental price.

This would indicate that Manhattan condos are still overpriced by a factor of about 2.5, which means that the prices can be expected to fall to levels 60% lower than they are today.

This appears to be a shocking figure, but frankly, with 8,700 NEW condos sitting empty in Manhattan today, and any additional shadow inventory from foreclosures of EXISTING homes and condos, it really would not be surprising.

Different cities and states have different housing characteristics, and so the 60% figure may be unique to Manhattan. In other regions the losses may be smaller, but as I've said before, my own estimates are that housing prices have already fallen to where they were in the early 2000s decade, and they can be expected to fall further to the 1990 levels.

Even as bad news as this is, none of it takes account of the fact that the huge Boomer generation is retiring. A December, 2008, research paper entitled Aging Baby Boomers and the Generational Housing Bubble: Foresight and Mitigation of an Epic Transition the collapse of the "small short-term housing bubble" that we've been seeing will be made worse by the collapse of the "generational housing bubble," as elderly people in the huge Boomer class sell their homes.

A month of ominous events

It's hard to get past the feeling that something major has changed in the last month.

From the point of view of Generational Dynamics, it's possible that all these events are related through generational attitudes.

As we go deeper and deeper into a generational Crisis era, and more and more nihilistic Generation-Xers are in charge, led by incompetent Boomers, people in general become angrier and angrier, less willing to compromise, more willing to argue and confront and defraud.

The relationship between the financial stories is most obvious. The world is in a deflationary spiral, meaning that there's less money in the world every day and there's less money for individual people. As people become poorer, they becoming angrier and more desperate. They tend to blame other people, as in the situation in the Koreas and the Mideast. This is how a generational crisis war gets launched.

But it has a "feel" of being more than that. I mentioned last week that I was surprised by how quickly, within a matter of a few days, relations between Israel and Turkey seemed to collapse. But now that I think about it, all of the events listed above have shown extremely rapid deterioration, all in the supposedly lusty month of May.

Recall that after the Lehman Brothers bank collapse in September, 2008, world trade and transportation almost came to a complete standstill. It began to recover in 2009, thanks to massive stimulus and bailout packages in America, Europe and China.

The effects of those stimulus and bailout programs are now running out, and the generational effects are re-asserting themselves again.

In fact, it's even possible that some sort of major generational change in attitudes has occurred around the world. These new changes may be taking the form of a more assertive, much more confrontational world all around. The next few months should reveal more.

From the point of view of Generational Dynamics, all of the above events are consistent with predicted trends, as we head for a major financial crisis and the Clash of Civilizations world war.

A catastrophe of 'biblical proportions'

It's really sinking in what an enormous catastrophe the Gulf of Mexico oil spill is.

Here's an excerpt from an opinion piece by self-defined progressive Rob Kall:

"By August, if the estimates of gusher flow are correct, at 50,000 to 120,000 barrels a day, the damage to the gulf and beyond, caused by the oil and by the-- by then millions of gallons of toxic dispersant-- will still be just starting. There's some speculation that even rain from gulf waters could make America's farm fields toxic. And, there's speculation that oil slicks will decrease evaporation and dramatically decrease rain, creating a drought. BY August, who know how far up the east coast the red crude-- sea of blood of biblical proportions-- will extend-- perhaps even, via the gulf stream, to the United Kingdom."

I'm going to assume, perhaps Pollyannaishly, that Kall's scenario is over the top, and it won't be that bad.

He refers to a "sea of blood of biblical proportions.' And indeed, it's such a huge disaster, that it actually seems like something out of the Old Testament. I'm not a religious person, but if I were, then I'd be wondering how the people of the U.S. had sinned so much that God had decided to inflict this disaster on the country. If I were a religious person, and given my view of what's happened in the past couple of years, I would probably wonder if God was punishing America for praying to a false god -- someone who claimed that Katrina wouldn't have been so bad if he had been President, and someone who then claimed that he would heal the earth when he became President. This would truly be Old Testament revenge against someone who is now reduced to helplessness, with nothing to do except complain about how BP shouldn't pay too much in dividends, as if that had anything to do with the catastrophe.

From the point of view of Generational Dynamics, disasters like the oil spill or the 1930s dust bowl occur at various times. Whether they're inconveniences or utter disasters depends on how people react, and that depends on the generational era.

Would the oil spill still be a catastrophe during an Awakening era, such as America in the 1960s and 1970s?

Well, there would be a much better quality of leadership, among Presidents (Kennedy, Johnson, Nixon, Ford, Carter) who had survived much worse horrors in World War II. There would have been a hell of a lot less political bickering, and a much more unified desire to solve the problem. Also, there would be a hell of a lot more money available, to send to the people of Florida and Louisiana to help them get their lives together, including starting new businesses to replace their lost fishing-related businesses, money that's not available now in a Crisis era financial crisis. When you're a survivor of a genocidal crisis war, with tens of millions of deaths and mass starvation, disease and slaughter, then later catastrophes seem smaller by comparison, and problems are seemingly easier to solve.

More on Generational Dynamics predictions

Last week, I posted an article titled "The rise of left-wing violence around the world." This led to a discussion in the comments section of the forum for this article, in which I was accused of bias, and it turned into something of a flame war. However, it appears to have ended well.

The discussion gave me an opportunity to repeat some things I haven't said in a while, and they're worth repeating here.

When I say that I'm not here to promote a personal ideology, I really mean it.

The predictions and analyses that I post are mathematically derived from the Generational Dynamics theory and methodology that I've developed. I've posted many things that I find hard to believe, or that are counter-intuitive, or that seem completely wrong, or that I hate, or that keep me awake at night, but I post them anyway.

My educational background is as an undergraduate and grad student at MIT, studying mathematics, specializing in Mathematical Logic. I spent six years studying mathematical logic, and I passed the course and exam requirements for a Ph.D., but didn't complete my thesis. Thus, I sometimes claim to have an "all but thesis" degree for a Ph.D. in Mathematical Logic at MIT.

I mention this now, because it's relevant to the point I want to make. Generational Dynamics is essentially a mathematical model for how the world works. The predictions and analyses that I post are derived from that model. Based on my education, I am perfectly capable and qualified to separate out mathematical conclusions from my own hopes, desires, dreams, wishes, and beliefs. It's like saying that 2+2=4, irrespective of your ideology.

I know that a lot of people don't believe this, but the "List of major Generational Dynamics predictions" is nothing short of breathtaking, a breakthrough of major historical proportions. Speaking as a mathematician and historian, before I became aware of generational theory, I would not have believed that such a list was possible. Today I know that there's no web site in the world with the predictive success of this web site, because I know, as a mathematical conclusion, that no world model could be more accurate than the Generational Dynamics model.

One of the issues that people have raised has to do with the time frames for predictions to come true.

So it's worth pointing out that there are some "negative predictions" -- predictions that something won't happen -- that are less susceptible to this problem. In fact, it's the negative predictions that have really convinced me personally that this stuff was working.

The predictions for the Awakening era countries -- Lebanon, Iraq, Iran and Thailand -- have been negative predictions, usually predicting that there won't be a civil war, or that once started, a civil war will fizzle quickly. Particularly in Lebanon and Iraq, and to a lesser extent in Thailand, the world's analysts and journalists were absolutely certain that there would be a full scale civil war, and there wasn't. These negative predictions turned out to be very convincing.

The case of Sri Lanka was both positive and negative predictions. It was clear that the Sri Lanka civil war was climaxing, and I was able to predict that it was coming to an end with an explosive climax. But I was also able to predict that there would NOT be further violence after the climax, just as there was no further violence after the fall of Berlin. Everyone else in the world was predicting that the 30-year long civil war would continue for many years, but indeed all violence stopped after the Tamil Tigers were defeated. I was actually very nervous about making the "no further violence" prediction, and I've always felt that the sudden and immediate end of violence was almost an "eerie silence." But there it is.

That leaves the "big ones," the predictions of major financial crisis and world war, and related predictions. What I'm afraid of is that all of these will come true almost simultaneously through a domino effect. When that happens, I guess that it will really prove that Generational Dynamics predictions are valid, but I don't know how many of us, including me, will be around long to see it.

Over the years, many people have assured me that I'm completely wrong. I tell those people to be careful, because they're not disagreeing with me. They're disagreeing with a mathematical model that has proven correct over and over again for many years now. Occasionally when someone tells me that I'm completely wrong, I give a very simple answer, that I'll repeat now:

I hope you're right.

Additional links

On Sunday in Normandy, France, veterans and politicians commemorated the 66th anniversary of the D-Day landings. Some 215,000 Allied soldiers, and roughly as many Germans, were killed or wounded. Associated Press

This year's World Cup soccer championships will be held in South Africa starting Friday, but it appears that Africa itself will suffer a major humiliation, in that no African nation is expected to come even close to winning. They have the talent, but corruption by their government officials ruins their chances. For example, when an African team does well and wins large bonus payments, government officials pocket the money, and the players don't see a cent. NY Times

The loony left in South Korea are making up fantastic tales to explain how North Korea didn't sink the warship Cheonan, some even accusing the South Korea government of causing the explosion to gain an election advantage. Asia Times

Belgium is really two countries in one: 6 million Dutch speakers in the flat, northern lands of Flanders (the Flemish), and 4 million French speakers in the southern region of Wallonia (the Walloons). The relationship has always been difficult, but polls show a sharp change in attitude among the Flemish, who are now seeking independence. Global Post

(Comments: For reader comments, questions and discussion, see the 7-Jun-10 News -- Globally, May was a month of ominous events thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Jun-2010) Permanent Link
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6-Jun-10 News -- Anger at Israel grows over Gaza blockade

Egypt to strip citizenship from men married to Israeli women

Turkey threatens to cut diplomatic relations with Israel

Diplomatic relations between Israel and Turkey continue to plummet sharply, as forensic evidence from last week's confrontation emerges.

Turkey is claiming that Israel could not have fired solely in self-defense in last week's military confrontation with the "Freedom Flotilla" that was blocked by the IDF (Israeli Defense Forces) from reaching a harbor in Gaza.

Autopsies on the nine Turkish men who were killed on the boat Mavi Marmara during the confrontation indicated that most of them were shot several times, usually to the head at close range, according to the Guardian. The autopsies were conducted by the vice-chairman of the Turkish council of forensic medicine.

Pro-Palestinian activists on the ship are disputing Israel's story altogther, claiming that IDF commandos opened fire first and had a "shoot to kill policy."

The Israeli are insisting that they had were caught by surprise when the activists attacked the soldiers with knives and steel rods, and that they only fired in self-defense. They point out that someone firing quickly in self-defense may well shoot the same person more than once.

However, public anger against Israel is growing substantially, as large crowds in the capital, Ankara, protested at the Israeli embassy.

Turkey's ambassador to the U.S., Namik Tan, says that high emotions and massive protests and Turkey, Turkey may be forced to cut all ties with Israel. Washington Post

However, an unnamed top official in Israel's foreign ministry is quoted by Haaretz as saying that Israel will not apologize and that "the Turkish demand for an official apology was mainly an excuse to allow Turkish Prime Minister Recep Tayyip Erdogan's to cut diplomatic ties with Israel."

A personal attack of this kind on a foreign leader of a country is infuriating to the citizens of that country, and raises tensions enormously. There is certainly now a decent probability that Turkey will cut diplomatic relations with Israel within the next week or two.

Israel diverts Rachel Corrie humanitarian aid boat

The new 'humanitarian aid' boat, the Rachel Corrie, tried to reach a Gaza port on Saturday, as we reported yesterday.

As the boat neared Gaza waters, the Israeli navy intercepted the boat, and forcibly diverted it to the Israeli port of Ashdod. Both sides exhibited restraint, and there was no violence. Israel said that it would unload the aid and transfer it to Gaza, according to the Guardian.

Egypt to strip citizenship from men married to Israeli women

An Egyptian court has ruled that the country's Interior Ministry must stript the citizenship from men married to Israeli women. The children will also lose their citizenship. The court decision cannot be appealed, according to the Associated Press.

Tens of thousands of Egyptian men are married to Israeli women. In many cases, the couples met when Egyptian men started visiting Israel to work after the 1979 peace treaty.

However, the court ruling is based on a 1976 law that revokes citizenship of Egyptians who married Israelis who have served in the army or embrace Zionism as an ideology.

What's bizarre about the ruling is that it specifically targets Israeli women, including Arab Israelis, irrespective of religion (Jewish, Christian or Muslim). Furthermore, the ruling does not target non-Israeli Jews.

The ruling is related to Egypt's national security, according to Al-Jazeera. The lawyer who brought the original case to court celebrated the decision and said he wanted to prevent the creation of a generation who are "disloyal to Egypt and the Arab world". He said that the children of such marriages "should not be allowed to perform their military service."

The deteriorating situation in the Middle East

If the intention of the "Freedom Flotilla" organizers was to thoroughly raise Mideast tensions and substantially increase the chance of war in the near future, then they succeeded.

However, the events of the past week are not the CAUSE of the deteriorating relations, though they may be the TRIGGER.

The anger at Israel among Turks and Egyptians has been increasing for years, especially since last year's war between Israelis and Hamas in Gaza. Thus, if this event hadn't occurred, then something else would have triggered the same answer.

From the point of view of Generational Dynamics, the Mideast is headed for a major war, re-fighting the genocidal war between Jews and Arabs that followed the partitioning of Palestine and the creation of the state of Israel in 1948.

What's interesting about the situation in Turkey is that the Turks may be moving to reclaim the role that Attaturk gave up in 1924, when he decalred that Turkey would be a secular state. For several years, Turkey has been moving away from secularism and moving towards becoming a Muslim religious state. Furthermore, Turkey is making a point of championing the Palestinians, according to the CS Monitor.

It may be that Turkey is moving, intentionally or not, towards restoring the Caliphate in Istanbul, becoming the religious leader of all the Muslims on the Arabian peninsula. This is a rapidly developing situation, so we may have answer soon.

Additional Links

President Lee Myung-bak said that "There is absolutely no possibility of a full-scale war on the Korean peninsula." This is a severe case of denial. Associated Press

In an implied criticism of China, U.S. Secretary of Defense Robert Gates challenged China to deal realistically with North Korea, and to develop more durable military ties with the U.S. Associated Press

(Comments: For reader comments, questions and discussion, see the 6-Jun-10 News -- Anger at Israel grows over Gaza blockade thread of the Generational Dynamics forum. Comments may be posted anonymously.) (6-Jun-2010) Permanent Link
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5-Jun-10 News -- Markets fall on jobs and Hungary news

A new humanitarian aid ship is approaching Gaza

Hungary's economy close to default, according to government official

The financial world was shocked to hear on Friday from a spokesman for the Prime Minister: "It’s clear that the economy is in a very grave situation. I don’t think it’s an exaggeration at all [to talk about a default]."

According to Bloomberg, the comments raised concern throughout Europe.

However, another Hungarian official, from the opposition party, said later that Hungary is "in no way near default," and that the previous statement was "part of short-term political tactics."

Jobs report frightens investors, causing markets to fall

Every month for years, financial pundits on CNBC and in the Wall Street Journal have been talking about an imminent recovery and a surge in new job creation. Those hopes have been growing in the last few months, as job creating appeared to be slowly trending upward.

Thus, the pundits were expecting to see that an explosion upward occurred in the figures for May, and that at least 100,000 to 150,000 new jobs had been created.

The jobs report, announced on Friday morning at 8:30 am ET, said that 431,000 jobs were created in May, and that seemed like a very spectacular figure.

However, it next turned out that of those 431,000 jobs, all but 43,000 were temporary workers hired to collect census information, and that those jobs would disappear very soon. And the 43,000 figure was much lower than analysts had predicted.

This news, combined with the worries about Hungary, caused markets in Europe and America to fall over 3% on Friday, according to Associated Press.

This plunge is consistent with trends predicted by Generational Dynamics.

As I've said many times, 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.")

A new 'humanitarian aid' ship, the Rachel Corrie, approaches Gaza

It's now generally agreed by observers that Israel fell into a well-laid trap earlier this week when it entered a violent confrontation with the "Freedom Flotilla," and met with so-called "peace activists" who were fully prepared to die as martyrs in order to collect their 72 virgins.

It even turns out that Hamas doesn't even want the humanitarian aid that was offered, according to Der Spiegel, which says that humanitarian aid is always a "political game" in Gaza. When humanitarian aid comes in, the Hamas elite take the goods and keep it for themselves. Other humanitarian aid is rejected completely because the donations are "bad for business," competing with goods that other Palestinians are trying to sell.

Now another humanitarian aid ship is headed for Gaza, and is expected to try to break the naval blockade sometime this weekend. The ship is the "Rachel Corrie," named after another peace activist. In 2003, Corrie stood in front of an Israeli bulldozer to prevent it from demolishing a Palestinian home, but unfortunately, she didn't bother to make sure that the bulldozer driver could see her, and so she got killed.

According to the LA Times, the Rachel Corrie is carrying 21 people and 1,200 tons of aid, hopefully aid that Hamas is willing to accept.

Israel has said that they will stop the ship from reaching Gaza, and that it will be diverted to the Israeli port of Ashdod.

Both the Israeli side and the pro-Palestinian activist side have learned their lessons from what happened last week, and hopefully will avoid violence this time.

However, there are more aid flotillas coming, and there is a great deal of international pressure on Israel to end the naval blockade of Gaza. It will be interesting to see how this situation develops over the summer.

Additional links

Burma (Myanmar) is attempting to develop nuclear weapons and long-range missiles, according to information provided by a Myanmar army defector. Myanmar News

Russian Prime Minister Vladimir Putin is proposing legislation that would allow Russia's intelligence service for 15 days, without having to get permission of the courts (or anyone else). Spiegel

(Comments: For reader comments, questions and discussion, see the 5-Jun-10 News -- Markets fall on jobs and Hungary news thread of the Generational Dynamics forum. Comments may be posted anonymously.) (5-Jun-2010) Permanent Link
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4-Jun-10 News -- North Korea: 'War may break out at any moment'

Europe's sovereign debt crisis is as bad as ever

Tensions continue to grow between North and South Korea

A dangerous situation continues to develop on the Korean peninsula, two weeks after South Korea's May 20 report blaming North Korea for the torpedo that sank the warship Cheonan on March 26, killing 46 people.

South Korea's president Lee Myung-bak originally promised retaliation for the attack, but Lee was forced to back off some of his plans, for fear of triggering a wider war. And on Wednesday, Lee's party suffered substantial losses in regional elections, apparently rebuffing him for his initial firm response to North Korea.

On Thursday, Ri Jang-Gon, a North Korean diplomat speaking in Geneva said: "The present situation of the Korean peninsula is so grave that a war may break out at any moment." According to AFP, he blamed the "grave situation" on South Korea and the United States.

Ri warned that the North Korean people were "ready to promptly react to ... various forms of tough measures including an all out war."

Indeed, in the last couple of weeks, we've reported several ways that North and South Korea could go to war fairly quickly, on either the Yellow Sea or the DMZ (demilitarized zone) separating the countries. Either country may make a misstep or miscalculation and the other may then respond militarily, as both countries have now adopted "shoot first and talk later" policies.

An increasingly tense point of contention is the industrial complex in Kaesong, just across the border to North Korea. This was a joint project by the two Koreas to develop closer relations. The businesses are owned by South Koreans, and there are about 1,000 South Korean employees working there, in addition to 40,000 North Korean employees.

Both North and South Korea have threatened to close Kaesong, but so far, neither side has done so. According to Bloomberg, the reason is that both sides have so much to lose monetarily. The South Koreans fear that they'll lose their investments in Kaesong, and the North Koreans fear that they'll lose the salaries that the South Koreans pay for the North Korean workers. (The workers don't actually get the money; it goes into Pyongyang's coffers.)

Still, workers from both sides are increasingly nervous about the situation. No one talks about the Cheonan incident, according to the article, and business has been slowing down for fear that a sudden shutdown will cause loss of investments. There's also the implied threat that the North Koreans may take the South Korean workers hostage.

It's widely believed that time is not on the side of peace, according to an opinion peace in the Korea Times.

"If we make it through the coming weeks without any fighting, we are faced with another challenge. North Korea is a poor country and its government maintains control through extreme force. Kim Jong-il may face problems when poverty further represses his people, and when budget cuts begin hitting the government harder and harder.

An irrational government is a very dangerous thing. At the end of the Cold War, the United States was paying the bills for its enemy. It was better to have a stable enemy than an unstable one. The same is absolutely true now. It's why we worry about Kim's health and the debate over his heir. When vying factors in a government fight for control, chaos frequently ensues. It could be devastating for the region if Kim lost control of his government.

Yet this is inevitable. When he dies, or tries to hand over control, we will know even less about an already mysterious government. We will see potential leaders attempt to demonstrate their strength, and try to test the limits of their newfound power. There may well be hardliners in the government who seek to demonstrate North Korea's military might."

More on the generational divide in South Korea

I actually had three different web site readers ask me essentially the same question about my article yesterday on the South Korean election:

#1: "Reading today's article about Korea, are you not surprised to see 1950's veterans being more belligerent than the younger generation? Surely, Generational Theory should forecast the opposite?"

#2: "What is it with the youngsters in South Korea wanting peace while the old timers want war (June 3)? I thought the elderly, remembering the war, would want peace and the ones born since the war would want confrontation. What am I not understanding?"

#3: "What are the implications here for generational dynamics? If the last crisis war was WWII (or, perhaps more accurately, the Korean War), then, under generational dynamics, that generation should be driven away from war. The current young generation should be driven toward war. However, these polls and election results seem to indicate the exact opposite."

Those are astute questions. I'm glad that everyone has been paying attention.

In 2007, I wrote a generational history of South Korea since World War II, in the article, "South Korean politicians are 'euphoric' over North Korea nuclear deal."

As I pointed out in that article, the 1950s Korean War was NOT a generational crisis war for Korea. World War II was a crisis war for Korea. The 1950s war was devastating, but in many ways it was a proxy war between the U.S. and China, being fought on Korean soil. There are many ways to see this, but the most obvious one is that the Korean War never ended. A generational crisis war always becomes increasingly violent until it reaches a genocidal climax, but the 1950s war was stopped by an armistice, not a climax. Theoretically, North and South Korea are still at war today.

So the older generation that I was referencing yesterday were actually the "April 19" generation, in the generational Prophet archetype like our Boomers, and the younger generation were the "Kwangju generation" or "386 generation," in the Nomad archetype like our Generation-X.

The older generation, the April 19 generation, are not survivors of the last crisis war, WW II; if they were, they'd be treating North Korea in a much more compromising and conciliatory fashion -- and the North Koreans would be much more comprising and conciliatory as well.

Instead, like our Boomers, the April 19 generation is much more confrontational, and more willing to demand revenge for the Cheonan sinking. But they're also much more oblivious to the danger. Most of them undoubtedly believe that a war won't happen, or that it can't happen because it would be bad for business. So it's not correct that the older generation wants war; they're simply oblivious to the danger of war.

Thus, a recent VOA article quotes an elderly woman as saying, "We have to be stronger. The measures taken by our government are too soft. We have to kill all the North Korean aggressors. That is why I attended today's rally." Another man said, "We should use all possible sanctions and keep looking for ways to get North Korea to change through international collaboration. But there should not be war."

The younger generation, the 386ers, are like our Gen-Xers, the nihilistic generation. However, nihilism means different things in different places, and apparently to the 386ers in South Korea, it means total appeasement of the North Koreans.

According to a recent NY Times article, up until the late 1980s, governments led by the April 19 generation "resorted to North Korea scares so often that many people now refuse to believe any stories about the regime, no matter how overwhelming the evidence." Thus, there's sympathy for Pyongyang, and the Cheonan sinking is sometimes referred to as an "accident."

In the North, the government is led by Kim Jong-il, born in 1942, and likely to be much more conciliatory then either of the younger generations that we've discussed. Little is known about the ministers and officials who report to Kim, but it's likely that they're considerably younger, and considerably more confrontational.

That's why so many people are concerned about a succession crisis in North Korea, as Kim Jong-il becomes increasingly frail. Such a crisis will cause people the North's version of Generation-X to be fighting one another for power, and that can't be good for anyone.

The euro crisis is not over

According to an analysis by Jean Quatremer in Libération (French), summarized by EuroIntelligence, the sovereign debt crisis is not over.

In fact, all indications are that things are as bad now as they were a few days prior to the recent $1 trillion rescue of May 10. The following graphic tells the story, as it shows the CDS prices for the debt issued by the eurozone countries:

CDS prices for eurozone countries' debt <font size=-2>(Source: Libération)</font>
CDS prices for eurozone countries' debt (Source: Libération)

Recall that a credit default swap (CDS) is a kind of insurance policy on debt that pays off when the underlying debt defaults. When CDS prices rise, it means that investors are increasingly afraid that the underlying debts will default.

In the above graphic, you can see that the CDS price for Norway's debt is shown as 22.4, meaning that it costs $22,400 to insure $10 million of Norway's debt for five years; that was a typical CDS price for any country, prior to the financial crisis that began in 2007. For Greece, on the other hand, the price is $721,200, which is astronomical, and indicates a very high probability of default.

The CDS prices for the 5 PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) are shown on the graph for the past year. Their peak occurred just before the $1 trillion rescue on May 10, and then they fell dramatically for a few days. It feels like that rescue happened years ago, but it was just three short weeks ago, and in that time, CDS prices have continued to increase in price, as if the rescue had no effect at all.

According to Quatremer:

"However, the reactions of the markets are at the least very curious. Thus, they do not want to see that the situation in the United Kingdom is much worse than that of Greece or Spain: CDS prices for Britain are just 84.6, even though Britain's public deficit is much larger than that of Athens, and its debt is exploding and will pass that of Greece by 2015 ... Exactly the same thing is true for the United States. Because the question of sovereign debt touches not only Ireland and the Southern euro zone, but also all developed countries that have been absorbing the effects of the banking and economic crises."

Thus, the airheads at CNBC and the Wall Street Journal who say that the worst is over are going to be very surprised.

Additional links

Iran has lost a lot of money as a result of its politically-motivated move a couple of years ago to sell its oil in euros rather than dollars. But now Iran is going to exchange 45 billion euros for dollars, and will substantially decrease its oil sales in euros. Bloomberg

BP stands for British Petroleum, and with all the "BP-bashing" going on in the United States, thanks to the oil spill, British pensions are in jeopardy. Telegraph

The Defense Department has been ignoring basic research for years, according to a report sponsored by DoD. Many technically literate program officers, scientists and engineers who shaped DoD research within the agency or as contractors have moved on, and the new generation lacks the appropriate training to continue the research mission. Fierce IT

Ottawa children's soccer league has adopted a new rule that says that any team that wins a game by more than five points will lose by default. This is supposed to "protect" self-esteem, but one child's father called the rule ludicrous. "I couldn’t find anywhere in the world, even in a communist country, where that rule is enforced." National Post.

In the Korean language, South and North Korea have different names, Hankook and Joseon, respectively. Some South Koreans are arguing that their country's name should be changed to Hankook in English as well. Supposedly, this would reduce tensions. Korea Times

In a very surprising admission, Pakistan's interior minister Rehman Malik said that extremist Taliban groups were firmly entrenched in the southern portion of Punjab province, the nation's most populous province. This follows the killing of more than 80 people in two mosques last week in Lahore. NY Times

Following the recent riots and demonstrations in downtown Bangkok, Thailand, Prime Minister Abhisit Vejjajiva narrowly survived a no-confidence vote in Parliament. Reuters

The riots and demonstrations in downtown Bangkok also shut down the thriving multi-million dollar sex tourism industry in the "Land of Smiles." Slate

(Comments: For reader comments, questions and discussion, see the 4-Jun-10 News -- North Korea: 'War may break out at any moment' thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Jun-2010) Permanent Link
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3-Jun-10 News -- S. Korea's ruling party suffers big losses

Record numbers of candidates are running in midterm elections this year

South Korea's ruling party loses big in regional elections

It had been thought that Korean President Lee Myung-bak would benefit in Wednesday's regional elections, because of his firm response to the North Koreans after the sinking of the warship Cheonan, but it appears that the opposite has happened.

It now appears that Lee's Grand National Party (GNP) has unexpectedly lost many local elections to their political opposition, the Democratic party (DP), according to Yonhap. About 4,000 posts, including those of provincial governors, mayors, councilors and education chiefs were up for grabs, and the DP took many of these posts away from the GNP.

I would conclude from these results that the number of young people voting was much higher than expected. According to a recent Chosun article, 60% of all Koreans approve of sanctions against North Korea, but a smaller percentage of young people approved than the percentage of older people.

This could be seen at a May 26 rally in Seoul of thousands of people demonstrating against North Korea and demanding revenge, according to VOA. However, it was clear at the time of the rally that most of the demonstrators were elderly survivors of the 1950s Korean war.

Young people, on the other hand, apparently want to allow North Korea to escape any punishment at all. Professor B. R. Meyers of Dongseo University in South Korea described this in a recent NY Times article.

According to Meyers, "[A] lack of indignation is mainstream here. Most people now accept North Korea’s responsibility for the sinking that killed Mr. Mun and 45 other sailors. A small but sizable minority suspect an elaborate government conspiracy of some sort. What almost all seem to share is the desire that South Korea put this unfortunate business behind it as soon as possible."

This generational difference is similar to the kinds of generational differences we see in other countries. As I've written in the past, today's young Millennial generation in America knows almost nothing about what's going on in the world, and many of them couldn't find China on a map if they had to.

My guess is that this explains the surprise victory of the opposition party in Wednesday's elections.

The government of President Lee must itself be very well aware of the indifference of young people. That's one possibly reason why Lee has dropped the plan to conduct "propaganda activities" against the North, and Reuters now reports that Lee is delaying the planned request to the United Nations Security Council to censure North Korea for the Cheonan sinking.

Additional links

More than 2,300 people are running for 471 House and Senate seats in the midterm elections in the fall, reflecting the widespread anti-incumbent and anti-Washington anger across the country. This is the highest number of candidates since at least 1975. Associated Press

The number of business startups in 2009 reached their highest level in 14 years. This is consistent with what happened in the 1930s. While the employment index was losing hundreds of thousands of jobs each month, in 2009, 558,000 new businesses were created each month. Ewing Marion Kauffman Foundation

Women's dresses are getting longer, which means the stock market will fall, according to the "Hemline Index" first developed by George Taylor in 1926. According to the theory, the stock market rises and falls with women's hemlines. Ritholtz

The Department of Homeland Security held a conference last Thursday asking the private sector, especially retail establishments, to heighten their level of awareness and report anything suspicious to law enforcement immediately. The number and pace of attempted attacks against the United States over the past nine months have surpassed the number of attempts during any other previous one-year period. National Retail Foundation

France is pulling its defense personnel out of Taiwan, cutting off all direct military contracts between the two countries. It's thought by some that this is being done at China's request, and that Beijing will reward Paris with a big aviation deal at the Paris Air Show in June, 2011. Asia Sentinel

Hundreds of thousands of Facebook users were hit by a "clickjacking scam" over the past few days, tricking users to post advertising messages to their pages. Facebook users should review their pages and delete those with malicious links. Cnet

(Comments: For reader comments, questions and discussion, see the 3-Jun-10 News -- S. Korea's ruling party suffers big losses thread of the Generational Dynamics forum. Comments may be posted anonymously.) (3-Jun-2010) Permanent Link
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2-Jun-10 News -- Turkey: Gaza incident is 'turning point in history'

Japan's Prime Minister Yukio Hatoyama resigns

Turkey's PM Erdogan says that Israel must be punished for Gaza incident

In an angry and emotional hour long speech in Turkey's parliament on Tuesday, Prime Minister Recep Tayyip Erdogan called the encounter between Israel's navy and the Gaza-bound aid flotilla a "bloody massacre," and a "turning point in history," according to Turkey's Hürriyet news service.

Saying that Israelis "once again showed their ability to perpetrate slaughters," and that they must be "absolutely punished by all means," Erdogan spoke as follows:

"It is no longer possible to cover up or ignore Israel’s lawlessness. This bloody massacre by Israel on ships that were taking humanitarian aid to Gaza deserves every kind of curse. This attack is on international law, the conscience of humanity and world peace. Israel in no way can legitimize this murder. It cannot wash its hand of this blood. ...

We will not turn our back on Palestine, Palestinians and Gaza, even if nobody backs them. Once again we call on Israel to immediately end its inhumane blockade of Gaza."

When I wrote about this yesterday, I wrote that the "Freedom Flotilla" was a moronic stunt, and very dangerous during a generational Crisis era. Here you can already see the reasons I made those remarks.

The situation is analogous to what's happening on the Korean peninsula since the sinking of the warship Cheonan. Both North and South Korea have made threatening statements that will lead them to war unless one or both governments back down. Since governments don't like to back down, a war is a real possibility.

Now we're seeing the same dynamics between Israel and Turkey in the Mideast. Turkey is demanding that Israel be punished, and unless Israel agrees to be punished, Turkey will have to concede. But it's a lot more complicated than that, because other "peace" groups are planning to send their own flotillas to Gaza. Israel is committed to stopping these flotillas, and Erdogan will once again express fury and outrage. If Erdogan decides to provide military protection for a future Gaza flotilla, then the possibility of war will increase substantially.

I'm actually astounded by the rapidity with which Turkish-Israeli relations are disintegrating. A week ago I would have thought that a war this summer between the countries was next to impossible, but today I would have to say that it has a non-trivial probability.

From the point of view of Generational Dynamics, an eventual split between Turkey and Israel was inevitable. Historically, Turkey was the world's center for Sunni Muslims as head of the Ottoman Empire, prior to its destruction in 1921. Furthermore, Turkey has been a historical enemy of Orthodox Christian Russia, as well as other Orthodox Christian countries, such as Armenia and Greece.

In the coming Clash of Civilizations world war, it's expected that Sunni Muslim countries will be allied with Pakistan and China, versus India, Russia, Israel and the West. Thus, Generational Dynamics theory would have to predict a disintegration of Turkish-Israeli relations. The events of this week illustrate how startlingly fast such disintegration can occur.

Israel's armed forces are charged with incompetence

Even many supporters of Israel are charging the Israeli Defense Forces (IDF) with incompetence. There are undoubtedly a lot of hard feelings still from the incompetence shown by the IDF in the 2006 war with Hizbollah. (See "How Israel panicked in pursuing the summer Lebanon war with Hizbollah.")

The charge this time is that Israel bungled the commando raid. The German magazine Der Spiegel says that Israel "fell into a trap," and it asks three questions that Israel has to answer:

Other critics simply claim that the IDF overreacted -- just as Israel overreacted in the 2006 war with Hizbollah.

Martyrdom on the beaches of Gaza

In fact, it does seem more and more that Islamist terrorists did indeed set a trap for Israel, and the trap worked.

Translations of Palestinian and Arab television programs that appeared late last week indicate that many Islamists were preparing for martyrdom in a military conflict with Israel.

An al-Jazeera television documentary described the attitudes of the "peace activists" on the flotilla as it approached Gaza. According to Palestine Media Watch, activists were chanting references to Khaibar, the name of a village where many Jews were killed by Mohammed's army in 632. In the al-Jazeera documentary, "One woman standing on the ship said that now we are awaiting one of two happy endings: either Martyrdom or the beaches of Gaza."

According to translations by Memri, other Arab media reports on the flotilla participants portray them as writing wills, preparing for martyrdom, and determined to reach Gaza or die.

It seems apparent that the "peace activists" were not participating in a humanitarian mission, but were intending a bloody confrontation with the Israelis. They set a trap for the Israelis, and the Israelis fell into it.

Israeli blockade of the Gaza Strip

Here's an explanation from the Washington Post:

Israeli blockade of the Gaza Strip <font size=-2>(Source: Washington Post)</font>
Israeli blockade of the Gaza Strip (Source: Washington Post)

Japan's Prime Minister Yukio Hatoyama resigns

Japan's Prime Minister Yukio Hatoyama on Wednesday, after months of continually falling approval ratings, which are now below 20%, according to Yomiuri.

The most recent drop was triggered by his abandonment of a campaign promise to move the US Marine Corps' military base off of the island of Okinawa. Last month he apologized to the people of Okinawa, saying that he was unable to reach an agreement with the US on a suitable place to move the base to.

However, that wasn't his only problem. Hatoyama had also been embroiled in a money scandal after revelations that his mother had provided him with millions of yen in political funds.

However, it's probably not correct to attribute Hatoyama's resignation simply to his own faults. Japan has had a series of Prime Ministers for the last few years, each of whom had to resign after about a year because of plunging ratings, and some kind of scandal.

As in other countries in a generational Crisis era, political compromise has been replaced almost entirely by political bickering, and this has cost one Prime Minister after another his job.

Additional links

Hollywood actor Kevin Costner has a team that has been working on "centrifugal separator" technology for 15 years, and he claims that his technology could be part of the solution to cleaning up the Gulf of Mexico oil spill. LA Times

The U.N. International Atomic Energy Agency (IAEA) says that Iran now has enough fissile material to build two nuclear bombs. This news can only further increase the tension in the Middle East. London Times

Al and Tipper Gore, who have been married for 40 years, announced that they intend to separate. Politico

(Comments: For reader comments, questions and discussion, see the 2-Jun-10 News -- Turkey: Gaza incident is 'turning point in history' thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Jun-2010) Permanent Link
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1-Jun-10 News -- Wide condemnation of Israel over Gaza flotilla

Thailand red shirt protestors' 'Men in Black' are revealed

Humanitarian aid flotilla for Gaza becomes catastrophe for Israel and activists

The "Freedom Flotilla" of humanitarian aid from Europe finally approached Gaza on Monday morning where, as expected, it was confronted by the Israeli navy, which attempted to divert the flotilla to an Israeli port. There, the aid was to be examined for weapons, and would be shipped on to Gaza.

As well as humanitarian aid, the flotilla contained hundreds of "political activists," including a long list of world-renowned names and veteran activists, according to the Guardian.

This was always going to be a public relations setback for Israel but, as one BBC reporter said, what was going to be a public relations disaster for Israel turned into a catastrophe.

Israeli navy commandos landed on the ships that were supposed to have only unarmed, peaceful activists. However, before it all ended, at least 9 of the activists were killed, according to AFP, and more than 80 have been arrested.

Worldwide condemnation of Israel has been immediate. The major sponsor of the flotilla was Turkey, and Turkish Prime Minister Recep Tayyip Erdogan said that Israel’s raid was "state terrorism," according to Bloomberg.

Palestinian president Mahmoud Abbas called the raid a "massacre," according to the Telegraph. Britain's foreign secretary said, "I deplore the loss of life during the interception of the Gaza flotilla." President Obama did not condemn Israel, but "expressed deep regret at the loss of life."

The investigation

The activists claim that the Israelis landed on the boat and immediately started shooting unarmed activists. The Israelis say that they landed on the boat and they were immediately attacked by thugs with knives and clubs.

There will be an investigation to determine who's at fault.

The IDF (Israeli Defense Force) has made public a video of the commando raid, and it's posted on the Telegraph web site. It clearly shows that the Israelis were attacked by activists armed at least with clubs, and that the Israelis were fighting for their lives. Insofar as facts will make any difference to the final outcome of this event, it appears that the activists were violent first.

Readers may have surmised over the years that I don't think much of Boomer publicity stunts, since they're always loaded to the brim with phony outrage and hypocrisy. I got pretty sick of them in the 60s and 70s, and REALLY sick of them in the 80s and 90s and 00s.

So when I first read last week that a flotilla of "humanitarian aid" was leaving Europe for Gaza, it immediately seemed suspicious. And then I read that there would be hundreds of "political activists" on the flotilla, and there was little doubt in my mind that was one of the most moronic stunts I've seen in a while.

Humanitarian aid was never the purpose of the "Freedom Flotilla." As I understand it, anyone can provide humanitarian aid to the Gazans, as long as the Israelis can first inspect the materials for weapons.

The purpose of the flotilla was to provoke a naval confrontation with the Israeli navy. And now they've gotten the naval confrontation that they wanted, with the resulting casualties. So I guess that a good time was had by all.

Relations between Turkey and Israel

If this event had occurred during a generational Awakening era or Unraveling era, it would still have been moronic, but not nearly as dangerous. In those eras, there would simply have been a lot of verbal bloviation, but no real serious consequences.

But this is a generational Crisis era, when people are quick to confront. Thus, Turkey and Greece have withdrawn their ambassadors to Israel, and Turkey is promising additional reprisals, according to Bloomberg. Elsewhere I've read that Turkish activists are planning to send more flotillas to challenge the Gaza blockade.

The position of the Turks is particularly interesting. The Turks strongly condemn Israel's treament of the Gazans. But the Turks have their own problems with suicide bombers among their own Kurdish population, and the Turks treat the Kurds much more harshly than the Israelis treat the Gazans.

In 1924, Ataturk, the founder of modern Turkey, declared that Turkey would henceforth be a secular state. The Caliphate in Istanbul was abolished, and all kinds of Muslim symbols were discouraged or even forbidden.

Readers may recall that in the 2007 election for president, one of the issues was that Erdogan's wife always wears a headscarf, considered a sign of a hidden Islamist agenda. (See "In Turkey, May 16 election may bring Islamist President into power.")

The fact that Erdogan is Prime Minister is one example of how Turkey is turning back from it's change to secularism back to its roots as a more religious country, as it was at the time of the Ottoman empire.

The NY Times says that "Turkey, a NATO member, has long been Israel’s closest friend in the Muslim world, with $3 billion in trade and strong ties between the countries’ militaries and governments."

This was perhaps true of Turkey as a secular state, but as the country has swung towards becoming a more Sunni Islamic state, there was never any real chance that Israel and Turkey would remain allies. In fact, Erdogan on Monday had to warn the Turkish people not to be carried away with emotions and take revenge on Jews living in Turkey.

What the "Freedom Flotilla" did was to substantially heighten tensions in the Mideast, and increase the probability of a major confrontation with other copycat flotillas. How will Turkey respond when another flotilla is diverted by force? A miscalculation by either side could result in war during this generational Crisis era.

One possible outcome is that Israel will be forced to lift the naval blockage of Gaza. Even some Israeli supporters are suggesting this, under the reasoning that there are already weapons being smuggled in through the tunnels under the wall separating Gaza and Egypt.

Thailand's 'Men in Black'

The recent "red shirt" protests in Bangkok, Thailand, were supposed to be completely peaceful people, involving unarmed activists, but as we've reported, the protestors also included some violent "men in black," who had weapons and used them against the police.

According to the Asia Times, these men in black were a secret group known as the "Ronin warriors," made up mostly of present and former men in the Thai military.

The Thailand story is relevant to the Gaza flotilla story because the technique was similar in both cases. In both cases, there were large groups of sympathetic, unarmed activists, but they were hiding a small core of violent armed extremists.

As I wrote recently in "The rise of left-wing violence around the world," left-wing violence is not only on the rise, but it's also receiving sympathetic and supportive treatment by the mainstream media.

This technique of using large numbers of unarmed activists as a kind of "cocoon" around a core group of violent armed extremists is a technique that left-wing groups use to get away with mayhem and murder.

Additional links

The eurozone is expected to be under a great deal of pressure this week, after Spain's debt rating was downgraded. Spain's government may collapse, and France's debt rating may be the next to fall. Guardian

France's President Nicolas Sarkozy has been reluctant to talk about austerity programs for France, but France will have to carry out a number of harsh spending cuts in order to keep its top AAA credit rating. AFP

German President Horst Koehler surprised and shocked everyone by resigning on Monday. He had made a gaffe by saying that a country like Germany, which is heavily reliant on foreign trade, must know that military interventions could be necessary to uphold German interests. The Afghan war is very unpopular in Germany, and the people are very sensitive to the belief that they started WW II for economic interests. Deutsche-Welle

Russian experts have arrived in South Korea to check the findings that North Korea was the guilty party in the sinking of the South's Cheonan warship on March 26. If the Russians concur, then they'll support a resolution condemning North Korea in the U.N. Security Council. Chosun

It's called "jingle mail" when a homeowner decides to stop paying the mortgage and simply mails the keys to the bank and takes off. But more and more, homeowners who stop paying the mortgage just stay in the home as long as possible, forcing the bank the endure the legal expenses of eviction. NY Times

(Comments: For reader comments, questions and discussion, see the 1-Jun-10 News -- Wide condemnation of Israel over Gaza flotilla thread of the Generational Dynamics forum. Comments may be posted anonymously.) (1-Jun-2010) Permanent Link
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